High cost, price war led to sale of India Cements: Srinivasan to staff

"I am going to leave India Cements," he declared. "The reason is that our competitors can crush us with lower prices. With slightly higher cost of productions, we had taken all steps to reduce costs."

Long before the news of Kumar Mangalam Birla-controlled UltraTech Cement acquiring India Cements hit the media, its managing director, Narayanaswami Srinivasan, delivered a poignant farewell speech to the company’s employees on Sunday morning. His voice, heavy with emotion and the weight of five and a half decades in the cement industry, resonated with the sense of an era drawing to a close.

He attributed the company’s sale to a confluence of adversities: The relentless price war waged by competitors that “can crush” India Cements, and the firm’s inability to liquidate its land holdings to navigate through a financial crisis. The sale, he admitted, was a last resort.

Addressing an audience of select 300 employees, the 79-year-old industry veteran was probably bidding adieu to a long career punctuated by both triumphs and tribulations. Yet, even as the chapter closed on his tenure, he sought to reassure his audience — there is “no need for anybody in India Cements to feel insecure or threatened”.

“I am going to leave India Cements,” he declared. “The reason is that our competitors can crush us with lower prices. With a slightly higher cost of production, we had taken all steps to reduce our costs.”

India Cements’ story is deeply entwined with the post-Independence industrial fabric of India. 

Founded in 1946 by S N N Sankaralinga Iyer and T S Narayanaswami — Srinivasan’s father — in Tamil Nadu’s Tirunelveli district, the company quickly became a trailblazer by offering the country’s first public issue shortly after Independence. In 1969, following his father’s demise, Srinivasan, who was then in his early 20s, assumed the mantle of joint managing director at the company.

A decade later, in 1979, a struggle with the then-managing director, K S Narayanan — son of the other founder — led to Srinivasan’s departure from the company as managing director. In between, he reportedly foiled an attempt by ITC to take over the company.

Following the protracted battle, Srinivasan reclaimed the MD position in 1989, while Narayanan’s son N Sankar, chairman, Sanmar Group, became non-executive chairman.

Under Srinivasan’s leadership, India Cements embarked on a trajectory of growth that saw it emerge as the largest cement producer in South India. The acquisition of the Coromandel Cement plant in Cuddapah in 1990 was a strategic masterstroke, catapulting the company to new heights. In 1998, India Cements executed the first successful hostile takeover in India by acquiring Raasi Cements.

Beyond the boardroom, Srinivasan’s passion for cricket has been legendary. He founded the Chennai Super Kings, a team that captured the imagination of cricket aficionados; he also ascended to the helm of both Board of Control for Cricket in India and International Cricket Council.

In recent years, however, India Cements found itself grappling with financial duress. The company had pinned its hopes on its substantial land assets — a sprawling 26,000 acres across Andhra Pradesh and Tamil Nadu. The strategy was to monetise these holdings to pare down debt and fuel capital expenditures.

“We had taken all steps to reduce our cost and we were also relying on an investor to purchase a significant amount of land we own, which would have alleviated many problems,” Srinivasan told employees. “But that did not happen, and therefore, we reverted to the solution we had considered earlier, which is selling the company.” Sources indicate that the company’s debt burden stands at approximately ~2,500 crore.

Underscoring his commitment to the workforce, Srinivasan revealed personal discussions with Kumar Mangalam Birla regarding the future of India Cements’ employees. “The future is as solid as when I was head of the plant. You constitute the core of the cement business. You must work with a belief that everything will be the same as before,” he assured them. His final words lingered in the room — a heartfelt benediction to a legacy and an industry he had shaped, “I really wish you all the best”.