Mutual funds (MFs) have increased their exposure to leading cement firms, thanks to the recovery of the commodity witnessed in the last two quarters.
For instance, MFs scaled up their exposure to stocks of ACC, the largest cement maker in the country, to 2.68 per cent in the March quarter from 2.52 per cent in the December quarter. In the case of Ambuja Cements, the third-largest cement maker, MFs increased their equity stake to 0.92 per cent from 0.52 per cent quarter-on-quarter (q-o-q).
Even in Shree Cement, their exposure is continuously rising – it reached 9.43 per cent in the March quarter. These funds have also raised their exposure to India Cements by hiking their equity holding to 10.17 per cent from 8.49 per cent q-o-q.
| MFs’ exposure to cement companies | ||
| Company | Equity holding in % | |
| Dec'08 | Mar '09 | |
| Ambuja | 0.52 | 0.92 |
| ACC | 2.52 | 2.68 |
| India Cements | 8.49 | 10.17 |
| Shree Cement | 9.38 | 9.43 |
| UltraTech | 1.66 | 1.58 |
| Grasim | 5.98 | 4.83 |
A fund manager, who did not wish to be named, said, “The last couple of months have seen growth in cement despatches. Moreover, with continuous rise in prices, the cement industry has attracted attention.”
Also, there could be some delays in the commissioning of fresh projects and, therefore, the time frame for cement companies to command higher realisation would be extended, the fund manager explained.
Fund managers have shown increased interest in cement stocks since November last year when growth returned to the industry, according to analysts. The growth rate in the cement sector had plunged to as low as 4 per cent before it jumped to above 8 per cent in November and sustained so far.
Analysts said there should not be any problem for the cement industry till the monsoon, though it would be interesting to observe how the scenario would be post-monsoon.
Another analyst with a domestic brokerage firm said that returns were good in large cap cement stocks. “Fund managers have considered the fact that cement demand would sustain,” he said.
Cement makers are sceptical about the market scenario in the second half of the current calendar year. For example, players like Ambuja, ACC and UltraTech have already talked about adverse impact on prices and margins in the coming quarters on the back of upcoming capacities.
Interestingly, mutual funds seem to have chosen to stay away from stocks like UltraTech and Grasim (the Birla group companies with considerable volume expansion). For example, the funds’ equity exposure to UltraTech has dipped to 1.58 per cent from 1.66 per cent, while in Grasim it has gone down to 4.83 per cent from 5.98 per cent q-o-q. However, the fall is attributed to Grasim’s various other businesses that are under pressure.
Since, January 1, 2009, top cement stocks have outperformed the Sensex. During the period, the Sensex posted a rise of 11.09 per cent, whereas stocks of companies such as UltraTech and Shree Cement rose 44 and 57 per cent respectively.
The 212-million tonne cement industry is adding around 30-35 million tonnes of new capacities in the current financial year.
