Anil Kumar Sharma, the Chief Financial Officer at Heidelberg Cement India Ltd, plays a pivotal role in steering the financial strategies of one of the country’s leading cement producers. In this interview, Mr. Sharma provides insights into Heidelberg Cement India’s business landscape, the challenges and opportunities facing the cement industry, and the impact of digitalization and sustainability initiatives on financial performance. Below is the full interview.
Brief update on Heidelberg Cement India business. As the Director of Finance at Heidelberg Cement, what are your primary responsibilities?
Heidelberg Materials Group, one of the world’s largest building materials companies, entered India in 2006 by acquiring Mysore Cements, later renamed HeidelbergCement India Ltd. With a total cement capacity of ~14 million tons across two companies, the Group primarily operates in Central and Southern India, with a turnover of around Rs 5000 crores
As a CFO, I focus on maintaining liquidity, handling working capital and treasury, overseeing growth through mergers and acquisitions, ensuring compliance and strengthening internal controls, tax strategy and supervising IT systems. Our financial tactics aim to deliver steady investor returns and expansion. Reinvesting surplus capital for shareholders’ value acceleration and exploring opportunities within this sector are key elements of our Financial Strategy.
Sustainability is becoming increasingly important in the cement industry. How is the financial department at Heidelberg Cement supporting and financing sustainability initiatives? What impact have these investments had on the company’s financial performance?
Sustainability has always been crucial for humanity. However, it has gained more attention in the past decade due to the visible impacts of ecological imbalance. The average global temperature has risen by 1°C over the last 50 years, driven by rapid urbanization and growth. Annual CO2 emissions total around 36.4 billion tonnes, with 43% from electricity/heat production and 23% from transportation.
We have a responsibility to pass on a livable world to future generations. Sustainability isn’t a burden but an investment in survival and growth, especially for industries that heavily use natural resources. Our environmental goals focus on (1) Climate protection (2) Resource preservation (3) Emission reduction (4) Minimizing environmental impact at quarries and production sites. We aim to align sustainability with cost optimization, environmental stewardship, and efficient resource use.
Key initiatives include:
- Alternative Fuels: We’ve increased flexibility in our fuel mix, incorporating alternative fuels like biomass, municipal waste, and plastic waste, achieving a 10% Thermal Substitution Rate (TSR) with plans to increase it further. This reduces both costs and our carbon footprint.
- Green Energy: We’ve invested in solar and waste heat recovery power plants and secured renewable energy through third parties. Currently, 35% of our energy is green, with a goal to reduce grid power dependency to below 50%.
- Water Conservation: Our water-positive approach, including harvesting and creating reservoirs, ensures our plants give back three times the water they consume.
- Temperature Reduction: We are establishing green belts around our plants to lower ambient temperatures by 2ºC compared to areas 1 km away.
- Inclusive Development: Our CSR efforts focus on vocational training, clean water access, infrastructure, education, and medical services, particularly benefiting local communities and girl students.
In the finance department, we carefully assess the cost-benefit of owning versus hiring before finalizing Capex, aiming to optimize ROI with a sound financial structure. Sustainability not only reduces costs but also advances our social and environmental goals.
The adoption of digital technologies is reshaping finance functions. How is Heidelberg Cement leveraging digital tools and technologies to enhance financial operations and reporting?
Our business is volume-driven, involving numerous daily transactions such as raising invoices, debit notes, and credit notes. These repetitive tasks, currently handled by many people, can be effectively automated to enhance productivity and standardize processes. The cement industry, being labor-intensive, faces challenges like rising labor costs and a shortage of skilled workers. Automation is not only beneficial for standardizing processes but also for reducing manual errors.
Initially, integrating technology into business operations was seen as expensive, but its benefits are now widely recognized. At HeidelbergCement, digital transformation is reshaping our business, particularly in finance and manufacturing. We have launched a global digitalization project with three key pillars:
- H-Connect: A real-time, end-to-end customer portal where customers can access their account statements, track material dispatch, place orders, and more.
- H-Produce: This focuses on our manufacturing system, bringing technology into production processes, including equipment maintenance, remote monitoring, and online tracking of production KPIs. This reduces maintenance costs and boosts productivity.
- H-Service: All service-related processes are automated under H-Service. We’ve implemented Robotic Process Automation (RPA) for tasks such as managing master data, credit limits, order closures, report broadcasting, and price approval workflows. RPA is also being used in manufacturing to handle repetitive tasks.
HeidelbergCement is committed to its digitalization journey, continuously identifying and implementing automation projects based on capex requirements. While we have made significant progress, there is still a long way to go.
The cement industry is facing evolving challenges and opportunities, including fluctuations in raw material prices and regulatory changes. What are the risks / concern for cement industry in short to medium term?
The cement sector is currently facing significant challenges, including excess capacity, which has led to a reduced capacity utilization of around 70%. Given the capital-intensive nature of the industry, this underutilization results in inadequate returns. Last year, cement input costs surged, but intense market competition prevented these costs from being passed on to customers, causing the Return on Capital Employed to hit unprecedented lows. The weakening Indian Rupee against the Dollar further risks increasing input costs.
Additionally, the current liquidity shortage in the market is extending Days Sales Outstanding (DSO) and increasing Days Inventory Outstanding (DIO). A higher fiscal deficit also limits the government’s ability to accelerate infrastructure development, potentially slowing growth in the cement industry. However, the government’s focus on infrastructure expansion and increased budget allocations present opportunities for the sector. We anticipate continued capital investments in new cement facilities for several more years.
A growing concern is the dwindling supply of essential cementitious materials like fly ash and slag. Fly ash availability has decreased compared to a decade ago, sometimes requiring procurement from distant locations. Slag, a by-product of steel manufacturing, is also becoming increasingly scarce. These materials are crucial for reducing the carbon footprint of cement production, and as demand grows, their limited supply poses a medium to long-term risk. It is imperative for the industry to invest in research and development to find alternative raw materials that support environmental conservation.
Our organization mitigates these risks through thorough assessments and timely actions. We also have a Continuous Improvement Programme (CIP), where employees regularly evaluate processes and costs. Their recommendations have helped us enhance processes, boost efficiency, and improve productivity.
With your background in taxation and financial planning, please share your experience on transformation of indirect taxes under GST regime?
GST is one of India’s most significant tax reforms, transforming the indirect taxation landscape by subsuming many Central and State taxes. It replaced multiple taxes with a single, uniform tax across all States—”One Nation, One Tax.” This change has simplified doing business, especially in dealing with multiple States for material movement. Previously, differing State taxes made processes cumbersome, but GST has streamlined operations, making logistics and procurement more efficient and transparent.
The calculation of GST is straightforward, eliminating the need for numerous forms that varied from State to State. This has improved the overall supply chain system and introduced a high degree of automation, making the process of availing Input Tax Credit (ITC) smoother and more timely, leading to better reconciliation with vendors and customers.
However, the shift to GST came with challenges. The GST framework, including tax levy, ITC, and the time of supply, differed significantly from the old tax regime. Business practices had to change, with the introduction of online returns, e-invoices/e-way bills, and new tax treatments for stock transfers. Initially, businesses struggled with transitioning ITC on opening inventory, filing returns, and adapting to the high level of computerization required for invoicing and bookkeeping.
While the initial implementation was challenging, the system has stabilized over time. Setting up procedures for GST took time, as it does with any major change, and it required significant unlearning of the old tax regime. Training was essential, and we proactively trained our vendors and customers to ensure smooth migration. Though challenges remain, GST has ultimately become a catalyst for smoother business operations in India.
Note: We are also on WhatsApp, LinkedIn, and YouTube, to get the latest news updates, Join our Channels. WhatsApp– Click here, and for LinkedIn– Click Here
