Facing heightened competition from rivals, Shree Cement, the country’s third-largest cement group, plans to increase its share in its existing markets by offering varied products based on requirements of different customers and improving distribution, as a short-term goal.
Competition has intensified in the cement industry with the Adani Group’s acquisition of a controlling stake in Holcim’s cement businesses in India — Ambuja Cements and its subsidiary ACC — in a $10.5 billion deal. The deal makes the Adanis the second-largest cement producer in the country after the Aditya Birla Group’s UltraTech Cement. Shortly after the Adani-Holcim deal, the Aditya Birla Group announced an ambitious capacity expansion plan for UltraTech, with an investment of Rs 12,886 crore.
“We are envisioning an increase in installed capacity to 80 MTPA by 2030, exploring new geographies through both the organic and inorganic routes,” Prashant Bangur, joint managing director, Shree Cement, told shareholders in the company’s annual report for 2021-22. The company is setting up an integrated cement plant at Nawalgarh in Rajasthan with a project cost of Rs 3,500 crore.
Shree Cement’s production capacity stood at 46.40 million tonne per annum (MPTA) as of March 2022. The company said in its annual report that to maintain and grow market share, it has been adding capacities in the markets where the demand-supply situation is favourable and there is no or low cannibalisation with the existing plant. “Our continued thrust on building a brand equity through high quality products being readily available in the market has helped us consolidate our market share,” it said.
The company has 14 manufacturing locations with presence in 10 states. During the last fiscal, it commissioned two new cement/ clinker projects: a third kiln with 4MTPA capacity in Raipur district of Chhattisgarh and a 3MTPA greenfield project in its Patas, Pune grinding unit. The greenfield project will help the company strengthen its market share in Maharashtra.
“We are in the process of setting up an integrated cement plant at Nawalgarh in Rajasthan with a project cost of Rs 3,500 crore. The project will have a waste heat-based power generation facility as well. We expect to commission this plant by March 2024,” the company said. It is also setting up a cement grinding unit of 3 MTPA in West Bengal through a wholly owned subsidiary.
“Our short-term goal is to improve market share in our existing markets by offering varied products based on requirements and preferences of our different customers at a reasonable price, and improve distribution,” Shree Cement said in its annual report for FY22.
UltraTech’s existing cement production capacity stands at 119.95 MTPA. The company last month said its board had approved a capital expenditure plan of Rs 12,886 crore to increase capacity by 22.6 MTPA through brownfield and greenfield projects, in a phased manner by FY25. Ambuja and ACC combined reportedly have the capacity to produce at least 70 million tonne of cement annually.
Shree Cement has been deploying its cash surplus to enhance its production capacity, improve efficiency and diversify to new markets. The company, which has been a dominant player in northern India, has expanded operations to the eastern and southern markets.
The cement industry may see a 16-17% volume growth year-on-year during the first quarter of this financial year on a low base, implying a 4.5% volume CAGR on a three-year basis, ICICI Securities said in a note on July 4. “South and west regions are likely to see strong y-o-y growth on a low base impacted due to the second Covid wave, while rest of the regions are likely to see high single digit growth y-o-y in Q1FY23. As per DIPP, industry volumes have grown by 16% y-o-y in Apr-May’22. Hence, we do not see much risk to our/ consensus estimate of 8-9% y-o-y industry volume growth for FY23,” it said.