Displaying items by tag: Shree Cement

Adani Group and JK Lakshmi Cement were reported to be leading the race to acquire Sanghi Cement this week. The Economic Times newspaper reported sources who said that both companies are about to start due diligence processes ahead of making formal offers in the next few months. The enterprise value of Gujarat-based Sanghi Cement is around US$730m. Shree Cement, Nirma Group and Dalmia Bharat were said to have been interested previously, but no longer at this stage. However, none of the companies involved have commented directly on any bidding process so far.

Coverage in the India-based press earlier in July 2023 suggested that Shree Cement had dropped out of the bidding process for a 40 - 70% stake in Sanghi Cement. Although the exact reasons for Shree Cement withdrawal were not expressed, it was noted that the enterprise value for Sanghi Cement included debts of around US$220m. In late 2022 the Kotak Mahindra Bank made an investment of around US$67m in Sanghi Cement to ‘help the company's liquidity profile and enhance its operations.’ The head of the bank’s Special Situations Fund added that the cement producer’s performance had been under pressure due to high energy costs and that this had been further exacerbated by impending debt repayments stemming from expansion capital expenditure.

Sanghi Cement had the misfortune of commissioning a new line at its integrated plant during the Covid-19 pandemic. The subsidiary of Sanghi Industries operates a 6.6Mt/yr unit at Kutch in Gujarat, with a 130MW captive power plant and a 13MW waste heat recovery (WHR) unit, making it one of the largest plants in the country. It also owns three cement terminals in Gujarat, Maharashtra and Goa. Its annual power and fuel costs rose by 79% year-on-year to US$49.9m in the year to March 2022. Then its finance costs tripled to US$29m in the year to March 2023. Some of the increased fuel costs may have been down to the new production line but its total income in the year to March 2023 was lower than in the year to March 2019.

Adani Group and JK Lakshmi Cement both operate plants in Gujarat. Adani Group runs one integrated and one grinding plant in the state via its Ambuja Cement subsidiary. JK Lakshmi Cement owns a grinding plant. A number of other companies additionally manufacture cement in the state. The biggest of these is the country’s largest cement producer, UltraTech Cement, with three integrated plants and two grinding ones in Gujarat. It would be a surprise if this company tried to buy a share of Sanghi Cement. One prominent India-based cement company that does not have a manufacturing presence in the state is Shree Cement. This made it a compelling candidate for the acquisition before it ruled itself out.

On the national stage, ratings agency ICRA’s June 2023 cement sector report forecast a ‘stable’ outlook for the sector, with cement volumes expected to grow by 7 - 8% in the 2024 financial year. This should be supported by the residential market and infrastructure projects. Crucially, it also noted that power and fuel costs, which peaked in the July - December 2022, eased in early 2023 and are anticipated to further soften in the 2024 financial year. The agency’s view was that this would help company earnings margins, but not to the levels seen in the five years prior to the Russian invasion of Ukraine. This may be cold comfort for Sanghi Cement, but it may have implications for any bidding process.

Lastly, ICRA also warned of the weakening effects that El Niño could have on the monsoon season and, in turn, rural house building during this period. The weather has been a ‘hot’ topic globally this year, as various records have been broken. Yet on a day-to-day basis the weather can also affect the business of making and selling cement. ICRA’s concern was for the latter. An example of the former occurred in June 2023 when Cyclone Biporjoy caused disruption at Sanghi Cement’s Sanghipuram plant. The unit was shut down in mid-June 2023 to protect the staff. Some damage was reported and the plant reopened at the end of the month. Again, as with fuel prices, the weather may also play a part in the calculations of any company considering buying a stake in Sanghi Cement.

India: Shree Cement’s sales amounted to US$609m during the first quarter of the 2024 financial year, up by 19% year-on-year from US$512m during the first quarter of the 2023 financial year. Its net profit rose by 84% to US$70.8m from US$38.5m.

The producer also approved plans to spend around US$850m on four new cement plants. These include two 3.65Mt/yr clinker plants, with waste heat recovery (WHR) systems, at Pali in Rajasthan and Kodla in Karnataka. Two additional grinding plants will also be built at Etah in Uttar Pradesh and Bangalore in Karnataka. All four units will have a cement production capacity of 6Mt/yr. It intends to support its expansion plans by raising US$122m from issuing non-convertible debentures (NCDs).

Neeraj Akhoury, the managing director of Shree Cement, said, “We have started the trial commissioning of our new unit at Purulia, West Bengal and are confident to commence operations of new plants at Nawalgarh in Rajasthan and Guntur in Andhra Pradesh within scheduled timelines. We are also happy to announce our next phase of capacity expansion projects of 12Mt that will take the group’s cement capacity to 72.4Mt.”

India: Shree Cement has pulled out of the race to acquire a 40 – 70% stake in Sanghi Cement for US$205 – 369m. The Financial Express newspaper has reported that Shree Cement said that it will shift its short-term focus to ‘internal expansion.’

Sanghi Cement operates 6.1Mt/yr of cement capacity and a 143MW captive power plant in Western India. It has debts of US$219m.

India: The Cement Manufacturers' Association has elected Neeraj Akhoury. He is the managing director of Shree Cement. In a statement the association said “Akhoury brings with him more than 30 years of experience in steel and cement industries. He has worked in various leadership roles in India and other emerging markets.” The association also elected Parth Jindal as its vice-president. Jindal is the managing director of JSW Cement.

India: Shree Cement has entered trial cement production at its new 3Mt/yr Purulia grinding plant in West Bengal. The site is the company’s first manufacturing plant in the state, according to the Times of India newspaper. Reuters has reported that the Purulia plant will raise Shree Cement's total installed capacity by 6.4% to 49.9Mt/yr. The producer invested US$67m in the facility, and raised the funds for it through internal accruals.

Managing director Neeraj Akhoury said "The plant has also allowed us to bring more jobs to Bengal, as well as showcase our advanced production systems which meet stringent environment norms." Akhoury indicated that the producer aims to raise its installed capacity by 60% to 80Mt/yr by the end of the 2028 financial year.

India: Shree Cement has rejected findings by the government's Income Tax Department of tax fraud worth US$2.8bn. NDTV News has reported that the producer's alleged financial mismanagement resulted in losses of up to US$170m/yr for national and state governments. The mismanagement reportedly included the use of forged documents. Authorities conducted a second set of searches at company sites in Rajasthan during the week ending on 25 June 2023, following preliminary searches on 21 June 2023.

Shree Cement said "The company's management team is available and extending full cooperation to the officials. The information as required by the officials is being made available."

India: The government's income tax department has carried out raids at five locations belonging to Shree Cement. Reuters has reported that the authorities said they conducted 'survey action' on 21 June 2023.

India: Shree Cement has announced four planned capacity expansion projects that aim to increase its installed cement production capacity by 20% to 55.9Mt/yr. The Telegraph newspaper has reported that the producer expects to invest US$670 - 730m in the expansion. The investments will go towards the establishment of new facilities in Karnataka, Punjab, Uttar Pradesh and West Bengal. The West Bengal project consists of a grinding plant in Howrah or Purba Medinipur District. The new phase of expansion is part of Shree Cement's strategy to reach 80Mt/yr of cement production capacity by 2030.

Vice chair Prashant Bangur said “Given the robust demand for cement in the country and Shree Cement’s aspiration to grow further, we are looking at four more units once the present phase of expansion is over.”

Shree Cement is currently expanding its Guntur, Andhra Pradesh, and Nawalgarh, Rajasthan, cement plants and building its new 3Mt/yr Purulia grinding plant in West Bengal.

India: JK Organisation and Nirma Group have submitted non-binding offers to acquire 40 - 72% stakes in Sanghi Cement. The Economic Times newspaper has reported that promoters value the company at US$726m.

Shree Cement also previously entered non-binding talks to acquire Sanghi Cement on 29 April 2023.

India: Shree Cement has won an auction for the Chandrapur limestone mine in Maharashtra. The mine has reserves of 50Mt of limestone, and is equipped to meet the raw materials consumption of a 1.5Mt/yr integrated cement plant. The mine occupies a 105 hectare site close to the Chandrapur and Warora railheads, 200km from Nagpur. Shree Cement will reportedly consider building new sidings to connect the quarry to the national rail network.

The Economic Times newspaper has reported that Shree Cement bid to pay taxes of 27% of the value of limestone extracted from the quarry, in addition to mining royalties. The local price of cement-grade limestone was US$5.76/t in May 2023.