Detailed Narrative
Strategic Shift: Value Over Volume
Shree Cement has strategically prioritized value over volume since October 2024, aiming to narrow the price gap with competitors like UltraTech. This approach has successfully reduced the price differential from INR 30 to INR 15 per bag. While this strategy led to lower overall volumes and mid-50% capacity utilization in Q3 FY26, management expects improved realizations and profitability going forward⏳. The company believes this discipline will allow for better capacity utilization in the future.
Q3 FY26 Volume and Realization Performance
The company reported a sales volume of 8.7 million tons in Q3 FY26, an increase from 7.9 million tons in the September quarter. December saw 3.3 million tons sold, and January's volumes are in line with December. Realization for Q3 FY26 stood at INR 4,652 per ton, an increase from INR 4,554 in Q3 FY25. Management expects Q4 FY26 volumes to reach 9-9.5 million tons, driven by increased demand from government spending towards the end of the fiscal year.
RMC Business Expansion and Capacity Utilization
Shree Cement is aggressively expanding its Ready-Mix Concrete (RMC) business, planning to increase the number of commercial RMC plants from 19 to 45 within the next 6-8 months (by September 2026). This expansion is expected to cost approximately INR 150 crores. The RMC plants currently contribute INR 71 crores in revenue for the quarter, with 45% captive consumption of cement. This initiative is aimed at improving geographical reach, optimizing logistics costs, and increasing overall cement volumes and capacity utilization.
Cost Management and Green Energy Initiatives
The company continues to focus on cost efficiency, maintaining one of the lowest per kilocalorie fuel costs in the industry at INR 1.56. Renewable energy sources now account for almost 61% of the total power mix, with plans to add another 2-3%. The upcoming Kodla plant, expected to be commissioned by March 2026, will include a Waste Heat Recovery System, further contributing to alternative energy generation and cost reduction. Management stated that they are not concerned with international fuel prices as they constantly optimize their multi-fuel mix for the best landed cost.
Capital Allocation and Debt Position
Shree Cement is a net debt-free company, holding approximately INR 6,000 crores in free cash on its balance sheet. The total capex for FY26 is projected to be INR 2,000 crores, with INR 1,500 crores already spent and INR 500 crores planned for Q4 FY26. For FY27, an initial capex guidance of INR 500 crores has been provided, primarily for RMC plants (INR 200 crores), railway sidings (INR 200-250 crores), and routine capex (INR 50-100 crores). Management acknowledged that ROCE/ROE metrics are currently trending downwards due to cash being held for future large-scale capex, which is yet to be firmed up.
Outlook and Industry Dynamics
Management expects cement demand to grow in line with the national GDP, projected at 7.4% for FY26-27 by the RBI, translating to 7.5-8% growth for the cement industry. The company aims to maintain its EBITDA per ton delta against competitors. The non-trade share of sales, currently at 35% due to government spending, is expected to revert to the historical 25% level. The company's total cement capacity is projected to reach 72 million tons by March 2026, with a long-term target of 80 million tons by FY29, subject to demand conditions.