Hyderabad: The Hyderabad-based Rain Group, which has recently bought, through group company Rain Calcining Ltd, the world’s second largest calcined petroleum coke (CPC) producer CII Carbon Llc. for $595 million (Rs2,440 crore), is planning to expand its cement operations at a cost of Rs300 crore.
The Rs1,200-crore Rain Group, which nearly tripled its sales after the CII Carbon buyout, has businesses in calcined petroleum coke or CPC used in aluminium production, power generation and the manufacture of cement.
The expansion of its cement unit at Nalgonda in Andhra Pradesh is aimed at taking advantage of raw material and energy synergies with its expanding CPC and power units as also the rising cement prices in domestic market.
“The Nalgonda unit, which currently has a capacity of one million tonnes (mt), will have another 1.5mt added at an investment outlay of Rs300 crore,” said Rain Group managing director N. Jagan Mohan Reddy.
The Nalgonda expansion will begin early next year and be completed by early 2010. Rain’s cement business is organized under Rain Commodities Ltd.
This is in addition to the capacity expansion currently being implemented at one of the group’s unit at Sreepuram in Kurnool district of Andhra Pradesh by 1.5mt. The Kurnool project is being taken up at Rs334 crore, which is being funded by Rs94 crore of internal accruals and Rs240 crore debt.
The group currently has combined capacity of 1.5mt at Nalgonda and Kurnool and the expansions at Kurnool and Nalgonda would raise capacity to 4.5mt. Reddy said the group plans to reach a total cement production capacity of 5mt by 2010.
“It is estimated that (cement) demand will grow by 10% to 12% for next five years. But at the same time, new capacities are also coming up in next 12-36 months. We expect 90mt to be added by fiscal 2010. This will raise the total industry capacity to around 255 mt,” said a cement analyst with Religare Securities Ltd who asked that he not be identified in keeping with his company’s policy.
The analyst said South India has shown the highest growth in demand of 17% in fiscal 2007 against the all-India average of 11%. Among southern states, Andhra Pradesh has the highest capacity of 24mt. Heavy demand of cement for infrastructure projects coupled with government sponsored housing and infrastructure projects has kept cement prices rising in the southern states.
Separately, the Rain group plans to merge Rain Calcining and Rain Commodities. “Power and fuel together constitute 35% of production costs of cement. The amalgamated entity would now be in a position to supply both power and coal, thereby making the cement operations self sufficient for critical raw materials,” said Reddy.
To meet the captive power needs, Rain is adding 50MW of power capacity as part of a new CPC facility it is setting at Visakhapatnam. The expansion will take the total power capacity of the company to 100MW.