AV Birla plans to ramp up RMC business

Aditya Birla group, currently one of the largest manufacturers of cement in India, is planning to make heavy investments in the ready mix concrete segment. Demand for the product has been growing.

The group would set up 30 RMC plants in the country in 2-3 years as a part of its strategy to take top slot in the segment.

The first RMC plant in this phase of expansion will be in Kolkata. The group has eight RMC plants in the country, all of them are owned by Grasim. However, some new units could come under Ultratech Cemco Ltd.

Ultratech does not have any RMC unit at present. The group completed the formal acquisition of L&T Cement in July 2004.

Grasim has almost doubled the turnover of RMC segment to Rs 116 crore in 2003-04 from only Rs 59.8 crore in 2002-03.

The chief marketing officer of Ultratech, O P Puranmalka, said the first RMC plant in this phase would be at Rajarhat on the outskirts of Kolkata.

"It is likely to be commissioned by March 2005. The group has not yet decided whether it would be under Grasim or Ultratech. The issue will be decided by the boards of both the group companies. The group has not yet decided about the location of other plants," he said.

According to the CMO of Ultratech, machinery at each plant would cost around Rs 8-10 crore. The cost of land would have to be added on to this figure.

"Investment in each RMC plant might differ because of the land factor. Cost per plant is generally around Rs 8-10 crore," he pointed out at the formal launch of Ultratech Cement here today.

Demand for RMC was steadily increasing in metro cities as the product did not require storage space.

"It is generally supplied on demand so in metros such as Mumbai, RMC usage is growing. The logistics is also important for RMC business because you have to supply the product on demand very quickly. This is the main reason why the group is planning to set up plants in key locations," another group official said.

Meanwhile, the Aditya Birla group would invest Rs 200 crore for debottlenecking capacity as well as reducing cost of production in UltraTech Cemco Ltd.

Besides, it would invest around Rs 50 crore for the promotion of Ultratech brand. Puranmalka said the capacity of UltraTech will be increased by around 2.5 million tpa following the debottlenecking.

The current capacity of UltraTech is around 17 million tpa. The total cement capacity of A V Birla group is around 31 million tpa.

"The process will be completed in 2 years," he said. Costs may also come down after debottlenecking but the CMO refused to comment on the issue.

He said capacity utilisation at UltraTech, which was now around 92 per cent, was likely to improve following the debottlenecking. The company exported around 40 per cent of its production to west Asia and Europe as well as Bangladesh in the last fiscal.