Resilience – The Need of the Hour

Our businesses are facing severe headwinds from the current geo-political and economic situations,
both globally and in India. Several policy measures announced by the government in recent times
demonstrate the efforts to overcome slowdown that the country is facing.

Hindalco is largely LME-driven and lower LME prices are due to several reasons, be it the trade war or
the crude politics affecting the price in some way or the other. With persistent low LME prices and the
copper facility yet to turn in optimum performance, we need to come up yet again with the Resilience
which Hindalco has shown in earlier downturns.

I would like you to work on the following areas and discuss specific steps in your area of operations:

1. Customer: It is important to hold on to the existing customers in a low demand scenario and
understand their business dynamics and look for opportunities to enhance realisation. It is
also a great opportunity to visibly improve service level and TAT on quality related complaints.

2. Supplier [minerals, raw material, logistics]: These constitute 70%+ of our costs. Longer-term
relations, understanding suppliers’ business environment and negotiations to bring down
costs would be key in the current environment.

3. Manufacturing Cost and Wastage: The manufacturing and mining locations need to focus on
all items of cost and productivity norms and areas of wastes. However, there should be no
compromise on Safety and on all cases of reasonable R&M, essential for steady and
undisturbed operations. Disposal of wastes [wealth from waste, be it residues or obsolete
items] and strict control over all discretionary expenditure to be undertaken, including those
which are on-going. It is also important that losses on account of control lapses, etc.
experienced in the recent past are not repeated at any cost.

4. Overheads: Overheads at Unit Admin and Offices and the Corporate Office form a large chunk
of our non-manufacturing expenditure. All discretionary costs, including travel, get-togethers,
engagement of consultants and internal conferences [collaboration through VC, etc are
encouraged though] should be examined thoroughly.

In a low growth scenario, it is common to get into a cash-trap with high inventory and receivables
and low cash. So, working capital management at all operating levels are important, with
appropriate risk-management where our credit exposures are high.

In this connection, Alphonso has been working with your finance colleagues on specific initiatives.
You are requested to present the initiatives and targets in your area for the rest of the year in the
October ExCom.

Resilience through prudent cost management, customer and vendor relationship and working
capital control will enable us to pass through the current phase, where sufficient cash generation
is a must to fund our strategic growth projects.

7 October 2019 Satish Pai