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Parmod Sagar and the stupendous success story of RHI Magnesita India

2023-04-28

Apr. 27, 2023 - Parmod Sagar, MD & CEO of RHI Magnesita India, has had a busy quarter. We catch him shortly after the completion of RHIM’s two acquisitions and just a day after it reported its December quarter results. Sagar, 55, has been at the helm of affairs at the Gurugram-based manufacturer and supplier of refractory products—used in steel, cement, non-ferrous metals, and glass industries—since 2013. Now, it wants to expand further.

RHIM India—born out of the integration of three Indian subsidiaries, RHI Clasil, RHI India and Orient Refractories, of Austria-based RHI Magnesita Group—had announced the acquisition of Dalmia-OCL and Hi-Tech Chemicals in the December quarter, for which it shelled out Rs 1,708 crore and Rs 621 crore, respectively. “These acquisitions will help us serve our customers globally, as well as make India a hub to serve other regions,” says Sagar, adding that the challenge now will be to integrate the three companies, build a one-team culture and drive synergies in the nine manufacturing plants, from three earlier. “But, we are excited,” he says.


The two acquisitions have tripled RHIM India’s capacity to 500,000 tonnes, and upped its share in the domestic refractory market to 30 per cent. Dalmia-OCL, particularly, allows the company to make strong inroads into the non-steel industrial segment. “Earlier, our ratio was 80 per cent steel and 20 per cent industrial (cement, glass, non-ferrous). Now, it is 72 per cent steel and 28 per cent industrial. This gives us a lot of leverage,” says Sagar, who is the winner in the Industrials category of the BT-PwC India’s Best CEOs ranking this year.


Having grown RHI Magnesita India's share to 30 per cent in the country's refractory market, 

its leader Parmod Sagar is now focussed on building synergies with the acquired firms


Even though Dalmia-OCL’s Rs 443-crore debt now reflects on RHIM’s books (taking its total debt to Rs 1,070 crore), Sagar is bullish about the long-term prospects of the company. “The DOCL acquisition gives us an entry into the western and southern parts of the country, where RHIM had no prior presence,” the company’s management had said in its Q3 analyst call some weeks ago.

Although RHIM’s margins came under pressure in Q3FY23 and net profit slumped 23 per cent, its operational revenues have remained strong. Sagar is of the view that the consolidated PAT dropped mainly due to the depreciation of the rupee, resulting in a forex loss of 11 per cent compared to the September quarter (Q2FY23). “We also intentionally built up inventory post-Covid-19. The high-value inventory will start tapering off in this quarter, and we will be in a better position from FY24,” he says.


Given the logistical uncertainties around Covid-19, resulting in sky-high freight rates and unavailability of containers at major ports around the world, RHIM had been stocking up inventory over the past two years. “It was a conscious decision... in spite of it having a negative impact on our working capital,” says Sagar. “But it is because of our strengths that we could... serve all our customers 24x7.” So, has the refractory business recovered now? “Shipments and supply chains are much better. But it has not gone back to the pre-Covid-19 era yet,” he says.

For the nine-month period ended December 2022, RHIM’s gross sales stood at Rs 1,847.3 crore, while net profits were Rs 213.3 crore. In the Q3 analyst call, the company’s leadership had said that demand from domestic firms look strong and it is expected to reach 1.6 million tonnes in FY24.

While all this augurs well for RHIM, it is likely to face some short-term headwinds when it comes to exports, due to the ongoing geopolitical issues and energy crisis in Europe. But the favourable domestic climate could offset weaknesses in other markets, say analysts.

"RHIM has the best business among listed players due to its comprehensive product portfolio, strategy to expand domestic market share and also leverage its manufacturing and R&D expertise to drive new product development,” says Sahil Sanghvi, Equity Research Analyst at Monarch Networth Capital. “Its presence in both mini mills and large integrated steel plants will only grow larger in its pursuit of more contracts,” he adds.

Sagar, who also leads RHIM’s West Asia and Africa businesses, speaks not only about expanding the company’s geographical footprint (beyond 75 countries) but also “growing with the organisation” himself. “I was not appointed CEO from outside. I know the business inside and out. As a leader, one has to be impartial and patient… Only then can you build a culture of delegation and empowerment,” he says. His colleagues attest to this philosophy. Jyotirmay Bhattacharjee, Sales Director and one of Sagar’s direct reportees, says, “If I had to sum him up in one word, it would be ‘transparent’. Even if he has a difference of opinion with you, he would never sugarcoat his words. And if you manage to convince him of something, you wouldn’t find a better candidate to present your ideas.” Bhattacharjee adds that the latter has transformed himself. “I’d say he has... metamorphosed.”


Ask Sagar about his leadership mantra, and he mentions RHIM’s Global CEO Stefan Borgas. “He’s a fantastic leader. I admire him,” says Sagar. “If you are a true leader, it should be visible in your actions.”


And now, the RHIM boss is looking to chase the next target, that is, reducing the company’s carbon footprint. By 2025, the company plans to spend €50 million globally to reduce its CO2 emissions by 15 per cent. “It is a long and expensive journey. But we are working on green refractories and a circular economy,” says Sagar.

His other goal, he says, is to correct the gender imbalance in his organisation. Nearly two and a half years ago, RHIM had only 3 per cent women employees. Now, it’s at 7 per cent. “Our target is to reach 15 per cent by 2025,” says Sagar, adding, “My instruction to every team is, if we are hiring two people, one should be a woman.”

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