Cement prices in the north and south of India are still under pressure due to heavy flooding and excess supply
As the monsoons ended last month, cement companies have increased prices. Last month cement companies hiked prices in the rage of Rs25- Rs40 for a 50-kg bag. According to media reports, Indian cement producers are likely to increase prices of cement by about 12% to Rs20 per 50-kg bag in Gujarat as construction activity is picking up. Companies are also planning to raise prices in Maharashtra. Over the past two to three months, cement prices in Andhra Pradesh were up by Rs60-70; Rs40 in Kerala, while Tamil Nadu and Karnataka saw an increase of Rs50 per 50-kg bag.
"The recent price hike has not been done due to an increase in demand. It is a complete understanding between cement companies," an analyst from Centrum Broking Pvt Ltd told Moneylife.
Even prices in the southern part of the country have been increased; cement prices in the north and south are still under pressure due to heavy flooding and excess supply.
Major cement companies have registered some growth in sales and production in September. UltraTech Cement, a subsidiary of the Aditya Birla Group, posted a 2.71% increase in sales, while production was 2.85 million tonnes (MT) in September. Ambuja Cement's sales were up 9% to 1.48MT, while production increased to 14.84 lakh tonnes during the month from 13.82 lakh tonnes in September 2009.
ACC posted sales of 1.58 MT, a decline of 3.07%; however, Jaypee's sales surged 61% to 1.17MT in September compared with the same period of 2009.
Sales growth has been showing a marginal fall in the period of April-July 2010; however, the industry registered a meagre growth in August following moderation in demand in southern India.
According to Nomura's report, published today, since the last two months, ACC, UltraTech and Grasim Industries are broadly coming back on track, while Ambuja Cement has been the standout performer during this period.
Shree Cement and India Cement were underperformers during the period. Heavy monsoons, mainly in north and east India, have hampered the construction activity during the last two-three months. Nomura expects some pick up in demand after the monsoons, but is doubtful over double-digit growth in demand for FY11. The firm has reduced its demand growth estimation by 1% in FY11 to 9.5%
The report says that currently SAAR (seasonally adjusted annual run-rate) is indicating total demand of 212.8MT for FY11 which would mean growth of just 6.9% y-o-y in FY11 on 10.7% y-o-y growth in FY10.
Since the past one-and-an-half years, the industry has seen a significant increase in capacity. It added 51MT of new capacity in FY10 and anther 41MT and 20MT increase in capacity is expected in FY11 and FY12 respectively, adds the report. However, only 10MT addition in capacity is expected in FY13, says the report.
The capacity utilisation for the industry will remain low at about 81% even in FY13, says Nomura. The report further adds that the future capacity addition will far exceed incremental demand till FY11. In FY12, utilisation and demand is expected to be roughly the same. It is only in FY13 that incremental capacity addition starts trailing demand, thereby leading to some improvement in capacity utilisation rates.
Region wise, demand in southern India could remain depressed for some time. The region's current capacity utilisation is merely 58%, with some capacity increment still to be commissioned. Demand in the region, particularly in Andhra Pradesh, is still sluggish, says the report.
After seeing volatility in the first quarter of this year, prices started correcting from May and by June in some regions. Prices were down till August. Cement companies started rising prices in September. During September, there were multiple price hikes in the south which helped companies recover at least part of their realisations lost during the previous three months. The impact of price hikes in the south has also been seen in regions like the west, where prices have bounced back from August lows, noted the report. Nomura predicts a 5.7% price decline in FY11 followed by a 2%-3% increase in FY12.
The report adds that the top five Indian cement producers, such as UltraTech, Jaiprakash and ACC will hold around 45% of the installed capacity base by the end of FY11, while the top ten will produce about 65%. However, more than 40 companies control 35% of total production. However, such a long tail will make it difficult to achieve any sort of understanding on pricing, says the report.
Input costs may bring some relief for cement companies as international coal prices have been stable over the past few months. Diesel prices have increased by 15% in the past one year and a further hike will bring changes in prices.
The decision to stop giving interest on deposits in inoperative accounts with EPFO would improve returns for three crore operational accounts by 0.25% next fiscal, according to a study by the retirement fund manager.
According to a PTI report, the trustees of the Employees Provident Fund Organisation (EPFO) on 15th September decided to stop crediting interest in these inoperative accounts with effect from 1 April 2011.
Inoperative accounts are those accounts in which no provident fund contribution is received for a period of the 36 months or more. At present, over Rs15,000 crore of the unclaimed money is lying in more than three crore inoperative accounts.
The latest estimates by EPFO say that about Rs5,000 crore left in such accounts in 2011-12 would earn over Rs400 crore which would help improve the rate of return on deposits by other live subscribers by 0.25%.
"The rational expectations indicate that about Rs5,000 crore would remain with EPFO in inoperative accounts next fiscal which would help us crediting over Rs400 crore or 0.25% extra return in live accounts," Central Provident Fund Commissioner Samirendra Chatterjee told PTI.
EPFO has estimated that about Rs10,000 crore would taken out of these inoperative account holders out of the total Rs15,000 crore money lying in such accounts.
About 24 lakh inoperative accounts holders, which form just 8% of total 3 crore such subscribers, account for Rs10,000 crore lying in such accounts. About 8% of account holders are those who have intentionally continued to keep their money in their accounts for years together after they have retired or left jobs, the EPFO analysis said.
They did so because there is no other investment option which gives them 100% capital security and return of over 8.5% in the country, it added.
Chatterjee said, "It is also expected that these Rs10,000 crore withdrawn from the inoperative accounts will find their way with safe avenues like fixed deposits."
Asked about the next year's rate of return for EPFO subscribers, he said, "It is too premature to say now, but it is true that the live account holders would get the benefits of income on frozen inoperative accounts next fiscal onward."
Binani Cement on Wednesday said its promoters will acquire all the shares held by public and delist the company from the stock exchanges, reports PTI.
Pursuant to the promoter and holding company Binani Industries' decision to acquire the entire public shareholding, the company has decided to delist from the BSE and National Stock Exchange, a filing with the stock exchanges said.
Public shareholding in the company currently stands at 30.1% and at the current price of Rs95.65 a share it is worth around Rs550 crore.
However, the offer price has not been disclosed yet.
"Board of Directors of the Company at the Board Meeting, held on October 6, 2010, decided to purchase the entire public equity shareholding of its subsidiary Binani Cement, by giving an exit opportunity to the public shareholders...," promoter Binani Industries in a separate filing to Bombay Stock Exchange.
As per the latest information available on BSE, promoters of the Binani Cement have 69.9% stake in the company whereas remaining 30.1% shares are with the public.
The news of delisting pushed the shares of Binani Cement by 14.1% while closing at Rs95.65 per share, whereas the shares of Binani Industies shares jumped by 10.3% to Rs 121.45 per share at Bombay Stock Exchange.