Ramco Cements plans Rs 1,200-1,300 crore capex

Ramco Cements plans Rs 1,200-1,300 crore capex

9 Jun    Finance News

Ramco Cements, one of the major cement manufacturers in south India has said that the company is planning a total capex of Rs 1,200-1,300 crore over the next two years to expand the capacity.

The company’s net debt stood at Rs 3,800 crore as of FY22 and it plans to repay Rs 500 crore debt in FY23 whereas it targets to become net debt-free by FY26 if no other major capex is planned, top management officials of Ramco Cements told the annual investors’ meet, recently. The management was represented by company’s CEO A V Dharmakrishnan and CFO SVaithiyanathan.

Giving details of the capacity expansion, the company said at its Kurnool plant, trial production of clinker is going on and with this, the clinkering capacity has gone up to 13.65 MTPA. The cement grinding facility, 6 MW of Waste Heat Recovery System (WHRS) and 18 MW TPP will be commissioned during Q2 FY23. An additional 1-1.5 MTPA grinding capacity will come up in Karnataka at a capex of Rs 300-305 crore, where the land acquisition is in process.

The company won the limestone mine in Karnataka at 25% premium from base price which is lower than the recent bids. These mines can be used for integrated plant which would come up in the state. Also, this mine can be used to feed the grinding unit in Maharashtra later, once it comes up.

“Company has no issues of limestone in Andhra Pradesh – if limestone cost goes up, company has option to feed the limestone from AP to TN in future,” they said.

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On the recent Adani-Holcim deal and the possible impact on Ramco or other south- based players, Ramco said Holcim group’s presence in the south region is lower, which poses less concern for south-based players. Also, the company is not much worried on Adani coming in the market and is rather a welcome move.

To get a view on Adani’s rationality in pricing, taking cues from this coal dealing, Adani has never under-cut the pricing, does not sell at a throwaway price and is quality conscious. Hence, the new entrant would likely behave rationally on the pricing front, they added.

Answering questions on the issue of sustainable profitability in terms of Ebitda per tonne, Ramco Cements said the near-term scenario is uncertain given sharp rise in cost inflation and lag in cement price increase. However, the average Ebitda per tonne of the past 10-12 years can be taken as sustainable profitability range.

On the pricing dynamics in different market, the company said price increase in east is sustaining, whereas south region price have come down from the peak levels. The company proposes to take Rs 20-25/bag price increase in south during June in view of fuel price increase but the sustainability of this price needs to be watched out

The company said during April and May, the demand was robust on the low– base due to lockdowns last year during second wave of Covid. The demand has shown improvement as infrastructure projects have started picking up in the recent months. Overall, industry growth could be at 10% whereas company would likely achieve volume growth of 15% in FY23.

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