Within a short span of just eight months, KJS Cement has achieved one hundred per cent capacity utilisation, and the brand has already become the preferred choice of consumers. Plans are on to set up one more line of 2.5 million tonne capacity, making it a total of five million tonne. Pawan Ahluwalia, Managing Director, KJS Cement, in an exclusive chat with ICR, shares his views on the current scenario, the challenges faced by the industry and the core strengths of the company. Excerpts from the interview.
What are your views on the current scenario of the Indian cement industry?
The current market is slightly depressed. However, as cement sales is cyclic in nature, we do not see this trend lasting long. I think the industry will be back on track by September 2013, after the monsoons. The market will regain its pace and the cement industry is expected to grow at the rate of 8 to 10 per cent a year. The per capita consumption of cement in India is far below the global average. This singular factor underlines the tremendous scope of growth in the Indian cement industry, in the medium to long term.
How do you assess your financial performance so far?
It is too early to comment on the financial performance as we have not yet completed one full year of production and sales. All of this takes time to settle down because we started the commercial production only in July 2012. So normally, it takes about eight to nine months to settle down to full capacity. Hopefully the next quarter may be good for us. However, let me confidently say that our per metric tonne of NCR realisation is comparable with the best in the industry.
How many plants does the company have and where do you source coal and steel from?
We have only one plant located in the district of Maiher, in Madhya Pradesh. We are currently concentrating on central Indian markets, as these are our natural markets. Our share of the market can be fairly assessed once we fully cover the natural markets/geographical areas. We also have an iron ore mines in Orissa, which is the largest in the state. We also have a steel plant in Satna. Thus, we source steel from our plant. And the coal we get from South Eastern Coalfield and we have applied for linkage which is likely to be cleared shortly. Then, once we get the linkage, we will have no problem. Right now, we are using the coal from South Eastern Coalfield and recently, we imported coal from South Africa.
How energy-efficient is your plant at Maiher?
Well, we have one of the most modern plants in the country today. We have FLS Pyro shipped from Denmark. Our grinding system, Loesche, is from Germany. We have used advanced technology in different areas of cement production. The technology we have used is extremely fuel-efficient, most productive and we ensure that the machines are used optimally without any breakdowns.
Could you brief us on your dealer network.
We have a sizable network of about 600 dealers which includes the areas of Madhya Pradesh, UP and Bihar. Since cement is basically logistics business, the farther the distance, the lower the contribution. So we would prefer to consider only the niche markets.
Who are your major clients right now?
Our main focus is on trade sales. Which goes direct to the consumer, I mean building construction, road- making and all that.
Is there any capacity expansion on the anvil?
Not right now as we have sufficient installed capacity to meet the demand. However, we are planning on a captive power plant and also grinding unit.
What are the major challenges faced by the industry?
First of all, taxation is highly skewed for cement; we would like to see a rationalised tax structure. Also I would like to add that the demand-supply scenario is out of sync, yet major players are into augmentation of capacity. The input costs have gone up, the logistic cost is heading high as also the overhead costs. These are having an impact on the industry which is still in consolidation mode. So the growth of the cement industry, as per my understanding, is going to be about 11 to 12 per cent as has been projected by the Planning Commission. And that much I think will be sufficient for the industry to grow.
What support do you require from the government on the policy level?
The excise duty needs to be reduced; this has been a long time demand. The government should also support the industry with a reliable supply of coal. As there is a huge paucity of coal, the ideal solution is to allocate a reasonable share of coal to the cement industry. If the industry receives support from the government on power and energy, the rest all can be taken care of by the industry itself.
How does the company address the logistics issues?
Transportation/logistic cost and also energy costs, are huge costs in the overall production costs. Our endeavour is to constantly work towards the lowering of these costs. Logistics has been the biggest cost for us and we prefer railway logistics over road. Road transport is becoming expensive day by day not only due to increasing costs of diesel but also due to secondary cost because you have to dump your material into the godowns and again load and unload it, for which you need 300-400 trucks. Availability of the same is an issue. While using the railways, you carry the 3,000-3,500 tonne at a go.
Are there any takeovers on the cards?
We are open to that. But right now our focus is on onsolidation of our core markets.