HOME         WEBSITE         SUBSCRIBE           E-GREETINGS   
                               

Monday, March 24, 2014

Ind-Ra: Accelerating Consolidation in Cement Industry on Weak Demand

As expected by India Ratings & Research (Ind-Ra) in its 2014 outlook on cement manufacturers (published 20 January 2014), consolidation in the Indian cement industry continues. Additionally, the agency expected heightened consolidation activity in South India, driven by the region's over capacity issues. The two acquisitions in the cement industry post January 2014 totalling around USD750m are aligned to our expectation. 

In 2013, the cement industry saw mergers and acquisitions of around USD3.3bn. These are part of a strong, long-term trend within the industry and are likely to continue in the near future. The genesis of the current bout of consolidation could be the Competition Commission of India's (CCI) 21 June 2012 order on 11 cement companies against coordinated supplier actions. 

The possible acquisition targets include cement companies or cement manufacturing facilities (which are part of over leveraged conglomerates) with cost-effective access to raw materials and energy or a locational advantage to optimise freight costs. However, Ind-Ra believes facilities with limited viability due to a weak structural cost position will find few takers. 

The agency expects low demand due to a continued weak economic activity and the upcoming elections to accelerate the consolidation activity in FY15. Cement production grew 2% in 3QFY14 from 5.9% in 2QFY14. The construction sector grew (major consumer of cement) 0.6% in 3QFY14 from 4.3% in 2QFY14. 

Growth for the cement industry for 4QFY14 and 1QFY15 is likely to be in the range of 2%-3% due to subdued demand. Also, the profitability of integrated players and small players could come under pressure in FY15. However, Ind-Ra draws some comfort from stable, low coal prices and steady exchange rates which will cushion margins.
Posted by

Blog Archive

____________________________________________________________________________________________

Disclaimer - All investments in Mutual Funds and securities are subject to market risks and uncertainty of dividend distributions and the NAV of schemes may go up or down depending upon factors and forces affecting securities markets generally. The past performance of the schemes is not necessarily indicative of the future performance and may not necessarily provide a basis for comparison with other investments. Investors are advised to go through the respective offer documents before making any investment decisions. Prospective client(s) are advised to go through all comparable products in offer before taking any investment decisions. Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the fund will be achieved. Information gathered & material used in this document is believed to be from reliable sources. Decisions based on the information provided on this newsletter/document are for your own account and risk.


In the preparation of the material contained in this document, Varun Vaid has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the Varun Vaid and which may have been made available to Varun Vaid. Information gathered & material used in this document is believed to be from reliable sources. Varun Vaid however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. Varun Vaid does not in any way through this material solicit any offer for purchase, sale or any financial transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice.


Varun Vaid, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on the basis of this material. All recipients of this material should before dealing and/or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice. The investments discussed in this material may not be suitable for all investors. Any person subscribing to or investigating in any product/financial instruments should do soon the basis of and after verifying the terms attached to such product/financial instrument. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. Please note that past performance of the financial products and instruments does not necessarily indicate the future prospects and performance there of. Such past performance may or may not be sustained in future. Varun Vaid, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation in the financial instruments/products/commodities discussed here in or act as advisor or lender / borrower in respect of such securities/financial instruments/products/commodities or have other potential conflict of interest with respect to any recommendation and related information and opinions. The said person may have acted upon and/or in a manner contradictory with the information contained here. No part of this material may be duplicated in whole or in part in any form and or redistributed without the prior written consent of Varun Vaid. This material is strictly confidential to the recipient and should not be reproduced or disseminated to anyone else.


Varun Vaid also does not take any responsibility for the contents of the advertisements published. Readers are advised to verify the contents on their own before acting there upon.


Published Credits goes to following sources & all the mentioned sources as footer below the published material- Bloomberg, Valueresearch Online, Capital Market, Navindia, Franklin Templeton, Kitco, SBI AMC, LIC AMC, JM Financial AMC, HDFC AMC, The Hindu, Business Line, Personal FN, Economic Times, Reuters, Outlook Money, Business Standard, Times of India etc.