JK Cement to invest Rs 2,500 cr

JK Cement is planning to invest around Rs 2,500 crore to increase its capacity three-fold to 15 million tonne in five years. This will be in addition to the Rs 1,100 crore which the company is spending on its ongoing projects.

The company, which currently has a capacity of 4.4 million tonne, is undergoing expansion at two locations, the greenfield plant at Muddapur in Karnataka with a capacity of 3.5 million tonne and Nihon Nirman in Rajasthan near Gotan (0.4 million tonne). With the two plants, the company's capacity will increase to over 8 million tonne by March 2009.

"Though nothing is concrete at present, we have a vision to be a 15-million tonne player by 2012," said A K Saraugi, chief financial officer, JK Cement. "The addition of another 7 million tonne (once the company has 8 million tonne capacity) will require an investment of around Rs 2,500 crore," he added.

"After a site is found, it will take two years to get various clearances and actually start the work. By the time the Karnataka project gets commissioned, we can venture into other places," Saraugi added.

The company is looking for a site in the eastern part of the country, where the availability of slag (used in production of cement) is good. "We will look for tie-ups with steel makers for the supply of slag," Saraugi added.

All new projects are not necessarily going to be greenfield. "If we get a chance for viable acquisitions, we are open to the possibility," he said.

In FY07, JK Cement posted a net sales of Rs 1,233 crore. The company hopes to see a 20-25 per cent jump in its sales in the current financial year. JK Cement, which has its presence in the grey as well as white cement market, is expecting an increase of 8-10 per cent in grey cement production and 15 per cent jump in white cement.

The company acquired Nihon Nirman from Industrial Development Bank of India (IDBI) for Rs 42 crore in January this year. It is a white cement producing plant, but the company is investing Rs 33 crore to convert it into a grey cement producing plant. It will add around 4.8 million tonne capacity by October.

For the time being, there is not much competition in the white cement category Saraugi said, "Whenever the need arises, the plant can be converted into a white producing plant. If we go for a new grey cement capacity, it will cost Rs 3,500 per tonne, whereas here it will be only Rs 2,500 per tonne." It's profitable, he added. JK Cement is the second largest producer of white cement after Aditya Birla group.

The company is also adding up around 100 Mw of captive power. "All our plants, in Rajasthan and Karnataka will have their own power generation," he said.