Shree Cement to enter western India in next six months
Shree Cement, second largest company in the segment, will be debuting in the West Indian market in the coming six months, with a 2.5 million tonne per annum (mtpa) grinding unit near Pune.
“It will be our maiden entry into Maharashtra and cater to demand for the western part of the state,” H M Bangur, managing director, told Business Standard.
Investment in the plant, spread across 65.7 acres, is Rs 625 crore. It doesn’t have linkages to limestone reserves and is getting this from a Shree unit near Kodla village in Karnataka.
The idea is to initially sell in the Pune-ahmednagar-navi Mumbai-aurangabad area. “We will see how it works in the next two-three years and then only will get to know if we have set up a capacity the market can absorb,” said Bangur.
According to Yes Securities, West India has total installed capacity of 70 mtpa. Ultratech Cement is the largest at 15.3 mtpa in Maharashtra and 12.5 mtpa in Gujarat. Followed by Ambuja Cement with 11.5 mtpa. Shree Cement is poised to enter when demand is recovering and prices have stagnated on the higher side. According to market sources, prices in the western region were hiked by ~20 a bag (50 kg) to ~335-340 in early January and another hike of ~10 is likely in the near term.
In the near past, says ratings agency ICRA, demand in Gujarat was affected by labour and water scarcity; in Maharashtra, it was positively driven by infrastructure and affordable housing.
Asked about the tepid market condition, Bangur said,
“Indian cement consumption at 350 kg per person per year, on the average, is half the world’s average; it can well be at 600-700 kg. Demand for cement is bound to increase.”
Shree has targeted a capacity of 55 mtpa by 2023 and 7580 mtpa by 2026. The expansion into western India is part of this. Strong in the northern region, Shree has been eyeing a national presence since 2016, when it started to acquire land for forays into eastern and southern India.
In 2018, it commissioned a plant in Karnataka thereby entering south India. It had entered the eastern market four-five years before, with a plant in Jharkhand and in Bihar. And, is on the lookout for another facility in West Bengal, where it is in the process of acquiring land. It is also readying a 2.5 mtpa grinding unit in Odisha.