Mithun Roy

Mumbai: India Cements is setting aside Rs 2,010 crore to boost its production capacity to about 14 mtpa (million tonnes per annum) by December 2008 through de-bottlenecking, upgradation of production facilities and setting up of two new grinding units.

Currently, it has a production capacity of 9.1 mtpa. The two grinding units will come up in Chennai and Perli (Maharastra) — each with a capacity of 1 mtpa — by the end of the first quarter of fiscal 2009.

It will invest around Rs 810 crore in these projects.

The company also plans to set up two cement plants in Rajasthan and Himachal Pradesh with an aggregate capacity of 3.5 mtpa by May 2010 with an estimated capacity expenditure of Rs 1,200 crore.

V M Mohan, joint president, corporate finance, India Cements, said: “Our capacity will increase to 18 mtpa once all the projects are commissioned, including the Rajasthan and Himachal cement plants.”

On Indian Premier League cricket, he said the company has found an innovative way of promoting brands at a time when India Cements is spreading its presence across the country.

Manish Saxena, Deepak Agrawala and Ravikiran Surana of Deutsche Bank Securities said in their recent research report that unrelated diversification into Indian Premier League cricket will lead to greater concerns among investors over the company’s long-term growth plans and future use of cash.

A source said that India Cements has initiated talks to acquire coal mines in Indonesia and a final decision in this regard will be taken next fiscal.

But this was not independently confirmed.

It required around nine lakh tonnes of coal, a raw material for cement, every year. At present, it imports about 70% of its coal requirements from Indonesia.

It has seven cement plants in Tamil Nadu and Andhra Pradesh and sells its products under several brands like Sankar Super Power, Coromandel Super Power and Raasi Super Power with a market share of around 30%. It sells about 90% of its production in Kerala and Tamil Nadu.

In the past, the company has added to its capacities mainly through acquisitions starting from Coromandel Cement in 1990, Visaka Cement in 1996 and Raasi Cement in 1998.

Analysts said that southern markets have witnessed good demand, tight supply and firm price trends in 2007 and the demand outlook for fiscal 2009 also looks promising.

In the period between fiscal 2009 and fiscal 2010, demand in the region is expected to grow by 13%.

Mohan didn’t comment on cement pricing but said the demand will remain robust in the coming months.

Industry experts believe that prices should maintain their upward trend for next two quarters until some of the large greenfield projects come onstream.

The demand for cement is expected to remain buoyant in line with the booming economy, which demands investment in infrastructure activities like building highways, airports, ports, besides housing and office space.

India Cements is a diversified company with interests in shipping, real estate development and wind energy.

Source : DNA