The Indian cement industry is witnessing a trend where major players are diversifying into adjacent businesses. For instance, the Aditya Birla Group has entered the paints industry through Grasim, while Adani has expanded into cement-consuming industries. Similarly, JSW has ventured into steel production. However, Shree Cement has chosen to focus solely on its core business of cement production, with a secondary focus on ready-mix concrete (RMC). The company’s management believes that diversification can be risky, as it may lead to losses in other businesses, while the main business drives most of the profits.
Shree Cement’s strategy is to concentrate on cement and RMC, which is essentially a derivative of cement. The company is bullish on the growth prospects of RMC in India, where currently only about 8% of cement is sold as RMC. In contrast, countries like the UAE have a much higher percentage of RMC sales, ranging from 70-80%. The company believes that India should adopt the RMC model, as it is the future of cement sales. RMC allows for more efficient sales of cement, and Shree Cement is well-positioned to capitalize on this trend.
The company’s focus on cement and RMC is driven by its belief that these businesses are closely related and can drive growth and profitability. By concentrating on its core strengths, Shree Cement aims to maintain its competitive edge in the Indian cement industry. The company’s management is confident that its single-minded focus on cement and RMC will yield better results than diversifying into unrelated businesses. As the Indian cement industry continues to evolve, Shree Cement’s strategy of focusing on its core business and expanding into RMC is likely to pay off in the long run.