Mar 04, 2011, 05.11 PM | Source: CNBC-TV18
Vinod Juneja, MD of Binani Cement, in an interview with CNBC-TV18ís Latha Venkatesh and Gautam Broker, gave his analysis on the budget and the how would it impact his company going forward.
‚Äú We might have a price hike of Rs 10-12 per bag, but we are doubtful about the increase to be passed on to our consumers. ‚ÄĚ
- Vinod Juneja (MD)
In the interview, he gave his analysis on the budget and the how would it impact his company going forward.
Below is the verbatim transcript of the interview. Also watch the accompanying video.
Q: Coal India has hiked prices and a lot of it will fall on your lap. What is the extra raw material or coal cost that you have to bear?
A: The energy cost of the efficient company is about 15% and other company is about 18% in all the cement companies. The energy cost will be about 18%, whether you generate your own power or take it from the national grid of the state. Pet coal has been given some concession in the budget, which hardly anybody uses in the cement manufacturing sector.
Most of the people either import the regular coal with burning calories to 60-65%. The impact of coal in India should be least. About Rs 200 per tonne will impact our total manufacturing cost of the energy sector. It will increase about 5-6% total cost of Coal Indiaís impact.
Q: Do you suspect of not being able to push off anything in the form of higher prices? How much will your margins be impacted?
A: For last six months, due to prolonged monsoon in India and the infrastructure spending on the government sector, the cement industry margins have been less. First time after the budget, Finance Minister Pranab Mukherjee spoke to the executive committee members at the FICCI AGM in Delhi, where we discussed about the speed of implementation of the things presented in the budget.
Q: In the cement industry, Binani Cement in particular, with coal plus this excise, how much do you think your margins will get eroded? How much could cement prices increase?
A: The excise increased from the bags of 50 kg to Rs 190. We thought ad valorem will be fixed in the sector, but unfortunately that has been given in two slabs. Cement will be cement, whether you sell it at Rs 190 or Rs 200. They should be kept fixed.
They have increased the price beyond Rs 190 to Rs 360. This will have a big impact. Cement industry has had an investment of 210 million tonne. Last year, the cement industry had a new additional capacity of 250 million tonne.
Cement industry should have been running with a capacity of above 90%, but for last few months, it has been at 78% capacity. We will have a price hike of Rs 10-12 per bag, but we donít know how far we will be able to pass on the increase to our consumers.
Q: Will the price hike of Rs 10-12 be on both, coal and the excise duty?
A: We are talking about the overall budget impact, whether it is Coal India or the excise duty announced yesterday. We will have Rs 10-12 price hike.
Q: How much do you think you will be able to push on? Will you be able to raise it to Rs 5?
A: Honestly, we wanted to pass on everything to the consumers. The cement industries are bleeding due to the hike in the coal price last time. Most of our coal was coming from Australia where there have been floods now. These are few international sectors which are not in our control. It is not purely cement for the cement industries as they are running a power plant and a logistic company.
Q: Will you be able to raise prices at all or will it be by Rs 12?
A: The price increase will depend on the demand and supply of the product. So far, March will be very good for the cement industry as the budget sanctions for the last fiscal will end very soon and the budget cannot be carries by March 31.
Q: In the last few weeks, we have seen cement prices increase by about Rs 20-25. Has that been mainly because of the rationalisation of capacity by many of the majors?
A: No. It is not due to rationalisation. Binani Cement is running almost 90-92% capacity. Historically, in the month of March, the prices of cement go up, as most of the construction work on roads and bridges takes place between the months of April-May, when there is no monsoons.