Prepared by:

Mahesh Panicker Gaurav Rana Gaurav Kumar Raghav Shankar

Price
Cement prices hiked by Rs.10/- to Rs.25/- per bag in north, east and central India. In Eastern UP the prices of cement have risen to Rs. 225/-. And by Rs.10/- to Rs.15/- per bag in Delhi, Punjab and Rajasthan. Companies operating in these areas are ACC, Ambuja Cement, Ultratech, JP Associates, Birla Corp, Sree Cements.

According to a report by Sharekhan limited dealers are of the view that Market will find it difficult to absorb the price hike given the current demand scenario. The volume growth for the top 3 domestic cement players viz-a viz: ACC, Ambuja and Ultratech for the month of August 2011 was mixed on a year-on-year basis.

Among the companies ACC registered a better performance with a robust 19.7% growth in its dispatches. Ultra tech and Ambuja Cement posted a growth in their dispatches of 3.4% and 2.7 % respectively.

The volume growth is largely on account of low base effect and not on account of a real pick up in cement off take. On a monthly basis all the large players have actually posted a de growth in their dispatches.

DEMAND
In terms of demand, cement off take in most part of the country has been affected primarily by heavy monsoon and political hurdles (particularly in Andhra Pradesh). We believe the sector could under perform in the coming 6 months on the possibility that the cement manufacturers may fail to adhere to the supply discipline. However we believe any correction in the sector will provide an investment opportunity in selected companies.

Corporate affairs minister Mr. Virappa Moily said that there was no signs of cartelization by leading firms in the cement sector. In July this year the serious fraud investigation officer {SFIO} had allegedly said that ACC Ambuja and Ultratech had formed a cartel to raise prices and has recommended a strong action.