Cement Sector and opportunities in India
- India is the 2nd largest cement producer in the world after China.
- The production of cement was 502 Million tonnes in 2018 and expected to grow 550 tonnes by 2020. The demand of the cement industry is expected to reach 550-600 MT per annum (MTPA) by 2025 because of the expanding demand of different sectors, i.e., housing, commercial construction, and industrial construction.
- A total of 210 large cement plants account for a combined installed capacity of 410 MT in India, whereas, 350 mini cement plants make up for the rest. Of the total 210 large cement plants in India, 77 are in the states of Andhra Pradesh, Rajasthan, and Tamil Nadu. The sale of cement in India stood at Rs 63,771 crore (US$ 9.05 billion) in FY20.
- According to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 and March 2020.
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Opportunities Available for the Cement sector
The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom line in the future. In the next 10 years, India could become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well armed to face stiff competition from cement plants in the interior of the country. India’s cement production capacity is expected to reach 550 MT by 2025.
Due to the increasing demand in various sectors such as housing, commercial construction and industrial construction, the cement sector is expected to reach 550-600 million tonnes per annum (MTPA) by the year 2025.
The Union Budget has allocated Rs.139 billion (US$ 1.93 billion) for Urban Rejuvenation Mission: AMRUT and Smart Cities Mission. The government’s infrastructure push combined with housing for all, Smart Cities Mission, and Swachh Bharat Abhiyan is going to boost cement demand in India.
The Government of India extended an additional outlay of Rs. 18,000 crore (US$ 2.43 billion) for the PM Awaas Yojana – Urban over the already allocated Rs. 8,000 crore (US$ 1.08 billion); this is expected to be used for the development of ~30 lakh houses (ground support for 12 lakh houses and completion of 18 lakh houses) and will likely create an additional 78 lakh jobs and boost production and sale in the steel and cement sectors.
Challenges faced by cement Industries
The future of cement industries in India is looking positive but cement industries are facing a situation on Over capacity. Some challenges are indicated below:-
- Lack of price determination due to interventions by the Competition Commission of India & the populist State Governments
- Shortage of domestic coal & increasing cost of imported coal is also adding to the overall increase in production cost
- The logistics cost for cement is high since a lot of the cement is still transported through road transport.
- The current Railways capacity is not adequate enough for transportation
1. Rise in Petrol and Diesel Prices
The petrol price in Mumbai was Rs. 95 per Litre on Saturday and it has increased by 30 Paisa. Diesel price also increased by 36 paise from the Saturday rates. There is a price difference between Petrol and diesel prices from state to state due to tax and duties.
Central And state tax makes up 61% of retail selling price and 56% of diesel prices. The international market price per barrel is 61 USD.
The demand for Crude oil is rising Due to the unlocking of the economy globally, increase in demand, and global supply. As we see rising demand for crude oil, we can see the shift to renewable energy. It will also impact the demand on the automobile industries as well.
There is a fair chance of increasing the price of crude oil.
2. Franklin India Debt Mutual Fund
Franklin India had declared to shut 6 funds with AUM of Rs.25k cr on 23 April 2020 due to liquidity and redemption Pressure. Franklin AMC had received near 13k from the maturity of bonds till January 2021. This will help to pay back to its investor and still some bonds are in the process of maturity.
The schemes — Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund.
3. Govt is planning to infuse Rs. 3000cr into PSU general Health Insurance companies
The targeted health insurance companies are Nation Health Insurance, United Health Insurance, and oriental Health Insurance. The purpose of providing this fund is to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improve risk management.
The cabinet had also decided to increase the authorized share capital of National Insurance Company Ltd. to Rs 7,500 crore and that of United India Insurance Company Ltd. and Oriental Insurance Company Ltd. to Rs 5,000 crore each to give effect to the capital infusion decision.
This Decisions will be taken on March 8 in parliament, after that execution will start.
These steps will help to create confidence among the investor towards PSU sector and help to improve overall health Industries.
4. RailTel IPO
RailTel Corporation a “Mini Ratna (Category-I)” PSU is one of the largest neutral telecom infrastructure providers in the country owning a Pan-India optic fiber network on exclusive Right of Way (ROW) along Railway track.
Facts about the company
- Largest neutral telecom infrastructure providers
- Wide Range of services
- Optic fiber network covering 59,098 route Kms and 5,929 railway stations in India
- Has an exclusive right of way along 67,415 Kms connecting 7,321 railway stations
- Has 305,746 retail customers and 5,023 Access network providers (ANPs) to deliver the last mile connectivity
RailTel is providing good opportunities for investment and it has high potential to grow as infra grows.
- Vodafone Idea Group – Vodafone Group is evaluating to sell its stake in Indus tower to infuse capital in Vodafone Idea to meet capital requirement. This action takes place when the global leader of Vodafone ask its promoter to infuse capital in the Group. It is a discussion going on and if they want to implement this process, UK- Vodafone need to bring its shareholder on Board.
- Bajaj Finance Payment APP – Bajaj finance is planning to introduce its payment app – Bajaj Pay. it will help its customer in term of there all payment solution like EMI, PPI, UPI and Credit Cards bill. They will mostly lunch this app in Q4 for 2021. Apart from this, they will also include other services on this app like loans, insurance solution, Investment advisory and other financial services. This move is slow but not late. Due to growth in seamless transaction and market opportunities, we see good potential growth in this company.
- L&T construction arm bags order worth up to5000 Cr in Bangladesh – l&T construction arm bagged order of Rs. up to – 5000 k order form Bangladesh to built infra for transmission of electricity to enhance the power transfer capacity. Scope of the work involves design, supply, installation, testing and high voltage transmission line. wth this news share of the company was of trading 1.13 per cent higher.
- Infra Bonds ( Budget 2021 ) – to make infrastructure bonds more attractive, the government may provide additional tax benefits up to Rs.20,000/- over and above of 80c investment ( Rs.150000/-). This movement will help to save tax for Individuals and also help to generate fund for Infra development to government.
- Amazon – Future group – Reliance deal – Indian stock exchange had given green signal to Future group to sell its asset to Reliance with was ties between its business partner Amazone.com Inc.Indian Stick exchange have to issues with the deal and given approval to Future group and reliance. The outcome of this dispute is to, who will emerge as retails market king to be worth around $740b years by 2024.
- Ceat Tyres – Ceat tied up with Nissan to supply Securarange of tyres for Nissan magnite Model. Ceat is providing the best in class in these segments and the design is made in such a bay that they make less noise on-road and give a comfortable ride experience. These tie-ups help ceat to acquire more business in tyre segments.
- Hero MotoCop – due to lockdown and low availability of public transport there is huge potential growth in 2 wheeler segment as demand is increasing in personnel vehicles. in November Herocop sold 519091 units which are 14 % higher than last year’s November sales.
- Company Holds a better position in the market in terms of Market which means they have a various variety of products for Entry and Executive levels. The biggest strength which is reachability to Rural and Semi-Urban area. Almost 60% of sales come from rural areas.
- Tie up with Harley Davidson also adding advantage to the company and this will help the hero to come in premium segment bike range.
- Bharti Airtel – Nettle Infrastructure Investment ( Subsidiary of Bharti Airtel ) increased 4.94 % Stake in Bharti Infratel for Rs. 2882.32 cr and due to this stock in rose up by 2.78 % at 10 am. P 5 Asia Holding Investments Mauritius sold 6.65 crore scrips of Bharti Infratel at Rs 215.5 per share.
- Now the Nettle and Bharti Airtel holds 18.62 % and 23.04 % stake in Infratel. Indus tower which is India’s largest Standalone Mobile network tower merged with Infratel this will be the reason for increasing the stake in Infratel .vodafone hold around 28.12 % stake in the merged entity. Yesterday Vodafone has raised there tariff rates which will help gain airtel to acquire more customers on board with a better connectivity network.
- Indigo airlines – Indigo is operating 1000 daily flights which are 70 % of pre covid level. India resumed its domestic flight on 25 May in pandemic with 33% of passenger capacity. As unlocking happens in the subsequent month the passenger-carrying capacity increase from 33% to 70 %. Ronojoy Dutta ( CEO ) Indigo Said,” we are operating 70% of our pre covid capacity and will continue to grow in 2021.
- With supportive government policy, the incentive to Airlines industries, Unlocking the economy and development in Veccacine will help to grow Airlines industries in India. As limited players in the Airlines industries now, the outlook is positive for this company.
- Blue dart prepares for Vaccine Shipment – Blue Dart is now working with Pharma companies to prepare for covid -19 vaccine as there transfer partner. They are closely working with Pharma companies in covid vaccine development phase and there is specific requirement of temperature ( upto-80* c). we can see the good rally in logistic sector in next 1 years time because once the vaccine development is completed , we have more dependency on distribution network. Big logistic company will gain more in terms of market competitions.
- MSCI Change will to get more inflow into D Street -MSCI has confirmed that they will implement new regism regarding Foreign Ownership limit in November . Due to change in MSCI , India’s weight in its emerging market 0.60% that is 8.7% from current level 8.1%. Due to change in MSCI will Bring inflow of RS.18,000cr and from this resigm kotak Mahindra Bank , IPca Lab , Pidilitte industries ,Bajaj Finance , Britannia , Nestle will get more benefits. MSCI Index is used to track Indian stock overseas with several passive funds replication their portfolios according to the stock weight age that the index carries.
- Airtel’s results:- Yesterday Airtel come with positive results for Investors. They have shown 22 % growth in sales since 2011 and they manage to narrow there losses on YOY basis. They recorded losses of RS.763 cr which is much lower then last Years loss that is 23,405cr.During this quarter they had add 1.4c r who use 4g network services. Airtel Also paid more than 10% of the AGR due. Overall looking to market conditions we see positive growth In Airtel but still there is slow growth in telecom sector until unless change in govt policy.
- ICICI pru Life Q2 Results :- ICICI pru reported flat growth in profit for the September quarter yoy basis of Rs.303cr. Net premium earned by ICICI pru life was 8572 crore in September quarter with net investment income stood of Rs.8118 crore in second Quarter. They have very strong VNB performance for the quarter. VNB ( Value of New Business ) is used to measure profitability of new business written in a period.it represents the value of all future profits to new business contacts. As a market opportunity post lock down as well we can see positive growth in this industries and Market leader will get most benefits from this opportunities.