Shree Cements Plans Mega Capacity Expansion

Shree Cements plans to invest a sum of Rs.4,750 crore on expanding its capacity across various products as well as in setting up a captive solar plant. Out of the total outlay of Rs.4,750 crore, a sum of Rs.3,500 crore will go towards enhancing cement capacity, Rs.500 crore towards setting up a state-of-the-art solar power and Rs.700 crore towards its clinker manufacturing capacity.

The integrated cement plant will be set up in Nawalgarh in Rajasthan. The Rs.3,500 crore allocation will be towards cement capacity of 3.50 million tonnes per annum (MTPA). This is higher than its current average capital cost. Shree Cements currently has total cement capacity of 43.40 MTPA and it operates at 67% capacity utilization. 

Shree Cements is the second largest cement player in India after Ultratech. Shree Cements had reported 90% yoy growth in profits in the Jun-21 quarter but the profits had been lower on a sequential basis. That had impacted the sentiments around the stock, but the latest expansion plan has come as a positive for the stock.

The plant will also have a clinker capacity of 3.80 MTPA. The plant is expected to be ready for operation by the end of fiscal year 2023-24. In addition, to tap the huge demand-supply gap in East India, Shree Cements East Private Limited will set up a clinker grinding unit in the Purulia district in West Bengal.

The solar power plant will have a capacity of 106 MW and will supply power to the various plants of Shree Cements. Most cement stocks have rallied sharply as infrastructure demand for cement has been robust and housing demand is expected to pick up in next few quarters. After a very long time, the bargaining power is back with cement manufacturers and they have been able to pass on the spike in input costs to the end customer. That is evident from the recent spike in cement prices.

Also Read: Are Cement Prices Improving?