Birla Corp plans to scale up cement manufacturing capacity
The expansion, which would be partly green-field and partly brownfield, will entail a total investment of around Rs 5,000 crore, to be funded through a mix of debt and equity
Birla Corporation, the flagship company of the MP Birla Group, is looking to scale up cement manufacturing capacity by over 60% to 25 million tonnes (mt) from the current 15.5 mt in the next four to five years. The expansion, which would be partly greenfield and partly brownfield, will entail a total investment of around Rs 5,000 crore, to be funded through a mix of debt and equity.
The company has already commenced construction of the 3.9-mtpa greenfield project at Mukutban in Maharashtra. It is expected to be complete by FY2022. The estimated investment on the project is close to Rs 2,450 crore. The company has tied up with a consortium of lenders for a 12-year term loan of close to Rs 1,625 crore.
According to Pracheta Majumdar, CEO, Birla Corporation, the company would want to become a 25-30 mtpa player in the cement industry in the near future. “We have a definite strategy for growth….. in cement we want to be a 25-30 mt player and that is our immediate goal. We will reach 25 mt by 2024-25 and will add another 5 mt thereafter either through greenfield or an acquisition,” Majumdar said.
Birla Corporation and its subsidiary, RCCPL Private Ltd, have 10 cement plants spread across the country with an annual installed capacity of 15.5 mt.
Birla Corporation is also setting up the second production line at Kundanganj in Uttar Pradesh of 1.2 mt to augment unit capacity to 3.6 mt. This apart, expansion of the NCCW plant at Chanderia in Rajasthan has also begun. It will add clinkerisation capacity of 4,80,000 tonnes which, in turn, can feed the additional clinker needs of the Kundanganj grinding unit. The company will also look to add another production line at its existing unit at Maihar in Madhya Pradesh.
Birla Corporation has been able to ramp up capacity utilisation across its factories to well over 95%. For the quarter ended June 30, 2019, the capacity utilisation was up at 98%, as against 92%, the same period last year. However, Majumdar believes that with IT intervention, additional capacity can be added in existing factories without any major capex, just by reducing breakdown.
“The headroom (for expansion) is immense. Even before Mukutban comes we will be growing may be 7-10%. Mukutban will give us a quantum jump but even before that we will not be stagnant,” he pointed out.
The company had registered 4 per cent volume growth in Q1FY20 and is hopeful of keeping the momentum of growth in the coming quarters. While Majumdar stresses on the need for adopting IT in a big way to ramp up capacity, the company’s COO, Sandip Ranjan Ghose, talks about the need for premiumising cement sales. The share of premium brands, which was around 20% of the company’s portfolio on a smaller base (of production) around three years ago, currently stands at close to 40%. “We had one clear focus…. we knew we would reach a ceiling in terms of volume so our only salvation was premiumisation of brands,” Ghose said.