Hyderabad: City-based Sagar Cements Ltd said it entered into a joint venture with France’s Vicat SA to set up a 5.5-milliontonne (mt) cement manufacturing facility in Gulbarga, Karnataka, involving an investment of Rs2,500 crore.
The factory will have a unit to produce 4mt of clinker, or powdered cement, and a 60MW captive power plant. It will begin operations in 48 months, said S. Sreekanth Reddy, executive director of Sagar.
The French firm is also buying a 6.6% stake, or one million shares, in Sagar through a preferential offer of Rs700 a share, spending Rs70 crore.
Vicat is paying nearly double the current market price. Sagar’s shares closed at Rs388.10, up 3.2%, on the Bombay Stock Exchange on Tuesday.
The Gulbarga project, funded through Rs720 crore in equity, will have Sagar’s share at 49% and Vicat holding 51%. Another Rs1,780 crore would be in debt, arranged and guaranteed by Vicat.
India is the second largest cement market after China, with an annual capacity of 165mt. Last year, India consumed 178.5mt, according to the Cement Manufacturers’ Association. Cement consumption in the country has grown 8.7% in five years and 10% in two years.
Vicat operates in nine countries.
Sagar, which reported Rs276 crore in revenue and Rs31 crore in net profit in the year to March, has a manufacturing capacity of 2.5mt of cement.