INSUBCONTINENT EXCLUSIVE:
The allocation of Rs 1.2 lakh crore for rural development and panchayati raj may create incremental source of demand for cement companies in
The allocation comes at a time when the industry is at the cusp of demand turnaround
This is reflected in the year-on-year rise of 3-5 per cent in all India cement prices in the first fortnight of January
The price range is Rs 335-340 per 50 kg bag.
According to industry estimates, infrastructure provides 15 per cent of the total cement demand
Given this, large cement companies with strong balance sheet and diversified geographical presence, focused more on volumes rather than
increasing cement prices to secure business.
The high allocation as proposed in the latest budget may boost rural housing and infrastructure
According to the budget speech, farmers' income is expected to grow two times by 2022
This should provide strength to rural consumption which in turn may increase construction activities related to Individual Building Housing
According to analysts' estimates, rural housing contributes 35 per cent to the cement demand.
Given these factors, cement companies are
likely to report incremental volumes from rural areas
Companies such as Ultratech Cement (over 30 per cent sales from rural areas), Shree Cement, Ambuja Cements, The Ramco Cements and J K
Lakshmi, which have strong distribution presence and dealers' network in rural areas, are likely to benefit the most.