Hyderabad: My Home Industries Ltd (MHIL), part of an eponymous Hyderabad business house with interests in cement, power, realty and infrastructure, plans to nearly double its cement manufacturing capacity, investing up to Rs1,535 crore, after recently doubling size to 3.2 million tonnes (mt) a year.
The current expansion will see MHIL set up a new cement factory with a production capacity of 3mt, a stand-alone grinding unit of 1.5mt and a 9MW captive power plant. Typically, grinding units provide the finished product, with the mother factory supplying the clinker (raw material). The new cement plant, planned near Guntur in coastal Andhra Pradesh, will cost about Rs1,200 crore.
The grinding unit at Visakhapatnam is estimated to cost Rs270 crore, funded entirely through internal accruals. The project also involves setting up two other grinding units, one each in Tamil Nadu and Karnataka, said V.S. Narang, MHIL’s director (technical). These units will be catered to by the Guntur plant.
MHIL, which is negotiating with banks, financial institutions and institutional investors for funds required for the new project, expects to achieve financial closure before the end of the current fiscal year. The project would have a 1:1 debt-equity ratio. “The cement facility at Guntur and the two grinding units in Karnataka and Tamil Nadu would go on stream within two-and-a-half years from financial closure,” Narang said. The power facility, costing around Rs65 crore, is expected to go on stream by 2008-end.
An analyst said MHIL’s expansion could turn out to be ill-timed. “We expect a glut in the cement market over the next two to three years, as manufacturing capacities are being ramped up aggressively. We estimate 100mt of fresh capacities (60% of existing capacities) will be added to the existing capacities by fiscal 2010,” said Nitin A. Khandkar, senior vice-president of research with Keynote Capitals Ltd. “However, demand for cement may not increase commensurately. We, therefore, expect cement prices to come under pressure, if capacities are utilized fully.”
MHIL expects the production of corrosion-resistant cement, in demand in coastal Andhra Pradesh, Orissa and parts of West Bengal, to partly buffer the impact of oversupply of the commodity. Keeping in view the high demand and realization for “ground slag”—a by-product in steel production—used in the production of corrosion-resistant cement, MHIL plans to even export the product. “We plan to use 50% of grinding capacity to make slag cement and balance 50% to produce ground slag. We are now evaluating the opportunities in the Middle East markets for ground slag,” Narang said.
Having already placed orders for grinding equipment with the German capital goods maker Loesche GmbH during the last quarter of 2006-07, MHIL expects the delivery of machinery before the end of the current fiscal year. “We expect the grinding unit at Visakhapatnam to take off by August next year,” he said.