Shree Cement has planned an investment of Rs 903 crore to set up an additional capacity in the eastern part of the country buoyed by the demand potential in the region in the coming years.

The company plans to set up a 3-million-tonne-per-annum (mtpa) grinding unit in Cuttack district of Odisha at a cost of Rs 423 crore and a 2.5mt unit at Seraikela-Kharsawan district in Jharkhand at a cost of Rs 480 crore. Both projects will be funded through a combination of internal accruals and debt.

While the Odisha unit is expected to be commissioned by the September quarter of 2019, the Jharkhand unit is expected to go on stream by the June quarter of 2019.

In February this year, the company commissioned a 2mt cement plant at Aurangabad in Bihar. With the 5.5mt additional capacity in the pipeline, the total capacity of the cement maker is expected to reach 45.5mt. The company’s units are located in Rajasthan, Chhattisgarh, Bihar, Uttar Pradesh, Uttrakhand and Haryana.

The company has also strengthened its logistics infrastructure in the eastern region through the acquisition of Raipur Handling and Infrastructure Pvt Ltd, which operates a railway siding at a private freight terminal in Chhattisgarh. This unit, valued at around Rs 59 crore, is located close to the company’s manufacturing plant and is expected to help the company in transporting goods through rail.

“We are optimistic about the growth prospects of cement in the eastern part of the country. Our investments in setting up new capacity is after taking into account a long-term view of the demand in the region,” said H.M. Bangur, managing director of Shree Cements.

Demand update

According to Crisil, cement demand in the eastern part of the country (including the Northeast) accounted for 22 per cent of the total cement demand of 296mtpa in 2017-18. This was up from 17 per cent in 2012-13.

In the long term, cement demand in eastern India is expected to outpace most other regions and grow at a compounded annual growth rate of 7.5-8.5 per cent between 2017-18 and 2022-23. The research firm said demand will be largely backed by government-induced spending on physical and social infrastructure. Further, an uptick in infrastructure investments is also expected via key projects such as the eastern dedicated freight corridor in Bihar, Jharkhand and Bengal; metro projects in Calcutta, Patna, Ranchi; smart city related development in Odisha, Bengal, Jharkhand, Bihar and Chhattisgarh; and several other road and highway projects.

Overseas expansion

Shree Cement has also completed the acquisition of Dubai-based Union Cement in July through its wholly owned subsidiary Shree International Holding incorporated in the UAE. With operations in Ras Al Khaimah in the UAE, Union Cement has a clinker capacity of 3.3mtpa and cement capacity of 4mtpa.