Birla Corp To Pump Over Rs 1000 Cr In Next Five Years

The M P Birla group flagship Birla Corp, formerly Birla Jute & Industries Ltd, recorded discouraging performances both in 1996-97 as well as in the first half of the current fiscal.

During 1996-97, sales turnover dropped by nearly 2 per cent. Income from other sources and from exports helped the company prevent being in the red during the year.

Income from sale of fixed assets, export incentives and supply of electricity to internal departments, together increased by nearly 45 per cent. Income from export rose by more than 18 per cent. But due to higher burden of interest and depreciation, net profit dropped more than 89 per cent, despite a considerable drop in tax burden.

 

Performance in first half of the current fiscal was no better. Sales turnover declined by nearly 10 per cent. In spite of a fall in total expenditure and interest burden, it registered a loss of Rs 12.37 crore in the first half of 1997-98.

Birla Corps cement units in West Bengal, M P and Rajasthan and jute units in West Bengal registered a drop in production in both 1996-97 and in the first of current fiscal.

According to A L Kapur, executive director and chief executive officer, to achieve economies of scale, the company has plans to invest above Rs 1,000 crore over the next five years. It also proposes to double cement production from 3.5 million tonne to seven million tonne through greenfield projects and by setting up additional units near its existing cement manufacturing plants.

It has already set in motion plans to set up a Rs 400 crore greenfield cement project in south India followed by another unit near Calcutta. It has also obtained environmental clearance for setting up another project in Satna, Madhya Pradesh, with an annual capacity of 1.2 million tonne.

Efforts are also underway to set up yet another 1.2 million tonne capacity cement-manufacturing unit at Chittor, Rajasthan.

The financing of the proposed projects is planned through internal accruals and borrowings, which includes opting for external commercial borrowings.

The overall cement market, which remained slack over the previous fiscal due to surplus capacities, is unlikely to look up in 1997-98 with further capacity expansions planned by producers. This will naturally lead to overcrowding in the market and consequently have adverse effects on cement prices.

According to Kapur, given the cyclical nature of the cement industry, the location of a plant and its commissioning should be synchronised with the period when the market is most upbeat.

During the year under review, Birla Corp entered into an agreement with Redland Plc of UK to set up facilities for the manufacture of readymix cement concrete(RCC) in India.

Birla Redland Readymix Ltd, the new company with both the partners holding 50:50 stake for the Rs 12 crore project, is planning to set up a RCC unit near New Delhi, followed by two more in the northern region and one in Calcutta.

The companys unit , Bally Jute Mills, which was leased out on April 9, 1997, has since been sold out to minimise the loss in jute division of the company.

A major development work, connected with the supply of high specification unsupported PVC sheet for auto trim division, has yielded satisfactory customer acceptance.

About 41,000 sq metres were produced for the automotive segment last year and good growth is expected in the current year as well.