Jan. 28 (Bloomberg) -- Hindalco Industries Ltd., India's biggest producer of non-ferrous metals, may say third-quarter profit rose 21 percent after the company increased prices of aluminum used by construction companies and automakers.

Profit probably rose to 3.2 billion rupees ($72 million), or 3.25 rupees a share, in the quarter ended Dec. 31, from 2.65 billion rupees, or 2.69 rupees a share, a year earlier, according to the median estimate of five analysts surveyed by Bloomberg.

Hindalco raised aluminum prices 16 percent in the December quarter after India's economic growth of 8 percent in the six months ended Sept. 30 boosted sales. Hindalco has raised rates by 5 percent since Jan. 1 after aluminum reached a 17-year high in London. Higher prices may help earnings growth continue in the next quarter and partly offset the loss from its copper- refining business, investor U.P. Bhat said.

``We are very positive on Hindalco and think the stock is the best pick in the non-ferrous sector,'' said Bhat, a fund manager at Canbank Mutual Fund in Mumbai. ``Copper has been a problem area and we're hoping Hindalco is able to stabilize production soon.'' Canbank has 26,179 shares of the company.

Shutdown

Hindalco had an unexpected 7 percent drop in second-quarter profit as floods in the western Gujarat state, where its copper plant is based, forced it to cut production. An accident at one copper smelter in November and a 27-day maintenance shutdown at another unit probably led to a loss of more than 25,000 tons of the metal, JPMorgan Chase & Co. said in Dec. 6 report.

Hindalco's Gujarat plant has the capacity to refine 500,000 metric tons of copper a year after it completed an expansion in April 2005. Copper output fell 3.5 percent to 56,350 metric tons in the second-quarter, the company said.

Copper-refining brings in 45 percent of Hindalco's sales and aluminum contributes the rest. The company is scheduled to report earnings Jan. 30.

Hindalco's shares have been the fifth-best performers on India's benchmark Sensitive stock index in the past month on optimism expanding demand in the U.S. and China, the world's fastest-growing major economy, may drive aluminum prices higher.

``We expect aluminum companies to witness strong earnings growth as Chinese demand is not slowing,'' Sanjay Dongre, a fund manager at UTI Asset Management Co., said. ``We're bullish on the sector.'' UTI has $5.7 billion in assets and 7.7 million Hindalco shares, according to Bloomberg data.

State-run rival National Aluminium yesterday reported a 28 percent jump in third-quarter profit.

Cars, Power

Aluminum will be the biggest gainer among the most-traded base metals in 2006 as global production fails to keep pace with demand, Merrill Lynch & Co. said in a Jan. 6 report. The metal may rise as much as 14 percent, beating copper and nickel, according to Merrill Lynch analyst Daniel Roling.

Aluminum for delivery in three months climbed 2 percent to $2,515 a ton at 12:38 p.m. in London yesterday. The lightweight metal, used in beverage cans and aircraft, rose 16 percent last year, 22 percent in 2004 and more than 18 percent in 2003.

Hindalco sells 80 percent of its aluminum products locally at prices linked to the London Metal Exchange.

India's aluminum consumption grew 15 percent in the first half of the fiscal year that began April 1, 2005, on demand from automobile, power and construction industries, the biggest users of the light-weight metal. Lending rates have remained at three- decade lows, making car purchases cheaper.

Indian utilities are expanding capacity to feed the Asian nation's economic growth. Asia's fourth-biggest economy needs to increase its electricity generating capacity by nearly 60 percent by 2010 to 200,000 megawatts to meet demand. India is targeting an annual economic growth rate of more than 7 percent over the next 10 years.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net.

Last Updated: January 27, 2006 18:31 EST