German building material producer Heidelberg Cement plans to treble its capacity in India to 15 mtpa in three-four years through inorganic and organic routes involving over Rs 8,000-crore investment.
“We have plans to raise capacity to 15 mtpa in the next three-four years from the current level of 5.4 mtpa. We will be pursuing both organic and inorganic routes to achieve the target,” Ashish Guha, Chief Executive Officer, Heidelberg Cement India said today.
Heidelberg Cement operates in India through a subsidiary, Heidelberg Cement India. It had entered into Indian market in 2006 with the acquisition of majority stake in Mysore Cements.
It increased capacity through both organic and inorganic routes since then to raise it to six mtpa. The company also sold a 0.6 mtpa grinding facility to JSW Group last May in line with the company’s philosophy of divesting less strategic assets with lower margins.
Guha said since organic route for expansion has become a little tougher now following the passage of Land Acquisition Bill, the company would focus on acquisitions or the inorganic route to hike capacity to 15 mtpa in next three-four years.
“We are looking for acquisition in different parts of the country including north, central, west and east. It will all depend upon getting the right opportunity at a right price,” he said, declining to comment if the company has initiated talks with potential sellers.
Guha said it roughly takes $130-140 investment for creating every tonne of cement capacity through the Greenfield route. Going by that calculation, Heildelberg Cement may have to put in Rs 8,200 crore (at current exchange rates), if it goes for capacity expansion only through organic route.
Acquisitions defy any such thumb rule.
Stating that in case of acquisitions, the company would look to buy assets having a minimum of three mtpa capacity, he said funding for the proposed expansion, even if it is through the inorganic route, would not be a problem as the local unit have the support at the group level.
Additionally, sitting on a 1.6:1 debt-equity ratio, the India unit, a listed entity, is placed comfortably to use both the options for arranging funds.