For next 3 years, we will set aside Rs 9,000 cr as capex: Shree Cement MD

World GDP growth will be less than three per cent, and even with revised estimates, India's GDP growth will be more than the global average, says Hari Mohan Bangur

The country’s second largest cement producer, Shree Cement, which backed out of the race to acquire Emami Cement, wants to maintain a pace of organic growth at which it feels comfortable. Not keen on taking competition head on, Hari Mohan Bangur, managing director of Shree Cement, unfolds his plans and his take on the economic situation in the country in an exclusive conversation with Avishek Rakshit. Edited excerpts:

For the first time since listing decades ago, you raised capital via qualified institutional placement (QIP). How will you utilise the proceedings of Rs 2,400 crore and will it be enough for your plans?

The funds raised via QIP will be used to fund capacity expansion over a period of six years; a part of it will also be from internal accruals. The amount we raised and our internal generation should suffice for the growth we have planned. There is zero debt and we don’t expect any debt to be there. 

What is your expansion strategy and the target in the coming few years?

The current installed capacity is 41.9 million tonnes per annum (mtpa) and we want to reach at least 55 mtpa by March 2023. It will go up further to 75-80 mtpa in the next six years. More capacities are going to come up in the east, north and south India, where we have a strong presence and clinkerisation units. We are not going to central India, Gujarat or North-East. 

What is the capex to fund growth?

For the next three years, the capex will be Rs 9,000 crore. But I can’t give a capex projection for a six-year timeframe. A lot will depend on how the US dollar behaves, what will be the market position and others.

Will you opt for the usual route of greenfield and brownfield projects or are acquisitions under consideration as well?

We know organic growth takes time and so we plan and start early. Various projects are at different stages, some of which had started 10 years back. If acquisition comes at a very reasonable cost, we will look at it; otherwise we are geared up for this capacity by organic means. Organic will be the prime focus. 

What kind of a valuation will you consider for acquisition?

It depends on the infrastructure in totality. We think $75-80 per tonne will be our cost of putting a new unit. If something comes at this rate or cheaper, then we can look at it.

Is that why you did not finally bid for Binani Cement or Emami Cement despite being interested initially?

We are not at all sorry for what we did because at the price with which they have gone or reportedly expected to go, we were far behind. There is no point in bidding.

UltraTech is penetrating deeper into every market and you lost market leadership in north to them as well. How do you see the scenario?

Can a lightweight player take on a heavyweight boxer and compete? We are in the same business but we are not in competition. So, to say we are competing with them is itself wrong. They are doing things at their own speed and that speed doesn’t challenge us. We will grow only at the speed at which we are comfortable with. 

Slowdown has hit every sector of the economy. What has been the impact on cement and your company?

We are talking about slowdown all the time; but world GDP growth will be less than three per cent, and even with revised estimates, India’s GDP growth will be more than the global average. Have we got the birth-right to grow continuously at a far better rate than the global average?

But nearly every company from different sectors is giving a bad projection now. Isn’t that a fact?

But then, look at the profit levels of all who are saying they are hit by the slowdown. The very people, who are talking so much about the slowdown, I ask, has their lifestyle been affected? Everybody is spending more but we have a fancy to say that we are hit by a slowdown. As compared to the past, our growth has come down definitely, but there is nothing to be sorry about it. It is not a disaster as it is being painted. Some people somehow give us the euphoria that we should grow at 8-9-10 per cent and then we feel that at lower growth rates, the collapse has come.