Andhra Pradesh mini-cement units find ways to survive amidst bigger players

Andhra Pradesh mini-cement units find ways to survive amidst bigger players
12 October 2007

Small cement plants, tagged as mini-cement units, are steaming ahead with the growth in economic activity that broke the annual cycles of price fluctuation besides ensuring steady increase in prices since the later part of 2005.

Though many were caught off-guard over the sudden spurt in demand that brought an upturn in market prices, several of them started increasing their capacities by going in for modifications and de-bottlenecking to cash in on the new found opportunity at a minimum cost.

Several of them have now embarked on brownfield expansions, which was unimaginable in the country a decade ago when the number of operational mini-cement units had shrunk to 50 from 350 units in 1995 and some of them were even sold as a scrap. Post expansion, the cement production from nearly 125 mini-cement units now operating in the country, is expected to reach 12-15Mt in the next three years from the current 6Mt, according to industry sources.

In Andhra Pradesh, 14 mini plants produce 3Mta of cement. This is expected to touch 7-8Mt after the proposed expansion.

This new found confidence among the small players, even in the face of large capacity additions undertaken by the big companies, which can swing cement prices either way, is not just coming from the Indian growth story but also from the operational efficiencies many of them have already achieved. The situation in Andhra Pradesh has reached a stage where one cannot distinguish small from the big at plant level and at the market place except in scale. While the plants are as modern and efficient compared with their bigger counterparts, the prices of these smaller brands in their strongholds are also ruling on par with the big brands.

"It is the electrical and thermal efficiencies that make all the difference in the Industry besides the logistics," says S Srikanth Reddy, director of Sagar Cements Limited, which currently operates an installed capacity of 5 lakh tonne clinker and 6.5 lakh tonne cement at its two plants annually. He claims that his plant is the most operationally efficient facility in the entire country and, according to him, consumes just 78 units of power per tonne of cement produced as compared with the best average of 83 units. Earlier, the normal power consumption levels before the modernisation was anywhere between 90 units and 100 units of power per tonne. The target for the Rs 295-crore expansion project of Sagar Cements is pegged at 75 units per tonne, according to Reddy.

By adding a few equipments and modifying the processes, these companies have been increasing the production capacities without adding a new line, which further contributed to their top line and bottom line. While the strategy of maximising the production at the existing facilities has been adopted by every one, Ckoramaandel Cements Ltd made a further headway in this respect.

"While many of the companies could achieve around 15 per cent increase by this method, we are able to achieve close to 50 per cent increase through the modified designs and adding some equipment to the plant," Ckoramaandel Cements Ltd managing director Ramesh Chandro told Business Standard. The company has increased the production capacity to between 650 tonne and 700 tonne per day from close to 450 tonne capacity previously and is planning to increase the capacity further to 825-875 tonnes per day. The company has invested just Rs 9 crore to achieve the present capacity.

The net result would be that the annual capacity of Ckoramaandel Cements is expected to touch over 3 lakh tonne from around 1.6 lakh tonne after the completion of the second phase revamp. The company is awaiting regulatory approvals to begin its Rs 132-crore brownfield expansion project, which would take the total production capacity to 9 lakh tonne a year.

"Promoters of these companies are progressive, which is why they could withstand the crisis in the past. Therefore, our plants are very much comparable with large cement companies in terms of operational efficiencies. At the same time, we are conservative when it comes to spending because our companies went through a very bad patch in the past," KV Vishnu Raju, managing director of Anjani Portland Cement Ltd and the president of All India Mini Cement Manufacturers Association observes.
Published under Cement News