India Cements to raise prices next month, initiates plan to sell land assets

File image of India Cements' Vice Chairman and Managing Director N Srinivasan

The India Cements Ltd. plans to increase prices in three stages next month and sell land to repay debt after posting a loss in the fourth quarter of FY22.

The price of a cement bag will be increased by Rs 20 each on June 1, followed by an additional Rs 15 on June 15 and Rs 20 on June 30, managing director N Srinivasan told reporters on May 27.

“This should help us cover costs. Going forward, it will help our profit and loss account look better,” Srinivasan said, adding that he couldn’t remember the company effecting such a hefty price increase in any single month in the past.

Demand for cement is likely to be boosted after a higher allocation for infrastructure – $26.7 billion in roads and $18.8 billion in railways – in the Union Budget for FY23, according to the India Brand Equity Foundation, a trust established by the Department of Commerce.

India Cements reported a loss of Rs 23.7 crore in the three months ended March as against a profit of Rs 71.6 crore a year earlier. Revenue from operations fell to Rs 1,391.99 crore from Rs 1,449.62 crore.

According to Srinivasan, the average price of cement in the south ranged from Rs 360 to Rs 400 a bag.

Asked whether other cement companies would follow suit, Srinivasan said he wasn’t quite sure what they would do.

“If I take the lead, I think people will follow,” he added. “There are 40 different brands operating in the market. I will not be distorting the system.”

India Cements is the largest cement producer in south India with a capacity of 14 million tonnes from seven plants.

The company’s shares fell 4 percent to Rs 162.65 on the BSE on May 27, when the benchmark Sensex gained 1.2 percent.

Pandemic, rains

The Chennai-based company said net profit for FY22 dropped to Rs 38.9 crore from Rs 222 crore in the preceding year due to spiralling input costs and lower volumes. Overall volumes dropped 11 percent in the quarter and variable production costs increased 33 percent, the company said.

Srinivasan said the past year was unprecedented for cement companies in the south as they were hit by a combination of the Covid-19 pandemic and its fallout and unusually excessive rains. ICL had to rejig its product mix accordingly, which had huge implications for the company.

Srinivasan said an internal group had been set up to advise the company on monetising land assets. ICL owns 26,000 acres of land across locations. The money raised from selling land will help repay debt and improve its plants, he said.

“I am not a distressed seller. Selling a small portion will suffice,” Srinivasan said in response to a question.
The company repaid Rs 551 crore last year and hopes to repay Rs 500 crore this year.

Asked about increasing prices when monetary and fiscal authorities are battling inflation, Srinivasan said, “I have to run my business. If I don’t increase prices, I will make a huge loss.”

He said most cement companies in the south were operating at 40 to 50 percent capacity.

“If the cement does not go from here, the north will face a huge shortage in a few years,” he said.

Lauding the finance minister for being appreciative of their plight, Srinivasan said he hoped “something positive will come soon.”

Cement units in the south, he said, had asked for a telescopic freight so that they could move their output to other parts of the country.