Within a fortnight of pushing prices to an all-time high, cement companies have felt forced to offer discounts on sales in some regions, as demand turned sluggish.
The price correction is Rs 5-15 for a 50-kg bag in the north, central and western regions. Experts say other regions may follow if demand fails to pick up. The price correction phase has come much ahead of the monsoon months, when it is usual. Earlier, industry CEOs had told Business Standard they did not foresee downward movement till May.
Hari Mohan Bangur, chairman and managing director of a major company in the north, Shree Cement, says, “There has been some sluggish demand, post March, which has brought a softening of Rs 5-7 a bag in the northern market.” He is hopeful that by mid-April, demand will re-surge.
| STOCK MOVEMENT (In the last fortnight) | |||
| Company | March | 6-Apr | Change(%) |
| ACC | 1,022.10 | 1,127.70 | 10.33 |
| Ambuja | 128.85 | 150.55 | 16.84 |
| UltraTech | 1,016.70 | 1,114.25 | 9.59 |
| Shree | 1,871.10 | 1,957.45 | 4.61 |
| JK Lakshmi | 44.35 | 54.40 | 22.66 |
| India Cements | 91.10 | 101.85 | 11.80 |
| Madra Cements | 97.30 | 108.85 | 11.00 |
| All in Rs/share Source : Bombay Stock Exchange | |||
In Mumbai, where prices in the retail market had touched a high of Rs 305 a bag, the correction has been Rs 5-10 each. “There is probability of a further, but not a massive, decline in prices in the coming weeks, as companies need to sell their production from their expanded capacities,” said one of the largest cement dealers in the city.
According to Shailendra Chouksey, Director, JK Lakshmi Cement, since “demand is under pressure, it is natural that prices would not rise”.
In a recent note, J Radhakrishnan, research analyst at India Infoline, says, “Cement demand in the central and northern regions and Gujarat has turned sluggish after strong demand seen till mid-March. Supplies have increased in the last two weeks, outpacing demand.”
However, cement shares appear to have shown no impact. Rather, over the past fortnight, stocks of the cement majors have outperformed the benchmark indices by a large margin. During this period, shares of Holcim-owned companies (ACC & Ambuja) galloped 10 per cent and 17 per cent, respectively. While shares of UltraTech, India Cements and Madras Cements jumped between nine and 12 per cent.
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Industry analysts say the strong stock performance is on the back of the expected better results in the March quarter, as demand remained positive and prices were up almost 25 per cent quarter-on-quarter. However, they added, the momentum in cement stocks was unlikely to continue for long, as prices and demand would come under pressure sooner or later.
The country currently has close to 290 million tonnes of installed cement making capacity, of which produceable capacity is 260 mt, as many newer plants are undergoing a stabilisation periof of four to six months before getting fully commissioned. Holcim, the Swiss giant, and domestic giant Aditya Birla Group control a third of the Indian market.