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Published on: Sept. 20, 2021, 7:08 a.m.
NCL on the growth path
  • Ravi with daughter Roopa and nephew Gautam: strengthening its market; Photos: Sajal Bose

By Sajal Bose. Deputy Editor, Business India

During the cement industry’s consolidation phase in the late 1990s, standalone single plants and regional players had two options: sell out or scale up. A few, such as NCL Industries (formerly Nagarjuna Cements Limited) decided to face the challenges head on and stayed relevant in the segment.

The company was established in 1979, and commissioned a mini cement unit at Simhapuri in Telangana. NCL adopted the then government’s vision to augment cement supply in the country through mini cement plants. This was in the late 70s. It was one of the first mini cement plants in the country with a capacity of 200 tonnes a day. 

“My father, the founder of the company, Ramachandra Raju, believed that cement should not be the only focus. He always thought ahead of his time and decided to diversify into innovative building material products,” recalls the managing director of the company, K Ravi, 67. The company’s first diversification venture was a spray plasters manufacturing unit followed by cement bonded particle board production in the 90s. Both were new in the country and highly technical. Gradually, it has added more products. After Raju’s demise in 2008, his eldest son Ravi took over the helm of the company.

NCL Industries today has five business verticals – cement, ready mix concrete, cement bonded particle board, NCL Doors and hydropower. Cement alone contributes almost 85 per cent of the total revenue of Rs1,935 crore. The company employs 1,000 people. From 200 tonnes a day in 1984 to 2.70 million tonnes at present may not seem significant growth in capacity compared to its peers when one takes account of the fact it is 40 years old. Ravi claims: “Our focus is on sustainable growth and also we have built a diverse product portfolio to serve the construction market.” 

NCL Cement under the Nagarjuna brand is popularly known as ‘Monagadu Cement’ (monagadu means ‘hero’ in Telugu). The company has an integrated plant in Simhapuri at Suryapet district in Telangana and a grinding unit at Kondapalli in Andhra Pradesh with a total installed cement capacity of 2.70 mtpa. The integrated plant at Simhapuri is currently running at close to cent per cent of the rated capacity and employs 365 people. 

A cost-efficient producer, the plant sources its energy partly from its 8 MW of West Heat Recovery (WHR) unit and rest from the grid. The limestone mine is very close to the Simhapuri unit. Also, the company gets fly ash supply from Vijayawada Thermal Power Station, at a distance of 120km. The company has an in-house wagon loading facility. “The proximity to good limestone which is soft, gives us an edge on freight and energy cost,” says K Gautam, joint managing director, who also oversees the plant operation. He is Ravi’s nephew.

Railway grade cement

Nagarjuna Cement is available in various grades of OPC and PPC. Its cement is ideal for a variety of applications – from housing to mega structure and irrigation projects. It also manufactures special IRS grade 53S cement for making sleepers for the Indian Railways. “We are one of the few companies in the private sector in Telangana to manufacture special railway-grade cement required for railway sleepers and pre-stressed concrete works,” says B Roopa, executive director and Ravi’s younger daughter. She heads the company’s cement marketing. 

NCL’s key markets are Andhra Pradesh, Telangana, Kerala, Madhya Pradesh, Tamil Nadu, Karnataka, Odisha, Maharashtra, Pondicherry and Chhattisgarh. “We are very strong in branding and our strength is a 2,000-dealer network. 80 per cent of our cement is sold through retail. The retail margin is always better,” explains Roopa. Every year the company adds 150-200 dealers. “Cement demand in the South is close to 80 mtpa whereas the rated capacity is 155 mtpa. Nagarjuna Cement is a popular brand and their capacity utilisation is one of the highest in the region, almost close to cent per cent. So, it manages to sell their entire production. This reflects the company’s brand value and reach,” says a senior analyst tracking the building material industry.

India, the second largest cement producer, recorded a capacity of nearly 545 mtpa in FY20. The segment is indispensable and is considered one of the vital constituents of the country’s economy. The fortunes of the cement industry are closely linked with the progress of infrastructure and the housing industry. Demand for housing is driven by income growth while infrastructure development largely depends on both state and central government expenditure. The outlook of the cement industry has been encouraging, given the government’s focus on infrastructure and housing. It is expected that demand will pick up in the medium and long run.

NCL is now on a growth drive. It has rolled out greenfield and brownfield expansions to strengthen its market. The company is setting up a new grinding unit at Visakhapatnam in Andhra Pradesh and modernising its existing cement plant in Simhapuri to increase its cement capacity. It is also investing Rs300 crore for these expansions, funded through internal accruals and bank loans. 

The greenfield 0.66 mtpa grinding unit at Tallapalem in Visakhapatnam, Andhra Pradesh will spread over 40 acres of land. The company will put a 100 TPH capacity-vertical cement roller mill and two 120 TPH capacity packing plants. The unit will have flexibility in producing PSC, composite cement and PPC. It is strategically located near the port and the Chennai-Kolkata national highway. It is close to Rastriya Ispat Nigam Limited (RINL) and Simhadri Super Thermal Power plant. So, the company proposes to get a seamless supply of slag as well as fly ash for its different grades of cement production. 

Since there is no limestone to produce clinker in Visakhapatnam, NCL will transport clinker from its mother plant at Telangana for the new grinding unit. Land has already been acquired for the project. The public hearing for the proposed project is now fixed in October. Once the public hearing is over, it will go for environment clearance. “The total project cost is R150 crore and we expect to commission the project by March 2023,” says NGVSG Prasad, executive director & CFO. “The plant is expected to derive the full benefit of our brand image in North Andhra and the coastal belt,” says Roopa.

Presently NCL is replacing its old ball mill with a modern vertical raw mill in clinker Line-1 and also adding a vertical coal mill with its auxiliaries in its existing plant at a cost of Rs50 crore. This will be completed by March 2022, and will reduce power cost significantly. The company will save Rs4 crore per annum. 

Capacity enhancement

NCL is also modernising and upgrading its cement mill in Simhapuri by replacing the old mill with higher rated capacity vertical roller mill. With this, an additional cement capacity of four-lakh tonnes per annum will be added by the second quarter of the next financial year. The company is investing Rs100 crore for capacity enhancement. When ready, NCL’s cement capacity will increase from 2.70 mtpa to 3.1mtpa. It will go up to 3.7 mtpa once the Visakhapatnam grinding unit is commissioned. “Our target is to have 5 mtpa in the next two to three years. We are looking for more land under mining and plan to ramp up our clinker capacity,” says Ravi.

“NCL is a regional player but has been doing phenomenally well for the last few years. Their brand, Nagarjuna, has good acceptance in the Telangana and Andhra markets. The cement price is stable in the southern market at present; hence the company is reaping the benefits,” says a senior executive of one of the largest cement companies in the country. 

Also commenting on NCL, Yashwant Krishna managing director, Parasakti Cements a known regional player says: “Nagarjuna is an old recognised brand in the South. A quality producer serving through a large dealers’ network. Its brand has a strong presence in the northern coastal market.” 

Nagarjuna cement is the chosen brand for the Polavaram Dam, the national irrigation project, expected to supply water and stabilise over 75 lakh acres. The dam is being built across the Godavari River in Andhra Pradesh. It is a multipurpose major terminal reservoir project for the development of irrigation, hydropower and drinking water facilities. “We are the single largest supplier of cement for these prestigious projects,” says Roopa.

During the first wave of Covid, when the industry was struggling with the lockdown, Andhra Pradesh did not want to stop the Polavaram irrigation project. The government has given us permission to start the plant to supply cement to Polavaram. It was blessing in disguise for us to sail through smoothly during Covid,” adds Roopa.

When the lockdown was lifted, the market was starving for cement. Since the NCL plant was operational and supplying cement for Polavaram, stock was readily available with the company. The demand for NCL cement soared, backed by repeat orders. It has immensely benefited the company, which also entered into new markets. Management explains it was the best year for the company. 

Mahender Reddy the owner of Nagarjuna Steel Mart a prominent dealer for Nagarjuna cement has been associated with NCL since 2013. Reddy says: “NCL maintains a good reputation of quality product and services. The management is easily approachable and allows dealers to grow with the company. But the company needs to have more products.”

NCL’s Ready Mix Concrete (RMC) brand Nagarjuna RMC is popular among top builders and large projects; benefits include speed, minimum wastage and labour cost. Currently the company has four plants in Hyderabad and three in Visakhapatnam. All the RMC units are equipped with an adequate number of transit mixers with a capacity of six cubic metres.

Pre-laminated cement boards

The company’s Bison Panel brand is cement bonded particle board which is very popular in the building material segment. NCL brought this technology in collaboration with Bison Werke of Germany three decades ago. NCL is the only producer of cement bonded particle board in the country. Bison Panel is made of 62 per cent cement and 28 per cent wood. It is strong, durable and not affected by fire, weather, termites etc. It comes in different varieties – Bison Panel Plain Board, Bison Lam, Bison Plank and Bison Designer Board. “We are the only player in the world producing pre-laminated cement boards,” claims Gautam. 

The product is heavy and used for shuttering, interior cladding, kitchen platforms & cabinets, wall panelling, and also the shelters for the Indian army. Bison Panel forms part of the composite roofing in airports as it contributes towards noise reduction. The company has two manufacturing facilities in Paonta Sahib, Himachal Pradesh and Mattapalli, Telangana which produce 90,000 tonnes annually. It has achieved a revenue of Rs130 crore. “Bison Panel is a known brand in the industry. It is a good product for specific purpose, whereas MDF is all-purpose usage,” says SP Mittal, a wood panel industry veteran and chairman, Greenpanel Industries.

The company also introduced doors called Duradoor for housing and commercial buildings. It has the capacity to produce 1,500 doors a day at its state-of-the-art facility in Telangana, in technical collaboration with AGT Turkey. The company also owns two mini hydel power plants of 15.75 MW capacity in Andhra Pradesh and Karnataka.

“NCL has been built around proactive management, brand visibility and a distribution network and these have defined our success,” says Prasad. NCL Industries reported annual gross sales of Rs1,934 crore in March 2021 as against Rs1,322 crore in March 2020. The profit after tax rose to Rs144 crore in 2021 from Rs51 crore in March 2020. Prasad explains that the cement outlook appears to be very good and this has to be continued. Hence, they are exploring growth opportunities but in a sustainable manner. 

For the three months ended June 2021, the company achieved a revenue of Rs553.29 crore as against Rs551.10 crore in the last quarter ended in March 2021. The net profit stood at Rs34.47 in June 2021 as against Rs31.26 in March 2021. The current share price of the company is Rs240 on a market cap of Rs1,100 crore. The promoter holds 43.73 per cent of the company and the balance 56.27 per cent is with the public.

Cement is a numbers game. NCL needs to add more capacity to become a noticeable player in the industry. The ability of the new generation running the business will now be tested to see whether they can transform the company from a regional to a national player.

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