Mr. Alok Sanghi, Director, Sanghi Industries is a Business Management Graduate from Indiana University, USA. He joined his family business – Sanghi Industries Ltd. in 2005 and under his able leadership the company has completely changed the conventional ways cement was marketed and sold in India by innovating new concepts and evolving exceptional marketing and sales practices like establishing Consumer Care Centres – a one stop shop for all building and construction related requirements, free of charge on site concrete testing services through mobile concrete testing laboratories, a toll free helpline etc. He has explored several international markets for cement exports and has led the company to be one of the leading bagged cement export companies of India. Alok Sanghi is actively associated with CII’s Young Indians (Yi) Chapter – an organization involved in various social upliftment activities. He is also a member YPO (Young President’s Organization) and is also associated with the Lions Club.
Sanghi Industries Limited has emerged as a major cement player in western India over the last few years. Company’s 3 million tonnes per annum capacity plant in the Abdasa taluka of Kutch district in Gujarat is ranked as the second largest cement plant at one location in India. It is one of the top 3 players in Gujarat and is now increasing its presence in Maharashtra, Rajasthan and Madhya Pradesh (MP). Sanghi Industries Ltd is a company engaged in manufacturing and distribution of Cement in Western India. The company is having its cement plant of 3.0 MTPA capacity at Sanghipuram in Kutch District – Gujarat State.
Replying to Anil Mascarenhas of IIFL, Alok Sanghi says, “We expect the cement industry to grow at 7-8%, while it will grow at around 10% in Gujarat. The western region will outperform the industry.”
The slowdown in the economy and the capacity additions in the industry have not augured well for the cement sector. How are you viewing the situation?
The Indian cement industry is the second largest after China, with a total capacity of about 300 million tonnes (MT) as of financial year ended 2010-11. The growth prospects for the cement industry are directly linked to the overall growth in India’s economy, real estate and construction sectors. India’s economic growth has slowed down in recent times on account of rising inflation, high interest rates, high prices of commodities and fuels. A slowdown in the real estate sector too has taken place. If it persists for an extended period, it would impact the growth in consumption of cement. To top it, the industry has witnessed significant capacity additions in recent times which will continue over the next few years. This will lead to over supply in the market and result in a constant pressure on realisations. At the current demand growth rate of 5%, the industry will take 2-3 years more to absorb the additional supplies.
On the other hand, there are encouraging factors like increasing demand from the government, institutional and infrastructure segments. The long term growth potential is huge as the per capita consumption of cement is a meager 230 kgs as against 1380 kgs in China (as of 2010-11). This huge potential is attracting all global cement majors – some are already there and more are looking at entering India in the near future.
Comment on your infrastructure advantage.
We have a distinct infrastructure advantage from day one of our operations. Our plant is ideally located to have all the raw material required available within a 35 km radius. We have adopted the most eco-friendly mining techniques available. Direct access to the sea via our own jetty, helps us to cater to various markets effectively at a significantly lower cost. This includes direct access through the sea route to one of the biggest cement consuming market of Mumbai. This jetty also allows us to import coal directly at our own jetty, minimising the cost of transportation. Our own power plant caters to our electricity requirements. All the above factors enable us to serve our customers faster and better, with a significant cost advantage.
What are your expansion plans? How would they be funded? What is your present capacity?
We are planning to increase our capacity from the current 3 MTPA to 7 MTPA over the next few years. A mix of debt and equity will be used to fund this expansion. We are also planning to expand our marketing network to MP, Rajasthan and Mumbai.
What is the capacity utilisation for Sanghi Cement and for the western region in the current year? What is your expectation for FY13?
Sanghi’s capacity utilization was 78% in the April-Dec 2011 period, while it was 76.85% for the western region according to CMA data. For FY2013, we expect a capacity utilization of 75%.
You call yourself a 5 Star certified company.
Yes. Sanghi is what we proudly call a ‘5 STAR’ certified organisation in the Indian cement industry as it conforms to Quality Management System (ISO:9001:2000), Environmental Management System (ISO:14001:2004), Health & Safety Management System (OHSAS:18001:2007), Testing & Calibration Management System (ISO:17025:2005) as well as Social Accountability Management System (SA:8000:2001).
What are the reasons for the sharp jump in industry dispatches for November and December apart from low base?
Traditionally, November and December are the peak consumption months for the Indian cement industry. It got a further boost in 2011 due to strong demand from the infrastructure, institutional and government projects.
Which regions and segments are seeing good demand and where do you think improvement is possible next year?
The western region is seeing the best demand with infrastructure, institutional and retail segments taking the lead. We feel that the western region will continue to lead the demand figures next year too.
What is the broad demand number you expect in FY13 for the industry and which region is likely to outperform the industry?
We expect the cement industry to grow at 7-8%, while it will grow at around 10% in Gujarat. The western region will outperform the industry.
South prices are strong for quite some time. If the prices fall in south, do you think prices in other regions can get impacted?
Yes, all regions are interconnected. The price fall in southern region may impact other regions.
How are the costs trending now? What is the coal source mix for Sanghi Cement?
The cement industry is facing serious problems from the rising costs of inputs, especially coal, as they are increasing continuously. Additionally, the tax burden on the cement industry is also very high as compared to other industries.
What is your rail road mix?
We have less than 10% of our dispatches through Rail mode. However, we are trying to build a Rail line to our plant which should increase our percentage of Rail dispatches. We also use the sea route.
Rail freight expenses were increased two months back. How are road freight rates behaving?
Road freights have also increased by 10-15% compared to last year mainly due to increase in the diesel prices.
What is the coal-based captive power capacity for you?
Sanghi’s coal-based captive power capacity is 63 MW.
What is the regional sale mix for Sanghi?
We sell 90% of cement produced in Gujarat and the remaining 10% comprise of sales in other states as well as exports.
Brief us on your financials and outlook.
For the latest quarter ended December 31, 2011 the company has posted a net profit of Rs. 3.04 crore as against a loss of Rs. 21.64 crore for the same period of 2010. Similarly, there was a significant rise in sales to Rs. 227 crore for the quarter ended December 31, 2011 as against Rs. 155.60 in the same quarter in 2010. For the 15 months year ended June 30, 2011 company’s net sales were Rs. 900 crore and net loss was Rs. 29.55 crore. We expect a significant improvement in our financials over the coming quarters as our operational efficiencies improve and the demand for cement picks up, especially in western India.
What are your hiring plans? Do you hire from B-Schools? What must B-schools do to make students job-ready?
Being in an expansion mode, we would definitely require additional human resource.
We do hire students from business schools. We feel that business schools must include more of actual field work in various industries. They should also increase interactions with industry experts as the latter can share their own hands-on experiences and give them an idea about how the corporate world actually functions.
Your message to anyone who wishes to join your company?
Endeavour to learn and grow. Have patience, as success is not an overnight phenomenon.
What is the shareholding capacity?
As of September 30, 2011 the promoters holding stood at 51.06%, foreign institutional investors (FIIs) held 1.42%, foreign financial investors (FFIs) holding was 17.01% and 30.51% was held by others.