HeidelbergCement aims to add 9 Mt by 2017

Majority of this likely to come via inorganic route

HeidelbergCement India, Indian arm of the Germany-based HeidelbergCement, aims to more than double its manufacturing capacity by 2017. Majority of these expansions is likely to come via mergers and acquisitions route.

The company, which entered India in early 2006, currently has a cement making capacity of 6 million tonne per annum (mtpa). It recently expanded in the central region - Uttar Pradesh (Jhansi) and Madhya Pradesh.

Ashish Guha, managing director and CEO of HeidelbergCement India told Business Standard, "We should reach around 15 Mt by 2017 - an addition of 9 Mt. And most of these additions would be via inorganic route." He hinted that there could be at least two transactions in the foreseeable future, but did not give any time frame for the same.

"In current scenario, it does not make sense to go for green field expansion. Our growth will be inorganic," added Guha. This is not the case only with him but several business heads in the cement business of the industry think the same way. Issues relating to land acquisition and environmental clearances are putting pressure on cement sector's expansion spree. Several players are facing delays due to such constraints.

HeidelbergCement (India) has a large presence in the central part of India. "In the region we have more limestone resources," he adds. According to Guha, central region is better placed for appreciation in cement prices. But that does not stop him from looking at attractive opportunities even in the South - where cement firms have been undergoing through one of the worst phases.

At some places even if the asking price is $90 per tonne (enterprise value), it would not be a good offer for me due to low demand resulting into poor capacity utilisation, said Guha. "There is hardly any demand for cement. However, costs have been moving up and industry is unable to pass on the costs to consumers," he added.

On Tuesday, stocks of HeidelbergCement closed weak at Rs 41.5, down 3.38% on the BSE.

India has over 40 players operating in the 350 million tonne cement sector. Out of it, large players like Aditya Birla group's UltraTech, Swiss major Holcim's ACC and Ambuja, Jaiprakash Associates, India Cements and Shree Cement control almost half of the market.

According to the working group on India's cement Industry, country's cement companies would have to take the overall capacity to 480 Mt by the end of the current five year plan (2012-17). India's consumption of the building material is projected to reach around 400 Mt by then.