InvestorQ : Can you tell me about the capital allocation framework of Hindalco? How is likely to add value to Hindalco?
Arti Chavan made post

Can you tell me about the capital allocation framework of Hindalco? How is likely to add value to Hindalco?

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Rutuja Nigam answered.
9 months ago
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In the last few months, Hindalco has executed a very interesting capital allocation framework strategy which provides a clear and lucid view about how the surplus capital will be allocated in the future. What is the logic out here? Hindalco is now generating big cash flows not only from Novelis, its Canadian acquisition, but also from the core India business of Hindalco. It was time to give clarity to investors on how cash will be deployed optimally.

Some of the numbers and the outcome of the framework are extremely interesting. For example, it is estimated that the core aluminium and copper business will generate nearly $3 billion of net cash over next 5 years after taking case of the working capital needs, maintenance capex requirements and even the additional growth capex is considered.

The amount of $3 billion Hindalco has on hand to allocate to debt reduction, shareholder rewards and for treasury operations. The company has committed in its framework to allocate 50% of its net cash after working capital and maintenance capex to growth capex. Another 30% will be allocated to debt reduction and 10-12% to pay out to share holders either as dividends or buybacks or any other form of shareholder rewards.

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