Independents struggle under southern excess capacity, India

Two years of flat growth in south India has pushed independent cement firms to seek buyers, according to a report in the Times of India.  After news of Sree Jayajothi Cements looking for buyers, the paper has learnt that the promoter of Bhavya Cements is also scouting for suitors.

South India is reeling under excess capacity and cement manufacturers are operating their plants at only 70-75 per cent of the rated capacity. With growth in lower single digits, the promoter of Bhavya Cements, V Ananda Prasad, has decided to exit from the cement business.

"The process to find potential suitors is on. The promoter is expecting around INR900 crore or roughly US$160/t which is slightly on the higher side," sources said. Bhavya has mandated Ernst & Young to find buyers for the 1.4Mta cement plant that it operates in Thangeda, near Dachepalli in Guntur district of Andhra Pradesh. The company has approvals to expand capacities from 1.4Mt to 5Mt.

"The limestone reserves are very good. It is a very good asset, provided there is a slight scale down in valuation expectation," sources said.