India Cements is a leading cement manufacturer in south India. The company’s turnover has been steadily increasing from Rs 620.94 cr in 1994-95 to Rs 1,406.45 crores in 1999-2000, representing a compounded annual growth rate of 17.8%. The growth has been primarily achieved through acquisitions. The company has focussed on cost control and has been quite successful in reducing coal and power consumption. Further, its thrust on blended cements and switch over to dry/semi-dry process from the wet process of manufacturing will improve the margins.

The company posted a turnover of Rs 1,406.45 cr for the year ended Mar.2000, representing a mere 4% increase over the previous year. Net profit was down by 49% at Rs 42.58 cr. For the half year ended Sep.2000 the company’s sales grew by a mere 2% to Rs 727.19 cr. Other income grew by 22% to Rs 2.44 cr. Operating profit was Rs 154.36 cr, down by 5%. Due to the swapping of high-cost debt by low-cost debt and the funding of the acquisition of Vishnu Cements by equity, interest cost came down by 3% to Rs 91.53 cr. Provision for depreciation increased by 12% to Rs 37.63 cr. The resultant net profit was down by 27% at Rs 25.20 cr.

The company is a leader in the south where the price realisations are better. Further, the second half is likely to be good, in line with the industry trend. The company plans to commission a 15-MW gas-based power plant in Tamil Nadu, for which gas linkage has been obtained.

The daily clinker capacity at Dalavoi is being increased from 3,250 tonnes to 3,600 tonnes and the capacity at Yerraguntala is being raised from 1,200 tonnes to 1,500 tonnes. Both will entail an outlay of Rs 15 cr. The capacity of the Sri Vishnu plant will go up from 2,700 tonnes to 3,400 tonnes at a cost of Rs 5 cr. The company is planning to convert its wet process cement plant at Sankaridurg to the dry/semi-dry process, which will enhance the plant’s capacity from 6 lakh tonnes pa to 9 lakh tonnes pa. While the conversion to semi-dry process will cost Rs 30-40 cr, the dry process will cost around Rs 90 cr

Recently, while the producers have been able to hold on to the increase in cement prices, capacity utilisation has taken a beating. Nevertheless, with its leadership position in the south and improving cost effectiveness, India Cements has good long term prospects.