Rajendra Chamaria, Vice chairman and managing director, Star Cement
Image: Amit Verma
Delhi, May 1986. It was an outrageous idea. “There was no Google search. So that was the only way to find out,” recalls Rajendra Chamaria, who scoured the serpentine bylanes of Daryaganj for hours on a scorching Sunday, and finally found the book. A small cement plant in Jaipur was up for sale, and a young, third-generation entrepreneur—Chamaria’s family has been in the business of timber and manufacturing of concrete sleepers for railways in the Northeast—sniffed an opportunity to cast a separate identity for himself. Chamaria, who graduated in Assam and joined his father in 1979, got a cursory glimpse into the nuanced world of limestone, clinker, cement, mortar and concrete through the book. “It made me familiar with cement,” he says. “There was some kind of instant bonding.”
Well, bonding bred curiosity, and aspiration. Armed with the rudimentary and theoretical knowledge, the ambitious founder started building a concrete castle in the air. A week later, he dashed to Jaipur, bought the plant which was barely functional, got it fixed, and started the pilot. Though the venture trudged through the formative years, it gave Chamaria the much-needed operational insight, and encouraged him to take bigger and bolder bets. A few years later, in the early 1990s, he set up another plant, in Himachal Pradesh. Though the input—in terms of intent, investment and commitment—was bigger than the Jaipur gambit, the output remained the same. The plant had a muted growth, which made Chamaria wonder if he was ploughing the sand. “I knew I was missing something,” he realised.
The answer, interestingly, was neither in the book, nor with Google. The secret lies in going back to the roots of any venture. In Chamaria’s case, though, the missing puzzle could only be traced by going to the roots of the family business. He explains. There are at least two fundamental things that one must try to figure out before zeroing in on any location to roll out a business. “Is there a market or are raw materials readily available,” says Chamaria
, whose forefathers migrated from Rajasthan to Assam over one-and-a-half centuries ago, and built a sizeable timber empire in the Northeast.
Chamaria’s father too matched both the criteria. After a partition in the family business, Chamaria’s father relocated to a remote corner of Arunachal Pradesh in 1971, and started rebuilding the timber business. What helped him flourish again was a massive market and abundant raw material. “He ticked both the boxes,” he says. Jaipur and Himachal Pradesh ticked only one box: Market. Chamaria quickly realised that his home turf—the Northeast—ticked all the boxes needed to build a successful cement empire. In the ’80s, the region was clamouring for infrastructural development, and there was no dearth of limestone, the main ingredient in manufacturing cement. Emboldened, and encouraged by the suggestion of an independent business consultant, the young founder decided to nourish his cement dream and start a plant in southern Assam.
The family, friends, well-wishers and industry observers were aghast at the move. They tried to temper the brash confidence of the young convert, and inject some realism into his ‘outrageous’ plans. To be fair to them, they raised the right red flags. First, the timber business made up over 80 percent of the revenue. Any move to shift energy into a new venture was laced with the risk of focusing less on the core. In fact, there was a strong argument in favour of expanding the timber business rather than letting it be on an auto-pilot mode. The second objection revolved around the supposed ‘smartness’ of the rivals who stayed away from the rough and tough terrain of the Northeast. “The bigger ones failed to crack it. You won’t be able to do it even in your wild dreams,” was another word of caution. Also read: Tata Communications' new avatar: Stronger, independent, profitable
Chamaria, though, brimmed with confidence. “It was brash confidence,” he recalls. The plant started, things moved at a rapid clip, but there was a small problem. Though limestone was in surplus, the high cost of logistics in bringing it to the factory evaporated the thin margin that the business offered. Another problem stemmed from the nature of the venture. A cement business is inherently capital and labour intensive. While Chamaria had the former, the latter—skilled as well as unskilled—started painfully grinding the founder. While the technical talent refused to relocate to the Northeast, the manpower within the state was not easy to rope in even after offering higher remuneration.
There were more roadblocks. The challenging terrain, coupled with the lack of a long track record in the business of manufacturing cement, and the complexities and inordinate delays in getting statutory clearances, posed their own share of hurdles. “It was immensely challenging,” recalls Chamaria. Reading a book and deciding to get into the cement business was quite akin to scanning a swimming manual and taking the plunge. It also taught the young founder the blunders in extrapolation. A successful past—Chamaria’s family had battled odds to make it big in the business of plantations—is no guarantee of a successful future. “I thought we had done it in the past, so we could do it again,” he says. The maths, however, was different.
Chamaria, though, didn’t give up. He roped in Sajjan Bhajanka and Sanjay Agarwal of CenturyPly as co-promoters, and started Cement Manufacturing Company (CMCL) in Arunachal Pradesh in 2001. Four years later, he ventured into Lumshnong, Meghalaya, and set up an integrated plant. Between 2005 and 2009, he established an additional grinding unit and a power plant in the state. And in 2016, CMCL was rebranded as Star Cement, and the next year the company got listed.
Fast forward to 2023. Star Cement has so far lived up to its billing. It has emerged as the largest cement producer in the Northeast region, with a dominant 23 percent market share; has built six manufacturing units—four at Lumshnong, and one each in Siliguri and Guwahati; and has managed to weave an extensive footprint of over 1,600 dealers and 12,000 retailers. The financial report card of the debt-free company looks glowing. Look at the numbers. From a revenue of ₹1,831.04 crore in FY19, the numbers have increased to ₹2,221.82 crore in FY22, and breached the ₹1,800-crore mark in the first three quarters of FY23. Profit during the same period stands at ₹304.97 crore, ₹246.77 crore and ₹95.17 crore, respectively.
Analysts decode the thumping performance of Star Cement. Strong entry barriers created by the regional demography supports the company in maintaining market share, underlines Axis Securities in its brokerage report last November. While access to limestone mines within 2-3 km of a plant’s location enables competitive logistical costs, a strong dealer and distribution network in the operating regions helps in extensive market coverage. Also read: CK Venkataraman: On a mission to make Titan every woman's best friend
Star’s regional clout, in fact, is set to be enhanced with its capacity expansion plans. The cement brand plans to hike production in the region from 5.4 mt to 9.4 mt by FY25, and has also reportedly earmarked ₹2,000-2,200 crore for expansion related capex over the next two-three years. The move to add 4 mt of integrated cement capacity to consolidate its presence in Assam and Meghalaya comes at a time when the central government is aggressively pushing its infrastructure play in the seven Northeastern states.
Another plus for the company has been low per capita cement consumption in the Eastern regions: 131 kg versus pan-India’s average of 230 kg. No wonder, last year, demand increased by 17 percent in the Northeastern regions against an all-India average of 8 percent, Star Cement pointed out in its latest annual report. The move to expand its presence in Bihar and West Bengal, too, is seen as conducive to fixing its overwhelming geographic concentration of revenue. “We see stronger earnings visibility for Star Cement, and geographical diversification will further de-risk the company’s earnings,” underlined a recent brokerage report by BOB Capital Markets, a wholly owned subsidiary of Bank of Baroda. With the industry cost structure staying elevated, competitors will find it difficult to tap the far-flung Northeast market without a base in the region, it pointed out.
Marketing and branding experts highlight another strategy which helped Star Cement grab mindshare as well as market share. “There are times when David transforms into a Goliath,” reckons Rajan Gahlot, assistant professor at Delhi School of Economics. And this can only happen when David is not only aware of his strengths but also plays on them. “Star Cement sharply focussed on a region, and the Northeast became a big home advantage,” he says.
Once Star demarcated its territory, it became easy to build deep moats. Energetic word-of-mouth marketing, sharp communication, aggressive brand building, favourable industrial policy of the states and a steady expansion in retail and manufacturing footprint laid the foundation for Star’s regional dominance. “History and geography played a part in Star’s success,” reckons Gahlot. While a history of successfully running timber operations gave it a comprehensive familiarity with the area, population, challenges and opportunities, a hostile terrain ensured the brand stayed away from directly confronting its big rivals.
Despite heady progress made by Star, challenges remain. The biggest, Gahlot points out, would be to resist the temptation of moving across India. “This would be disastrous,” he says. Cement is not a copy-and-paste business segment. All the variables—market, raw material, freight and talent—must fall in place. Though it makes ample sense to expand into neighbouring Bihar and West Bengal, the brand must ensure it doesn’t spread itself too thin. There is a reason why the big boys couldn’t make it big in the Northeast. “Star must remember this when it steps out,” he says.
Chamaria reckons he is aware of the challenges, but he prefers to focus on his strengths. “Every outrageous plan starts with brash confidence,” he says, alluding to the beginning of his entrepreneurial journey of cement. Despite seemingly insurmountable odds, the company kept moving ahead. “You can’t survive in the business of cement if you don’t have a concrete mindset,” he reckons. Though he did encounter his fair share of naysayers and critics who always questioned him, Chamaria too had a counter-question for the sceptics. “They always asked ‘what if it fails’, and I replied by asking ‘what if it succeeds’,” he smiles, adding that it’s good to look at the downside. “But the magic happens when you go with the upside,” he says.
(This story appears in the 31 March, 2023 issue of Forbes India. To visit our Archives, click here.)