AV Birla Group's Ultratech Cement, the country's largest cement manufacturer, is planning a capital expenditure (capex) of Rs 10,000 crore over next one and half year to expand its cement production capacity to 70 million tonne (MT).
According to chairman Kumar Mangalam Birla, the outlook for the Indian economy has turned distinctly positive though the near term outlook for cement sector remains challenging. “The company’s installed capacity has been scaled up to nearly 62 MT in the last fiscal. The company has earmarked around Rs 10,000 crore to be incurred in setting up the remaining grinding units, clinkerisation plants, cement terminals and other capex in the current round of expansions. These are likely to be commissioned in a phased manner by 2015,” wrote Birla in his letter to shareholders.
The cement major had last fiscal incurred a capex Rs 2,228 crore towards its ongoing capex programme.
During the year, Ultratech had invested mainly in brownfield capacity expansion projects in Karnataka, Chhattisgarh and Rajasthan, a packaging terminal in Maharashtra, thermal power and waste-heat recovery plants, jetty expansion in Gujarat, ready mix concrete plants and other normal capex. Ultratech had last fiscal also acquired two cement plants with 4.8 mtpa capacity from Jaiprakash Associates at an enterprise value of Rs 3,800 crore.
According to the company's 2014 annual report, the cement major had produced 40.79 mt of cement last year with effective capacity utilisation of 79%.
Birla believes that despite a subdued growth of the industry, long-term fundamentals and growth prospects remain intact and the capacity additions would keep the company in the state of preparedness.
The cement industry has in the recent past struggled due to higher capacity additions compared to incremental demand that resulted in sector capacity utilisation declining to below 70%.