Siliguri plant will start in the second week of October 2020: Sanjay Kumar Gupta, Star Cement

Sanjay Kumar Gupta, Chief Executive Officer (CEO), Star Cement, talks about cement prices, demand recovery, Capacity utilization, export market and expectations from the government during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:  

Q: Price increase and cost optimization play an important role in the cement sector. How much has it benefited you?

A: As far as the price increase is concerned, then the price has been coming down for the last two months. The price has dropped by Rs 10-12 per pack in the North-Eastern sector. There has been a sharp decline of around Rs 15-20 per bag in the East region. Currently, it is not a matter of price increase as we are going through the monsoon season, when there is always a pressure on demand and everyone has a desire to increase volume, due to which a normal pressure is seen on the price. As far as cost is concerned then every cement company works on their cost and we are working on it. We are working in many areas including the raw material and coal cost and we will get its result this year, itself.  

Q: Tell us the kind of demand recovery that is visible. Is there any month-on-month improvement in demand? As monsoon is about to end, so are you seeing any pick up in construction activities, if yes, then what is your demand projection from here?

A: If I will talk about the period after the first quarter then there has been July and August and September is going on. We saw some demand growth in July and there was a 4-5% volume growth as compared to the corresponding month last year. The volumes grew by 8-10% in August 2020 compared to the corresponding month of last year. It seems that there is low single-digit growth in demand, especially in the Eastern sector. Going forward, we expect that the demand will be visible in the third and fourth quarters. As I have said it before that many Eastern states will see elections in the next 12-18 months. So, some infra demand and state-driven demand is seen. Retail demand is a bit muted because the monsoon is on and we expect that a demand uptick will be seen by the end of September.

Q: What is an update on your capacity at the plants are you operating at 100% capacity, if yes, then do you think that an expansion will be needed in near future or you are well-positioned to cater to the upcoming demand? 

A: We are functioning at current time 100% capacity. Generally, we operate at 60-65% capacity in the second quarter, and we are already at 65% capacity utilization. Our capacity utilization in the third and fourth quarters stands around 80-95%, and we expect that similar level of capacity utilization will be seen, at our plants. As far as capacity is concerned, then our capacity is sufficient in the North-East sector, but it was slightly low in the East sector. And to cater to the demand of the region, we are establishing 2 million-ton cement grinding plant in Siliguri, which is likely to be commissioned and become operational from the first or second week of October 2020. Commissioning of the plant will increase the availability of our cement, especially in the markets of Bengal and Bihar, and we will also gain market share in these two states.

Q: I would like to know about export. Do you see any improvement there? What are export prospects and which geographies are looking promising and performing better at this moment?

A: Several options of export is not available in North-East and East areas, except to Nepal, as we can cater to some parts of Nepal from here. Otherwise, much opportunity to export cement from the eastern sector is not available. However, we will try to export some cement from the Siliguri plant to Eastern Nepal market, although it is not a big market and stands at around 0.8 to 1 million tonnes. Other than that, there is no other big export market for cement.

See Zee Business Live TV Streaming Below:
 

Q: GST Council meets are held at regular intervals and every industry is presenting their representation and calling for reducing the rates to boost the demand. What the cement industry is expecting and do you think that a rate rationalization is required?

A: Every time in our representation to the government of India, we have said that Cement has been kept in a 28% category, which is very high. In many of our representations, we have said that GST on cement should be less, but the government has its difficulties and GST collections are not quite strong at present. COVID has impacted demand in many sectors and it has had an impact on GST collection. But I feel that the government will make some reduction in GST in form of a stimulus and many sectors will get relief from it. It becomes clear from many speeches of Prime Minister and Finance Minister that the government has plans to consider something. We expect that some GST reduction can be seen even in cement.