Connect with us

Concrete

Why cement sector needs to break out of its concrete cocoon?

Published

on

Shares

By Sandip Ghose of Birla Corp. Courtesy moneycontrol.com One pic of cement bag.

Cement manufacturers will need to rapidly reinvent their marketing act to compete in a digital marketplace. The more savvy and nimble-footed players will have an edge over their stodgy peers.

Five months after the outbreak of COVID-19 and nationwide lockdown, as the economy is still trying to find its feet, one sector that has given some joy to the markets and investors is cement.

The near-instant bounce back of cement sales in May and June after a virtual washout in April 2020 surprised the manufacturers as much as analysts and industry observers. Various factors have been attributed to the recovery?from pent-up demand to pick up in rural housing post a good rabi harvest and availability of labour in villages, thanks to the returning migrants.

In a parched economic landscape, when people are moving around with magnifying glasses looking for green shoots, concrete – of all things – was found to have gathered some moss. This has been reflected in the buoyancy of cement stocks of both large and midcap companies. The industry players have been expressing "cautious optimism" and predicting a return to the growth path in the next fiscal (2021-22). "Rural demand is likely to help contain the on-year drop in cement sales volume to 12-14 percent this fiscal as against an average annual growth of 6 percent during the last three fiscals," analysts from rating agency Crisil said in an industry research report.

A "V-shaped" recovery was predicted from a sharp contraction of 85 percent in the first quarter to an estimated 7-10 percent growth by the fourth quarter, led by strong rural demand and pick-up in infrastructure activities.

This near-term confidence is based on the assumption of the pandemic blowing over and returning to economic normalcy. However, none of the projections appear to have factored in some of the structural changes that are expected in the post-COVID-19 world.

The Indian cement industry has for long been comfortably numb in the hangover of the "control-raj" days. Stakeholders have historically viewed the industry with the bi-focal lens of supply and demand. The huge headroom in per-capita cement consumption-when compared to economies like China-gave the industry a long runway. The players were, therefore, content to grow in tandem with the national GDP-relying on the natural pull from rapid urbanisation and rural housing.

Cement players, therefore, focused on acquiring limestone reserves and setting up manufacturing capacity to keep pace with demand. To its credit, the Indian cement industry has consistently invested in upgrading technology, being among the best in the world on efficiency and environment parameters.

However, the same focus did not go into product innovation and demand-generation by increasing the use of concrete in novel applications.

Forays into new product forms-such as value-added concrete-were half-hearted given the large rural and "individual home builder" segments, the low hanging fruits as it were. Similarly, there was little attempt to change in "Route-to-Market" or the age-old sales and distribution model.

For increasing footprint and reducing market lead, cement players set up dispersed grinding capacity but comparable investment did not happen in front-end logistics. Bulk transportation, point of consumption storage terminals and packing facilities did not feature in the list of priorities. Even today the standard pack size remains 50 kgs, with high reliance on manual handling at the manufacturing-end and the distribution chain.

Going forward, however, it would be counter-intuitive to believe that disruptions of COVID-19 will spare the cement trade and life will return to the old pre-March 2020 ‘happy days’. There is a general consensus among marketers that contactless delivery and social-distancing norms are here to stay.

It would be a fallacy to assume that these changes will affect only a few sectors like consumer goods and home-delivery services. Therefore, even adjacent product categories such as paints, tile and wood adhesives, water-proofing and construction chemicals are anticipating changes in customer behaviour to impact their businesses. Cement, therefore, cannot remain cosily protected behind a brick and mortar wall, as it were.

Experts have warned that this pandemic may not be a one-time phenomenon. Mankind should expect similar disruptions from both natural and man-made causes. Even in this short period, COVID-19 has taught us that-it has a nasty habit of revisiting in waves. So seasonal surges and localised outbreaks may become a normal feature in the coming days.

This will require the cement industry to rapidly adopt digital marketing and remote working practices. Acquiring technology and digital platforms is going to be easy. The real challenge will be in bringing about the cultural change in organisations steeped in traditional ways of working.

Contactless transactions will be the preferred mode for customers as well as the trade. This will not only accelerate digital order booking and payments but may also trigger a large0scale shift to online portals for the sale of cement.

Manufacturers will need to rapidly reinvent their marketing act to compete in a digital marketplace. The more savvy and nimble-footed players will have an edge over their stodgy peers.

Just like cooking and baking at home, the pandemic will usher a "Do It Yourself" cult among householders. This will require manufacturers to look at smaller pack sizes and product innovations such as quick-setting cement, masonry cement, mortar, ready-to-use concrete mix, bagged concrete and other niche products.

The bigger changes can be expected in construction technology, especially in large projects. Shortage of labour, social-distancing norms and challenges of providing hygienic shelter for workers will encourage contractors to adopt labour-saving practices, automation and use of alternative material such as particle and gypsum boards.

After the pandemic, environmental concerns will again occupy the centre stage. The clamour for reducing the use of cement or replacing it with greener alternatives is bound to increase. Both due to the change in government policy and end-user awareness there will be a greater premium on energy-efficient buildings, green architecture and the use of natural material.

The industry is banking heavily on infrastructure projects. The government has already indicated a willingness to relax the use of bitumen for highways for reasons of cost and speed.

The other area of opportunity that cement makers are looking at is affordable housing. But, to really take off, the definition of affordable housing itself will need to change-through new design, construction material and building technology. It will also require different application skills (beyond basic masonry) that may not be available in the current universe of construction workers.

The pandemic has highlighted the risk of living in congested cities. Given the experience of lockdown, people have turned wary of high rise buildings and housing complexes. With work from home becoming common, there could be reverse migration to the suburbs and smaller towns. This trend will be accelerated by the development of highway infrastructure, air-connectivity and development of ‘rurban’ India.

The cement industry will have to break out of its concrete cocoon and look at changes in the outside world. Production capacity and demand will no longer be the only determinants of success. Size matters. But, strategic foresight and marketing savvy will win the day.

(Sandip Ghose is a marketing professional. He has worked in FMCG, media and cement sectors. He tweets at: GHOSESPOT @SandipGhose)

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Concrete

Cement Makers’ Margins To Fall Rs 50-75 Per Tonne Amid West Asia Conflict

Crisil Sees Margins Easing Despite Steady Demand

Published

on

By

Shares

Crisil said operating margins of Indian cement manufacturers are expected to decline by Rs 50-75 per tonne (t) this fiscal to Rs 925-950 per t due to higher input costs triggered by the West Asia conflict. The analysis covered 18 cement companies accounting for nearly 90 per cent of India’s domestic cement capacity and noted margins had improved sharply to around Rs 1,000 per t in fiscal 2026.

Crisil noted that the reduction would be driven mainly by higher power and fuel costs, which account for about 30 per cent of total costs, as petcoke and imported coal prices have surged amid geopolitical uncertainties. Freight costs, which account for about a quarter of total costs, are also expected to remain elevated because of higher diesel prices. The impact on profitability is likely to be more pronounced in the first half of the fiscal year before easing commodity prices moderate cost pressures later.

The rating agency said steady domestic demand and strong balance sheets should keep credit profiles stable despite the moderation in margins. Green energy currently accounts for 35-40 per cent of the sector’s total electricity consumption and is expected to partly cushion higher energy costs. Operating cash flows are likely to remain resilient, supported by projected 6-7 per cent growth in cement demand this fiscal.

Crisil highlighted that demand growth will be driven primarily by infrastructure spending, which meets about one-third of sector consumption, and by a nearly 18 per cent higher budgetary allocation for core ministries that should support project execution. Weaker rural housing demand amid pressure on agricultural incomes from a possible below-average monsoon may be offset by improved urban housing demand supported by favourable home-loan rates and a strong pipeline of Pradhan Mantri Awas Yojana-Urban projects. Ongoing capacity additions will keep capital expenditure elevated and may lift net debt to EBITDA to between 1.2 and 1.4 times from around 1.0 time last fiscal, though ratios are expected to remain healthy.

Continue Reading

Concrete

UltraTech Board Approves Rs 50 bn Fundraise Via NCDs

Company to issue half a million debentures for expansion plan

Published

on

By

Shares

UltraTech Cement’s board of directors has approved raising Rs 5,000 crore (Rs 50 bn) through non?convertible debentures issued in rupees.

The finance committee cleared a proposal to issue up to 500,000 fully paid, unsecured, listed, rated, redeemable, rupee?denominated, non?convertible, non?cumulative debentures of Rs 1 lakh each (Rs 0.1 mn each), aggregating to the Rs 5,000 crore programme.

As of June 2026 the firm reported net debt of Rs 15,875 crore (Rs 158.75 bn) and said its capacity expansion projects under execution are backed by capital expenditure of about Rs 17,000 crore (Rs 170 bn) over the next two to two?and?a?half years.

UltraTech spent Rs 9,500 crore (Rs 95 bn) on capital expenditure in financial year 2026 and in April the group crossed 200.1 mn tonnes per annum of domestic grey cement capacity and 205.5 mn tonnes per annum of global capacity.

The chief financial officer indicated the company would take consolidated capacity beyond 242 mn tonnes per annum, with grey cement capacity reaching 212.7 mn tonnes per annum by the end of financial year 2027. He noted the net debt?to?earnings before interest, taxes, depreciation and amortisation ratio stood at 0.87 times as of June 2026 and the company was confident of ending financial year 2027 with the ratio below one time.

In the first quarter of financial year 2026?27 UltraTech’s net profit attributable to owners rose 16.8 per cent year?on?year to Rs 2,599.3 crore (Rs 25.993 bn) and revenue from operations increased 15.9 per cent to Rs 24,648.20 crore (Rs 246.482 bn). The board approval is expected to complement internal cash flows as the company advances its expansion programme.

Continue Reading

Concrete

Lokesh Lays Stone For Rs 31 Billion Cement Unit In Kadapa

Line-2 expansion to make Kadapa a major cement hub

Published

on

By

Shares

Andhra Pradesh Education and IT Minister Nara Lokesh on Wednesday laid the foundation stone for the Line-2 expansion of Dalmia Bharat Cement at Chinnakomerla village in Mylavaram Mandal in Kadapa district. The project carries an investment of Rs 31 billion (bn) and is slated for completion by the third quarter of the financial year 2028. The expansion is intended to boost industrial growth and employment generation across the Rayalaseema region.

Once commissioned, the Kadapa facility will become Dalmia Bharat’s largest integrated cement manufacturing ecosystem in southern India, creating over 1,000 direct and indirect jobs and opening new business avenues for regional micro, small and medium enterprises and transport operators. Lokesh said the expansion signalled growing corporate confidence in the state and reflected the practical ease of doing business that secured repeat investment.

He placed the project within the government’s wider economic targets and recalled the Yuvagalam padayatra commitment to generate two million (mn) jobs within five years, noting that the state would cultivate talent while industry created opportunities. Lokesh highlighted Andhra Pradesh’s competitive pursuit of major manufacturing accounts, mentioning past successes and a personal initiative to engage global investors when persuading them to anchor expansion in the state.

The plant will leverage Kadapa’s abundant limestone reserves to scale production and sustainability. Clinker capacity is planned to rise from two point five million tonnes per annum (mn tpa) to six point one mn tpa, while overall cement output will increase from three point six mn tpa to nine point six mn tpa. The unit is designed to operate on over eighty per cent renewable energy and deploy waste heat recovery, zero liquid discharge, water recycling and advanced AI systems to optimise efficiency. Industries Minister TG Bharat, BC Welfare Minister S. Savitha and Jammalamadugu MLA C. Adinarayana Reddy attended the ceremony.

Continue Reading

Video Thumbnail
â–¶

    SIGN-UP FOR OUR GENERAL NEWSLETTER


    Trending News

    SUBSCRIBE TO THE NEWSLETTER

     

    Don't miss out on valuable insights and opportunities to connect with like minded professionals.

     


      This will close in 0 seconds