We are not into retailing and non-trade
Tata is a company that does not need any introduction. The company has touched all the aspects of human life. Tata as a part of its sustainability initiative came up with a cement plant in the year 1993 in Mithapur. The cement is produced under the brand name, 'Tata Shudh'. Zarir Langrana, COO, Tata Chemicals, India talks to ICR about their journey, future plans and the challenges faced by the company.
What is your view on the current scenario of Indian cement industry?
We think in general, the growth of the cement sector will remain healthy given the current is fundamental economic environment. We might witness spikes as we generally do, periodically within sector and within regions. However, we are very positive about the growth and we constantly keep hearing about the expansion plans of the cement giants so definitely all the industry gurus share this view. Increasing urbanisation, growth in infrastructure projects and real estate will boost the demand of cement. Growth in the upcoming fiscal is expected to happen. The year 2013-14 or the first half of 2014 will witness a lot of growth keeping also in view the elections of 2014.
Tell us about the journey of Tata Shudh Cement
Our cement plant based in Mithapur, is possible the only one of its type, at least of what we are aware of, in the world and is unique. It is actually not a cement plant; it is our technological innovation where we ultilise waste and convert the waste into wealth. We operate an inorganic complex in Mithapur where we manufacture a key inorganic bulk chemical called Soda Ash. In the process of manufacturing Soda Ash, we use a bunch of raw materials and we have an effluent stream at the end of the process. Being a bulk chemical the volumes of raw materials used and the volumes of this stream was very large. In addition, our challenge was how do you lessen the environmental load and use some of the raw materials that are rejects from the process and we came up with the solution of manufacturing cement using these. For e.g, a key material is limestone but the limestone has to be of a particular size. So once that size goes in the process, there are also under size and over size that are left behind. So now what do you do with the remaining limestone. How do you utilise it profitably and not add to waste or dispose the same in the market. We also have our own power plant where we generate steam and power and in the process of generating that, we generate flyash. So how do we use all of these streams and convert it into something useful. This cement plant came up to actually utilise these; as a feedstock and it uses the entire stream that the soda ash plant generates. That's how we started our journey and that's where we are today. It is really our effort to convert waste into wealth, brand that wealth and sell the same in the market. It's been a long and fruitful journey and we are happy that we have established ourselves with in the geography of Gujarat where we market a well recognised brand and are respected in the market. We have our own niche of customers and a brand that we are proud of. It is not large in terms of volume and size, and scale as compared to some of the other manufacturers but it has its own little place in the market and it is something that we going forward will build up in various ways.
What is your market share in Gujarat?
Our market share in Gujarat is about three per cent. We are not large but we have our own niche.
What are your strategies behind operating in Gujarat
As we told you our cement business is tightly integrated with the chemical business so we can produce only as much only as our generated feedstock. In addition, as you know cement dynamics the closer you sell the cement to the producing site the more attractive the business is; cement does not lend itself to travelling long distances.
Does the company have any expansion plans?
There will be some debottlenecking that will take place and some expansion, since today there is a little mismatch between our clinker capacity and cement manufacturing capacity. So that will move it up a little but not substantially. However, the expansion is more likely to be in speciality cements and niche products. While the volume may remain the same, there certainly are plans to add more value added products to the portfolio.
Could you brief us more about masonry cement?
Normal Fly Ash generated in Power plants is used in the preparation of PPC whereas we generate Sulphated Fly Ash. This can be used only in the preparation of Masonry Cement. There are 40-45 per cent of Masonry and Plastering works when any construction takes place and Masonry cement can be used for this purpose. This is not meant to be used in load bearing structures. We sell about 90,000 mt of Masonry cement.
It is said that consolidation remains the key in the cement industry does the company plan any tie up?
Since our focus is around developing new speciality and value added cements and in that process if we need to tie up with anyone, it might happen. We would rather develop products, processes and applications of our own and then see what the best way to structure it is. The first stage is developing the portfolio and obviously building a brand.
What are the quality control polices followed by the company?
We have a state of art online quality control system at the plant. Obviously all of what we produce needs to meet the minimum mandated standards that you need to achieve and Mithapur being a chemical complex has in place the entire necessary infrastructure that meet these standards. In addition to stringent quality standards we also concentrate on other two aspects - one is the safety standard and the other is sustainability standards - be it in energy efficiency, greenhouse gas abatement or packaging. We ensure that our plant is the safest in the industry and operates sustainably.
Kindly tell us about your dealer network and also the USP of your product?
Cement realisations are the best when it is supplied to the nearby locations. Since we have our plants in Mithapur, so we concentrate more on Saurashtra, which comprises the districts of Rajkot, Amreli, Jamnagar, Porbandar, Junagadh, Bhavnagar and Surendranagar. Approximately 52-55 per cent of our production is sold in these areas. Our material travels about 200-250 km if they are sold in these regions. You get better realisation if the distance is within a range of 350 km. Our next priority is Kutch. Third priority is Ahmadebad. We have 350 dealers in all, out of which 200 are in Saurashtra, 50 in Kutch. So we would say that these 250 dealers get prompt and timely service and do not face any issues.
Which are the major projects that the company has worked on?
Since we are into retailing and not into non-trade, you will not see us undertaking major projects. Of course, there are school and buildings including one in Rajkot constructed using Shudh cement, but you will not see us in infrastructure projects like dams since we do not wish to venture in those areas. We are deliberately focused on the retail market with our current portfolio.
What are the major challenges that the company and the industry faces?
We would say there are three major challenges that we face, one is the scale of operations. We operate on a small scale as compared to other major players in the market. Second would be quickly adding to the portfolio of the value added cement to our portfolio and the third is that Gujarat itself is a very competitive market for a product like this. About the sector the major cost is logistics and hike in the prices of raw materials.
What is the USP of your product?
The products that we manufacture are at par with any other products available. As we said, the focus is towards adding value added products and hopefully a few years down the line we shall have a portfolio of the value added products. How do we offer a bouquet of complimentary products to the consumers is where we would like to go.