In conversation with Dharmender Tuteja, CFO, Dalmia Bharat

Dalmia Bharat Limited’s future growth roadmap involves strategically pivoting around premium products, a diverse product portfolio, raw material security and a robust pursuit of renewable energy or reduction of net carbon emissions

Can you shed some light on your FY23 results?

During FY23 we delivered volume and revenue growth of 16 per cent YoY at a volume of 25.7 million tonnes and 20 per cent YoY at Rs 13,540 crore, respectively. This growth of 16 per cent is estimated to be more than 1.5 times the all-India demand growth. During the year, the NSR growth has been almost 4 per cent, which was led by stability and strengthening of prices in the eastern and north-eastern states. While the increase in NSR at 4 per cent has been higher than the long-term average price increase of 2 per cent annually, it has not been sufficient to offset the adverse impact of input price inflation.

During the year, the average fuel consumption prices spiked from the equivalent pet coke price of USD 141 in FY22 to USD 198 per tonne in FY23. However, our proactive approach has enabled us to successfully mitigate the adverse impact of inflation by improving our manufacturing and sales KPIs. The group recorded an increase in profit after tax from continuing operations by Rs 246 crore to Rs 1,083 crore as compared to the previous year’s Rs 837 crore. The basic and diluted earnings from continuing operations for FY23 were at Rs 55.44 per share and Rs 55.41 per share, respectively.

With a constant push by the government on infrastructure and a robust real estate cycle already kicking in, what is your outlook on the Indian cement industry for the next few quarters? 

We continue to have deep conviction in the India growth story and would reiterate that the next two to three decades really belong to our country with GDP growth expected at 6.5 per cent to 7 per cent in FY24 and beyond. The government’s unwavering focus on the infrastructure and housing sectors in India reflects deep-rooted optimism in the nation’s growth trajectory. With successive budgets we witness a steadfast commitment to augment capital expenditure and drive the manufacturing industry through initiatives like the PLI scheme.

These endeavours, coupled with a resolute focus on the housing sector, are poised to propel the demand for cement within the country. In alignment with the government’s vision of fortifying India, our organisation has pledged substantial capital investment for the forthcoming years. Our strategic approach entails the establishment of greenfield units and the enhancement of existing facilities to meet our targeted capacity expansion goals.

At the moment, what are your top three strategic priorities?

For next year i.e. FY24 some of our areas of focus will be:

1. Timely completion of the ongoing capex and integration of the Jaypee Cement’s assets.
2. Further improve our manufacturing KPIs and build long-term input security.
3. HR transformation with a focus on leadership development and digital enablement of the company.

What is the current competitive landscape for your company, and what are your plans for enhancing your competitive position?

With an installed manufacturing capacity of 43.7 million tonnes presently, we rank as the fourth-largest cement producer in India. As we set our sights on a path of aggressive expansion, our imminent journey is driven by a commitment to achieve a capacity of 110-130 million tonnes by 2031, with a projected CAGR of 14-15 per cent. In alignment with our overarching strategy to emerge as a pan-India pure play cement entity, a pivotal milestone beckons us to reach 75 million tonnes by FY27.

Our future growth roadmap involves a combination that encompasses both organic and inorganic opportunities, strategically pivoting around premium products, a diverse product portfolio, raw material security and a robust pursuit of renewable energy or reduction of net carbon emissions. Our proactive investments in cutting-edge technologies and the systematic implementation of Industry 4.0 IIoT solutions along with other initiatives have helped us with the ability to add capacity at the lowest cost.

Furthermore, our unyielding commitment to a circular economy drives our transition from ‘grey to green’ in cement manufacturing. Dalmia Bharat’s carbon footprint of 462 kg CO2 emission per tonne of cementitious material remains one of the lowest in the cement industry, globally. Embracing a sustainable ethos, our growth trajectory is also underpinned by a decisive shift from thermal energy and electricity to renewable alternatives by 2030. We already have a captive renewable energy capacity of 170 MW and sourced about 21 per cent of the electricity requirement through RE sources in FY23. We are also in the process of increasing our RE capacity to 328 MW by the end of FY24.

The company has outperformed in the last decade with revenue growing faster than the demand for cement. What were the contributing factors for this, and do you expect the momentum to continue going forward? 

In the last decade, our growth was driven by a strategic combination of organic and inorganic expansion. During the initial years up to 2010, the company focused on organic expansion through a mix of brownfield and greenfield projects. From 2010 onwards, we shifted our growth strategy towards mergers and acquisitions and undertook significant acquisitions such as Adhunik, Calcom, Jaypee Bokaro, OCL, Kalyanpur Cement and Murli Industries. These acquisitions not only enabled us to increase our capacity faster than the industry growth but also contributed to regional diversification of our capacity footprint. On an overall basis, during the period 2010 and 2023 our growth in capacity was at a CAGR of 12 per cent and our revenues increased at 18 per cent CAGR along with an improvement in the overall capacity utilisation.

With a robust outlook for demand in the sector, we are positive about our growth going forward. To capitalise on this multi-decade growth in cement demand, we have created ‘Vision 2031’ for Dalmia Bharat and have become the first Indian cement company to lay down a long-term capacity expansion plan of 110-130 million tonnes by 2031, translating into 14-15 per cent CAGR, which is again expected to be higher than the industry capacity growth rate. The company has also been conscious that growth should come alongside a strong balance-sheet and hence the capex plan is supported by a robust capital allocation framework which defines certain guardrails for ensuring financial prudence and execution.

Can you elucidate on the company’s brownfield expansion plans?