Managing Director Parth Jindal outlined plans to enter North and Central India, aiming to scale capacity from 20.6 million tonnes to 41–42 million tonnes in the next three to four years, and eventually reach 60 million tonnes.
The broader goal is to secure a place among India’s top five cement producers, he told CNBC-TV18 in an interview.These are edited excerpts of the interview.
Q: Talking about expansion plans part, you are looking to increase your total grinding capacity to 41-42 million tonnes per annum, and even double the clinker capacity. When do these capacities come on stream?
A: At the moment, we are in phase one of our expansion, which is we are we are adding a grinding unit in Odisha, in Sambalpur, and we are adding our integrated unit in north India, in Rajasthan in Nagaur. These two plants, although we have guided that they will be ready in different times, I’m very confident that within this financial year, both of these plants will be up and running, which will take our capacity from 20.6 million tonnes to about 26 million tonnes.
We have also started the groundwork for the other expansions that we have in place, which is some of them are brownfield in our existing locations. So Vijayanagara in Karnataka, we want to add 4 million tonnes of grinding there. Dolvi in Maharashtra, where we again JSW Steel as a large complex, we want to add 4 million tonnes there and then our complex in central India, which is the mines we acquired from India Cements about three years ago in Hatta in Madhya Pradesh. All these projects are primed, and we can begin work very, very quickly.
It is my endeavour, my aim, to get to 41 million tonnes within three to four years. The sooner, the better. But obviously the performance and the leverage needs to be in check, and we would modulate our growth based on our leverage.
Q: And 60 million tonnes per annum, you have got that ambition too?
A: Within the existing locations, within the existing mining deposits that we have, we have enough limestone and enough land as well as enough fly ash as well as slag, which tied up to take our capacity to 60 million tonnes. The way to think about us is today we are 20.6 million across seven locations. These seven locations themselves can go from 20.6 to 30 million tonnes. Then the balance 30 million tonnes would be coming from three different sites, Rajasthan and Nagaur, along with its split grinding units, would be 15 million tonnes. Central India, which is Madhya Pradesh and Uttar Pradesh should be 10 million tonnes. Then Gulbarga cluster in Karnataka and the grinding unit in in southern part of Maharashtra would be another 5 million tonnes.
This entire strategy is in place to 60 million tonnes, which we hope that once we get to 40-41, we will embark upon the journey from 41 to 60, which, again, should take another three to four years. If all goes well, we could get to 60 million tonnes sometime in the early part of next decade and if it goes a little bit worse, then it will be in the middle part of next decade.
Q: Today, you are the ninth-largest player by capacity. Can you break into the top three or top five and challenge companies like Shree Cement and Dalmia Cement?
A: First of all, all the companies that are there in the cement industry have been around for a very long period of time, and they have all built fantastic businesses. They all have their own growth plans. The top four players of the country are well out of reach at the moment, and obviously they also are expanding. The fifth spot is up for grabs, and that’s the aim, is to try and see how quickly we can get there.
Having said that inorganic opportunities in the cement industry, as we have seen over the years, have come, and there has been a lot of consolidation. One of the disadvantages of being in the cement industry is that the competitors that we deal with on a daily basis, are all sitting on very strong balance sheets. So for them to acquire inorganically is far easier than for us at this stage to acquire.
But obviously, with the IPO coming in, with liquidity coming in, with currency being available, tomorrow if a very exciting opportunity comes in a market that is attractive, we could do a QIP, we could do a follow on. We could do so many things which the group has done in the past, which will allow us to compete.But all said and done, my fundamental belief is that you need to be at least a 10% market share player across the country to be relevant. Last year, the Indian cement industry consumed 435 million tonnes of cement. I believe over the next five to six years, this number will grow at a CAGR of about 6 to 7% in lockstep with GDP, and get to about 750 million by 2030-2031.
So, in order for us to have 10% we would need to be selling 75 million, which is higher than our current plan, but still getting to about 55-60 million tonnes of sales, 7 to 8% market share would be the first step, and then to get to that 10%. I do think the cement industry, the consolidation wave will continue, and it will become an industry which is dominated by call it six to seven players.
Q: What is the next phase of growth for JSW Cement, and which markets are you targeting next?
A: Over the years, JSW Cement has been growing steadily. In 2016, when I took over the business, we were a 6 million tonne company, and over the last nine years, we have tripled our capacity from 6 million to now over 20 million tonnes. At that time, we were primarily only in the South. Now we have entered the markets of the West and the East. And now that the company has grown to this size and scale, we are truly poised for our next phase of growth, which is to enter the markets of the North as well as the central parts of India.
The IPO, and the proceeds of the IPO that we are getting is going to allow us to expand into the north, and, over time, expand into the central part of India as well. I truly believe that in order to be relevant in the Indian cement industry, you need to be present across the country, because you never know which region is doing well which region is doing badly. In order to truly make a well, diversified and stable business model, being in different regions and all the regions of India is very important, and that’s the ambition of the company.
Q: Your debt today is ₹4,200 crore. ₹520 crore of the IPO proceeds go in reducing your debt. What would the post listing debt look like, and leverage ratios, and you have got so much capex coming on stream, so how would the leverage ratios move?
A: Last year, due to the difficulties that the industry faced, our net debt to EBITDA almost touched five times, which is way above healthy or a comfortable level for the company. It is my intention that over time, bring the debt as close to two times as possible, and not exceed 2.50 times. This may change from time to time, given the dynamics, but in general, being below 2.50 times net debt to EBITDA is the aim of the management.
Q: Considering your ambitious expansion plans, what is the total estimated capex outlay for you?
A: I am not allowed to actually give the forward guidance in terms of capex. But what I can say is that building organically for JSW is significantly cheaper than building for any of our large competitors or in any of the acquisitions that are happening. On average, the acquisitions have been happening at about $120-130 per tonne, some of them even as high as $150 per tonne. Our capex intensity for this phase of expansion is less than half of that.
Q: You are going to be building incremental capacity at 60-70?
A: Close to that.
Q: What about the operating EBITDA per tonne, in FY25 it was depressed at sub 700. What is the number looking like in quarter one?
A: Our quarter one results will be announced soon after the IPO. But the industry has seen a sharp increase in EBITDA per tonne. The pricing power has come back into the industry, and all our competitors have announced their results at nearly 30 to 40% EBITDA improvements, both overall as well as on a per tonne basis. We would be in that ballpark for sure, and we would announce our results imminently after the IPO.
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