Displaying items by tag: Shree Cement

India: Shree Cement has appointed Suresh Rathi as its Chief Logistics Officer and Sushrut Pant as its Head of Marketing.

Rathi is a mechanical engineer who holds a master of business administration (MBA) in finance. He holds over 30 years experience in supply chain, finance project management and information technology in the building materials, mining and metal sectors.

Pant holds a MBA from the Indian Institute of Management in Ahmedabad. He has worked in the fast-moving consumer goods and cement sectors.

India: Shree Cement is reportedly planning to raise US$84.4m through the sale of bonds. Reuters has reported that the bonds will mature in five years from their date of issue.

India: Shree Cement has held a ceremony inaugurated its new its new Purulia grinding plant in Digha, West Bengal. Commercial production at the 3Mt/yr unit started in late July 2023. It had an investment of US$66m. Mamata Banerjee, the Chief Minister of West Bengal, attended the event.

Adani Group announced this week that it was set to acquire a majority stake in Sanghi Cement. Its subsidiary Ambuja Cements said it was going to spend an enterprise value of just over US$600m on buying a 57% share in Sanghi Industries. The acquisition will be fully funded through internal accruals. The transaction works out at about US$99/t of clinker production capacity, a similar amount to what Adani Group paid Holcim to buy Ambuja Cements and ACC in 2022.

The acquisition has generally been perceived as consolidation in a crowded market. Profits have been under pressure in recent years due to the coronavirus pandemic lockdowns, logistics issues and then energy and other input price rises. However, commentators from ICICI Securities, cited in the local press, took the alternative view that Adani Group might be trying to start a price war in the west of India. They noted that demand for cement was 70Mt/yr in the region versus a production capacity of 82Mt/yr. Yet Sanghi Cement has reportedly been operating at less than a third of its capacity. Adani Group also revealed its intention to increase the cement production capacity at Sanghi Cement’s Sanghipuram plant to 15Mtyr by mid-2025 from 6.1Mt/yr at present. If the plant were upgraded it would potentially increase Adani Group’s market share from 19% to 37%.

Another aspect to consider with any large corporate action by Adani Group is the political angle. Adani Group’s chair Gautam Adani is often linked in the local press to the country’s ruling Bharatiya Janata Party (BJP) and Prime Minister Narendra Modi. So, every time Adani Group does something newsworthy, opponents of the BJP play up the perceived connections. This time the Indian National Congress (INC) simply noted publicly that a rival bidder for Sanghi Cement had encountered a tax investigation before it withdrew from the auction. There is no evidence suggesting that anything underhand happened here. Yet the point to consider going forward is that anything that Adani Group does is likely to be subject to more scrutiny than its peers. This may have unexpected consequences.

The financial results for the India-based cement producers covering the first quarter of the 2023 - 2024 year have been released in recent weeks. Generally, revenue and sales are up strongly but profits less so. Due to this, there has been a lot of attention placed on the costs these companies are incurring. Inflation on energy costs reportedly peaked in late 2022, but as Graph 1 below shows, it has been a mixed situation for the larger cement companies.

Graph 1: Comparison of Power & Fuel costs for selected Indian cement producers in first quarter of 2021, 2022 and 2023 financial years. Source: Company financial reports.

UltraTech cement said that its energy cost grew by 3% year-on-year in the first quarter of the 2024 fiscal year and it blamed this mainly on negative currency exchange effects. It also reported higher raw material costs due to the growing price of fly ash and slag. Ambuja Cements (and subsidiary ACC) managed to cut both its fuel costs and increase its earnings, which, while impressive, is not entirely unexpected following the takeover by Adani Group in mid-2022. Similarly to UltraTech Cement, neither Shree Cement nor Dalmia Cement were able to grow earnings faster than revenue, so earnings per tonne of cement fell. Birla Corp, however, did manage to pull off this trick due to a “substantial decline in fuel and power costs.”

One consequence of a competitive cement market with lower profits than previously, is a renewed emphasis on marketing. Adani Group’s subsidiaries Ambuja Cements and ACC both highlighted the companies’ branding and marketing activities in the first quarter. Ambuja Cements has resurrected its television advert with wrestler The Great Khali, ACC is highlighting its part in the building industry since the 1930s with its own campaign and both companies are targeting sporting events such as the India versus Australia World Test Championship. Adani Group is building up brand awareness following the acquisition and potentially leading up to a name change in the future.

The other companies are also doing this but one campaign that sticks out has been Shree Cement’s use of classic video games such as the ‘Shree Cement Bros” video on its website. Computer game character Mario has done a lot of things in his time but he also worked in a cement plant back in the 1980s Game & Watch title ‘Mario’s Cement Factory.’ We are still waiting for the 4k remake with online multiplayer for some reason! Until then, it is worth reflecting that brand awareness is important in the world’s second largest cement market and it may become more so as Adani Group continues to establish itself.

India: Shree Cement launched commercial cement production at its new Purulia grinding plant. Dion News Service has reported that that facility, in Digha, West Bengal, has a capacity of 3Mt/yr.

The producer said that its entry into the West Bengal market will help to serve growing demand in the state.

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.