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Sagar Cements Ltd will invest Rs 120 crore in laying a private railway line to improve its market reach and cut freight costs.
The 7-km line will connect the company’s plant, near Matampally in Nalgonda district of Andhra Pradesh, with the main railway line.
Of the proposed investment of Rs 120 crore, Rs 98 crore is to come from debt and the remaining from internal accruals.
COST SAVINGS
“Completion of this line will lead to better efficiencies and savings in costs. Rs 20 crore has already been invested in the project,” Sreekanth Reddy, Executive Director, Sagar Cements, told Business Line here.
The line is expected to be completed by FY2015 and dispatches by rail are expected to go up 20 per cent thereafter, he added.
In the year ended March 2013, Sagar Cements’ dispatches were 15.50 lakh tonnes. Of this 39,449 tonnes were transported by rail.
On the revenue flow from the Sagar-Vacat joint venture cement plant, commissioned six months ago, Reddy said: “It was a long-term investment and we wanted to access certain markets through it.”
Sagar Cements’ sales outside Andhra Pradesh have been steadily increasing and accounted for 46 per cent of total sales in the last financial year.
Capacity additions in the south continue to create an oversupply situation, dampening cement prices till recently.
“We have consequently been compelled to look at States outside Andhra Pradesh,” he said, adding: “Right from the beginning, we have been doing it consciously as a de-risking strategy and to broad-base our reach.”
OUTLOOK
On the outlook for the year, he said things would largely remain the same.
“With domestic coal becoming more readily available, our dependence on high-priced international coal will become moderate. This, in turn, helps us manage our costs better,” he said.
In 2012-13, Sagar Cements revenue stood at Rs 558.52 crore, with a net profit of Rs 8.78 crore.
The scrip lost 2.96 per cent on the Bombay Stock Exchange on Thursday to end at Rs 195.30.
naga.gunturi@thehindu.co.in
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