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tate-run cement producer Semen Indonesia will provide a loan worth Rp 5 trillion (US$421.76 million) to its subsidiary Semen Gresik to partly finance the latter's new cement factory in Central Java, according to an announcement posted on the Indonesia Stock Exchange (IDX) website.

The agreement for the loan, which reaches a total of Rp 5.07 trillion if the interest is included, was signed on Monday.

Semen Indonesia Corporate Secretary Agung Wiharto said the loan would carry an interest of around 8 percent per annum, higher than the interest rates of three-month deposits offered by state-owned lenders Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI).

Agung said the interest rates of three-month deposits at state banks were between 5 to 6 percent per year.

The loan, the statement said, could be converted into shares. Semen Indonesia currently holds 99.23 percent of Semen Gresik's shares.

During the first quarter of 2014, Semen Indonesia's cash reached a total of Rp 4.62 trillion, while its time deposit amounted to Rp 3.99 trillion.

'We have idle cash. We want the cash to be used to improve our group's performance,' Agung said when contacted by reporters. The loan will be used by Semen Gresik to finance a new cement plant in Rembang, Central Java.

According to the statement, the loan is equal to 70 percent of the total funds needed to finance the construction of the Rembang facility.

Semen Gresik will start construction of the new facility next year and is expected to start production in the third quarter of 2016.

The facility will have the capacity to produce 3 million tons of cement a year.

Semen Gresik previously secured a letter of credit (L/C) facility worth Rp 1.4 trillion from Bank Mandiri in March, also to help finance the construction of the Rembang facility.

Semen Indonesia president director Dwi Soetjipto said previously that the new plant was expected to help the company boost its total cement production to 39.3 million tons by 2016 and to 40.8 million tons by 2017.

Semen Indonesia produces 31.8 million tons per year.

It holds the largest chunk of the nation's cement market with a 43 percent market share, followed by PT Indocement Tunggal Perkasa and PT Holcim Indonesia.

The company's another subsidiary, Semen Padang, officially launched the construction of a Rp 3.25 trillion Indarung VI cement factory in Padang, West Sumatra, last month.

The new factory, which has an annual capacity of 3 million tons of cement, is expected to commence operations in the second half of 2016.

Semen Indonesia also announced on Tuesday the establishment of a new subsidiary, which marks the company's moves to diversify its business outside the cement industry.

The new subsidiary its information technology (IT) business, Sinergi Informatika Semen Indonesia (SISI), which began operations on Monday.

Agung said the company disbursed Rp 80 billion as an initial investment for the new company, which was expected to support the company's main business and enhance efficiency.

Semen Indonesia holds an 85 percent share in the IT firm, while its subsidiaries Semen Padang, Semen Tonasa and Semen Gresik hold 5 percent each.

PT Semen Indonesia will also expand its business to Myanmar, following its operation in Vietnam several years ago.

Dwi said recently the company would finalize the acquisition of a local cement firm in June this year.

'The value is the same as we previously announced, namely between $200 million and $300 million,' Dwi said after an annual general shareholders meeting in Jakarta

The company will be seeking bank loans and issuing bonds if, in the end, it decides to acquire both producers.

'We have not yet decided which way we are going. Right now, we are concentrating on finishing the due diligence process,' he said.