Tamajit Pain / Reuters
Kolkata: Diversified Kesoram Industries <KSRM.BO> plans to spend up to 25 billion rupees by end-2009 to expand tyre and cement capacity, a senior official said on Tuesday.
The company is setting up three new tyre units in the northern state of Uttaranchal to take tyre-making capacity to 734 metric tonnes per day from 252 metric tonnes now, director S.K. Parik told Reuters in an interview.
The firm will add another 1.65 million tonnes to its cement making capacity, taking it to 6.2 million tonnes per annum by 2008 from 4.5 million tonnes now, he said.
“The projects will be funded through a mix of debt and internal accruals,” he said.
Tyre and cement make up 85 percent of the annual revenue for Kesoram, which also makes rayons and chemicals.
The company plans to fund the tyre issue by selling Rs5 billion of bonds and has tied up with banks to raise Rs7 billion for expansion in cement units, Parik said.
The company hopes to start first phase of commercial production in its new 257-metric-tonne-per-day bias tyre unit in Uttaranchal from next month.
The other 125-metric-tonne-per-day bias tyre unit in the same location for trucks and farm house use will be operational along with the radial tyre unit of 100-metric-tonnes-per-day by end-2009.
“The expansion will meet growing radial tyre demand as the sector is gradually shifting to radials,” he said, adding the existing tyre unit is located in the eastern state of Orissa.
The firm will save on costs as the new units are in an area designated as tax-free by the federal government, he said.
The expansion in cement will be taken up in the existing unit in the southern Indian state of Karnataka, with current capacity of 3.65 million tonnes per annum.
The other unit in the state of Andhra Pradesh, also in southern India, has a capacity to produce 900,000 tonnes per annum of cement, won’t be included in the expansion, he said.
Parik said cement demand is expected to remain robust in FY09 on growing construction activity in India.
In FY08, the firm posted Rs3.83 billion of net profit on sales of Rs34.79 billion.