Birla Corporation looks at a better demand for cement in 2016-17

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SME Times News Bureau | 04 Jul, 2016
The M.P. Birla Group's flagship firm, Birla Corporation expects the cement sector which is facing the problem of excess supply will see a better demand in the current fiscal on the back of planned spending by the central government on various projects.

"The demand for cement is expected to be better in financial year 2016-17 on the back of planned spending by the central government on various projects including highway infrastructure, railways, urban infrastructure, river-linking, increased government spending in Bihar and West Bengal post elections," the company said in its latest report.

It said that Indian cement industry is facing the problem of excess supply on two counts - demand for cement being subdued due to slow capital expenditure in infrastructure and poor rural income, while in the last few years, the industry went on an expansion drive.

In a message to the shareholders in the report, company Chairman Harsh V. Lodha and its Managing Director Bachh Raj Nahar said Prime Minister Narendra Modi's announcement on investment of Rs 1 lakh crore to double the capacity of the ports augurs well for the cement sector.

Setting a goal for building 15,000 km of highways and the proposal to use cement in place of bitumen by the Minister for Road, Transport and Highways is expected to boost the demand, it said.

A Crisil Research Report said over five year period, cement demand is projected to increase 8-8.5 per cent CAGR, led by continued growth in the housing and infrastructure sectors.

On the supply side, the company said the pace of new capacities in the industry has slowed down. "Over the period 2016-17 to 2019-20, the capacity addition in the industry is expected to be muted as the industry is approaching the end of investment cycle," it said.

As a part of capital expenditure, the company also plans to procure equipment to augment the capacity of mechanical mining.

The cement maker posted a net profit of Rs 157.35 crore in 2015-16.