With high input costs eating into margins, ACC Ltd, India?s largest cement maker, has kicked off a separate business of alternative fuels & raw materials (AFR) to cut costs and earn more sales income by extending waste management services to multinational companies (MNCs) in India.
In an exclusive interview with FE, Sumit Banerjee, managing director, ACC, said, ?We have initiated AFR as a separate business, and from next year (2009) onwards it is going to have the shape of a business in the books of the organisation.?
The company?s new initiative, which is looking at pet coke and biomass as alternative fuel and raw material, is held by a separate business segment with a team working on it.
Moreover, ACC will be providing waste management services to waste generating industries in India. This will be contributing as an additional sales income to the company.
?We have made a small beginning in this, where we have signed long-term contracts with some MNCs in India. And in the next 2-3 years we expect this initiative to add about Rs 50-100 crore to our bottomline annually,? Banerjee said.
The company is in discussions with stakeholders and is also in the process of obtaining approval from the government for this.
On the business of waste management services, Banerjee said, ?We will be basically taking from companies waste that could not otherwise be disposed of safely in India because third party incinerators and waste disposal agencies are at a very nascent stage here. However, in cement manufacturing, we have the required high temperature to burn a lot of substances.??
The move, analysts feel, would impact the company positively, but only in the long term. Says Hitesh Agrawal, research head, Angel Broking, ?This move seems to be a way to reduce the impact of the weakening cement cycle by getting into related verticals. This initiative could add about 5-7% to the company?s EPS but only after 2-3 years.?