ACC Ltd., India's foremost manufacturer of cement said it would invest Rs.1,600 crore in 2009 and another Rs.1,300 crore next year on capacity expansion despite uncertainty over demand and fears of surplus capacity depressing prices, media reports said.
The company plans to augment its capacity at Bargarh plant to 2.3 million tonnes (mt) with a 30 MW captive power plant. The capacity expansion is scheduled to be completed by mid-2009.
Besides, ACC is planning to expand its clinker capacity at Wadi and commission two new Greenfield grinding plants in Karnataka in phases by 2009 end. A 7,000-tonne a day clinker line and an additional 25 MW captive power plant in Chanda is also expected to go on stream by mid-2010.
Once the expansion programmes are completed by mid-2010, ACC's production capacities will go up to 30.5 million tonne from 22.6 million tonne. It had earlier forecast cement consumption to grow 6 to 8% in 2009, compared with a 9.3% average rise over the past five years.
Sumit Bannerjee, Managing Director, said the company would pump in major portion of funds for the projects from internal accruals. The company has reserves and surplus of Rs.4,636 crore as at the end of December 2008.
Bannerjee hinted at a shortage of coal supply, with the domestic coal supply through linkages remaining erratic and requiring a ramp up.
N.S. Sekhsaria, Chairman, while unveiling the company's investment plans at the annual general meeting in Mumbai on Wednesday, said, No business is without risks, and all sectors of the industry are vulnerable to some cyclical ups and downs in the long term. ACC is today strongly positioned to negotiate these uncertainties.
The first two quarters of the current year are expected to be reasonably good for the cement industry due to the government focus on infrastructure and low-cost housing, Sekhsaria added.
ACC deputy chairman Paul Hugentobler said the addition of new production capacities is expected to stabilize cement prices in the middle of this year. He expects cement prices to come down in few months when monsoon sets in. Moreover, new capacities, which are coming up in the middle of the current year, will bring price stability.
Last week, the government warned cement makers that it would not extend any stimulus package to the industry unless prices were reduced. The Department of Industrial Policy and Promotion (DIPP) communicated the government's decision to the Cement Manufacturers' Association, after which almost all major cement companies hiked the price by Rs.3 to Rs.7 per 50 kg bag.
Meanwhile, Hugentobler, who is a member of the executive committee of Swiss cement giant Holcim, said the foreign company would scale up its stake in ACC to 51%. Holcim holds 46% in ACC. He also said that Holcim would not merge ACC and Ambuja Cements.
At the BSE, ACC share are current trading at Rs.587.20, down by Rs.3.95 or 0.67% from the previous close. The company's scrip touched an intraday high of Rs.600.00 and an intraday low of Rs.582.20.
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