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Kesoram expansion on hold

Calcutta, July 5: Kesoram Industries, the flagship of the Basant Kumar Birla group, has put on hold its cement expansion plan because of excess capacity in the market.

The company had decided to set up a 2.5-million-tonne plant in Karnataka and an associated power plant for Rs 1,160 crore. The new capacity was to come up in 2012-13.

“Given the market condition, we are not taking it up now. There is no point in creating fresh capacity in a market like this,” said K.C. Jain, whole-time director and in charge of the Kesoram’s cement division.

Kesoram has expanded capacity to 7.2 million tonnes in Karnataka and Andhra Pradesh for Rs 1,200 crore.

Last year, it was forced to operate at 75-per-cent capacity because of a glut, though this was higher than its rivals in the South. Jain said demand had grown just 2 per cent, while excess capacity was as much as 16 per cent. “It will take two to three years for demand to catch up,” he said at the 92nd annual general meeting of the company today.

Sluggish demand meant a squeeze in margins, but Kesoram had to deal with rising fuel costs as well caused by a hike in coal prices. The company’s cost went up 12-13 per cent last fiscal.

Manjushree Khaitan, daughter of B.K. Birla and a director on the Kesoram board, said global consultancy firm McKinsey had been appointed to develop an organisational strategy.

Kumar Birla

B.K. Birla said his grandson Kumar Mangalam Birla, chairman of AV Birla Group, had little time to join the board of Kesoram. “He is very busy. He hardly gets time to come to Calcutta.”

The grandfather had been urging Kumar to take charge of Kesoram for the last five years, but the grandson had so far declined the offer.

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