Next 12-24 months should be good for cement industry: Mahendra Singhi, MD & CEO, Dalmia Cement

It was earlier approved by the board and we are looking at completing it soon, before the end of the current calendar year. (Representative image)

Dalmia Cement (Bharat), a subsidiary of Dalmia Bharat, mitigated a seasonally weak second quarter, banking on its existing inventory and prior orders. The firm intends to increase its cement grinding capacity to 48.5 million tonne per annum (MTPA) by March 2024, and completely shift to renewable energy by 2030, MD and CEO Mahendra Singhi said. In an interview with FE’s Rajesh Kurup, Singhi said the next year or two would be good for the sector. Edited excerpts:

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The weak Q2, coupled with high energy prices, impacted Dalmia Cement…

We achieved a sales volume growth of 6% year-on-year, while sales revenue rose by 11% in Q2. Energy prices – power and fuel costs – were the major issues, but we had some inventory and prior orders that helped us mitigate some impact. The outlook on costs seems to be better and with demand also looking up, the industry should be back to pre-Covid scenario by December.

What is the status of the $2-million plant in Bokaro?

It is progressing as per schedule. We have acquired the land, placed orders for a cement mill and will soon be starting the construction activity. Across all our plants, we intend to reach a cement grinding capacity of 36 MTPA by March 2022 (from 33 MTPA now) and 48.5 MTPA by March 2024.

Where will the capacity additions come in from?

The Cuttack line has already been commissioned, and following the commissioning of Murli (Maharashtra) and Bokaro plants in two-three months, we will reach 36 MTPA. Over the next two years, we will add new capacity in Tamil Nadu, Bihar, Bokaro and also de-bottleneck our existing plants. So, all these would lead to 48.5 MTPA, and requires a capex of about Rs 9,000-10,000 crore over the next three years. The capex would be raised mainly through internal accruals and debt.

Your plans to completely shift to renewable energy from the current use of thermal energy by 2030.

That’s our commitment. We intend to transform from thermal energy and thermal electricity to renewable energy by 2030. In a couple of years, we will be coming out with a specific plan as we are waiting for right policy interventions.

We have already started replacing fossil fuel. We are collecting municipal waste – industrial wastes of various chemicals, pharmaceuticals and other firms – from over 25 towns and cities, and using it as green fuel.

What is the status of divestment of Hippostores?

It was earlier approved by the board and we are looking at completing it soon, before the end of the current calendar year.

What is the general outlook for the industry? Analysts expect cement prices to rise.

From a cement demand point of view, it should shape up well. On the cement prices, we believe that to some extent the industry would be able to pass on the extra cost, incurred due to high energy costs, to consumers. In the next two-three months, there could be some softening of energy costs following decisions by the Chinese government and the European Commission to contain fuel costs. They are also exploring the possibility of containing sea freight, which had more than doubled in the last one year.

India’s current installed cement capacity is at about 500 million tonne. How much is this expected to go up?

We believe that cement companies would add more capacity wherever they have limestone mines. So that way 4-5% addition in capacity could be expected over the next few years. The top 4-5 companies are also expanding capacity. I believe roughly 30 MT of new capacity would get stored by FY23 or FY24.

Industry was expecting cement prices to rise after Diwali?

After Diwali, demand for cement in the country is expected to grow by about 12%, taking into account the low base of last year. If we disregard the low base, normal cement demand growth would be 5-6%. For the cement sector, rural demand is also important which we expect to go up. The next 12-24 months should be good for the cement industry.