The old office ‘para’ (area) or what is known as BBD Bagh is testament to the old businesses that were built in this part of the city, where once Kolkata’s elite thrived. While many offices have shifted addresses, one that continues to sit grandiosely amongst the old ones is the white heritage building where Benu Gopal Bangur’s family runs its show from, the owners of the third largest cement company in the country and one of the handful of billionaires from Bengal.
It was way back in 1977 that BG Bangur incorporated Shree Cement. In 1983 they commissioned its first plant in Rajasthan and in 1985 it began production. Until then a family business, in 1995 BG Bangur’s family gained full control of the business.
It is 2022, Shree Cement currently produces 46.4 million tonnes per annum, a massive leap from the mere 1.8 million tonnes per annum (MTPA) it produced in 2000. It is now present in Rajasthan, Haryana, Uttarakhand, Uttar Pradesh, Bihar and Chhattisgarh. Behind the steering wheel is 70-year-old Hari Mohan Bangur, who has been running the show along with his father since he graduated from IIT Bombay in 1975. Nineteen years ago, in 2003, HM Bangur’s son Prashant Bangur too joined the business.
Sitting in his sprawling office with a huge Cisco monitor on the table, HM Bangur talks about the pandemic. “We were all in panic and it is the first time we saw such a situation where plants had to be closed and nobody knew what will happen and how long it will last.”
As India businesses downed their shutters during a strict lockdown in March 2020, the first thing Bangur did was simple–calculate how long the company can sustain its cash if operations are restored post six months or one year. The stress test threw up a number, the calculations suggested that their cash pile would survive for the next three years. For a commodity manufacturing company that was a healthy sign.
But the next question was, was there a need to cut back on salary costs of employees and would they need to let people go? Bangur was clear that if they let go of talent today, they might not be able to hire good ones tomorrow. The employees stayed. Another thought that crossed HM’s mind was that if plant closure problems persisted it would take other companies down too. But their analysis showed that they would be able to survive through it. With enough cash in the bank HM was clear—people wouldn’t be let go. “In those pandemic days, our market share was a little better. And the consumption was low due to a real shortage of supply. But activity was low everywhere, so low production was also good enough to survive, that was the key,” HM says with a smile.
Shree Cement bosses believe that business is now back to normal as market demand at present is at an all-time high. Construction activities backed by infrastructure projects, state elections, and a general real estate revival is helping ancillary industry get back on its feet.
But he does repent one call that he made during the pandemic. Of not building capacity in this period. “One casualty which is of long term in nature that we faced during Covid was that due to the uncertainty we had to take a position on how the demand will move, how demand will sustain going forward. All the new projects were delayed and we were almost ready with all our expansion plans and capital expenditure, but Covid delayed our plans by about two years. We were uncertain about how to go ahead,” he says.
Now, as things have opened up, the company is back at full throttle with its capex plans and growing its capacity. Though he rues again that two years have been wiped out from the company’s growth path.
To embark on its capital expenditure plans, in November 2019, the company had raised Rs 2,399.99 crore through a qualified institutional programme at a share price of Rs 19806.46. By January 2020 it was becoming clear that the coronavirus was taking over the globe and things were slowing down. But nearly two years later, post fund-raising in September 2021, the company announced to the bourses that it is pumping capital as part of its capex expansion plan. The company has announced it will invest Rs 4,750 crore until FY 2024. It has commissioned an integrated cement plant at Nawalgarh, Rajasthan, which will be operational by December 2023. The Rajasthan plant consists of 3.5 MTPA cement and 3.8 MTPA clinker facility. The capex also includes a 3 MTPA clinker plant near Purulia, West Bengal.
As on April 15, Shree Cement’s shares were trading at Rs 25,369.70 apiece. While it has tapered it gains from Rs 30,811 per share from the same period last year, the third largest cement manufacturer in the country has seen a consistent recovery of its shares, which were at Rs 21,996.74 per share on March 11 this year.
According to JM Financial’s analyst report in February 2022, the brokerage expects Shree Cement to outperform its peers over the medium term. In addition, it expects the company to generate a healthy return on invested capital (RoIC) of over 20 percent as the new capacities ramp up operations. “We continue to value Shree Cement at 18 times economic value of equity (EVE) blend of 10-year and 5-year median multiple.” EVE is a long-term economic indicator of cash flows.
To be fair, the cement firm’s earnings before interest depreciation tax and ammortisation (EBIDTA) for the December quarter stood at Rs 826 crore, a decline of 24 percent on a year-on-year basis. This was primarily attributed to rise in power and fuel and freight costs on a per tonne basis. Higher commodity prices didn’t help the cause either. But even with the decline, Shree Cement managed to sustain industry leading profitability in a challenging quarter that saw most companies post a higher decline in margins.
But where does HM Bangur see Shree Cement over the next few years? “We want to grow 1.5 times the industry growth rate, that’s all.”
According to analyst reports, Shree Cement wants to build a capacity of 80 MTPA by 2030 exploring new geographies through both the organic and inorganic routes. Apart from the clinker plant which it has commissioned in Bengal, it is waiting for environmental and other clearances for more in the area. Besides it is also putting up a new plant in Andhra Pradesh–the unit orders will be decided this month and it will take two years to complete.
With climate change and sustainability at the heart of how businesses are being reimagined, Shree Cement too is pursuing ways to reduce its impact on the plant. Bangur says matter of factly, “By nature cement manufacturing is a dirty process and a lot of energy is consumed in making cement. The raw material has to be disintegrated, which also ends up releasing carbon dioxide. But cement is needed for modern living and without cement things will not work. So, the point is, how to make cement with the least amount of carbon dioxide or greenhouse generation?”
The answer lies in the fact that the Bangurs have invested heavily in putting up a waste heat generation unit. Today, Shree Cement consumes more than 55 percent of its power from wind and solar units which helps them reduce its carbon footprint. It is now making more of composite cement as part of its product mix where apart from fly ash, slag is also utilised, which helps in carbon reduction as part of the clinker manufacturing process. It has hired PwC to quickly adapt and incorporate newer ideas which will help them achieve their sustainability goals. “Our aim will be to remain much lower than the world average as far as carbon emissions are concerned,” says HM.
Prashant, who oversees new project acquisitions, scouts for land, as well as works with his father round the clock to keep the ship running effectively, adds, “By reducing our carbon footprint we are also cutting down our cost because it is not only pollution, burning fuel will become very costly. Thus fuel reduction, energy reduction is what we are aiming for.” For example, at their plant in the United Arab Emirates over the last few years they have seen the energy cost come down by 20 percent. Similar effects can be seen at their other remodeled projects, saving around Rs 400 per tonne thanks to production by green energy initiatives as compared to their traditional plants.
At the office, even as Prashant is going through the daily production figures, a call is patched with Benu Gopal Bangur, the man listed on the Forbes Billionaires list this year with a net worth of $7.6 billion.
At 91 years, one would expect him to sit at home and relax, but that’s not how he works. He is on the call from their Dubai office and says, “I am at work.” When asked about his being on the list, Bangur senior, who walks 6 km a day, says much of the noise of being a billionaire is usually when others say it, he is busy working on his own things.
The cement czar from Kolkata derives most of his wealth from his majority shareholding in the company he founded 45 years ago. The promoter family owns 62.55 percent stake in the company as on December 30, 2021.
“Overall, when we see the totality of the things till now, things have worked in our favour, because for every failure many unintended successes have also come our way. It is a mixed bag of luck but one thing which will always be there, is to keep trying new things, it is only when you keep trying new things you will learn,” says HM Bangur on a parting note even as he points out one of his Sanatan Dinda paintings that he really loves—one of Maa Durga—that adorns the hallway.