 "A labourer loads cement bags onto an improvised motorized rickshaw at the construction site of a residential complex on the outskirts of Kolkata")
After the signing of the agreement to acquire the cement business of Reliance Infrastructure, Kolkata-based Birla Corporation is now focusing on building a brand image for its cement range.
Officials close to the development said that a lack of brand-building activity had resulted in the company owning a marginal market share in the northern part of the country.
“Where we are losing out and need to focus on is on building a brand of our cement portfolio and sustain it in the long run,” said an official. The company is also in the process of restructuring its marketing team apart from rationalising the marketing budget. Lack of a brand presence in its portfolio had motivated the company to opt for the acquisition of Lafarge cement plants in Sonadih in Chhattisgarh and Jojobera in Jharkhand for Rs 5,000 crore.
The deal facilitated Birla Corporation to completely acquire the Concreto brand and partially control the PSC brand.
Regulatory approvals and considerations resulted in the deal being called off and the MP Birla group firm resorting to legal action against the France-based company.
Even though it didn’t have a brand, the Reliance acquisition gave Birla Corporation an advantage of Rs 300-400 per tonne in input cost.
While the Reliance deal helps Birla Corporation save between Rs 30 and Rs 40 a bag, the deal comes with other benefits as well. “It gives the company a tax benefit incentive in Madhya Pradesh and also provide access to various mining licences. All that needs to be done is to just pay for the mining fees to obtain the permit,” said the official.
The bargain gives the Kolkata-based company access to various mining leases in Madhya Pradesh, Karnataka, Maharashtra, Andhra Pradesh, Himachal Pradesh and Rajasthan.
In the coming financial year, Birla Corporation will take forward the 4.5 million tonnes per annum (mtpa) project at Wani in Maharashtra, which was planned by Reliance Infrastructure for Reliance Cement. To avail the tax benefits and facilitate the transition, a part of the cement from the recently acquired Maihar plant in Madhya Pradesh will be sold under the Reliance Cement brand name for sometime, while a part will be packaged with the Birla Samrat logo.
Nevertheless, the recent move from Birla Corporation clearly cites its goal to scale up its production capacity to about 15 mtpa. While the Lafarge deal had the potential to pull up the former's capacity to 14.45 mtpa, the Reliance Cement deal gave it provisions to boost it to 14.8 mtpa.
The company, whose ownership is still disputed between the Lodha and the Birla family, however, told Business Standard that it was not in the race to increase its production capacity for the sake of it and was rather focusing on increasing its bottom line and future competitiveness.
It has already started using pet coke in its plants in Madhya Pradesh, Rajashtan, West Bengal and Uttar Pradesh resulting in an annual saving of Rs 72-84 crore, which will be further scaled up. It is also planning to “rationalise” its limestone procurement.
Additionally, it plans to scale up using alternate fuel and further wastage recovery, which can help the company battle a falling bottom line.
