Ultratech hopeful of cement demand picking up

Ultratech Cement expects domestic cement demand to return to its "normal level" on government's push for infrastructure projects and uptick in rural housing, after weak volume growth in the past three to four years.

Besides, rapid urbanisation along with reduced home loan interest and strong demand from IT/ITES park in centres like Chennai, Bangalore and Hyderabad would also act as demand drivers for the cement industry, the Aditya Birla group firm said in an investor's presentation.

"Demand is likely to reach its normal level with improved focus on infrastructure, low-cost housing and uptick in rural housing," it said without specifying a definite time period.
 

According to industry body Cement Manufacturers' Association, the domestic sector added 50 million tonnes per annum (MTPA) capacity in last three years.

However, the industry has witnessed a slow growth in the last few years. In FY2014-15, production was 270.93 MTPA up 5.6 per cent and 4.9 per cent with 283.45 MTPA in FY 2015-16.

"Cement volume growth has been weak in past 3-4 years, led by a slowdown in housing and commercial (segments)," Ultratech Cement said in its presentation.

According to the company, rise in rural demand along with improvement in economy there on the back of two years of good monsoon and seventh pay commission hike would drive demand.

It further said government-led spending will continue to be a key growth driver on projects which include building another one lakh kilometre of concrete roads, Western and Eastern dedicated freight corridors and port development.

"Metro rail project coming up in various cities like Mumbai, Delhi, Kolkata, Chennai, Lucknow, Kochi, Jaipur, Ahmedabad, Chandigarh, Nagpur, Kanpur, Hyderabad, Surat and Pune" with plan of 1,000 kms track would also lead to pick-up in the demand.

According to Ultratech, the government giving industry status to affordable housing programme is improving business sentiments.

Globally, the Indian cement market is the second largest with a capacity of 425 MTPA after China, which has around 2,400 MTPA.

Despite this, the per capita cement consumption is around at 200 kg, which is lowest among developing countries against the world average of 580 kg, the company said.