← Throughline · holding view Deep analysis ↗ Q3 FY26
SHREECEM Shree Cement Limited · Cement Q3 FY26 · concall
Pattern: volume lag mid 50

Q4FY26 reversed Q3FY26's capex collapse: FY27 capex back up to INR1,500cr.

4 deflections · 4 weak · 9 clean — pushback across 8 of 17 Q&A turns

Focused evidence 8 of 17

Rahul Gupta · Morgan Stanleyweak

Thank you for taking my question. A couple of questions. First, given you are prioritizing absolute earnings, your volumes have lagged the overall industry to some extent. Now in fact, your operating rates would be more like mid-50 utilizations. Now how should we think about your capacity expansion plans and target of 80 million tons from the next 2 years' perspective? How should we look at your volumes from the next 2 years' perspective? That's my first question.

Mr. Gupta, thank you for your question. 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. Now naturally, if you want to maintain discipline on pricing and narrow down the gap, you had to take the pain of sacrificing volumes. That is what we did. And I'm very happy to report that the December growth, though aided by additional demand over November, volume-wise November we sold about 2.7 million tons and December we sold about 3.3 million tons, and January is more or less in line with December '25. We expect the same momentum to continue with a much higher realization and it should automatically improve our capacity utilization. On the other hand, the capacity utilization will further be augmented by concentrating more and more on RMC plants, which shall give me a better geographical reach, a more logistical cost optimization and increase the volumes as well. 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.

Rahul Gupta · Morgan Stanleydeflection

Got it. So two follow-ups, sir. One, given you have narrowed the gap from INR30 to INR15, is it fair to say that you would continue to focus on reducing this further? And my second question is what would be the absolute revenues of the RMC business and how much cement your RMC would be using internally?

My dear friend, your first question is infructuous. You are saying that will you keep on reducing the gap? It is obvious. I'll keep on increasing my profits. So that is one part. The increase in profit mainly in cement is because of top line. The cost is more or less the same for the industry, except in a few factors. 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. We started RMC about 2 years back. And in 3-3.5 years, we will be achieving 45 plants. Whereas leading players in RMC like UltraTech has over the last 25 years setup to reach its current scale. So we are on track. It is very difficult for me because much depends on how the demand scenario emerges. But certainly, all my RMC plants will be using my cement and it will aid the cement quantity and capacity utilization. KK Jain: It is INR 71 crores for the quarter. So 45% is the captive consumption for RMC plant for the quarter.

Pinakin · HSBCweak

Sir, in the September quarter the sales volume was 7.9 million tons. What would be the comparable sales volume in the December quarter? That would imply a roughly 7% decline in blended realization, which seems to be higher than what the peers have reported. What would be driving this decline in realization sir? Sir, what would be the comparable Q-on-Q change in pricing for the company? And any colour on the capex for next year at this point of time? And on a per ton basis, there is a decline in power and fuel costs?

KK Jain: 8.7 million tons. Ashok Bhandari: 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. December '25, realization was INR 4,652. December '24 is INR 4,554. I don't have the September '25 numbers. As I said, we will be adding about 26 to 30 RMC plants. And the capex expected is about INR500 crores in FY '26. Obviously, there are two reasons. One is that per kilocalorie cost is lowest in the industry sitting at 1.56. And my renewable energy has kept on increasing and it has reached almost 61%. This trend, why it should not improve, my friend? You see, as far as the per kilocalorie cost is concerned, you have to understand that it is the function of international coal prices or pet coke prices. I cannot take a call there. What I can say is over the 40-year existence of this company we have always been the lowest price procurer of fuel. As far as Kodla, the new unit, which is due to be commissioned by March, I'll be having a Waste Heat Recovery System there, which will add up to my renewable or alternative energy.

Shravan Shah · Dolat Capitaldeflection

Yes, thank you, sir. Sir, two questions. First, in the last con-call Q2, you highlighted that investors should look at the Shree Cement from the consolidated perspective. But in last two quarters, you have shared the UAE volume, and this time, this is not part of the press release. And also post the call, when we try to connect with the CFO, sir, Mr. Jajoo, he is not ready to share the numbers. So, how can one look at these things? This is first part. Yes, sir. What's our clarification on the MCA investigation that is on under section 210? Sir, road rail mix for this quarter and fuel mix for this quarter? And capex till now how much we have done for FY?

One second. Now let me stop you here. One second. Do you mean to say that we have not published consolidated numbers? Wait a minute, no, one second. So, please go through the results. I don't think you have gone through the results. Please go through the results. Standalone is there, consolidated is there. And you very well know how to calculate UAE from the two numbers. So, what are we trying to say? You try to make simple things difficult at all the times whenever we receive your call. Let us not argue on this. You ask your second question. It is a routine inquiry. They have asked for information; the information has been shared. Now, they have not come up with any report. So, what do I do? Subhash Jajoo: Road-rail is 88% and 12%. It's 76% petcoke, 6% coal, and balance is alternative fuels. Till now, we have done around INR1500 crores. And another INR400-INR500 crores is to be done in this quarter.

Satyadeep Jain · Ambit Capitaldeflection

Hi, thank you. Just first question on the strategy - pricing versus utilization. You've added capacity in North and South in the past few quarters. How do you look at an ideal utilization given these capacities have been added, but overall volume increase is not there? So, is there an ideal utilization you look at when starting an asset to optimize the operating leverage, fixed costs there? Sir, in that context, the focus on utilization, how do we look at the 80 million ton? Would you rather wait to improve utilization? And what's the progress on Jaisalmer?

Please appreciate that I had always been maintaining that demand is not in the hand of any cement manufacturer. Demand emanates from overall growth within the economy. We are not happy with our current capacity utilization. We are taking steps to correct it. We have corrected it largely to some extent in January. I have also pointed out that we are concentrating on setting up more and more RMC plants, which should give me a fillip in capacity utilization. But at this point of time, especially in this quarter, because in this quarter the demand may be abnormally high due to pull from the central agencies, we may better answer this question in the first quarter of FY '26-'27. Generally, your thinking is correct, that we are not announcing specific sites and specific plants only because we want the capacity utilization to increase. I had hinted that 80 million tons by FY '29 may get deferred or may culminate is completely dependent on how the demand pans out in FY '26-'27. So, this is a question for which I don't have a ready answer. I would like to expand. Please understand that Shree Cement has increased its capacity 110 times from 1985. Means in last 40 years, we have gone 110 times in capacity. So, our growth has not been lagging. Our CAGR for growth is 12.5% plus. And we expect to do it better. But then you must set up capacity not for idle capital but for productive capital, which is a function of demand. If demand doesn't have the necessary leverage, what is the point in setting up capacity and keep on operating at 56%, 60%, or 62%? Ideally, we should reach 70% kind of a capacity utilization. Now, whether it takes place in one year or in one and a half years, time can only tell.

Navin Sahadeo · ICICI Securitiesweak

Yeah, good evening sir. Am I audible? So my question was on this value versus volume strategy in the context of market share as well as industry superior profitability. Like past four quarters as you mentioned in your opening comments, since October '24, the strategy of value over volume was clearly I think rewarding us in terms of significantly higher EBITDA per ton or margins versus the peers. In this quarter it is a bit of a dampener and also of course the volumes are also like, some maybe if I may say some loss of market share as well? My second question was on realizations. So in, I think in Q3 we have sequentially, I think, realization drop is about four odd percent?

How can you not be audible? You are the host man. Navin, slow down. Hear me out. There were two major changes in our sales strategy in last one year. One was that we had made our rebate and discount policy so transparent, non-negotiable and non-discretionary that the favoured dealers were getting pissed off. So it took some time for them to realize that this is a non-negotiable policy and now they have fallen in line. And number two is that end November we have inducted a new President Marketing and he has shown good results in last one month, one and a half month. So I expect that the things should be better in coming times. Now of course I can say anything. I cannot but be bullish on cement. So I will keep on talking bullish sentiment on cement. But please understand that demand is not in my hand. If demand is there you will not find us wanting. All of you are saying this. Unfortunately I don't have this number. But since all of you are saying it maybe this is correct. Maybe there was a drop in realization or whatever. But you ask me a pointed question or you come to Calcutta. Come one day. I will give you good tea.

Uttam Srimal · Axis Securitiesweak

Yes, good evening sir. Thanks for the opportunity. Sir my question pertains to premium cement. So we have made a very good progress from 15% last year to 22%. So where do we see this number going forward in next year? And sir, in next year what would be our depreciation cost?

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. Number two, the brand belongs to the company. The classification of brand also belongs to the company. 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. Because there is no yardstick to define what a premium cement is. So please understand, we are at about 21%-22%. We have defined our premium brands and we are sticking to it. We are not changing the mix of my total cement as per my convenience. And at the moment with the current demand scenario we are at 21%-22%, and we expect to maintain the same run rate for this financial year. Next year what will happen let us see. Depreciation should be about INR1,600 crores. Yes, I said INR1,600 crores. INR1600 and INR1700 please don't hold me to the number. But it will not vary as it had been.

Navin Sahadeo · ICICI Securitiesdeflection

Yes. I'll take the last question sir. So in the like, you mentioned that we have narrowed the price gap versus the industry leader from INR30 to INR15. So what is then the next milestone? Is it coming at par or is it like, how should one benchmark it at that point of time onward then we again start chasing volume? Sir on the staff cost I just wanted to know what would be the normalized cost? At a broader industry level, do you think non-trade share or non-trade exposure is rising because everybody is chasing those bulk volumes, RMC units?

Navin, hear me out. I don't have the capacity or capability or even the enthusiasm of saying I will sell at par with UltraTech. If I say that, you will not believe it. But on the other hand, I with full confidence I can say, that I'll maintain the delta on EBITDA per ton basis, vis-a-vis the competition, which I had been doing except in this quarter. I had been doing it for 40 years that you know. This quarter we lost out on volumes it's all right. It was a calculated move. You ask this to Mr. Jajoo. I don't know. 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.

▸ Other Q&A (9)
Rajesh Ravi · HDFC Securities

Hi, sir. Good evening. Sir, just a few housekeeping questions. What were the trade and blended cement share in this quarter and lead distance? And if I look at your fuel costs sequentially, this has come down by around INR0.10. So there is a INR50 per ton saving and your green power mix remains similar. So how is the power cost per ton at a company level? And the realization for the quarter you mentioned was 4,625, right? And just wanted to understand, you mentioned that you'll be focused more on bridging the gap and getting a better price realization. So at least on the volume, what sort of growth one should build in for this year because earlier we were looking at 37 million to 38 million tons for this year, which seems there could be a slip of 1 million to 2 million ton on the volumes? And lastly, if you could share the UAE performance, which you did in last quarter?

Subhash Jajoo: The lead distance for the quarter is 446 kilometer and the trade sale is 65%. Blended is also 65%. Ashok Bhandari: I may not be having that data immediately. I will send you. 4,652. Yes. Mr. Ravi, please here me out fully. Number one, the demand in October and November was low that you know, which I had no control. December, the demand picked up, we have picked up more. January, the trend is similar to December. We don't find any let up in February and March because the central government budget has to be spent by 31st March, so I don't think there will be any let up in volumes. 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. In total, yes, I will not be growing at 7% to 8%. But then that was a function of low demand, what to do. But going forward, I'm confident that we should do. You see today, the RBI governor has pointed out to a 7.4% GDP growth rate for FY '26-'27 in his MPC. 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%. It is getting better by the day. I don't have the UAE numbers with me at the moment. We'll share with you.

Jashandeep Chadha · Nomura

Thank you so much sir for the opportunity. Firstly, sir, Shree Cement has been operating in multiple regions. I wanted to understand the basic understanding of how all these regions are performing? Not necessarily from Shree perspective, but from industry perspective? But I was also looking from January and going ahead, which region you are seeing uptick coming in volume demand? I understand on per kilo calorific value, Shree Cement has been the lowest and will continue to be the lowest. But with pet coke international prices going on, what kind of impact will be on the cost for fourth quarter? You are expecting 7 to 8% Y-o-Y growth for the industry, and Shree Cement will largely be in line with the industry. Is my understanding right, sir?

Can we be at divergence with the industry region-wise? So we will be in line with the industry only. Exactly how much Shree has sold in each region of its capacity, the number I'm asking Mr. K.K. Jain to share with you. K.K. Jain: Yes. In North region, the sale is 53 lakh tons, East 23 lakh tons and South 11 lakh tons. And in percentage term, it is 61% in North, East 26% and South 13%. Ashok Bhandari: What is the date today my friend? It is 6th of February. Let the January numbers come to me. Please understand that nothing stops me from changing from coal to petcoke or petcoke to coal. I have multi-fuel burners. This is a constant exercise which my purchase people do, that which mix gives them the best landed fuel cost. I am not at all concerned with international prices. I am concerned with landed cost of fuel because that is the actual cost to me. As on date, we are at 1.56 per kilocalorie. It may remain same for January, but it may go up in February and March. In any case, I don't think it should increase to 1.80, which is my peer group fuel cost. Your understanding is correct, with a caveat that we had generally grown better than the industry. Last one year you leave, because that was with the strategy of narrowing the gap between the selling prices. But once we have achieved that, then probably we may grow better than the industry also. But let the time tell its own story.

Siddharth Mahortra · Kotak Securities

Thank you, sir, for the opportunity. Sorry if I missed this number. Sir, what is the capex we are expecting for say 2027? Could you sort of quantify what sort of industry growth was prevalent in 3Q for the industry? Sir can I just please get the power mix split sir if possible? Sir a couple of your peers have sort of sounded out, that they see a very interesting and exciting opportunity in UAE to either sort of increase their stake in subsidiaries there or expand their capacities there in additional grinding units. So sir, given the fact that we already have a long standing exposure to that geography...

Look, my major focus is going to be 26 RMC plants, 26 or 30. Per RMC plant it costs about INR5 crores. So, 150 crores visibility I have. Balance is completely dependent on how I try to attain. Like March '26, we will be completing Kodla plant. We have spent about INR2000 crores of capex in this financial year. Next financial year, I'm giving you a INR150 crores capex. I'm also working on railway sidings, which should be about how many crores? KK Jain: About INR150 crores to INR250 crores on railway siding. Ashok Bhandari: About INR200 crores to INR250 crores on railway siding. So, INR400 to INR500 crores of capex visibility is clearly there. Balance visibility I'll be able to give you once I start planning my further capacity addition. So, you will have to give me one more quarter to give you more clarity on this. 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. Q3, you see, it is not comparable. I had a different strategy of operating my plants. The industry had a different strategy. So they are not apple-to-apple comparison. I was concentrating more on value, less on volume. So obviously my growth was lower than the industry. Subhash Jajoo: See our total power capacity is currently 1137 megawatt, out of which 503 is the thermal power capacity and balance is all green. WHR is 265 megawatt, Solar is 314 and Wind is 56. So 634 megawatt of green capacity, 503 megawatt of thermal, total 1137. Ashok Bhandari: Let me stop you here my dear friend. Do you think that if there is a profit opportunity Shree Cement will let it go a-begging? If there is potential, if there is real demand perk up, if the operations are profitable or good enough profitable, we will certainly do whatever is required to be done. We have the largest cement plant in UAE today in our control. I would not like to comment on that as yet. I'll comment in March.

Tushar Chaudhari · Prabhudas Lilladher

Good evening sir. Sir just wanted to know this employee cost is little bit higher this quarter. Is it because of Baloda Bazar? So volume actually I wanted to know? Volume 2% growth is written. Last year it was 8.77%. I have only blended realization? 2% volume growth, is it including clinker? Because press release is saying 2% volume growth?

Read Note number 3 of the result. Listen. The new labour code has made me provide for all back liabilities which is amounting to INR56 crores. We do not show any expense as an exceptional expense, because it is all in routine course of business. So we have additionally provided INR56 crores as required by the law and we have disclosed it by way of a note in Note number 3. This is all employee cost. So last year what had happened my dear friend? Last year what was my realization? This year what is my realization? I gave this number. December '24 my realization was INR 4554. And December '25 my realization is INR 4652. So you sell to lose money or you sell to make money? We have deliberately constrained our volumes to decrease the delta between other selling price and my selling price. We have reduced it by 50%. Now it is fine. Now we will see what to do. That I don't remember it off hand. I will get back to you. You send a mail to Mr. Jajoo and Mr. Jajoo will get back to you with exact numbers.

Indrajit Agarwal · CLSA

Yes sir. I just wanted to clarify one number. Did you say fourth quarter run rate to be similar as December and 9 to 9 and a half million tons volume in fourth quarter? So that would imply more or less flattish Y-o-Y number. Is that understanding correct?

Yes, I did. Maybe 1% or 2% growth I don't know. I have not done the maths.

Harsh Mittal · Emkay Global

Sir just one question. So given that our cash levels as on December ending is INR6000 crores, and we are expecting an healthy cash flows in the coming years with a limited capex. So sir, can we expect a material upside in the dividend outlay going ahead?

Let us understand, material is a relative definition. So let me assure you that yes the dividend payout will be better. It is not my prerogative to say how much better, how much not better, that is up to the wisdom of the board. But I expect the dividend payout for FY '25-'26 to be better than FY '24-'25. And it is not a differential of INR5 rupees kind of a thing. We may give you a better one.

Lakshminarayanan · Tunga Investments

Yes, thank you sir. Sir some of the return metrics for the company, we see that it's currently trending downward. Predominantly because of lower profitability from incremental capacity. Got it. Sir my question is slightly different. I mean, I understand your point. So now our ROCE or ROEs are trending downwards over a period of time. Given this trend, what is the primary metric the company prefers to evaluate its long term performance?

No, my friend. Sorry. Please let me correct you. The profitability absolute number has gone down because we had by choice taken a value over volume path. Please understand. We have achieved the convergence vis-a-vis say UltraTech on per bag prices. So it is not that, the capacity utilization has substantially affected my profitability. It was my design that it had lower volumes to better my prices which had affected the profitability. One second my dear friend. Let us understand. 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. On the other hand, I am committed to add on capacity to 80 million tons. So what do I do? I have to bear the pain of rather inefficient cash utilization in the form of treasury, till I formalize my plan to have major capex. For the first time in my career, I think, I have spoken of a INR400 to INR500 crores capex visibility in next financial year. We had never done that. But then the demand scenario is such that I cannot give you a firm commitment on when my capacities will come up. As soon as the capacities come up the the return on cash of 4% will vertically jack up the ROCE or ROE.

Rajesh Ravi · HDFC Securities

Hi sir, just a follow up question. On the realization which you explained that you have bridged the gap with UltraTech, can I believe that is visible in numbers. When I compare yours with the like-to-like numbers of UltraTech, in last one year while your competitor has shown a INR50 rupees decline, yours realization has gone up by INR100 rupees. However, if I look at the margin front, your margins have been more or less flattish year-on-year, while the competitor had seen a margin upswing, both on a year on year basis on a two year basis. So is it like you have maintained your pricing? And sir just on the adjusted for the labour cost still your employee cost is higher by INR20 crores quarter-on-quarter. And sir lastly just on the UAE business could you make it a practice to in the press release only to share the volumetric and the numbers in AED. And sir lastly could you repeat the capex number for full year and next year what are you targeting?

Ravi, one second. Fixed cost recovery is completely dependent on capacity utilization, that you appreciate? To catch up on the value terms, I had sacrificed volumes. So my fixed cost recovery was less. So my margins dropped. Now if I play intelligently, my fixed cost recovery will improve and my margins will also improve. 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. My dear friend, what happens if I increase my capacity? Exactly. I will certainly give a thought to this. Give me one quarter, let us see what I can do in next quarter. If I can I will certainly do that. This year I'll be doing INR2,000 crores. I've already completed INR1,500. I will be doing about INR500 crores in this quarter. Means January-March. One second. 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. But I am putting a caveat that, this is only because I am not firmed up my plan of adding up further capacity. If that gets fructified the number will substantially change. Yes. I don't think we will go beyond 72 million ton which we will achieve by March '26.

▸ Prepared remarks (3 blocks)
'As per my past practice, I shall not be making an opening statement as all the numbers are with you in the form of results. We may start the Q&A to use the time more efficiently.' MD Neeraj Akhoury was absent from the management line-up — first call without him in this brief window. Bhandari's framing throughout the call: value-over-volume strategy since October 24 narrowed price gap with UltraTech from INR30 to INR15 a bag. December volumes 3.3 mt (vs November 2.7 mt); January in line with December. Q4FY26 guidance 9-9.5 mt. RMC at 19 commercial plants, target 45 by September 2026. UAE numbers not in press release this quarter. MCA Section 210 inquiry surfaced for first time — characterized as routine.
Q3FY26: Volumes 8.7 mt; Realization Rs.4,652/ton (vs Dec '24 Rs.4,554; Sept '25 not provided in call). Lead distance 446 km. Trade share 65%. Blended cement 65%. Fuel cost Kcal Rs.1.56 (lowest in industry). Renewable energy 61%. Pet coke 76% (Q3) vs coal 6% + balance alt fuel. Road-rail 88-12. Regional sales: North 53 lakh tons (61%), East 23 lakh tons (26%), South 11 lakh tons (13%). Capex YTD Rs.1,500 cr; Q4 expected Rs.400-500 cr; FY26 total Rs.2,000 cr. FY27 capex visibility INR400-500 cr (RMC 26-30 plants @ INR5-6cr each = INR150-200 cr; railway sidings INR200-250 cr; routine INR50-100 cr).
'For the first time in my career, I think, I have spoken of a INR400 to INR<strong>500 crore</strong>s capex visibility in next financial year.' 80 MT 'by FY29 may get deferred or may culminate is completely dependent on how the demand pans out in FY26-27.' Cap planned at 72 mt by March '26. Net cash ~INR6,000 cr free cash. Power capacity 1,137 MW (503 thermal + 634 green; WHR 265 + Solar 314 + Wind 56). RMC 19 plants → 45 by Sept '26 (45% captive consumption; INR71 cr quarterly revenue). Premium share 21-22% (defined per company classification). Labour code provision INR56 cr in employee cost (Note 3 of result). FY27 depreciation INR1,600-1,700 cr. Dividend FY26 better than FY25 (not just INR5 differential).
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