North India-based J K Lakshmi Cement has dropped its plan of last year to acquire a cement company in Egypt for Rs 800 crore.
"We had been looking at capacities but we haven't been able to find one so far. Also, international economic conditions are not conducive and it will not give us the returns as expected. So, we are not looking at that option any more,” said Shailendra Chouksey, director. “In India, the valuations local players are seeking is very high. It is cheaper to put up greenfield (new) capacity than acquiring one.”
Part of the Hari Shankar Singhania group, it has targets to achieve a total capacity of 10 million tonnes per annum (mtpa) by 2013-2014. It is setting up a split grinding unit of 0.55 mtpa in Haryana, which would increase production capacity to 5.3 mtpa by the end of the year. It is also setting up a 2.7 mtpa factory at Durg in Chhattisgarh, for Rs 1,200 crore, and a 1.5 mtpa facility at Udaipur.
Chouksey said, “The land acquisition process for our Durg plant has started. By October 2013, we will achieve a production capacity of eight mtpa (by the entire group).
With the onset of the monsoon, cement prices in the northern market had slipped by Rs 20-25 per bag since June 15. Though realisations of the company were higher for the first quarter of 2011-12, its dispatches dropped by 11 per cent.
Chouksey added, “ The fundamentals of cement consumption have been lacklustre this year. Last year, the growth was around 4-5 per cent and in the first quarter of this financial year, the country has reported flat or negative growth. There is an underlying fear as manufacturing, construction and realty sector are all going through a very slow phase.”
JK Lakshmi mainly sells in the northern market and in Gujarat and Maharashtra. Its power and fuel costs per tonne increased by 17 per cent quarter on quarter and 11.7 per cent year on year. Freight costs per tonne also grew by 14.8 per cent per cent for the first quarter and 16 per cent quarter-on-quarter due to higher diesel costs.
With an increase in international coal prices and pet coke prices, the company is evaluating options to buy coal assets. Chouksey said, “We are at an exploratory stage. We have cash and liquid assets worth Rs 565 crore, so we can easily fund the acquisition through internal accrual.”