Business Daily from THE HINDU group of publications
Saturday, Dec 09, 2006
Mergers & Acquisitions
J.K. Cement plans to acquire plant with 1.5-mt capacity
MR YADUPATI SINGHANIA (right), Managing Director and CEO, JK Cement Ltd, and Mr Sreechand Krupalani, MP, at the Bhoomi Pooja and foundation ceremony of the company's new plant at Muddaapura Taluk, Mudhol District in Karnataka on Friday. - G.R.N. Somashekar
Bangalore , Dec. 8
J.K. Cement is looking at the possibility of acquiring a cement plant with a capacity of about 1.5 million tonnes as part of its expansion plan.
It is also not averse to shedding some equity for this purpose. "We would be open to shedding equity depending on what type of value it gives us," the J.K. Cement Chief Financial Officer, Mr A.K. Saraogi, told Business Line. As per the current equity structure, the promoters' holding is 62 per cent while the rest is with the FIs and the public.
The company plans to add four million tonnes of capacity in the next five years. This will entail an investment of between Rs 3,500 crore and Rs 4,000 crore. Mr Saraogi said the expansion will be both through the organic and inorganic route.
He said in the medium term, it does not see any margin pressure. Currently, the cash profit margins are as high as between 25 per cent and 30 per cent compared with between 5 per cent and 10 per cent over a year ago.
Mr Saraogi said that with such high margins, cement manufacturers including theirs are now willing to expand capacities.
No hike in prices
He also ruled out any immediate hike in cement prices though it depended on the Government policies. The last hike was some time early this year. Currently, the cement prices are in the range of Rs 175-210 per bag (50 kg).
He said the total capacity of all the cement factories in the country is around 150 million tonnes. With a demand growing at 10 per cent every year, the mismatch in the demand supply will continue to be around 5 per cent.
He said the Commonwealth Games will lead to an additional demand of seven million tonnes by 2010. " We don't see any problems to meet the demand."
The per capita consumption for India is 140 kg while the global per capita consumption is 350 kg and that of China is one tonne.
To invest Rs 1,000 cr for new plant
JK Cement will invest Rs 1,000 crore for setting up a 3.5-million-tonne greenfield cement plant in Karnataka.
After laying the foundation stone for the project at Muddapur near Bagalkot in North Karnataka, the JK Cement Managing Director and Chief Executive Officer, Mr Yadupati Singhania, told newspersons that the cement plant will go on stream by 2008.
Mr Saraogi said that once the entire plant is commissioned it will directly add Rs1,500 crores to the topline.
The plant will be commissioned in two phases. In the first phase, three-million-tonne grey cement plant with an investment of Rs 950 crore will be set up. In the second phase, a split-grinding unit at Bellary will be set up with an investment of around Rs120 crore. This will take the total capacity to 3.5 million tonnes. He said a 100 per cent captive50 MW thermal power plant will also be set up near the plant.
Mr Saraogi said with the setting up of the cement plant JK cement which is primarily a regional player will get a national foothold. The company has taken on lease two mining sites, which is spread across over 700 acres for a period of 20 years. According to a company study, there are around 90 million tons of limestone reserves, which is equivalent to 25 years - 30 years of production. The township and the factory will be built in 250 acres. The project will provide jobs to around 10,000 people.
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