The Hindu Business Line : Sagar Cements scouting for buys in Meghalaya, Orissa

Sagar Cements Ltd (SCL) is scouting for acquisitions besides augmenting its limestone resources in a significant manner in an effort to consolidate and emerge as a long-term player in the industry.

“We are actively on the look out for inorganic growth and are negotiating with some cement companies in Meghalaya and Orissa,” Mr S. Sreekanth Reddy, Director, Sagar Cements Ltd, told Business Line here while not disclos ing target companies.

Dual approach

The Hyderabad-based, small-cap cement company was putting in place a dual approach for growth consisting of organic, inorganic growth and strengthening its raw material base, he said.

Performance

The company, which achieved 43 per cent operating profit margins over a turnover of Rs 28.1 crore in the first quarter of current fiscal, currently, has 500 million tonnes of limestone reserves in India in addition to one billion tonnes of resources in Oman. “We are also looking at acquiring 250 mt of limestone at a location which cannot be disclosed yet. This would make our resources the largest in the country,” Mr Reddy said.

Brownfield project

The company is in the process of executing its brownfield project to increase the clinker capacity from 0.6 mt per annum (mtpa) to 2 mtpa and cement capacity from 0.3 mtpa to 2.30 mtpa by June 2008.

Expansion

The proposed investment will expand the existing manufacturing operations in order to serve the growing demand for cement in the southern States. “The capacity addition at our existing plant will make sense as the extension of railway line from Jaggayyapeta to Vishnupuram has already been announced,” he said.

Funds

The funds for the expansion project have been mobilised through equity, internal accruals and long-term loans from banks and other financial institutions. A line of credit of $19 million has also been okayed by IFC, the financial arm of the World Bank, Mr Reddy said.

Post expansion, the growth strategy being put in place is intended to transform the small cement player into a medium sized operations company. “We are expecting the total income from Rs 112 crore in fiscal 2006-07 to over Rs 220 crore by fiscal year 2009-10 when the project becomes fully operational,” Mr Reddy said.

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