Plants revamp to cost India Cements Rs 1,500 crore

CHENNAI: An exceptional income boosted the net profit of India Cements to Rs 90.73 crore for the third quarter ended December 31, 2022 (Rs 3.30 crore), even as it has effected a refurbishment programme by engaging two global consultants FLSmidth and Krupp Polysius to improve its operational efficiencies. This would incur the company a cost of about Rs 1,500 crore.

N Srinivasan, vice-chairman-MD, India Cements, on Friday, said India Cements has embarked on a programme for the complete refurbishment of its old cement plants so as to improve their efficiency to bring it on par with competition. The exercise, estimated to cost Rs 1,500 crore to Rs 1,600 crore, is expected to take about 15 to 18 months for completion. This cost is proposed to be funded internally as the company does not intend to go for bank borrowing or raising debt. India Cements has a vast land bank of 26,000 acres, which would be monetised to raise the required funds.

He also said, “We have asked the experts to submit their report as how to make these plants as efficient to be on par with the competition. They are expected to do that soon.” The refurbishment programme would start with Malkapur and Vishnupuram plants in Telangana. It will not cover its modern plants like Sankari in TN and Banswara in Rajasthan.

The cement behemoth’s total income was Rs 1,223.40 crore (Rs 1,114.22 crore). The net profit figure includes the exceptional income from sale of investments made in Madhya Pradesh for setting up a new cement plant. It has eight integrated cement plants - two in AP at Chilamkur and Yerraguntla, two plants in Telangana at Vishnpuram and Malkapur, one at Banswara in Rajasthan, three plants in TN at Sankarnagar, Sankari and Dalavoi besides two grinding units — one near Chennai and the other at Parli in Maharashtra. The combined capacity of these would be nearly 16 million tonnes.

Since India Cements has a series of vintage plants and technology with varying operating parameters, it has pushed the cost of production against its peers. In terms of consumption of fuel (coal and oil) and power, the company has found it is incurring an additional cost of Rs 500 per tonne of cement produced compared to the most efficient players in the industry. Hence, the revamp programme is aimed at addressing this cost difference and improve the operational parameters of the plants.

Elaborating on this, Srinivasan said the 1 per cent difference did not make much impact when the rate was $60 but when it went up to $300, the gap between the company and its competition widened triggering a quicker response to initiate action.

To a query, he said the demand in the south market had not picked up due to capacity overhang and the company expects this situation to prevail before the price would start moving. It also plans to focus on volume by selling more blended cement.