Heidelberg, Ultratech may partner RINL for cement plant

German cement major Heidelberg and domestic giants including Ultratech and Reliance Cements have evinced interest to be the joint venture partner in state-run Rashtriya Ispat Nigam's proposed Rs 1,000-crore, 3 mtpa cement plant at Vizag.

"We are looking for a partner to set up a 3 mtpa plant at Visakhapattanam. Heidelberg, Ultratech and Reliance Cements have shown interests to be our JV partner," RINL Chairman and Managing Director A P Choudhary told PTI.

Sources said Zuari Cements, Bhavya Cements, JP Cements and Binani Cements have also shown interests in the joint venture. These firms responded to the Expression of Interest issued by RINL earlier.

"The finalisation of the partner would not take more than 2-3 months from now. We will be able to establish the joint venture before the end of the current fiscal," Choudhary said.

Asked how much stake the steel maker would offer to its partner, he said no decision has been taken yet, but RINL is willing to give up to 74% stake to the partner since cement making was not its core business.

The proposed venture would use fly ash and slag, two key raw materials for making of cement, generated from RINL's Vizag plant, where the capacity would shortly be increased to 6.4 mtpa from 3 mtpa.

Around Rs 1,000 crore investment would be required to set up the cement plant, Choudhary said, adding that the cost would be borne by the two firms according to the shareholding pattern.

The production at the plant is likely to start in two years from the zero date of construction, he added.

The country's cement market is facing over-supply and the situation is unlikely to improve in the coming years as well. Faced by a demand-supply imbalance, fuelled by supply glut, profitability of the cement makers is already on the wane.

"Over the next two years, while cement capacities rise by 60 mtpa, demand will increase by a mere 30 mtpa. Operating rates of the companies will, therefore, plunge to around 72% in FY13 from an already subdued 78% in FY11," Crisil Research had said in a recent report.