Nilesh Narwekar is the Chief Executive Officer of JSW Cement. BE’s Anustup Roy Barman spoke to him about the present situation and the prospect of the cement sector and JSW Group.
Q. How has your Salboni plant performed in the last one year after the longstanding problem with the government?
A. JSW has strong relationships across all stakeholders including business partners, government, regulators, etc. The Chief Minister of West Bengal, Mamata Banerjee, inaugurated the Salboni cement unit early this year. Our Salboni facility commenced operations in January 2018 and has been supplying cement to entire West Bengal and parts of Jharkhand, Bihar, and Odisha. The plant’s capacity is 2.4 MTPA. Following the commissioning of this unit, we have ramped up sales in the region. We aim to have our Salboni unit operating at approximately 80% capacity utilisation in line with industry levels.
Q. What is your present market size? How do you plan to expand that?
A. JSW Cement is a leading producer in PSC category in the southern states. We recently started operations in the eastern states of India and plan to ramp up our presence in both the eastern and western regions of the country. We have increased our cement capacity to approximately 11.6 MTPA in the current fiscal. There are plans to add more capacities to meet our 2020 target of 20 MTPA.
Our current supplies from Salboni unit will cover West Bengal, Bihar, and Jharkhand. We have also added a new variant of slag cement, Concreel HD, to our differentiated portfolio. Eastern Uttar Pradesh and the North East are the other lucrative markets for our business.
In the west, we will supply both PSC and CHD to Maharashtra from our Dolvi unit. We plan to expand the Dolvi unit’s capacity to approximately 2.2 MTPA in line with our 2020 target. We have plans to expand our marketing footprint in Gujarat.
Q. How much did the JV with Wagner’s Group help your company?
A. JSW is currently in the process of finalising the JV with Wagner’s group for producing Earth Friendly Concrete (EFC).
Q. What are the specialties of your green cement, EFC and Concreel HD cement?
A. JSW PSC is manufactured from superior quality slag produced at our steel manufacturing plant, conforming to IS: 12089 standards for producing PSC. In addition to reduced consumption of Gypsum (raw material), and energy conservation on account of lower power and fuel requirement, PSC cement provides various advantages such as resistance to chloride and sulphate attacks, low risk of cracking, high compressive strength, and superior finish.
Just like JSW PSC, Concreel HD is also a green product and provides similar advantages. The product provides additional benefit of high early strength and quick setting, making it a perfect solution for all the strength bearing/concrete applications.
Earth Friendly Concrete (EFC) will be a cement free concrete produced using industrial by-products. The major benefit of EFC will be in conservation of raw materials, low power and fuel requirement and reduced emission of carbon dioxide.
Q. What is your take on consolidation in the cement industry?
A. Consolidation in the cement industry will help to streamline capacity scenarios currently playing out in the Indian market. The acquisition route is allowing big players access to untapped markets and achieve economies of scale.
Also, the amendment to the Mines and Minerals (Development and Regulation) to allow transfer of lease for captive mines along with cement assets has greatly incentivised acquisition route.
Q. What are the main problems that the cement industry is facing?
A. The key problems faced by the Indian cement industry is the muted demand especially from the housing segment, which accounts for roughly 60-65% of total cement consumption, lower realisation due to price drop across all regions and cost pressure due to high pet coke prices driven by disruption in supply from the US.
High GST (28%) and over capacities (approximately 120 MTPA), duty free import of cement and existence of duty on import of Limestone, Gypsum, Coal, Pet coke, etc. continue to be a cause of concern for cement manufacturers.
Q. How do you think these problems can be solved?
A. On the demand front, execution of affordable housing scheme, take-off of key infrastructure projects, Smart city mission, and overall improved macro-economic environment will help to push cement consumption in the coming months. Higher focus on improving rural income in this year’s budget will also boost consumption. The prices are also expected to see an up-turn as demand improves. Any decision on the reduction in the GST rate will also improve the demand.
On the cost front, import duties on raw materials should be reduced or done away with. Reduction in diesel and coke pet prices will positively impact the production costs. Also, the consolidation in the industry will help to take away excess capacity.
Q. Has the budget of this year been able to satisfy all the needs of the sector? What more did you expect from the budget?
A. The Union Budget has placed great impetus on public spending with major expenditure planned in the infrastructure segment. The government has rightly allocated a higher budget for infrastructure development given the infrastructure needs and subdued demand from housing and industrial/commercial segment. The execution on the ground and ability to raise funds for these large scale projects will decide the fate of the industry over the next two - three years.
Construction of highways, coupled with improvement in railways, Air infrastructure (new airports and enhanced connectivity among the existing ones) and schemes such as Bharatmala and Sagarmala projects will aid higher cement consumption.
Provision of a high budget for smart cities mission, affordable housing (with 88 lakh new units to be constructed) and construction of new metros will also boost cement consumption.
Q. How do you plan to expand your market amid the gap of growing demand in the northern region and negative demand in the southern region?
A. JSW has strong footprint across southern India. The focus has been on increasing our market share without compromising profitability. We aspire to become a top cement brand in the south. We entered eastern India recently and are currently looking to expand aggressively in West Bengal, Odisha, Bihar, and Jharkhand. In the west region, we are looking at supplying to markets in Maharashtra from our Dolvi unit.
In addition to increasing presence, JSW is trying to build a healthy product portfolio. Currently, we are selling PSC, Concreel HD and GGBS. Going forward, the company has plans to introduce composite cement, slag sand, construction chemicals, EFC etc.
Q. How has JSW Cement performed in this financial year compared to last year and why?
A. JSW Cement has witnessed robust growth in volume of 14-15% y-o-y in FY 18 (both cement and GGBS combined). Cement demand and pricing continue to be weak in South and therefore realizations have been weaker as compared to previous years. Despite this, we have been able to bring down our costs and stabilise the newer expansions/plants.
Q. A large number of foreign players are expected to enter the market owing to the steady growth. How do you plan to deal with the new players?
A. Increased competition will help the industry in the long run. We expect these global players to introduce new technologies, process improvement and global best practices in the Indian market.