Dalmia Cement plans to set up two new cement units, with a capacity of 2.5 million tonnes each, in Meghalaya and Karnataka, expected to go on stream within two-and-a-half years.
The company will pump in Rs 2,500 crore, of which Rs 600 crore is internal accrual. The rest of the funding will be tied up in two years.
“We want to be a pan-India player. So, to begin with, we planned to go deep in the east and south,” said Puneet Dalmia, managing director of Dalmia Bharat Enterprises.
With commissioning of the new units, the group’s total cement making capacity will reach 19.3 million tonnes from the existing 14.3 million tonnes. This will catapult the company among the large players of the industry. Of the existing capacity, Dalmia owns 9 million tonnes, while OCL India, in which the Dalmia group has 45 per cent equity, has 5.3 million tonnes of capacity.
In a recent deal, private equity firm Kohlberg Kravis Roberts (KKR) put in Rs 750 crore in Dalmia. “Of which, we have withdrawn Rs 500 crore and will take a call on the rest if required,” said Puneet Dalmia. With the demerger and spinning off the business complete, Dalmia said, the Dalmia Bharat Enterprises will be listed on the domestic exchanges in a few days.
No major cement players have presence in the northeast. Though French giant Lafarge had plans the company is facing problem on account of environmental issues.
“Our company already has the mining leases, environment clearances and required land for the new capacity,” added Dalmia. He added that in the north-eastern region, hydropower projects coupled with road construction would boost demand for the building material.
The northeast is one of the few markets which normally tend to command higher prices of cement compared with average national prices. “It is true that prices are on the higher side, but at the same time, cost of production, too, is high in the region,” said Dalmia.
When asked about the rationale behind the Karnataka plant, at a time when the company already had reasonable presence in the south, he said it had a short-term cautionary outlook. “In the long run there will not be any problem in the south. In the cement business, one needs to have deep pockets and patience,” he added. The company also has plans to put up two 45 Mw of captive power plant to sustain these units.
The current captive power generation capacity of the company is 72 Mw.
At present, the domestic cement industry has a capacity of 275 million tonnes per annum and is expected to reach beyond 300 million tonnes by 2012.