Chettinad Cement, a flagship company of the Rs 4,000-crore Chettinad Group, is planning to increase its annual production capacity to 25 million tonne. The proposed expansion is planned with an outlay of around Rs 5,700 crore. In an interview to TE Narasimhan, group managing director MAMR Muthiah, who took over as the new president of the Cement Manufacturers’ Association recently, says that his company will remain conservative, which will be a safe model to operate in the current environment. Edited excerpts:
How has been the third quarter for the industry and for the company, and the challenges faced during the quarter?
The industry has shown around five per cent growth as compared to last year. In 2012-13, the growth is expected to be 8-9 per cent. Clearly, the consumption is picking up, which helped companies to report an increase in absolute numbers. However, the price realisation per bag still remains challenging, mainly due to various taxes and logistics costs, which take away around 50-55 per cent of the ex-factory costs. As a company, we will grow by 10 per cent.
You are planning to almost double your production capacity. What kind of investments would it require?
With the commissioning of the 2.5-million tonne greenfield facility at Gulbarga in Karnataka by July this year, our capacity will increase to 14 million tonne from the current 11.50 million tonne. By 2020, we will increase our total annual production capacity to 25 million tonne. We are open to inorganic growth, especially in Andhra Pradesh, and are scouting for land in Gujarat, Madhya Pradesh and Rajasthan mainly for limestone resources. One of the reasons to have different plants is mainly to avail benefits like tax incentives.
What are you plans, post the merger of Allied Minerals and Metals?
The company (Allied Minerals) owns substantial limestone-bearing lands in Guntur district of Andhra Pradesh. It offered to merge with Chettinad Cement. The company is planning to set up a greenfield project with a 3.5-million tonne per annum (mtpa) cement manufacturing unit and a 100-captive thermal power plant at Dachepalli village in Guntur, and a 2-mtpa grinding unit at Visakhapatnam with an investment of around Rs 1,500 crore. The company has acquired around 650 acre for the project and has initiated steps to obtain the preliminary approvals.
How are the proposed expansions, including those of Allied Minerals, being funded?
We are a cash-rich company, and so it will be a combination of debt and internal accruals. We are conservative. And if we don’t ... we will will come under pressure.
Group company, Chettinad Power Corporation, was planning to set up a 1,200-Mw, coal-based thermal power plant in Nagapatnam district of Tamil Nadu. What is the reason for the delay ?
Any project will face delay, especially during the land acquisition process. The issue has been addressed. The company is now in the process of getting statutory clearances for the project. We are hopeful of achieving the financial closure for the project in the next six months.
As the president of the Cement Manufacturers’ Association, what are your expectations from the Budget?
Customs duty should be reduced from five per cent to zero and import duty on gypsum, coal and pet coke should be waived off. Similarly, exercise duty should be matched at par with the steel industry, which is at eight per cent. The other major one would be the GST. When it gets implemented, it should be at par with the steel industry.
