Cement being bought mostly in villages, tier-II cities: Shree Cement MD

H M Bangur expects demand to return once Covid-19 cases subside and the stimulus package ensures a robust supply side

Shree Cement, among the top three cement producers in the country, is seeing supply chain and operations slowly returning to normalcy. In an interview, H M Bangur, managing director of the firm, tells Amritha Pillay that he expects demand to return once Covid-19 cases subside and the stimulus package ensures a robust supply side. Edited excerpts:
 
How do you view the stimulus package announced last week?
One needs to look at the fiscal package from two points —demand stimulation and the supply side. The government has done enough for the supply side, like, for MSMEs, a credit line has been extended. With this, the supply side will remain robust for some time, say two years or so.

 
What about the demand side?

In geographies like the US, the UK, and China, the experience is that once cases reduce and the situation improves, demand returns immediately. Once demand returns, those with a robust supply line will be able to meet the demand. Unfortunately, the focus is on questioning what has been done for demand stimulation. However, the government has taken a different view and done enough for the supply side.
 
So, do you expect demand to return once cases reduce in India?
This is the experience in the three continents (Europe, America and parts of Asia), but nobody knows for sure what will happen in India.

 
Have operations stabilised? What is the utilisation?
We have multiple units, and all put together, we are working with around 50 to 60 per cent of the normal capacity. The pre-Covid utilisation level was 70 per cent.
 
Have the initial issues around supply chain been resolved?
Everybody wants to earn and there are no major problems with operations or the supply chain. Some temporary problems will always be there. All our dealerships are operational.
 
With the supply chain now in place, which segments are buying cement?
Cement is being now bought mostly by villages and tier-II cities, while bigger cities have an issue. For instance, Agra will buy cement, but for major cities like Mumbai and Kolkata, the demand is weak. House construction is the primary demand. The impact of Covid-19 is lower in smaller centres, so there is less fear.

 
As smaller cities buy cement, how much of your demand has recovered?
When we are producing at 60 per cent, demand is also at the same level. We are only producing what we can sell. We are able to cover our costs with the current pricing. At present, nobody speaks about a hike in cement prices. Right now, sales is imperative.
 
Are you facing labour shortage at your plants?
Demand is definitely lower in big cities because labour is absent. Labour concern is the main reason for low demand from these geographies. As far as our own plants are concerned, labour availability is not a major concern.