Consolidation will accelerate, boosting pricing power over time: Dalmia

Dalmia said that the company is optimistic on the sector in the long-term, even as margins remain weak in the short-term

Dalmia Bharat had announced a capital expenditure (capex) plan of ₹3,520 crore last week to add 6 million tonnes per annum (MTPA) of new capacities. Puneet Dalmia, chief executive officer (CEO) and managing director (MD), told Amritha Pillay during a virtual interaction, that he is optimistic about the sector in the long term, even as margins remain weak in the short term.

 

The company announced plans to take its capacity to 55.5 MTPA. In the long term, you have indicated 75 MTPA by FY28 and 110-130 MTPA by FY31 as other targets. Can you elaborate?

 

We will do it in a phased manner and as and when we are ready, we are going to keep announcing it. With a capex of ₹3,520 crore, we will be adding capacities to serve western India — Maharashtra, Goa and northern Karnataka. This is consistent with our strategic vision to become a pan-Indian company. We are underrepresented in Western India.

 

What is your cement demand outlook?

 

We are a long-term believer in India's growth story; there are four big drivers to cement demand, which are housing, infrastructure, private capex and organised real estate. If India grows at 6-7 per cent per annum, the demand for cement can grow at 7-8 per cent. For the current financial year, the growth is likely to be 4-5 per cent. We lost two quarters because of elections and excessive rain.

 

Cement prices have inched upwards recently. Do you expect demand to improve?

 

When we make Capex investments, we take a long-term view. We think this industry is likely to consolidate faster over time. The top-four players have captured most of the incremental demand. This consolidation story is likely to accelerate, and this will lead to a better pricing power over time. In the short term, because of lower demand, and focus on market share and growth, there is intense competition right now. And margins are low, but this is a cyclical business, and margins will slowly improve over time.

 

What is Dalmia Bharat’s strategy, volumes or margins?

 

Our capacity utilisation is 68 per cent right now, and we want to ramp it up.

 

Would you also look at acquisitions?

 

We will look at both organic and inorganic, provided they fit into our strategy, and are available at the right price. As of now, we are announcing this organic work plan, and our base case plan will be organic.

 

Do you expect FY26 to be better than the weak FY25?

 

I'm cautiously optimistic. I would just say that I am not in the business of making quarterly or yearly predictions. My investment strategy is governed by a long-term view. In the short term, it is hard for me to see what's going to happen, because the global macro is quite volatile. There is geopolitical risk.

 

At the macro level, you listed private capex as one of the four pillars of demand growth. Are you noticing a private capex pick-up yet?

 

The balance sheet of India Inc is strong. There is a lot of firepower to go and government policies are enabling manufacturing in India. Currently, there is a lot of global uncertainty. As this plays out and settles down, there will be a lot of news flow in this (private capex) space. There is a huge emphasis from the government to enable manufacturing. There are a lot of schemes like production-linked incentives (PLIs) in every state. It is not just a national vision. I can see this growing at the state level also.