After a gap of almost 10 years, Indian cement companies are in the shopping mode. On the cards is close to 54 million tons of additional capacity, which translates into an investment of around Rs 21,600 crore.
With rapid rise in real estate activities and increased off take for infrastructure projects, cement companies are now back to the drawing board chalking out strategies to hike capacities. As per reports 37 million tons of clinker capacity the hike would be 54 million tons.
Indian companies are now ordering cement equipment. Cement capacities all over the world have been built largely by four equipment suppliers — three German and one Chinese. It is learnt that orders from Indian companies are last in the global queue We note that at end calendar year 2005, the order book of equipment suppliers (globally) was already 86 million tons with approximately 2.7 years as lead time. Hence, baring a few large cement players, we highlight risks of late commissioning particularly for smaller companies a Deutsche Bank report said.
This indicates that smaller companies may not be able to cash in on the boom, which is expected to sweep the Indian cement industry over the next 2-3 years. Almost all companies have announced expansion plans. Some of the smaller ones have also been bitten by the cement flavor. It remains to be seen how much of the announced capacity hikes will actually hit the market. In fact, ICL, is taking its capacity from the present 9 million tons to 11 MT.
One issue which could make expansion tough is availability of coal. Today, power plants are finding it difficult to get coal. Cement companies may find it difficult to get coal linkages. True, the option of importing is always there, but that would mean a cost over run, industrial sources said.