India Cements plans greenfield projects in the North

Special Correspondent

Re-enters shipping with the acquisition of two ships of 40,000 dwt each

Two projects to go on stream by 2010

Ships will essentially serve captive needs

CHENNAI: A dominant player in the Southern markets, India Cements Ltd. (ICL) has announced its intention to make a foray into the North by setting up a couple of greenfield projects.

The company has zeroed in on two States — Rajasthan and Himachal Pradesh — for locating these plants. While one unit will have a capacity of two million tonnes a year, the other will have a capacity of 1.5-2 million tonnes. ICL had already got the limestone mining lease.

The capacity of ICL will go up to 18 million tonnes once these projects go on stream in the first quarter of 2010. The company, it may be recalled, is already expanding its capacity to 14 million tonnes from the present nine million tonnes. By 2009-10, it is hoping to work at full capacity of 14 million tonnes.

Addressing a press conference here on Monday, N. Srinivasan, Vice-Chairman and Managing Director, said the company could raise the capacity to 14 million tonnes without any borrowing. Since it was planning to take the capacity further to 18 million tonnes through the organic route, the company had decided to raise $150 million from the market. WThe company, he said, would take recourse to equity/ equity-linked securities to raise funds. An extraordinary general meeting had been convened on December 14 to get the shareholders’ approval for the fund-raising exercise.

Mr. Srinivasan said ICL was keen to strengthen the supply chain. The objective was to ensure consistent and quality coal supply at reasonable price. In this context, he informed presspersons of ICL’s re-entry into shipping with the acquisition of two ships of 40,000 deadweight tonnage (dwt) each. “The ship buying has been firmed up,” he added. The company, it may be recalled, exited the shipping field in early 2003.

He justified the ship buying on the ground that the freight rates had consistently rising in the past five years. The time-charter rate had gone up to $60,000 a day from $ 15,000 a few years ago. Mr. Srinivasan said owning vessels would help ICL cut freight cost and save substantially. These ships would essentially serve the captive needs of the company. ICL, it may be mentioned, has been importing roughly around nine lakh tonnes of coal annually from Indonesia for several years now. The acquisition of ships would also help ICL get depreciation benefits, he added. He said the greenfield projects would have captive power plants of say 40 MW capacity size as well.

All these would entail an investment of around Rs. 1,500 crore, he said. A part of the fund needs would be met through internal accruals, he added. Mr. Srinivasan said during the time leading up to the commissioning of these greenfield projects, ICL would also strive to reduce its debt.

Mr. Srinivasan asserted that ICL had made a detailed assessment of the emerging demand-supply situation in regions where it was planning its two projects. “We will be entering the Northern (in the first quarter of 2010) markets at a good price period,” he said. ICL is now selling in seven States.

Once these two projects went on stream, it would have sales presence in six more States and become a pan-India organisation, he said. There was no project risk in the move to enter the North. The decision to go in for equity/equity-linked securities was intended to take the financial risk out of the business risk, he added.

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