Shree Cement bets big on infrastructure

MUMBAI: At a time when realty is slowing down, Shree Cement is banking on the country���s infrastructure and industrial boom. It���s also focusing on rural and overseas markets to increase profitability from next year when the additional capacity is expected to hit the domestic market. The HM Bangur-owned Rs 2,200 crore Kolkata-based firm, which runs the largest single-location integrated cement factory in the north, expects cement demand to grow by 10% on the back of strong infrastructure growth.

���It���s a difficult time for cement companies. Input costs are soaring whereas additional capacities will come in next year end, which will further dent margins,��� Shree Cement managing director HM Bangur told ET. When asked about the way out, Mr Bangur said upward revision of cement price is a must to maintain margins and profitability. ���Market forces will determine the quantum of the hike. It may be anything between Rs 20-30 per 50-kg bag,��� he said.



Mr Bangur said the company is aware that the additional capacity will be a concern from next year. Shree Cement has decided to strengthen focus on rural and overseas markets to overcome margin pressure, he added.

Annual production of cement is expected to go up from 165 million tonne to about 275 million tonne in three years.
The share of the rural market in the company���s overall sales has been on the rise for past two years. It is now pegged at 7% and is expected to touch 10% in next five years.

One of the raw materials namely pet coke prices rose by 27% in FY08 to Rs 4,587 per tonne. It has dented margins of cement companies, said analysts of domestic brokerage firms.

The company plans to expand in Libya, Israel, Sudan. A top level team has recently done a survey in these markets.
Prabhudas Lilladher VP & Head of Research (Institutional equities) Apurva Shah said, ���Cement demand would continue to grow primarily due to rise in the infrastructure sector. The companies are betting big on the infrastructure sector which is experiencing a phenomenal growth.���

Shree Cement���s market share is the highest in the Delhi market, the most important market in the NCR region. The company���s 86% output is sold in north Indian markets while the remaining 14% is consumed in the central India. It sells products under the brand names Shree Ultra Ordinary Portland Cement, Shree Ultra Red Oxide Cement and Bangur Cement.