Mumbai: Orient Cement Ltd, a C.K. Birla group company, is in talks with cement companies for acquiring a manufacturing plant as part of a plan to triple capacity by 2020, a top executive said.

“We are in strategic discussions with three players for acquiring a cement plant with a capacity of up to 2 million tonnes per annum (mtpa),” said Deepak Khetrapal, managing director and chief executive officer. However, he declined to name the companies.

The firm is looking for a plant primarily in Madhya Pradesh or Chhattisgarh, he added.

The acquisition will aid Orient Cement s strategy to increase its capacity of 5 mtpa to 15 mtpa by 2020. The plan also involves setting up greenfield facilities and expanding existing ones. It has set up a 3-mtpa greenfield facility at Gulbarga, Karnataka, which will become operational by the first quarter of the next fiscal.

The firm also plans to open another greenfield project in the next five years, Khetrapal said.

The acquisition plans come at a time of increasing consolidation in the cement industry. In September, UltraTech Cement Ltd acquired the Gujarat cement plant of the Jaypee Group in one of the biggest deals in the sector. In March, Dalmia Cement (Bharat) Ltd bought Jaiprakash Associates Ltd s stake in a cement joint venture in Jharkand.

In some regions, limited raw material resources like limestone reserves means acquisitions become the only way for a company to access them, experts said.

“Madhya Pradesh is a good cluster and has proximity to limestone reserves, which are key for manufacturers, and that is basically pushing firms to acquire plants in the area,” said Nitin Bhasin, head-research, Ambit Capital, a financial services firm.

Orient Cement has outlined a capital expenditure of around Rs.2,700 crore for this expansion, to be funded through internal accruals and debt. The company can borrow around Rs.1,200 crore, which will keep its debt-to-equity ratio at 1:1, Khetrapal said.

As of 31 March, the company had a debt-to-equity ratio of 0.39 times, according to data from Bloomberg. As of 30 June, its total debt stood at Rs.3,276.5 crore.

At present, the company operates in three regions of Maharashtra—Khandesh, Vidarbha, Marathwada—and Telangana. The expansion will give Orient Cement access to markets in Karnataka and central India.

According to Religare Research, the expansion will help push the firm s volume growth.

“With the demand cycle set to recover in the second half of 2015, Orient Cement s planned 3 mt expansion in Karnataka would boost volumes—particularly with the Andhra Pradesh government likely driving allocation for infrastructure projects in the southern region,” analysts Mihir Jhaveri and Prateek Kumar wrote in a 7 August report.

“Orient Cement is one of the most efficient mid-cap firms and will be a key beneficiary of an improvement in operating conditions in the South,” the report said. To be sure, other cement makers, too, have drawn up expansion plans to meet an anticipated increase in demand.

According to an April report by the Confederation of Indian Industries (CII), a lobby group, and consulting firm AT Kearney, India s cement demand is expected to reach 550-600 mtpa by 2025, mainly as a result of infrastructure and housing needs.

JK Lakshmi Cement Ltd, with a current capacity of 6.6 mtpa, plans to expand it to 12 mtpa by the end of fiscal 2016, Shailendra Chouksey, whole-time director, said. This expansion includes both brownfield and greenfield projects. Ambuja Cements Ltd has also announced a capacity addition of 4.50 mtpa, which includes both brownfield and greenfield projects. The greenfield projects will be set up in Rajasthan, Madhya Pradesh and Uttar Pradesh, and the total expansion cost is estimated at Rs.3500 crore, the company said