Companies & Sectors
Cement industry to pick up steam over the next two years: Credit Suisse

Credit Suisse expects the supply glut pressure to ease up, with north India benefitting the most from the accretive price increase in cement. However risks like paying the penalty of $1.2 billion levied by CCI and government support remains 

When the infrastructure boom was happening between 2000 and 2009, cement companies, in anticipation of huge demand started ramping up their capacities. However, this proved to be a costly mistake and they paid the price for it, when infrastructure development slowed down considerably (thanks to the policy paralysis of the government coupled with corruption and global slowdown). This left the cement industry with a supply glut as well as drastic price reductions and wafer-thin margins (and in some cases even outright losses) and poor performance, especially over past few years.

However, according to Credit Suisse, the cement industry is expected to pick up steam in the next two years with supply pressure easing and improved demand. “We expect the cement upcycle to continue at least for the next two years with accretive price increases leading to margin expansion. Capacity additions should peak out in FY14 and production discipline should imply a recovering FY14 and a stronger FY15,” it said in a research report.

Government support crucial


Credit Suisse feels one of the key drivers for the expected outperformance of these cement companies is the higher outlay announced in the recent Union Budget for rural infrastructure development vis-a-vis Prime Minister’s Rural Roads Programme (PMGSY) and rural housing (Indira Awas Yojna) as well as a pick up in general demand. Credit Suisse expects ACC and Grasim to outperform in the next 12 months while it is neutral on UltraTech Cement and Ambuja Cement. None of the south-based cement companies were covered though.

However, Credit Suisse said, one of the key risks to the recovery is the implementation of the Competition Commission of India’s (CCI) order against cartelisation that could see an outflow of as much as $1.2 billion, which will severely impact future capacity expansions.

Capacities added in FY10 still not breaking even


In fact, according to Credit Suisse, some small- and mid-cap companies are not even breaking even on RoIC (or return on invested capital). Not only is cement capital intensive, it is also extremely competitive which tips the scales in favour of large-cap cement companies. It is quite possible that consolidation could happen; or there is even the possibility of small-cap cement companies winding up since the economics are stacked against them.

Even among large-cap cement players, production has slowed down, thanks to the rapid capacity expansion that happened between 2005 and 2010. According to Credit Suisse, “Greenfield capacities commissioned in FY10-12 are still not breaking even on cost of capital as these capacities are operating at ~70%-75% utilisation. 60% of new capacities commissioning during FY13-15 are greenfield capacities with higher break-even utilisation.” In other words, new plants take longer time to break even as opposed to brownfield plants (or simply boosting existing capacities. But supply pressure is expected to cool off, leading to inventory take off and higher sales, as well as meet 65% of the demand, according to the report.

Production discipline holds the key


Credit Suisse says its views on cement upcycle assume production discipline to continue where volume growth of existing players is expected below industry average to accommodate new capacities. The economic rationale for the production discipline is higher sensitivity of profits to prices (5% profit change for 1% change in prices) versus volumes (2%). "We expect production discipline to be sustained, as the pace of new capacity additions has slowed, which reduces supply pressure, majority of capacity addition in last four years was with mid-caps and small-caps where overall RoIC is still below cost of capital due to low utilisation and profitability and 60% of new capacities commissioning during FY13-15 are greenfield capacities with higher break-even utilisation," it said.

North to have the maximum accretive price increases

Credit Suisse said it expect overall accretive price to increase but regional performances could come out as different. It said, “We expect maximum accretive price increase in the northern region over next two years followed by eastern and southern regions. We expect no accretive price increases for western and central India, given the higher supply pressure. However, if ABG’s or Reliance’s commissioning is delayed in FY14, supply pressure could be lower in western and central regions. Of the two regions, central is likely to face the maximum supply pressure where Madhya Pradesh and Uttar Pradesh caters to 15% of India’s cement demand.”

Cost to go up over next two years

According to Credit Suisse’s analysis over past two decades, cement price increase have not exceeded inflation unless cost increases were more than inflation and cement companies have been able to pass on increases in cost unless demand growth was weak as was the case in FY11 when the demand in southern India turned negative.

However, Credit Suisse expects cost to increase by about 8% over the next two years against inflation of 7-8%. “As per the feedback from the industry there are two factors leading to cost increase. One increase in cost of linkage coal as Coal India starts importing coal and implement pooling process to average coal costs. We expect cost of linkage coal to increase at a 10% CAGR over the next two years; and diesel price deregulation for bulk purchasers such as Railways and periodical increase in diesel price which impacts road freight,” it said.

“The extent of accretive price increases depends on whether the demand is strong (if south recovers) or moderate (low accretive price increase). We build in higher increase in EBITDA/t in FY15 only as we expect southern India demand to recover by FY15 and supply pressure to moderates in FY15,” it added.





TCS assures smooth passport delivery system

The high-level meeting of Pune Passport Grievance Forum with senior-most officials of Tata Consultancy Services organised by Moneylife Foundation at its Mumbai office has raised some hopes for the generally harassed passport applicant 

Tata Consultancy Services’ (TSC’s) vice-president and head for government-industry solutions unit, Tanmoy Chakrabarty, assured the conveners of the Pune Passport Grievance Forum (PPGF) that they will submit to the ministry of external affairs (MEA) a proposal to extend online appointments stretching to 20 to 30 days in order to lessen citizens’ distress in not getting online appointments promptly. Presently, citizens can take appointment only for the day.
While stating that TCS would consider giving more appointments than 650 per day currently, he appealed to citizens to be present for the appointment. He said that presently, 20% of applicants drop out every day, thus denying genuine passport applicants his or her fair chance. The meeting started with a detailed presentation by Mr Tanmoy Chakrabarty, Head Government Industry Solutions Unit at TCS on how its contract with the government on passport seva works across India. This was followed by a presentation by Moneylife Consulting Editor Vinita Deshmukh on the problems faced by applicants at the Pune passport office at each level. 
Very importantly, it was revealed that a passport applicant can book his appointment for seven days from the day he logs in and not ONLY one day as is the common understanding. Shalini Mathur, senior Manager, TCS, stated that, “It has always been open for seven days from the day you log in, but most applicants are unaware of the same.’’ For some strange reason, this was not given adequate publicity.
Passport applicants undergo the trauma of revisiting Counter B or Counter A in Pune due to the supposed inadequacy of their documents. Rajesh Dogra, operations head of Passport Seva Project, stated, “We shall propose to the MEA to appoint seasoned passport officials at one more counter, which we will create, called Pre-A counter. Here, the documents will be verified by veteran passport office employees before they are scanned, so that number of trips are reduced when the applicant goes to Counter B for verification of documents.’’ 
This was a sequel to a question posed by conveners of PPGF as to why untrained and raw TCS personnel have been appointed at Counter A, where documents are blindly scanned without even basic verification. Presently, applicants are required to make several visits, on the whims and fancies of the passport officials.

In order to bring complete transparency to the number of documents that a citizen is required to bring to the passport office for his application, Dogra stated that, “Public information boards will be prominently put up on the premises of TCS and the Regional Passport Office (RPO), at several places, so that citizens are clear about the list of documents required. This will ensure transparency.’’
Regarding the inconvenience caused to applicants waiting for hours on end outside the Passport Seva Kendra of TCS, Chakrabarty has appealed to citizens to come only 15 minutes before their scheduled appointment. As for the inconvenience caused to applicants travelling to Pune, TCS officials assured that they would take up the opening up of mini Passport Seva Kendras in all six districts based on a proposal by MEA last year.
TCS officials will also request RPOs of the MEA to lodge complaints against illegal passport agents who roam in the premises. TCS will request MEA officials to hold passport melas in various towns and cities to make people aware of the working of the passport offices.
Sucheta Dalal, managing editor of Moneylife, stated that, “The Pune campaign has had an overpowering impact, which has led the highest authorities of TCS to take notice. Citizens of Pune should keep up the campaign till it reaches a logical end.’’

Conveners Vinita Deshmukh, Vijay Kumbhar and Sandeep Khardekar represented PPGF. They have decided to intensify the campaign through a thorough follow-up with TCS. They are also writing to minister of external affairs Salman Khurshid and are taking up the issue of police verification and security with the Pune police
Read related stories here: 



Mahiti Adhikar Manch

5 years ago

Dear friends,

I Congratulate the efforts of done at moneylife to bring TCS to listen the greivances.

I request my comments be not taken personal, my apologies, if they have hert the some participants from citizens side.

I don't think TCS should feel bad, actualy transparency is very less from them. Otherwise they would have complied the Information Commissions order. They still say will have to consult legal department. Is their legal department bigger than the order of commission.

TCS is having most of the contracts of Mahaharastra government, including the BMC. Maharashtra and BMC website also does not have any agreement posted on the website which need to be as per to Seqction 4 of RTI.

You may find some time potehole tender on website of BMC but not of any IT company.

I applied for passport of myself, daughter and wife on on-line application on 8th March, two times got msg to contact on 10th, 13th and now 17th. It is surprising how come the slot gets full before the time allotted to get in touch online. This is my experience.

I just came to know about the meet when I spoke to Vijay for some other issue, when he was travelling to Mumbai for the meet.It was just a coincidence of my application for passport and the mail of Moneylife on passport on 13th. So thought of informing of very current problem.

I may not be able to participate to take responsibility as already there involvement for formtion of SALT(Social Audit Local Team), Mahti Adhikar Manch and added one more of NCPRI. So I may not be able to do justice for additional responsibility.

Bhaskar Prabhu

R Balakrishnan

5 years ago

I had three to four experiences with Chennai Passport Office. Must say that their pre-checks of documents helps us a lot. The queue system works, though it is like a fish market. A govt employee is best suited to check the documents is not right. After all, the law is clear cut about what documents are needed. Does not need an Einstein to figure out. If there are three to four pre checking counters, life will be smooth.
The bigger issue at Chennai is the one about police verification. That takes time and a lot of 'push'. Hope the police verification at Pune / Mumbai is greasefree.
Again, it is sad that a routine experience becomes a nightmare and requires high profile intervention.


5 years ago

Congratulations.. but as Shri Bhaskar Parabhu has pointed out, all these can be sabotaged by the online appointment software logic and operation and the so-called help-line guys..The team that has taken up this issue should keenly follow up and test the system at very stage instaed of waiting for complaints to surface.


Vinita Deshmukh

In Reply to PATTABHI 5 years ago

Like I said, lets not be cynical - we are not some roof top howlers to let go of an issue. Also, TCS officials have promised to look into this - they claim the software is not at fault. Lets give them time to rectify. I am confident something good is going to come out of this


5 years ago

Hi Moneylife,

Congratulations for bringing the TCS officials to the table for discussions.

I am surprised that their manager is quoted as saying like:

"Shalini Mathur, senior Manager, TCS, stated that, “It has always been open for seven days from the day you log in, but most applicants are unaware of the same.’’ For some strange reason, this was not given adequate publicity."

Now as an applicant I have no choice in this.As i log in for an appointment, I see a date and some time slots.I click randomly and pray that it goes forward.Now where is the choice of 7 days??Almost all applicants are seeking any day any time and not trying for an appointment of their date and time.Most likely when the applicant clicks on any time slot, the system goes slow and will not result in the appointment getting successful.

You may also call the TCS officials to your office to try out the exercise of getting an appointment fixed by them using your system.You may call for some volunteers who have not been able to get an online appointment for their log in ID and password.This may be tried by TCS to know first hand the problem faced by the common man.If the TCS guys get an appointment by their trying, the person who got the appointment fixed will be happy and thankful.Else TCS will know the problem first hand.


Vinita Deshmukh

In Reply to rajeshpai 5 years ago

yes you are absolutely right about this as I got a call to air the same doubt late last night. Will be speaking to Shalini today to clarify further and will revert to you.

Mahiti Adhikar Manch

5 years ago

I feel this is one more attempt by them to just do the PR agency.

I am trying to get the appointment via net for the past 3 days I am not getting at all. It gives us the next date to get in touch. Every time to they give date of contact and time to contact is 3.oopm but when you go to their site the slot is full before time. Latter when you visit their site at 3.00 pm again they will give next date to contact so again it come try on and on ...

So I contacted the help line they said visit the Pass Port office at Mumbai with online registration number and they will help to get the appointment then what is the use of online form submission.

It is all an eyewash and just one more pr from TCS.

Bhaskar Prabhu
MAhiti Adhikar MAnch


Sucheta Dalal

In Reply to Mahiti Adhikar Manch 5 years ago

Hi Bhaskar

I wish you were there for the meeting yesterday. It was certainly open to all activists. We had also asked people to send in passport related issues and received just three or four that have been passed on to TCS.

Had you come, you would have been able to make your point.

The meeting was frank and open and as someone who has spent over 27 years in journalism and activism, I can tell you that it was a genuine attempt to understand issues, explain bottle necks and find a solution.

I dont think it is fair for you to dismiss it as PR without having been there.

In fact, what TCS has done, if you want to call it PR in the most positive sense, must be appreciated and emulated by the rest of corporate India.

I dont see Infosys, which is in a similar situation over MCA21 as well as the Tax website, try and reach out to people. They simple wash their hands off and tell us to talk to the government.

What made the meeting so meaningful yesterday is that Vinita Deshmukh, Vijay Kumbhar and Sandeep Khardekar were so well prepared.

Hats off to Vinita for waking up at 2.45 in the morning to prepare a power-point presentation and to come all the way from Pune to be in for the meeting before 10.30 am.

Even after the meeting there is a flurry of activity in the passport office at Pune. Why not make an attempt to do a serious study of the problem in Mumbai? Document the problem and lets take it up.

Vinita Deshmukh

In Reply to Sucheta Dalal 5 years ago

I totally agree with Sucheta. Bhaskarji, we could give you all our ``expertise'' if you want to lead this campaign in Mumbai.With Sucheta around, be sure of pillar-like support.

nagesh kini

In Reply to Sucheta Dalal 5 years ago

Bhasker, I entirely agree with Sucheta.
After my two appearances at the Sub-Registrar's Worli office, I'm convinced with a dedicated person at the helm of affairs assisted by a lean and mean staff and working software and hardware even the most ancient of state govt. bodies can deliver more efficiently.
The Sub-Registrar has funded from his pocket a wheel chair here and also at his two earlier rural postings.
In Mumbai there is no lift for the elderly and handicapped to
access the steep 2nd Floor. His requests are in vain! He needs help!

Vinita Deshmukh

In Reply to Mahiti Adhikar Manch 5 years ago

yes you are right that online appointment should be accessible to each applicant and he or she should not have to go for a walk-in. We have taken up this issue. However, lets not be too cynical - the fact that TCS top most officials came for a one-to-one meeting, means they are serious about it. And of course, you think Moneylife and Pune Passport Grievance Forum is going to let them go with the alleged `PR' visit? I am sure you know us better! Cheers

nagesh kini

5 years ago

I've just witnessed two documents at the Office of the Sub-Registrar Mumbai City III at the MTNL Building, Smashan Bhumi Marg, Off Adarash Nagar, Worli.
Though a Maharashtra Govt. entity it is most unlike one.
Most Citizen-friendly in the truest sense and needs to be replicated by all Pass Port offices too.
Operates in 7am-2pm and 2-9pm.
Grants appointments too.
Everything computerized - Finger printing and iris scanning. Enough comfortable seating with all day Marathi TV channel.
Sub-registrar Mr. Samudre extremely friendly, Cell 9730273300. Suggests SMS before calling.
Worth a visit by all activists.


Vinita Deshmukh

In Reply to nagesh kini 5 years ago

sounds good. Maybe TCS could at least have a look at this model. Tks


5 years ago

Wow I am impressed with this. TCS did the right thing by at-least meeting and talking. I am sure this communication will go a long way in delivering a better service to us - the citizens. Congratulations Moneylife and the Vinita and team in Pune for the persistent efforts . Thank you.

India’s GDP growth forecast trimmed to 5.6%: Nomura

Nomura has downgraded India’s GDP growth forecast amidst risk of food inflation and weak industrial production. Morgan Stanley and HSBC have cut their forecasts, as well

Nomura has further downgraded India’s GDP (gross domestic product) forecast to 5.6% from 6.2%. Conditions have been deteriorating by the day that it isn't surprising to see other foreign brokers scurry and cut India's economic forecast as well. According to Reuters both Morgan Stanley and HSBC each cut their India’s economic growth forecasts for 2014 to 6% from 6.2% to reflect lower-than-expected growth in the October-December quarter. Food inflation has returned to haunt the discerning Indian consumer, with food inflation rising up to 13.5%, up from 13.2% last month and as well as liquidity concerns in the banking system.
Click here for other reports on Nomura.
Foreign brokers and institutions have their hopes dashed, after having been consistently optimistic about India's economy and pouring records amounts of capital into the market in the last few months. Earlier, they got their hopes dashed when India's finance minister presented a rosy picture of India's economy earlier this year, prior to the budget. However, post-budget and rate cuts, the picture, in their eyes, has transformed from rosy to gloomy. Food inflation has started to creep up and cause concern, despite growth in India's industrial production and core inflation declining. Nomura voiced its concerns about industrial production despite its increase. It states: “We expect the industrial cycle to go through a prolonged bottoming out” and, “Sticky retail inflation suggests inflationary pressures remain in the system.” CPI inflation had risen to 10.9% in February, higher from 10.8% in January (Nomura had expected it to be 10.7%). Similarly food and core inflation rose 20 basis points (bps) and 30 bps to 13.5% and 8.6% respectively. Furthermore, Nomura states, “We expect inflationary pressures to re-emerge in second half of 2013 because of rising food prices”. However, overall core inflation has fallen, largely due to lower global commodity prices and weak demand. Nomura expects core inflation to remain at 6.6%. 
Many pundits had been observing India’s inflation figure and noticed that it had somewhat stabilized. With this view in mind, they had predicted that Reserve Bank of India (RBI) would cut interest rates throughout the rest of the year. However, with the view of food and retail inflation run-off, Nomura thinks that rate cuts are unlikely happen except for a possible cut in May. It states: "We expect RBI to keep the repo rate unchanged at its 19th March policy meeting, cut by 25 basis points on 3rd May, followed by a long pause in 2013.” This also suggests that not many are as optimistic as once thought. The Indian economy is expected to be bumpy and an uncertain ride. One thing for sure is that optimism has died down considerably and replaced with cautiousness. Nomura expects the Indian economy to remain weak and state: “Going forward, we expect industrial production to remain weak for the next few months.”
In a separate report on the state of the liquidity in the banking system, Nomura touched upon the issue of rate cuts, bond yields and the effect of liquidity on the economy. Mostly targeted towards institutions which trade in government bonds, the report did mention that liquidity could be an issue for the Indian economy and RBI is unlikely to take an aggressive approach to rate cuts. It said, “Given current macro dynamics of a high current account deficit and low deposit growth in the banking system, we think it is unlikely that the RBI takes an aggressive approach towards easing.” It expects that as much as Rs70,000 crore of tax outflows is expected to affect the banking system and, in turn, the liquidity (in form of lower deposits/savings in the banking system). The report states, “Banking system liquidity should improve in April as government spends the money. However, despite the liquidity improvement in April, banking system will remain in a deficit”. 
Another ongoing concern has been the trade deficit which had been widening, thanks to rupee depreciation, increased oil and gold imports. Nomura expects trade deficit to widen in March. The report states, “We expect the trade deficit to widen again in March and the current account deficit to rise to 5.1% of GDP in FY13.” This is a pessimistic outlook. Earlier, the trade deficit had narrowed down from $20 billion to $14.9 billion, a significant reduction, for the month of February. This happened on account of payback on gold imports, lower oil imports as well as moderation in overall imports. Oil imports moderated to $15.1 billion according to Nomura, as oil marketing companies are recovering more on account of higher diesel realisations (thanks to liberalisation of diesel prices). However, One must keep in mind that it is during festive seasons, particularly months of October to December, when trade deficit usually widens as consumers splurge on gold and new cars (which in turn will require more petrol—though there's a lag effect on oil imports which is felt later).


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