The cement industry is likely to show an incremental growth over the coming years. Albeit the fact, the cost in factors of production has increased, the growth of it will be met by the demand of various infrastructural activities and housing requirements in rural areas.
India Rating and Research (Ind-Ra) in its report said that, the demand will be backed by an increase in government expenditure, despite an increase in input cost. The credit profile of cement manufacturers is expected to be stable on a secured operating profitability in the absence of debt-led-capex. The rating agency also expects the cement industry to grow at 4 to 5% Y-o-Y in the fiscal year 2018.
The increase in crude oil prices which leads to an increase in diesel rates, the price of pet coke and coal which have been doubled as compared to last year will not shape the industry as there is a stable cement demand in the housing sectors in rural areas and also the construction of roads and highways.
The Budget 2017-18 reveals a positive impact towards the construction industry. The Pradhan Mantri Awas Yogna providing ‘Housing for all’ in rural areas and the Road and Highways construction works throughout the country would increase the demand for cement in the next fiscal.
The rating company expects cement producers to add additional 50 MTPA capacities over FY16-FY18 at a CAGR of 6 per cent compared to CAGR of 4.9 per cent during FY13-FY16 (additional 40 MTPA). The country’s eastern region will continue to lead supply growth and is likely to add 17 MTPA through FY16-FY18, followed by north (14 MTPA), it said.
The rating agency does not expect capacity utilization to improve significantly in FY18 during which it is likely to remain at around 70 per cent.
News Sources: economictimes.indiatimes.com
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