Aditya Birla Group-owned UltraTech Cement's management said in its post-earnings call with investors that it has planned a wide-reaching capital expenditure programme to bring the facilities of its newly acquired firm, The India Cements Ltd, up to speed with the rest of the company's manufacturing facilities. UltraTech took control of the firm in March, with India Cements turning a profit of Rs 92 crore at the EBITDA level in the April-June quarter.
The projects under the capital expenditure programme will primarily focus on efficiency measures, particularly in energy consumption, with the ultimate goal of enabling India Cements to meet most of its power requirements through renewable energy or waste heat recovery systems (WHRS).
"The team has done a full assessment, and we will be undertaking a capex plan for efficiency and productivity improvements, going forward. Most of these projects will have an attractive payback period and will generate positive returns. Projects would include WHRS, preheater modification, cooler upgrades, and alternate fuel technologies, to name just a few," said Atul Daga, chief financial officer at UltraTech Cement.
"Today the cost of production is higher than average, but in FY28 we will see substantial improvements in operating costs. As we complete the capex programme, we are increasing the renewable energy quotient to 21 megawatts (MW) of WHRS and 219 MW of renewable energy, thus taking the green power quotient for India Cements from 3 percent to 86 percent of its power requirement in FY28, helping us reduce its carbon footprint".
Daga, however, said the quantum of the capital expenditure is expected to be disclosed in the next quarter, with funding to come from both debt and internal accruals.
Paring debt
With India Cements previously debt-ridden under its former promoters, UltraTech's management added that it is working to reduce the cost of debt. For UltraTech, the average cost of borrowing is around 7 percent, Daga said.
"We have also been able to reprice and refinance India Cements borrowings. They are also getting rated triple-A with more or less the same kind of rates," Daga noted.
Asked about whether UltraTech plans to eventually merge India Cements, Daga said that for the near term, the entities are planned to be kept separate, with focus on "cleaning up" India Cements' operations. However, it can still consider the merger in a slightly longer timeline.
"We are fully cognisant of a huge amount of stamp duty that would be involved. Why spend money on that? But if it's worthwhile, perhaps in FY27 or FY28, actually we will revisit the decision. As of now, it will continue as a separate entity," said Daga.
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