The company had decided to scale down operations after the slowdown.
ACC, India’s largest cement maker, has decided to review its decision of scaling down the company's ready-mix concrete (RMX) business and recommence the expansion plan by the middle of 2010.
“We have a long-term view of this business. All that we have done is scale down our capex expansion plan due to the decline in demand for ready-mix concrete in certain mega cities like Mumbai and Bangalore. We will review the whole thing by the middle of 2010 and recommence expansion plans,” ACC Managing Director Sumit Banerjee said today.
The company had earlier announced a plan for investing Rs 600 crore to set up RMX plants by 2011. Later, the slowdown in demand in the realty and private construction segment forced the company to drop the plan. Banerjee said the company is expecting to see a recovery in the RMX business in cities like Bangalore, Mumbai and Chennai by the middle of 2010, and "will get back to business" then.
The RMX business of ACC is now being handled by its wholly-owned subsidiary, ACC Concrete. The company owns 37 plants for this business. With the fall in demand, the company had decided to either scale down the production or close down some of these plants temporarily.
But ACC has re-opened its ready-mix concrete plant in Yelahanka in Bangalore. "We operate with just one plant in Bangalore," said Banerjee, pointing out that the company is keeping a close eye on demand. ACC owns six RMX plants in Bangalore alone.
Sees higher cement prices
ACC is also seeing an improvement in prices of cement in certain regions of the country with the uptake in cement consumption, especially in the infrastructure space. The company is also increasing its capacity from 22.63 million tonnes per annum to 29.5 million tonnes by the middle of 2010, to cater to the expected increase in consumption.
"Cement prices were down in October and November because, traditionally, that is a slow season for cement. But we are already seeing a hardening of prices of cement in some regions, particularly in Mumbai, Bangalore and Hyderabad, where prices had dropped earlier. We are optimistic that the consumption will grow faster than we had estimated earlier, given the strong demand from the infrastructure and institutional space," Banerjee said.
In the financial year 2009-10, ACC expects cement consumption to grow at 11 per cent, much higher than the 9 per cent estimated earlier for the next few years.
More expansions on the anvil
Meanwhile, ACC today inaugurated a greenfield cement grinding plant at Thondebhavi in Chikballapur district of Karnataka. The plant, which has been set up with an investment of Rs 350 crore, has a capacity of 1.6 million tonnes per annum and would produce fly ash-based Pozzolana cement.
The company is also expanding the capacity of its plant at Wadi in Karnataka from the present 5.8 million tonnes per annum to 8.8 million tonnes per annum by March 2010. Banerjee said this would make the Wadi plant the single largest cement kiln in the world.
The company is also increasing the capacity of its plants in Chandrapur in Maharashtra and Bargargh in Orissa as part of a Rs 1,500-crore capacity expansion plan for this financial year. In the financial year 2010-11, the company plans to invest Rs 1,300 crore for capacity expansion, mostly to complete ongoing projects.
Banerjee said the additional capacity the company was creating now "would be absorbed in the market without any problem."
