Weak demand sentiments in the wake of Covid-19 pandemic and the related disruptions notwithstanding, Birla Corporation Ltd, the flagship company of the MP Birla Group, is confident of sticking to its original plan of scaling up cement manufacturing capacity by over 60 per cent to 25 million tonnes (mt) from the current 15.5 mt by 2025.

According to Pracheta Majumdar, Wholetime Director & Chief Executive Officer, Birla Corporation, the construction of the 3.9 mt cement plant at Mukutban in Maharashtra has been progressing and should be commissioned by August 2021. This would help scale up the total capacity to 20 mt from the current 15.5 mt.

The estimated investment on the project is close to ₹2,450 crore and the company has spent close to ₹1,085 crore on the factory till the end of FY-20, as per the company’s latest report.

“We want to reach 25 mt capacity and achieve a capacity utilisation of over 90 per cent by 2025. Mukutban will take us to 20 mt and the project is a good addition to our company both businesswise and bottlomline wise. The details for enhancing capacity to 25 mt are being worked out,” Majumdar said addressing shareholders’ queries at the 100th annual general meeting on Tuesday.

The Mukutban project, which was initially envisaged for completion by June 2021, is likely to face some delays on account of shortage of labour due to reverse migration. The project is now expected to see completion by August 2021.

The company expects to conclude the kiln capacity expansion project of its Chanderia unit by around 400,000 tons in FY- 2021.

However, the ₹285-crore expansion project at the Kundanganj unit, has been put on hold to restrict debt and conserve liquidity. “The project will be taken up on normalisation of business environment,” the annual report said.

Covid impact

Responding to a shareholders’ query, Harsh Vardhan Lodha, Chairman, Birla Corporation, said the company is “much more Covid-ready today” than it was in March.

“It is difficult to ascertain the future impact of Covid on the business. But we expect things to normalise soon barring any unforeseen circumstances moving forward,” he said.

While there is expected to be a correction in commodity prices due to the global slowdown in demand thereby bringing down the variable costs, however, the benefits of reduced variable costs will likely be neutralised by poor absorption of fixed costs due to low capacity utilisation, the company said.

The company’s gross term loans at the end of FY-2020 stood at ₹4,226 crore as against ₹4,049 crore a year earlier. Net debt at the end of March stood at less than ₹3,500 crore, which is approximately 2.5 times its EBITDA in 2019-2020. This includes bank loans of ₹543 crore taken for the under-construction cement plant at Mukutban.

“The company should be in a very comfortable position in terms of its gross and net debt in the next couple of years once the Mukutban unit achieves one full year of operations,” Lodha said.