In the backdrop of the recovery in the southern cement market, Madras Cements, the flagship enterprise of Chennai-based Ramco Group, is planning to take the next big step by expanding its capacity with an investment of Rs 3,000 crore. The company’s new chief executive officer, AV Dharmakrishnan, a chartered accountant by profession and tech-savvy by nature, tells TE Narasimhan that the challenge for him will be logistics and brand building. Edited excerpts:
You have taken up the responsibility at a time when the southern market has shown some recovery by posting an 8.98 per cent growth. Will this trend continue and what are the challenges that you foresee?
From the industry perspective, the supply position is alarming. The real challenge is geographical expansion and diversifying with the use of the existing facilities.
The major challenges are logistics, capacity utilisation and brand building. Today, the distribution cost is equal to the manufacturing cost.
How are you planning to address these challenges? What will be your immediate focus areas?
We have focused enough on manufacturing and other cost control measures.
Now, logistics is the first priority. We are planning to have our dedicated lorries for attracting customers by expanding our geography.
You already have a plant in south. Will you be looking at setting up a facility in north as part of your geographical expansion?
The immediate focus is to increase our capacity utilisation to 90-95 per cent from the current 70 per cent. As part of expanding our capacity, we may look at a plant in the north, going forward.
The company is also planning to set up a packaging facility in Sri Lanka.
What are the expansion plans that are on the cards?
Our current capacity is 12 million tonne and we want to increase it to 20 million tonne in the next four to five years with an investment of around Rs 3,000 crore.
How will it be funded?
Through a mix of debt and internal accruals.
Cement manufacturers are diversifying into power in a big way. Will Madras Cements follow suit?
Madras Cements has started this trend. Currently, the company has 160 Mw of wind farms.
No other cement company in the world has such a big capacity. If there is no power cut in the state, this would have been a wonderful strategy for the company and we would have increased revenues.
We will expand it as the opportunity and requirement arise.
What is your outlook in terms of the top line?
During the nine months ended December 31, 2011, the company reported a total income of Rs 2,337.97 crore, as against Rs 1,933.4 crore a year ago, an increase of around 20 per cent.
Our net profit rose to Rs 286.02 crore from Rs 147.20 crore during the same period. The company expects to grow by around 20 per cent during the current financial year.