The Hindu Business Line : `Expect firmer cement prices on supply gap'

Mr N. Srinivasan, Vice-Chairman and Managing Director, said that there is no tax liability other than MAT this year. He expects to see firmer prices in FY08 due to demand-supply mismatch

Excerpts from CNBC-TV18's interview with Mr Srinivasan:

What has been the realisation picture for you in particular? The gross realisation for the whole year is Rs 3,130 per tonne compared to about Rs 2,460 last year but the prices have been firm. We are working at 100 per cent capacity, we have grown at about 3 per cent over last year but during this year, we expect all our brownfield expansion to come through. So this year, in the coming financial year, we expect that we would have at least about more than 10 per cent growth.

The results are because of good cost control. We have maintained our cost, our power fuel cost has been controlled, and overall cost control has been excellent. As a result of which the additional revenue has gone straight through to the bottomline, which is why we have had a net profit of Rs 139 crore for the quarter.

In the markets that you operate in and even otherwise, are you seeing any kind of a cool off in prices, particularly in South and from the interaction that you would be having with your peers in northern and western markets as well on account of the import threat or otherwise?

This is the busiest season for cement and across the country, the demand is very brisk and the entire industry is operating at full capacity, which automatically would imply firm prices.

Until the monsoon, I do not see any change and even during the monsoon, prices are unlikely to drop. The last two years, even during the monsoon, we did not see any softening of price because the demand supply equation has been like that and during this year we had the same 10 per cent growth. Last year, the total sale was 156 million tonnes plus 4 million tonnes of clinker export. So this year also, we will grow. Additional capacity is coming... but most of it is likely to come at the end of the year or sometime next year. So this year, you could see may be even firmer prices based upon pure demand supply.

Probably in South India due to the lower prices prevailing in the market, there might not be too much of an import threat but in other markets that India Cements particularly does not operate in, do you see any kind of price declines as a result of import threat?

No, I do not think so. We are talking of demand of 170-175 million tonnes and a few thousand tonnes imported here and there is not going to make much difference.

From the talk that we have had with dealers and certain other people in the industry, the word that is coming out is that since the government on its part did not maintain the status quo and went ahead and cut the import duties, the cement industry, if it wants to, has the option of actually not keeping its word given to the government? I think the pricing is totally company specific; it is a view that each company has to take. The CMA does not produce cement; so the major producers have to take a view in the light of whatever has happened.

Are you saying that you have the option of actually going ahead and increasing the prices should the need arise?

The price will be discovered in the market, this is what I am trying to explain. Today, the price is determined by the market place; it is not a question of any producer being able to control a price or fix a price. The demand-supply equation is a pure market force that determines the price of cement today.