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India Cements will set up a new cement factory in Madhya Pradesh entailing an investment of ₹1000 crore, a move that is aimed at preparing the company to meet emerging demand in the coming years.
The proposed factory will have a capacity of about 2.5 million tonnes a year, increasing the total capacity of the company to 17.5 million tonnes.
“The process of applying for environment licence and other approvals has started and the plant may begin operations by January 2021. We plan to fund this through our internal accruals only. If needed, we may go for a small bridge loan,” N Srinivasan, Vice-Chairman & Managing Director of India Cements said here. The decision to establish a new factory comes after the company’s acquisition of entire shareholding of Springway Mining Pvt in Madhya Pradesh for a sum of ₹183 crore.
The company has a mining lease for more than 100 million tonnes of limestone, a key raw material for producing cement, in the State.
Rising demand
The proposed unit will help the company tap a large market like MP which is crowded by many players. It will also cater to neighbouring Sstates.
India Cements is also contemplating expanding capacity at its other factories as it is hopeful of reaching full capacity utilisation during the fourth quarter of this fiscal, up from about 80 per cent now and 67 per cent in last fiscal.
The company is bullish on demand scenario over the next few years in view of the growing cement consumption on the back of higher infrastructure projects in the country.
Q2 net down
The company has reported a drop in its net profit at ₹1.43 crore for the quarter ended September 30, 2018 when compared with ₹23.67 crore in the year-ago quarter, mainly due to cost pressures.
Srinivasan said the tough cement market conditions in the South coupled with a steep increase in fuel and power prices (₹407 crore in Q2 of this fiscal as against ₹297 crore in the prior year quarter) along with depreciation of rupee affected the operating performances during the quarter. The company had a loss on account of foreign fluctuations to the tune of ₹12 crore.
The company sold about 30.10 lakh tonnes of cement in Q2 of this fiscal, up 11 per cent. But net plant realisation was lower at ₹3,347 per tonne (₹3,473 tonne), due to which there was a bottomline erosion of ₹38 crore for the quarter.
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