EXCLUSIVE: Ramco Cements likely to be debt-free in 6 months, says CEO

Ramco Cements, the country’s fifth largest cement manufacturer, boasts of a few firsts in the industry. Its operating margin is an industry-leading 30 percent and it claims to have the lowest cost of power in the industry – thanks to higher usage of captive power that insulates the company from tariff rise and shortages. Give it six months and the Chennai-based company could add another enviable milestone to its financial and operational performance. Barring working capital loan and some interest-free loan, the company is likely to be long-term debt-free in six months, the company’s Chief Executive Officer AV Dharmakrishnan told Moneycontrol in an exclusive interview.“We have pre paid Rs 550 crore this financial year. In six months, we will pay Rs 500 crore more and will be long-term debt-free. We will have only working capital loan of Rs 500 crore and some interest-free loan thereafter,” he said. According to a report by Motilal Oswal Securities, the company has an interest-free debt of Rs 1200 crore on its books.“The interest-free loans are from various state governments and have to be paid back in seven years,” Dharmakrishnan said.Ramco has an integrated cement manufacturing capacity of 12.5 million tonnes per year and a grinding capacity of 17 million tonnes per year. All of this comes from its five integrated plants – three being in Tamil Nadu and one each in Andhra Pradesh and Karnataka. There are four satellite grinding units also --  two in Tamil Nadu and one each in West Bengal and Andhra Pradesh – lending a grinding capacity of 4 million tonnes that forms part of the total 17 million tonnes grinding capacity.Ramco sells in the states it has manufacturing capacities besides Kerala and Odisha. The Kerala market is served from Tamil Nadu while Odisha is fed by the company’s Andhra capacities.Tamil Nadu and Karnataka account for 45 percent of the company’s revenues, Andhra Pradesh 23 percent, Karnataka 12 percent and the eastern region -- Odisha and Bengal -- 20 percent.The east -- at 20 percent contribution to its revenues – is a growing market for Ramco and the company is now looking to add new capacities there. This includes doubling grinding capacity in Bengal to 2 million tonnes and setting up a greenfield 1 million tonne grinding capacity in Odisha.“Demand is good in the east. So, we want to put up capacities there. This will be mostly funded through internal accruals,” the CEO said. The new capacities will take 18 months to come up – the work is yet to start at either of the places.“We have seen three to four land parcels in Odisha. We are in the process of finalising one,” Dharmakrishnan said. He said depending on the demand, the company could also go for expanding its clinker capacity.He said he expected prices to remain stable in the south, the industry currently working at less than 80 percent of its capacity. He said the company’s coal inventory would last till July and a decision on further stocking up would be taken later.“We have raw material inventory, mainly coal, for 5-6 months. Till June-July, we have inventory. We will decide when to buy as raw material prices again came down in last one month,” he said.