Looking back, how has the performance been for Dalmia Bharat since last year’s nationwide lockdown?
If I step back, we started the year with a lot of uncertainty as you know March 23, 2020 was a lockdown. We were focussing on what lies ahead. Nobody knew what is going to happen. That time we pulled cash down and we prepared for two years of zero revenue. We had cash sitting on the balance sheet, too much uncertainty. We did not know when things will open up and we were ready for the worst. Also, we stepped up the engagement with people and we really focussed on making sure that everybody feels safe and healthy.
We started the first quarter with a 30% dip in volume and then there was a V-shaped recovery and in the last quarter the industry grew in double digits. So, from a minus 30% it went back to double digit growth very quickly. We saw a couple of things. One, because the lockdown was sudden, when it opened, people wanted to complete their projects very quickly. If the road was 90% complete, people wanted to complete it very fast. If people were building a new room in their house, repairing the house or building a new floor, everybody wanted to complete it quickly. There was a demand surge and whoever was ready to capture this demand surge was able to open their factories quickly and was able to get the supply chain running fast. Transporters, dealer shops, C&F agents, all of them captured the benefits if you could get the whole ecosystem to work quickly. This was the first half of last year. In the second half I think the big companies gained market share over the smaller companies. They adopted digital technologies faster. They were able to invest in giving extra credit to their distributors. They were also able to invest in brands and leverage their strength in the channel. Overall, what we have seen is that whoever got off the blocks fast, gained market share.
Second, large companies gained market share over small companies. Overall we have benefited from good macro environment, infrastructure spend, rural spending and great team work. We have also increased the share of our premium products and that has led to healthier margins. We have grown volume quite significantly. In this quarter, we did 24% volume growth, 6.4 million tonnes which is the highest ever quarterly volume and for the first time in the whole year we have crossed 10,000 crores in revenue and 1,000 crores in PAT. I am very pleased with the performance. But this is an outcome of partly industry recovering very quickly, which is driven by infrastructure spending and rural demand, and partly great teamwork amongst our people. If you prioritise people over profits, magic happens.
As you look ahead being a year into pandemic with the second wave’s far greater numbers, what really is the situation on ground? What we understand from our channel checks is that there are multiple constraints in terms of transportation, delayed offtake. How is it that you are coping with the second wave, the mini lockdown curbs and curfews being put in place?
You are absolutely right. Things are very different this time around. The strain of virus is more infectious, it spreads very quickly and it is even affecting younger people. It is also leading to a very sudden breakdown in health, so there is a lot of fear factor. First point for us is how we can focus on the physical and emotional wellbeing of people. Not just our employees, but vendors, dealers, our customers, all of them. So, we have taken some steps to once again really focus very deeply on ensuring that physically and emotionally we feel safe and healthy. We have set up a 24×7 helpline, we have a feet-on-street team which can help people source oxygen cylinders, oxygen concentrators again in every plant. We have tied up with hospitals for beds to the extent it is available. We have also tied up with home care and nursing facilities, as well as diagnostic so people at least feel that there is somebody to talk to, there is somebody who they can reach out to and they do not feel alone when they are dealing with a difficult situation. This we have extended not just to our employees, but also to our vendors and our customers.
The second thing that we are seeing this time is that there is a lot of negativity around, so we are focussing on amplifying the positive. There are of course heart-wrenching stories which are very painful, which are very difficult to hear. But there are also great stories on healthcare workers doing a great job or our own people being able to source oxygen cylinders at 2 AM in the morning, get beds for people, get injections for people. We are focussing on amplifying the positive.
Third, we are rolling out the vaccination drive very quickly. We are tracking this on a daily basis in every plant, in our regional offices and corporate offices. We are taking all steps to roll out vaccines in our entire ecosystem and we are tracking those numbers and hopefully in the next four to eight weeks we should be 100% covered. Step up the outreach, make people feel safe and connected, and leverage our collective strength, I think that is point number one. Point number two on the business environment, this time it is not a national lockdown. But we are facing mini lockdowns across the country and the situation is different in every region. So, if for example I see our footprint, we are seeing the maximum impact as of now in east India. In Odisha, Jharkhand, Bihar the situation is quite tough and sales are trending lower even adjusted for seasonality. But if I see northeast, the situation is much better compared to east India and southeast is somewhere in the middle.
We have to create flexible plans; it is a very dynamic and volatile environment and we have to be very flexible and very agile if the demand is lower. We have to focus on costs very quickly and if the demand is high we must capture market share very quickly. One, our planning has to be very flexible, and second, the approach to market and approach to management has to be very localised as the situation is different from state to state. It is not a ‘one-size fits all’ localised strategy, it is a very flexible and adaptive strategy. I think I am very hopeful that this too shall pass and things should start looking up, but we are prepared for any eventuality.
How does that translate into business? You had guided for a capacity expansion of about 55 to 60 MTPA for the next three years. Are you on target with that plan or are you in wait-and-watch mode?
Absolutely. First of all, we feel very confident and hopeful. In the last year, we delivered our best profits and best growth ever. We feel very confident about the future. But we are cautious and optimistic given this wave. We ended the year with around 31 million tons of capacity. Our plans to invest in Murli, invest in our Odissa branding unit are on track and we should take the capacity to 37-38 million tons. At least there is another 20% growth, which is under construction. It should get up and running in the next six months.
Having said that, we are watching what is going to happen in the second wave and depending upon how the situation stabilises and depending on how the situation evolves, we will pace our growth accordingly. As I said, we have to be flexible and adaptive to the macro environment. We continue to invest in the projects which are already on stream and we will take a call on the rest of our expansion plan and how to pace it depending upon how the situation evolves.
What are you planning in terms of upcoming capacities at the Bengal grinding unit, Cuttack, Bihar unit? When will the commercial production start and Murli Industries and the limestone availability as well? And how much would be the additional capex on Murli?
From an overall perspective, our Bengal unit has already started production — commercial production started in the end of this quarter. That is up and running. Our Odissa grinding unit we were planning to start this quarter, but given the labour availability and given the Covid issues, it is delayed by one month. We should definitely be able to start it next quarter at best.
In Murli Industries we are continuing to invest and we think we should be able to start commercial production by June of this year. Again, given the Covid situation and Maharashtra situation, maybe there is a lag of a couple of months here and there, but not much. Overall, all plans are on track barring a couple of months delay. Having said that, we have enough capacity in our existing plants to be able to capture the market demand if it comes.
On Murli, the balance capex number which is to be spent is about 500 to 700 crores and the capacity which we will get with this whole investment is around 3 million tons. But we are also looking at limestone availability and we are quite confident that we should be able to get at least 15-20 years of limestone with very high level of certainty. And if that happens then we are going to further invest in expanding Murli, as well. So, three million tons is a confirmed number, but depending upon limestone which we are highly confident about, we should be able to further look at expanding Murli as well in the near future.