Mumbai: Cement maker Shree Cement plans to invest up to Rs2,000 crore by 2011-12 to expand cement and power making capacities at its existing plants in Rajasthan, a top official said on Wednesday.

It will spend about Rs1,500 crore for expanding power capacity and Rs500 crore for cement expansion, H M Bangur, managing director, told Reuters in an interview.

“When demand comes, we will be prepared for it. Individual house builders are pushing up demand … lot of liquidity and enough pent up demand in rural India is the prime reason," he said.

The firm is raising capacity to 11.5 million tonnes a year by FY10 from 9.5 million currently and would reach 13.5 million by FY11.

“Infrastructure is there but household demand is quite big. 60% of India’s cement demand comes from housing."

Indian cement makers are increasing their capacity on expectation reviving economic growth will boost construction activity.

Earlier on Wednesday, Jaiprakash Associates commissioned a new 2.4 million tonne/year cement plant in the western state of Gujarat, taking its capacity to 14.7 million tonnes a year.

India has nearly 50 cement makers with an annual capacity of about 200 million tonnes. Production is expected to rise to 235 million tonnes by 2009-10.

Shree Cement will raise about Rs1,500 crore through internal accrual and 500 crore will be raised via debt to fund the expansion, said Bangur. The firm has already tied up Rs300 crore of debt funding, he added.

It is adding 150 megawatt (MW) of power by March 2010 and 300 MW by March 2012, he said.

The company, which had already been expanding capacity, expects to sell 9.5 million tonnes of cement in 2009-10, up from 8.4 million tonnes sold a year ago.

“Volume growth will drive growth," Bangur said, adding it would be difficult to fix a revenue target as selling price of the commodity, used in housing and infrastructure sectors, fluctuates on demand-supply conditions.

Input & Demand

The cement maker would require 1.1 million tonnes of pet coke, that makes up 40% of the production cost of the firm, which could go up to 1.5 million by FY11, he said.

The firm mines limestone, an input for making cement and generates enough power for own consumption but procures pet coke from international markets.

The company, having plants only in the northern part of India, was looking for mines in the southern state of Karnataka.

“Talks are on in various stages in various states … it depends on where things move faster but we are looking at Karnataka … and are looking to set up a plant there," Bangur added.

Shares in firm ended up 0.25% at Rs1811.70 in the Mumbai market that ended down 0.16%.