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Krishnan Thiagarajan

The cement industry has got the rough end of the stick from the Finance Minister in the latest Budget. Cement manufacturers will have to bear the brunt of a hike in excise duty proposed from Rs 400 to Rs 600 per tonne for cement sold at a retail price exceeding Rs 190 per 50 kg bag. This would translate into a hike of Rs 10 per 50 kg cement bag. However, if the prices are kept below Rs 190 per 50 kg bag, the excise has been reduced from Rs 400 to Rs 350 per tonne (or Rs 2.50 per kg).

Cement prices are ruling between Rs 195-210 per 50 kg bag across the Northern, Eastern, Western and Southern regional belt.

Since no major cement production capacity is coming up before the second quarter of 2008 and demand is likely to remain robust from ongoing infrastructure/construction projects, the manufacturers may be able to pass on the price hikes in the near term.

However, over a one-year horizon, the cement volumes may slacken and affect the profitability of large and mid-sized cement players such as Grasim, Gujarat Ambuja, ACC, India Cements, Shree Cements and Kesoram Industries.

Not surprisingly, most of these stocks have witnessed a sharp fall.

More Stories on : Cement | Budget

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