Cement price likely to increase by Rs 15-20 per bag, says Crisil

Retail prices of cement is likely to rise again by another Rs 15-20 over the next few months and touch an all-time high of around Rs 400 per bag this fiscal, rating agency Crisil said on Thursday in a sector note.

The rise in price has been attributed to inputs commodity cost pressure such as coal and diesel supported by rising demand.

Crisil in its report said amid rise in price the earnings before interest, tax, depreciation, and amortisation (EBITA) of cement makers will decline by Rs 100-150 per tonne this fiscal because of high input costs.

The recent rally in prices of imported coal (up more than 120 per cent on-year in the first half) and petcoke (up 80 per cent) is likely to increase power and fuel costs by Rs 350-400 per tonne (up around 40 per cent on-year) this fiscal as a large part of the cost inflation is yet to be absorbed, the note stated.

Cement sales volume is expected to rise 11-13 per cent this fiscal, albeit on a low base. This will largely offset the impact of cost pressure on cash accruals and keep credit profiles stable, the agency said, analysing 17 cement companies, which have a volume market share of 75 per cent in India.

Cement volume growth will be driven by demand revival across segments ? infrastructure, housing and industrial ? as the impact of COVID-19 wanes.

Cement demand saw a robust growth of over 20 per cent in the first half of this fiscal, but should moderate to 3-5 per cent in the second half, primarily because of a high-base effect, translating to 11-13 per cent growth for this fiscal, it said.

At the regional level, South India witnessed the steepest hike of Rs 54 per bag in October over the previous month, followed by the central region with Rs 20 per bag. The north saw a hike of Rs 12 riding on healthy demand, while in the west the price increased by Rs 10 per bag. The east saw a moderate increase of Rs 5 per bag.