Ramco Group’s Madras Cements Ltd (MCL) is planning to add 3 million tonnes (mt) of capacity over the next three years, adding to an ongoing expansion programme and doubling annual production capacity to 12mt.
The company will also enter the sugar industry, mainly for cogeneration of power, which will substantially reduce the cost of power for its energy-intensive cement production.
“We expect (cement) demand to exceed supply in this region for the next two years. Even after expansion, we will operate at higher capacity utilization,” said A.V. Dharmakrishnan, executive director (finance), MCL.
South-based cement manufacturers, such as The India Cements Ltd and MCL, operated at full capacity last year even as demand for the building material is projected to grow at 10-13%.
MCL, which operates with a relatively low share capital of Rs12 crore, has identified two locations, one in Tamil Nadu, near its existing plant at Ariyalur, and the other in Karnoor district of Andhra Pradesh.
The company already has secured limestone reserves in both the locations, said Dharmakrishnan.
MCL is already adding 4mt of capacity by March 2008 at a capital expenditure of Rs1,500 crore.
Combined with the existing capacity of 6mt, that expansion will make MCL the No. 1 cement manufacturer in the South, displacing India Cements.
“We will be the first to put on the extra production, so we hope to achieve higher capacity utilization. It might take some time for others to add capacity as there has been delay in machinery arrival and civil construction,” said Dharmakrishnan.
India Cements has recently absorbed Visaka Cement, increasing its capacity to 8.8mt per annum.
India Cements is also adding 2mt over the next 12 months, company officials said earlier.
MCL is planning to enter the sugar industry to derive low-cost power for its cement plants and also as part of a diversification strategy. “The Tamil Nadu government is planning to issue new licences for starting sugar companies. We will be interested in securing a few licences mainly for cogeneration of power,” said Dharmakrishnan.
Cogeneration of power from the sugar industry would cost only Rs1.25 per unit, compared with Rs2.5 per unit for electricity generated via thermal power.