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Cementing Its Future

Putting the hard times behind it, NCL Industries is now bracing itself for a surge in growth.

Cementing Its Future

Those were tumultous three years for K. Ravi, MD of NCL Industries. Between 2012 and 2014, Ravi faced daunting challenges. At the time, building materials companies in Andhra Pradesh were coping with the uncertainties around the bifurcation of the state. NCL has a strong presence in Andhra with its Nagarjuna brand of cement and other building products, but it took a toll on the company. In April 2013, a corporate debt restructuring (CDR) plan seemed the only way out for the company. It had a Rs100-crore debt and cement plants were running at less than 40 per cent capacity. Sectoral growth had also slowed. "There was no other option," says Ravi. "Had we not resorted to CDR, we would have been declared an NPA, a stigma we did not want the company to face."

But then, Ravi and his team realised that as long as the company was in CDR, no banker would take any additional exposure. "While we were able to fulfil the requirements under CDR, when opportunities for growth arose from the second half of 2014, the CDR mechanism proved to be a stumbling block." The company then opted for private placement of NCDs (non-convertible debentures). While more expensive than the prevailing banking rates, it ensured funds for expansion and repayment of term loans. "We needed Rs325 crore for cement capacity expansion, setting up another cement-bonded particle board plant and for repayment to existing term lenders to exit CDR, which was done after Piramal Enterprises agreed to subscribe to our NCDs," says Ravi.

The expansions, he says, are more or less complete. Now, in what seems an attempt to either exit the high-cost funding or to fund a new round of expansion, if not both, the company is seeking to raise more resources. Its officials are, however, not willing to comment except confining themselves to the statement shared by the company with Bombay Stock Exchange on August 14, where it says that its board has "approved the proposal to raise Rs250 crore by issue of equity shares by way of Qualified Institutions Placement".


The company has posted three-year average income growth of 29.3 per cent. The top line (standalone) at Rs884.8 crore (its net profit was at Rs54.7 crore) grew at a 3-year CAGR of 28.8 per cent. The stock price of NCL Industries is up over four times in the last three years.

The company was set up in 1983 by Ravi's father K. Ramachandra Raju. It began as a small cement unit with a 200 tonnes per day capacity. Today, its capacity is two million tonnes per annum. It has two cement plants - one at Simhapuri (an intergrated plant - clinker and cement grinding facility) in Telangana and the other at Kondapalli in Andhra (with its cement grinding unit). The latest expansion in cement production has been done at Telangana and will take the total capacity soon to 2.7 million tonnes per annum.

Explaining how each expansion cycle for the company has meant more modernisation and efficiencies, N.G.V.S.G. Prasad, Executive Director and CFO, says that even a one unit reduction in power consumption contributes Rs1.2 crore to the bottom line. Over the past decade, the company has reduced power consumption from 96 units per tonne of cement production to nearly 88 units per tonne. Now, in the new production line, the suppliers have assured power consumption of just 75 units. "Power and fuel (coal used for cement production in NCL) together make up for nearly 35 to 40 per cent of total production cost," says Prasad.

The company has also expanded its reach. "We have now covered the entire Andhra and Telangana apart from parts of Tamil Nadu and Karnataka," says Ravi. Now, with increased capacities, he sees the company geared to cash in on the new opportunities that are likely to emerge in the building materials space.

Amaravati, the new capital of AP (which incidently is not very far from its Kondapalli plant), could also throw up new opportunities. For NCL as a standalone company, cement contributes over 80 per cent to its revenues. About 10-12 per cent comes from its cement-bonded particle boards business and the rest from its two hydro power plants. K.V. Vishnu Raju, Chairman of Anjani Vishnu Holdings and Vishnu Educational Society, who knows the company and its promoters since last 20 years, says: "They have created one of the strongest brands in cement. Also, they have the advantage of split locations, which gives logistical advantage, crucial in cement. Plus, their innovative basket of products works in their favour." For the moment, the company appears to be on a sound footing.


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