Industry majors line up to buy Cement Corp’s ailing plants

Industry majors line up to buy Cement Corp’s ailing plants
Published: 18 March 2008

Leading cement makers such as ACC, Ambuja Cement and Lafarge are reportedly looking at buying the closed manufacturing facilities of the ailing public sector enterprise Cement Corporation of India (CCI), according to sources close to the development.

CCI, which has reported losses in most years of the past decade, has been mulling putting seven of its plants on the block. The company reported a loss of Rs 166 crore last fiscal.

The company management, however, is faced with opposition from employees on the issue of the sale of the manufacturing facilities. The employees have taken the matter to the court and up until a verdict comes, the management may not really be in a position to sell the facilities.

Nonetheless, the prospect of sale has kept the private players interested in the matter, who have been evaluating its potential. ACC and Lafarge declined comment while Ambuja Cement and CCI didn’t respond to the email sent to them. An industry analyst says the acquisition of CCI units may bring the buyer several advantages.

“Most cement makers, Indian or international, want to expand fast in the country, but are finding it very difficult to obtain limestone mining lease, environmental clearance or to acquire land. CCI units will bring all of that in one stroke,” he says.

He, however, cautions that the equipment in these units may not be of much use to a buyer as the units have been non-functional for a long time now.

Also, a major challenge would be dealing with the employees, if the deal mandates the new owner to keep them employed. Sources say CCI may work out VRS for its employees soon in order to make the assets look attractive to a potential buyer.

CCI, which started operations in 1970, has a total of 10 plants spread across the country with a combined installed capacity of 3.8Mta. But only three plants at Bokajan (Assam), Rajban (Himachal Pradesh) and Tandur (Andhra Pradesh) with a combined capacity of 1.4Mt are actually operational.

The company plans to utilise the sale proceeds of its seven plants to refurbish its three operational units. A CCI official said the current utilisation in its three operational plants could be close to 70%, but the company didn’t respond to the ET’s email seeking information on plant utilisation, sale or employees opposition to it.