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Demonetisation and After | Positive Outlook

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Vaibhav Agarwal visited north India to assess the impact of the government’s radical move on the region’s cement industry.

We visited cement manufacturers, channel partners, builders and contractors in north India for an update on the situation and outlook after the government’s demonetisation move.

The channel mechanism in north India is very different from the south; channel partners aren’t as happy, and this is a key reason for price volatility in this region. Even so, most partners sounded positive, especially on demand. A majority of them said that pricing is bound to improve in the region and that all players, including the large northern majors, appear to be in favour of better prices.

Prices should recover steadily in the north over Q4/Q1. The impact of demonetisation is now neutralised. Most of the respondents said that although demonetisation has had an impact, it was much lower than initially anticipated.

North India is a largely cash and carry economy. Most traders either adapted to the situation (accepting payments through bank transfers) or were accepting old currency even after 8 November 2016. In many cases, traders said that a lot of their outstandings were cleared in old currency; a few even recovered written off debts ‘ which kept the cycle up. Most channel partners/dealers we met complained of low net margins irrespective of cement prices. This is one of the key reasons why prices there remain more unstable despite high capacity utilisations.

Also the main reason why most price hikes in the north do not flow through as effectively as they do in the south, is because channel partners simply do not participate in companies’ price hike announcements (a key issue that has remained unaddressed for long).

This segment has also not taken to e wallets and swipe machines and it demands more stringent laws for cheque returns due to the weak channel margin structure in the north. Ergo, almost all partners said that they are not in favour of moving to digital payments.

A 1-2 per cent charge on digital transactions, they say, is a very high cost ‘ one that would take away most of their margins. Barring a few, most dealers didn’t have the mechanism for digital payments. It was said that the largest cement major rolled back the idea of installing swipe machines for channel partners. Trade associations here have approached the government to make laws more stringent for cheque returns, as issuing post dated cheques is the most common business practice there. A change in target customer segments has also helped a few manufacturers.

Smart shift
A few cement manufacturers have made a deliberate and smart shift in focus to accounts within their non-trade sales. These are a sub-segment of non-trade customers where the order flow is more regular, with no payment issues, and no extended credits. We understand that this deliberate shift has helped a few north-based manufacturers (such as JK Cement) to sail through demonetisation better. Construction of toilets and roads are some of the key demand drivers. Almost the entire channel expects prices to be up by a minimum (net) of Rs 25/bag over H1CY17.

We reiterate JK Cement as our top northern pick. Other companies like JK Lakshmi Cement, and Mangalam Cement are also attractive bets. Shree Cement will continue to command a premium due to its ability to perform well in all scenarios.

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Concrete

Star Cement launches ‘Star Smart Building Solutions’

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Star Cement has launched ‘Star Smart Building Solutions,’ a new initiative aimed at promoting sustainable construction practices, as per a recent news report. This venture introduces a range of eco-friendly products, including tile adhesives, tile cleaners and grouts, designed to enhance durability and reduce environmental impact. The company plans to expand this portfolio with additional value-added products in the near future. By focusing on sustainable materials and innovative building solutions, Star Cement aims to contribute to environmentally responsible construction and meet the evolving needs of modern infrastructure development.

Image source:https://www.starcement.co.in/

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Concrete

Nuvoco Vistas reports record quarterly EBITDA

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Nuvoco Vistas reported its highest-ever quarterly consolidated EBITDA of Rs.556 crore in Q4 FY25, with annual EBITDA at Rs.1,391 crore. Cement sales reached 19.4 MMT in FY25, with Q4 contributing 5.7 MMT. Revenue rose 4 per cent YoY to Rs.3,042 crore in Q4. Net debt reduced by Rs.390 crore to Rs.3,640 crore. The company received NCLT approval for acquiring Vadraj Cement, targeting 31 MMTPA capacity by FY27. Key marketing initiatives, expanding RMX and MBM businesses, and a focus on sustainability (457 kg CO2/tonne) drove performance. Nuvoco remains focused on premiumisation, operational efficiency, and market expansion.

Image source:nuvoco.com

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Concrete

UltraTech Cement increases capacity by 1.4Mt/yr

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UltraTech Cement has expanded its production capacity by 1.4 million tonnes per annum (Mt/yr) through a combination of debottlenecking efforts and operational efficiency upgrades across several of its plants. The enhancements include an addition of 0.6Mt/yr in grinding capacity at the Nagpur facility in Maharashtra and a combined 0.8Mt/yr at the Panipat and Jhajjar units in Haryana. With these upgrades, the company’s total domestic grey cement capacity has risen to 184.8Mt/yr, while its global capacity now stands at 190.2Mt/yr.

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