Birla Corporation, the MP Birla Group flagship company, is looking to invest close to $1 billion (approximately ₹8,000 crore ) to ramp up production capacity by an additional 10 million tonnes (mt) to 30 mt over the next eight years. The company’s production capacity currently stands at around 20 mt.
According to HV Lodha, Chairman, Birla Corporation, the capacity addition would be by way of greenfield and brownfield projects as well as debottlenecking across its various plants.
The company is mulling the possibility of setting up a 4 mt greenfield integrated cement manufacturing unit in chhattisgarh. Besides, it is looking to add 4 mt of capacity through a brownfield project, and another 2 mt through debottlenecking exercise.
“The overall investment to ramp up capacity by an additional 10 mt through greenfield, brownfield, and debottlenecking would be close to $1 billion,” Lodha told media at a press conference after the company’s annual general meeting on Tuesday.
The company’s subsidiary RCCPL Pvt. Ltd started commercial operations at its 3.9 mt integrated cement plant at Mukutban in Maharashtra in April this year. With this, the company’s consolidated annual production capacity stands at almost 20 mt. The company is hopeful of achieving a production of around 0.6-0.7 mt from the Mukutban plant during the remaining five months of the current fiscal and is hopeful of achieving a production of around 3 mt during FY24.
Margins to be under pressure
Addressing the shareholders earlier at the AGM, Lodha said, while the company was able to scale up sales to top 14 mt during last fiscal, its profitability came under immense pressure as margins for the entire cement industry contracted by 400 to 500 basis points. Input costs, which started to shoot in 2021-22, continue to impact profitability in the current year as well. “Things may not look up immediately, but post Diwali, we are hopeful of a robust turnaround,” he said.
Despite the tepid demand for cement during the last fiscal, the company achieved 6 per cent volume growth and a near 10 per cent revenue growth over the previous year, as well as a capacity utilisation of 95 per cent. The company’s sales in as many as five key states were the highest ever.
“But even so, EBITDA for 2021-22 fell almost 16 per cent from the previous year, largely on account of an extraordinary increase in fuel costs. And because of weak demand, cement companies were unable to raise prices until the end of the financial year. But even that couldn’t be sustained for long, and the price hike had to be rolled back,” he said and added, “Even in the current year, we continue to face the same headwinds of escalating power, fuel and freight costs and demand not living up to the billing of India’s projected economic growth of 7.4 per cent.”