B K Birla, chairman, B K Birla Group of companies, may have crossed 85, but has still not slowed down. He is going ahead with expansions planned in cement, textiles and paper. CNBC-TV18 shares with domain-b its exclusive interview with Birla.
B K Birla, chairman of the B K Birla Group of Companies plans to expand its cement and paper business. Birla says that the company will increase its cement capacity at a cost of about Rs1,000 crore.
Birla further adds that the new textile mill could cost about Rs580 crore. Also, the company would finance expansions via internal accruals and debt. He also says that the company would halve the number of textile looms from 1,100 in one year.
Birla also affirms that they have no problems with Wadias over the land issue. He says that the land agreement is clear and it can go ahead with plans.
Birla is unsure of how long cement prices will stay firm. Birla feels that textiles is not a lucrative business in Mumbai.
Further, he adds that Kumar Mangalam has been offered control of Century Textiles However, Kumar Mangalam is not willing to take control of Century yet, he said. CNBC-TV18 shares with domain-b its exclusive interview with Birla.
The cement division is doing well; is it a conscious strategy that now you will invest more in the cement business of Century Textiles, going forward?
I would like to tell you that we are trying to expand in cement and paper business. We will start two plants for cement; one at our existing plant location and the other in West Bengal. The total increase in capacity will be about three billion and the investment will be Rs1,000 crore. We hope to complete the plant in two years.
You've lined up significant expansion plans in all three divisions. Are you looking at raising any money through equity or debt route?
I have already explained about cement. We are also starting a new textile mill in Gujarat. The cost would be about Rs580 crore and we hope to complete it within 18 months. So these are two important expansion schemes.
What about the money that will be required for this capital expansion?
We have our own finances and we will get finance from the banks. So I do not think we will have any problem about finance.
Would you need to do any equity dilution? Do you need to issue any shares to raise capital?
I do not think that we will issue any shares. I think we will be able to get the finance from the banks or from other sources.
What is your outlook for the textile division; both in terms of volumes and prices?
At the moment we have got 1,100 looms and we will cut it down to almost about half within a year. After that, we do not have any scheme at the moment. But in the meantime, we will be examining the proposals and we will finalise the best among them after a year.
With the expansion that you are planning in Gujarat, is it the slow transition of your textile business away from Mumbai to Gujarat?
I do not think it is shifting; we will start a new plant in Gujarat and in this plant, at the moment, we do not have any proposal. But we will cut down the capacity to about half.
Has there been any resolution in the real estate plans or the mill land? There was some confusion between you and the Wadia Group. Has that been resolved?
Yes, I do not think we have any problem. We have the agreement and that is very clear. We do not have any problem about that.
What is the agreement that you have reached?
We have already got the agreement and I do not think it is necessary to make another agreement. Our agreement is clear.
Will you go ahead with your plans as earlier indicated of trying to either develop that mill land in any way that you think fit?
At the moment, the idea is that we will cut down the stalled capacity that we should be able to do within a year. Thereafter, we shall again examine the matter and then we will finalise the scheme.
Your cement and paper division seems to be doing much better than the textiles business. Would you think of defocusing on textile and concentrating on cement, going forward?
Textiles in Mumbai is not a paying industry as the wages are extremely high here. At the moment, we are paying Rs400 a day to a worker and for the same production, in parts of Maharashtra or Gujarat, we can have workers at about Rs100. Therefore, we are interested (Should it be not interrested) in textile at the moment. But we are willing to expand in paper. We will start a new textile mill in Gujarat that will focus on spinning, weaving and processing.
What is the outlook for cement prices and realisations?
We have already expanded and we will expand more in cement. At the moment, cement prices are fairly attractive. But we cannot say how long they will last.
What was the last interaction you had with Kumar Mangalam Birla and his involvement on either the Century Board or the expansion plans that you have at Century?
It is dependent entirely on him. A year ago, I had told him that he should take over Century. His argument is that he has got ample of work and he has asked me to try and continue as long as I can. I am now about 85 and a half years; perhaps after two-three years, Kumar Mangalam will agree to take it over.
Does that mean that he will not join your board in the near future?
He is already on the board at the moment. But the point is that the effective control at the moment is mine. So I would like to handover the effective control to Kumar Mangalam in due course of time.