As part of a plan to put one of India’s oldest business groups back on the growth track, Puneet Dalmia has chalked out an ambitious strategy to triple the Dalmia group’s cement manufacturing capacity over the next decade.
Market pie: Dalmia Cement (Bharat) Ltd managing director Puneet Dalmia says if the company can capture a small fraction of the gross domestic growth, it will be enough on its plate to concentrate on.
Dalmia Cement (Bharat) Ltd, or DCBL, the second largest cement maker in southern India after India Cements Ltd, has firmed up plans to expand its cement capacity to 35Mt by 2020 from the current 13.5Mt, DCBL managing director Dalmia said in an interview with Mint last week.
As part of the new strategy, DCBL, which currently earns most of its revenues from Andhra Pradesh, Tamil Nadu and Kerala, will expand to eastern India, dominated by Lafarge India Pvt. Ltd, and northern India where Ultratech Cement Ltd, ACC Ltd and Ambuja Cements Ltd are the market leaders.
“We have floated a special purpose vehicle—Dalmia Cement Ventures Ltd—a fully owned subsidiary of DCBL, that will build 10 mt (production capacity) in Karnataka, Himachal Pradesh and Meghalaya,” said Dalmia. The SPV has acquired 10,000 acres of land in the three states and has received environmental clearance for leased limestone mines, the critical raw material to make cement. An additional 10mt of capacity will be built in Madhya Pradesh and Rajasthan for which the company has begun land acquisition. According to the company’s estimates, the total investment to build 20 mt capacity is Rs6,400 crore. DCBL needs Rs800 crore to put up a 2.5 mt unit that excludes land and power cost.
“We have invested Rs250 crore and have a confirmed credit line of Rs3,000 crore to build 10Mt and we have a range of options, including a stake sale in Dalmia Cement Ventures Ltd to private equity investors, an initial public offer or even a follow-on offer by the parent company,” said Dalmia, who represents the third generation of the Dalmia group.