Grasim Greenfield and Capex Monitoring

8/8/2019 Grasim Greenfield and Capex Monitoring

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Fact Files Of Grasim

GrasimIncorporated on 25Aug 1947

Textilemanufacturingsuccessfullydiversified intoVSF, cementand chemicals

Worldlargest

producer of VSF

9th largest producer of Cement

2ndlargest

producer of causticsoda inIndia

4th

largest producer of insulatorsin theworld

GrasimandGravierarange of fabricssignifythe'power of fashion


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Grasim Cement

Its first cement plant at Jawad in Madhya Pradesh in mid 1980.Span India, with 11 composite plants, 11 split grinding units, five

bulk terminals and 69 ready-mix concrete plants.Grasim is also the largest producer of white cement in India, with acapacity of 560,000 tpa as on 30 June 2009. Branded as BirlaWhite.Grasim is a voluntary member of the Cement Sustainability Initiative(CSI), which is the apex for the cement industry globally to establish

common measures, share best practices and exchange data relating toenvironmental impact.


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Project Classification

GreenFieldproject

(Add Capacityto Scratch One.)

ProjectRoute

BrownFieldProject

(Add Capacityto Existing.)


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GreenField Project

The setting up of greenfieldcement projects means startingfrom scratch at a new location /

site with the land andinfrastructure as available. Thegreenfield plant can be set up asintegrated plant or with splitlocation where clinker can bemanufactured at one location &

cement grinding and/or packingcan be done at another location.


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Influencing FactorsQ uantitative factors

1. Gestation period2. Investment cost3. Profitability and Financial Viability

Q ualitative factors

4. External Environment

5. Technology6. Design and Engineering7. Project Management


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Quantitative Factors

1 .Gestation Period

Site identificationRaw material studiesEIA/EMP studiesPlant technical concept & project reportFinancial closure

Project implementationStabilization


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Project Estimated Amount(per ton)

Specific investment cost for Greenfield project

Rs. 4800-5100

Specific investment cost for brownfield project (Up gradation) Rs. 3950-4350

Specific investment cost for brownfield project (New line)

Rs. 4500-4800

2.Investment Cost


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3 .Profitibility &Financially Viable

For similar capacity addition the brownfield project shall generallyhave better financial viability due

to lower gestation period andlower investment levels


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Qualitative Factors

4 .External Environment

Land and Infrastructure Fresh acquisition and development isrequired.Limestone new mineable deposit to be identified, investigated andacquiredFuel linkages to be established afreshEnvironment clearance large lead time for data collection

Market entry barriersFinancing More difficult and rigid terms & conditions.


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Qualitative Factors

5 .Technology

Raw material availability augmentationComputer Aided Deposit Evaluation (CADE)Quarry Scheduling and Optimization ( QSO)GrindingPyroprocessingImproved equipment


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Qualitative Factors

6 .Design & Engineering

LayoutInfrastructure limitationsSafety considerationsEnvironmental considerationsTemptations to have more and more flexibilityEnergy optimizationAgeing of civil structuresAgeing of old equipment proposed to be retained in the upgraded plantRequirements for future growth


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Qualitative Factors

7 .Project Management

The project implementation time hasshrunk and the project overruns aresuicidal. The lenders are increasinglyinsisting on detailed planning, efficientmonitoring and control mechanism(time/cost) to avoid/ minimizeoverruns.


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Case Objective & Details (Demo)For up gradation of kiln from 10,000 tpd clinker to 12,000 tpd clinker

Details

Description Present Proposed

Kiln Capacity 10,000 tpd clinker 12,000 tpd clinker

Kiln Speed 2.0 rpm(maximum) 4.0 rpm

Kiln Slope 3.50% 3.50%

Kiln Size 7.0 m dia. x 110m length 7.0 m dia. x 110 m length

Preheater Single string, 4 stagecyclone preheater

Existing string with 4 stage cyclones askiln string and a new string with 4 stage

preheater and In Line Calciner (ILC)

GCT/ECP One GCT and two parallelESPs

A new GCT/ ESP is required for dedusting the new PH fan.The GCT is

proposed to be before the new PH fan andit will discharge to the new ESP, where anew ESP fan will vent out the clean air tothe atmosphere through an independentchimney.Its existing GCT & ESP willcontinue to be used.


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Case Details Cont..

Description Present Proposed

Specific heatconsumption

880 Kcal/ kg clinker 750 Kcal/kg clinker

Filling in kiln 9.64% 14.83%

Fuel firing Kiln : 100% Kiln : 45%

Precalciner : 55%

Burner for fuel oil firing

Kiln : FLS Kiln : FLS Duoflex burner for oil or gas.Precalciner: A new burner of FLS design

Clinker Cooler Planetary coolers New generation, highefficiency FLS SFcooler with more than73% heat recuperationefficiency.


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Case Details Cont..

Other EquipmentDescription Present Prposed

Crusher 6000 tph A new crusher of capacity 9000 tph to meet therequirement of this kiln.

Raw mill 2000 tph 3600 tphThe following modifications:

Replacement of the existing two nos.conventional dynamic separator by a suitablydesigned new generation high efficiencydynamic separator.

Installing a closed circuit roller press in frontof raw mill.

Cement mill 1160 tph 2660 tphconsidering about 20% margin, it isrecommended to install a new cement mill of cap around 1500 tph

Power consumption - 100 kWh/t cement


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ResultA debt equity ratio of 70:30 has been considered for projectfinancing.Kiln run days has been considered as 330 days per annum.The plant operating efficiency are considered as follows:

1st year of operation 9 0%

2nd year of operation onwards 100%

The Financial indicators are worked out as follows:IRR on investment 2 0 .82 %

IRR on equity 31 .94%

Payback period 4 years 2 months

Based on the estimates, the total cost for the proposed project works

out to Rs.657

2 million for kiln upgradation


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Findings

SN Parameter GreenField Brownfield

1 ExternalEnvironment

- +

2 Technology + +

3 Design &Engineering

+ -

4 ProjectManagement

+ -

5 Gestation Cost - +

6 Investment cost - +

7 Financial Viability - +


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Cement Manufacturing


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Process at Glance


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Process at Glance Cont..


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CAPEX Monitoring

Capital expenditures(CAPEX) are expenditurescreating future benefits. Acapital expenditure is incurredwhen a business spends moneyeither to buy fixed assets or toadd to the value of an existingfixed asset with a useful lifethat extends beyond the taxableyear


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Process

Project Sanction

Prepare Budget for Sanction Amount

Commitment

Actual Expenditure

To Be Spent


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Sanction Budget

H eads Rs. (in Crore)

Land & Site Development 154.74

Civil & Structure Work 400.83

Plant & Machinery 669.17

Power Generation 212.38

Technical Know how Fee 3.75

Supervision expenses 14.00

Mis. Fixed Assets 9.66

Township & Other Amenities 45.72

Pre operating Expenses 43.57

IDC 30.56

Other extra ordinary expenses 36.05

Spares 45.00

Total 1665.43


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Commitment











IDC 40.88


Spares 39.97

Total 1462.50


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Actual Budget











IDC 40.88


Spares 6.88

Total 1386.32


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Surplus/Deficiet Budget






Technical Know how Fee -00.02





IDC -10.32


Spares 38.12

Total 298.63


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Findings & Learning's

The Plant & Machinery consisted of around 40% amount of the totalsanction amount i.e. its the major part of the project.In front of total sanction amount, company is place the order for Rs.1462.49 Cr. as on 31 st July, 08 i.e. they commitment for around88% sanction amount.Out of the commitment amount they make the payment Rs. 1366.32Cr. as on 31 st July, 08.The sanction amount for IDC is Rs. 30.56 Cr. while the company paidRs. 40.88 Cr as on 31 st July, 08 i.e. they make excess payment of Rs.10.32 Cr for IDC. These expenses increase due to project timeextended.


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Findings & Learning's

The Technical Know how fee budget is Rs. 375 lacks while company paid Rs.377 lacks as on 31 st July, 08. i.e. they make excess payment but there is traveling expenses include for Rs.1 Cr. thats why the payment exceed as per budgeted amount.I observed that the sanction amount for the project was revised due tothe following reasons - There is an unexpected Pilling Work incurred after working

started on the project. The steel prices increasing continuously, currently the steel price

in the market is Rs. 52000 par ton as the inflation rate increasecontinuously.

The labour cost increase as per company standard rate.


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SAP


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SAP


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SAP


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SAP


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SAP


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SAP


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SAP


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References

I M Pandey Financial Management.www.adityabirla.comwww.adityacement.comFinancial Management

By M.Y. Khan & P.K. Jain

Annual Reports of Grasim Industries Ltd.2007-082008-09

www.birlagroup.comwww.grasim.com


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Grasim Industries Limited

Thank you

Documents

Grasim Greenfield and Capex Monitoring