The Rs 50,000-crore Shriram Group plans to use Sree Jayajothi Cement Ltd — in which it had acquired a majority shareholding — as its vehicle to enter conventional energy.
It may be noted that the group had entered into the cement business through Sree Jayajothi. To support the plan, the largely private equity-backed group is also looking at raising around Rs 400 crore from PE funds.
Speaking to Business Standard, T Shivaraman, managing director & CEO of Shriram EPC, said one of the major constraints in Sree Jayajothi Cement was power. To address this, the company was planning to set up a power plant with a capacity of 35-40 Megawatt.
“In a way this will be a foray for the group in the conventional energy space. The group has been taking up EPC contracts for coal-based power plants, but this will be the first plant owned and operated by us.”
The Shriram group’s renewable energy arm —Orient Green Power Ltd — operates biomass, biogas, wind energy and small hydroelectric projects. As of September, 2011, its total portfolio of operating projects included 300 Mw of aggregate installed capacity, comprising 250 Mw of wind energy projects and 50 Mw biomass projects. The company has set a target to increase it to 1,000 Mw by 2013.
To fund the proposed power plant and for working capital requirements, Shriram EPC is planning to raise around 350-400 crore from PE funds. “This is a bad time to bring in strategic partner,” said Shivaraman.
Besides, the company would now focus on the conventional energy space. “We are not interested in big projects. Our focus will be small projects,” he said.
The proposed Rs 220-230 crore power plant will be based on imported coal and help the cement manufacturer to increase the capacity utilisation to around 60 per cent from 30 per cent last year.
“We could not increase the capacity mainly due to lack of power in Andhra Pradesh. Once we reach the 60 per cent capacity utilisation, we can also start break even.”
The company has a cement manufacturing facility at Yanakandala village, near Banaganapalli in Kurnool district of Andhra Pradesh, with a combined clinkerisation capacity of 2 million tonnes per annum (mtpa) and cement grinding capacity of 3.2 mtpa.
Going forward, it plans to increase the capacity to 5-6 million tonnes with an investment of Rs 900-1,000 crore. The process will start in the next two years. The facility has enough space to expand and there is also a good market, said Shivaraman.
Shriram EPC and group entities had acquired 68 per cent (19 per cent plus 49 per cent) in Rajapalayam, Tamil Nadu-based Sree Jayajothi Cement Ltd.