Prime Minister Manmohan Singh's assurance to industry that the government will take corrective action to revive the industrial climate in the county, has raised hopes among cement manufacturers of an uptrend in the sector's fortunes. Top honchos at these companies are also hoping to see some traction in infrastructure projects already announced in the run-up to the general elections.
During the last quarter of financial year 2012-13 the market witnessed muted demand growth and several companies were forced to take price rises. Though, double digit growth for the industry still looks distant, cement manufactures are predicting a growth of between seven and eight per cent.
"Last quarter was very poor, one of the worst in fact, but strong growth will only come back if the PM actually walks the talk. The oversupply situation still persists but since elections are next year, a slew of measures by the government may turn things around," said V P Sharma, chief operating officer, Dalmia Cement.
"Our future isn't five per cent growth," the Prime Minister said on Wednesday. "Business cycles are recurrent themes in all textbooks of economics."
But while there was clear admission that industry would have to learn to cope with the situation, Singh emphasised the government would play its part in restoring the macroeconomic balance.
H M Bangur, managing director (MD) at Shree Cement
pointed out that it will be a wait-and-watch policy for him. "In the past, during election years, spending used to be higher and projects used to pick up. However, whether the recent slew of assurances by the government will actually translate into growth is something that will emerge with time. Industry will see most units operating at 80-85 per cent of their total capacity," he said.
According to industry reports, February dispatch numbers have been poor and the recent diesel price hike for bulk buyers is putting an additional burden on the counters. For each million tonne of cement produced, prices went up Rs 13-15 crore owing to freight hike coupled with price rise in petrol and diesel.
As a consequence, companies had to take price hikes, which in turn dented demand.
"This would be the year of the Lok Sabha elections and government spending is expected to increase. Infrastructure projects, which are in slow growth, are likely to gain momentum. As a standalone company as well, we have grown in a tough environment," said Vinod Juneja, MD, Binani Cement.
Echoing Bangur's view, one analyst said the Lok Sabha elections could become the reason for growth revival but it has to be fueled with other aspects as well.
"The peak season so far has not seen good demand but market movements will depend on how the government actually implements the resolutions. Price hikes were taken across the country, so another price hike cannot be taken despite thin margins," he said.