Ultimately cement is a commodity
Dhimant Mehta is one of the important distributors from Mumbai is in conversation with ICR. Well known for his business acumen. He is also office bearer of Cement Stockist & Dealers Association. Bombay.
Please introduce your firm to our readers.
We are into the cement business from the last three generations. My father along with his partners started the business in 1955. We ventured into the cement and steel business in 1960. I got associated with the cement business at the age of 19 in the year 1982, when cement was under partial decontrol. Apart from cement, we deal with fly ash, GGBS, RMC AAC blocks, cement-based mortars, etc. We deal with UltraTech, J K Lakshmi, Binani, BK Birla Group, JSW and Mehta Group.
What is the sentiment in the market right now? Please comment on housing, commercial space and infra development in the country.
The economy is on the slow track but I find some movement upward in the last one to one and half months. There is enhanced buying in the neighbouring states like Gujarat, Rajasthan. But in Mumbai, demand is stagnated at 6.5 lakh tonnes per month which is at 2012 levels. In the last few years, degrowth has also happened. In the current fiscal, majority of demand is coming from Mira, Dahanu, Raigad and other peripheral areas around Mumbai. Some of the projects with Brihanmumbai Municipal Corporation (BMC) are held up.
In case of Real Estate, many projects have been launched but affordability is a big question. Even in B and C class cities demand is held up. The scene on commercial space is better in Mumbai, but in 2011, this sector was stagnant so builders moved to residential market. Now it is the other way around. The number of infrastructural projects like Metro rail, coastal road and new international airport will spur the cement demand considerably. When all these projects take off in 2016, demand will certainly go up to 7.25 lakh tonnes per month.
Will the new business channels like E-commerce come to cement business also? What impact will it have?
E-Business portal can come to cement sector also. Cement, together with associated products, will make sense. It is more cosmetic in nature. It is a sort of window-dressing to create value for the company. It will not make a major impact on the business.
Cement is not available through unsecured credit. It is a multi-brand market and price is volatile. Manufacturers do not want power of pricing to move out of their hands.
The challenge for E-commerce is that nothing else is sold on credit like cement, it is a multi-brand market, price is volatile. Major producers are together, price is in the hands of the manufacturers.
To what extent there is impact of IT or electronics on the cement business?
IT is extensively used by the manufacturers. Our offices are connected with the manufacturers for placing orders and getting dispatch details. GPS is extensively used on trucks and bunkers. It has resulted in better transparency and higher efficiency at work.
What is the biggest challenge in distributorship?
The major challenge today is recovery of money. We have to coordinate with everybody in the channel link. The business can be managed only with enough financing power and better financial management.
GST, if passed, how far it will impact the cement business in the coming years?
Cement business would not be impacted with GST. It will improve the movement of cement from neighbouring states. There might be enhanced competition.