India Cements expects recovery in key southern markets

G Balachandar Chennai | Updated on September 28, 2020 Published on September 28, 2020

Sees pent-up demand, rural markets boosting sales

India Cements expects better performance in the coming quarters, supported by improving conditions in its key markets such as Andhra Pradesh and Telangana, in addition to pent-up demand and rural sales.

The southern States such as Andhra Pradesh and Telangana, as well as Maharashtra, witnessed a steep decline in demand post general elections due to deferment of spending on major projects by the newly elected State governments during 2019-20. Since the company had five units in these States, it was hit harder than its peers.

Also, the Covid-19 situation caused a further dent in its performance. The cement industry in the South had registered a decline of about 45 per cent during the first quarter of this fiscal.

Also read: India Cements posts ₹17-crore PAT in Q1

Maharashtra and Tamil Nadu have been the worst affected States due to Covid-19 with continuous lockdowns severely impacting industrial activity. The construction industry in the metros was hit consequent to the non-availability of migrant labour.

India Cements saw a drop in volume of around 48 per cent during Q1 in the South (excluding Maharashtra).Overall, including Maharashtra and the North, it saw a 52 per cent reduction in volume. However, as the lockdown was eased gradually, the demand started to come back.

Also read: Ramco Cements to broadbase production facilities

“The cement industry has started recovering slowly from May 2020, given the pent-up demand and the improved rural demand. During the first quarter of FY21, the Andhra Pradesh and Telangana governments restarted their infrastructure projects and housing for poor schemes. With further relaxation of lockdown measures, there are expectations of increased public spending on rural infrastructure, irrigation, road building and other projects. This, along with a pick-up in individual home building and construction, is expected to improve cement demand,” N Srinivasan, Vice-Chairman and Managing Director of the company said while making the Chairman’s address at the virtual Annual general meeting of the company.

Cement prices

While the company expects a recovery in demand in its key markets, an increase in selling prices and other cost-related measures helped the company improve its bottom line. Cement prices, which touched low levels in the March quarter, increased sharply in April and these prices sustained during Q1.

While it significantly reduced the discount it offered channel partners, the company sold only on a ‘cash and carry’ basis as against its earlier practice of offering credit.

Also read: Cement demand expected to be buoyant from October: Dalmia Cement

Meanwhile, the shareholders of India Cements approved the reappointment of Rupa Gurunath as Whole-Time Director for five years from March 5, 2020 at the virtual AGM held on Monday. She has been associated with the company as a director since September 24, 2007 and Whole-Time Director since March 5, 2010.

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Published on September 28, 2020
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