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Tuesday, April 16, 2013

JK Lakshmi's Chhattisgarh project faces 3-mth delay

This story first appeared in DNA Money edition on Tuesday, April 16, 2013.

A delay of 2-3 months appears inevitable in the launch of JK Lakshmi Cement’s (JKLC) greenfield project at Durg, Chhattisgarh, following violent disruption of project work by irate local villagers seeking employment for all of them earlier this month.
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t is learnt only around five locals lost their land due to the project getting located at Durg. Now, the plant may be commissioned by the first quarter of next fiscal, said a Karvy Stock Broking report written after a meeting with top JKLC officials.
The Durg project is expected to expand JKLC’s clinker capacity by 1.8 million metric tonne (mmt) and grinding capacity by 2.7 mmt. JKLC officials could not be reached for a comment.
The Karvy report said JKLC management expects damage caused to the new plant to be around Rs 150 crore. A precise figure will be arrived at over the next few days when equipment manufacturers and surveyors ascertain the actual damage.
There is low probability that such protests may recur, the management said in an analyst guidance.
Rajesh Kumar Ravi, research analyst at Karvy, said such agitations are mostly politically motivated and are part of business risks associated with large greenfield capital expenditure (capex).
“We do not expect any negative impact in our sales volume assumption for FY15E as we have already modelled this capacity to be effective in the second quarter of fiscal 2015 (2QFY15). With the financial damage covered under insurance, the expected loss of up to Rs 150 crore should not impact its near-term cash flow,” said Ravi.
A Religare Institutional Research note last week said JKLC had estimated an initial loss of Rs 250-300 crore when it first filed the first information report with the police. But this was revised down to Rs 120-150 crore on further examination. The insurance company will take around ten days to determine the actual loss.

Follow Ashish K Tiwari on twitter @ashishktiwari 

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