Acc Shelves 4mt Expansion Plan For Karnataka Unit

The Associated Cement Companies (ACC), Indias largest cement producer, has put on hold plans for a four million tonne cement expansion plan in Karnataka due to unfavourable market conditions.

Executive vice-chairman, S Ganguly, told newspersons yesterday in Mum-bai that they have received a formal approval from the state government for investing Rs 550 crore in the first phase which will be two million tonnes.

But the company will not proceed with it until the cement market improves favourably. ACC already has a two million tonne cement plant at Wadi.

The expansion was to be part of the companys plan to attain a cement capacity of 20 million tonnes by the year 2000.

 

As it is a large investment, we are not pressing the button yet, though we are in state of readiness. We dont wish to commit large sums in an unfavourable market, he explained.

The decision follows ACCs poor performance in 1996-97 when higher input costs, lower cement prices dragged down net profit by 66.22 per cent.

Ganguly said the second half of 1996-97 hit performance badly as industry growth fell compared to the second half of 1995-96. Overall, industry growth in 1996-97 was eight per cent against 12 per cent in 1995-96.

ACCs sales realisation fell by four per cent and freight costs rose to Rs 320 per tonne from Rs 250 per tonne. Prices all over the country, except in the south fell badly and higher input costs, especially freight hit the company hard.

Ganguly said for 1997-98, total cement sales including traded cement should touch the figure of 11 million tonnes from 9.05 million tonnes in 1996-97.

The company is adding over two million tonnes of extra capacity during 1997-98. A capital expenditure of nearly Rs 300 crore has been set up for this purpose.

To raise funds, the company will be relying on a mixture of FI term loans, foreign debt and short-term debt. The company raised nearly $55 million foreign debt at a rate of 0.9 per cent over Libor.

The issue was lead managed by Bank of America and the State Bank of India. ACC also completed its Rs 100 crore non-convertible debenture issue.

Board takes up Tata Sons issue

The ACC board discussed the contentious issue of its links with Tata Sons at its meeting yesterday. S Ganguly, executive vice-chairman, ACC said no decision was reached and the board would be meeting again.

All ACC board members including chairman Nani A Palkhivala and the four Tata Sons directors were present. Tata Sons holds 11.2 per cent in ACC.

Ganguly tried to play down the issue saying it has been blown out of proportions. ACCs relationship with Tatas is at two levels. It is privileged that Tata Sons is the largest single shareholder.

ACC has also in recent years entered into fruitful fraternal relationship with several Tata group companies like Tata Chem and Tata Power, so there is no question of Tata Sons pulling out, he explained.

The controversy over links arose after a Tata Enterprises publication excluded ACC from the Tata family.

Ganguly said just because Tata Sons is the single largest shareholder does not mean that ACC has to toe their line. The owners role should not be confused with that of the management, he added.