The robust performance of the 227-million tonne domestic cement industry, with a growth rate of over 11 per cent in the June quarter, has made Foreign Institutional Investors (FIIs) increase their exposure in the top sector firms.
The FIIs have increased stake during the quarter in ACC, Ambuja Cements, UltraTech, Grasim and Shree Cement.
Analysts said at the start of the quarter, there were apprehensions whether the strong growth performane of the March quarter would be sustained. “Factors like pre-election demand for infrastructure projects, pro-industry election results and delayed monsoon kept the growth momentum going,” they added.
The FIIs have been selective. All the companies in which they have shown interest have major exposure in the northern and central regions (except UltraTech) - the markets which are outperforming the national average growth in production and consumption. These regions have seen a rise of cement prices between Rs 5 and as much as Rs 40 for a 50 kg bag.
Correspondingly, FIIs have cut their stakes in south-based cement majors, including India Cements and Madras Cement, where the dip is from 26.9 per cent to 23.86 per cent and from 2.29 per cent to 1.61 per cent, respectively. The southern market is witnessing relatively lesser consumption and building material is available at discounts.
“Good days for the cement players in the north and central parts are getting extended and that is why the FIIs are shifting to north-based players,” said an analyst with a domestic brokerage firm.
More From This Section
The outlook had hit bottom in the middle of the last financial year, when growth had dipped to as low as below 4 per cent on the back of decline in demand and fear of a glut.
The industry has added around 8 mt capacity till now, and is expected to add around 45 mt, in the current financial year.