Orient will cut costs, add cement capacity

Says rising input prices may compel it to effect a hike after the rains

MUMBAI: Orient Paper and Industries Ltd (OPIL), the C K Birla group flagship with interest in cement, paper and electric fans, has embarked on a cost-cutting exercise to enhance profitability.

The company is setting up a 50 MW coal-fired captive power plant for its cement business. Slated to go on stream by March 2009, the plant will result in a per-unit saving of Re 1 and overall savings of Rs 33 crore at the operating level in FY09.

The company currently sources power for its Devapur unit in Andhra Pradesh from the State Electricity Board, at around Rs 3.10 per unit.

OPIL is also expanding the cement and clinker capacity in phases. In the first phase, it is focusing on augmenting cement grinding capacity by 1 million tonne (MT) to improve the blending ratio, with commissioning scheduled for March 2008.

In the second phase, it will increase clinker and cement grinding capacity by 1.4 MT and 1.6 MT, respectively. The new capacity would be commissioned by March 2009.

OPIL sees a total capital expenditure of Rs 590 crore for the expansion, of which, Rs 430 crore would come from internal accruals and the rest through a rights issue.

L Pachisia, managing director, OPIL told DNA Money, “The company is in a position to tap southern and western region markets due to our location advantage. We are selling 58% of our cement in Maharashtra and 33% in Andhra Pradesh.”

On hiking cement prices, Pachisia said, though OPIL has kept cement prices stable over the last few months, the increasing cost of raw material like coal may force it to take a decision once the monsoon is over.

OPIL also has a split grinding unit at Jalgaon in Maharashtra. The present annual capacity of its cement division is 2.4 MT.