Though Swiss cement major Holcim has put its ready-mix concrete (RMC) expansion plans in India on hold with slowdown in the construction industry, its competitors are in no mood to follow suit.
French major Lafarge and Aditya Birla group's Grasim Industries are sticking to their plans of adding RMC units in the country. "We have no plans to put our RMC expansion plans on hold. They are on schedule. RMC, though at present a new concept in the country, is the future of cement business," said a senior executive in the Aditya Birla group, which operates its cement business under Grasim Industries.
Overall, the RMC business is a loss-making division. "Unless volumes grow substantially, the division will remain unprofitable," said industry analysts. The north-based JK Lakshmi Cement too, has set up 10 RMC units and has plans to add another five units with an investment of Rs 1,000 crore by March 2009.
"RMC is a highly capital intensive business and has a long gestation period, but it has bright prospects and is growing fast," the executive added. When Lafarge acquired L&T Concrete in the first quarter of the current financial year, it captured 25 per cent of the RMC market with 66 plants. The company has already added four units and plans to add five more by March.
"Our market projections were based on the natural growth in demand and the current poor level of penetration in the sector of RMC products as compared to other developing markets. We don't see any significant change in the long-term demand trends to warrant a shift in our strategy," said a Lafarge spokesperson.
Grasim has plans to take its total number of RMC units to above 90 from 40. Holcim, which has its RMC business under ACC Concrete, had planned to add 40 units each year but due to the slowdown in the construction sector, it aborted the expansion.
"This year, we have added 20 plants. There will be no new plants next year," Paul Hugentobler, member of the executive committee, Holcim was quoted as saying. In the domestic market, RMC sales volume constitute less than 3 per cent of the total cement sales as against 60 per cent in the western markets.