Shree Cement has moved in the last two decades from having 2 million tonne (mt) production capacity to becoming the country’s third largest cement player, with an installed capacity of 43.3 mt in India and 47.4 mt overseas. The company’s next phase of growth is underway. H M Bangur, managing director of Shree Cement, tells Ishita Ayan Dutt in an interview that India’s economic growth augurs well for cement and the entry of the Adani Group does not alter his company’s plans.
What follow are edited excerpts from the interview.
Shree Cement’s profitability in Q1FY23 was impacted by higher costs: what is the outlook for Q2?
In a commodity market, you just don’t know what the next quarter will be like. We have to look at it year-on-year or long-term because then many things average out.
The industry was caught unaware by international fuel prices after the Ukraine war in Q1. Now prices have started softening. But in Q2, volumes are historically impacted by rains. So, Q2 profitability will be like Q1. But we see it as a short-term pain. If rains are good, then the economy in that area will be better. And if people prosper, more cement will be sold.
So lower fuel cost will be felt in Q3?
Yes, right from the beginning of Q3. But that will hold for everyone and there will be competition in the market. But these are all small problems.
The way the Indian economy is moving, two years down the line, the cement requirement will be very high. So all infrastructure companies–and we are the provider of infrastructure–should do well. We are very bullish and we are putting up new factories.
What are the upcoming expansion projects?
We have three projects. Purulia in West Bengal should be completed by March 2023; Rajasthan is a much bigger project–Rs 3,500 crore–and should be completed between December 2023 and March 2024. We have just started in Andhra, that should be done by March 2024. All put, it will add up to about 10 mt. The total investment would be around Rs 6,500 crore.
Your target capacity by 2030 is 80 mt capacity. What is the roadmap from 57 mt to 80 mt?
We have a roadmap but we don’t want to announce it in advance. We are buying land in many places, applying for the environment clearances.
You are also looking at acquisitions. Typically, Shree Cement has grown by setting up greenfield plants. What is prompting you to look at acquisitions?
Except one grinding unit in Panipat and an acquisition in the UAE, all our projects are greenfield. We are in discussion with one or two players for acquisition. But we would not like to comment on that.
Are you looking at accelerating growth in the wake of consolidation in the industry and the emergence of a new number 2, Adani?
Many things may happen externally. But the basic premise–how fast we should grow–hasn’t changed. We are working with our strength and our speed. For the last three years, we have been saying that we will achieve 80 mt capacity by 2030 and we are maintaining it.
Adani has come and replaced a multinational [Holcim]; the multinational had acquired from Sekhsarias, Ambuja and ACC. Now, the cycle has been completed with the multinational again selling to an Indian promoter. Names change, but ultimately an Indian promoter has come back.
Were your expansion plans impacted by Covid-19?
For one year, we delayed the plan; the target (of 80 mt) was initially for 2028. But we panicked because all the states were closing down and there was no movement.
Does the 80 mt capacity entail plans of expanding outside India?
We have one unit outside India (UAE). But we have realized that the Indian market is growing much faster than the world market. So why expand outside India.
Till 2014, Shree Cement was completely North India-based. What kind of geographical spread are you looking at now?
Our game plan is very clear. We would like to be among the top three players in areas where we are applying or initiating action. In the north zone, we are now number 2; in the east, we have increased our footprint and within two years, we will be among the first three players; in South India, we have just begun.
We would not like to spread ourselves too thin. We will be concentrating in some areas – when we have a good market share there, we will move to newer areas.
What is the outlook on demand?
Demand is very good–every year there is a 5-7 per cent growth in demand.