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Birla Corporation LTD

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Brief Company Introduction

Birla Corporation Limited is the flagship Company of the M.P. Birla Group. It was first incorporated as Birla Jute Manufacturing Company Limited in 1919. The Company is primarily engaged in the manufacturing of cement as its core business activity. It has a significant presence in the jute goods industry as well. The Company had acquired 100% shares of Reliance Cement Company Private Limited (Reliance Cement), a subsidiary of Reliance Infrastructure Limited (RIL). After this acquisition, Reliance Cement has become a wholly-owned material subsidiary of Birla Corporation Limited. This acquisition provided Birla Corporation Limited with the ownership of high-quality assets, taking its total capacity from 10 MTPA to 15.6 MTPA. Presently, the cement capacity is 20 MTPA, following the Mukutban integrated unit project.

Financial Results & Highlights

Detailed Results:-

  1. The company had an average performance with revenues at Rs. 2511 Cr growing 9% YoY.
  2. The company witnessed a considerable hit in EBITDA with EBIT margins at 5%.
  3. The company’s PAT was at Rs. 85 Cr, down -24% YoY.
  4. The company also witnessed growth in other income, with it being highest at INR 67 Cr.

Investor Conference Call Highlights:-

  1. The management is excited and keen as this was Birla Corp’s maiden conference call.
  2. The management explained in depth the company’s history and heritage, along with its journey right from Mr. Madhav Prasad Birla up till now.
  3. The management gave an outline about the board of directors and their experiences.
  4. The company hit EBITDA positive in the Mukutban plant, last fiscal year.
  5. The management to supply the Durgapur plant with excess clinker from Mukutban, which will help to free up Maihar and Satna to supply to UP, the most profitable market for the company.
  6. The EBITDA per ton for the company in Q4 was INR 615 vs INR 650 the previous year. This is mainly due to higher fuel costs. On a sequential basis, it grew by INR 240.
  7. The management has plans to ramp up Mukutban steadily and profitably.
  8. The management states that Mukutban plant exited the month of March at 1 lac tons and plans to exit the next year at 2 lac tons of cement.
  9. On account of the specific projects taken, the management expects a saving of atleast INR 50 per ton.
  10. The management expects the cost at the Mukutban plant to come down by another INR 300 to INR 400 per ton. 
  11. The company has already commissioned the WHRS at the Mukutban plant, and will be using maximum percentage of coal from its own captive mines. It is also working on AFR.
  12. The company has also input tax credit incentives on its Mukutban plant, which will result in the incentives of INR 600 per ton accruing in the company’s P&L account.
  13. The management is working on putting up a second line at the Maihar plant with grinding capacities for additional clinker. 
  14. The company’s power and fuel costs went up to INR 1500 per ton this year, with it averaging INR 1600 in the previous three quarters. The management was able to bring this down to INR 1300 per ton in the fourth quarter.
  15. The management gives guidance that on a company level, power and fuel costs should be lower by INR 250 per ton by the next FY.
  16. The total quantum of the incentive at the Mukutban plant is 100% of the project cost, which is about INR 2,300 crores, which is available for a period of 20 years. 
  17. During the year, the company has been able to ramp up the Kundanganj plant from 2 mn ton capacity to 2.7 mn ton through internal optimization.
  18. Apart from Mukutban, all other plants are operating at close to 100% capacity utilization.
  19. The company has outstanding incentives of INR 150 Cr in West Bengal, which will improve margins further.

Analyst’s View

Birla Corporation is a leading mid-size cement maker that is well established in the North, Central and West regions. It has a great history with its business starting with Jute and over the years shifting primarily towards cement. The acquisition of RCCPL has proven to be beneficial for the company and the management has integrated both the entities satisfactorily over time. The capacity expansion over years upto the 20 million tonne mark is a great achievement for the company. Yet, the competition faced from the leaders in this sector and the legality issues that the company’s management has faced makes the future uncertain. There also seem to be issues faced over maintaining margins, which peers manage to do better. Capacity expansion targets have also historically been delayed as per our tracking. Thus, keeping in mind of the various factors and points, it is recommended to let this company pass on and remain in the watchlist.