Shree Cement Ltd’s share of green power in total electricity consumption at 60% in the December quarter (Q3FY26) was among the highest in the industry. The reading for rivals UltraTech Cement, Ambuja Cements, and ACC was 42.1%, 36.9%, and 31.3%, respectively.
Increased thrust on green/renewable power has given Shree an edge on cost optimization over other larger peers. The move is part of Shree’s plan to enhance profitability and boost pricing power. Fuel cost at ₹1.56/kcal in Q3FY26 was at an industry-low, the management said in the earnings call, and does not expect to exceed ₹1.80/kcal.
Shree has been consistently ramping up its green power generation capacity, which stood at 634 megawatts (MW) at December-end, up from 582MW at March-end. The current capacity comprises 265MW waste heat recovery systems, 313MW solar energy, and 56MW wind energy.
Shree is following the value over volumes strategy, adopted to narrow the pricing gap with peers. Interestingly, this was a sharp contrast to rivals who were rapidly chasing volumes. The management said it has successfully reduced the pricing gap with competitors such as UltraTech from approximately ₹30 per bag to ₹15 per bag. While Shree intends to maintain this pricing differential, it could shift focus towards volume growth.
Chink in the armour
Still, muted volumes suggest market share loss, which is an irritant. In Q3FY26, year-on-year volume growth was flat at 8.7 million tonnes (mt) versus the industry’s high single-digit growth. Loss of production due to disruptions in operations at the Baloda Bazar plant, Chhattisgarh, and subdued demand in the first two months of Q3 hurt volumes. Shree’s Q4 volume guidance is around 9.5mt. This implies FY26 volume would drop 3% year-on-year, as against earlier guidance of 4% growth, cautioned HDFC Securities. Further, the cut in FY26 capex guidance to ₹2,000 crore from ₹3,000 crore was disappointing.
While Shree has been adding incremental capacity, low utilization levels are feared to hamper competitiveness and accentuate market share loss. Lower volumes tend to lower the capacity utilization rate. Although higher sales of premium products and increased use of green energy are margin levers, lower utilization could offset some benefits.
“Over the past three years, Shree’s capacity utilization rate has gradually declined to 60% in 9MFY26, compared with 69%/67%/64% in FY23/FY24/FY25, and remains below the industry standard of ~70% for a larger player,” said Yes Securities.
Shree’s shares are down 7% in the last six months and trade at FY27 EV/Ebitda of around 17x, a discount to UltraTech’s nearly 20x multiple, Bloomberg data showed.
