Sanghi Cement's Kenya plant on slow lane

The company is facing delays in land acquisition, and also other infrastructural issues like power connectivity

Gujarat-based cement manufacturer Sanghi Group is going slow on its Kenya project owing to delays in land acquisition. Meanwhile, the company has decided to focus on the domestic market, and invest close to Rs 100 crore in expanding the capacity of its Abdasa plant in Kutch by around 30 per cent.

As for its Kenya project, Alok Sanghi, director, informed, "The project is definitely on a slow lane now, we are facing delays related to land acquisition, and also other infrastructural issues like power connectivity etc. We have not yet begun work on constructing the plant." He, however, clarified that the Kenya project was a separate venture, a private investment by promoters, and not a part of the listed entity Sanghi Industries Ltd (SIL).

Sanghi Group had announced plans of building a 600,000 tonnes per annum cement plant in Nairobi, Kenya in around 2010, and by the end of 2011, the company had also secured environmental clearances and rights to mine limestone. However, nothing much has happened on ground till then. The project cost was estimated to be around Rs 400 crore. "The project cost still remains the same," Sanghi said.

On the export front as well, the company has changed its portfolio from cement to clinker. "We are now exporting about half a million tonnes of clinker as against around one million tonne of cement that we were doing earlier. The cement export market has shrunk," Sanghi admitted. The company exports mainly to countries in West Asia, Africa, apart from neighbouring Bangladesh and Sri Lanka. Around 20 per cent of its total production is exported.

Meanwhile, back home, the company is planning to de-bottleneck its Kutch plant, in order to raise production capacity from a current 2.6 million tonnes per annum (mtpa) to around 3.5 mtpa by 2015. The focus on domestic markets comes in at a time when the demand for cement is likely to see some upturn in the coming quarters. "If a stable government is formed after the elections, the demand for the commodity is expected to rise," Sanghi felt.

From being an export-focussed company, Sanghi has turned its attention to the domestic space, at a time when demand is expected to rise.

In the longrun as well, demand for cement in India is expected to rise. According to a recent report by the Confederation of Indian Industry (CII), an additional capacity of 330 to 380 mtpa for cement and about 240 to 270 mtpa for clinker would be required by 2025. This would entail an investment of around Rs 300,000 crore. The sector, however, has been reeling under demand crunch as well as cost pressures for the last few years. Of the net standing capacity of 360 mt, cement consumption is hardly around 260 mt, with capacity utilisation falling to around 70-72 per cent. Cement demand is projected to grow to 2.5 to 2.7 times the current volumes and reach 550 to 600 mtpa by 2025.