RMC Market Grows in Fits and Starts

RMC Market Grows in Fits and Starts

The recent exit polls that have predicted that the BJP will emerge as the leading party in Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi, have brought some positive feelings back to the stock market, as its prime ministerial candidate is perceived by some quarters as being more business-friendly and reform oriented, and therefore, will be better equipped to script a new trajectory of growth and bring the economy back on the growth track. However, a more cautious and seemingly reasonable view from various stakeholders seems to suggest that the exit polls cannot be taken to be a near perfect indication of the things to follow, especially where the General Election is concerned.

As I write this, there are still five more days to go for the actual results of the state elections; what is more important, and what India Inc is really looking for, is a stable government that is willing and strong enough to ease out and implement the de-bottlenecking processes. So the impact of the exit polls in the long term doesn´t seem to hold much relevance, especially since the General Elections has a record of throwing up last-minute surprises.

Ready- mix concrete, which is slowly becoming an important constituent of any construction activity, is expected to fuel the growth of the cement industry. As per the inputs INDIAN CEMENT REVIEW has collected, the current market size of RMC is pegged at around Rs 6,000 crore approximately, whereas the current production of RMC is around 15 to 20 million cu m a year as against a total concrete market of approximately 300 million cu m a year. Even though in 2012-13, the overall economic slowdown, sluggishness in construction activity, liquidity crunch and policy hurdles resulted in a lower demand growth of concrete, the curve is further to sharpen, given the ambitious infrastructure projects to be taken up. So, from 20 million to 300 million cu m, there is a lot of catching up to do.

In developed markets, nearly 80 per cent of cement consumption is in the form of ready- mix concrete whereas in India, it accounts for less than nine per cent. India, which has close to a thousand RMC plants, is expected to clock a ten per cent YOY growth in number of the plants. A recent Crisil research report projects the penetration of RMC to be 14 per cent by 2017-18 from the current level of 9 per cent. The infrastructure sector accounts for 17 per cent of the total RMC demand; at the same time, of late there has been more focus on the Tier 2 and Tier 3 cities, and a perceptible shift shows many an entrepreneur foraying into the market with small capacity plants that could meet the local demand. However, the prevailing tax structure is really a deterrent. The government needs to come up with some incentive schemes, especially for small customers who are willing to install small RMC plants.

It´s also heartening to note that the major cement players have already started diversifying their product bouquet; instead of selling cement, these companies are coming out with value-added products in the form of a variety of performance and application- based concretes that further improve the quality and durability of a structure or the end-product. Some have even come up with unique product offerings that enable customers to order ready- mix concrete in small quantities. This innovative approach has really caught on and will further augment the growth of the RMC industry.

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