Madras Cement: organic growth mooted
Cement manufacturers in the south of India had a bad start this financial year as consumption dropped in the April-June quarter. In this situation, Madras Cements stood out because its net profit increased, largely on account of a tight control over costs. AV Dharmakrishnan, Senior Vice-President (Finance), spoke to India’s Business Line about the company’s efforts to check costs and the situation faced by the industry today.
Excerpts:
What were the reasons for the fall in cement consumption in South India in the first quarter of the current financial year?
In the first quarter, all-India growth was only 3 per cent, compared with last year’s 5 per cent. In this background, in Andhra Pradesh, there was a decline of 14 per cent, in Tamil Nadu a decline of 13 per cent, in Karnataka a decline of 6 per cent, and in Kerala a decline of 7 per cent.
I don’t have statistics on which sector consumes what quantity of cement. What people say is infrastructure development has come down. Government spending is not as much as before in all states. In Tamil Nadu, there was water shortage. Karnataka had positive growth of over 15 per cent in the past three-four years. Strangely, this time it is negative. Whatever spending took place might have happened in the last four years, with maybe a little lull in the current year. In Andhra Pradesh with a change in government, investment may have slowed down. That is my feeling.
Generally in the South, doesn’t the biggest demand come from the government?
Not necessarily. It’s mostly from the housing sector.
Will you consider acquisitions?
Our policy is clear, we will have organic growth. Growth in installed capacity would come only through organic growth, maybe by de-bottlenecking, and in future maybe by expanding at existing sites.
Is there likelihood that there will be more debt repayment this year?
This year we have a capital expenditure programme of a little over Rs 90 crore. We are implementing a 36-MW thermal plant in Alathiyur (in Tamil Nadu where the company has a plant) from internal accruals. After this, I am confident debt will come down by Rs 60 crore-Rs 80 crore.
