Small players in the cement sector, including Barak Valley Cement, Burnpur Cement, and Shree Cement, as well as large MNCs like Lafarge, are looking to set up fresh capacities away from overcrowded western markets. The reason? A growth of around 5.6% over the last five years, an expected surge in demand for cement in the eastern region of the country by nearly 8%, and a shortage in supplies.
The total cement capacity in the eastern region in 2006-2007 was 12.38 million tonne (mt) against a consumption of 17.08 mt, resulting in a deficit of 6.15 mt for the period.
Lafarge, the second largest cement producer in the world, is embarking on an expansion overdrive that will see its capacity more than double to 12 million tonne in India from the current 5.5 million tonne. Lafarge currently has a market share of 20% in the eastern region of the country.
Burnpur Cement, which at present has an annual capacity of 0.3 mt, will be expanding its capacity to 1 mt per annum, where the company has worked out a Rs 500 crore backward integration plan to be executed over a period of 2-3 years. The unit will be in Jharkhand, and will be in two phases, and the company is raising Rs 26 crore through the IPO route to part finance its expansion of Rs 120.9 crore in phase I.
Says Ashok Gutgutia, vice chairman and managing director of Burnpur Cement, ?The gap between demand and supply in the Eastern region will increase in future. The backward integration of clinkerisation with captive limestone mines shall provide financial benefits for our existing unit, thereby assisting it in utilising full capacity.?
Similarly, Barak Valley Cement Ltd recently raised Rs 23.52 crore from the capital markets to part finance its expansion, where the company will increase its current capacity of cement production from 460 tonne a day to 600 tonne a day.
Shree Cement is reported to set up a Rs 2,500 crore, 6 million tonne cement manufacturing plant in Katni, Madhya Pradesh.