Ind-Ra maintains stable outlook on cement sector for FY21

Our Bureau Mumbai | Updated on March 03, 2020

The India Ratings and Research (Ind-Ra) has maintained a stable outlook on the cement sector for FY21. It expects cement demand growth to recover to around 5 per cent during the year, on the back of a modest pick-up in infrastructure spending and housing segment, with some recovery witnessed during November-December 2019, Ind-Ra agency said in a media statement on Tuesday.

The agency said that a continued oversupply coupled with below 70 per cent capacity utilisation is likely to limit the upside to profitability. Also, the possibility of an increase realisation looks limited, after a healthy uptick in FY20 despite a demand slowdown. Power and fuel costs are likely to remain range-bound and savings can flow in from the increased proportion of power generation through waste heat recovery, optimisation of lead distance and product mix,

It expects the sector to gradually deleverage in FY21, due to EBITDA generation from acquired capacities by large players. The liquidity position of its rated cement companies to remain strong, led by the availability of significant cash balances, comfortable free cash flow generation and unutilised bank lines. Refinancing requirements are limited, with liquidity ratio of most companies being above 1x. Also, a few entities requiring refinancing have easy access to capital markets and bank finance, the agency added.

Published on March 03, 2020

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