Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Cement manufacturers cannot ignore this region - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 30, 2010

    Cement manufacturers cannot ignore this region

    Recently, we had interacted with a few cement manufacturers from the northern region. Here are the key takeaways.

    The growth so far...
    The northern region has witnessed an average of 9% growth in dispatches in the past 5 years. This has been led by focused investments in the real estate sector, increased urbanization and infrastructure build up.

    Slower growth in dispatches in the recent past could be attributed to slow economic growth. Economic slowdown not only impacted demand but also led to delay of upcoming projects, which further impacted volume growth. However, this was a short term impact. With signs of economic recovery and improvement in consumer sentiment, demand for goods and services has picked up. Cement, which is a basic construction material, has reported near double digit growth towards the end of CY08. Since then, this double digit growth has been sustained.

    Northern region Unit FY05 FY06 FY07 FY08 FY09
    Capacity m tonnes 28 31 34 47 50
    % of industry % 18.2 19.4 21.4 23.9 22.7
    Growth in consumption % 6.1 11.7 10.3 12.1 4.8

    Source: CMA

    The primary reasons for the same have been that a lot of infrastructure is being developed in the northern region for Common Wealth Games to be held in July, 2010. Now one would wonder, what would be the scenario post the Common Wealth Games! Will the growth decelerate? If not then what would be the other factors that would drive the regional demand for cement?

    What we deciphered from our research meetings with northern players is that growth in demand is sustainable. What would primarily drive the regional growth is infrastructure build up, housing demand, replacement demand and industrial demand.

    Infrastructure build up: The government is infusing money to build urban infrastructure in and around Delhi and Rajasthan. Infrastructure in the capital city is taking place in light of the Common Wealth Games and to support tourism sector growth. In general too there is need to upgrade and sustain infrastructure of the capital city. Rajasthan is one of the major producers of cement and nearly accounts for over 15% of the cement output within the country. This is mainly because of the region being rich in limestone reserves. Timely availability of raw material is also a key factor for cement manufacturing. Also, the government is expected to infuse Rs 140 bn to augment infrastructure facilities within the state. This would further boost demand for the commodity.

    Industrial and service sector growth: The northern regions are attracting corporate investors. In the state of Uttar Pradesh ITes and real estate sector is expected to receive an investment of around Rs 25 bn. Moreover, power and utility companies have planned huge capex; organised retail players are spreading wings in Tier II and Tier II cities and small towns.

    Also, huge cash and carry formats (Wal-Mart) are being planned. To build plants, retail outlets, corporate buildings, cement is consumed as it is a key construction material. Apart from this concretization of roads has further given a fillip to the demand for cement. Even to enable transportation, a well constructed path is necessary. This is how commercial and industrial sectors are driving demand for cement in the northern region.

    Thus, planned infrastructural investments, and industrial and commercial growth would continue to drive the demand for the commodity in the long run. This is over and above the housing demand and replacement demand that the region would witness. Moreover, with urbanisation and rising disposable income, nuclear family concept is becoming popular. Apart from rising population, changing preferences would also support growth of construction material. One must also note that with rise in population, apart from housing demand, the demand for hospitals and schools is also set rise. On these counts, the northern region is expected to sustain around double digit growth over the medium to long term.



    Equitymaster requests your view! Post a comment on "Cement manufacturers cannot ignore this region". Click here!


    More Views on News

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    ACC: Jan-March Quarter Sales up 9% YoY, Margins Dip (Quarterly Results Update - Detailed)

    May 4, 2017

    Expanded capacity results in topline growth during the quarter ended March 2017.

    ACC: Demonetisation Takes Toll on Volumes (Quarterly Results Update - Detailed)

    Feb 20, 2017

    Demonetisation hits cement demand during the quarter ended December 2016.

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 22, 2017 (Close)


    • Track your investment in ACC LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts