Novelis Fire Incident: Can the company’s weak results impact Hindalco’s share price?

Synopsis: Hindalco shares slipped 2% after Novelis posted a $160 million Q3 loss due to Oswego plant fires. While adjusted EBITDA per tonne rose 6% to $430, brokerages remain mixed amid near-term operational disruptions.

The shares of this company are primarily engaged in the production of aluminium and copper and in the manufacturing of aluminium sheet, extrusion, and light gauge products for use in packaging markets like beverage and food are in the spotlight after its subsidiary reported results with EBITDA per tonne shipped rose 6% and brokerage commentary on its fire incidents. 

With a market capitalisation of Rs. 2,15,598 cr, the shares of Hindalco Industries Ltd were trading at Rs. 959.40 per share, dropping 2% in today’s market session, making a low of Rs. 943.45, down from its previous close of Rs. 965.70 per share. 

Novelis Results 

Novelis, subsidiary of Hindalco Industries Limited, which is a leading player in aluminium, copper, and metals, and a flagship company of the Mumbai-based Aditya Birla Group, reported a net loss attributable to common shareholders of $160 million in the third quarter of fiscal year 2026, compared with a net income of $110 million a year earlier. The results were heavily impacted by fires at its Oswego, US plant in September and November, which disrupted production and led to rolled product shipments being around 72 kilotonnes lower than expected. 

The incidents resulted in an estimated pre-tax impact of $54 million on Adjusted EBITDA and net loss, along with additional pre-tax losses of $327 million related to the fires. Adjusted EBITDA for the quarter stood at $348 million, down 5% year-on-year, reflecting the impact of the Oswego disruptions and $34 million in tariff-related costs. Rolled product shipments declined 11% YoY to 809 kilotonnes, although Adjusted EBITDA per tonne shipped rose 6% to $430. 

Oswego Plant Fires Disrupt Operations

Its manufacturing plant, Novelis Oswego, New York in the U.S. experienced two separate and significant fire incidents, the first on September 16 and the second on November 20, 2025. 

All employees were safely evacuated during both incidents, and no injuries were reported. The fires were confined to the hot mill area, while all other critical assets at the Oswego facility remained unaffected and operational. The plant is insured for both property damage and business interruption losses related to these events.

Novelis expects to restart the Oswego hot mill by late Q2 of calendar year 2026. The estimated total free cash flow impact from both fires, before insurance recoveries, is around $1.3–1.6 billion, which includes an Adjusted EBITDA impact of approximately $150–200 million. 

Shipments are expected to be lower by roughly 150–200 kilotonnes due to the disruption. However, the company anticipates that around 70–80% of the cash flow and Adjusted EBITDA impact will be recoverable through insurance, with the majority of these recoveries expected in future periods.

Brokerage Views

Brokerage views on Hindalco remain mixed, with analysts largely factoring in near-term pressure from the one-off impact of the Oswego plant fire at Novelis, even as the longer-term outlook stays constructive.

HSBC continues to remain positive with a ‘Buy’ rating and a higher price target of Rs. 1,240, which is 29% upside from current levels. It highlighted that despite the Oswego fires, Novelis delivered a strong underlying performance, with adjusted EBITDA per tonne rising 6% year-on-year to $430. 

The brokerage added that management remains confident about the commissioning timeline of the Bay Minette facility, with full-scale operations expected in H2CY26 and cold mill commissioning beginning in March.

Jefferies has also stuck to a ‘Hold’ stance with a price target of Rs. 855, which is a downside of 10% from current levels, stating that within the Indian metals and mining universe, it currently prefers exposure to steel companies over aluminium players like Hindalco.

Nuvama has retained its ‘Hold’ rating on Hindalco while revising its target price upward to Rs. 923 from Rs. 838, which is 4% downside from current levels. The brokerage expects consolidated EBITDA to decline by 10% in FY26, followed by an 8% growth each in FY27 and FY28, supported by higher aluminium prices. It has advised investors to wait for better entry levels.

CLSA has reiterated its ‘Outperform’ call on Hindalco with a price target of Rs. 1,035, noting that while the Novelis results were affected by exceptional factors, adjusted EBITDA per tonne is expected to improve from Q4 onwards. 

CLSA flagged the possibility of an additional $200 million equity infusion from the parent to support Novelis. The brokerage expects benefits from the removal of tariff-related costs, better spreads, and ongoing cost efficiencies. However, it cautioned that reported EBITDA and PAT may stay weak over the next few quarters due to the Oswego disruption, delayed insurance claims, higher capex, and rising working capital. 

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