Hindalco Industries Ltd

#MDStart#

MANAGEMENT DISCUSSION AND ANALYSIS

Overview:

Hindalco Industries Limited, the metals flagship of the Aditya Birla Group, is the world's largest aluminium rolling and recycling company, a major player in Copper and Specialty Alumina, and one of Asia's largest producers of primary aluminium. Our future-facing initiatives led us to be among the top 1% in the aluminium industry in the S&P Global Sustainability Yearbook 2024 for the third year in a row. Industry leaders are the top-performing companies in the Index.

In India, Hindalco's aluminium manufacturing units cover the complete value chain, from bauxite mining, alumina refining, coal mining, captive power generation and aluminium smelting, to downstream value-addition of aluminium rolling, extruding, and foil making. Hindalco's copper division in India operates a world-class custom copper smelter with capability to manufacture copper rods.

Guided by its Purpose of building a Greener, Stronger, Smarter world, Hindalco provides innovative solutions that nurture a sustainable planet. Today, Hindalco's global footprint spans 52 manufacturing plants across 10 countries.

Hindalco's wholly owned subsidiary Novelis is the leading producer of flat-rolled aluminium products and the world's largest recycler of aluminium. Novelis delivers innovative solutions to customers in the beverage cans, automobile, aerospace, and high-end speciality markets, including foil packaging, certain transportation products, architectural, industrial, and consumer durables. Novelis operates an integrated network of technically advanced rolling and recycling facilities across North America, South America, Europe, and Asia. Novelis, which has recycling operations across the world, recycles over 82 billion used beverage cans a year.

In FY 2023-24, Hindalco delivered an outstanding financial and operational performance backed by the exceptional performance of its India and Novelis' operations. This strong performance, despite macro-economic headwinds, was driven by higher volumes, better margins, strategic product mix, stability in operations and continued outstanding performance of its copper business in India.

On a consolidated basis, Hindalco continued to maintain its strong balance sheet in FY 2023-24, resulting in a 1.21x Net Debt-to-EBITDA at the end of the year against 1.39x in the previous year.

Achieved

+ Aluminium metal production at 1,331 KT

+ Aluminium third party metal sales (in all forms) at 1,372 KT

+ Alumina production at 3,665 KT

+ Aluminium Downstream production at 367 KT and Sales at 370 KT

+ Copper Cathode Production at 368 KT and Metal Sales at 506 KT

+ Record Copper Rods production at 488# KT and Sales at 389 KT

+ Overall shipments in Novelis of 3,673 KT + Adjusted EBITDA at $1.87 billion in Novelis + Yearly adjusted EBITDA/tonne of $510 in Novelis + Net Income of $ 600 million in Novelis + Consolidated Revenue of ?2,15,962 crore + Consolidated EBITDA of ?25,728 crore + Consolidated PAT of ?10,155 crore

# actual production including fixed term contract volumes

Expansion Plans

Hindalco's business model, with its strong focus on expanding the portfolio of downstream products in India, has increased current downstream capacity to 430 KT at the end of FY24. Further, downstream capacity is expected to reach around 600 KT by FY 2026. Today, Utkal Alumina has a capacity of 2.5 million MT after the completion of its recent debottlenecking expansion of 350 KT. Utkal Alumina remains among the most economical producers of alumina in the world.

With a focus on cost-optimisation specially in coal and alumina, Hindalco has enhanced operational efficiencies and lowered the overall cost of production. Factors such as Utkal Alumina's low-cost alumina, better coal mix, and improved operational efficiencies contributed to Hindalco being able to reduce the overall cost of production across its India operations.

In line with its long-term growth strategy of organic expansions, Hindalco announced investments of around $2 billion for its India operations, largely focusing on downstream expansions over the next 3 to 5 years.

These investments will be spread across the Aluminium, Copper, and Specialty Alumina businesses and resource securitisation. To strengthen the supply chain and improve the quality of coal, the Company has acquired two captive coal mines in India. The Company's intent is also to build a larger value-added product portfolio over the next few years to dissociate its business from the volatility of global aluminium prices.

Novelis launched a multi-year strategy to transform and improve the profitability of its business through significant investments in new capacity and capabilities across all operating regions. It remains committed to this strategy with $4.9 billion worth of organic growth expansion projects expected to be completed in the next 3 years.

Industry Review & Outlook

In Calendar Year (‘CY') 2023, the global economy grew by 3.2%. In the same year, the global production of aluminium increased 3% Y-o-Y to ~71 million MT, while global consumption was flatfish at ~70 million MT due to inflation-led slowdown in demand. Hence, global markets were in a marginal surplus of 0.6 million MT in CY23. In a region-wise split in CY2023, production in China grew 4% Y-o-Y to 41.6 million MT, led by increases in Guangxi, Gansu, Sichuan, Yunnan, and Inner Mongolia. Aluminium consumption in China grew by 5% to ~43 million MT led by the sharp increase in demand for EVs and solar. However, the demand was subdued in the sectors of building and construction, and packaging. With consumption of ~43 million MT, and production of 41.6 million MT, China saw a deficit of ~1.4 million MT.

In the rest of the world, production of aluminium was flatfish Y-o-Y at ~29 million MT in CY2023. A major drop in production in Europe was offset by the increased production in Indonesia, Brazil, and India. While transport grew on account of pent-up demand, all other sectors like consumer durables, packaging, and construction saw headwinds. Hence, overall consumption declined by 4% Y-o-Y to ~29 million MT, leading to a significant surplus of ~2 million MT in CY2023. (See Figure 1 and 2)

Table 1: Global Production and Consumption (in million MT)

With global markets being in surplus, inventory levels increased to 9.7 million MT. In CY2023, the global prices of aluminium averaged at $2249/tonne as against $2703/tonne in CY2022.The graph here shows the pricing trend over the past 5 years:

The regional premiums also saw volatility during CY2023. The average spot Main Japanese Port (MJP), duty-paid European Rotterdam Ingot and US Midwest premium was $86/t, $274/t and $23 cents/lb respectively in CY2023, versus $99/t, $462/t and $30 cents/lb respectively in CY2022.

India Consumption: Domestic consumption saw significant improvement across all sectors. Domestic consumption is expected to grow by around 11% Y-o-Y in FY 2023-24 on account of market demand. However, import of aluminium continues to be a concern for domestic players. Overall imports, including scrap, touched ~2.7 million MT in FY 2023-24 from ~2.5 million MT in FY 2022-23.

The Table (table 2) shows the sector-wise change in domestic consumption of aluminium in FY 2023-24 vs previous year.

Outlook:

In CY2024, global GDP growth rate is likely to be around 3.2%, as per the IMF projections (IMF WEO, July 2024). US growth is projected to pick up from 2.5% in 2023 to 2.6% in 2024, due to continuing strong momentum. Activity in the Euro area to pick up from 0.5% growth in 2023 to 0.9% in 2024, as effects of the energy price shock subside and inflation falls, leading to stronger household consumption. Chinese growth is expected to moderate from 5.2% in 2023 to 4.6% in 2024, due to a drag from property sector. India remains a bright spot, with the forecast for FY 2025 at 7%. Overall, advanced economies are likely to grow by 1.7%, while emerging economies are likely to grow by 4.3%.

Overall, in CY2024, global primary aluminium demand is likely to experience a 3% growth to around 72 million MT. Global production is also expected to be around 72 million MT. Hence, the resultant market is likely to remain balanced. Production in the world, excluding China, is expected to increase ~2% to around 29-30 million MT. Primary aluminium supply in China has grown ~3% to ~43 million MT in CY2023. Consequently, inventories are likely to remain stable at around 9.7 million MT by the end of CY2024.

World Excluding China Demand Drivers:

China Demand Drivers:

The Indian market is likely to see a steady growth across all sectors. Imports of aluminium products, including scrap, continue to remain a major concern for domestic aluminium producers. Over the past few years, the domestic rolled and foil products industries have seen an increase in imports at lower prices, especially from China and the FTA countries. The government has supported the aluminium industry by imposing Anti-Dumping Duty (‘ADD') on imports of flat-rolled products from China. The foil industry has petitioned with the Government on imposing ADD on foil imports from China/Thailand to support the industry against unfair trade practices.

ii. Copper - Industry Review & Outlook

In CY23, overall global copper production grew ~3.6% to 25.6 million MT. Consumption also grew 2.8% Y-o-Y to 25.6 million MT, resulting in a balanced market.

In CY23 Chinese production increased 8.6% to 11.5 million MT, whereas consumption grew 7.7% to 14.6 million MT, resulting in a deficit of 3.1 million MT. Across the world, excluding China, production declined 0.3%, whereas consumption declined 3.0% Y-o-Y, resulting in a surplus of 3.1 million MT in CY23.

Table 3: Global Production and Consumption

(in million MT)

On a yearly basis, domestic demand for refined copper increased 10% to 817 KT in FY 2023-24 from 746 KT in FY 2022-23. Of this, the share of imports was 30% at 244 KT in FY 2023-24 versus 24% at 181 KT in FY 2023-24.

For the calendar year 2024, the annual benchmark treatment charge/refining charge (Tc/Rc) was settled at 80/8 (20.5 c/lb). This settlement reflects a notable decrease of ~ 9% compared to the CY2023 benchmark Tc/Rc of 88/8.8 (22.6 c/lb). For CY2024, the market is expected to be in deficit of ~ 440 KT.

Spot terms experienced a continuous decline due to a combination of disruptions in a large copper mine in Central America coupled with 4-5 new smelters being commissioned in Indonesia, India, and China during this year.

Outlook:

Global demand for refined copper is expected to increase ~2.5% in CY2024. China is expected to grow ~3.2% and the rest of world is expected to grow ~1.5%. Demand for refined copper in India is likely to be around 880 KT in FY 2024-25.

Tightness in the concentrate market is likely to continue for the next couple of years with resulting subdued Tc/Rc levels in the short to medium term. Maintenance shutdown planned by many Chinese smelters during Q1 FY25 may offer some short-term relief.

iii. Novelis - Global Flat Rolled Products (‘FRP') - Industry Review & Outlook

Approximately a decade ago, Novelis launched a multi-year strategy to transform and improve the profitability of business through significant

investment in new capacity and capabilities. Novelis leveraged new capacity, global footprint, scale and solid customer relationships to drive volumes and capture favourable supply and demand market dynamics across all end-use markets. With growth in volumes combined with improved pricing, significant increase in scrap inputs, operational efficiencies and high-capacity utilisation rates, Novelis significantly improved the profitability of beverage packaging and specialties products and maintained high margins for automotive and aerospace products to increase total company adjusted EBITDA per tonne from $308 in fiscal 2016 to $510 in fiscal 2024 and turn a net loss of $38 million into $600 million in net income.

However, continuing inflation and geopolitical instability in Europe in fiscal 2023, led to increased global operating costs, including for energy, freight, labour, coatings, and alloys. While many of these operating cost pressures have lessened in recent months, some costs, including for labour and repairs, and maintenance, remain elevated. Elevated interest rates have also increased interest expense on variabk interest rate loans. The challenging inflationary and geopolitical environment is negatively impacting near-term demand in some specialty end-markets, such as building and construction, which is more sensitive to inflation and interest rates. Such elevated costs and reduced demand will continue until economic conditions stabilise. Despite Novelis' results being negatively impacted by higher costs, it was able to partially mitigate a portion of the higher inflationary cost impact through a combination of hedging, passing a portion of higher costs to customers, favourable pricing environments, and utilising recycled materials. Novelis also implemented cost control measures across global operations, including employment, professional services, and travel costs.

The global long-term demand for aluminium rolled products remains strong, driven by anticipated economic growth, material substitution, and sustainability considerations, including increased environmental awareness around PET plastics. However, reduced demand for Can sheet beginning in the second half of fiscal 2023 attributed to the beverage packaging industry reducing excess inventory as supply chains improved and markets adjusted to a more moderated level of beverage packaging demand following the COVID pandemic. Inventory levels across beverage packaging supply chain have now largely normalised.

Increasing customer preference for sustainable packaging options and package mix shift toward infinitely recyclable aluminium are driving higher demand for aluminium beverage packaging worldwide. To support growing demand for aluminium beverage packaging sheet in North America, Novelis broke ground on a 600 KT capacity greenfield rolling and recycling plant in Bay Minette, Alabama, in October 2022. Novelis' plan is to allocate more than half of this plant's capacity to the production of beverage packaging sheet. Novelis continues to evaluate opportunities for additional capacity expansion across regions, where local Can sheet supply is insufficient to meet long-term demand growth.

Long-term demand will continue to grow for aluminium automotive sheet, which drives Novelis' recently completed investments in automotive sheet finishing capacity in Guthrie, Kentucky, and Changzhou, China. This demand has been primarily driven by the benefits that result from using lightweight aluminium in vehicle structures and components, as automakers respond to stricter government regulations regarding emissions and fuel economy, while maintaining or improving vehicle safety and performance. There is increased demand for aluminium in electric vehicles, as the metal's lighter weight can result in extended battery range.

The long-term demand for building and construction and other specialty products is expected to grow due to increased customer preference for lightweight, sustainable materials. Demand for aluminium plate in Asia is to grow, driven by the development and expansion of industries serving aerospace, rail, and other technically demanding applications.

Demand for aerospace aluminium plate and sheet has strengthened as air-travel demand has recovered toward pre-COVID levels. In the longer-term, we believe significant aircraft industry order backlogs for key OEMs, including Airbus and Boeing, will translate into growth in the future and that our multi-year supply agreements have positioned us to benefit from future expected demand.

For a region-wise detailed business overview, please refer to the 10Kfiled by Novelis Inc. dated 6 May 2024 for the year ended 31 March 2024.

Strengths

+ Fully integrated business model.

+ Major player in India across upstream and downstream.

+ Utkal - among the most economical and efficient Alumina producers; with capacity of ~2.5 million MT in FY 2023-24.

+ Increased focus on value-added products (VAP) will enable the Company to dissociate from LME.

+ Leadership in Flat Rolled Products.

Weakness

+ Commodity product (upstream).

+ Upstream business linked to LME volatility.

Opportunities

+ Immense headroom for growth in India; per capita aluminium consumption in India is at 1/4th the global average.

+ Rising aluminium consumption in end -use segments like Building & Construction, Automotive, Packaging, and Consumer Durables

+ Substitution opportunity versus steel, uPVC, wood, among others.

+ Smaller market share in extrusions and foils.

+ Light-weighting initiatives in commercial vehicles, personal mobility, etc. leading to higher adoption of Aluminium in the country.

+ Ongoing PLI scheme of the Government of India for White Goods and proactive trade measures by the Government to help in import substitution.

Threats

+ LME, Forex, and raw material price volatility.

+ Competition from China in downstream.

+ Rising imports of scrap.

+ Increasing imports of VAP from the Free Trade Agreement (‘FTA') countries.

+ Domestic availability/ shortage of resources (mainly coal)

Strengths

+ World's largest producer of flat-rolled aluminium products and global footprint, fitting global customer base.

+ World's largest recycler of aluminium translating into low-carbon footprint and relative independence from upstream primary metal suppliers.

+ Strong commitment to sustainability and recycling

+ Diverse product portfolio including a more recession-resistant beverage packaging end-market.

+ Significant investment in research and development, enabling innovative and specialised products.

+ Strong customer base with long term contracts.

Weakness

+ Dependence on global supply chain and exposure to disruptions due to geopolitical issues, trade policies, or natural disasters.

+ Reliance on third-party suppliers for raw materials (metal and non-metal).

Opportunities

+ Increasing demand for lightweight, fuel-efficient vehicles offers significant growth opportunities for automotive aluminium products.

+ Advances in recycling technologies can improve efficiency and reduce costs, further enhancing Novelis' competitive advantage in sustainability.

+ Digitalising the value chain, including implementing a ‘Plant of the Future' operating model would drive efficiency gains and overall operational excellence.

+ Building on existing sustainability leadership by expanding recycling capabilities

Threats

+ Stricter and constantly evolving environmental regulations and trade policies could increase compliance costs and require continuous monitoring.

+ Advances in alternative materials or technologies could reduce the demand for aluminium products.

+ Geopolitical instability, increasing tariffs, and protectionist measures could impact Novelis' customers resulting in an indirect impact on Novelis.

+ A global focus on sustainability and competition for scrap input materials could result in scrap becoming expensive.

Strengths

+ A balanced portfolio of revenue streams to tide through a volatile market.

+ Secured concentrate supply via long-term contracts with miners.

+ Focus on VAP like copper rods and Inner Grooved Tubes (IGT), first-of-its-kind special alloys.

Weakness

+ Dependence on imported copper concentrate

Opportunities

+ Immense headroom for growth due to lower consumption vs global average.

+ Strong demand for copper, particularly in EV and electrical segments.

Threats

+ Mine disruptions.

+ Duties & Free Trade Agreement and trade policies.

Operational Overview:

The Company delivered a robust performance in its aluminium business in FY 2023-24 supported by higher volumes, lower operating costs, and better operational efficiencies. The production of primary aluminium stood at 1.331 million MT in FY 2023-24 versus 1.322 million M" in the previous year. Overall alumina production stood at 3.665 million MT versus 3.525 million MT in FY 2022-23. Utkal Alumina recorded production of 2.450 million MT in FY 2023-24 and continues to be among the most economical and efficient alumina producers globally, providing strong support to most of Hindalco's India smelting facilities, leading to better cost optimisation and quality input material (alumina). The overall third-party sales of metal in all forms were at 1.372 million MT in FY 2023-24 against 11.350 million MT in FY 2022-23, up 2% Y-o-Y on account of higher downstream sales supported by market recovery this year. Production of aluminium VAP was higher by 5% Y-o-Y at 367 KT in FY 2023-24 vs 350 KT in the previous year. Third-party sales of aluminium VAP were higher by 5% at 370 KT in FY 2023-24 vs 354 KT in FY 2022-23.

Trends of total alumina production, and aluminium production and sales in the past 5 years is shown in the graph:

Aluminium Upstream

Revenue for Hindalco's aluminium upstream segment was down 2%, at 132,382* crore in FY 2023-24 from 133,010* crore in FY 2022-23 on account of lower average aluminium prices. EBITDA was up 9% at 19,161 crore versus 18,402 crore a year earlier supported by lower input costs. The EBITDA margins were at 28% in FY 2023-24, which continues to be one of the best in the industry.

Note: In the consolidated financial statements, within the aluminium segment, the significant entities are Hindalco and Utkal Alumina International Ltd. Utkal Alumina is a wholly owned subsidiary of Hindalco and supplies a substantial quantity of its production to Hindalco hence we have analysed the combined performance of Hindalco's aluminium business along with Utkal Alumina.

Aluminium Downstream

Revenue for Hindalco's aluminium downstream segment was 110,531* crore in FY 2023-24, down 4% Y-o-Y. EBITDA at 1573 crore was down 9% versus 1627 crore a year earlier due to lower realisations and unfavourable product mix.

* The above numbers are without elimination of Inter-segment revenue.

Operational Overview:

The Copper business delivered its best-ever operational and financial performance during FY 2023-24. Production of copper cathode was 368 KT in FY 2023-24, down 10% from the previous year impacted by planned maintenance shutdowns in the initial quarters. Production of continuous cast rods* was at a record 488 KT in FY 2023-24 versus 409 KT in FY 2022-23.

Total copper metal sales in all forms were at a record 506 KT in FY 2023-24, up 15% compared to 439 KT in the previous year which was in-line with the market demand. The sales of copper VAP (Copper Rods) were at a record 389 KT in FY 2023-24, up by 12% Y-o-Y, versus 347 KT in the previous year. The share of VAP (Copper Cathode Rods) to total metal sales was 77% in FY 2023-24, from 79% in the previous year.

Financial Overview:

Copper segment revenue for FY 2023-24 was at 149,321* crore (vs. 141,702* crore in FY 2022-23), up 18% on account of higher volumes in FY 2023-24. Copper business recorded an all-time high EBITDA of 12,616 crore (vs. 12,253 crore in FY 2022-23), up 16% Y-o-Y, on account of stable operations, higher domestic sales, and better Tc/Rc in FY 2023-24.

Operational Overview:

Driven by its purpose of shaping a sustainable world together. Our ambition is to be the leading provider of low-carbon, sustainable aluminium solutions and to achieve a fully circular economy by partnering with our suppliers and customers in beverage packaging, automotive, aerospace, and specialties (a diverse market including building and construction; signage; foil and packaging; commercial transportation; and commercial and consumer products, among others) markets throughout North America, Europe, Asia, and South America. We have recycling operations in many of our plants to recycle both post-consumer and post-industrial aluminium.

In FY 2023-24, total shipments were down 3% over the past year, at 3.673 million MT. The decrease in shipments is mainly due to lower beverage packaging shipments driven by customer inventory reductions in the first half of the fiscal year as well as softer demand for specialties products in a weaker macro-economic environment, partially offset by higher automotive shipments on strong demand.

With customer inventory reductions complete, beverage packaging shipments increased sequentially each quarter of fiscal 2024 and demand continues to strengthen.

In FY 2023-24, the share of beverage can sheet shipments were 57%, automotive body sheet shipments were at 21%, and specialities and aerospace shipments were at 19% and 3%, respectively. Novelis leveraged its extensive recycling footprint and favourable market conditions to utilise 63% recycled content in its shipments in the reporting period.

Novelis operates in four key geographies: North America, Europe, Asia, and South America. In North America in FY 2023-24 total third party shipments were at 1,513 KT down from 1,515 KT in FY 2022-23, due to strong demand in beverage packaging and automotive end markets, offset by lower specialties end-market demand impacted by high inflation and interest rates. In Europe, the Novelis shipped 967 KT in FY 2023-24, a decline from 998 KT in FY 2022-23 due to weaker consumer demand in the beverage packaging and specialties markets, partially offset by stronger demand in the automotive end market. In Asia, Novelis shipped 623 KT of rolled products in FY 2023-24 versus 678 KT in the previous year, predominantly due to destocking of beverage packaging and weaker consumer demand. In South America, Novelis shipped 570 KT in FY 2023-24, down from 599 KT in the previous year, due to the impact of beverage packaging destocking across the supply chain in this region. In FY 2023-24, Novelis reported an overall EBITDA/tonne of $510 an increase from US$478/ tonne in the last year.

Financial Overview:

Novelis' net sales in FY 2023-24 were at $16.2 billion, down 12% from $18.5 billion in fiscal 2023, primarily driven by lower average aluminium prices and a 4% decrease in total shipments compared to the prior year. The decrease in aluminium prices was driven primarily by a 12% decrease in average LME prices compared to the prior year.

Net income from continuing operations (excluding Special Items) of $688 million, a decrease of 12% compared to $781 million in fiscal 2023. The decrease in net income is primarily due to lower beverage packaging and specialty shipments, less favourable metal benefit from recycling due to lower aluminium prices, higher employment costs, favourable inventory timing effect from capitalising high operating costs last year, and higher income tax provision, partially offset by higher pricing, including some cost pass-through to customers, higher automotive shipments, some settling of inflationary cost pressures including energy costs, and favourable foreign exchange. Novelis reported Adjusted EBITDA of $1.873 billion vs $1.811 billion, an increase of 3% Y-o-Y, driven by the same factors described above, excluding the unfavourable impact from a higher income tax provision in the current year.

* Tax-effected special items may include restructuring & impairment, metal price lag, gain/loss on assets held for sale, loss on extinguishment of debt, loss/gain on sale of business.

FINANCIAL ANALYSIS AND OUTLOOK

The Standalone and Consolidated Financial Statements for the financial year ended 31 March 2024, have been prepared in accordance with the Companies Act, 2013 (‘the Act'), Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI Listing Regulations') and Indian Accounting Standards (‘IND AS'). The audited Standalone and Consolidated Financial Statement forms part of this Integrated Annual Report.

Statement of Profit & Loss

Appropriations to Reserves:*

Dividend

For the year ended 31 March 2024, the Board of Directors of your Company has recommended dividend of 1 3.50 per equity share of face value of 1 1 /- each (previous year 1 3.00) to equity shareholders.

Revenue

Hindalco's consolidated revenue was down 3% at 12,15,962 crore in FY 2023-24 compared to 12,23,202 crore in FY 2022-23, largely influenced by lower global aluminium prices. The graphs below show the split of consolidated revenues by businesses in FY 2023-24 and the trend of revenues over the past five years.

EBITDA

Consolidated EBITDA for FY 2023-24 was up 7% to 125,728 crore from 124,131 crore in the previous year.

This was driven by higher EBITDA in the Aluminium Upstream and Copper businesses in India. The EBITDA margin in FY 2023-24 was at 11.9% compared to 10.8% in FY 2022-23. The graphs show the consolidated EBITDA split by businesses in FY 2023-24 and trends over the past 5 years.

Finance Cost

Finance cost was up 6% at ?3,858 crore in FY 2023-24 from ?3,646 crore in FY 2022-23 mainly due to increase in interest cost in Novelis.

Partially same has been offset due to capitalisation of borrowing costs higher by ?211 crore in FY 2023-24 on consolidated basis.

Depreciation and amortisation

(including net impairment loss/ (reversal) of non-current assets)

Depreciation and amortisation (including net impairment loss/(reversal) of non-current assets) increased to 17,881 crore in FY 2023-24 from 17,294 crore in FY 2022-23 led by impairment activities related to the closure of the Clayton facility in New Jersey, USA, amounting to 1177 crore for property, plant, and equipment, and 14 crore for Capital Work-in-Progress in FY 2023-24. Additionally, the impending closure of the Buckhannon facility in West Virginia, USA, led to an impairment of 1154 crore for property, plant, and equipment in the same period.

Exceptional Income/ (Expense)

In FY 2023-24, total exceptional income was at 121 crore compared to 141 crore in FY 2022-23. This decline in exceptional income can be attributed to change in provision for expected cost of disposal of legacy ash lying in ash dykes/ponds, as per rules issued by the Ministry of Environment, Forest and Climate Change (MoEFCC). During the year ended 31 March 2024, in view of the regulatory approval received on closure of few ash dykes/ ponds, the company has reversed provision which is accounted as Exceptional Income.

Taxes

Provision for taxes was at 13,857 crore in FY 2023-24 against 13,144 crore in FY 2022-23. This decrease was due to higher profitability of the Company in FY 2023-24, and the Group's decision to retain the existing tax structure until utilising accumulated MAT Credit and deductions under Chapter VIA of the Income Tax Act. They re-measured the deferred tax liability for the future transition to the new tax regime, writing back 1427 crore of the net deferred tax liability and the company signed an MOU to sell land in Kalwa, Maharashtra, for 1595 crore, to be paid in instalments and 1.5% of project sales revenue. They recognised previously unrecognised capital losses of 1129 crore on Deferred Tax Assets due to expected future capital gains from this transaction.

Profit/ (Loss) after tax

Profit After Tax (PAT) in FY 2023-24 was at 110,155 crore up 1% from 110,097 crore a year ago. The net profit margin in FY 2023-24 was at 4.7% versus 4.52% in FY 2022-23.

Consolidated Net Debt to EBITDA

The consolidated balance sheet continued to remain strong with the Net Debt to EBITDA at 1.21 times at the end of March 2024 versus 1.39 times at the end of March 2023. (Net Debt to EBITDA = Consolidated Business EBITDA/ Consolidated Net Debt)

a) Redemption of Secured Non-Convertible Debentures

Your Company has redeemed the following Unsecured, Listed, and Non-Convertible Debentures on its maturity date.

The aforesaid debentures are listed on National Stock Exchange of India Limited.

b) Issue of Non-Convertible Debentures

During the year under review, your Company has not allotted any Unsecured, Rated, Listed, Redeemable, Non-Convertible Debentures.

i. Debtors Turnover (Days)

The Consolidated Debtors Turnover Days on 31 March 2024 was 28 days compared to 30 days on 31 March 2023. This displays the Company's consistency in managing its credit with customers and reflects the Company's strong financial position with respect to its customers. The Debtor Turnover (Days) is calculated as Average Debtors/Total Consolidated Sales x 365 days.

ii. Inventory Turnover (Days)

The Consolidated Inventory Turnover Days on 31 March 2024 was at 71 days versus 71 days at the end of 31 March 2023. This indicates the Company's effective management of its inventory levels throughout the year. Inventory (days) is calculated by dividing the Average Inventory by Revenue from Operations x 365 days.

iii. Interest Coverage Ratio

The Consolidated Net Interest Coverage Ratio on 31 March 2024 stands at 6.67 times compared to 6.62 times on 31 March 2023. This is higher from the previous year because of higher earnings (EBIT). This ratio reflects the Company's ability and strength to meet its interest obligations.

iv. Current Ratio

The Consolidated Current/Liquidity Ratio as on 31 March 2024 stands at 1.48 times versus 1.51 times at the end of 31 March 2023 and is reflective of the Company's strengthening of liquidity or solvency position compared to the previous year.

v. Debt to Equity Ratio

The Consolidated Debt-to-Equity Ratio as on 31 March 2024 is well below 1.0x, at 0.53x times compared to 0.64x times as on 31 March 2023. This is indicative of the Company's strong balance sheet and ability to meet its current short-term obligations.

vi. Return on Net Worth (RoNW)

The Consolidated Return on Net Worth as on 31 March 2024 is 10.11%, compared to 11.67% on 31 March 2023. This decline was primarily because of growth in net worth being more than growth in PAT. This is calculated as Profit After Tax/Average Net Worth.

vii. Operating Margins

The Consolidated Operating Margins for FY 2023-24 stands at 11.22% versus 10.25% in FY 2022-23 indicating higher operating profit in the reporting period compared to the previous year. Operating Margin is calculated as Operating Profit/Net Sales.

viii. Net Profit Margins

The Consolidated Net Profit Margins as on 31 March 2024 stands at 4.7% compared to 4.52% as on 31 March 2023. The increase is on account of higher consolidated profits recorded during the reporting period. It is calculated as Net Profit/ Net Sales.

Consolidated Cash flow:

Cash generated from operations for Hindalco Consolidated stands at 124,056 crore in FY 2023-24 versus 119,208 crore in FY 2022-23.

The table below shows the comparative movement of cash flows:

Standalone Performance

On Standalone basis, your Company registered a revenue of 183,009 crore for the fiscal year 2024 vs 176,878 crore in the previous year up 8% on account of higher volumes in FY24. EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) stood at 18,203 crore, up 2% compared to the last year, supported by higher volumes, better margins, strategic product mix, stability in operations, and continued outstanding performance of its copper business. Depreciation (including net impairment loss/ (reversal) of non-current assets) was up 2% at 11,961 crore in FY24 versus 11,927 crore in FY23. The Finance Cost was 2% lower at 11,268 crore in FY24 versus 11,300 crore in FY23. The reduction of 1131 crore in finance cost was due to pre-payment and repayment of debts made during the year. Additionally, interest capitalised during the financial year increased by 152 crore due to a rise in the average borrowing cost, which was 8.63% in FY 2023-24, up from 6.61% in the previous year. This reduction was partially offset by an increase of 1211 crore in finance cost for working capital loans. Profit before Tax (and Before Exceptional Items) stood at 14,974 crore, up 3% compared to the previous year due to higher EBITDA. Net Profit for FY24 stood at 13,697 crore as compared to 13,326 crore, up 11% Y-o-Y.

Business Outlook

Hindalco's relentless focus is on product innovation, better efficiencies, digitalisation, and organic expansions, with a diversified product mix and cost competitiveness. The Company's long-term strategic investments in Novelis and the India downstream expansion projects will strengthen its presence across the value chain.

Global long-term demand for aluminium rolled products remains strong, driven by positive economic growth outlook, material substitution, and sustainability considerations. However, reduced demand for Can sheet beginning in the second half of fiscal 2023 is attributed to the beverage packaging industry reducing excess inventory as supply chains improved and markets adjusted to a more moderated level of beverage packaging demand following the COVID pandemic. We believe inventory levels across the beverage packaging supply chain have now largely normalised, and demand for recyclable aluminium beverage packaging will grow at a globally (excluding China) 4% CAGR between 2023 to 2031, mainly driven by sustainability trends.

Demand for aluminium sheet across specialties markets, including electronics, electric vehicle battery enclosures, painted products, container foil, and building and construction markets also remains strong over the long term. This is due to increased customer preference for lightweight, sustainable materials, despite current economic headwinds impacting near-term demand for building and construction and some industrial products.

The automotive segment is poised to display strong near-and long-term demand and is expected to grow at a CAGR of 7% between 2023 and 2028. This demand has been primarily driven by the benefits that result from using lightweight aluminium in vehicle structures and components, as automakers respond to stricter government regulations regarding emissions and fuel economy, while maintaining or improving vehicle safety and performance. We are also seeing increased demand for aluminium for electric vehicles, as aluminium's lighter weight can result in extended battery range.

Requirement for aerospace aluminium plate and sheet has strengthened as demand for air travel has recovered towards pre-COVID levels. In the longer-term, we believe significant aviation industry order backlogs will translate into future growth and our multi-year supply agreements have positioned us to benefit from expected demand in future.

Continuing inflation and geopolitical instability in Europe in fiscal 2023 led to increased global operating costs, including energy, freight, labour, coatings, and alloys. While many of these operating cost pressures have moderated in recent months, some costs, including for labour and repairs, and maintenance, remain elevated. Elevated interest rates have also increased interest expense on our variable interest rate loans. The challenging inflationary and geopolitical environment is negatively impacting near-term demand in some specialty end-markets, such as building and construction, which is more sensitive to inflation and interest rates. We expect such elevated costs and reduced demand until economic conditions stabilise. Despite our results being negatively impacted by higher costs, we have been able to partially mitigate a portion of the higher inflationary cost impact through a combination of hedging, passing through a portion of the higher costs to customers, favourable pricing environments, and utilising recycled materials. We have also implemented cost control measures across our global operations, including a focus on employment, professional services, and travel costs. There is no assurance that we will continue to be able to mitigate these higher costs in the future.

Domestic copper demand is primarily fuelled by rods, a key downstream product in the copper industry. Hindalco has successfully increased its market share and met the rising domestic demand by expanding its copper value-added product (VAP) capacity, particularly through the production of rods and inner grooved tubes.

In its commitment to strengthen its position as a sustainability leader in the industry, Hindalco has set strategic priorities and allocated capital to foster organic growth in India and Novelis. These initiatives also emphasise enhancing value through (ESG) practices.

Research, Development & Technology

The Company's Research, Development & Technology (RD & T) activities are managed by dedicated technology teams at Hindalco Innovation Centres. The team's main focus is the development and commercialisation of premium differentiated products, improving our competitive cost position and product quality through process improvements and new process technologies. To support these goals, we are managing a pipeline of short-term and long-term technology programmes at 4 Hindalco Innovation centres in collaboration with the Aditya Birla Group's global research and development hub (The Aditya Birla Science and Technology Company), and external research institutes. The project portfolio addresses immediate needs for technologies, as well as the exploration of future opportunities.

This year, the technology team continued to make our processes greener and sustainable through value added products and applications. These initiatives helped our plants mitigate challenges of raw material quality, specific energy consumption, carbon footprint, cost effective management of waste, and recovery of value from by-products and waste products. Specific programmes such as CO₂ mineralisation with technology start-up Carbon 8 have been initiated. We continued our digitalisation programmes such as soft sensors, digital twins, etc. These initiatives are helping operation teams improve process control and achieve desired process performance. Technical competencies developed by the Company will go a long way in quick absorption/ adoption technologies to elevate economic performance and improve our new product/ new application pipeline to address impending market opportunities.

Bauxite & Alumina RD&T: Hindalco Innovation Centre (HIC) Alumina at Belagavi continued to focus on bauxite ore & alumina refining processes and specialty alumina, hydrate products & their applications. This HIC is helping the Aditya Refinery Project team on basic technology engineering and evaluation of bauxite samples. This year, key projects on development of boehmite for battery separator applications, stearic-coated Superfine Hydrates, Bimodal Hydrates, were successfully developed and commercialised in collaboration with the operations and marketing teams. HIC collaborated with a start-up to develop a process for gallium extraction and purification from spent liquor generated during Bayer process. Gallium is a strategic metal, and a process to extract gallium was fulfilled on a request from the Ministry of Mines, Government of India.

Primary Aluminium RD&T: This year we initiated a project to set up a dedicated a Booster Section of 10 pots at Mahan smelter to demonstrate the novel HiPoT 400 kA pot design developed in collaboration with ABSTC. This booster section will help to evaluate and implement inhouse technology at Mahan and Aditya smelters to increase production capacity and reduce specific energy consumption. The technology team continued to implement a range of technology solutions, which includes next generation Cu-onsert & Cu-insert collector bars, at smelters. The team has been working to develop inhouse advance process control at Aditya smelter.

Aluminium downstream RD&T: HIC-Semifab team along with SMEs are continuing research on optimising the product quality and developing new products and applications. This year, the technology team successfully developed battery-grade aluminium foils, which are being evaluated by customers. New aluminium alloy plates for Aluminium-Air batteries were also developed in collaboration with ABSTC and Phinergy, Israel. The technology team continued to focus on reducing the dependence on premium aluminium imports by developing solutions such as peripheral coarse grain-controlled alloys, that exceed surface and performance targets. The team also delivered high performance material solutions for battery enclosures for use in electric vehicles and continued to develop new light weighting applications in the transport segment.

Copper RD&T: This year HIC-Copper along with ABSTC focused on new technology projects such as evaluation of e-waste recycling process technologies, Cu-Mg alloy rods for railways applications, and new copper Inner Grooved Tubes for air conditioning. Under sustainability initiatives, a novel process was created to extract nickel from effluent stream, which will be used to develop battery grade nickel compounds.

The Company also has series of collaborative programmes with IITs, CSIR labs, as well as national and international start-ups to build competencies in select areas and create long term value. These engagements along with in-house research has resulted in the doubling of patent applications and research publications in international journals and conferences.

Sustainability

At Hindalco, we strive to create value from revenue streams that benefit the planet and people. Our firm commitment to ESG is proven through the fact that we are among the top 1% in the aluminium industry in the S&P Global Sustainability Yearbook 2024 for the third year in a row. We've demonstrated our commitment to addressing critical sustainability issues by working closely with stakeholders across the value chain. This approach reflects our plan for mutual growth, thereby earning the trust of all partners in the process.

At Hindalco, sustainability is driven at the highest level through the Apex Sustainability Committee, chaired by our Managing Director. The committee ensures the

implementation and monitoring of sustainability initiatives across the organisation. Our task forces and ESG SPOCs from all functions work to implement sustainability initiatives at the grassroots. A roadmap to achieve Net Zero by 2050 has been established, and we're already making significant progress. We've installed 173 MW of renewable energy capacity, with plans to scale it up to 300 MW by 2026.

The Company aims to achieve overall water positivity by 2050, with a sub-target of making downstream and mining operations water-positive by 2030. Currently, 5 mines are certified for water positivity by DNV GL. To make our operations entirely water-positive, we have ramped up freshwater conservation efforts using water from treated rainwater sources and desalinated water in the copper business. To achieve Zero Waste to Landfill by 2050, Hindalco extracts value from the waste generated and amplifies its waste recycling. As Currently of date, 3 of Hindalco's plants have been certified Zero Waste to Landfill by Bureau Veritas Industrial Services (India) Pvt. Ltd.

The Company is committed to protecting biodiversity and has developed BMPs for critical sites in collaboration with IUCN, aiming to achieve No Net Loss by 2050. Our industry-first Sustainable Mining Charter and KPIs under 7 thematic areas are the other crucial steps Hindalco has taken to make its mining vertical more sustainable. Hindalco's downstream operations (rolling, extrusions, and foils) and one refinery are now certified by the Aluminium Stewardship Initiative (ASI).

Hindalco engages with local communities to ensure mutual prosperity, which is achieved through programmes in education, healthcare, livelihood, infrastructure, and social reforms. The Company strongly believes in inclusive growth. This motivates Hindalco to deploy all resources necessary to bring about a positive change in the spaces in which it operates.

The initiatives and performance are detailed in the 'Our Capitals' section of this report.

Safety

As a responsible corporate, Hindalco's top priorities are human health and safety. The health and safety policy has been implemented at all plants and mines through robust occupational health and safety management standards.

To achieve the goal of Zero Harm and a good safety performance, various programmes initiated in the past few years are being continued. New initiatives, especially those using digital tools, are being introduced. As all these programmes mature, the safety culture in the organisation is getting strengthened. Improvement in safety indices continued in FY'24 - with a 5% reduction in LTIFR (0.22) and an 18% reduction in LTISR (82.72) from last year.

Although, the reduction in high severity accidents is encouraging and there were no fatalities among employees, the Company lost one contract driver in a vehicle-related accident in the mines. Hindalco regrets this loss and will strive to ensure every measure is in place to avoid any type of harm to the organisation and the community.

Hindalco's entire operations are audited every year, and all the businesses are set to meet the defined health and safety performance requirements and defined targets.

The initiative of leading cross-entity safety audits by business heads/cluster heads has been scaled up. In FY-24 all CEOs, COOs, Head MCOE, and Business heads have led at least one or more corporate cross-entity safety audits at various units and mines. Audits conducted under the leadership of business heads is an industry-first move, and clearly shows Hindalco's commitment to safety and its goal of becoming a zero-harm organisation.

The behaviour-based safety programmes at Hindalco have created a milestone through reinforcement of safe behaviour and reduction in unsafe behaviour. A total of 8,40,945 Behaviour-based Safety Observations and Potential Injury Observations were reported, and 6,67,974 numbers liquidated across Hindalco, against a target reporting of BBSO & Potential Injury Observations of 7,21,512 - a 116% + achievement on reporting side.

Hindalco invested approximately 17,79,734.78 man-hours towards classroom and on-the -job safety training (including direct employees and contract workmen) this year, against a set target of 9,82,104 man-hours. The focus on on-the-job training resulted in a 181.22% increase in man-hours dedicated to training compared to the previous year.

Hindalco's Apex Integrated Health Committee, which is led by a business head, has made all possible efforts related to health monitoring and improvement. This committee has supported the implementation of occupational health risk assessment and management procedures at all Hindalco sites.

Hindalco completed the Qualitative Exposure Assessment (QIEA) and Quantitative Exposure Assessment (QnEA) studies of all its manufacturing plants, and mines scheduled in FY 2023-24 and all recommended action points have been implemented.

All employee health data are recorded and monitored through PEHEL Software. This is also helping in giving the company a view of Health Risk Zones of employees.

In order to enable units to manage travel-related hazards, we introduced mobile apps to track journey risk assessment in FY 2023-24. This app provides real-time updates on route conditions, weather forecasts, and potential risks, enabling travelers to make informed decisions and mitigate dangers before they arise.

Furthermore, the development of specialised software for audit and assurance streamlined safety processes, enhancing efficiency and accuracy in compliance management.

We also leveraged digital platforms for contractor safety management, centralisation of data, and communication to ensure uniformity in implementation of safety standards across plants/ mines. Additionally, remote monitoring technologies transformed confined space job safety by enabling real-time supervision and intervention, which minimised risks to workers, and improved overall safety outcomes.

A comprehensive software solution was introduced to generate monthly safety reports from units and mines, facilitating data aggregation, analysis, and visualisation to drive informed decision-making and proactive safety measures.

These digital initiatives marked significant strides in enhancing safety protocols, thus fostering a culture of prevention, and safeguarding the well-being of workers.

Human Capital

Hindalco has been recognised as one of the top 10 Best Workplaces in Health & Wellness for 2024 by the Great Place to Work (GPTW) Institute. Our high scores in health and wellness signifies our commitments to the collective wellbeing of our people

Shillim, our culture change movement, has been successful in achieving considerable change in mindsets and ways of working. Parallelly, through Parivartan and Tamrodaya interventions at manufacturing locations, we intent to reach the next level of excellence.

As part of our Shillim initiatives, 48000 plus Bhoomika cards were exchanged, and 278 boards were presented as of today. As part of My People Hour (Empowerment by Design)-1900 sessions were conducted, and 617 decisions were devolved. Hindalco is transforming its culture and capability at grassroot level, transitioning to a dynamic cross-functional way of working, focusing on efficiency, innovation, digitalisation, and sustainability.

Our engagement and agility scores in VIBES Survey 2023 have improved by 7% vis-a-vis scores achieved in VIBES 2021 Survey, demonstrating the impact and success of culture change interventions.

We attract and nurture talent by providing experiential learning across our business value chains, intertwining their journey with meaningful CSR experiences during onboarding and induction.

In line with our focus on gender diversity, over the last decade, the number of women in management positions has nearly tripled. Share of women in our workforce stands at 9.8% and 15% for Hindalco India operations and Novelis respectively.

Under the First 10 Best 10 (F10B10) initiative, we are grooming home-grown talent and future leaders for the metals and mining industry. Our emphasis on capability building offers specialised technical and functional career paths. In FY 2023-24, we witnessed approximately 15% internal career movement in management grade only, which is a positive indicator of the above approach.

This year, on Human Rights Day, we celebrated and created awareness across Hindalco, reinforcing our pledge to prioritise human rights in all our endeavours. We launched our Human Rights Due Diligence (HRDD) self-assessment tool across all our units and conducted external audits of the HRDD tool at our Odisha plants and Gare Palma Mines.

Internal Control Systems and Adequacy of Internal Financial Controls:

The Company has an internal control system commensurate with the size, scale, and complexity of its operations.

The aim of the internal control system is to manage business risks with a view to enhance shareholder value and safeguard the Company's assets. The Company has in place a robust mechanism for internal audits led by with a dedicated Assurance & Control Function comprising specialists. The Internal Auditor is duly appointed by the Audit Committee and Board., viz. M/s. Ernst & Young for the Aluminium & Copper businesses. The Audit Committee discusses audit plans and significant audit observations made by the internal auditor for necessary corrective actions.

Our internal financial control framework is designed to ensure the accuracy and reliability of our financial and other records. Plus, we have identified and documented key risks and controls for each process related to financial operations and reporting. An extensive programme of internal audits and management reviews supplement the process of the framework.

(i) Meetings of the Board

During the year under review, six (6) Meetings of the Board of Directors were held. The details of the Meetings of the Board of Directors of the Company held and attended by the Directors during the financial year 2023-24 are given in the Report of Corporate Governance forming part of this Integrated Annual Report.

The maximum interval between any two Meetings did not exceed 120 days, as prescribed by the Act and the SEBI Listing Regulations.

(ii) Board Constitution and Changes

As of 31 March 2024, the Board of Directors comprised 10 Directors (including 2 women Directors), 5 of which were Independent Directors, 3 were Non-Executive Directors (2 were Promoter Directors), Whole-time Director and a Managing Director.

Based on the recommendation of the Nomination and Remuneration Committee ("NRC") and approval of the Board of Directors, the Shareholders accorded their approval on the below mentioned (a) appointments and (b) reappointments, respectively, on 20 March 2024, by way of Resolutions passed via postal ballot.

(a) Appointments

In the opinion of the Board, Mr. Arun Adhikari and Mr. Sushil Agarwal bring the required experience, integrity, expertise, and relevant proficiency to the Board, adding tremendous value in exercising their role effectively. The requisite declarations and eligibility confirmations under the provisions of the Act and SEBI Listing Regulations have been received from them for considering their appointment as Directors.

(b) Reappointments

Resignations

During the year under review, Mr. Anant Maheshwari [DIN: 02963839], resigned as an Independent Director of your Company w.e.f. 18 October 2023, due to personal reasons.

The Board placed on record its sincere appreciation towards the valuable contribution made by Mr. Anant Maheshwari during his tenure.

Retirements

Board has decided not to fill the vacancy caused by the retirement of Mr. Askaran Agarwala [DIN: 00023684], a Director, who retires by rotation at the 65th Annual General Meeting and does not seek reappointment.

The Board placed on record its sincere appreciation towards the valuable contribution made by Mr. Askaran Agarwala during his tenure.

Retirement by Rotation

Mr. Kumar Mangalam Birla [DIN: 00012813], is due to retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Resolution seeking the reappointment of Mr. Kumar Mangalam Birla along with his brief profile, forms part of the Notice of the 65th Annual General Meeting.

(iii) Declaration of Independence

The Company has received the necessary declaration from each Independent Director in accordance with Section 149(7) of the Act and Regulations 16(1)(b) and 25(8) of the SEBI Listing Regulations, that he /

she meets the criteria of independence as laid out in Section 149(6) of the Act and Regulations 16(1)(b) of the SEBI Listing Regulations.

In the opinion of the Board, there has been no change in the circumstances which may affect their status as Independent Directors of the Company and the Board is satisfied of the integrity, expertise, and experience (including proficiency in terms of Section 150(1) of the Act and applicable rules thereunder) of all Independent Directors on the Board.

Further, in terms of Section 150 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, Independent Directors of the Company have included their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs.

(iv) Board Evaluation

The Company believes that the process of performance evaluation at the Board level is pivotal to its Board engagement and effectiveness. The Company overhauled its Board Evaluation process during the year under review thereby with a comprehensive questionnaire comprising of subjective and objective questions thereby broadening the scope and parameters for assessment. The revised criteria for Board Evaluation was duly approved by the NRC on 13 February 2024, according to which the Board conducted annual performance evaluation of its own performance, the Directors individually, as well as the evaluation of the working of its Committees and the Chairman of the Board as mandated under the Act and the SEBI Listing Regulations.

The evaluation criteria for the Board, Committees, Directors, Independent Directors, and Chairperson encompass an assessment of various aspects crucial for effective governance and decision-making within the Company. The Board evaluation is structured around various key areas including the aspects like Board Structure, Meetings, Functions, Sustainability, and Digital Strategy.

The evaluation criteria for Committees additionally focuses on their mandate, composition, effectiveness, contribution to board decisions and inclusivity.

Similarly, for all Directors including the Independent Directors, the evaluation criteria encompass their understanding of roles and responsibilities, the external knowledge and perspectives they bring to the table, active participation in discussions, continuous updation and preparation.

Additionally, specific criteria are included for Independent Directors and Chairpersons to evaluate their adherence to regulatory requirements and effectiveness in leading and fostering inclusive board dynamics, respectively.

The evaluation is conducted through an online mode in a confidential manner and the Directors provide their feedback by rating based on various metrics.

The inception of Board's evaluation process was approved by the Board in year 2014. Basis the framework the results of the evaluation was placed before the NRC and Board. The evaluation framework has been overhauled in February 2024, with the inclusion of a detailed assessment that indicates a proactive approach to adapting governance practices to cater to the need of the hour. Below is a highlight of structured overview of the changes and their implications:

1. Scale Revision: The evaluation scale has evolved from a 3-point scale (Completely Agree, Somewhat Agree, Disagree) to a more nuanced 5-point scale (Strongly Agree, Agree, Neutral, Disagree, Strongly Disagree). This change allows for finer distinctions in feedback, providing clearer insights into the Board's performance.

2. Expanded Focus Areas: The evaluation now encompasses broader responsibilities:

a) Board Composition and Inclusivity:

Ensuring diverse perspectives and skills.

b) Effectiveness: How well the Board functions as a strategic entity.

a) Balancing Stakeholder Interests: Reflects a more stakeholder-centric approach.

b) Strategic Guidance: Assessing the Board's role in setting and achieving strategic goals.

c) Safeguarding Long-term Interests:

Emphasises sustainability and ethical considerations.

d) Awareness of Legal Compliance:

Ensuring adherence to relevant laws and regulations.

a) Investment of Time: Understanding the company's unique needs through dedicated effort.

b) External Perspective: Bringing external insights to board discussions.

c) Expression of Opinion: Active participation and contribution in board deliberations.

2. Descriptive Questions: Inclusion of open-ended questions allows for qualitative feedback and suggestions from Board members. This promotes continuous improvement in governance practices.

1. Feedback: Recommendations from the Board members are discussed with the independent directors at their separate meeting and subsequently with the NRC and the Board, wherein the evaluation and suggestions are considered.

2. Actionable Steps: The company has taken steps to implement suggestions, demonstrating a commitment to evolving and strengthening governance processes.

B. Committees of the Board

The Board has constituted seven (7) committees, viz. Audit Committee, Corporate Social Responsibility Committee, Risk Management Environment Social and Governance ("RM&ESG"), Committee, Nomination and Remuneration Committee, Stakeholders' Relationship Committee, Prevention of Insider Trading, Finance Committee and is authorised to constitute other functional Committees, from time to time, depending on business needs.

Details with respect to the composition, terms of reference, number of meetings held, etc. of the above Committees are included in the Corporate Governance Report, which forms part of this Integrated Annual Report.

C. Key Managerial Personnel (KMP)

In accordance with the provision of Sections 2(51) and 203 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Key Managerial Personnel of your Company are:-

1. Mr. Satish Pai, Managing Director;

2. Mr. Praveen Kumar Maheshwari, Chief Financial Officer & Whole-time Director and

3. Ms. Geetika Anand, Company Secretary.

During the year under review, there has been no change in the Key Managerial Personnel.

D. Remuneration of Directors and Employees

The Managing Director's goals are defined by the Company's 3C (Customer, Care and Cost) + 2S (Safety & Sustainability, Systems & Processes) principle.

Customer centricity and product development is a focus area with dedicated objectives on sales and customer satisfaction. The cash and cost goals focus on profitability, cash flows, production and cost optimisation. The sustainability goals cover Hindalco's performance in air, water, waste, biodiversity, climate management and overall ESG performance. System and process goals cover digitalisation, H R planning and driving culture. Performance evaluation is linked to the achievement of these goals. ESOPs are allocated based on performance, and vesting depends on the performance of the business in the preceding year.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is given in Annexure I to this Report. In accordance with the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees drawing remuneration in excess of the limits, set out in the aforesaid rules, forms part of this Report. In line with the provisions of Section 136(1) of the Act, the Report and Accounts, as set out therein, are being sent to all the Members of your Company, excluding the aforesaid information about the employees. Any Member, who is interested in obtaining these particulars about employees, may write to the Company Secretary at hilinvestors@adityabirla.com

E. Employee Stock Option Schemes and Share Based Employee Benefits:

Employee stock options is a conditional share plan for rewarding performance on pre-determined performance criteria and continued employment with the Company.

In terms of the provisions of applicable laws and pursuant to the approval of the Board and the Members of your Company, the N RC has duly implemented the following schemes:

a) Hindalco Industries Limited Employee Stock Options Scheme 2013 ("Scheme 2013")

b) Employee Stock Option Scheme 2018 ("Scheme 2018")

c) Hindalco Industries Limited Employee Stock Option and Performance Stock Unit Scheme 2022 ("Scheme 2022")

The above Schemes are in line with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations"). The details as required to be disclosed under the SBEB Regulations can be accessed at www.hindalco.com

A certificate from the Secretarial Auditors, with respect to the implementation of the Company's ESOS schemes in accordance with Regulation 13 of the SEBI SBEB Regulations, would be placed before the Shareholders at the ensuing Annual General Meeting. A copy of the same will also be available for inspection through electronic mode.

F. Related Party Transactions

Ambit of related party and related party transactions ("RPTs") has been expanded pursuant to the SEBI amendments from time to time. Accordingly, approval and disclosure requirements for RPTs have also been strengthened, within your organisation.

During the year under review, all contracts, arrangements, and transactions entered into by your Company with related parties were on an arm's length basis and in the ordinary course of business. There were no material transactions with any related party as defined under Section 188 of the Act, read with the Companies (Meetings of Board and its Powers) Rules, 2014. All RPTs were approved by the Audit Committee and reviewed by it on a quarterly basis. Prior omnibus approval is obtained for RPTs that are repetitive in nature, entered in the ordinary course of business, and on an arm's length basis.

The Company did not have any contracts or arrangements with related parties in terms of Section 188(1) of the Act. Accordingly, the disclosure of RPTs as required under Section 134(3)(h) of the Act in Form AOC-2 is not applicable to the Company for financial year 2023-24 and hence does not form part of this Report.

Pursuant to SEBI Listing Regulations, the resolution for seeking approval of the Shareholders on material RPTs for transactions to be entered in FY25 is being placed at the ensuing Annual General Meeting.

Details of RPTs entered into by your Company, in terms of Ind AS-24 have been disclosed in the notes to the standalone / consolidated financial statements forms part of this Report.

In line with the requirements of the Act and the SEBI Listing Regulations, your Company has formulated a Policy on RPTs. The Policy is available on the Company's website at www.hindalco.com

G. Dividend Distribution Policy

In terms of Regulation 43A of the SEBI Listing Regulations, your Company has formulated a Dividend Distribution Policy, with an objective to provide the dividend distribution framework to the Stakeholders' of your Company. The policy sets out various factors, which are considered by the Board in determining the dividend pay-out. The policy is annexed as Annexure II to this Report and is also available on the website of your Company at www.hindalco.com

H. Subsidiary, Associates & Joint Venture Companies

Pursuant to the provisions of Section 129(3) of the Act, read with the Companies (Accounts) Rules, 2014 and in accordance with applicable accounting standards, statement containing the salient features of financial statements of your Company's subsidiaries, associates and Joint Venture Companies are provided, in prescribed Form AOC-1 is annexed as Annexure III to this Report.

Your Company has adopted a policy on determination of material subsidiaries in line with the SEBI Listing Regulations. The policy aims to determine the material subsidiaries of your Company and to provide the governance framework for such subsidiaries.

Utkal Alumina International Limited and Novelis Inc. are material unlisted subsidiaries of your Company. Your Company does not have any material listed subsidiary.

In accordance with Section 136 of the Act, the audited financial statements, including the consolidated financial statements and related information of your Company and audited financial statements of your Company's subsidiaries, joint ventures / associate companies, are available on our website, at www.hindalco.com

I. Corporate Social Responsibility

In terms of the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has constituted a Corporate Social Responsibility ("CSR") Committee, chaired by Mrs. Rajashree Birla. The other Members of the Committee are Mr. Yazdi Dandiwala, Independent Director, Mr. Sudhir Mital, Independent Director (w.e.f. 1 May 2024), Mr. Askaran Agarwala, Non-Executive Director and Mr. Satish Pai, Managing Director. Dr. (Mrs.) Pragnya Ram, Group Executive President, Group Head - CSR, Legacy Documentation & Archives & Corporate Communication is a permanent invitee to the Committee.

Your Company also has in place a CSR Policy and the same is available on the Company's website at www.hindalco.com

Your Company is a caring corporate citizen and lays significant emphasis on development of the communities around which it operates.

Your Company has identified several projects relating to Social Empowerment & Welfare, Infrastructure Development, Sustainable Livelihood, Health Care and Education during the year and initiated various activities in neighboring villages around plant locations. During the year, the Company has spent I 47.86 crore [Rupees Forty-seven crore and eighty six lakhs only] towards both Ongoing Projects and other than Ongoing Projects and has transferred I 47 crore [Rupees Forty seven crore only] to an unspent CSR account relating to Ongoing Projects.

The Annual Report on CSR activities is annexed as Annexure IV to this Report.

J. Conservation of Energy, Technology and Foreign Exchange Earnings & Outgo

The particulars, as prescribed under Section 134(3)(m) of the Act, read with the Companies (Accounts) Rules, 2014, are annexed as Annexure V to the Directors' Report, which forms part of this Report.

The details of the Foreign Exchange Earnings and Outgo are as follows:

K. Risk Management

Pursuant to the requirement of Securities and Exchange Board of India (Listing and Disclosures Requirement) Regulations, 2015, the Company has constituted Risk Management and ESG Committee (‘RM & ESG'), which is mandated to review the risk management plan/process of your company. The Company has a Risk Management Policy in place and regularly reviewed by Risk Management and ESG Committee. The policy is applicable across all our operations and is uploaded on the website of the Company at www.hindalco.com.

We have an established risk governance framework that enables proactive decision-making and ensures the organisation remains resilient. At Apex level, we have the Board level RM&ESG, headed by one of the Board members and comprising Managing Director (‘MD'), Chief Financial Officer (‘CFO') and Independent Directors as members. The invitee to these meetings are Chief Risk Officer (‘CRO'), Head of Treasury, Company Secretary, Head of Sustainability and business heads depending on the agenda matters. The committee meets every quarter and provides guidance and strategic direction for effective risk management, with oversight on risk exposure. Committee also ensures that appropriate methodology, processes, and systems are in place to evaluate and monitor risks associated with the business of the Company and reviews the adequacy of the risk management practices and actions deployed by the management for identification, assessment, mitigation, monitoring and reporting of key risks to the achievement of business objectives. We also have Risk Steering committee and Plant Risk committee comprising of various members such as direct reports of MD, plant heads, functional heads etc. These committees ensure identification, mitigation, and review of risks at various levels. Risk owners, Mitigation owners, Risk Champion and Risk coordinators are mapped for management of various risks at different levels.

Hindalco ERM framework incorporates guidelines from international frameworks including COSO and ISO 31000 and benchmark industry practices while also be tailored to suit the business objectives of the company. The framework is fully integrated with our strategic priorities. Responsibility of ERM process implementation is with Central ERM team while accountability of managing risks is with the business.

The CRO is responsible for the functioning of enterprise risk management and heads the central risk management team. The latter is the custodian of the risk management process at all locations. To manage the risks at the grassroots we have an established team structure at cluster, site, and department levels. These teams are responsible for implementing risk mitigation plans and report to the Risk Management Head at regular intervals. The ERM process being data intensive, an advanced IT system has been deployed across the organisation for management of risks through real-time dashboards. The digital system supports risk analytics and helps in developing a uniform risk culture as the same ERM framework is used from identification to reporting and reviewing risks.

Risk management and compliance with risk procedures are a part of the Key Result Areas (KRAs) of senior management and is linked to their variable incentives.

The year has been disruptive for the global business environment, with the various Geo-political events, Climate change, Supply chain disruption through Red Sea, increased vulnerabilities to Artificial intelligence to name a few. The Company remained vigilant of the ever changing macroeconomic, geopolitical situation, ESG landscape and global financial market sentiments to proactively manage risks in FY 2023-24. Identification and monitoring of Key risk indicators and mitigation plans has enabled us to become resilient to uncertainties and deliver the performance. The risk management framework is audited internally and externally during the Integrated Management System (IMS) audits. In addition, we regularly monitor and evaluate existing and emerging risks.

L. Vigil Mechanism

Your Company has in place a robust vigil mechanism for reporting genuine concerns through the Company's whistle-blower Policy. Your Company has implemented a whistle-blower policy for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud, or violations of your Company's Code of Conduct. Adequate safeguards are provided against victimisation for those who avail the mechanism and direct access to the Chairperson of the Audit Committee is provided in exceptional cases.

The whistle-blower policy is available on your Company's website at www.hindalco.com

M. Nomination Policy and Executive Remuneration Policy / Philosophy

Your Company's remuneration policy is directed towards rewarding performance based on the review of achievements. The remuneration policy aligns with existing industry practices, and there has been no change in the policy during the year.

The Remuneration Policy of your Company, formulated by the NRC of the Board, is annexed as Annexure VI to this Report and also available on your Company's website at www.hindalco.com

We affirm that the remuneration paid to the Directors is in accordance with the terms laid out in the Nomination and Executive Remuneration Policy of the Company.

N. Business Responsibility and Sustainability Report

In accordance with Regulation 34(2)(f) of the SEBI Listing Regulations, the Business Responsibility and Sustainability Report ["BRSR"] forms part of this Integrated Annual Report. The report describes initiatives undertaken by the Company from an environmental, social and governance perspective. Further, SEBI vide its circular no. SEBI/HO/ CFD/CFD-SEC-2/P/CIR/2023/122 dated 12 July 2023, updated the format of BRSR to incorporate BRSR core, a subset of BRSR, indicating specific Key Performance Indicators (KPIs) under nine ESG attributes, which are subject to mandatory reasonable assurance by an independent assurance provider. In accordance with this requirement, the Company has appointed Bureau Veritas (India) Private Limited as the assurance provider for BRSR core.

O. Directors' Responsibility Statement

Your Directors state that:

a) in the preparation of the annual accounts, applicable accounting standards have been followed along with proper explanations relating to material departures if any;

b) accounting policies selected have been applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your company for that period;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records

in accordance with the provisions of the Act for safeguarding the assets of your company and for preventing and detecting fraud and other irregularities;

d) the annual accounts of your Company have been prepared on a ‘going concern' basis;

e) Your Company had laid down internal financial controls and that such internal financial controls are adequate and were operating effectively;

f) Your Company has devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively;

g) Your Company has been in compliance with the applicable Secretarial Standards issued by the I nstitute of Company Secretaries of India.

P. Audit and Auditors: FY 2023-24

Q. Corporate Governance

Your Company is committed to maintain the highest standards of Corporate Governance and adheres to the Corporate Governance requirements set out by the SEBI. The Corporate Governance Report as stipulated under the SEBI Listing Regulations forms part of this Integrated Annual Report.

Your Company has duly complied with the Corporate Governance requirements as set out under Chapter IV of the SEBI Listing Regulations and M/s. Dilip Bharadiya & Associates, Company Secretaries, vide their certificate, have confirmed that your Company is and has been compliant with the conditions stipulated in the Chapter IV of the SEBI Listing Regulations. The said certificate is annexed as Annexure VIII to this Report.

Guarantees and Investments

Details of Loans, guarantees and investments covered under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, as on 31 March 2024, forms part of the Notes to the financial statements provided in this Integrated Annual Report.

S. Extract of Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return of the Company in Form MGT-7 for FY 2023-24, is available on the Company's website at www.hindalco.com

T. Disclosures Pursuant to the "Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013"

The Company has Zero Tolerance towards sexual harassment at the workplace. A detailed POSH Policy is in place as per the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act").

The POSH Policy of the Company is available on the Company's website at www.hindalco.com and all employees (permanent, contractual, temporary, trainees) as defined under the Act are covered by this Policy.

HINDALCO

Hindalco won Energy Transition Changemaker Award at COP28 held in Dubai

The objective of this policy is to provide an effective complaint redressal mechanism in case of any occurrence of sexual harassment.

The Company has also set up an Internal Complaints (IC) Committee at all locations, duly constituted in compliance with the provisions of the POSH Act. Additionally, the Company conducts interactive sessions for all employees to build awareness about the policy and the provisions of the POSH Act.

During the year under review, the Company received ten (10) complaints of sexual harassment. Of these, six (6) complaints were investigated and resolved as per the provisions of the POSH Act, and investigations are continuing for the remaining four (4) complaints.

UNITS & MINES

+ Muri won Gold at National Awards for Manufacturing Competitiveness;

+ Muri won National Energy Conservation Award 2023;

+ Aditya won India Manufacturing Excellence Award (Platinum certificate of merit in manufacturing) from Frost & Sullivan;

+ Aditya won F&S Sustainability 4.0 award (Platinum certificate of merit in sustainability) from Frost & Sullivan;

+ Aditya won Platinum award in 'Best Application and uses of Digitalisation & Technology for Safety' from CII National EHS Circle;

+ Aditya won Energy Management Leadership award from Clean Energy Ministerial platform of United Nations Industrial Development Organisation for leadership in energy management - 2023;

+ Aditya won State Pollution Control Excellence Award 2023 from Govt of Odisha - OSPCB;

+ Aditya won UNDP Mahatma Award for Biodiversity management from Mahatma Foundation;

+ Aditya won Performance Excellence Award for Best Manufacturing Practices at the IMC Ramkrishna Bajaj National Quality Awards (RBNQA);

+ Aditya's Five Quality Circle Teams won Gold Award in ICCQC'2023 - International convention on Quality Control Circles, Beijing - China - Nov'2023;

+ Aditya's Highest Export in 2020-21 & 2021-22 - Award of Certificate of Excellence for the year 2020-21 by Directorate of Export Promotion and Marketing, GOI;

+ Samri & Bagru Bauxite Mines awarded International Safety Award by British Safety Council, UK;

+ Bagru Mines won Gold award in National Award for Manufacturing Challenges assessment 2023 by International Research Institute for Manufacturing, India; + Samri Bauxite mines won Platinum award in sustainability excellence by FAME National award 2023;

+ Belagavi won CII National Award for Environment Best Practices 2023 for Most Innovative Environment Project; + Belagavi won Unnatha Suraksha Puraskara Safety Awards 2023 by National Safety Council, Karnataka Chapter;

+ Belagavi won India Manufacturing Excellence Award (IMEA) - 2023- Gold Award (861/1200);

+ Belagavi won Gold Award in F&S - Indian Manufacturing Excellence Award (IMEA) and 'Leaders Award' in F&S Sustainability 4.0;

+ Belagavi won Gold in India Green Manufacturing Challenge 2023 (IGMC) from International Research Institute for Manufacturing-India.

V. Other Disclosures:

In terms of the applicable provisions of the Act and the SEBI Listing Regulations, your Company additionally discloses that, during the year under review:

+ There was no change in the nature of business of your Company;

+ It has not accepted any fixed deposits from the public falling under Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Thus, as on 31 March 2024, there were no deposits which were unpaid or unclaimed and due for repayment, hence, there has been no default in repayment of deposits or payment of interest thereon;

+ It has not issued any shares with differential voting rights; + It has not issued any sweat equity shares;

+ The following matter is pending before the Hon'ble National Company Law Appellate Tribunal ("NCLAT") under Insolvency and Bankruptcy Code, 2016, wherein the Company has been arrayed as Respondent.

The details are mentioned below:

On 17 August 2021, PSA Nitrogen Limited filed Company Petition bearing no. C.P.(IB)-4082(MB)/2019 ("Company Petition") before the Hon'ble National Company Law Tribunal ("NCLT"), Mumbai, under Section 9 of the Insolvency and Bankruptcy Code, 2016, arraying the Company as a Respondent. This petition was dismissed for non-prosecution vide order of the NCLT dated 30 November 2021. Subsequently, two restoration applications filed by PSA Nitrogen Limited were also dismissed by orders of the NCLT dated 24 August 2022 and 24 January 2023.

PSA Nitrogen Limited then filed the present appeal [Company Appeal (AT) (Insolvency) No. 658 of 2023] before the Hon'ble NCLAT, challenging the dismissal of the restoration applications. This appeal is currently pending before the Hon'ble NCLAT.

+ There was no instance of one-time settlement with any bank or financial institution;

+ There were no material changes and commitments affecting the financial position of your Company between end of financial year and the date of report;

+ There is no plan to revise the financial statements or Directors' Report in respect of any previous financial year;

+ There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and your Company's operations in future; + There were no frauds reported by the Auditors u/s 143(12) of the Act.

Appreciation

We would like to record by gratitude and appreciation to all our the stakeholders', including the Central and State Government Authorities, Stock Exchanges, Financial Institutions, Analysts, Advisors, Local Communities, Customers, Vendors, Business Partners, Shareholders, and Investors forming part of the Hindalco family for their continued support during the year. Your faith and vote of confidence hold in good stead, and motivate us in pursuing greater opportunities, responsible growth and enhanced delivery on our strategy. Let us also take this opportunity to thank our employees, whose enthusiasm, energy, and zeal, help us progress along our vision. The contribution our people make is the base on which we build further and is integral to Hindalco's high performing culture.

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