Saturday, September 01, 2012

“WE WOULD PREFER AN ORGANIC PATH”

From expresways to Real Estate to cement to power, jaypee group has proved its worth as a diversified ENTITY WITH A FOCUS on infrastructure. In an exclusive Interaction with Manoj Gaur, Executive Chairman, Jaiprakash associates ltd. Priyanka Rai & Deepak Ranjan Patra attempt to find out how the group is planning to elevate itself to a new level

Jaypee Group is India’s third largest cement manufacturer. As per reports, you were planning to expand this business via acquisitions and Greenfield additions. Is that on track?Currently, we have an installed capacity of around 23 million tonnes and are expecting to increase the same to 35 million tonnes by March 2011. At that capacity (considering the fact that the country’s forecasted cement production capacity will be 280 million tonnes at that time) we will have a market share of 14%. Talking about acquisitions, we will wait for opportunities – like the sick cement plant we acquired from the UP government through a high court auction. Because, what we feel is that acquisitions are pricy affairs and ultimately valuations end up quite high putting unnecessary stress on the acquirer. So, instead of such acquisitions, we believe in setting up of new plants and adding to the country’s developments. If things go well, we will only try to increase our production capacity to 50 million tonnes.

As it is said in general, cement industry and cartelisation go hand in hand. What’s your experience about the same?
Look, today India manufactures nearly 230 million tonnes of cement through 130 factories owned by 60 different owners, both national and international. Under such a dynamic environment, cartelisation is quite impossible. It may be there on a regional basis, but not on a large scale. What I believe is that had cartelisation been there, so many cement factories would not have closed down in the past.

But how can you say “it’s not possible”, when the top 5 players are controlling over 60% of the market?I always believed and still believe that there may the possibility of a cartel, but it can not be successful in India.

Yamuna Expressway is one of your landmark ventures and it’s expected to be completed by March next year. How do you think this will add to your value, both in terms of recognition and revenue?
This is a project that will create a benchmark in India. Till date the country has not seen any Greenfield road projects of this size where the government has not contributed a single penny. The revenue model for this project has two streams – toll and real estate – and for us both are equally important integral parts of this project. At present, it’s tough to say how much return we shall generate, but on a rough estimate, gross ROE should be over 25%.


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