India Cements modernisation and asset sales

25 Sep 2023 CW Team

India Cements is intensifying its efforts to lower production costs by modernising its ageing factories and bolstering liquidity through the sale of non-core land holdings.

The Chennai-based cement manufacturer has grappled with elevated production expenses due to the antiquity of most of its facilities. This predicament becomes particularly acute when industry-wide margins erode, exacerbated by steep increases in coal prices. India Cements' older factories have been especially susceptible to cost pressures.

In addition, the southern cement sector, including India Cements, has been plagued by substantial excess capacity.

At the company's 77th annual general meeting, N. Srinivasan, Vice-Chairman and Managing Director of India Cements, emphasised the company's commitment to monetising non-core assets to enhance liquidity, improve operational performance, and meet essential capital expenditure.

To tackle rising costs, India Cements has launched initiatives to refurbish its manufacturing units. It has enlisted the services of the global consulting firm Boston Consulting Group to evaluate operations at three of its plants in Andhra Pradesh and Telangana. The goal is to identify measures that can enhance operational efficiency.

India Cements operates eight cement factories distributed across Tamil Nadu, Andhra Pradesh, Telangana, Rajasthan, and Maharashtra. The company has already engaged FLSmith and ThyssenKrupp Industries to conduct a comprehensive assessment of operating parameters at some of its other units. The objective is to modernise these facilities, bringing them in line with state-of-the-art cement factories.

In the coming quarter, India Cements expects to commission a new cement mill at Sankar Nagar, replacing an older one. Additionally, the completion of a waste heat recovery system at Chilamkur in Andhra Pradesh is anticipated in the current year. These projects are poised to contribute to reduced variable costs moving forward.

While many cement manufacturers in the country are investing in waste heat recovery systems (WHRS) to lower power expenses, India Cements has been a pioneer in this field. The company established a WHRS unit at Vishnupuram (now in Telangana) as far back as 2004.

Furthermore, India Cements is set to sell approximately 74 acres of land in Andhra Pradesh's Vizianagaram district to Ultratech for Rs 700 million (excluding taxes, stamp duty, and registration charges). These proceeds will be allocated for working capital, debt repayment, and capital expenditure in the near term.

After posting negative EBIDTA for three consecutive quarters, the company reported a positive EBITDA in the first quarter of this fiscal year. N. Srinivasan emphasised the company's focus on elevating its core business, cement, emphasising its copious limestone deposits and extensive experience in cement manufacturing. Despite its cyclical nature, the cement industry holds substantial growth potential.

India Cements is intensifying its efforts to lower production costs by modernising its ageing factories and bolstering liquidity through the sale of non-core land holdings. The Chennai-based cement manufacturer has grappled with elevated production expenses due to the antiquity of most of its facilities. This predicament becomes particularly acute when industry-wide margins erode, exacerbated by steep increases in coal prices. India Cements' older factories have been especially susceptible to cost pressures. In addition, the southern cement sector, including India Cements, has been plagued by substantial excess capacity. At the company's 77th annual general meeting, N. Srinivasan, Vice-Chairman and Managing Director of India Cements, emphasised the company's commitment to monetising non-core assets to enhance liquidity, improve operational performance, and meet essential capital expenditure. To tackle rising costs, India Cements has launched initiatives to refurbish its manufacturing units. It has enlisted the services of the global consulting firm Boston Consulting Group to evaluate operations at three of its plants in Andhra Pradesh and Telangana. The goal is to identify measures that can enhance operational efficiency. India Cements operates eight cement factories distributed across Tamil Nadu, Andhra Pradesh, Telangana, Rajasthan, and Maharashtra. The company has already engaged FLSmith and ThyssenKrupp Industries to conduct a comprehensive assessment of operating parameters at some of its other units. The objective is to modernise these facilities, bringing them in line with state-of-the-art cement factories. In the coming quarter, India Cements expects to commission a new cement mill at Sankar Nagar, replacing an older one. Additionally, the completion of a waste heat recovery system at Chilamkur in Andhra Pradesh is anticipated in the current year. These projects are poised to contribute to reduced variable costs moving forward. While many cement manufacturers in the country are investing in waste heat recovery systems (WHRS) to lower power expenses, India Cements has been a pioneer in this field. The company established a WHRS unit at Vishnupuram (now in Telangana) as far back as 2004. Furthermore, India Cements is set to sell approximately 74 acres of land in Andhra Pradesh's Vizianagaram district to Ultratech for Rs 700 million (excluding taxes, stamp duty, and registration charges). These proceeds will be allocated for working capital, debt repayment, and capital expenditure in the near term. After posting negative EBIDTA for three consecutive quarters, the company reported a positive EBITDA in the first quarter of this fiscal year. N. Srinivasan emphasised the company's focus on elevating its core business, cement, emphasising its copious limestone deposits and extensive experience in cement manufacturing. Despite its cyclical nature, the cement industry holds substantial growth potential.

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