Cement demand to pick up by second half fiscal 2016: O P Puranmalka

Dev Chatterjee
Business Standard
29 April 2015

UltraTech Cement, an Aditya Birla Group company, is in the middle of an expansion drive. This is mainly to take on competition from the Holcim-LaFarge combine. Though the entire cement sector witnessed a fall in volumes in the March 2015 quarter, the company is expecting demand to pick up from the second half of FY16. UltraTech Managing DirectorO P Puranmalkatalks toDev Chatterjeeabout the company’s growth plans and how it would meet its production target. Edited excerpts:

The Indian economy is not showing any signs of a pick-up. UltraTech’s March quarter results are also showing signs of volume decline. What are the growth opportunities the company is expecting in FY16?
The government’s recent focus on road projects, housing for all, and an increase in state allocations will drive infrastructure and housing demand. We expect the industry to grow 7-8 per cent in 2016 and we will be able to add volume growth through our recently commissioned brownfield expansion at Aditya Cement in Rajasthan. We will also add four other grinding units — one each in West Bengal and Bihar, Jhajjar, (Haryana) and Nagpur, along with one bulk terminal in Pune. Additionally, the recent Jaypee acquisition made by us in Satna should add to the growth.

With the weather department predicting a weak monsoon, will it impact cement demand? Do you see any pick up in the construction and infrastructure sectors?
It’s too early to predict how the weak monsoon will impact our demand, though the rural market is quite important for us and we plan to increase our share there. But initiatives by the new government such as housing for all, smart cities, Swachh Bharat campaign, infrastructure spending, concrete roads initiative and an increase in allocation of funds to states are likely to see a positive impact on the industry in the next three-six months. While the sentiments are positive, ground level actions will help rev up the economy in general.

Are you witnessing any demand revival in April, considering the March quarter wasbad in terms of demand?
The industry volume witnessed single-digit decline in the March quarter. Except for the eastern region, all other regions witnessed a decline in volumes. In March alone, the decline in the industry volume was 15-18 per cent due to weak government spending, as well as the impact of unseasonal rain. In April, volume trends are better than they were in March but it appears cement volume will likely be lower than last year.

UltraTech has grown inorganically by taking over Jaypee’s plants in Gujarat and MP. What’s the u;pdate on the integration with Jaypee’s cement plants in Gujarat and MP?
UltraTech has upgraded its product quality in conformity with the UltraTech brand, which epitomises super quality. Consequently, the brand has been well accepted in the marketplace. The brand has completely transitioned into UltraTech. The full impact of the integration of MP plant will be reflected in Fiscal 2016’s accounts.

Apart from integrating the teams, UltraTech ensured that the safety practices and processes were improved in line with their standards. Significant investment in infrastructure and environmental processes has made the Gujarat plant as good as any other UltraTech plant.

Holcim has decided to merge with LaFarge. Both companies have significant market shares in India. How do you plan to take on competition from the merged entity?
By March 2016, our capacity would have reached 71 million tonnes per annum (mtpa) with commissioning of our new projects, which are at various stages today. Our pan-India presence, logistic infrastructure, network strength and technical expertise ensure we are well placed in the Indian cement industry. Our expansion projects are taking shape as planned. We have recently commissioned a new clinker line at Aditya Cement of two-mtpa capacity. Four grinding units are in various stages of construction and one bulk terminal is almost ready for commissioning. By 2020, we aspire to be a 100 million tonne company, and an active partner in the growth story of a new India.

Are you adding the capacity of Century Textiles and Kesoram with Ultratech in your target of becoming a 100 mtpa cement company?
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