It will be business as usual June onwards: N Srinivasan, VC & MD, India Cements

by Jeremy


The decent price and that too with no credit, and the experience we gained during the last year will take care of our business, even if our capacity utilisation is little lower.

Cement major India Cements does not see the second wave of Covid -19 creating a big problem for the company, believing that markets will reopen in June and there will be pent-up demand. N Srinivasan, vice-chairman & MD of India Cements, who was reappointed for five years on Monday, says the company, marking its 75th anniversary this year, did quite well in FY21. It generated enough cash flows to retire debts by Rs 500 crore in the just concluded financial year. Excerpts.

What is your assessment of the possible impact of the Covid-19 second wave on the company and industry?

In the west and north of India, lockdown restrictions [are being relaxed] and we expect gradual relaxation in June in the south also. Therefore, this year, overall, we may be better placed as we have had the experience of dealing with the first wave. In the last fiscal, we had reduced our receivables and had good cash management. This year, we expect to generate more money, prices are holding and the volume overall should be better than last year. We had managed the cost of production and contained the fixed cost. As I said, by June, most markets will be [free of] restrictions and there will be a pent-up demand. For our company, it will be business as usual then onwards.

How has Q4 been in terms of volumes and performance?

The fourth quarter has been very good for us. Out of 29 lakh tonne of cement and clinker we did for the entire year, around 6 lakh tonne had been in the last quarter. Our stock drawals were also strong in the last quarter. The company’s cement production improved every quarter during the year, with capacity utilisation improving from 37% in the first quarter to around 77% in the fourth quarter, including clinker sales. Capacity utilisation in March 2021 was around 82%.

Though we are entitled to operate our plants, we are operating units based on the inventory which we want to keep, as outlets have remained closed due to local lockdowns. At present, we don’t want to build up a higher inventory. The moment the outlets open, we will be able to operate at higher capacity utilisation levels.

How has the company’s debt position been? Are there pressures on inputs cost?

At the beginning of FY21, the company’s total debt position was at Rs 3,500 crore. It has come down to Rs 2,900 crore at the end of the fiscal. During the last year, we repaid Rs 500 crore of debt in spite of the fact that we did not operate at full capacity, and we had managed our inventory well. We are also on course to repay another Rs 600 crore debt in FY22, based on our assessment that by mid-June all markets, including the south, will be out of lockdown. There is no need to tweak any of our business plans in the wake of the second wave of Covid-19 … In this current year, input cost may go up, but I believe that it can be passed on to the market. The prices of cement have gone up in May by Rs 10 per bag and will increase in June by around Rs 10 to Rs 15 per bag.

What has been the impact of the cash and carry practice of the company?

The company will continue the practice of cash and carry (sales on cash), which it introduced last year across all geographies, even strongly. As a company, we are very particular about cash. We believe that price is important and that we sell at a decent price. … The decent price and that too with no credit, and the experience we gained during the last year will take care of our business, even if our capacity utilisation is little lower.

Which are the sectors that will drive demand?

Covid-19 caused an artificial reduction in demand because of the restrictions. The basic demand was there. If you look at the pre-Covid period, the demand was going up across the country. The demand will go up because of the infrastructure focus of the government. The expansionary Budget for 2021-22, which had its thrust on increased capex, is expected to spur growth. If the promised capex on infrastructure, roads, metro rails take place, there is scope for higher demand for cement.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.





Source link

Related Posts

Leave a Comment