Shree Cement Limited — Q3 FY26 earnings call

Call held 6 Feb 2026

Management summary

Shree Cement reported improved realizations and volumes in Q3 FY26, driven by a strategic focus on value over volume. The company maintained a strong balance sheet with significant cash reserves, supporting ambitious RMC plant expansion and ongoing capex. While volume growth lagged the industry due to strategic choices, management expressed confidence in future growth and profitability, with a focus on cost efficiency and renewable energy.

Highlights

  • Realization per ton improved to INR 4,652 in Q3 FY26 from INR 4,554 in Q3 FY25, narrowing the price gap with competitors.

  • Sales volume increased to 8.7 million tons in Q3 FY26 from 7.9 million tons in Q2 FY26, with December and January showing strong momentum.

  • Net debt-free status with INR 6,000 crores cash on balance sheet provides strong financial flexibility for future capex.

  • Renewable energy contribution reached 61%, contributing to lower power and fuel costs (1.56 per kilocalorie).

  • Aggressive expansion of RMC plants from 19 to 45 within 6-8 months, expected to boost cement volumes and capacity utilization.

Concerns

  • Volume growth lagged the overall industry to some extent in Q3 FY26 due to the 'value over volume' strategy, resulting in mid-50% utilization rates.

  • Employee costs increased by INR 56 crores this quarter due to provisions for back liabilities under the new labour code.

  • ROCE/ROE metrics are trending downward, which management attributes to inefficient cash utilization while awaiting major capex plans.

Key financials

  1. Sales Volume 8.7 million tons +10.1%QoQ
  2. Realization ₹4,652/ton +2.1%YoY
  3. RMC Revenue ₹71 Cr
  4. Employee Cost (back liabilities) ₹56 Cr
  5. Power & Fuel Cost (per kilocalorie) ₹1.56
  6. Renewable Energy Share 61%

What they filed

Q1 FY27: revenue up 13.6%, net profit down 29.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,727 4,235 5,240 4,948 4,303 +15%4,416 +4%5,643 +8%5,623 +14%
EBITDA593 947 1,381 1,229 851 +44%861 −9%1,250 −9%1,074 −13%
Net profit93 229 556 619 277 +198%279 +22%532 −4%438 −29%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Sales Volume
8.7 lakh tons Total
  • North Region 5.3 lakh tons 60.9%
  • East Region 2.3 lakh tons 26.4%
  • South Region 1.1 lakh tons 12.6%

Capital allocation

high confidence
  • Capex ₹500 Cr this quarter · ₹2,000 Cr (FY26) planned
    • Kodla plant completion
    • RMC plants (26-30 new plants) ₹150 Cr
    • Railway sidings ₹200 Cr
    • Normal routine capex ₹50 Cr
    Ashok Bhandari: Like March '26, we will be completing Kodla plant. We have spent about INR2000 crores of capex in this financial year. ... This year I'll be doing INR2,000 crores. ... Next year I have not firmed up my plan on further cement capacity addition. We have frozen the plan to set up about 30 RMC plants. One RMC plant costs roughly INR5 to INR6 crores. So you take about INR200 crores for RMC, INR200 crores for my railway sidings, and INR50 to INR100-crores for normal routine capex. So I am giving a guidance of next year capex at INR500 crores.
  • Debt Net ₹0 Cr
    Ashok Bhandari: However, you are may be fully aware that we are completely net debt free and we have about INR6000 crores of free cash sitting in our balance sheet.
  • Liquidity Cash ₹6,000 Cr Company is net debt free with significant free cash on balance sheet.
    Ashok Bhandari: However, you are may be fully aware that we are completely net debt free and we have about INR6000 crores of free cash sitting in our balance sheet.

Guidance & targets

Volume

  • Q4 FY26 Sales Volume Volume · Q4 FY26 · High confidence 9-9.5 million tons
    I can easily and with a great deal of confidence, say that within this quarter, we will do 9 million to 9.5 million tons.

    — Ashok Bhandari

Capacity

  • Total Cement Capacity Capacity · FY29 · Medium confidence 80 million tons
    Now coming to your second question of our declared capacity of 80 MT by FY'29. FY'29 is still far off. We are still sitting in FY'26. We shall get back to you in due course.

    — Ashok Bhandari

  • RMC Plants Capacity · by September 2026 · High confidence 45 plants

    Previously 19 plants → 45 plants

    Point number two, as on date, we have 19 commercial RMC plants. We intend to take it to 45 within next 6 to 8 months, means you can easily assume that by September'26, the number of plants will increase to 45 from 19.

    — Ashok Bhandari

  • Total Cement Capacity Capacity · by March 2026 · High confidence 72 million tons
    Yes. I don't think we will go beyond 72 million ton which we will achieve by March '26.

    — Ashok Bhandari

Capex

  • FY26 Capex Capex · FY26 · High confidence INR 500 crores
    And the capex expected is about INR500 crores in FY '26.

    — Ashok Bhandari

Renewable Energy

  • Renewable Energy Share Renewable Energy · Medium confidence 2-3% increase

    From 61% today

    And my renewable energy has kept on increasing and it has reached almost 61%. This trend, why it should not improve, my friend? ... and we are trying to add 2% or 3% more.

    — Ashok Bhandari

Industry Growth

  • Cement Demand Growth Industry Growth · next year · High confidence 7.5-8%
    And I have been maintaining that cement generally grows at 1x to 1.1x national GDP. So next year, I expect the demand to be around 7.5% to 8%.

    — Ashok Bhandari

Non-Trade Share

  • Non-Trade Share Non-Trade Share · Medium confidence 25%

    From 35% today

    We will go back to 75-25 kind of a level. We are today at 65-35.

    — Ashok Bhandari

Market context

  • National GDP Growth Rate Industry Growth · FY26-27 · High confidence 7.4%
    You see today, the RBI governor has pointed out to a 7.4% GDP growth rate for FY '26-'27 in his MPC.

    — Ashok Bhandari

What to watch in Q4 FY26

Q4 FY26 Sales Volume

next quarter
Current 8.7 million tons (Q3 FY26)
Target 9-9.5 million tons

Why it matters

To verify if the company achieves its Q4 FY26 volume guidance, indicating a recovery in volume growth after the 'value over volume' strategy.

I can easily and with a great deal of confidence, say that within this quarter, we will do 9 million to 9.5 million tons.

Risks & concerns

  • Lagging Volume Growth

    medium

    Company's volume growth lagged the industry due to a strategic focus on value over volume, impacting capacity utilization.

    Analyst acknowledged

  • Declining ROCE/ROE

    medium

    ROCE/ROE metrics are trending downwards, attributed by management to inefficient cash utilization while awaiting major capex deployment.

    Analyst acknowledged

  • Demand Uncertainty for Capacity Expansion

    medium

    The 80 MT capacity target by FY29 is dependent on how demand pans out, indicating potential deferrals if demand is not sufficient.

    Management acknowledged

  • Employee Cost Increase

    low

    Employee costs increased by INR 56 crores due to provisions for back liabilities under the new labour code, a one-time impact.

    Analyst acknowledged

Q&A highlights

5 direct, 2 evasive
Volume vs Value Strategy and Capacity Expansion Direct
Now please understand that since October '24, I had been maintaining that we will be concentrating on value over volumes. That was with a purpose. The purpose was very simple. We had a large divergence between our sales price and sales price of competitors like UltraTech. If you will notice by restraining our volumes, we have narrowed the gap from about INR30 a bag to about INR15 a bag.

Clarifies the company's strategic shift to prioritize profitability over volume growth, explaining the lagged industry volume performance and the rationale behind it.

Asked by Rahul Gupta

Realization Calculation and Power & Fuel Costs Evasive
No. You have to do your math correctly. Please understand that my per ton realization has gone up. The blended realization, I don't know how you are calculating. If you want we will give you a detailed calculation sheet. Mr. Jajoo, CFO of the company will send you a mail or you can send him a mail asking precise question. I think you are mistaken somewhere.

Highlights a discrepancy between analyst's calculation of blended realization decline and management's claim of increase, suggesting a need for clarification on calculation methodology.

Asked by Pinakin

UAE Volume Disclosure and MCA Investigation Evasive
Do you mean to say that we have not published consolidated numbers? ... So, what are we trying to say? You try to make simple things difficult at all the times whenever we receive your call.

Analyst questioned the lack of explicit UAE volume disclosure and the difficulty in obtaining numbers, indicating a potential transparency issue or frustration with data availability.

Asked by Shravan Shah

ROCE/ROE Trend and Capital Utilization Direct
The profitability absolute number has gone down because we had by choice taken a value over volume path. ... If I keep on making profit, my capital employed keeps on going up. If the additional profit, I am not distributing or I am not utilizing for capex then it is giving me a 4% to 5% revenue return. So if you combine everything you find that, the ROCE or the ROE is going down.

Addresses the declining ROCE/ROE, linking it to the strategic shift and the temporary inefficient utilization of cash while awaiting finalization of major capex plans.

Asked by Lakshminarayanan

Premium Cement Definition and Strategy Direct
Have you read any cement research report which has talked of anything else but premium cement? So if everybody is going to make premium cement, then where is the premium? The premium cement becomes the normal cement. Number one. ... There is no standard which defines premium cement. So it is your ten brands, it is your pen, and it is your pencil. And whatever you want to put, you put as a premium brand and sell it.

Management challenges the concept of 'premium cement' as a distinct category, implying that brand positioning is subjective and that widespread adoption dilutes its premium status.

Asked by Uttam Srimal

EBITDA per ton vs UltraTech and Employee Cost Direct
This is the first time in the history of this company, that I have reported a more or less equal EBITDA per ton net of labour code expenses vis-a-vis UltraTech. Otherwise we had always maintained a INR100 to INR150 delta plus side. And I expect to catch that up.

Reveals that the company's EBITDA/ton, after accounting for labor code expenses, was comparable to UltraTech for the first time, indicating a potential shift in competitive positioning.

Asked by Rajesh Ravi

Non-Trade Share Trend Direct
No. As I told you my dear friend this quarter becomes very typical. Non-trade is basically large purchases by infrastructure projects. This quarter the government has to finish the budget allocated in FY '25-'26. So this quarter you may have a trend where non-trade may be more. But I don't think that is a sustainable trend. We will go back to 75-25 kind of a level. We are today at 65-35.

Explains the temporary increase in non-trade share due to government spending, but expects a return to the historical 75-25 trade-to-non-trade ratio, providing insight into demand drivers.

Asked by Navin Sahadeo

3 min read 6 chapters

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.

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