Aditya Birla Group firm Ultratech Cement today said it will invest around Rs 10,000 crore over the next three years to enahnce its annual capacity by 9.2 million tonnes, expecting up to 10 per cent growth in demand.
"The company has a capital outlay (plan) of around Rs 10,000 crore to be spent over the next three years. These includes setting up an additional clinkerisation plants at Chattisgarh and Karnataka along with grinding units and bulk packaging terminals across various states," Ultratech said in a filing to the Bombay Stock Exchange.
The 10th largest cement maker in the world, UltraTech Cement has an annual capacity of 52 million tonnes.
The Aditya Birla Group flagship said the orders have been placed for the proposed expansions, which would be completed in early FY14.
"Consequent to these expansions, total cement capacity addition will be 9.2 mtpa," it said.
India had produced 247 million tonnes cement last fiscal and is expected to add 29 million tonnes in FY11, 24 million tonnes in FY12 and 17 million tonnes in FY13. Between FY10 and FY13, demand is likely to increase by 63 million tonnes, a recent Elara Capital report said.
The excess supply has contracted the bottomline of the cement makers on pricing pressure. The margins are on the wane for quite some time now for the cement firms as well.
Ultratech's proposed expansion, like many others in the industry, is thus aimed at meeting the growing demand in the coming days and that is not without reasons. Prime Minister Manmohan Singh has already said that the country required $1 trillion in the next Five-Year Plan period ending 2017 to spruce up its infrastructure.
"Cement demand is expected to grow around 8-10 per cent from FY12 on the back of the government's boost to rural development, infrastructure and housing. These aspects augur well for the company," the Aditya Birla Group flagship said.
The pricing environment is likely to remain challenging with rising energy costs due to greater reliance on imports, which will continue to squeeze margins, it, however, added.
Meanwhile, Ultratech has reported Rs 319 crore vis-a-vis Rs 499 crore in the same period of the previous fiscal.
"The results for the corresponding quarter of FY10 have been re-cast to include Samruddhi Cement's performance for a like-for-like comparison. In that sense this quarter's numbers are strictly not comparable with the corresponding period of the previous year," it said.
In 2009, the boards of Ultratech Cement and Samruddhi Cement, a wholly-owned subsidiary of Grasim Industries, had unanimously approved Samruddhi's merger with UltraTech. The record date for the merger was August 25, 2010.
Net sales during the quarter stood at Rs 3,715 crore as compared to Rs 3,682 crore in the same period of the previous fiscal.
