The Hindu Business Line : Mini cement plants focusing on expansion

The availability of limestone reserves, a growing demand for cement and easier access to funds, including from private equity investors and global cement manufacturers, is driving this transformation in the mini-cement industry.

“We understand that there is considerable upgradation in the 198-odd mini cement plants during 2007-08 which is continuing well into the current year though it is difficult to give specific details at this point of time,” a functionary of Cement Manufacturers Association (CMA) told Business Line over phone from Noida.

According to Mr Ramesh Chandro, Managing Director of Ckoraamandel Cements Ltd and past president of All India Mini Cement Manufacturers Association (AIMCMA), over a quarter of the 14 rotary kiln mini-cement plants and a few of the 150 vertical shaft kiln technology plants are now going for massive expansion. This might bring in 6-7 million tonnes of capacity addition in 2008-09.

“What is favouring the expansion of mini plants is the abundant availability of limestone especially in the South,” Mr K. V. Vishnu Raju, Chairman and Managing Director, Anjani Portland Cement, said.

According to Mr Srikant Reddy, Executive Director, Sagar Cements, the possession of huge limestone deposits by many companies is actually aiding the expansion. “Though a nationwide inventory of limestone deposits has not been prepared in the recent past, the current deposits with companies will cushion capacity expansion for next 15-20 years,” he said. Sagar Cements has over a trillion tonnes of limestone reserves, he added.

The company is increasing capacity at its Andhra Pradesh plant to 2.5 million tonnes a year and has also announced a 5.5 million tonnes cement plant in Karnataka jointly with Vicat of France, a global cement manufacturer, which recently picked up a 6.6 per cent stake in Sagar Cements.

In addition, there are untapped limestone deposits in Madhya Pradesh, Gulbarga (Karnataka), Adilabad, Anantapur and Guntur (Andhra Pradesh), Kashmir, Himachal Pradesh, Assam and Sikkim which, if effectively tapped, can sustain future expansion, according to industry sources.

There is ready availability of investors too. Encouraged by the current market situation, both domestic and international investors are keen on investing in mini cement plans, Mr Chandro said.

According to AIMCMA data, about Rs 1,500 crore by way of debt, internal accruals and PE funds had gone into capacity expansion in the year 2007-08.

This could be much more in the current year as overseas investors are showing lot of interest in Indian cement industry, say experts. Any cement plant with an annualised grinding capacity of less than 0.3 million tonnes is considered a mini plant. Most of these units are located in Andhra Pradesh, Karnataka, Gujarat Rajasthan and Madhya Pradesh.

In 2007-08, over 5 per cent of the 198 million tonnes of cement production came from mini plants.

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