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Cement firms look East! Shree Cement, UltraTech, others eye expansion

Cement firms look East! Shree Cement, UltraTech, others eye expansion

Earlier in the week, Shree Cement said it was investing over Rs 600 crore in West Bengal to set up a cement grinding unit. Other players are also making swift moves

Cement industry's growth in eastern India, for long, was unimpressive (Source: Reuters) Cement industry's growth in eastern India, for long, was unimpressive (Source: Reuters)

For a long time eastern India was a laggard in India's cement industry, but that's changing fast with most players investing in the region.

Earlier in the week, Shree Cement said it was investing over Rs 600 crore in West Bengal to set up a cement grinding unit. Other players are also making swift moves. UltraTech, the biggest of them all, is adding close to 7 MT on its already large base of close to 120 MT.

South-based Sagar Cements, after acquiring Orissa's Jajpur Cements, is expected to add more capacity in the region. Without a doubt, the most audacious bet has been that of Nuvuco Vistas, owned by Nirma, with its buyout of two existing assets - Lafarge and Emami for Rs 14,900 crore - giving it a capacity of 19.5 MT.

Cement industry's growth in eastern India, for long, was unimpressive. Total installed capacity in the East for FY12 was 50 million tonnes per annum (MT) when the total national capacity was 350 MT.

Inadequate focus on infrastructure coupled with the absence of a housing boom did not help the cause.

Cut to FY21 and the capacity has risen to 111 MT of a total base of 537 MT. That makes it the second largest region by pecking order by some distance - West and Central are at 71 MT each while North is at 104 MT. At 181 MT, the South is the largest.

Jigar Shah, CEO, Maybank Kim Eng Securities India, points out that the per capita consumption in the East is well below the average in India but demand is on a rise.

"Now, the demand is rising as these states develop. It has been helped by the boom in housing," he says.

"Besides, the improvement in rail and road routes have improved significantly to deliver cement from the factory to the place of consumption," he adds. Higher demand will give companies more pricing power or the ability to pass on price hikes to consumers.

A sectoral report put out by ICICI Securities' Rashesh Shah earlier this year predicted cement capacity in the east to hit 131 MT in FY23 on a national base of 587 MT. "Utilisation levels in the east (central and north) are expected to remain above 80% till FY23 despite capacity additions," it says.

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