Zuari Cements, the 50:50 per cent joint venture between the K K Birla-promoted Zuari Chambal group and Italcementi Spa of Italy, has initiated talks with cement units located at Nalgonda in Andhra Pradesh for possible acquisitions or marketing alliance - for foraying into coastal Andhra and southern Orissa markets.
If the company decides to go for acquisition, it is likely to go in for units with capacity not less than one million tonne per annum. For marketing alliance, the decision will be based on the scalability of the unit and its limestone reserves.
A company official said: "With this possible acquisition in Nalgonda, we would be able to cover the entire southern market along with some parts of Maharastra and Goa". Zuari's own plant situated at Yerraguntla in Andhra Pradesh has a production capacity of 2 million tonne.
For leveraging its existing distribution network, Zuari has entered into marketing alliance with Southern India Cement, Ratna Cements and Cement Corporation of India (CCI). Southern India and Ratna have a production capacity of 1.2 lakh tonne per annum (tpa), this along with 3.5 lakh tpa from CCI's Tandur plant, Zuari would be able to sell an additional 5.4 lakh tonne this year from the marketing alliance alone.
The official explained: "With minimum capital expenditure, we are able to sell higher quantum through the marketing alliance. This has helped us understand the market better, for future expansion in the same market".
The joint venture partner Italcementi is likely to take active interest in the management of the company by November and the company has decided to shift its base from Hyderabad to Bangalore to herald this change.
Last year, Italcementi, a US$3 billion company with 57 cement plants, picked up 50 per cent stake in the company for Rs 370 crore and it was then decided by both partners to increase the capacity to 8 million tpa by 2006.
