India Inc shifts into overdrive

Written by Pradip Kumar Dey | Mumbai | Updated: Sep 8 2007, 05:41am hrs
Helping to drive the economys growth momentum, Indian manufacturing companies are now working at near-optimum capacity. A study carried out by FE of 157 large companies indicates that the average capacity utilisation increased to 87.77% in FY07. Of the sample, more than 60% of companies saw capacity utilisation increasing, and 25 companies actually operated above rated capacity.

A large number of companies operating at above 100% capacity were from the pharmaceutical and cement sectors. The average capacity use of 14 pharmaceutical companies increased from 84.58% in 2005-06 to 93.45% in 2006-07. Ipca Lab achieved the highest average capacity use among the pharma companies in 2006-07. Others in line were Cipla and Ranbaxy Labs.

In the cement industry, Ambuja Cement and Shree Cement were the leaders. The average capacity use of ten cement companies increased from 73.02% to 79.03% during the study period. Ambuja cement achieved the highest capacity use in 2006-07. An analyst from a rating agency said, Strong housing demand and infrastructure focus by the government helped to drive cement demand across all regions.

Fresh capacity materialising in 2007 is likely to be absorbed by this robust demand and, in turn, the cement industry will continue to operate at utilisation levels above 90% in the near future. Refinery companies like Chennai Petro and MRPL were also operating above rated capacity. Keeping up with the rising automobile demand, tyre companies CEAT and JK Tyres also produced way above capacity.

Among other industries studied, a significant increase in capacity use was seen in electronics (54.71% to 63.94%), paints (77.70% to 82.90%), personal care (73.25% to 87.50%) and steel (67.94% to 71.31%).

On the other hand, a decline in capacity utilisation was seen in the case of automobiles, excluding ancillaries (82.45% to 80.47%), paper (108.87% to 92.62%), petrochemicals (67.67% to 61%) and sugar (81.32% to 76.74%).