Emami Ltd, a maker of consumer goods and edible oils, said it is looking to scale up its cement production capacity from 4 million tonnes (mt) to 15-20 mt in 3-5 years and unveiled its cement brand Double Bull on Monday.
Emami said it has budgeted as much as Rs9,000 crore for the proposed expansion of its cement production capacity.
The company currently has only one operating unit in Chhattisgarh. The integrated unit, which can produce up to 2.4 mt of cement a year, has been in operation since July. Two more limestone-grinding units are currently under construction—one each in West Bengal and Odisha.
The facility in West Bengal, which will have capacity to produce 2 mt of cement a year, is likely to be commissioned in January. The Odisha unit near Balasore, with a production capacity of 1.5 mt, will be ready in about 12-15 months.
Revenue from cement in the current fiscal is expected to touch Rs500 crore, according to director Aditya V. Agarwal.
In the first phase of development of its cement business, Emami will spend around Rs3,500 crore on its manufacturing facilities in a debt-equity mix of 70:30, he said, adding that repayment of the loans will start in two years.
In the second phase of scaling up, the company is looking to expand in Rajasthan and Andhra Pradesh, where it has secured limestone deposits.
Emami is looking to set up an integrated cement plant in Rajasthan with a capacity of 5.5-6 mt at an investment of Rs3,500 crore. A relatively smaller facility will be set up near Guntur in Andhra Pradesh at an estimated investment of Rs1,500 crore, according to Agarwal.
Apart from organic growth, Emami is also exploring opportunities to buy into existing cement production capacities, said Manish Goenka, another director.
Agarwal and Goenka jointly head the cement vertical within Emami.
Historically, Emami has grown its flagship business of consumer goods through acquisitions. The decision to diversify into cement manufacturing was taken after at least five years of deliberation, said Agarwal. Now, the company wants to scale up rapidly.
The business has certain entry barriers, Agarwal said, adding that despite being a commodity, cement offers opportunities in product differentiation. The biggest challenges are access to limestone deposits and large tracts of land to build factories, he said.
Speaking about the Emami Double Bull brand, Goenka said the group chose the bull as a symbol of strength, promising in its cement “double (compressive) strength”.
Initially, Emami will focus on selling in eastern India and the eastern parts of Maharashtra, according to Agarwal.
The eastern Indian market has a number of new entrants fighting for market share, which has kept prices depressed for the past year, said Rajesh Kumar Ravi, an analyst at Centrum Broking Ltd. The challenge for Emami as new entrant is to strike a balance between shoring up sales and selling at remunerative prices, he added.