Anil Singhvi helped build Gujarat Ambuja Cements from scratch to India’s most profitable cement company. He joined the company as its deputy manager in 1986 and rose to become its managing director in 2006. He took charge as vice chairman of Reliance Natural Resources Ltd (RNRL) of the Anil Dhirubhai Ambani Group (ADAG), in 2008 to help build its cement and shipping business.
Why is ADAG getting into the cement business?
The cement business has been very steady for two decades with a cumulative annual growth rate (CAGR) of over 8%. It is now 1.3 times of the GDP. Cement is a very strategic fit for the group, which has huge interest in power and infrastructure. Fly ash generated from power plants and power will be the key strategic advantage for cement, apart from huge captive demand for all the thermal/hydro power plants and infra projects.
What is your plan of action for the cement business?
Reliance Cementation, a wholly-owned subsidiary of RNRL, will execute the cement foray of the ADAG. We intend to set up four cement plants with the availability of fly ash, power and limestone. Work has already started in Maharashtra and Madhya Pradesh. We intend to synchronise the commencement of the first cement plant with that of Sasan UMPP.
Where do you see ADAG’s cement business in five years?
We would like to be among the top five players in the cement industry. We plan to set up four cement plants with a capacity of five million tonnes each. With a total capacity of 20 million tonnes in five years, we will be just behind ACC, Grasim, Ultratech and Ambuja.
What kind of investment will the project entail and how will it be funded?
Creating 20 million tonne capacity would cost about Rs 10,000 crore. We will look at raising debt. Cement projects can take debt up to about 150%. Currently, we do not have any plans to go public.
How do you see the consolidation game playing out in the cement industry?
Cement companies are doing well as demand is picking up. Further consolidation is unlikely in the Indian cement space now. The Holcims and the Lafarges of the world have done in India whatever they could. Cash flow and balance sheet of the most foreign cement players are in trouble with huge debts they have taken in past and hence unlikely to buy anything anywhere. Even domestic players have incurred huge capex in past 12-24 months, leaving no scope for further investments.
How do you see global cement scenario?
The cement industry in western countries i.e., the US and Europe and some part of Latin America, has been suffering on account of very low growth and severe winter during 2008-09. This has hugely impacted large cement players viz., Holcim, Lafarge and Cemex etc. Due to very low activity in housing, in particular, and infrastructure, in general, the growth in demand for cement has been reduced considerably in these countries. But since cement is not a typical commodity, there is not much of an impact on global cement pricing scenario.
India and China continue to show good growth of cement consumption and being the two largest cement consuming countries, the overall cement consumption growth for the globe is not affected much.
How difficult is it to raise finances in current conditions?
The 2002-2007 period was a golden era for easy financing, though there were some excesses. The FCCBs (foreign currency convertible bonds) proved to be a double edged sword as the equity becomes debt. Going forward finances will be not so easy to raise because of risk aversion.
How would you rate the Indian economy amid the global meltdown?
The Indian economy has once again shown good resilience amid the global meltdown. This has been largely possible as our economy is largely domestic consumption and investment led and external trade is a very low portion of total GDP. Our economy has remained by and large unaffected from the global events. You would recollect, even during Asian crisis in 1997, the Indian economy withstood the event very well. This, once again, proves the point that we are definitely different from most economies and our demographic dividend is paying very well.
Why is ADAG getting into the cement business?
The cement business has been very steady for two decades with a cumulative annual growth rate (CAGR) of over 8%. It is now 1.3 times of the GDP. Cement is a very strategic fit for the group, which has huge interest in power and infrastructure. Fly ash generated from power plants and power will be the key strategic advantage for cement, apart from huge captive demand for all the thermal/hydro power plants and infra projects.
What is your plan of action for the cement business?
Reliance Cementation, a wholly-owned subsidiary of RNRL, will execute the cement foray of the ADAG. We intend to set up four cement plants with the availability of fly ash, power and limestone. Work has already started in Maharashtra and Madhya Pradesh. We intend to synchronise the commencement of the first cement plant with that of Sasan UMPP.
Where do you see ADAG’s cement business in five years?
We would like to be among the top five players in the cement industry. We plan to set up four cement plants with a capacity of five million tonnes each. With a total capacity of 20 million tonnes in five years, we will be just behind ACC, Grasim, Ultratech and Ambuja.
What kind of investment will the project entail and how will it be funded?
Creating 20 million tonne capacity would cost about Rs 10,000 crore. We will look at raising debt. Cement projects can take debt up to about 150%. Currently, we do not have any plans to go public.
How do you see the consolidation game playing out in the cement industry?
Cement companies are doing well as demand is picking up. Further consolidation is unlikely in the Indian cement space now. The Holcims and the Lafarges of the world have done in India whatever they could. Cash flow and balance sheet of the most foreign cement players are in trouble with huge debts they have taken in past and hence unlikely to buy anything anywhere. Even domestic players have incurred huge capex in past 12-24 months, leaving no scope for further investments.
How do you see global cement scenario?
The cement industry in western countries i.e., the US and Europe and some part of Latin America, has been suffering on account of very low growth and severe winter during 2008-09. This has hugely impacted large cement players viz., Holcim, Lafarge and Cemex etc. Due to very low activity in housing, in particular, and infrastructure, in general, the growth in demand for cement has been reduced considerably in these countries. But since cement is not a typical commodity, there is not much of an impact on global cement pricing scenario.
India and China continue to show good growth of cement consumption and being the two largest cement consuming countries, the overall cement consumption growth for the globe is not affected much.
How difficult is it to raise finances in current conditions?
The 2002-2007 period was a golden era for easy financing, though there were some excesses. The FCCBs (foreign currency convertible bonds) proved to be a double edged sword as the equity becomes debt. Going forward finances will be not so easy to raise because of risk aversion.
How would you rate the Indian economy amid the global meltdown?
The Indian economy has once again shown good resilience amid the global meltdown. This has been largely possible as our economy is largely domestic consumption and investment led and external trade is a very low portion of total GDP. Our economy has remained by and large unaffected from the global events. You would recollect, even during Asian crisis in 1997, the Indian economy withstood the event very well. This, once again, proves the point that we are definitely different from most economies and our demographic dividend is paying very well.
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