Hindalco unfazed by Trump’s tariff bombshell — Novelis has leverage over share prices!

The US President’s surprise move to impose a 25 per cent tariff on all steel and aluminium imports has sent shockwaves across global markets. However, industry experts have reinstated their trust upon Hindalco’s 100 per cent subsidiary Novelis, confirming that it is well-equipped to weather this storm. The 20-year-old Atlanta-based business has been owned by Indian metals company Hindalco Industries since 2007.

Novelis, a major exporter of aluminium to the US, has made a recent USD 2.5 billion investment in a new plant in Alabama and is seen as a strategic hedge against potential tariff impact. Brokerage firm Nuvama says ‘the effect of tariff imposition, if it happens, shall be minimal on Novelis’s earnings’.

The Hindalco management has indicated that any increase in aluminium prices due to the tariffs will be decreed on to buyers through higher premiums. This, coupled with Novelis’ operational efficiency, is expected to cushion the blow.

Novelis’ market position

Novelis’ soft earnings in the recent quarter have already been factored in, as the management had earlier guided for weaker numbers. However, Nuvama expects Novelis’ earnings to bounce back in the final quarter of the fiscal year.

Maintaining a ‘Buy’ rating on Hindalco, Nuvama believes the parent company’s strong performance, driven by higher aluminium prices, will offset any potential tariff-related challenges faced by Novelis.