Burnpur Cement launched Pozolona Portable Cement from Patratu plant in Jharkhand.
In an interview to CNBC-TV18, Ashok Gutgutia, VC & MD of Burnpur Cement spoke on how this will impact capacity utilisation and revenues. He also spoke about the impact of demonetisation.
Below is the verbatim transcript of Ashok Gutgutia's interview to Reema Tendulkar & Nigel D'Souza.
Nigel: You have launched Portland Pozzolona Cement (PPC) product at one of your plant in Jharkhand. You are expecting it to go to 100 percent capacity utilisation. Could you tell us what is the capacity of this plant, what kind of capacity utilisations is it functioning at and what kind of numbers you could give, by when can you be at 100 percent?
A: We have two plant; one at Asansol in West Bengal and other in Jharkhand at Patratu and both the plant have a capacity of 0.3-0.3, so a total of 0.6 million tonne per annum. Currently we are running our plant at 60 percent, earlier it was around 75-80 percent but due to demonetisation the capacity utilisation has come down. However, it is slightly improving so we are hopeful that by next quarter, up till June things would be improving a lot.
However, market has two segments; one is slag and other is Polymer Portland Cement Concrete (PPCC); PPCC has different buyers and slag cement has different buyers. We are not having one segment with us at present. So once this segment is added to our profile, our capacity utilisation would be almost to the tune of 100 percent.Reema: Could you give us some revenue estimate. What would be the total volumes of PPC cement that you are looking to sell in FY18 assuming that you will be able to run at 100 percent capacity? What will be the kind of revenues and margins you generate on it?
A: We are planning to make PPC cement to the tune of 30 percent and 70 percent would be generated from the slag cement. So if you talk about total revenue, it would be around Rs 200 crore out of which Rs 150 crore would be from slag and Rs 50 crore from PPC cement, so a total of Rs 200 crore from Patratu plant. However, from Asansol plant, it is another Rs 100 crore, so it makes total around Rs 300 crore of topline once we complete PPC cement and the bad effect of demonetisation is over. Therefore, we hope in April-June things would be moving in a positive way.
Nigel: You said Rs 300 crore is the total sales that you can do for FY18?
A: Yes because from April onwards we are going to improve our sales as the effect of demonetisation will be coming down as well as the addition of PPC with our profile - that would give additional revenue to us. Nigel: Rs 300 crore is 100 percent.
A: Yes.
Nigel: We need to ask you about the last quarter as well, we didn't get you after that. The last quarter was just a one-off quarter because of demonetisation. Will we see more pain in Q4 and expect things to pick up in Q1 of FY18?
A: The demonetisation effect was there in January and February. Things are improving, so pain would be there up to March but things should be over by April-May-June quarter. However, cement industry as a whole and our company would be doing in a much better way than what we have done in the last three quarters.
Reema: Coming back to the point about margins you will enjoy on PPC. You spoke about the revenues - Rs 300 crore annually but what about the margin level, what will be the kind of margins PPC will enjoy?
A: PPC is made with the adhesive of fly ash and we have got Patratu thermal power station which is only three kilometre away from our plant. So transportation cost won't be there and fly ash is available free of cost from the plant. So in that case this material would be available to us at a very cheap rate, so realisation would be much better as far as PPC is concerned and profit part would also improve once the PPC profile is added to our product.
Nigel: What is your account currently termed as with your lenders. At one point of time it became irregular. We were looking at the finance payment in the past quarters as well - that has come down drastically. So give us a few details - what is the current debt in your books, what is your account currently termed as from your lenders and is there is a resolution that has come about?
A: Debt was from four different banks. As on today our bank account is irregular, so we have asked the bank to restructure our account where we have asked for reduction of interest because interest part is very high, they are charging almost 15 percent whereas we had asked for 10 percent, so bank has already taken up the matter and they are positive that within a short span of time once it is restructured the account would become regular and things would become positive.
Reema: For how many months have you not been able to make the dues? Is it only on the interest component? You are giving us revenue guidance of Rs 300 crore for FY18. Will not the cash generated from slag as well as the PPC business be sufficient to start making the repayments?
A: We have got date of production. We are now eligible for the incentives that we are suppose to get from the state government. So capital incentive of Rs 15 crore is ready with the government which we are suppose to get in the month of April and from April onwards value-added tax (VAT) components - we are going to get 75 percent rebate on every sale of bag, so around Rs 25 per bag because VAT component is Rs 40 per bag. So if it is 75 percent, it comes to Rs 25 per bag. So April onwards Rs 25 per bag would be the extra benefit that the company will be getting from the VAT and Rs 15 crore - one at a time as capital subsidy. So the amount that will be extra from April onwards plus the market improvement plus addition of PPC, so we are trying to see how we can generate more funds, how we are improve our profitability so even after paying to the banks we can save money for the company also. These are the strategies that the company has taken to improve on.
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