Graphite in Rs 400 crore expansion

Graphite India, a manufacturer of graphite electrodes, has lined up investments of Rs 400 crore over the next one year for capacity expansions and setting up a thermal power plant in Durgapur, West Bengal.

K K Bangur, chairman, Graphite India, said, “Power constitutes one of the major costs of electrode production. The board has approved setting up a coal-based thermal power plant of 50 megawatt (mw) capacity at Rs 214 crore. This would increase our power generation capacity from the current 33 mw to 83 mw.”

The company has about 20 acres for building the power plant and has also applied for coal linkages.

The balance Rs 186 crore is being used for ongoing expansion plans at its existing plants in Bangalore, Nashik and Durgapur.

The company would ramp up capacity to 90,000 tonnes from a present domestic capacity of 60,000 tonnes, and 18,000 tonnes at Germany.

“Given the severe global downturn, we started the year with a 40% operational capacity and have increased it to 70% as of now. For the entire year, the capacity would be around 60%. Over the last few months, input costs have up substantially. Some of our raw materials such as needle coke are entirely imported,” Bangur said.

The company’s operating margins for the quarter ended December stood at 39% compared with 22% in FY09. But in the coming months, such high margins may not be sustainable, Bangur said.

“We have been able to control costs in many areas. We had to rationalise production. It is true that such high extraordinary operating margins are not sustainable. This is primarily because input costs have gone up and the rupee has appreciated …almost 9% since the beginning of the fiscal. We could be looking at 25-30% margins going forward,” Bangur said.

Graphite India is largely an export-led company with over 80% of exports. It caters to over 50 countries with substantial exports to Middle East, USA and Latin America among others. Europe is serviced by its German subsidiary.