A Rs 9,000-crore capacity boost: MD Puneet Dalmia chalks out Dalmia Bharat's three-year playbook

plans to invest Rs 9,000 crore in the next three years on capacity enhancement through brownfield and greenfield projects, raising the cement maker’s capacity by about 60% to nearly 50 million tonnes a year. In an interaction with ET’s
Bhavya Dilipkumar and
Satish John,
Puneet Dalmia, the company’s managing director, said this is the biggest Capex project since its inception.

Edited excerpts:

The company’s PAT was at Rs 238 crore and
has come down sequentially during Q1, were there any impacts due to the pandemic?

Last quarter, there was a deferred tax adjustment because we moved to a new tax regime. But I think overall, the revenue growth and the volume has been around 35% this time. We navigated a lot of micro lockdown in this quarter. There were elections in Many of the states that were present. I think there was definitely a disruption in the supply chain. Despite all this, I think we have done a great job.

your Capex plans for the financial year 2022?

We have announced Rs 9000 crore of expansion over the next three years. From our current capacity of around 30 million, we’re gonna take our capacity to 48.5 mt. This is our largest capital expansion announcement since its inception. The simple principles that have driven our thinking on capital allocation are that we will deliver predictable, sustainable and profitable growth over the next decade. And all of this with a strong balance sheet and the highest standard of corporate governance.

Will this investment be a mix of brownfield and Greenfield projects? And what is your long-term target for capacity expansion?

Yes, it will be a mix of brownfield and greenfield. We will be undertaking two greenfield projects in Tamil Nadu and one in Bihar. And the rest will be Brownfield projects. Out of 18 million tonnes, greenfield will be 5.5 million tonnes. We will also be undertaking debottlenecking exercises in our existing plants. We have also announced a clear capital allocation policy, where we said that we expect to grow at a CAGR of 15% over the next decade. We will take our capacity to between 110 – 130 mt by 2031. We will announce our capacity expansion to 60 million tonnes with more specifics in another 9-10 months.

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How is the company planning to fund these projects?

Our internal accruals are more than enough to fund the Rs 9,000 crore project. But we are also and working on a comprehensive funding plan. We are almost a debt zero company, and our net debt to Ebitda is around 0.08 times, so we have enough headroom even if we look for raising funds from outside.

Will you be looking to invest more in
the company’s refectory business?

We have divested the refractory businesses into a company called Dalmia Bharat Refractory Ltd. We have actually consolidated the refractory business…and have combined all the refractory businesses into one. Shareholders and creditors have approved this…We will not be investing in refectories. The company will have its own balance sheet and management team, and they will be taking care of it separately.

What are some steps towards sustainability in Dalmia’s cement making?

We are one of the first companies globally to announce net-zero carbon emissions by 2040, and we are working towards that. We have, in fact, decided to report our sustainability metrics every quarter. We are also launching innovation and green funds to develop and adopt green technologies. 10% of our operating cash flow will be allocated towards this Fund. This will continue to bring down carbon costs and make us the most sustainable company in the industry.

What is your outlook for FY 22? Is
rural India driving the cement still?

The recovery in demand can be seen, it is coming back, but I think we have to see how quickly the vaccination program gets rolled out. I hope the worst is behind us. And from now on, he should improve. But, you know, I am cautiously optimistic in the short term. I expect there will be a revival in urban and rural markets.

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