Shree Cement to enter eastern India with two projects
After gaining a strong foothold in the northern parts of India, where it is the largest player, Shree Cement is hoping to capture a large slice of the pie in the eastern part of the country, which has scant reserves of limestone deposits, the key ingredient for making cement.
As part of its plans to expand from its Bihar base across the east, Shree Cement has undertaken construction of two greenfield projects; one in Raghunathpur region in West Bengal and the other near Cuttack in Odisha.
Each of these two grinding units will have a two million tonne per annum (mtpa) capacity and will be fed with raw materials from its limestone block in Chattisgarh.
“Each of these units will attract an investment of Rs 500 crore”, the company’s managing director, H M Bangur said, adding that the company has already acquired 120-130 acres of land in West Bengal and the deal to acquire 150 acres in Odisha is underway.
As per Bangur, each of these units will become the prime distribution hubs for the respective states.
Commissioning of these units, expected to take place in late 2018, will help the company take up its presence from one state to three in east India.
As part of its eastern presence, the company first ventured into Bihar in 2007, where Bangur claims to be the market leader. Recently, it scaled up this Portland Slag Cement plant to 3.6 mtpa from the previous 2 mtpa in that state.
Although Shree Cement covered the entire Rajashtan, Haryana-Punjab and Uttar-Pradesh-Delhi belt in the north and the Chhattisgarh-Bihar belt in the east, the crucial markets of West Bengal and Odisha were missing in its geographical map.
As per Bangur, the eastern part of the country is immensely underserved by the cement companies and has a 30 per cent growth potential over the immediate next few years.
Besides, it is investing another Rs 700 crore to construct two new units near Raipur in Chattisgarh which will take up the current capacity from 2.6 mtpa to 5.4 mtpa.
Another plant in Karnataka is underway.
“The total capital investment this year will be Rs 2,000 crore”, Bangur added.
As part of its expansion plans, Shree Cement has targeted to reach a 33.6 mtpa capacity from the current 23.6 mtpa by the end of 2019.
According to Bangur, while the cement industry has a 370-mtpa capacity at present with 300 million tonnes cement demanded annually, over the coming 10 years, the demand would scale up to 600 mt, which will call for 700-mt capacity.
During the quarter ended March 31, 2017, Shree Cement posted a 54.1 per cent fall in net profit at Rs 304.5 crore as against Rs 663 crore during the same period last year.
Bangur said freight costs had increased by 41.7 per cent at Rs 606.7 crore during the January-March period as cement had to be transported from its Rajasthan facility to Bihar. Its plant in Bihar was closed for 15 days and in case the company hadn’t ferried the cement from Rajasthan, its market dominance could have been challenged owing to less availability of its cement with the stockists and retailers.