Barak Valley Cements Ltd: Growing leaps and bounds
To culminate their dreams into reality, three visionaries came together and started Barak Valley Cements Ltd (BVCL) in the northeast India. This region is known for difficult terrain, inaccessible places, political instability and insurgency, but they successfully overcame all these adverse conditions. Today, BVCL is a well-established cement manufacturer with dealer-distribution network spread across the northeast. Read on to know how BVCL tapped the potential of the region.
To accelerate the pace of industrialisation and the development of the northeast region which remains backward, the government offers incentives such as exemption in central excise duty, central sales tax, income-tax and various other subsidies for setting up industries here. Leveraging on this opportunity, three homegrown visionaries came together to start a cement manufacturing company. They were Prahlad Rai Chamaria, Bijay Kumar Garodia and Santosh Kumar Bajaj. They set up the cement company Barak Valley Cements Ltd (BVCL). The company was incorporated as a public limited company in the year 1999, under the Companies Act, 1956. The promoters, reputed businessmen with vast experience, were aware that rapid industrialisation of the region will fuel the demand for cement. They established their manufacturing unit in Barak Valley region, Assam. Since it started commercial production in April 2001, the company has achieved significant growth. The turnover of BVCL has increased six-fold from Rs 1,890.58 lakh during the financial year 2001-02 to Rs 11,294.09 lakh during 2009-10. Started with an initial production capacity of 300 tpd, today the total capacity stands at 1,050 tpd. The cement manufactured by BVCL is available in various grades and is marketed under the brand name ‘Valley Strong Cement’.
BVCL has its manufacturing units located at Joom Basti, Devendranagar, Badarpurghat, in the Karimganj district of Assam. Being a self-sufficient unit right from raw material procurement to crushing, blending, grinding and packaging of cement are carried out with total perfection. The company uses dry process rotary kiln technology with four-stage suspension pre-heater technology.
To manufacture high-quality cement, the company has installed state-of-the-art grinding mills with closed circuit system for uniform particle size and to make cement free from iron content, which contributes to superior quality of the cement. The production of clinker is highly mechanised and it features latest and advanced cooler whose cooling efficiency leads to superior clinker quality. The automated packaging & bagging lines ensure advance and tamper-proof sealing.
"It’s not just quality cements that you can buy from BVCL. Technical product and product-application knowledge, astute business management, coordination with builders, even better building tips are ‘extras’ that come along," says the company. BVCL sources its principal raw materials from captive limestone quarries in Meghalaya. These quarries have substantial reserves of high-grade, high carbonate content limestone – a pre-requisite for manufacturing high strength cement. The company’s product portfolio includes both ordinary portland cement (OPC) and portland pozzolana cement (PPC). The company is ISO 9001: 2008 certified and the products conform to Bureau of Indian Standards (BIS) specifications. The products manufactured by the company are available in various grades. The 43 grade OPC is the most popular general-purpose cement. This can be used for general civil engineering works, resource conservation challenge works, pre-cast items such as blocks, tiles and pipes, and to manufacture asbestos products such as sheets and pipes. The company’s 53 grade OPC is high strength cement. The 53 grade OPC is used where consistent high strength is required. These include pre-cast concrete items such as paving blocks, tiles and building blocks; and pre-stressed concrete components, runways, concrete roads, bridges and resource conservation challenge work. BVCL products are approved and accredited with quality standards viz BIS licence for 53 grade OPC cement, IS 12269: 1987; BIS licence for 43 grade OPC cement, IS 8112: 1989; BIS licence for PPC Part 1 fly ash-based cement, IS 1489: Part 1: 1991; and BIS licence for PPC part 2 calcined clay-based cement, IS 1489: Part 2: 1991. These quality standards not only ensure that customers get cement as per industry norms but also fulfill the company’s vision of satisfying buyers and sellers, and delighting the end-user.
BVCL is an undisputed leader when it comes to distribution in its geographies. The company has a well entrenched distribution network in the northeastern region and ensures that ‘Valley Strong Cement’ is quickly and easily accessed and timely delivered to destinations.
Incentives and sops
BVCL being located in Assam, is entitled to various benefits like excise duty exemption, central sales tax/VAT exemption, income-tax exemption, working capital interest subsidy and insurance subsidy. Currently, the company is enjoying several state and central government incentives.
The major benefits available to the company are:
- 100-per cent central excise duty exemption up to 31 March 2018.
- 100-per cent central sales tax/99 per cent VAT exemption up to 31 March 2017.
- 100-per cent income-tax exemption under Section 80 IC, subject to minimum alternate tax (MAT) U/s 115JB of Income Tax Act, 1961 up to 31 March 2018.
- Insurance subsidy, being 100 per cent premium payable under Comprehensive Insurance Scheme, 1997 by the Government up to financial year 2018.
- Working capital interest subsidy of 3 per cent payable by the government up to financial year 2018.
- Capital investment subsidy of 30 per cent investment in new plant & machinery up to 31 March 2017.
The manufacturing unit of BVCL is located in Barak Valley region, Assam, which is well connected with national highways and railway. This not only helps in reaching the market but also helps in economically pricing the product. Furthermore, Barak Valley region is surrounded by Mizoram, Tripura, and the southern part of Meghalaya, which are major markets for BVCL and its strategic location also helps in meeting the demand of dealers, sub-dealers, and distributors in the shortest possible time. The company also has the advantage of easy availability of raw material near the plant site. Limestone deposits of good quality having CaO (calcium oxide) content of more than 47 per cent are spread over a large area just 75 km away from the plant site. Coal, the main fuel, having calorific value of 6,000-7,000 kcal/kg is available in plenty in Bapung and Surupi areas of Meghalaya, which are 80-90 km from the factory site. Due to this, the company is able to produce BIS quality cement at competitive prices. Further, there are no administrative restrictions on the mining of coal and limestone, ensuring ease in procurement of the same.
To cater to the demand and to effectively manage, the company has established wholly owned subsidiaries. These include Badarpur Energy Pvt Ltd (BEPL), Cement International Ltd (CIL), and Meghalaya Minerals & Mines Ltd (MMML). BEPL has set up a 6-MW biomass captive power plant at Badarpurghat in Karimganj district, Assam. BEPL also helps the company in reducing the problems faced on account of maximum demand limitation, higher power cost, frequent power cuts, variations in voltage etc. Increasing demand for cement led BVCL to acquire CIL. CIL has set up a 300-tpd cement grinding unit at Jhoom Basti, Badarpurghat, Karimganj district in Assam and would produce PPC. MMML, the sole supplier of limestone to BVCL became a wholly owned subsidiary of BVCL in 2006. MMML has set up limestone crushing and galvanised plant at Lumshnong, Meghalaya for the crushing, segregation and homogenisation of limestone.
BVCL believes that a company’s success and its growth are directly influenced by the quality of its contributions to the betterment of society and the quality of life. Keeping this noble vision in mind, the company is involved in various social welfare activities. The company conducts free medical camps and awareness programmes for AIDS, family planning, etc, distributes free medicines, conducts mass marriages, etc. The company has also set up free healthcare centre at Debendra Nagar, Badarpurghat, in Karimganj district, Assam. The company has also built school at Badarpur in collaboration with Vivekananda Kendra Kanyakumari and has joined hands with the district administration to establish a children’s park at Karimganj. According to the company, in the years ahead, BVCL will strive to be a major social benefactor and will help enhance the quality of life.
Future is bright
"The Central and northeast state governments are aggressively focusing on improving the basic infrastructure in the region. While investments are being made to improve the road network across the entire northeast, especially by the NHAI, large projects are being undertaken by government agencies like NHPC, NEEPCO and NTPC, contributing to the overall growth in cement consumption in the region. The Central Government has put special focus on the development of hydel power projects and defence infrastructure in the northeast, especially in Arunachal Pradesh. This is expected to create huge cement demand in the region across the next 3-5 years. In view of large government spending in power, roads, railways, ports and rural and urban development as well as an improved real estate sector and affordable housing expansions, cement demand is expected to grow around 10-11 per cent in the coming years. The flexibility of the rural economy, owing to probable agricultural output improvement, rural infrastructural building and social schemes are also likely to reinforce cement demand in the coming days," says Bijay Kumar Garodia, Chairman, BVCL.
The company has always strived for excellence whether it is improved cement products, planned diversification into power generation, other need-based growth areas, better marketing & distribution, and taking customers from simple satisfaction to complete delight, superior services. Being one of the major cement manufacturers with well-established manufacturing units and dealership network in the northeast, the company is better placed to take a big successful leap towards the future.
Tell us about your future plans
BVCL is the largest cement producing company in Assam. The company has excellent financial credentials and clean track record with banks and financial institutions. Our company was the first in Assam to enter the capital market in 2007. The current cement manufacturing capacity of our plant is 1,050 tpd. To expand our cement production capacity and to further cater the unfilled demand of cement in the northeast, we have just undertaken a 2-million tonne per annum cement plant along with 25-MW captive power plant in Meghalaya. In this regard, necessary land has already been acquired at village Mustoh in Meghalaya.
We have also entered into civil construction, providing infrastructure and other related activities in the northeast region through our group concern NEPIL, which undertakes civil and engineering works of unrestricted value with most of the government departments, and public and private sector organisations. NEPIL has participated in various tenders floated by government authorities like PWD, irrigation, water resource department and other PSUs from time to time. The initial response from this civil construction sector is encouraging and we are looking for some bigger contracts in near future. We have also entered in tea and rubber plantation and processing activities in our tea gardens at Assam which are spread in over 2,000 hectare.
Price hikes, drop in input costs help cement industry to post positive margins: Care Ratings
Region-wise,the southern region comprises 35% of the total cement capacity, followed by thenorthern, eastern, western and central region comprising 20%, 18%, 14% and 13%of the capacity, respectively.
The cement industry is expected to post positive margins on decent price hikes over the months, falling raw material prices and marked drop in overall production costs, said an analysis of Care Ratings.
Wholesale and retail prices of cement have increased 11.9% and 12.4%, respectively, in the current financial year. As whole prices have remained elevated in most of the markets in the months of FY20, against the corresponding period of the previous year.
Similarly, electricity and fuel cost have declined 11.9% during 9M FY20 due to drop in crude oil prices. Logistics costs, the biggest cost for cement industry, has also dropped 7.7% (selling and distribution) as the Railways extended the benefit of exemption from busy season surcharge. Moreover, the cost of raw materials, too, declined 5.1% given the price of limestone had fallen 11.3% in the same aforementioned period, the analysis said.
According to Care Ratings, though the overall sales revenue has increased only 1.3%, against 16% growth in the year-ago period, the overall expenditure has declined 3.2% which has benefited the industry largely given the moderation in sales.
Even though FY20 has been subdued in terms of production and demand, the fall in cost of production has still supported the cement industry by clocking in positive margins, the rating agency said.
Cement demand is closely linked to the overall economic growth, particularly the housing and infrastructure sector. The cement sector will be seeing a sharp growth in volumes mainly due to increasing demand from affordable housing and other government infrastructure projects like roads, metros, airports, irrigation.
The government’s newly introduced National Infrastructure Pipeline (NIP), with its target of becoming a $5-trillion economy by 2025, is a detailed road map focused on economic revival through infrastructure development.
The NIP covers a gamut of sectors; rural and urban infrastructure and entails investments of Rs.102 lakh crore to be undertaken by the central government, state governments and the private sector. Of the total projects of the NIP, 42% are under implementation while 19% are under development, 31% are at the conceptual stage and 8% are yet to be classified.
The sectors that will be of focus will be roads, railways, power (renewable and conventional), irrigation and urban infrastructure. These sectors together account for 79% of the proposed investments in six years to 2025. Given the government’s thrust on infrastructure creation, it is likely to benefit the cement industry going forward.
Similarly, the Pradhan Mantri Awaas Yojana, aimed at providing affordable housing, will be a strong driver to lift cement demand. Prices have started correcting Q4 FY20 onwards due to revival in demand of the commodity, the agency said in its analysis.
Industry’s sales revenue has grown at a CAGR of 7.3% during FY15-19 but has grown only 1.3% in the current financial year. Tepid demand throughout the country in the first half of the year has led to the contraction of sales revenue. Fall in the total expenditure of cement firms had aided in improving the operating profit and net profit margins of the industry (OPM was 15.2 during 9M FY19 and NPM was 3.1 during 9M FY19). Interest coverage ratio, too, has improved on an overall basis (ICR was 3.3 during 9M FY19).
According to Cement Manufacturers Association, India accounts for over 8% of the overall global installed capacity. Region-wise, the southern region comprises 35% of the total cement capacity, followed by the northern, eastern, western and central region comprising 20%, 18%, 14% and 13% of the capacity, respectively.
Installed capacity of domestic cement makers has increased at a CAGR of 4.9% during FY16-20. Manufacturers have been able to maintain a capacity utilisation rate above 65% in the past quinquennium. In the current financial year due to the prolonged rains in many parts of the country, the capacity utilisation rate has fallen from 70% during FY19 to 66% currently (YTD).
Wonder Cement shows journey of cement with new campaign
The campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV…
Cement manufacturing company Wonder Cement, has announced the launch of a digital campaign ‘Har Raah Mein Wonder Hai’. The campaign has been designed specifically to run on platforms such as Instagram, Facebook and YouTube.
#HarRaahMeinWonderHai is a one-minute video, designed and conceptualised by its digital media partner Triature Digital Marketing and Technologies Pvt Ltd. The entire journey of the cement brand from leaving the factory, going through various weather conditions and witnessing the beauty of nature and wonders through the way until it reaches the destination i.e., to the consumer is very intriguing and the brand has tried to showcase the same with the film.
Sanjay Joshi, executive director, Wonder Cement, said, "Cement as a product poses a unique marketing challenge. Most consumers will build their homes once and therefore buy cement once in a lifetime. It is critical for a cement company to connect with their consumers emotionally. As a part of our communication strategy, it is our endeavor to reach out to a large audience of this country through digital. Wonder Cement always a pioneer in digital, with the launch of our IGTV campaign #HarRahMeinWonderHai, is the first brand in the cement category to venture into this space. Through this campaign, we have captured the emotional journey of a cement bag through its own perspective and depicted what it takes to lay the foundation of one’s dreams and turn them into reality."
The story begins with a family performing the bhoomi poojan of their new plot. It is the place where they are investing their life-long earnings; and planning to build a dream house for the family and children. The family believes in the tradition of having a ‘perfect shuruaat’ (perfect beginning) for their future dream house. The video later highlights the process of construction and in sequence it is emphasising the value of ‘Perfect Shuruaat’ through the eyes of a cement bag.
Tarun Singh Chauhan, management advisor and brand consultant, Wonder Cement, said, "Our objective with this campaign was to show that the cement produced at the Wonder Cement plant speaks for itself, its quality, trust and most of all perfection. The only way this was possible was to take the perspective of a cement bag and showing its journey of perfection from beginning till the end."
According to the company, the campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV. No other brand in this category has created content specific to the platform.
In spite of company’s optimism, demand weakness in cement is seen in the 4% y-o-y drop in sales volume. (Reuters)
Cost cuts and better realizations save? the ?day ?for ?UltraTech Cement, Updated: 27 Jan 2020, Vatsala Kamat from Live Mint
Lower cost of energy and logistics helped Ebitda per tonne rise by about 29% in Q3
Premiumization of acquired brands, synergistic?operations hold promise for future profit growth Topics
India’s largest cement producer UltraTech Cement Ltd turned out a bittersweet show in the December quarter. A sharp drop in fuel costs and higher realizations helped drive profit growth. But the inherent demand weakness was evident in the sales volumes drop during the quarter.
Better realizations during the December quarter, in spite of the 4% year-on-year volume decline, minimized the pain. Net stand-alone revenue fell by 2.6% to ?9,981.8 crore.
But as pointed out earlier, lower costs on most fronts helped profitability. The chart alongside shows the sharp drop in energy costs led by lower petcoke prices, lower fuel consumption and higher use of green power. Logistics costs, too, fell due to lower railway freight charges and synergies from the acquired assets. These savings helped offset the increase in raw material costs.
The upshot: Q3 Ebitda (earnings before interest, tax, depreciation and amortization) of about ?990 per tonne was 29% higher from a year ago. The jump in profit on a per tonne basis was more or less along expected lines, given the increase in realizations. "Besides, the reduction in net debt by about ?2,000 crore is a key positive," said Binod Modi, analyst at Reliance Securities Ltd.
Graphic by Santosh Sharma/Mint
What also impressed analysts is the nimble-footed integration of the recently merged cement assets of Nathdwara and Century, which was a concern on the Street.
Kunal Shah, analyst (institutional equities) at Yes Securities (India) Ltd, said: "The company has proved its ability of asset integration. Century’s cement assets were ramped up to 79% capacity utilization in December, even as they operated Nathdwara generating an Ebitda of ?1,500 per tonne."
Looks like the demand weakness mirrored in weak sales during the quarter was masked by the deft integration and synergies derived from these acquired assets. This drove UltraTech’s stock up by 2.6% to ?4,643 after the Q3 results were declared on Friday.
Brand transition from Century to UltraTech, which is 55% complete, is likely to touch 80% by September 2020. A report by Jefferies India Pvt. Ltd highlights that the Ebitda per tonne for premium brands is about ?5-10 higher per bag than the average (A cement bag weighs 50kg). Of course, with competition increasing in the arena, it remains to be seen how brand premiumization in the cement industry will pan out. UltraTech Cement scores well among peers here.
However, there are road bumps ahead for the cement sector and for UltraTech. Falling gross domestic product growth, fiscal slippages and lower budgetary allocation to infrastructure sector are making industry houses jittery on growth. Although UltraTech’s management is confident that cement demand is looking up, sustainability and pricing power remains a worry for the near term.