Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ACC plans to set up slag based cement plant - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 24, 1999

    ACC plans to set up slag based cement plant

    According to newspaper reports, Associated Cement Companies (ACC) is planning to set up a 1 m tonnes per annum cement plant in Karnataka. The company is likely to go ahead with the project only if Jindal Vijaynagar Steel Ltd. (JVSL) agrees to supply the new unit with slag, a waste produced in the manufacture of steel, which will be used as raw material for the manufacture of cement.

    ACC, India's second largest cement producer, has an aggregate cement capacity of 1.3 mn tpa. It is implementing an expansion plan under which the cement capacity is expected to rise to 15 m tonnes by 2001.

    The primary raw material used in the manufacture of cement is limestone. As this raw material is to be found only in select pockets, it usually adds to the transportation costs for the cement company, which has to then locate the plant either near the raw material site or consumption centres. Moreover, cement manufacturers have to enter into agreements/contracts with limestone suppliers, which could lock the quantity and/or price of the limestone supplies. This limits the flexibility in terms of cost control and pricing. More importantly, there is uncertainity regarding the regularity of the supply, especially if the plant is far away from the limestone mine. This creates the need to create an inventory, which uses working capital and consequently increases the cost of production.

    The advantages of using slag over limestone are apparent. The slag is received from the steel plant, and therefore as long as steel is being manufactured, there will be slag. Moreover, as both the plants are more likely to be in close vicinity of each other, there will be little cost incurred on transportation of slag. More importantly, the quality of cement is the same as when limestone is used in the manufacturing process.

    There is a mutually beneficial relationship between the steel and cement manufacturers. This is so because the steel manufacturer also benefits in terms of being paid for the waste that is produced, instead of bearing the costs of its disposal. Therefore it is in the interest of both the parties to build a long-term relationship.

    Also, If ACC were to be successful in setting up the cement plant, it would have a bigger presence in South Indian cement markets, where demand for cement is growing at a faster rate than in the other areas of the country.

    However, there is a downside to the use of slag as raw material. The technology for manufacture of cement using slag is yet to be tested on a large scale in India. Moreover the cement manufacturer, ACC, will become overly dependent on the steel manufacturer, JVSL, for its raw material supplies. This could weaken ACC's bargaining power vis a vis JVSL, leading to lesser control on raw material costs. Apart from this, there is a possibility of a disruption of production in the steel plant, which could adversely affect the steel plant.

    Market View:

    The stock has been rated as a 'BUY' on account of the strong recovery in demand and consequently the prices of cement. Moreover, the company's initiatives in controlling costs and increasing efficiency is expected to drive earnings growth.



    Equitymaster requests your view! Post a comment on "ACC plans to set up slag based cement plant". Click here!


    More Views on News

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    ACC: Jan-March Quarter Sales up 9% YoY, Margins Dip (Quarterly Results Update - Detailed)

    May 4, 2017

    Expanded capacity results in topline growth during the quarter ended March 2017.

    ACC: Demonetisation Takes Toll on Volumes (Quarterly Results Update - Detailed)

    Feb 20, 2017

    Demonetisation hits cement demand during the quarter ended December 2016.

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in ACC LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Detailed Financial Information With Charts