Shree Cement plans to spread in east

~2,000-crore investment plan to increase capacity

Shree Cement, largest player in north India, is investing about ~2,000 crore this year to raise capacity, with a focus on cornering a larger market share in the east.

As part of its expansion plan in the east from its base in Bihar, Shree Cement is constructing two plants — one in Raghunathpur, West Bengal, and the other near Cuttack, Odisha. Each of these two grinding units will have a capacity of two million tonnes per annum (mtpa) and will be fed with raw material from its limestone block in Chhattisgarh. Limestone deposits, a key ingredient for making cement, are scanty in the east.

“Each of these units will attract an investment of ~500 crore,” managing director, H M Bangur said, adding the company had acquired 120-130 acres in Bengal and a deal to acquire 150 acres in Odisha would be signed soon.

Bangur said these units would become prime distribution hubs for their respective states. Commissioning of these units, expected to take place in late 2018, will help increase its presence from one state to three in east India.

Bangur said the eastern part was immensely underserved by cement companies and has an annual growth potential of 15-30 per cent over the next few years. The industry has 370-mt capacity and sees demand of 300 mt annually. Over 10 years, the demand nationally would scale up to 600 mt, which will call for 700-mt capacity. East India accounts for 17-18 per cent of the total production.

As part of its expansion plan, Shree Cement has targeted to reach 33.6 mtpa capacity, from 23.6 mtpa by the end of 2019.

Shree Cement is also investing another ~700 crore to construct two new units near Raipur in Chhattisgarh, which will take the current capacity to 5.4 mtpa, from 2.6 mtpa. Construction of another plant in Karnataka is underway.

“Total capital investment this year will be ~2,000 crore,” Bangur added.

As part of its eastern foray, the company had first ventured into Bihar in 2007. Bangur said the company was market leader in the state. Recently, it scaled up its Portland slag cement plant to 3.6 mtpa from 2 mtpa in that state. Although Shree Cement has covered Rajasthan, as well as the Haryana-Punjab and the UttarPradesh-Delhi belts in the north and the Chhattisgarh-Bihar belt in the east, Bengal and Odisha were missing from its map.

During the quarter ended March, net profit fell 54 per cent to ~305 crore, from ~663 crore a year ago.

Bangur said freight costs rose 41.7 per cent to ~607 crore during January-March as cement had to be transported from its Rajasthan facility to Bihar. Its plant in Bihar was closed for 15 days in February, following an order from the National Green Tribunal. If the company hadn’t sent the cement from Rajasthan, its market dominance could have been challenged, owing to stockists and retailers seeing a shortage.