Sanghi Industries Ltd set up the world’s largest lignite based cement plant at Sanghipuram in Gujarat. The company manufactures clinker and Ordinary Portland Cement at its 2.6-million tpa plant. Alok Sanghi, a Business Management Graduate from Indiana University, USA, spoke to Renu Rajaram on the prospects for the Indian cement industry and the ongoing and future plans of his company.
How is Sanghi Cement positioned in the market?
Sanghi Industries Ltd has emerged as a major cement player in western India over the last few years. The company’s 3-million tpa plant in Abdasa taluka of Kachchh district in Gujarat is ranked as the second largest cement plant at one location in India. It is one of the top three players in Gujarat and is now increasing its presence in Maharashtra, Rajasthan and Madhya Pradesh. It was amongst the first few cement players to focus on branding a commodity product like cement in India.
The cement sector is expected to boom with higher allocation for infrastructure and housing in the 12th Five-Year Plan. What would be your strategy?
During the 12th Five-Year Plan, the government is planning to spend around $1 trillion on infrastructure, almost double what it spent during the 11th Plan. This is surely going to increase demand for cement. However, in the short to medium term, the demand would be from real estate sector. The company is right now focusing more on higher capacity utilisation and ensuring quality cement production. Capacity utilisation during 2011-12 has gone up to 81 per cent compared to 71 per cent last year.
What is the demand-supply scenario for cement? What are the growth drivers in this sector?
Currently, India has excess supply of cement because of excess capacity expansion during the last five-year plan and this situation is likely to continue over next two-three years. The industry added around 150 million tonnes of capacity during the 11th Plan taking the total capacity to over 300 million tonnes. However, demand has not been that strong during last couple of years due to general economic slowdown and lower infrastructure spending.
The company is focusing on higher capacity utilisation to ensure that expected rise in demand due to government spending can be tapped.
Tell us about your products and investment and expansion plans?
We manufacture Portland Pozzolana Cement and Ordinary Cement. We are not expanding clinker capacity as of now. We will be expanding grinding capacity in next one year and thereby increase capacity utilisation and increased clinker to cement ratio. We expect top-line growth of 15 per cent this year.
Sanghi Industries started off as a predominantly export driven company and has since turned its eyes on the domestic markets.
Due to global slowdown that started in 2008 export demand of cement was gradually falling. On the other hand, demand from the domestic market was strong until 2010-11, when that too started dipping. Though domestic supply is higher, demand from infrastructure spending by government is likely to improve over the next five-year plan. We wanted to ensure that when demand picks up, we are very much in place to tap this demand and so we are in the process of improving our domestic distribution network.
How do you plan to wipe out the company’s debt level which currently stands at around Rs.750 crore?
Debt repayment will be done from internal accruals. The company is back in black since last two quarters and we expect to be in profitmaking mode now. We have started repaying high-interest debt in a gradual manner and we plan to reduce debt level by Rs.100 crore by the end of current fiscal, which ends in June 2013.
Can you tell us about the power plant, sea terminal and capacity expansion in Kachchh?
The company installed a 60-MW captive thermal power plant in fiscal 2009-10 and commenced generation from December 2009. The thermal power plant is designed to use coal/lignite or a mixture of both as fuel for its operations. Sea terminal is based in Navlakhi Port in Rajkot district. The sea route will be used to cost effectively increase our geographical reach and grow our markets.
What is the turnover and capacity of this plant at present and after expansion?
The current capacity of the plant in Kachchh is 3 million tonnes. We are presently operating at around 80 per cent capacity. We plan to increase grinding capacity this fiscal and increase clinker to cement ratio to further raise capacity utilisation.
What is your view on safety and sustainability issues?
The company has developed environment friendly and safe mining practices and has received various awards for its mining practices over the years. The company adopts value engineering techniques for enhancing productivity, cost effectiveness and ensure sustainability of product dispatched.