When the Bangurs of Shree Cement decided against selling their plant a decade ago, they took a risk that has since been well-rewarded
Benu Gopal Bangur
Chairman, Shree Cements
Age: 82
Rank in the Rich List: 35
Net Worth: $1.66 billion
The Big Challenge Faced in the Last Year: Slowing growth has put profitability under pressure; company has seen margins dip
The Way Forward: The Bangurs are going ahead with an ambitious plan to double cement capacity. So far the company has been restricted to North India but it is now looking to set up two units in Chhattisgarh
Nearly 10 years ago, the Bangurs were having a tough time running a two-mill cement plant in Rajasthan’s Beawar district. This was in 2002, after the market had gone through a four-year slump. Saddled with excess capacity, Shree Cement, their company, was hardly making any money. To compound its problems, it had borrowed money at 19 percent to fund expansion.
Managing director Hari Mohan Bangur got nervous and decided to look for a prospective buyer. They zeroed in on French cement major Vicat, which was looking for a presence in India and had valued the business at Rs 800 crore. Moreover, it was willing to do a 50-50 deal. Vicat needed a toe-hold in India while the Bangurs needed funds to repay the banks. The price seemed right and two sets of lawyers had vetted the agreements. “Spirits were high that night,” says Bangur. The papers were to be signed at 9 am the next day.
But the 61-year-old is a born fighter who still plays volleyball every day during Kolkata’s winters. “I knew there is nothing 50-50 in business. If I like the colour red and they like yellow, whose word prevails?” he says. “Plus, in time, my stake would get diluted and I would be left with nothing.”
So Bangur went to his father Benu Gopal (BG), now 82 and chairman, and asked for one more chance to turn things around. The way he looked at it was that there were takers for the company. Even if he couldn’t turn things around, they could always find a buyer a couple of years down the line. Vicat even raised the price, but his mind was made up. “My life is over, it is for you to take this decision,” Bangur recalls his father telling him. BG Bangur seems to have done well by trusting his son.
A decade later, Shree Cement remains firmly in his hands with a 10-fold capacity increase. Vicat, meanwhile, has had to partner with Andhra Pradesh-based Sagar Cements that barely manages to churn out 2.35 million tonnes annually compared to Shree’s 13.5 million tonnes.
Shree Cement has seen its stock jump from Rs 45 ten years ago to Rs 4,500 today. Simply put: A rupee invested in Shree Cements in 1985 would have appreciated at a rate of 28.5 percent a year. This has propelled BG Bangur to 35th on the Forbes India Rich List with a net worth of $1.66 billion (he was 34th with $1.7 billion last year).
What is it that makes Shree Cement a consistent performer? For starters, the market turned around sharply after 2003-04. More importantly, Bangur, who studied chemical engineering at IIT-Bombay, was able to make use of a pioneering technology in India. Add to that the complete operational freedom to his executives—he rarely travels to his plants—and you begin to understand why Bangur has succeeded where others faltered.
The Roots
The Bangurs belong to an illustrious Marwari business family from Didwana in Rajasthan. In the 1950s and 1960s, they were among the top 10 business houses in India, with interests spanning jute mills, tea gardens, textiles and shipping.
Cement was not part of the core family business. In 1915, Bangur’s grandfather went to Jamnagar where the maharaja offered him land and other sops to set up a cement plant. Digvijay Cements was born. (It has been sold several times since and continues to do business till today.)
During this period, the Bangurs operated as a joint family. In the 1970s, during the licence raj, some executives from Digvijay Cements suo moto went and applied for a licence to start a cement plant in Rajasthan. The owners continued to be unaware even as the executives received the licence. When they were finally informed, the promoters upbraided the employees saying the company was barely making any money, and they did not want to set up another cement plant. Defeated, the executives said they would get the permit cancelled, at which point they were given another tongue-lashing: “Humaara naam kharab karoge kya? (You want to ruin our reputation?).”
Construction began in the late 1970s. Prashant Bangur, Hari Mohan’s 33-year-old son and executive director, says delays were inevitable in those days. It took till 1985 to complete the plant and the company shipped out its first bag of cement in 1986.
Bangur came up with a three-brand strategy: Shree Ultra, Bangur and Rockstrong. While Shree Ultra and Bangur are in category B, Rockstrong is in category C. All three cater to Delhi, Haryana, Rajasthan and western Uttar Pradesh. In order to make the distinction clear, the company keeps the marketing and advertising functions separate; offices of the different brands are in different parts of Delhi; they use different advertising agencies as well. Depots, too, are kept separate.
(This story appears in the 28 November, 2013 issue of Forbes India. To visit our Archives, click here.)