The Hindu Business Line : Nil import duty hits cement shares

Analysts felt the decline in stock prices was a knee-jerk reaction to the announcement. Domestic cement companies will not be affected as freight and other logistical problems will lead to the landed cost of imported cement exceeding domestic prices.

Currently, a cement bag of 50 kg costs Rs 230, while the landed cost will be around Rs 250, said analysts.

The stock of ACC fell 7.06 per cent to Rs 1,037; Gujarat Ambuja lost 6.71 per cent to close at Rs 136.9, while Ultratech Cement plunged 4.71 per to close at Rs 1,111.75 on the BSE.

"Cement is mainly used for inland purposes, while the transport from the coastal regions will lead to higher cost of imported cement," said Mr Amitabh Chakraborty, Business Head, Brics PCG. He added, "The announcement will only act as a cap to the rising cement prices."

Analysts said that domestic cement prices can rise by up to Rs 10-15 per bag, and the imported cement costs will still be higher.

"There is not much spare capacity of cement in other countries; also, the Government's announcement is only a signal to the domestic companies to lower their prices," said Mr Radhakrishnan, cement analyst, India Infoline Ltd.

There is already a demand-supply mismatch in India and, considering the increasing demand projected for the future, domestic cement prices will only go up, said an analyst tracking the sector.

"The earnings growth of companies will not be affected. Also the cement companies are quoting at a 10 per cent discount to valuations. The fundamentals of these companies will continue to remain the same in the medium term," said Mr Chakraborty.

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