India: Madras Cements eyes 20% growth

Buoyed by likely growth in demand for cement in south and the company's renewed focus this year on a few states in the east and west, Madras Cements expects a 20% growth in its top line in the current FY12-13. This is also likely to see its capacity utilisation rise over 10 per cent during the year.

The company will also become self-sufficient in captive thermal power generation this year, thereby freeing its wind power capacity to be entirely supplied to the state grid.

"The cement industry has always gone through this demand-supply mismatch, since firms plough back some of their reasonable profits during high cycles to expand capacities.

The same phenomenon has resulted in an over-capacity scenario in south. But, it is good that companies build up capacities in anticipation of future demand," AV Dharmakrishnan, CEO, Madras Cements told Financial Chronicle.

According to him, more than the additional capacities built-up, what had really hurt the cement producers in the south was the sudden drop in demand in a major cement-consuming state like Andhra Pradesh.

"Demand for cement in the state was growing at around 20% YoY for about 7-8 years and it suddenly tumbled into negative growth phase due to several factors including political and financial. This March, it had just about come out of that negative phase and one has to wait and see on what course it takes in the coming months," he pointed out.