MUMBAI Aug 30 (Reuters) - UltraTech, India's No. 1 cement maker, is planning a 19 percent increase in capacity by the next fiscal year, its chairman said on Thursday, even as he warned that the outlook for the sector remained challenging.
"I believe the short-term prospects for the industry appear bearish. Regardless, over the medium to long term, the sector offers good growth potential," Kumar Mangalam Birla said in a statement released after the company's annual shareholder meeting. "Undoubtedly, we are facing some tough challenges today."
Rising input and energy costs have been squeezing margins at cement companies, while demand remains a worry amid a weakening economy and high interest rates which have slowed housing and infrastructure development in Asia's third-largest economy.
Cement makers also came under pressure after the country's anti-trust watchdog fined 11 companies, including UltraTech, saying they colluded to underuse their plants and create an artificial shortage of cement.
Capacity at UltraTech, part of the diversified Aditya Birla Group, will be raised to 62 million tonnes by the next fiscal year that starts in April 2013 from 52 million tonnes.
India's biggest cement maker has been in talks to buy one of two cement plants put up for sale by debt-laden Jaiprakash Associates, in western and southern India, sources said last month.
UltraTech reported a near 14 percent increase in net profit for the quarter ended June to 7.18 billion rupees ($129 million) compared with a year earlier.
Shares in UltraTech, valued by the market at $8.46 billion, closed 0.3 percent lower at 1,712 rupees in a positive Mumbai market. The share has gained 47 percent in 2012 compared with a 13.5 percent increase in the market overall. ($1 = 55.6250 Indian rupees) (Reporting by Aradhana Aravindan and Aditi Shah; Editing by David Holmes)