The fact is with or without foreign competition, Indian cement companies have traditionally generated low return on capital.
| Financials | ||||||
| Cement companies | Capacity (mn tonnes) | Sales (FY04, Rs cr) | Net profit (FY04, Rs cr) | Market-capas on 20 Jan 05 | ROCE (%) | ROE (%) |
| Grasim | 15.50 | 5221.75* | 779.26* | 11743* | 13.81* | 21.61* |
| UltraTech | 17.50 | 2262.84 | 200.24 | 4151.00 | 1.48 | 3.61 |
| ACC | 18.20 | 3283.98 | 200.24 | 6113.00 | 7.47 | 14.79 |
| Gujarat Ambuja | 12.50 | 1731.76 | 222.09 | 7601.00 | 6.59 | 13.74 |
| India Cement | 5.00 | 1003.63 | -95.93 | 820.00 | -3.91 | -26.66 |
| * Includes non-cement business | ||||||
The reason is that for many years cement supplies exceeded demand, resulting in weak prices. Also, smaller players indulged in undercutting prices to keep themselves afloat.
But that scenario is set to change as India moves into a new growth trajectory. Cement demand is likely to mimic the growth rate in the economy, at least. The outlook for the coming year also positive too.
"The revival in the domestic capex cycle and a booming real estate market augur well for cement demand. The Central government's commitment to improving nfrastructure facilities will continue to drive cement demand. The construction boom in the Middle East should maintain export growth for the next 12 months. With no fresh capacity coming up in the near future, we expect pricing power to remain with manufacturers," says an analyst with a leading domestic broking house.