India Cements may spend Rs 600 cr over next two years

BusinessBloomberg UTV.

Share this article:

The realty space has seen sluggish demand and that in turn has also affected the capacity utilisation for the industry

Realty prices have remained stable in the Southern India and India Cements’ Joint President - Corporate Finance, VM Mohan believes that prices will continue to be steady. Speaking to Bloomberg UTV, Mohan said that the industry in South is awaiting the arrival of two new players, JP Associates and Jindal.

The realty space has seen sluggish demand and that in turn has also affected the capacity utilisation for the industry. Speaking on the same, India Cements' Mohan said, “utilisation levels are around 75%. However, capacity utilisation is lesser in the South.” On the other hand, supply-demand gap is more in there, he added. “The company’s current operating capacity is at 70%.”
 
Below are the other key takeaways from the interview:
 
On December data:

 - December has been a decent month for company
 - Sales have increased 16% vs previous year
 - Seen growth of 7% in Q3
 - Still short of growth achieved in April-Dec
 
On capacity expansion:

 - Not undertaking any capacity expansion
 - Rajasthan plant comissioned through subsidiary last yr
 - Immediate focus on acquiring land, quarries
 
2012 Outlook on capex & growth:

 - Likely to spend Rs 600 crore over next 2 years
 - Will spend on power plants in Tamil Nadu, AP
 - Also developing a coal mine in Indonesia
 
On demand:

 - November has been a good month
 - Growth in country has been 19% in November
 - South has grown around 14% in November
 - Expect demand to rise from January
 - Demand growth will be mostly due to low base
 - Not seeing much of government capex
 
On input costs:

 - Costs have gone up by 70-80% in some inputs
 - Operating costs have increased by Rs 200-250 this year
 - Coal prices have been increased in FY12
 - Expect further increases due to CII's new price regime
 - May have to buy some power from open access system
 - Cost could be Rs 7-8 higher in open acces system
 - Will continue to pass on cost increases in selling price
 
On Coal India’s new pricing regime:

 - Still working out what is likely to be the impact
 - CIL's move could increase costs by 30-40%
 - Average fuel cost could go up by Rs 300- Rs 350
 - Likely to see increase of Rs 35-Rs 40 per tonne
 
On price hike:

 - Likely to see increase of Rs 35-Rs 40 per tonne
 - Will have to increase price per bag by Rs 2-3
 
On debt concerns:

 - India Cements’ debt is close to Rs 2700 crore
 - Debt could be at current levels through next year
 - Debt will start going down from the year after