Shree Cement: Volume Growth Of 8-10% For FY25, New Acquisitions & Cement Prices | Hari Mohan Bangur

But Mr. Esham Bhangu, the MDH Sri Cement is with us. Hi, Mr. Bhangu, good morning. Thanks so much for making time and speaking with us. Let's begin by discussing pricing itself, right? That big conundrum that the entire sector has been facing for the last decade. The moment the price hike has taken, the demand kind of rolls back and that's the reason some of the companies have to roll back their prices as well. With the onset of monsoon now, do you expect further pressure on the pricing from here on for the next few months? No, then maximum pricing pressure time in the world in, in the first quarter, April, June, the volume expense and is negligible, maybe 1% or so. But yearly we expect volume expense of eight to 10% because the GDP is growing at 7% that roundabout. So in the next three quarters the demand has to meet maximize. The next three quarter demand will be around 9 to 10% to make up for the lost time in the first quarter. There were elections, there were water shortage, uncertainty of election results were there. Now all those is over Mangal. You know, we were just chatting with a mutual fund expert and he was talking about as to how the player with the largest capacity expansion is the one who's going to actually win the race in the next two to three years. Highlight for us. What kind of CapEx have you you know outlined for yourselves in the next three to five years? In next three years we will be about not about we will be more than 80 billion tons and next six years it will be about 100 million tons. 3, three years I can say because the work is already going on. We are sure about what we will be AGV next three years. Few uncertainties are there but more or less it is lined up. You know, I want to take a step back and understand from you slightly on the larger scheme of things. When we listen to, you know, players such as yours or even the Birlas in Adani Cement in the next three to five years. The kind of massive expansion plans they are undertaking, Some of them experts believe may not be possible organically and hence the speculation in the market that ex players going to be taking over, why play is going to be taking over. I want to understand the demand trends here in India with the CapEx from private side, public of course have been the government has been very active. What are the larger direction do you see for volume growth and profitability in the sector? 5, Three to five year kind of outlook, Volume growth will be phenomenal and Government of India is now having a lot of surplus fund for capital expenditure. In the last three months, the budget deficit is only 3% of the targeted budget deficit. That is very positive. Connections are well and our subsidy to the GDP ratio has also come down. There is enough scope for capital expenditure. This is one part and secondly, once all the needs of households are made, that is clothing, food, etcetera, then the in all the world history whenever this kind of $300.00, sorry $3000 or more per capita income is there, suddenly the cement demand has has to increase substantially. Right now our cement consumption is around 300 kilograms per capita and what average is 550? What average means developed, underdeveloped, all countries. So we will have enough expansion plan, enough growth plan. The need was always there. Need is converting into demand now because the money is available. So need part is tremendous. Forget the need part, it is the money availability which will set the demand to sure. So the neat part is now getting converted into demand as well. But talking about demand, Mr. Bangor, you said the volume growth over the next three to five years is going to be strong. What does that mean? Should we expect a double digit volume growth for the next few years? And when you say that worst is over in terms of pricing, do you expect a price hike soon? If yes to what quantum can be expected on a aggregate fi 25 basis in cement industry when we say very good prices, it will be little less than the inflation that is the normal training one year it can be high but rest of the profit is coming by volume expansion and more efficiency. But if you see five year or ten year or whatever history period, the cement price increase is less than inflation that is the 9 out of 10 years. Now the volume growth will be coming from government infrastructure which will be very strong and private. Everybody now is having more money, they want more privacy, they want more room. S private consumption also will be increasing. Individual house builders. Now any village will not have any kacha house. That has already been achieved. So now pakka houses are built so everywhere. Cement consumption is small, but with a large number of base. So total cement demand is very high. Sir, coming back to the number with respect to volume growth, you had guided for a double digit volume growth for FY25. Do you stick to that at least 10 to 12% kind of number? No, I said 9% or so, nine to 10%, very high single digit or very low double digit, that's all. Nine to 10% is what my target is. The other thing Sir, that I wanted to talk about is the fact that, you know, industry experts have been believing that 28% GST is pretty high and that it could come down to 12 to 18%. Do you have any sort of inkling that you know this could happen in some time? I don't think there is a, these are the thing. We are not really concerned about GST. We are more concerned about government is spending all the GST which is collected from the industry on infrastructure because our consumption has to be strong, government has to have surplus money. I don't think GST reduction will increase in demand substantially. It will definitely have some effect but basically cement demand is price in elastic. Are you also looking at you know candidates which are up for grabs in the East or the South capacity though you are mostly you know clear of your chart on capacity addition, not the going the inorganic way. We are totally geared up for 80 million ton organically inorganic growth. We will be looking at it but not really aggressively. If something comes up which is of right side and meets our overall demand, overall expectation and overall scheme of things where we want to be in five years later on that, then only we will look at it. You're open for acquisitions only at the right price. You will not overpay and overbid just to add capacities. Are there some, are there some fair priced assets up for grabs anywhere? Now everybody knows that there's a big buyer or two in town. So valuations have already become kind of steep. Are you in discussion on any of the fair price of people who want to partner with you? Right, though it will come suddenly, nobody knows for sure now. Nobody was expecting anything big in India cement. Suddenly it has come up. So will so many more things and whatever consolidation is there, if it is directly beneficial for someone, it is indirectly beneficial for the rest of the players. But we're just playing out in the industry is a consolidation. And just before we let you go. So your Ebidda Patan is something which is enviable for the entire industry. You sound very strong on that. What's the next target one should watch out for on a Ebidda Patan basis? Is that 1251300 kind of number on the anvil? Yes, it has to become for very long. We have been stuck at around ₹1000 or so. Price rise have not taken place, but the price has to come up a bit. I had to go more than 1300. Otherwise, forget about the acquisition. Even the new plants will not be sustainable for long. Bangor, you know, just in continuation to what my colleague was just asking you a while back about acquisitions. I wanted to understand whether there's anything that you've earmarked in terms of an acquisition size or is there any geography that you may have identified or a company which you may be working with. I'm sure you don't want to tell us the name, but anything which could be in the works for you, telling the name or telling the geography because there are so few targets, it is almost the same thing. I will not better comment about it. Have you earmarked any you know any sort of acquisition size that you may be targeting? Yes, we will be targeting only something like 3 to 5 million ton with smaller companies, a big company because we have already so much money and our long term plan of growth of 80 million ton is there. Once you acquire something, your initial plan goes haywire because then there is no more money left for your normal growth. That organic growth part chart out. So thanks, Mr. Bangalore, for making time and speaking with us and talking.