RHI Magnesita is spearheading adaption of Industry 4.0: Parmod Sagar

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RHI Magnesita is spearheading adaption of Industry 4.0: Parmod Sagar

RHI Magnesita is spearheading adaption of Industry 4.0: Parmod Sagar

Indian Economy
Oct 25,24

In this interview with Rakesh Rao, Parmod Sagar, MD & CEO, RHI Magnesita India, explains the importance of refractories for the growth of India's economy and manufacturing sector.

RHI Magnesita is spearheading adaption of Industry 4.0: Parmod Sagar

With 8 production facilities across India, RHI Magnesita India Ltd (RHIM) has emerged as one of the leading global manufacturers of high-grade refractory products, systems and solutions. The company plans to invest about Euro 400 million (?3,600 crore) to expand and upgrade its production capacity in India. In this interview with Rakesh Rao, Parmod Sagar, MD & CEO, RHI Magnesita India, explains the importance of refractories for the growth of India's economy and manufacturing sector.

Kindly provide us an overview of RHI Magnesita India business.

RHI Magnesita India Ltd (RHIM) is the leading global manufacturer and supplier of high-grade refractory products, systems and solutions which are critical for high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals and glass. We operate 8 state-of-the-art production facilities across India at Bhiwadi (Rajasthan), Visakhapatnam (Andhra Pradesh), Rajgangpur (Odisha), Khambhalia (Gujarat), Dalmiapuram (Tamil Nadu), Jamshedpur (Jharkhand), Katni (Madhya Pradesh), and Cuttack (Odisha).

RHIM’s products and services are divided into two operational divisions, each catering to specific customer industries. The first division focuses on supplying products and services to the steel industry, known as the “Steel Division”. The second division serves industries such as cement and lime, non-ferrous metals, chemicals, energy, glass, and others, referred to as the “Industrial Division”.

In recent years, our growth trajectory has been strong, driven by the synergies created through the integration of the three Indian subsidiaries and our continued investment in R&D, infrastructure, and customer-centric solutions. We also have robust export capabilities, serving markets across Asia, the Middle East, and other regions.

In the year ended 31 March 2024, revenue grew 38 per cent year-on-year with consolidated income of Rs 37.92 billion, while adjusted EBITDA before one time and exceptional item stood at Rs 5.78 billion at 15.3 per cent.

Why are refractories important for the growth of India's economy and manufacturing sector?

Refractories are the backbone of high-temperature industrial processes, which are essential for the manufacturing sector, particularly in steel, cement, non-ferrous metals, and glass. These industries are the driving forces behind India’s infrastructural development, and ‘Make in India’ initiative. As India moves towards becoming a global manufacturing hub, the role of refractories becomes even more critical in ensuring the efficiency, safety, and sustainability of these high-temperature operations.

For instance, steel is a key sector in India’s economy and refractories are vital to almost every aspect of steel production, from reduction furnaces to reheating furnaces. Without reliable refractory solutions, these industries would face significant downtime and operational inefficiencies, affecting productivity and economic growth.

What is the size of the Indian refractory market? Which end-users are driving the demand?

India’s aggressive domestic manufacturing and infrastructure development targets have catalysed the growth of the refractory industry, driven by increasing global demand for Indian steel. The emphasis in India on manufacturing and infrastructure is propelling the refractory sector forward. The Asia-Pacific region, with a refractories market size of $ 20.26 billion in 2023, is projected to reach $ 43.56 billion by 2033, registering a CAGR of 8 per cent from 2024 to 2033.

India is a major market for refractories, with a forecast of 6-9 per cent CAGR. RHI Magnesita India Ltd is well-positioned to leverage on this opportunity for a sustainable and profitable growth in the coming years.

The Government of India’s target, including reaching a $ 7 trillion economy by fiscal year 2030 and achieving 300 million tonnes of steel production by 2030, coupled with initiatives like Atmanirbhar Bharat, provide a strong foundation for economic growth. These factors create a conducive environment for increased demand for refractory products.

What are key challenges faced by refractory manufacturers?

The refractory industry has been facing several challenges, including supply chain disruptions leading to rise in raw material prices. Furthermore, end-user industries have witnessed a slowdown due to cheaper imports and increase in raw material and freight prices have presented new challenges. Additionally, technological advancements in industries like steel production demand continuous innovation in refractory solutions.

What kinds of opportunities the market presents to refractory makers?

The Indian refractory market offers immense opportunities, both domestically and internationally. The government’s focus on infrastructure development, industrial expansion, and the ‘Make in India’ initiative is fuelling demand for refractory products across sectors. This coupled with the growth of industries like steel and cement, creates a positive outlook for refractory markets.

On the global front, exports offer significant opportunities. Indian manufacturers have a competitive edge in terms of cost-efficiency and technological expertise. RHI Magnesita India, with its strong production base and high-quality offerings, is well-positioned to capture export markets in Asia, the Middle East, and beyond. The company enjoys the status of “Three Star Export House” for a period of 1 October 2023 to 31 March 2028. Exports are at 10.20 per cent of total turnover of standalone entity in FY23-24.

Moreover, innovation in refractories such as products that offer higher efficiency, durability, and sustainability, presents growth prospects in emerging industries like renewable energy and waste-to-energy plants.

What are your growth plans for RHI Magnesita in the next 4-5 years?

Looking ahead, RHIM plans to capitalise on its strong global presence, diversified product portfolio, localisation of imported products, and favorable domestic industry growth. Anticipated synergies from inorganic expansion, coupled with strategic partnerships and investments, position RHIM for sustained growth and profitability in the Indian refractory industry.

Leveraging synergies from recent acquisitions, RHI Magnesita India aims to increase its market share to 40 per cent within the next four years. This growth will be driven by our strategic focus on expanding production capacities, developing new business verticals, and enhancing our service offerings.

We also intend to invest more in R&D and innovation to develop advanced refractory solutions that cater to the evolving needs of industries, particularly in the steel, cement, and non-ferrous sectors. We look forward to expanding the export markets by utilising cost-effective production capabilities and a global network.

RHIM India is spearheading adaption of Industry 4.0 through ‘Robotics Technology’ offering for steel industry and lining Evaluation Scan for Cement Industry. Collectively, these advancements not only ensure operational efficiency and reliability but also set new industry standards. By embracing Industry 4.0 principles, we at RHI Magnesita India are committed to driving innovations and improving performance across the refractories sector which further solidifies our position as the market leader in delivering high-quality solutions.

RHIM India has also set up a new business vertical to service the iron-making industry. The new business vertical will support the industry through strategic partnerships to jointly address key challenges faced by the industry such as domestic refractory supply reliability and, productivity and performance improvement of the iron making plants. The new vertical will enhance the company's growth journey by leveraging synergies from acquisitions and, entering targeted areas where we are still underrepresented, such as iron making, DRI, pellets, and more. This vertical provides the company with a wider product offering across all segments and enables cross-selling opportunities.

We will also increase sustainability initiatives, focusing on reducing our carbon footprints, improving energy efficiency, and developing eco-friendly products. As a responsible manufacturing company, we are committed to the circular economy and our recycling rate of raw materials is at 14 per cent. We continue to leverage Group R&D and investments in sustainable technologies, such as proprietary technology to utilise recycled refractory material which significantly reduces emissions, and we are confident that this will increase further underlining our efforts.

RHI Magnesita has spent about Euro 300 million in the last 2 years in India for enhancing local production footprint through mergers & acquisitions. The company has committed Euro 400 million of phased investment by FY 2026 to strengthen its production capacity in India. Post acquisitions and integrations, it now has more than 500,000 tonnes of local refractory production capacity in India.

Looking ahead, as a market leader and an enabler of infrastructure growth, RHIM India, is well positioned to seize all the growth opportunities in sync with the end user industries and continue contributing to the economic growth. The company remains steadfast in its conviction that GDP growth will require the refractory industry to serve as a catalyst to support the vision of Viksit Bharat.