says Puneet Dalmia, Managing Director, Dalmia Cement (Bharat) Limited (DCBL). Read on to know more about the future strategies and the growth plans of DCBL.
What are your expectations from Budget 2011-12?
Our main expectations from the Union Budget 2011-12 are reduction in the import duty on coal and pet coke to 0 per cent, bringing down the VAT percentage of cement in line with other building materials and facilitating classification of cement industry in the infrastructure segment to reduce cost of funding new projects.
Recently Kohlberg Kravis & Roberts (KKR) has invested Rs 750 crore in Dalmia Cement. How is the company going to utilise this amount?
We have carved out a lucrative growth strategy for the future and moving swiftly towards achieving new milestones. We know our plans are ambitious and they require deep pockets and patient capital. Therefore we have raised equity through one of the leading global private equity (PE) firms KKR who has invested Rs 750 crore in our next phase of expansion, the largest PE investment in the cement industry in India. We have received Rs 500 crore, out of this we have an option to draw down the remaining Rs 250 crore in case we need them. We propose to use the money raised from KKR to set up greenfield capacities. Partnering with KKR is likely to bring in better corporate governance and best global practices. We will use the money to part fund organic and inorganic growth and deleveraging our balance sheet of the cement business. KKR has a long holding period and their investment in the cement space signifies the belief in the secular growth story of the industry.
What are the strategies the company will adopt to have a strong pan-India presence?
India is a growing market. With the long term strong driver such as infrastructure, housing, increasing prosperity of a common man, India will boom for next 20 years with a robust growth. There are several cities in India with more than one million population. So we see there is a lot of scope for us to align our strategies with the country’s growth trajectory. We are exploring all the lucrative avenues. We are in the process of setting up greenfield and combining with the inorganic growth at the same time.
How is the company going to benefit by segregating the businesses into new structure?
Dalmia Bharat Enterprises Limited is the entity with 85 per cent holding in DCBL, 45 per cent in OCL India and 100 per cent in the Dalmia Cement Ventures limited. This move was a part of the recent restructuring of businesses with an aim of creating pure play, focused and independent entities, pursuing aggressive growth, enhancing fund raising flexibility, providing shareholders additional liquidity and choice of ownership and unlocking shareholders’ value. Further this will enable us to streamline decision making process and increase efficiency in business through focused management teams and to create an enabling platform for fund raising and growth of respective businesses.
What are the new markets the company is planning to tap?
We have expanded with our new capacities that have been commissioned at Kadapa and Ariyalur. With this, we have entered the Karnataka and Andhra Pradesh markets. Our new Greenfield projects have been planned to deepen our southern and eastern India footprints.
Are there any new products, plants, capacity expansion in offing? If yes, please elaborate
We have recently announced plans to penetrate into the eastern and southern markets of India, through our two upcoming greenfield projects in Karnataka and North East, adding a combined capacity of 5 mt to our cement production.
How is the company planning to invest the Rs 2,500 crore capex?
We have announced funding of our new greenfield projects in Karnataka and Meghalaya at the cost of Rs 2500 crore. The funding will be managed through KKR investment, internal accruals plus sanctioned debt.
What are the machinery presently used by the company? How much the company plans to invest in machinery? What are the machinery the company plans to purchase?
The Dalmia Group is known for using the most efficient technologies of the day in all its plants. The recently completed plants boast of highly efficient pyro systems with 6/5 stage pre-heaters and vertical grinding mills for raw material, coal and cement grinding as well as other state of the art technologies such as MV drives, smart MCCs, automatic sampling system and robotic laboratory. In the upcoming projects, we have planned to spend around Rs 2,000 crore for plant and machinery.