Novelis’ adjusted net debt reaches US$852 crore in Q2 FY27

Novelis Inc. reported US$852 crore of adjusted net debt at Q2 FY27, after adjusted free cash flow totalled negative US$180.4 crore across Q1 and Q2 FY27. The company generated US$102.4 crore of adjusted EBITDA in the two quarters, but capital expenditure of US$154.3 crore and a US$41.8 crore operating-cash outflow coincided with the higher debt balance.

Why did Novelis’ adjusted net debt reach US$852 crore?

Novelis’ adjusted net debt reached US$852 crore at Q2 FY27 because debt components increased by more than cash and cash equivalents. Long-term debt, excluding the current portion, rose to US$703 crore from US$656.7 crore in Q1 FY27, while short-term borrowings increased to US$263.1 crore from US$228.4 crore. Cash increased to US$127.7 crore from US$110.5 crore, but did not offset those debt increases.

Adjusted net debt includes long-term debt, the current portion of long-term debt, short-term borrowings and unamortized carrying-value adjustments, less cash and cash equivalents. The US$852 crore Q2 FY27 balance was US$65.5 crore above Q1 FY27, US$179.6 crore above FY26, and US$272.1 crore above Q2 FY26.

The increase came during a period of substantial capital expenditure. Novelis spent US$77.5 crore in Q1 FY27 and US$76.8 crore in Q2 FY27, for a US$154.3 crore six-month total. The presentation’s cash-flow reconciliation does not provide a capital-expenditure target or a scheduled completion date for the wider spending programme.

How did Novelis’ cash flow change during Q1 and Q2 FY27?

Novelis recorded negative adjusted free cash flow of US$180.4 crore in Q1 and Q2 FY27, although the quarterly outflow narrowed to US$67 crore in Q2 from US$113.4 crore in Q1. Net cash from operating activities changed from an outflow of US$45.5 crore in Q1 to an inflow of US$3.7 crore in Q2. Net cash used in investing activities rose from US$67.6 crore to US$69.5 crore over the same quarters.

Capital expenditure was US$77.5 crore in Q1 and US$76.8 crore in Q2, making it the largest item in the adjusted-free-cash-flow reconciliation. Adjusted free cash flow before capital expenditure improved from negative US$35.9 crore in Q1 to positive US$9.8 crore in Q2. Combined for the two quarters, it was negative US$26.1 crore before capital expenditure.

For FY26, Novelis reported negative adjusted free cash flow of US$237.7 crore, including US$234.3 crore of capital expenditure. The US$180.4 crore outflow in Q1 and Q2 FY27 was therefore US$57.3 crore below the full-year FY26 outflow after two reported quarters. The source also states that there were no cash flows from discontinued operations in operating or investing activities for the periods shown.

Did Novelis’ adjusted EBITDA cover its capital expenditure?

No. Novelis reported US$102.4 crore of adjusted earnings before interest, tax, depreciation and amortization, or adjusted EBITDA, in Q1 and Q2 FY27, compared with US$154.3 crore of capital expenditure. Adjusted EBITDA was US$51.6 crore in Q1 and US$50.8 crore in Q2, a US$0.8 crore sequential decrease.

Rolled-product shipments increased to 919 thousand tonnes in Q2 FY27 from 916 thousand tonnes in Q1 FY27. However, adjusted EBITDA per tonne declined by US$10 to US$553 per tonne from US$563 per tonne. The higher shipment volume therefore coincided with lower quarterly adjusted EBITDA and lower EBITDA per tonne under Novelis’ reported measures.

Net income attributable to Novelis’ common shareholder rose to US$21 crore in Q2 FY27 from US$16.4 crore in Q1. The Q2 adjusted-EBITDA reconciliation included US$7.4 crore of net interest, US$15 crore of depreciation and amortization, and US$2.3 crore of start-up costs related to construction of the Bay Minette, Alabama rolling and recycling plant.

What happened to Novelis’ liquidity in Q2 FY27?

Novelis’ liquidity declined to US$203.8 crore at Q2 FY27 from US$212 crore in Q1 FY27. Cash and cash equivalents increased by US$17.2 crore to US$127.7 crore, but availability under committed credit facilities fell by US$25.4 crore to US$76.1 crore. The reduction in facility availability exceeded the increase in cash, producing an US$8.2 crore quarterly decline in liquidity.

Liquidity was also lower than the US$287.6 crore reported in Q2 FY26. Cash rose by US$12 crore year on year from US$115.7 crore, while committed-facility availability declined by US$95.8 crore from US$171.9 crore. Cash consequently accounted for a larger portion of the US$203.8 crore liquidity total in Q2 FY27.

Short-term borrowings reached US$263.1 crore at Q2 FY27, up US$132.6 crore from US$130.5 crore at FY26 and US$34.7 crore from Q1 FY27. The current portion of long-term debt also increased to US$7.3 crore from US$5.6 crore in Q1 FY27, while long-term debt excluding that current portion rose by US$46.3 crore over the quarter.

Conclusion

Novelis’ Q2 FY27 figures show that positive adjusted EBITDA and higher Q2 operating cash flow did not prevent a first-half adjusted-free-cash-flow outflow. Capital expenditure of US$154.3 crore, alongside a US$41.8 crore combined operating-cash outflow, coincided with adjusted net debt rising to US$852 crore and liquidity falling to US$203.8 crore.

The next reported quarters will indicate whether Q2’s US$3.7 crore operating-cash inflow continues while capital expenditure remains near the Q2 level of US$76.8 crore. Novelis also disclosed US$2.3 crore of Q2 start-up costs tied to the Bay Minette rolling and recycling plant, leaving the progression of that construction-related spending relevant to future cash-flow reporting.