INSUBCONTINENT EXCLUSIVE:
By DK AggarwalIndia is the second largest cement producer of globally
The industry has added 110 million tonnes of capacity in last five years.
However, financial year 2017-18 has been a relatively tough one
for the industry due to a ban on sand mining, use of pet coke and diminished market concentration of industry leaders.
Slower progress in
infrastructure projects and low offtake from housing and industrial users also slowed down growth.
However, with general elections nearing,
it is expected that there would be a greater thrust by all agencies to marquee projects such as Bharatmala, the Smart Cities Project and the
Housing for All by 2022 scheme.
Cement demand is expected to grow by 6-7 per cent to reach 307 million tonnes during FY2018-19
Higher government spending on infrastructure, pent-up demand, particularly in rural housing and low-cost housing, and rising per capita
income are expected to spur this growth.
Infrastructure projects, especially in the areas of power, telecom, irrigation, roads, metros and
railways, besides dedicated freight and industrial corridors are together expected to generate strong demand for cement.
As per the recent
Budget announcement, the government is planning to develop two defence industrial production corridors and has already increased budgetary
allocation for infrastructure to Rs 5.97 lakh crore
Early estimate of relatively better and widespread monsoon this year and increased spending on affordable and low-cost housing are expected
to have favourable impact on cement demand.
With the infrastructure sector enjoying priority status under the NDA government, the cement
and acceptance of manufactured sand, popularly known as M-sand in various regions, is expected to aid construction activities
It is expected that in order to meet rising demand, cement companies will add 56 million tonnes capacity over the next three
years.
Recently, UltraTech Cement acquired Jaypee Cement while Orient Cement took over two entities, Bhilai Jaypee Cement and Nigrie Cement
Grinding Unit.An improvement in utilisation rates of the newly acquired capacities and fresh capacity additions by these players would also
demand.
The expected increase in cement consumption is not yet factored into the stock prices
Stocks like as Ultratech Cement, Ambuja, ACC can be a good play on this theme for long-term growth.
