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Binani ‘Cementing Dynamic Growth’, 02nd January 2008

Binani Cementing Dynamic Growth- Binani Cement, a leading brand in Rajasthan, Gujarat and the Northern Capital Region (NCR), is seeking a bigger market for exponential growth. Capacity expansion and forays into a larger market are its key growth drivers, January 02, 2008.

Binani Cement Limited (BCL) manufactures Ordinary Portland Cement and Portland Pozzolona Cement at its plant in Binanigram (Sirohi, Rajasthan). The company has already completed expansion of its clinkerization unit from 2 MTPA to 4.3 MTPA by investing Rs. 800 crore. The two cement grinding units will commence production in the next quarter and by the end of the year the company’s cement capacity will increase from 2.25 MTPA to 6 MTPA. After the capacity increase, turnover is expected to touch Rs. 1,800 crore. “Our cement is sold under the Binani brand name and has good brand recall. The strong brand, combined with industry growth, will take Binani’s capacity to 10-12 MTPA in 3-4 years,” says Vinod Juneja, Deputy Managing Director, and the company’s spokesperson, while discussing the Binani Cement growth saga with Golden 400.


How has the company grown in the last 3-4 years?

In the last four years, incremental capacity additions have been slower than growth in incremental demand which has helped in better utilization of existing capacities. The company has always been operationally comparable with the cement majors. Availability of good quality limestone, 25 MW captive power catering to about 75 per cent of power requirement, and a fully automated plant adhering to European emission standards, have been the backbone of our operational growth. The company hiked capacity to 2 MTPA in 2000 and to 2.25 MTPA in 2005 by de-bottlenecking existing capacities. Interest on term loans was renegotiated with lenders and is under 10 per cent per annum. The move to boost capacity from 2.25 MTPA to 6 MTPA began in the second half of 2005. Early begun is half the work done. Since we had placed orders with equipment suppliers quite early, we could implement the project on schedule. Our clinkerization plant commenced operations in July 2007, i.e., within 19 months from zero date.

Can you tell us about the expansion in detail?

The capacity of the cement plant will increase to 6 MTPA by year-end. One grinding unit is being installed in Neem Ka Thana (North Rajasthan) closer to NCR. The expansion also includes a 2 x 22.3 MW (44.6 MW) CFBC Boiler Thermal Power Plant which has the flexibility to use any type of fuel. With this, the company’s captive power facility goes up to 69.6 MW. This will take care of the entire requirement of the cement units, both in Sirohi and Neem Ka Thana.

Which have been Binani Cement’s major markets? Is the company planning to expand its horizons?

Rajasthan, Gujarat and NCR have been our main markets. About 45 per cent of our cement is sold in Rajasthan, 30 per cent in Gujarat and rest in NCR. We are currently number three in Rajasthan and number seven in Gujarat. After expansion is complete, we expect to become number one in Rajasthan and be among the top three in Gujarat. We have a railway siding as part of our plant facility which leads to the broad gauge line joining Maharashtra and New Delhi. Connectivity not being a problem, we plan to penetrate northern markets and Maharashtra.

Binani Cement has been producing more of PPC in recent years. What would be the product mix of the company post-expansion and has the company tied up for fly ash?

We now have a PPC-OPC product mix of 65:35. After expansion, we expect to increase PPC to 70 per cent. The company sources fly ash from Torrent Power Ltd., NTPC, and the State Government power generation units in Suratgarh. It has also tied up with NTPC Panipat for its fly ash requirement in Neem Ka Thana.

Can you tell us about the raw material tie-up / availability, mainly limestone and coal?

The company already has two limestone mines, Amli and Thandiberi, about 2-7 km from the plant. The quality is good and reserves are sufficient for the next 25 years on expanded capacity. The requisite coal is imported. The company has been allotted a lignite mine in Nimbri Chandavan, north of Rajasthan, with about 18 MTPA of reserves. This mine will start operations from 2009.

The company recently took majority stake in a Chinese cement plant. What is the strategy behind this?

The company took a 49 per cent stake (with management control) in a Chinese company situated in Shandong Province, China. It is a port-based plant with 0.6 MTPA clinker capacity, 0.3 MTPA cement capacity, 3 lignite mines with 148 MT of limestone reserves and is also allowed to hike capacity to 2.2 MTPA. It is a new plant and is currently operating at 100 per cent capacity. It exports clinker to the Gulf. Binani Cement plans to penetrate African markets from its proposed capacity expansion in Gujarat. The Chinese plant is expected to do seed marketing for BCL’s cement plant. Per capita cement consumption is the highest in China. The cement industry in China is expected to undergo consolidation in the near future.

What are the future plans of the company?

The company wants to expand capacity to 10-12 MTPA and is finalizing expansion plans in Gujarat and eastern India. The Gujarat plant will mainly cater to the export market. Expansion will be carried out over two-three years. We will also expand overseas. Our Chinese plant capacity will he hiked to 2.2 MTPA.

How do you propose to fund the expansion plans?

The expansion will be funded by a debt equity combination of 1:1; equity includes internal accruals.

– Reproduced from Dalal Street Golden 4 Hundred issue