Banking on continued buoyancy in cement demand, foreign institutional investors (FIIs) raised their stake in top Indian cement companies during the quarter ended March 31 (see chart).
Domestic cement demand has been robust in spite of capacity additions in the sector. Cement consumption witnessed double-digit growth at 10.6 per cent to about 200 million tonnes in the 12 months ended March 31. Cement production, too, grew 10.8 per cent to 201 million tonnes. Most companies saw capacity utilisation well in excess of 100 per cent, with the national average at 96 per cent.
In early 2009, the Indian economy was in a recession and the cement industry faced prospects of substantial capacity addition, while there was no sign of demand going up. However, all projections of a slowing in demand were belied — capacity addition got delayed, demand remained robust and prices were firm.
| CONCRETE PLANS | ||
| Company | FII stake as on Dec 31, 2009 (in %) | FII stake as on Mar 31, 2010 |
| Prism Cement | 2.10 | 4.43 |
| Shree Cement | 4.17 | 4.87 |
| UltraTech | 4.83 | 10.93 |
| ACC | 11.08 | 12.56 |
| Ambuja | 22.91 | 24.14 |
| India Cements | 27.48 | 27.70 |
| Source: BSE | ||
“Growth was registered across all regions, led by rapid developments in infrastructure and a stable housing sector. The demand-supply scenario was generally at balance, with high levels of capacity utilisation in most regions,” says the 2009 annual report of ACC, the country’s biggest cement producer.
In 2009, capacity additions of the order of 26.9 million tonnes went on stream. There was some delay in the materialisation of new capacity addition, which helped ease the pressure on selling prices. The industry’s cost profile improved on account of lower procurement prices of coal and other commodities, the report said.
Cement firms have been reporting strong volume sales since the past few months. “We expect demand to remain robust, but accelerated capacity additions and stabilisation of new capacities may put pressure on prices after May 2010,” said an analyst with Angel Broking.