Cement demand to outspace supply for three fiscals
The incremental demand in the India’s cement sector is expected to outpace the incremental supply over the next three financial years, on the government’s push towards affordable housing and infrastructure, according to rating agency CRISIL.
While incremental demand is seen doubling to 48 million tonne compared with the past three financial years, incremental supply is seen moderating by a fifth to 31 million tonne from 39 million tonne.
Sachin Gupta, Senior Director, CRISIL Ratings feels the operating metrics of cement makers are also set to improve.
“We foresee a sharp recovery in demand this fiscal after demonetisation dealt a major blow leading to a 1.2% de-growth last fiscal.”
Gupta expects the cement sector to clock 5-6% compound annual growth rate between this fiscal and 2020, which is nearly twice as fast as between fiscals 2015 and 2017.
CRISIL rates 26 companies in the cement sector representing 54 per cent of the installed capacity in the country.
The cement sector signed Rs 32,000-crore of acquisitions in the last financial year.
However, CRISIL feels slower-than-expected demand from the infrastructure sector – as it is linked to government spending – could be a spoiler.
The implementation of the Real Estate (Regulation and Development) Act, 2016, could also have a short-term impact on volume growth.