Ramco well placed to take advantage of likely buoyancy: CEO
Cement demand is expected to grow by about 20% in FY22 following increased budgetary allocation for infrastructure in the Union Budget 2021-22 and the expected revival of urban housing, said A.V. Dharmakrishnan, Chief Executive Officer, The Ramco Cements Ltd. Excerpts:
Commodity prices are rising. Why is cement alone as input material facing an issue?
Commodity prices have increased all over due to the sharp increase in prices of diesel, coal, pet coke and polymer. Thus, the cost of production for cement has sharply increased. In the construction sector, a few industries like steel and cement are in the organised sector whereas land, sand, bricks, aggregates and construction labour are still under the unorganised sector.
While steel prices have risen sharply, it is not talked about much because a major portion of the steel is coming from outside the State; whereas, when it comes to an increase in cement prices, this industry alone is easily targeted, being native players. This could be due to bullying by various groups with vested interests on political grounds.
There are claims about a cartel being behind the recent cement price hike…
There are more than 50 companies in the country with sizes as high as 1 million tonne per annum (MTPA) to 120 MTPA. Since priorities and bandwidth of the companies will be different, it may not be possible for them to come together to achieve a common agenda and hence, cartelisation, which requires certain understanding among the companies, is not possible. Therefore, there is no question of cartelisation and such accusations are baseless.
How do you visualise FY22?
Cement demand is expected to grow by about 20% in FY22 due to increased budgetary allocation for infrastructure in the Union Budget 2021-22, besides expected revival of urban housing.
In addition, rural demand is also expected to sustain on the back of higher rural incomes witnessed in FY21 and with good farm income.
PMAY-G and PMAY-U schemes are expected to sustain momentum as they engage the rural workforce which, in turn, drive rural employment.
Rise in fuel prices like diesel, pet coke and coal may push up costs, which could affect the overall cost of production. However, the return of growth in cement demand will be well supported by rural demand, push for affordable housing and recovery in the infrastructure segment. With the completion of all capacity expansion now, Ramco Cements will be well placed to take advantage of the expected market buoyancy in the days to come.
Clinker is available only in South. Will it change cement units’ location strategy?
For Ramco, clinkering units will be in the South; satellite cement-grinding units will be set up in strategic locations based on market potential. Setting up of clinkering units is dependent on limestone availability.
How about competition from the unorganised sector?
There is no significant player in the unorganised sector. First of all, manufacturing units compulsorily require BIS certification and that calls for heavy investment to maintain quality. Besides, being a capital-intensive sector, brand awareness among the users is also very high. Hence, the entry of unorganised players is very much restricted.
What is your capacity?
Clinker capacity as at June is 11.4 MTPA. It will rise to 13.65 MTPA once the clinkering unit in Kurnool is completed in September. Cement grinding capacity is 19.4 MTPA. It will rise to 20.4 MTPA once the cement-grinding facility in Kurnool is completed by 2022-23.
Are you looking at acquisitions or going North?
As of now, good assets are available in the North. If any opportunity is there, definitely we will examine to expand or diversify markets.
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