Though there is a fair growth anticipated in the Indian cement industry in the coming years starting this fiscal, no such sign is visible so far. However, with more consolidations predicted in future, the industry is positive on the growth prospects in future.
According to a CLSA research report, the cement market growth is below the long term average. ´After a strong start to FY15, cement demand disappointed through the second half and for the fifth consecutive year, with growth below the long-term average of over 8 per cent. Urban housing and infrastructure have yet to see any meaningful pickup and we estimate a slight YoY decline in demand during March,´ the report says.
The report estimates a slight decline in March 2015 industry volumes. Accordingly the estimate is FY15 growth at 6 per cent YoY with first half at 9.5 per cent and second half at 2.5 per cent.
There is a sharp difference in cement prices across the regions with huge price rise in south while it remains weak across other regions, especially in the north. According to a review by HDFC Securities on cement industry, ahead of the Q4 results, the signals from the industry are not too encouraging. The review says, ´Indian economy is taking its own time to pick up steam while Indian politics is throwing up some anticipated and some not-so-anticipated challenges. Turmoil in commodity and currency markets continues.´
With the CCI giving the clearance to Holcim-Lafarge merger, has open doors to more such consolidations in the industry. According to reports, Jaypee Group is in talks with Heidelberg Cement and JSW Cement to explore a possible joint venture. The report stated that the plan envisages a separate joint venture entity which will house around 20-22 million tonne of Jaypee´s operational units spread across Uttar Pradesh, Himachal, Uttarakhand, Andhra Pradesh, and Chattisgarh. Jaypee Group is in talks with Heidelberg Cement and JSW Cement, to form a joint venture which will control the majority of its cement plants, the report says.
UltraTech Cement is also planning for more acquisitions. As per reports, the cement major is looking at a share-swap proposal to merge the cement division of B K Birla-owned Century Textiles & Industries with it at a valuation of Rs 10,500 crore. According to market information, shares of Dalmia Bharat gained over 8 per cent in February, touching to Rs 500, after the company said it has increased stake in OCL India, one of the largest cement entities in Eastern India with plants in Odisha and West Bengal. Dalmia Cement (Bharat) has increased its stake in OCL India from 48 per cent to 74.6 per cent.
As a part of the consolidation and growth of the cement sector, the Dalmia Bharat Group has been strategically acquiring assets and creating new assets in Southern, Eastern and North-Eastern India, according to the company. The company said the move would help in creating better operational synergies across the Group´s footprint. It is a step forward in the commitment towards aligning all stakeholders´ interests and overall value creation.
For Ramco Cement, sales declined in Tamil Nadu, Karnataka, Andhra Pradesh, Telengana and Odisha, while there was an increase of sales in Kerala and West Bengal. Ramco Cements expects to commission a grinding unit in Vishakapatnam this month.
Cement demand in the country continued to remain lukewarm in March 2015, but according to analysts, it is expected to see a revival from the July-September quarter of current fiscal on the back of steep increase in allocations to infrastructure spending. According to a brokerage firm, the weakness in the cement demand has been so severe during March that cement companies have been compelled to cut their despatches by 20-30 per cent. Increased government spending is expected to stimulate private spending, which is a positive outlook in the difficult times the industry is currently passing through.