(Mumbai, India) -- India’s two largest cement groupings are fighting it out for the top slot. The Aditya Birla group, which is in the process of merging the cement business of two of its companies, Grasim and another firm called UltraTech to create the country’s largest cement maker, has firmed up investment plans to take on arch rival, Holcim.
The Swiss company, the world’s second larger marker of cement, has management control of two Indian companies, ACC and Ambuja Cements.
A person familiar with the development told ET NOW that the UltraTech-Grasim combine will invest around Rs 7,000 crore to set up three greenfield facilities which are likely to come up in the states of Chattisgarh, Andhra Pradesh and Tamil Nadu in the next three-four years.
Post expansion, the Birla group’s cement capacity will go up from 48.8 million tonnes to around 62 million tonnes, marginally higher than what Holcim will have by then.
The orders for supply of equipment are likely to be placed by June this year and the building of the new facilities are likely to commence in a year.
ACC and Ambuja Cements currently have cement capacities of 26 million tonnes and 22 million tonnes each. Swiss giant Holcim, which owns around 46% in both the firms, has said that the combined capacity of its Indian affiliates will increase to 60 million tonnes by 2015.
Grasim’s chief financial officer Adesh Gupta said that the group is currently exploring the possibility of expanding capacity to maintain its leadership in the Indian cement industry. “No final decision has been taken yet. We hope to finalise our expansion plans in a month or two,” Mr Gupta said.
The $28-billion diversified Aditya Birla group is currently in the midst of restructuring its cement business by divesting the cement operations of Grasim, which also viscose staple fibre, into an intermediate firm called Samruddhi Cement, which will eventually be merged with UltraTech Cement. The restructuring plan is likely to be completed by the middle of the current calendar year.
Industry analysts say that the Aditya Birla group’s expansion will be funded through a mix of internal accruals and debt. “Internal accruals for Grasim and UltraTech put together is in excess of Rs 2,000 crore. So funding the expansion will not be a big challenge,” Amit Srivastava, research analyst at Karvy Stock Broking said.
However, the expansion programme of the Aditya Birla group and the Indian affiliates of Holcim could have some impact on cement prices, unless demand picks up strongly in the coming years.
“The industry has already added around 30 million tonnes of capacity between April and December 2009. Another 12 million tonnes will get added by the end of March. So the oversupply situation will have an impact on the profitability of cement companies once the monsoon sets in. We expect prices to correct by Rs 25-30 per bag post-June,” Mr Srivastava said.
Source: http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/cement/Birlas-line-up-Rs-7k-cr-to-ramp-up-cement-play/articleshow/5532601.cms