Displaying items by tag: Uttar Pradesh

India: HeidelbergCement India’s half-year results have benefitted from improved markets in building materials in central India including Uttar Pradesh. Its sales volumes of cement rose by 10.5% year-on-year to 2.39Mt in the six months to the end of September 2018 from 2.17Mt in the same period in 2017. Its revenue rose by 19.4% to US$138m from US$116m. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 47% to US$32.1m from US$21.9m.

The subsidiary of Germany’s HeidelbergCement said that although fuel prices rose in the latest quarter this was offset by a waste heat recovery system. The company operates two integrated plants and one grinding plant with a cement production capacity of 5.4Mt/yr.

India: The state government of Uttar Pradesh has identified land on which Jaiprakash Associates will have to plant a plantation as a penalty for conducting mining in a forest. The decision follows a National Green Tribunal order in 2016, according to the Times of India newspaper. UltraTech Cement purchased the Dalla plant from Jaiprakash Associates in 2017 but it has been unable to use the site fully due to legal issues. It will be able to use the site fully once the conditions of the government proposal have been completed. Other conditions of the government deal will force Jaiprakash Associates to pay four times the actual cost of land for its acquisition and to maintain the plantation for 10 years.

India: The Supreme Court has lifted a ban on petcoke and furnace oil to the cement and power industries in Delhi, Haryana, Rajasthan and Uttar Pradesh. The court also directed the Ministry of Environment and Forest (MoEF) to set regulations for the sale of petcoke and fix emission standards for thermal power plants, according to the Indo-Asian News Service agency. Representatives of the cement industry have welcomed the ruling. The Central Pollution Control Board and the MEF issued the ban following a directive from the Supreme Court in late October 2017 prohibiting industries in the three neighbouring states of Delhi from using the polluting fuels.

India: The Ministry of Environment and Forest (MEF) is considering exempting cement plants and power companies from a ban on using petcoke and furnace oil for industrial use in Haryana, Rajasthan and Uttar Pradesh. Additional solicitor general A Nadkarni informed the Supreme Court that the use of petcoke in the cement industry was ‘minuscule,’ for non-fuel purposes and that it is used for de-sulphuring, according to the Hindustan Times. However, the exemption, if granted, will only be allowed for one year to allow cement companies to switch to alternative fuels.

The Central Pollution Control Board and the MEF issued the ban following a directive from the Supreme Court in late October 2017 prohibiting industries in the three neighbouring states of Delhi from using the polluting fuels. Use of petcoke and furnace oil is already banned in the capital region. The ban was imposed following high pollution levels in Delhi.

India: Birla Corporation’s net profit has fallen by 72% year-on-year to US$6.8m in the first half of its financial year to the end of September 2017 from US$24.4m in the same period in 2016. However, its sales revenue grew steeply by 37% to US$444m from US$325m. Sales volumes grew by 39% to 5.9Mt from 4.3Mt.

The cement producer said that despite ‘challenging’ markets it had increased its sales volumes and benefitted from synergies following its acquisition of Reliance Cement in mid-2016. It added that demand and prices were ‘seriously’ impacted in central India by a prolonged shortage of sand and aggregates, especially in Uttar Pradesh, which constitutes around 35% of the company’s sales. Prices were also down in the northern states of Rajasthan, Haryana and the National Capital Region due to poor demand.

India: ICRA is expecting cement demand is pick up in the fourth quarter of the 2017 – 2018 financial year following weak real estate activity, sand shortage and Goods and Service tax (GST) implementation issues in the first half of the year. In its October 2017 update the credit ratings agency said that demand was expected to benefit from the housing sector and road and irrigation projects in the infrastructure sector, according to the Press Trust of India. It added that the profitability of the industry depends on the industry’s ability to control prices given that higher input costs for fuel and freight are expected.

The credit ratings agency said that cement demand remained subdued across the country due to various local issues. In the North, especially in the states of Uttar Pradesh and Punjab, the offtake had been impacted by a sand shortage and lack of labour. In the West the implementation of the Real Estate Regulatory Authority (RERA) Bill resulted in construction activity slowing down. In the South, Tamil Nadu and Kerala were hit as demand was affected by the sand shortage, drought impacting rural offtake and weak housing activity. A recent ban on sand mining in Bihar is also likely to reduce sales volume growth in the eastern region in coming months.

Congratulations are due to India’s UltraTech Cement this week for finally completing its US$2.5bn asset purchase from Jaiprakash Associates. The deal has been around in some form or another since at least 2014 when UltraTech arranged to buy two cement plants in Madhya Pradesh for around US$750m. That deal, publicly at least, became a victim of the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act. The Bombay High Court eventually rejected it in early 2016 after a period of delays. However, the deal bounced back in a much larger form around the same time and since then everything has gone relatively smoothly.

As chairman Kumar Mangalam Birla put it in his letter to shareholders in the company’s 2016 – 2017 annual report the, “move is essentially for geographic market expansion.” He then went on to mention all the usual keywords like ‘synergy’ and ‘economies of scale’ that you expect from an acquisition. Quite rightly he finished with, “It is with great pride that I record, that UltraTech is the largest cement player in India and the fifth largest on the world stage.” On that last point he meant outside of China but UltraTech does have a small number of assets outside of India, notably in the UAE, Bahrain, Oman and Bangladesh, hinting at an international future for the cement producer.

Map 1: UltraTech Cement’s plants in India. Source: UltraTech Cement Corporate Dossier, January 2017.

To give a scale of the deal, UltraTech has increased its number of integrated cement plants in India to 18 from 12 and its cement grinding plants to 21 from 16. Its overall cement production capacity will increase by nearly 40% to 91.4Mt/yr from 66.3Mt/yr. The new assets are in Himachal Pradesh, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Andhra Pradesh. The main regions that will benefit are the North, Central and South zones. In particular the Central Zone will see its capacity jump to 21.1Mt/yr from 6.2Mt/yr. This area also includes a new 3.5Mt/yr plant at Dhar in Madhya Pradesh that is scheduled for commercial production in late 2019.

The completion of the Jaiprakash Associates deal was followed by the introduction at the start of July 2017 of the Goods and Services Tax (GST), a rationalisation of some of the country’s central and state taxes. UltraTech promptly said it had reduced its product prices by 2 – 3% in light of tax reductions under the new regime. Some producers were warning of a rise in cement prices in the run-up to the introduction of the GST and the Cement Manufactures’ Association said that the new tax rate was insufficient. However, UltraTech said that the new tax rate of 28% was better than 30 – 31% previously. Other Indian producers also reduced their prices this week following the introduction of the GST.

UltraTech’s expansion and the start of the new tax scheme auger well for the Indian cement industry in 2017. Demonetisation knocked cement production at the start of the year and it may have lowered UltraTech’s capacity utilisation rate as well as reducing domestic sales by cutting housing demand. However, sector rationalisation and a simpler tax approach should help to remedy this. Not all government interaction has been helpful to the cement industry in recent years as the MMDR amendment and demonetisation show but the signs are promising.
Roll on the next set of financial reports.

India: UltraTech Cement has completed its US$2.5bn acquisition of six integrated cement plants and five grinding plants from Jaiprakash Associates. The transfer was made effective at a meeting of the Scheme Implementation Committee of the board of directors of UltraTech Cement. The purchase includes plants in Himachal Pradesh, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Andhra Pradesh with a total production capacity of 21.2Mt/yr.

“This move is essentially for geographic market expansion, enabling UltraTech’s entry into the high growth markets of India where it needed greater reinforcement,” said Kumar Mangalam Birla, chairman of UltraTech. He added that the acquisition would add synergies in manufacturing, distribution and logistics.

Following the purchase UltraTech holds 18 integrated plants, one standalone clinker production plant, 25 grinding plants and seven bulk terminals, increasing its Ordinary Portland Cement capacity to 93Mt/yr. UltraTech said that the new production units will make it the fourth largest cement producer in the world outside of China and that it confirms its place as the largest producer in India.

India: Dalmia Bharat's income has risen by 14% year-on-year to US$577m in the first half of its financial year, which ended on 30 September 2016, from US$505m in the same period of the previous financial year. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 28% to US$135m from US$105m. Its sales volumes rose by 21% to 7.18Mt from 5.95Mt. The cement producer explained that it had focused on building up existing capacity and entering new markets in Uttar Pradesh and Madhya Pradesh during the period.

India: The shareholders of Jaiprakash Associates approved the sale of the group’s cement business to UltraTech Cement. According to the deal, arranged earlier in 2016, UltraTech Cement will buy Jaiprakash Associates' cement plants in Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, which have a total production capacity of 21.1Mt/yr, at an enterprise value of US$2.4bn. In addition, it will acquire a 4Mt/yr grinding plant being built in Uttar Pradesh.

Approval has been obtained from the Competition Commission of India, according to the Press Trust of India. The next step involves seeking approval from the concerned High Court and the final approval from capital markets regulator.