In 2008 Young Turks, Puneet Dalmia, Managing Director of Dalmia Cement had been an inspiration to several young entrepreneurs. Since he took over the group Punnet along with his brother, he has managed to treble revenues crossing over a billion dollars. He is now on a mission to conquer Mount Everest. He wants to take the group revenues to over USD 10 billion by 2015.
A pioneer in cement manufacturing Dalmia Cement (Bharat) began operations in 1939. More than 70 years later, its managing director Puneet Dalmia took the company’s revenues to over Rs 2,000 crore making it the second largest cement manufacturer in south India.
Expanding its footprint to east India with Orissa Cement, the company’s steady 33% growth rate for five years attracted big ticket investment. The company inked Rs 500 crore deal with US private equity major Kohlberg Kravis Roberts (KKR) in 2010.
Dalmia has been focusing on increasing capacity as well as market share. He hopes to make Dalmia Cement one of the top three cement companies in India.
Below is the verbatim transcript of Puneet Dalmia’s interview with CNBC-TV18’s Shruti Mishra. Also watch the accompanying videos.
Q: In 2008, you spoke about your Mission Mount Everest to touch USD 10 billion in 2015. How close have you reached to the target?
A: Our first milestone was to reach a billion dollar in sales by 2010. We ended up with under a billion around USD 975 million. We were quite close to our first milestone.
In terms of looking at USD 10 billion by 2015 given the fact that there was a global meltdown for a couple of years, we had to adjust our plans a bit. We are little bit behind schedule, but we will have a significant scale up in the next decade.
Q: Could you take us through the manufacturing capacity of the plant that you have? What are the plans to take it forward?
A: Our total capacity across the group in cement is about 14 million tonne. We would like to be in the range of 30-40 million tonne player. This is our directional target as India will probably be 600-700 million tonne by then. At least, we want to be somewhere between 7-10% of the market.
Q: What are your expansion plans as far as the sugar business is concerned? How robust is that business looking?
A: Sugar business is overregulated business in India. There is lot of political interference and investors get concerned when there is over regulation. We are little cautious in approaching this business.
We like the power business within sugar, but if we look at pure play sugar business, the returns do not justify the capital which has been deployed in the business. There are serious policy issues in the sector.
We would like to engage with the policymakers to see how to deregulate this sector over a period of time and ensure that the volatility in this sector, created by political interference, gets a bit reduced.
Q: Will you be looking at acquisitions in the sugar business?
A: We have tried to look at some acquisition opportunities. We have not found in the asset quality to be right, but we continue to look at the right business model which will be our bigger challenge.
Q: You have stayed away from acquisitions on the cement side. Are you open to inorganic strategies as far as the cement business is concerned?
A: Absolutely. With the KKR deal, our mindset has changed. Apart from Greenfield, we will look at inorganic opportunities as well.
Q: Talking about power side of the business, where do things stand? Where do you plan to take them?
A: We have two types of power business in our portfolio right now and both are very small. Our thermal power business is about 100 MW and most of that is captive.
We have a small renewable play, which is wind and solar. We are doing a 10 MW plant at Rajasthan in solar space. We have created enabling structure for the power business now.
Our captive capacity is likely to grow inline with our cement capacity. Other than that, we are developing a project where if we can get any captive coal mine, we will develop thermal power business.
We don’t have ambitions to be a top five players in the thermal power space. It will just be an opportunistic investment. The total market will be 2 lakh MW in India and we can deploy significant capital.
It is synergistic with our skill sets, project development, mine acquisition and commodity type play.
Q: Cement, sugar and power are the three businesses that you are expanding significantly. Last time, you mentioned that you would not miss having a presence in the services side of the market. Has the family council come up with a decision of what you could possibly do on the services side?
A: That is where my heart is. As of now, we are in a mode of consolidation. We have expanded quite a bit. We need to make sure that whatever we have promised, we deliver on that. Around 12 to 24 months from now, we will probably be clearer on if, when and what to pursue.
Q: In 1999, you decided to experiment with your own business. You started jobs.com and e-recruitment site when the dot com bubble was about to burst and then sold off the portal to monster.com for Rs 40 crore in 2004 to return to the family business. Has this experience of setting up and running a new economy venture helped in transforming your family business into a professional organisation?
A: We have been able to attract better talent and put better systems in place. We have been able to create a very good foundation which will allow us to scale bigger.
Q: How is have you evolved over the last decade?
A: The biggest change for me has been humiliating. Youth brings a lot of aggression and hopes. One has to be practical about what can be achieved in what period of time.
Q: Do you miss not having an entrepreneurial start up?
A: An African proverb said that ‘if you want to go quickly, go alone; and if you want to go far, go together.’ In a total entrepreneurial start up, you have a freedom to do whatever you want.
It can be a quick and fast decision making. In a family set-up, you sometimes have to build more consensuses. It sometimes takes time to take decisions, but in the long term, it is a very sustainable business model.
I and my brother have certain strength. In a singles game you can do so much, but in a doubles game you can do much more.
Q: All your currently operating businesses are regulated businesses which are political in nature and needs a lot of government approvals. How do you deal with the fact that you are operating in such a regulated environment?
A: The government has realised that development gets them re-elected. Most wise governments are pro-economics now. If we look at complete deregulation, the whole world was in an economic crisis.
India was being criticised of not opening up and then India was being praised for being more cautious in its calibrated approach to opening up. Many of the things in India are frustrating at times, but if we take a long term and a national view, it is perhaps the right strategy.
Q: What are your revenue targets for FY12? How close are you to the aspiration of having a 10% domestic market share?
A: In the markets that we operate, we have 15% market share. There are some new markets that we have entered where we have 4% and 5% market share. We are scaling that up and are doing reasonably well.
Q: What about the rock-star model that you spoke about? You plan to bet on the ideas of other people and put your money on that. Are you looking at exploring that opportunity now?
A: That comment was made in the context of services. We don’t have the bandwidth to focus on services right now. If we look at services play, this would probably be one of the strategies that we will be thinking about.
Q: What are the future plans as far as Dalmia Cement is concerned? Are you also awaiting an IPO?
A: Only after we build a significant momentum and scale, we will be thinking about it. We are not looking at going public right now. We are just focused in the short term in consolidating our position and executing well. In the long term, we are looking at significantly scaling up our business.
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