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The Ramco Cements, a prominent cement producer in south India, is undertaking one of its largest capital expenditure programmes by investing ₹3,430 crore in a greenfield cement unit in Andhra Pradesh and in brownfield expansion across two States over the next 24 months.
The company on Friday broke ground for a 3.16-million tonnes per annum (MTPA) cement unit at Kalavatala in Kurnool district. The new facility, for which Andhra Pradesh Chief Minister N Chandrababu Naidu laid the foundation stone on Friday, will entail an investment of ₹1,500 crore.
Clearances in place
The plant is expected to be completed within 15 months from the date of all requisite clearances. The new factory is expected to generate jobs directly for 300 people and indirectly for 1,000 people.
While the mining lease is in place, the company has obtained environment clearance and a substantial portion of land for the project has been acquired by the company and the State government.
AV Dharmakrishnan, Chief Executive Officer, The Ramco Cements, told BusinessLine that the company was running at full capacity and the new factory will cater to the emerging demand in Andhra Pradesh and target neighbouring markets such as Karnataka, Odisha and West Bengal.
Capacity augmentation
The brownfield expansions include increase in clinker capacity to 4.60 MTPA from 3.10 MTPA along with a waste heat recovery system at the Jayanthipuram unit in Krishna district at a cost of ₹740 crore and expansion of grinding capacity at Visakhapatnam to 2 MTPA from 0.9 MTPA at ₹250 crore. These two projects are expected to be commissioned by March 2020.
The greenfield and brownfield expansions will take the total production capacity of Ramco Cements in Andhra Pradesh to about 10 MTPA, making it the largest cement producer in the State.
In the West Bengal unit at Kolaghat, East Midnapore district, the grinding capacity is being increased to 2 MTPA from 0.9 MTPA with a railway siding facility at a cost of ₹425 crore.
The company is investing ₹515 crore in increasing grinding capacity at its Odisha unit with a greenfield capacity of 0.9 MTPA. These projects are expected to be commissioned by April and September of 2019 respectively.
With all these expansions, the company’s total production capacity is expected to reach 20 MTPA by 2020.
Funding pattern
The projects will be funded through internal accruals and some debt, said Dharmakrishnan, who sees a robust demand for cement consumption due to infrastructure push both by the Centre and State governments.
The company had net cash accruals of close to ₹800 crore for FY2018 and about ₹200 crore in Q1 FY2019. In the absence of significant debt-funded capex in the last few years, the company’s debt levels have remained relatively modest compared to the accruals, according to rating agency ICRA.
Ramco Cements continues to have healthy market share in Kerala and Tamil Nadu and has been expanding its market share in the other regions where it is present, it said.
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