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Published: Jun 15, 2022
Updated: Jun 15, 2022

Sales, revenues at new high in 2022 - Birla Corporation Ltd. (BCL)

With the commissioning of its Rs 2,744-crore Mukutban integrated cement plant near Nagpur in Maharashtra, Birla Corporation (BCL) has reached an annual installed capacity of almost 20 million tonnes.

The Mukutban plant is in the fold of RCCPL Pvt Ltd (RCCPL), a wholly owned subsidiary of BCL, which has a clinker capacity of 2.68 million tonnes per annum and a cement grinding capacity of 3.9 mtpa. It also has a captive thermal power plant with a 40 MW generation capacity. The state-of-the-art cement plant started operations at the end March this year and has taken special care in opting for energy-efficient equipment right from the limestone crusher to grinding and packaging.

This is the largest greenfield investment by the company in the history of the MP Birla group. BCL has eleven cement plants spread over eight locations across the country. This includes its subsidiary RCCPL. The company produces an array of cement products under the MP Birla Cement brand and also offers construction chemicals and wall putty.

BCL has clocked the highest-ever cement sales of 14.22 million tonnes in FY22, translating into a record full-year revenue of Rs 7,560 crore and raising the cement division’s capacity utilisation to 92% as against 85% in the previous year. The previous highest volume sales of 13.65 million tonnes was achieved in FY19.

CRISIL expects Birla Corporation Ltd. (BCL) cement demand to remain stable in India in the current fiscal year and grow at 5-7%, provided the capital expenditure by states and the Central government isn’t scaled back. On the other hand, the cost pressure is unlikely to ease on cement companies in the foreseeable future, and hence profitability might remain under pressure till then.

MARGINS PRESSURE

The spurt in sales came mostly towards the end of the financial year. March quarter sales at 4.24 million tonnes was up 27% sequentially and 1.7% on a yoy basis. However, market conditions were not conducive for a price hike. According to rating agency CRISIL, margins for the cement industry contracted by 400-500 basis points in FY22.

Despite this, BCL managed to raise its full-year cement sales realisation to Rs 4,938 per tonne, up 2.2% over Rs 4,829 in the previous year. Likewise, the company’s EBITDA was Rs 1,208.79 crore, 15.9% lower than the previous year whereas EBITDA per tonne of cement for FY22 declined 25.4% yoy to Rs 755.

Due to a one-off credit adjustment of Rs 124.98 crore in income tax expenses in the previous year, the profit before tax in the fourth quarter was lower by 14.8% at Rs 153.18 crore and net profit by 55.5% yoy to Rs 111.08 crore. Similarly, for the full financial year, PBT was down by 24.5% to Rs 537.75 crore and PAT at Rs 398.59 crore was lower by 36.8% compared to the previous year.

BCL has net fixed assets of Rs 6,586 crore, capital workin-progress of Rs 2,549 crore, and investments of Rs 602 crore under the financial current assets category. Similarly, its total outstanding debt stood at Rs 4,208 crore as of March 2022, marginally higher than Rs 4,046 crore in the previous year despite fresh borrowing of Rs 432 crore during the year for the Mukutban project.

BCL has equity capital of Rs 77.01 crore and shareholders’ reserves of Rs 5,971.84 crore on a consolidated basis to translate the book value per share to Rs 785 of Rs 10 face value. The promoter group holds a 62.90% stake, of which around 35% is held by Vindhya Telelinks, a publicly listed company of the MP Birla group.

CAPTIVE COAL

Coal has become scarce and expensive. In order to address this important issue, BCL is scaling up extraction from its captive mines. Production from the Sial-Ghoghri coal mine has been ramped up recently to 30,000 tonnes per month, 20% higher than its peak rated capacity. On similar lines, the company has accelerated the development of its Bikram coal mine, where the extraction is expected to start in the fourth quarter of the current financial year. These measures augur well to insulate BCL from volatility in fuel prices to a large extent.

In another measure, in FY22 the share of renewables in the total power consumed by the company was at 21.77%, against 18.82% in the previous year. BCL is scaling it up further during the current fiscal year by adding an 8 MW solar power capacity at Chanderia, Satna and Kundanganj. An additional 9 MW is also being planned to derive power from a waste heat recovery system at the recently commissioned Mukutban plant.

In line with its routine practice, the company consumes industrial waste like slag and fly ash, which are blended with clinker to produce blended cement. In addition, the company also consumes agricultural and industrial waste to feed its kilns as alternative fuel and raw materials (AFR). BCL plans to scale up this AFR usage at least to 12% in the current financial year, as compared to 7% in the previous year.

During FY22, the company appointed close to 2,000 new dealers in its bid to improve market penetration. How ever, going forward, it aims to sharpen focus on the nontrade segment as well with the anticipation of the segment emerging as a major growth driver in the current FY23.

LOGISTICS FOCUS

The company’s integrated logistics management system will become fully operational in the current year at its integrated plants, which is likely to substantially improve its supply chain efficiencies.

Under the jute division, the company operates Birla Jute Mills, which is the first jute mill started by an Indian entrepreneur way back in 1919. FY22 was yet another year wherein the division has achieved impressive profits by focusing on and shoring up production of value added goods. It earned a cash profit of Rs 46.16 crore during FY22, more than double the cash profit of Rs 21.62 crore earned in the previous year.

Despite disruptions in the supply of raw jute, the division managed to ramp up production to 30,792 tonnes against 24,907 tonnes in FY21. During the year, close to 3.5 million shopping bags were exported vis-à-vis 1.2 million bags in the previous year. The division is scouting for further opportunities to scale up exports in countries like the US, the UK and France. Due to eco-friendliness of jute, the company sees strong growth prospects in this particular business.

India is the world’s second-largest cement producer after China and it accounts for over 7% of the world’s installed capacity. Ultratech, Holcim (Ambuja-ACC), Dalmia Bharat, Ramco, Shree Cement, Birla Corp, JSW, etc., are the leading players at the national level. Due to increased spending on housing and infrastructure, the Indian cement industry is expected to add 80 million tonnes capacity by FY24, the most in ten years. More importantly, India has large deposits of quality limestone all over the country. Further, there is no import threat, which itself is a big motivating factor to the flow of fresh investment into the sector, especially when there is also a huge growth potential in demand for cement. CRISIL expects cement demand to remain stable in India in the current fiscal year and grow at 5-7%, provided the capital expenditure by states and the Central government isn’t scaled back. On the other hand, the cost pressure is unlikely to ease on cement companies in the foreseeable future, and hence profitability might remain under pressure till then.

ADANI EFFECT

The Adani group’s recent entry into cement with the acquisition of Holcim’s listed cement assets in India, Ambuja Cement and ACC, for a little over $ 10 billion, may lead to a big trigger for consolidation in the industry as large players may try to acquire small and marginal players. In fact, Mr Adani has also announced doubling of the installed capacity from around 60 million tonnes to 120 million tonnes over a period of five years.

At its current market price of Rs 860 and PE 16.6, the company is being valued at Rs 6,621 crore. Its last one-year high-low price is Rs 1,650 and Rs 850 respectively; i.e., the stock is trading near its 52-week low.

Considering all these developments, Birla Corp, a leading integrated player, with a 20 million-tonne installed cement capacity and its highest-ever full-year sales in as many as five states, including Uttar Pradesh and Madhya Pradesh, will obviously stand to benefit, keeping in mind the medium- to long-term horizon.