Birla Corp to invest $1 bn over eight yrs, raise capacity to 30 mn tonnes

Current consolidated capacity is about 20 mn tonnes; mix of greenfield and brownfield projects, de-bottlenecking existing operations to help add another 10 mn tonnes

MP Birla Group flagship, Birla Corporation, will be investing at least $1 billion over the next eight years to ramp up cement production capacity to 30 million tonnes (mt).

Birla Corporation’s consolidated capacity stands at nearly 20 mt after the commissioning of the 3.9 mt greenfield plant at Mukutban in Maharashtra by subsidiary, RCCPL Pvt Ltd, in April this year. The next leg of growth-–from 20 mt to 30 mt-–will be a mix of greenfield, brownfield projects and de-bottlenecking of existing operations.

Addressing the media after the company’s annual general meeting, Harsh Lodha, chairman, Birla Corporation, said, of the 10 mt capacity addition, 2 mt would be from de-bottlenecking of existing operations, 4 mt from brownfield expansion and another 4 mt by way of greenfield.

For the new plant, Birla Corporation is targeting Chhattisgarh, but it would be contingent on getting a limestone mine. “We will participate in the auctions”, said Lodha.

The idea behind zeroing in on Chhattisgarh is that it would be contiguous to the project in Maharashtra. “We have a philosophy of not going into a disconnected area. This state happens to be contiguous to my expansion in Maharashtra, so it becomes a seamless expansion,” said Arvind Pathak, managing director and chief executive officer, Birla Corporation.

But the management also said that while it had zeroed in on Chhattisgarh, it was not cast in stone.

The Mukutban plant in Maharashtra has augmented Birla Corporation’s consolidated annual capacity significantly. It is in ramp-up mode and full capacity utilisation is expected to be achieved in three years’ time.

“It’s a relatively new market for us. But if demand picks up we might be able to do it faster also,” said Lodha.

He also pointed out that Mukutban has got a very good incentive structure. At current prices, it works to around Rs 650 per tonne for all cement manufactured out of Mukutban and sold in Maharashtra. The total quantum of incentive works out to about Rs 2,300 crore, which the company plans to consume in 12-13 years.

“The incentive will start flowing sometime in the middle of next year. Before that we will have to use our input tax credit,” said Lodha.

Over a period of time Mukutban would be one of the lowest cost plants in the country with the added advantage of the incentive, he added.

Addressing shareholders earlier in the day, Lodha said that the year till March 31, 2022 was one of stark opposites. “Whereas on one hand, we were able to scale up sales to top 14 mt for the first time in your company’s history, on the other, 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, he said, 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,” Lodha added.