The Indian cement sector has managed to bag a ‘stable’ rating outlook for FY17 from India Ratings and Research. The rating agency in its latest report – FY17 Outlook said, "Cement demand is likely to grow between 4 per cent and 6 per cent in FY17." Cement demand grew at 2.1 per cent during April-November 2015, which is a lot lower than the agency’s forecast of 6.5 per cent – 8 per cent in FY16.
"The agency does not expect any significant pick-up in urban housing demand as the real estate sector across major six cities (except Kolkata) is still ailing with high inventory levels," it said in the report.
While the southern part of India is giving signals of a spurt in capacity utilisation to 60-61 per cent in FY17 from 57 per cent in FY16, the eastern part, which is doing well, at 75 per cent is expected to see a downtrend and may fall by 8-9 per cent in FY17. Other regions are expected to maintain the current capacity utilisation.
If at all there are no improvements on the capacity utilisation, the cement manufacturers will continue to enjoy and maintain profitability on the back of lower fuel and freight prices.
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