Nirma chairman Karsanbhai Patel today said he would unleash a price war in the cement market once the company started producing cement at its proposed 1.2Mta unit in Mahuva, near Bhavnagar, India. He also said that the group has decided to set up a 0.3Mt capacity coke unit in the same location primarily for captive consumption by Nirma’s soda ash and cement business. The surplus produce will be sold to other soda ash and cement companies, he added.
“ I do not believe in cartelisation. I will let the market determine the price of cement,” Patel told reporters in an interview. He said that work on the cement unit should start very soon. It is awaiting some regulatory clearances.
Patel said he is clear in his mind that if more capacities are added to the cement business, companies like his will be able to drag down prices and create markets for themselves. Nirma unleashed a price war in the domestic market a decade ago forcing companies like Hindustan Lever and P&G to rethink their strategies, and in the process emerged as the country’s largest player in the soaps and detergents business.
The Nirma group is planning to invest between Rs 400-500 crore in the cements plant, he said. The equity investment will be made by a group company, which is privately held. The company has already got land in Mahuva. “various new projects are being looked after by Kalpesh, my son-in-law,” he added.
A recent research report by a local securities firm said that cement demand was expected to grow at a CAGR of 6.6 per cent between ’05-07 as against a 3.6 per cent increase in capacities and a 6.2 per cent rise in cement production. The report said the demand supply gap will lead to an increase in the prices of cement.