Not Relying On Inorganic Growth And Are Looking At Ways To Reward Shareholders: Shree Cement

Summary

Shri Cement's chairman, Mr. HM Bangur, discusses the company’s current performance, industry trends, and future strategies. Despite a subdued demand in May, the company expects 2-3% volume growth for the year, with pricing expected to drive a 9% revenue increase. Shri Cement remains focused on organic growth, with plans to reach 80 million tons of capacity by 2030. The company is also considering shareholder rewards, including dividends or buybacks, but specifics are still under discussion. Shri Cement's cautious, profitability-focused approach contrasts with investor expectations for more aggressive growth.

Takeaways

• 😀 Shri Cement realized around 80 to 100 crores in incentives, mainly from Rajasthan and UP, but West Bengal provided no incentives as the company doesn't have a unit there.
• 😀 Despite the revocation of incentives in West Bengal, the company does not expect other states to follow suit and impact their operations significantly.
• 😀 Demand in May was subdued due to heatwaves and government restrictions in certain regions, but the arrival of monsoon is expected to improve demand.
• 😀 Shri Cement anticipates a 2-4% volume growth for the current year, significantly reduced from a previous forecast of 8%, focusing on profitability through price hikes instead.
• 😀 The company expects a 5-6% price growth, which should result in a 9% revenue growth despite lower volumes.
• 😀 Shri Cement is targeting 80 million tons capacity by 2030 with plans for new units in Karnataka and Rajasthan, reinforcing its focus on organic growth.
• 😀 The company is not pursuing inorganic growth aggressively, despite some bidding activity, and remains focused on developing its capacity organically.
• 😀 Shri Cement is considering rewarding shareholders, but no specific details on potential buybacks or dividends have been disclosed yet. This is still under discussion with the board.
• 😀 The company maintains substantial cash reserves (~5,500 crores), focusing on flexibility to take advantage of future opportunities, rather than excess cash.
• 😀 The stock market has underperformed due to the company's conservative growth approach, with investors eager for more aggressive strategies, particularly inorganic growth.

Q & A

What was the total amount of incentives Shri Cement received across India in the past year?

Shri Cement received approximately 80 to 100 crores in incentives across India in the past year.

Did Shri Cement receive any incentives from the West Bengal government?

No, Shri Cement did not receive any incentives from the West Bengal government as they do not have a unit in West Bengal, and the incentive scheme was revoked.

Which states contributed most to the incentives for Shri Cement?

The majority of incentives came from Rajasthan, with some additional contributions from Uttar Pradesh and other places.

How did the early onset of the monsoon impact cement demand according to Mr. Bangur?

Mr. Bangur mentioned that while the early monsoon could cause a temporary disruption in demand for 10-15 days, it generally leads to better rural and urban demand, as good monsoons tend to improve overall demand.

What factors contributed to the subdued demand in May for cement products?

The subdued demand in May was attributed to the heat wave and the uncertainty caused by the war in North India. Additionally, government restrictions in regions like Rajasthan, Punjab, and Himachal Pradesh affected demand.

What volume growth is Shri Cement anticipating for FY26?

Shri Cement is expecting a volume growth of 2 to 3% for the year, with a possibility of reaching 3 to 4% depending on how the market performs.

What is Shri Cement's approach to pricing and profitability for the year?

Shri Cement is focusing on profitability over volume growth, with a price increase of 5 to 6% anticipated. This is expected to result in a revenue growth of approximately 9%, despite a lower volume growth.

What is the expected average EBITDA per ton for Shri Cement this year?

The expected EBITDA per ton for the year is around 1,400 rupees, which is similar to the first quarter's performance.

Would Shri Cement be interested in acquiring the JP Cement asset currently on the block?

Shri Cement is considering the JP Cement asset but is approaching the bidding process conservatively. They are not expecting to win the bid, as they will only quote what they consider a fair price.

What is Shri Cement's target capacity by 2030?

Shri Cement's target is to reach 80 million tons by 2030, potentially even earlier, with multiple plants already in progress, such as a 3 million ton unit in Karnataka and another 3 million ton unit in Rajasthan.

What are Shri Cement's plans for rewarding shareholders given its large cash reserves?

Shri Cement is discussing ways to reward shareholders, including the possibility of a one-time big dividend or buyback, but has not yet disclosed specific details. The decision will be made after approval from the board.

How much cash does Shri Cement currently have in its books, and what is their strategy regarding it?

Shri Cement currently holds around 5,500 crores in net cash. They plan to keep this cash available for future opportunities but are not reliant on it for immediate inorganic growth, as their focus remains on organic growth.