A worker stands on scaffolding as he trowells cement at the construction site (Photographer: Kuni Takahashi/Bloomberg)  

Why Cement Makers See Signs Of Revival 

India’s cement industry, weighed down by excessive supply and low demand for at least three years, is witnessing signs of revival on demand from the government’s infrastructure push, and low-cost and rural housing.

Capacity utilisation rose in January-March and April-June quarters for most cement makers. Even in the seasonally weak September-ended quarter when construction stops during the monsoon, the utilisation level averaged 70 percent compared with 65 percent a year earlier, according to data compiled by BloombergQuint.

The cement industry, after three years of poor growth, started showing signs of recovery from the second half of the last financial year, India Cements Ltd. said in its investor presentation. That, it said, was driven by increasing demand from infrastructure projects, roads, irrigation projects and the government’s push for affordable housing.

The industry’s capacity addition of 93 million tonnes in the last five years was higher than the incremental demand of 53 MTPA during the period, according to UltraTech Cement Ltd., leading to excess supply and lower capacity utilisation. India’s largest cement maker said an 81-million-tonne increase in demand is expected to outpace expansion of 51 million tonnes of cement capacity between financial years 2018 and 2021.

That will push the industry’s capacity utilisation to its highest in seven years by March 2019, according to UltraTech Cement. The company’s utilisation level fell year-on-year, but the numbers are not comparable as that was largely because it acquired units of Jaiprakash Associates Ltd.

Capacity Expansion Plans

Anticipating higher demand, most cement makers announced fresh capacity addition in their September-quarter earnings. That was led by north-based Shree Cement Ltd. and South-based Orient Cement Ltd. India Cement too announced plans to expand production ability in the north.

Who Stands To Gain

Revenue of cement makers expanding production capacity is expected to grow at a faster pace by financial year 2020, consensus of analyst estimates tracked by Bloomberg suggests.

Sales of Dalmia Bharat, Shree Cement and India Cement are expected to grow more than pan-India peers like UltraTech Cement and ACC Ltd. Lack of expansion means JK Lakshmi Cement Ltd.’s top line won’t grow as fast.

Orient Cement’s revenue growth is expected slow down despite better utilisation levels and capacity expansion, according to estimates. The company will commission fresh capacity towards the end of financial year 2021, said to a note by Systematic Institutional Equities, and its realisation will improve a year later.