> ## Content Index > Fetch the complete content index at: https://www.moatmarginresearch.com/llms.txt > Use this file to discover other available public pages before exploring further. # Hindalco Q2 Record: The Non-LME Half of EBITDA Was Flat as a Share, and Copper, Currency and Insurance Lifted It - URL: https://www.moatmarginresearch.com/hindalco-q2-non-lme-half-copper-currency-insurance/ - Published: 2026-11-08T03:27:44.000Z - Updated: 2026-11-08T03:27:44.000Z - Description: Hindalco's Q2 FY27 non-LME businesses gave 49.5% of segment EBITDA, down from 50.3%. What copper, the rupee and insurance did to the record quarter. - Author: A K Karthikeyan - Tags: Moat Insights **Hindalco's consolidated revenue from operations for July-September 2026 was ₹91,708 crore against ₹66,058 crore a year earlier (up 39%, the company's figure), EBITDA ₹13,757 crore (up 42%) and profit after tax ₹7,533 crore against ₹4,741 crore (up 59%). The company says "the non-LME-linked businesses contributed almost 50%" of earnings. On the company's own segment table that share is 49.5% of business-segment EBITDA, against 50.3% a year ago (our arithmetic): the record was broad, not a shift in mix. What lifted the non-LME group quarter on quarter was copper, and the copper line carries by-product and "one-time" gains the company does not size. The auditors' conclusion on both statements is unmodified.** ## The idea in one sentence A label such as "non-LME-linked" tells a reader what an earnings line is priced off, not what it is made of; in this quarter the group labelled that way matched the rest of the company in growth; its year-on-year gain was helped by rupee translation and an insurance recovery at Novelis, and its quarter-on-quarter lift came almost entirely from copper, which carries by-product and one-time gains the company does not size and a rebound after a planned shutdown in Q1, so the quarter is a weaker test of a more stable earnings base than the headline suggests (our reading). ## The fact that breaks the assumption The press release says: "Together, the non-LME-linked businesses contributed almost 50% to the company's earnings reflecting sustainable growth despite LME volatility and global macroeconomic headwinds." The presentation (slide 17) defines the group: "Non-LME linked business defined as Novelis, Copper and Aluminium downstream whose earnings have low correlation with LME." Its EBITDA was ₹6,860 crore, an all-time high, up 50%. Now put it next to the segment table (\[RS\], segment results; \[IP\] annexure). Business-segment EBITDA was ₹13,869 crore against ₹9,104 crore, up 52% (company figure). Novelis ₹4,858 crore, Copper ₹1,673 crore and Aluminium Downstream ₹329 crore make ₹6,860 crore, which is 49.5% of ₹13,869 crore. A year earlier the same three were ₹3,685 crore, ₹634 crore and ₹261 crore, ₹4,580 crore of ₹9,104 crore, or 50.3% (our arithmetic). The LME-linked Aluminium Upstream segment, EBITDA ₹7,009 crore against ₹4,524 crore, supplied ₹2,485 crore of the ₹4,765 crore year-on-year rise in segment EBITDA, 52% of it (our arithmetic). The non-LME group is as large a share as before, not a larger one, and half of this quarter's growth still came from the line priced off the London Metal Exchange. It is sequentially a different story: in Q1 FY27 the group was ₹6,091 crore of ₹13,480 crore, 45.2% (our arithmetic), because the upstream EBITDA fell ₹381 crore quarter on quarter to ₹7,009 crore while the group rose ₹769 crore, which is the figure to follow. ## One concrete thing, followed: Copper's ₹1,673 crore Of the ₹769 crore quarter-on-quarter rise in the non-LME group, ₹755 crore is Copper (₹918 crore to ₹1,673 crore); Novelis was ₹16 crore lower (₹4,874 crore to ₹4,858 crore) and Aluminium Downstream ₹31 crore higher (our arithmetic from the segment table). So the "up 13% sequentially" the deck prints (slide 17, "despite 10% decline in LME prices") is almost entirely a copper story. What the filings say about copper. Metal sales were 116 kt against 113 kt, up 2%, and continuous cast rod sales were 96 kt against 97 kt (\[IP\] media release; slide 25). Revenue rose 47% to ₹21,374 crore "on account of high metal prices and better by-product realisations". EBITDA rose from ₹634 crore to ₹1,673 crore. That is a rise of ₹1,039 crore on roughly flat volume, and EBITDA per tonne went from $641 to $1,510 (slide 18). The press release gives the reasons for the record: "strong operational performance, and healthy domestic demand across segments despite elevated LME prices and higher realisation of by-products like sulphuric acid and one-time gains". Slide 25 adds, beside the per-tonne chart: "↑ 63% QoQ on account of higher LME and by-product realization, includes one-time gain". And the quarter-on-quarter rise of 82% in rupee EBITDA is put down by the deck to "normalization post planned smelter shutdown in Q1", with metal shipments up 10% on the quarter (slide 25). So the company's own text lists three things inside the copper number besides operations: "higher LME", by-product realisations, and a one-time gain. It sizes none of them. Copper EBITDA on revenue was 7.8% against 4.4% a year ago (our arithmetic). Our reading: a business described as having "low correlation with LME" earned its record in a quarter when the deck itself credits "higher LME" for part of the per-tonne gain. The relevant question is not whether copper is good, but how much of ₹1,673 crore a reader may treat as repeatable. The filings cannot answer it. ## The mechanism: what "non-LME" does and does not remove Our reading of the structure: a downstream converter earns a conversion margin on top of a metal price, and a metal price that passes through to customers moves revenue (consolidated revenue is up 39% here; Novelis revenue is up 25% in US dollars, "driven by higher metal prices", per the release) far more than EBITDA. That is the sense in which Novelis, Copper and Aluminium Downstream are less LME-sensitive than a smelter. It does not make their earnings independent of anything else. Three other drivers sit in this quarter's numbers, and none of them is operating volume or margin in the ordinary sense. **Currency.** The deck says (slide 16): "Novelis EBITDA benefited from favorable INR/USD exchange rate movements. As a result, EBITDA grew by 32% in INR terms versus 20% growth in USD terms". Novelis' adjusted EBITDA was $508 million against $422 million (the company says up 20%) on shipments of 919 kt against 941 kt, down 2%. Had the rupee EBITDA grown only at the dollar rate, the segment would be about ₹4,436 crore, and about ₹422 crore of the ₹1,173 crore rise is therefore translation (our arithmetic, approximate: the rupee segment figure and the US GAAP dollar figure are not on identical bases). **Insurance.** Slide 22 says Novelis' adjusted EBITDA is "up 20% YoY, incl. $39 Mn in Oswego insurance recoveries and benefitted by better scrap spreads and higher recycling". Note 6 of \[RS\] confirms business interruption recoveries of ₹370 crore (US$39 million) booked in other income for the quarter, and a separate net recovery of ₹284 crore (US$29 million) in exceptional items. Excluding the $39 million, EBITDA would be $469 million, 11% above $422 million (our arithmetic), if the prior-year figure held no such recovery, which the deck does not say. The "Novelis recovery" the company names as the first driver of the record shows in the sequence too: EBITDA per tonne was $563 in Q1 and $553 in Q2, and rupee EBITDA was flat quarter on quarter (₹4,874 crore to ₹4,858 crore). Note 6 of \[RS\] puts business interruption recoveries at ₹819 crore (US$86 million) for the six months against ₹370 crore (US$39 million) for the quarter, so about ₹449 crore (US$47 million) fell in the June quarter (our arithmetic): the insurance recovery was smaller in September than in June, and Novelis' rupee EBITDA fell slightly on the quarter. **Tax.** Slide 16 says: "This increase in PAT is aided by HIL's transition to the new tax regime effective 1st April 2026\. Consequently, Effective Tax Rate reduced to 25% in Q2 FY27 versus 29% in Q2 FY26." The India-business statement in \[IP\] gives tax of ₹1,969 crore on profit before tax of ₹7,821 crore, 25.2% (our arithmetic), against ₹1,257 crore on ₹4,317 crore, 29.1%. Standalone, tax expense was ₹1,734 crore (current ₹1,708 crore plus deferred ₹26 crore) on profit before tax of ₹6,866 crore, 25.3%, against 30.3% (our arithmetic). At last year's 29.1% rate, India-business profit would have been about ₹308 crore lower, and consolidated profit after tax would have grown about 52% rather than 59% (our arithmetic, holding everything else). The consolidated effective rate was 28.9% against 27.5% (our arithmetic), because, our reading, the Novelis side carries its own rate. The company presents the lower rate as a regime transition effective 1 April 2026, so our reading is that it should recur in later quarters; it is a tax effect, not an operating gain. Taken together, our reading is that the non-LME group's record is a measure of three things at once: genuine operating improvement (Novelis' structural cost cuts, which the deck puts at "Over $240 million in run-rate cost savings though Q2 FY27"; Aluminium Downstream's 119 kt, up 6%, and EBITDA per tonne up 9% to $289), a commodity-adjacent windfall in copper, and translation and insurance effects at Novelis. The filings do not let a reader weigh them. ## Where this breaks: the bear case, and the case against it **The strongest argument against our thesis is in the company's own sequence.** Non-LME EBITDA has risen three quarters running (₹3,930 crore, ₹5,364 crore, ₹6,091 crore, ₹6,860 crore on slide 17; the Q2 FY26 figure was ₹4,580 crore, so Q3 FY26 was a fall, our arithmetic), and the last step came with LME falling. The deck's chart (slide 12) gives the aluminium LME at $3,576 per tonne in Q1 FY27 and $3,227 in Q2, a fall of 9.8% (our arithmetic), and $3,071 for Q3 "till date". If the group had the correlation of a smelter, its EBITDA should have dropped in Q2; the segment that dropped was Aluminium Upstream (down 5%). Net of the copper by-product and "one-time gain", the group may still have risen; the filings do not size them to test this. **Our share arithmetic is a segment-level view and the segments are not the whole group.** The company's consolidated EBITDA of ₹13,757 crore differs from segment EBITDA of ₹13,869 crore by unallocable items and eliminations (\[RS\] segment note), and consolidated EBITDA fell 8% quarter on quarter from ₹14,989 crore (the Q1 figure carried an unallocable income of ₹1,992 crore). A different denominator would give a different share. We use the company's own ₹6,860 crore and its segment total, and say so. **One quarter does not make a pattern.** The 50.3%-to-49.5% comparison is a single year-on-year pair; the quarter-on-quarter jump from 45.2% to 49.5% shows the share is volatile, not trending. We have no longer series for the group. **The upstream side is the profit engine, and it is where the cost-advantage moat would show.** Aluminium Upstream EBITDA margin was 52% against 45% (\[IP\] media release and slide 23), on EBITDA per tonne of $2,125 against $1,521\. The company says it was "driven by favourable macros, higher shipments and stronger operational performance". The filings give no cost-per-tonne, so they cannot separate a lower-cost position from a higher price. The deck itself says the per-tonne rise came "owing to favorable macros partially offset by increase in input costs" (slide 23). Our reading is that a smelter whose margin moves from 45% to 52% on favourable macros is showing the price, and that this quarter shows nothing about the cost curve. **Cash does not match the earnings headline.** The deck's slide 20 (a bridge from 31 March to 30 September 2026) reports "Healthy Cash flow from operations at ₹23,319 crore (↑ 57% YoY)" and "Net Cash inflow of ₹10,231 crore", and net debt to EBITDA of 1.80x against 1.23x a year ago. The statutory consolidated cash flow statement in \[RS\] shows net cash generated from operating activities for the six months of ₹2,825 crore against ₹8,016 crore, down 65% (our arithmetic), after an inventory build of ₹8,279 crore and a trade payables reduction of ₹4,634 crore, with payments for property, plant and equipment and intangibles of ₹19,344 crore against ₹10,685 crore (up 81%, our arithmetic). The deck's net debt bridge goes from ₹64,841 crore at 31 March 2026 to ₹80,435 crore at 30 September 2026, up ₹15,594 crore (our arithmetic), with capex of ₹20,719 crore. The company ties the higher working capital to "rate impact of higher metal prices". The two cash numbers use different definitions that the filings do not reconcile. **Review, not audit.** The limited review conclusion is unmodified; a review is "substantially less in scope than an audit", and the subsidiaries covered by other auditors' reports carry total assets of ₹262,204 crore and quarterly revenue of ₹57,915 crore (paragraph 7), which is most of the group (our reading). ## Why it costs the reader something A reader who takes "almost 50% non-LME" as a floor under earnings is assuming the ₹6,860 crore repeats. This quarter it contains unsized copper by-product and one-time gains (copper added ₹755 crore of the ₹769 crore sequential rise, which the deck also ties to normalisation after a planned smelter shutdown), about ₹422 crore of rupee translation at Novelis (our arithmetic), and $39 million of insurance recoveries. The record is real, and the review report does not qualify it. But the quantity that matters for a moat reader, the part of earnings that does not move with metal prices, rates or one-offs, cannot be read from these two documents. Capital that is sized to that number is sized to something the company has not measured. The cash side points the same way: operating cash flow was lower and net debt higher, while the deck puts capex of ₹20,719 crore "towards strategic growth projects"; Satish Pai, Managing Director, says Bay Minette, copper recycling, aluminium battery foil, Aditya FRP and Inner Grooved Tubes "will further accelerate the share of our non-LME-linked businesses" and that the aluminium refinery and smelters, copper smelters and coal mine projects "remain on track". The deck's own guidance is a test to watch, not a result: "Long-term $600+/ton EBITDA guidance intact" against $553 this quarter at Novelis. ## The concrete thing, again Copper's ₹1,673 crore on 116 kt is the record the release leads with, and the line the sequential non-LME growth hangs on. The company's own slide says it "includes one-time gain" and credits "higher LME and by-product realization". Until a document gives the size of the one-time gain and the sulphuric acid effect, the right reading of Hindalco's quarter is that the non-LME half held its place in a good year for metals, and that the proof it is more stable than the LME half has not arrived. ## Sources - **\[RS\]** [Hindalco Industries, outcome of the board meeting, results and review reports, 6 Nov 2026](https://nsearchives.nseindia.com/corporate/HINDALCOIND%5F06112026134336%5FBM%5FOutcome%5F0611%5Fsignedfinal.pdf) (NSE) - **\[IP\]** [Hindalco Industries, media release and Q2 FY27 earnings presentation, 6 Nov 2026](https://nsearchives.nseindia.com/corporate/HINDALCOIND%5F06112026135154%5FMedia%5Frelease%5FIP%5Fresults%5Fsigned.pdf) (NSE) - **\[AR\]** [Hindalco Industries, audio recording notice for the Q2 FY27 earnings call, 6 Nov 2026](https://nsearchives.nseindia.com/corporate/HINDALCOIND%5F06112026181533%5FAudio%5FRecording%5FIntimation%5Fsigned.pdf) (NSE) - Earlier Moat & Margin page on the company: [Hindalco Industries Ltd., first-pass moat teardown](https://www.moatmarginresearch.com/hindalco-industries-moat/) --- > Educational research, not investment advice. Every figure above is drawn from Hindalco Industries' own filings of 6 November 2026 (results and review reports, media release and earnings presentation, and the audio-recording notice; no call transcript was read), read from the primary documents; derived figures are our arithmetic, labelled as such. MoatSCORE: 5.74 (read live on the Moat Screener on 8 Nov 2026, where it is labelled first-pass). It is provisional. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.