On 01 February 2022, the Finance Minister of India, Smt Nirmala Sitharaman presented the eagerly anticipated Union Budget 2022. It comes at a time when the economy is still recovering from the devastating impact of the COVID-19 restrictions that had been imposed in the interest of the public, and as such, it was expected to make certain provisions for various industries in the country that would allow them to recover. Let’s take a look at some provisions that are expected to make an impact on the cement industry in India.
India is the second-largest producer of cement on a global scale with more than 7 per cent of the global installed capacity. Cement production reached 329 million tonnes (MT) in FY20 and is projected to reach 381 MT by FY22, driven by rural housing demand and the government’s strong focus on infrastructure development.[1]
Vimal Kejriwal, MD & CEO, KEC International Ltd., says, “I welcome the forward-looking, Capex-led Budget 2022, with a sharp 35 per cent increase in outlay. A strong focus on improving the safety of Indian Railways, faster implementation of metro rail systems, infrastructure status for data centers, along with an emphasis on PM GatiShakti with significant allocation towards Jal Jeevan Mission, Affordable Housing, BharatNet, and building 100 Cargo Terminals for multimodal logistics facilities augur well for KEC International Ltd. and our well-diversified businesses.”
It should be noted that India is still a developing country with tremendous improvements in infrastructure planned as of now. Infrastructural developments require cement as one of the primary raw materials, along with steel, coal, and other allied industries; and any expenditure or incentives for expenditure from the government in the infrastructural development sector is a very welcome sign which indicates a significant amount of growth in the cement industry, in addition to growth in these allied sectors such as coal, steel, aluminium, and mining. From this perspective, the Union Budget 2022 has been a blessing as it has made provisions for the following expenditures in infrastructural development [2]:
Government Scheme
Budget Estimates 2022-2023(INR crore)
National Highways Authority of India
1,34,015
Road Works
64,568
PM Awas Yojana
48,000
Metro Projects
19,130
PM Gram Sadak Yojana
18,000
Urban Rejuvenation Mission: AMRUT and Smart Cities Mission
14,100
Compensation to Service Providers for creation and augmentation of telecom infrastructure
9,000
National Investment and Infrastructure Fund (NIIF)
5,003
National Capital Region TransportCorporation
4,710
Member of Parliament Local Area Development Scheme (MPLAD)
3,965
Police Infrastructure
3,919
Border Infrastructure and Management
2,745
National Industrial Corridor Development and Implementation Trust (NICDIT)
1,500
North East Special Infrastructure Development Scheme (NESIDS)
1,419
Infrastructure facilities for Judiciary
858
Infrastructure Development and Capacity Building
588
Border Area Development Programme
566
Other Programmes including Railway Infrastructure
96,314
Total
4,28,400
As can be seen from the above table, a massive Rs 4,28,400 crore is expected to be spent for the purpose of infrastructural development in the upcoming financial year. A majority of these developments are concerning roads and transportation facilities in the country, however, schemes like the PM Awas Yojana, AMRUT[3], and Smart Cities Mission also incentivise residential infrastructural developments and give a boost to the real estate market. With the introduction of programmes such as the PM Gati Shakti, which aims to bring together Ministries related to transport (roads, railways, etc), we can expect a much more efficient planning system that may further increase the demand in the industries related to infrastructure, leading to even more growth.
One essential part of the Indian economy is the railway network. The railways present a special income and expenditure profile in the budget[4]. In 2022-23, the total expenditure on the Indian Railways is expected to be Rs 4,73,440 crore. While a lot of this amount goes towards the operating expenses of the railways, a significant percentage of it also goes towards infrastructural development which is undoubtedly a blessing for the cement industry.
Driving India ahead
Budget 2022 also makes provisions for improving the ease of doing business in India. Kejriwal further adds, “Initiatives such as the use of Surety Bonds as a substitute for bank guarantee, a cap on Surcharge of AOPs consortiums at 15 per cent as against 37 per cent earlier and an end-to-end online e-Bill System to enhance transparency are steps in the right direction for EPC contractors.”
While expenditure in the infrastructure, transport, and real estate sector from the government is sure to cause these sectors to grow, expenditure from individuals is also a key driving factor in the real estate sector. Individual customers would have greatly appreciated some form of tax benefits on home loans, which could have led to growth in the residential real estate sector, which also benefits the cement industry in addition to industries such as steel, home electronics and appliances, and many more. The middle class has also not received any reduction in the income tax, meaning that these individuals will be hesitant to make large investments such as real estate at the moment as well.
In conclusion, the new budget seems to be very beneficial for the cement industry, along with various other allied industries which play a role in construction and infrastructure. Budget 2022 promises tremendous developments in the public infrastructure and transportation in India, and development in these sectors is expected to lead to further development throughout the economy in the foreseeable future. Additionally, ease of doing business is also expected to improve with provisions such as the end-to-end online e-bill system. However, it is not only the government and large companies that form the market but also the individuals, and it would be very helpful for the industry if the government makes provisions for them.
Indian cement manufacturers are set to invest approximately USD 14.3 billion over the next four years to increase capacity by 25 %. This move, driven by rising domestic demand, is expected to add an additional 160-170 million tons of cement production annually. The industry’s expansion will be predominantly funded through internal accruals, with minimal reliance on debt. The expansion is spurred by government’s massive infrastructure push, with plans to invest USD 1.7 trillion in infrastructure projects by 2030. According to S&P Global Ratings, the demand for cement in India is projected to grow at a compounded annual growth rate (CAGR) of 7 % over the next four years, aligning with the planned capacity additions.
The bulk of this growth will come from the top-three cement producers–Ultratech, Ambuja and Shree Cement, which will account for over 70 % of the country’s total capacity increase. This expansion equates to an annual capital expenditure of close to Rs 300 billion, which will be more than double the average annual capex of the past decade. The leading cement companies, which produce 70 % of India’s total cement output, are in a strong financial position to support this expansion. Rising cement prices have bolstered their balance sheets, allowing them to reduce debt significantly while maintaining robust cash flows.
The Securities and Exchange Board of India (SEBI) has placed the proposed ?4,000 crore Initial Public Offering (IPO) of JSW Cement on hold, citing regulatory concerns. This development comes as a significant pause in the cement manufacturer’s plans to raise capital through the public markets, a move that was expected to bolster its expansion and growth strategies in the competitive construction sector.
IPO Overview: JSW Cement, a key player in the Indian cement industry, had announced its intentions to launch a ?4,000 crore IPO. The offering was aimed at raising funds to support the company’s ongoing expansion projects, reduce debt, and improve operational efficiency.
SEBI’s Decision: SEBI, the regulatory body overseeing the capital markets in India, has decided to withhold its approval for the IPO. The decision was made after careful scrutiny of the draft red herring prospectus (DRHP) submitted by JSW Cement. While specific reasons for the hold have not been disclosed, it is understood that SEBI has sought further clarifications on certain aspects of the filing.
Impact on JSW Cement: The postponement of the IPO is likely to impact JSW Cement’s financial planning and expansion initiatives. The company had intended to use the proceeds from the IPO to fund new projects, including the construction of additional cement plants, modernization of existing facilities, and investments in sustainable practices.
Market Reactions: The decision by SEBI has led to a cautious response in the market. Investors and market analysts are closely monitoring the situation, as the delay could affect investor sentiment towards the company and its future fundraising efforts. The construction sector, which heavily relies on capital-intensive projects, may also be impacted by this development.
SEBI’s Concerns: SEBI’s decision to put the IPO on hold highlights the regulatory body’s commitment to ensuring transparency and investor protection in the capital markets. The regulator may be seeking additional information regarding JSW Cement’s financials, corporate governance practices, or other disclosures to ensure that the IPO meets all necessary requirements.
JSW Cement’s Response: JSW Cement is reportedly working closely with SEBI to address the concerns raised and to provide the required clarifications. The company remains optimistic about receiving the necessary approvals in due course and proceeding with the IPO as planned.
Industry Context: The Indian cement industry has seen significant activity in recent years, with companies looking to expand their capacities to meet growing demand. IPOs have become a popular route for raising capital, allowing companies to fund expansion and reduce debt. However, the regulatory environment remains stringent, with SEBI playing a crucial role in maintaining market integrity.
Future Prospects: While the IPO is currently on hold, JSW Cement’s long-term growth prospects remain robust, driven by its strong market position and ongoing investments in capacity expansion. The delay in the IPO may prompt the company to explore alternative fundraising options, such as debt financing or private equity, to meet its immediate capital needs.
Regulatory Environment: SEBI’s decision underscores the importance of regulatory compliance in the IPO process. Companies looking to tap the capital markets must ensure that their disclosures are thorough and transparent, meeting all regulatory standards to gain investor confidence.
Conclusion: The hold placed by SEBI on JSW Cement’s ?4,000 crore IPO is a reminder of the challenges that companies face in navigating the regulatory landscape. While this may delay the company’s fundraising plans, it also provides an opportunity to strengthen its disclosures and align with regulatory expectations, ultimately benefiting both the company and its investors.
JSW Cement now faces the task of addressing SEBI’s concerns to move forward with its IPO, a crucial step in its growth trajectory within the Indian cement industry.
As urban areas expand and cities continue to grow, the need for sustainable building practices becomes more pressing than ever. Today, more people recognize the importance of creating urban environments that coexist harmoniously with nature. The question we must ask is: Can we build cities that not only meet our needs but also embrace the natural world?
The Rise of Sustainable Building
The concept of sustainable building is not new, but its importance has dramatically increased in recent years. With over 5.3 billion square feet of green building space in India alone, the shift towards eco-friendly construction is clear. This transition isn’t just a trend—it’s a necessary evolution as we confront the environmental challenges posed by rapid urbanization.
Reducing Our Carbon Footprint
Buildings are significant contributors to carbon emissions, accounting for nearly 40% of global emissions due to construction activities and the use of energy-intensive materials like steel and concrete. In India, the construction sector is responsible for 30% of the nation’s carbon emissions and generates an astounding 530 million tons of waste annually. This waste could fill 200,000 Olympic-sized swimming pools, highlighting the urgent need for more sustainable practices.
However, sustainable building practices are helping to reduce these impacts. For instance, green buildings in India are already reducing energy consumption by up to 40%, with a significant portion of their energy coming from renewable sources. By 2030, these buildings are projected to decrease carbon emissions by 33-35%. This is a testament to the power of sustainable construction methods and the positive impact they can have on our environment.
Building Smarter with Sustainable Materials
The choice of materials plays a crucial role in sustainable construction. Traditional materials like steel and concrete are energy-intensive and have a high environmental impact. For example, producing new steel emits over 2.5 tons of CO2 per ton of steel. However, using recycled steel can reduce these emissions by up to 60%. Similarly, conventional concrete production emits about 1 ton of CO2 for every ton of cement produced. By incorporating eco-friendly alternatives like geopolymer concrete, we can cut down these emissions by up to 35%.
The Power of Local Materials
Another key aspect of sustainable construction is the use of locally sourced materials. Materials like rammed earth not only reduce transportation emissions but also offer excellent thermal insulation, reducing the need for additional heating and cooling. Rammed earth construction can lower embodied energy by up to 30% compared to conventional materials. This practice not only supports local economies but also minimizes the environmental impact of transporting materials over long distances.
Innovative Approaches to Green Building
Around the world, innovative sustainable building projects showcase the potential of eco-friendly construction. In India, several projects have set remarkable benchmarks in sustainability by integrating cutting-edge technologies, adopting eco-friendly practices, and prioritizing environmental conservation.
The construction industry is one of the largest contributors to environmental degradation. Yet, it also holds immense potential to drive positive change. By adopting sustainable building practices, we can reduce the environmental impact of construction and create healthier, more livable urban environments.
Integrating renewable energy sources into building designs is a key component of sustainable construction. Solar panels, wind turbines, and other renewable energy technologies can significantly reduce a building’s reliance on fossil fuels, cutting down on carbon emissions and promoting a more sustainable energy future.
Water Conservation
Water is another critical resource that must be conserved in sustainable building practices. Rainwater harvesting, greywater recycling, and efficient water fixtures can help reduce water consumption and preserve this precious resource. By implementing these practices, buildings can significantly reduce their water footprint and contribute to more sustainable water management.
As the construction industry continues to shape the landscapes of our cities and communities, it must embrace a more sustainable path forward—one that prioritizes the health of our planet and the well-being of future generations. The choices we make today in building materials, design, and construction practices will have lasting impacts on our environment and quality of life.
By choosing sustainable building practices, we are not just constructing buildings but also building a better future. We are creating cities that work with nature, not against it, and ensuring that our urban environments remain healthy and vibrant for generations to come.
Eco-Blueprints: Mastering Sustainable Construction
By integrating sustainable practices into every aspect of construction, we can reduce our environmental footprint, conserve valuable resources, and create healthier, more livable spaces. The future of urban development lies in embracing these eco-blueprints and mastering sustainable construction practices. The time to act is now, and the path forward is clear. Let’s build a future that enhances life with green practices and ensures a sustainable world for all. To dive deeper into how sustainable building practices are shaping our future, don’t miss our latest YouTube video https://www.youtube.com/watch?v=QYmRyVu-cLwF
