xMithun Roy

Mumbai: Aditya Birla group flagship Grasim Industries will invest around Rs 3,000 crore this fiscal.

Of the total outlay, Rs 2,000 crore is for Grasim and Rs 1,000 crore for Ultratech.

The investments would be on ready mix concrete (RMC), power plants and cement capacity. The funding would be met entirely out of internal accruals.

Last fiscal, the company had invested Rs 4,700 crore on Grasim and Ultratech expansions. D D Rathi, CFO and whole time director, Grasim Industries Ltd told DNA Money, “The company is increasing focus on RMC as it’s the future business and margins are higher.We are increasing RMC network to 94 from current 22 in the next few quarters with around Rs 560 crore investment.”

RMC volumes rose 62% in Q4 last fiscal and by 36% for the whole fiscal, buoyed by a rapid expansion of network.

The cement capacity expansions at Shambhupura and Tadpatri will be operational in H1FY09, while the Kotputli (Rajasthan) plant is expected to go on stream in Q3FY09.

Upon completion, the company’s aggregate cement capacity, including that of UltraTech, will stand augmented at 48.7 million tonne.

Sanjeev Bafna, joint president and deputy CFO, Grasim Industries said, “The significant increase in input costs will have an adverse impact on margins though strong momentum in demand would help in absorbing the increased supply in the long term.”

The company is also investing Rs 1,500 crore for a total captive power plant capacity of 392 MW, which would be operational by the end of this fiscal.

Last fiscal, Grasim and its subsidiary Ultratech commissioned 6.6 mtpa of clinkerisation units in Rajasthan and Andhra Pradesh, respectively, besides 2.4 mtpa of grinding units.

According to industry experts, the additional 90 mtpa capacity announced by the industry over the three-year period from FY08 to FY10, could result in a surplus scenario, affecting realisations from end-FY09. Rising energy prices would lead to increased costs.

However, the addition of captive power plants at various locations will help contain this impact, they add.

On the other hand, Grasim’s fibre business is facing cost inflation due to rising sulphur and pulp prices, and a weak pricing environment.

At present, its VSF capacity stands at 333,975 tonne and it plans to increase its capacity at Harihar (Karnataka) by 31,000 tonne at an outlay of Rs 335 crore, which is expected to be operational in Q3FY10.

Additionally, an 88,000 TPA greenfield project is being pursued at Vilayat (Gujarat).

“Last year the sulphur prices were hovering around $100 per tonne, which is now increased to $800 per tonne,” said Bafna.

Source : DNA