Birla Corporation, the MP Birla Group flagship company, is expecting almost 15 per cent growth in volume terms in FY24, backed by steady investments in the infrastructure sector and with government projects catching speed. The company had witnessed almost 11 per cent growth in sales in volume terms at 15.73 million tonnes (mt) during FY23.
The company is bullish on the India growth story. Government projects, such as Pradhan Mantri Awas Yojana, have been catching speed and that is a sweet spot for companies like Birla Corporation, which operates primarily in the rurban markets, which is essentially the rural and the small towns, that is Tier II, Tier III towns.
According to Sandip Ghose, MD & CEO, Birla Corporation, the growth in sales volume would be driven by an overall growth in the market, which is expected to grow 8-9 per cent during the current fiscal, coupled with the ramp up in volumes at the Mukutban unit in Maharashtra.
The 3.9-mt Mukutban unit in Maharashtra, which is a part of the company’s material subsidiary, RCCPL Private Ltd, started commercial production at the beginning of FY23. The unit will support the volume growth during the current fiscal. The company had produced almost 1,00,000 tons per month at the unit during the last fiscal and is expecting to exit at 2,00,000 tons per month this year. Apart from this, it has got elbow room for capacity expansion in Chanderia unit in Rajasthan.
“We expect the market to grow at 8-9 per cent this year and we have headroom to grow our volumes in Mukutban which is being ramped up. This will give us an additional boost. We do not have any major capex plan immediately; we would like to consolidate over the next two years.,” Ghose told businessline.
Also read: Birla Corporation to invest $1 billion to ramp up capacity to 30 million tonnes by 2030
Growth in profitability
Birla Corporation had posted an EBITDA per ton of ₹615 a tonne for the fourth quarter, including the newly-commissioned Mukutban unit. This was marginally lower than ₹650 a tonne during the corresponding quarter of last year primarily due to higher fuel costs. On a sequential basis, the company’s EBITDA per ton grew by ₹240 a tonne backed by higher realisation supported by better geo mix and higher blended cement and higher premium category of cement, as well as reduced costs.
The company is expecting to touch an EBITDA of ₹850 per ton during the current fiscal. Its Mukutban unit turned EBITDA-positive in March, ahead of internal and street expectations despite not-so-encouraging market conditions in Maharashtra.
It is to be noted that most cement companies are likely to witness an improvement in EBITDA during the current fiscal as power and fuel, which accounts for nearly 30 per cent of total production costs for all manufacturers, has been witnessing a steep decline over the last few months.
For instance, during 2022-23, Birla Corporation’s power and fuel costs went up 32 per cent, while registering a sequential decline of 3 per cent in the March quarter. The company managed to scale back fuel cost by ramping up coal extraction from RCCPL’s Sial Ghoghri captive coal mine and optimum mixing of fuels such as imported and domestic coal and pet coke.
In a recent earnings call transcript by HDFC Securities, Ghose had said, “There are various levers available to us, including increasing the level of premium that we have got on our brands. So I would have the opportunity to increase margins and premiums on those brands across the markets, expand this footprint, and do other innovations. So we are looking at both the top line and bottom line to meet the market expectations or street expectations to keep us going.”