The Hindu Business Line : Gujarat Ambuja, ACC to invest Rs 3,000 cr

Cement majors Gujarat Ambuja Cements and ACC are planning to invest around Rs 3,000 crore to increase their capacities by 3 million tonnes (mt) per annum each.

With the cost of building new cement plants being lower than buying out existing capacity, more and more companies are venturing into greenfield projects. The Government's decision to give a fillip to the crumbling infrastructure in the country and booming realty sector have offered a life line to cement companies.

The board of directors of Gujarat Ambuja Cements on Friday cleared capital expenditure of Rs 1,519 crore for setting up a new three mt per annum plant in Himachal Pradesh to be commissioned by March 2009.

ACC, the largest cement manufacturer with a capacity of 19.3 mt per annum, is setting up a new plant with a capacity of 3 mt per annum at Wadi at a cost of Rs 1,480 crore.

Apart from the new Wadi plant, ACC is gearing up to capture the boom in the cement industry by increasing its capacity by 2.9 mt per annum in Gagal (Himachal Pradesh), Lakheri (Rajasthan) and Bargarh (Orissa). Further, ACC plans to expand by 2 mt per annum every year through internal accruals, if the demand-supply gap widens.

"At current market capitalisation levels, the large cement majors with capacities of 12-19 mt show capacity valuations of Rs 9,000-12,000 a tonne; this is over $200 a tonne while greenfield plants will cost around $80 a tonne," said an analyst.

Even the medium-sized companies with capacities of 2-6 mt are showing valuation levels of Rs 5,000-6,000 or $100 per tonne.

Gujarat Ambuja has already announced work on setting up a new plant with a capacity of 3 mt in Chhattisgarh at a cost of Rs 1,050 crore to be completed by March 2009. With these expansions, the total cement capacity of Gujarat Ambuja will rise to 22 mt per annum by 2009.

Gujarat Ambuja has also received board approval for merging Ambuja Cement Eastern Ltd effective January 1.