INDIA: Reliance Cement takes control of West Bengal plant

Reliance Cement Co. Pvt. Ltd has taken indirect control of a small limestone grinding unit in West Bengal for an undisclosed price. The facility, located at Durgapur, 180km from Kolkata, can produce up to half-a-million tonnes (mt) of cement a year.

Reliance Cement, which is part of Anil Ambani’s Reliance group, proposes to raise the annual production capacity of the yet-to-be acquired unit—Ma Chandi Durga Cement Pvt. Ltd—to 1 mt. For now, it is to be used as a contract manufacturing facility, run by its founders—the Kolkata-based Kedia family.

The Kedias couldn’t immediately be contacted for comment.

The Reliance group has an irrevocable right to gain control of Ma Chandi Durga Cement whenever it wishes to exercise it, according to Atul Desai, a director and chief marketing officer at Reliance Cement. He, however, refused to specify when his company could take direct control of the limestone grinding unit.

Reliance Cement will supply limestone to the Durgapur factory from its mines in Madhya Pradesh.

The deal with the Kedias, concluded in February and announced at a press conference in Kolkata on Wednesday, is the first acquisition of sorts by Reliance Cement.

“It’s a one-year old plant built with inputs from Holtec, so it meets our quality standards,” Desai said, referring to one of the leading consultants to the cement industry—Holtec Consulting Pvt. Ltd. Reliance Cement will use the Durgapur factory to set foot in West Bengal, where, subject to clearances, it proposes to build a 2.1 mt plant in Purulia district. It has already got possession of a 100-acre plot for the proposed unit.

The enterprise value of the Durgapur unit is estimated at Rs.60-70 crore, according to an industry expert. To set up a half-a-million tonne unit will cost around Rs.100 crore, this person said, asking not to be named. There are bottlenecks and the Durgapur unit may not be running at its peak capacity as of now, he added.

There are many small units across the country willing to get into contract manufacturing arrangements because their owners do not have the resources to create their own brands, but very few meet Reliance Cement’s standards, Desai said. As a strategy, the company wants to cut distribution cost, so wants control of small grinding units across India.