After acquiring Shri Vishnu Cements in a Rs 385-crore deal, Zuari Cements is on the prowl for more cement capacity in the south. "We are looking around in the market," Zuari Industries managing director & Chambal Fertilisers & Chemicals vice-chairman H S Bawa said.
Zuari Cements is a 50:50 joint venture between the KK Birla-promoted Zuari-Chambal group and Italcementi of Italy.
Bawa said Zuari Cements plans to have a capacity of five million tonne in the short run. It has a production capacity of 2.2 million tonne per annum at its plant at Yeraguntla in Andhra Pradesh. The 1.3 million tonne capacity of Shri Vishnu Cements takes the combined capacity to 3.5 million tonne. Zuari is looking at raising the capacity to 5 million tonne through another acquisition.
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Zuari Cements is also eyeing a greenfield cement plant in Karnataka. It has applied for a mining lease for limestine deposits in the Gulbarga district of the state. The deposits are good enough to support a plant with a capacity of over 2 million tonne per annum. Earlier, the company had been granted a prospecting licence for the limestone deposits. It has now sought to convert the prospecting licence into a mining lease. "We will take up this project later when we know that the market has stabilised," Bawa added.
Last year, Zuari Cements had ramped up the capacity of its plant at Yeraguntla from 1.7 million tonne to 2.2 million tonne.
Zuari Cements had also entered a marketing alliance with Cement Corporation of India (CCI). Under the arrangement, Zuari Cements sells CCI cement produced at its Tandur, Andhra Pradesh, plant in the states of Andhra Pradesh, Tamil Nadu and Kerala. This accounts for 25-30 per cent of the Tandur unit's rated capacity of 1 million tonne per annum.
On the funding of the Shri Vishnu acquisition, Bawa said over 60 per cent of the fund needs will be met out of Zuari Cements' internal accruals, while the remaining will be funded out of debt.
Meanwhile, Ashish Guha, managing director of Lazard India, which brokered the Shri Vishnu deal for Zuari Cements, said the price of acquisition is in sync with recent trend -- acquisitions at $70-90 per tonne of cement. He said that the price per tonne has remained almost same over the last few years because there wasn't enough demand to meet the existing production capacity. He said various factors including cost of production of cement in each plant and efficiency were taken into account before arriving at the valuation.