SRCM continues its endeavour to diversify its end markets by adding capacity in newer markets of East and South India over the next two years. It will be adding up to 6.4 million tonnes in the East and 3 million tonnes in the South over the next couple of years. This will reduce its dependence on the North from 100% in 2014 to less than 65% in FY20; currently, the North accounts for ~78% of SRCM’s capacity.
SRCM has increased capacity at a CAGR of 17% over FY12-17 by debottlenecking and diversifying into newer markets. Capacity addition far ahead of the industry has resulted in strong market share gains for SRCM. It is likely to increase capacity by ~32% over the next two years, which will result in continued trend of market share gains.
In FY17, SRCM increased capacity by ~14% to 29.3 million tonnes. The associated capex for the expansion was `7.6 billion. This translates into capex per tonne of $32 as against the industry standard of $50-70 per tonne. Of the total capacity addition of 3.7 million tonnes, 2.1 million tonnes was by way of debottlenecking, which typically entails lower capex cost.
SRCM has been able to mitigate the impact of sharp increase in petcoke prices in FY17 by building low cost inventory and improving power consumption norm. Petcoke prices increased ~21% in FY17, while SRCM’s unitary cost of power and fuel declined by ~6%. We expect the lag impact of increase in petcoke prices to be seen in SRCM’s unitary power and fuel cost.
SRCM has been known to utilise assets to optimal level to improve profitability and return ratios. It has seen lower plant load factor for its merchant power at Ras due to weak merchant power demand. Additionally, it is facing captive power deficit for its eastern operations. It shifted the idle boiler unit, and subsequently, the turbine from Ras to its eastern unit, thus saving significantly on capital cost.
SRCM has secured fuel requirement for expanded operations in Raipur unit by bidding for and winning three coal linkages from multiple fields, which will ensure uninterrupted supply of fuel with no major price volatility. Additionally, to support line-3 of clinker unit in Raipur, it has secured limestone deposit adjacent to the present unit; this can support operations of ~2.5m tonnes of clinker capacity.