One of the country’s biggest cement manufacturers has contended that there is no truth in accusations by the government that cartelisation pervades the sector.
Speaking to CNBC-TV18, HM Bangur, managing director of
Shree Cements, said there is no cartelisation in the cement industry, "The market share changes drastically from player to player. Our volumes have come down by 13 percent in this quarter, while the overall volume drop was 1-2 percent, in cartelization that doesn’t happen. Basically, cartelisation isn’t there but price movement will be in the same direction as it is a commodity."
In June, union minister for roads, transport and highways, MSMEs Nitin Gadkari had criticised cement companies for ‘unjustified’ price increases, reiterating the charge that cement manufacturers in the country often form cartels to hike prices of the commodity.
However, cement prices in the last three months have been easing due to lacklustre demand, as the economic slowdown, lack of funding for government projects have impacted the industry.
"Slowdown in the cement sector is part and parcel of the real economy. Cement will grow only is infrastructure is good, GDP growth is happening," said Bangur, adding that demand for the commodity has fallen to the low single digits.
However, the festive season and above-average monsoon in most parts of the country should augur well for demand in the industry, he added.
On the recent bouquet of relief measures to revive demand in the economy, Bangur said the finance minister has taken a lot of ‘confidence-building measures’, but it will be a few weeks before a sense of improvement in the general market feeling is clear. However, the direction of the steps bodes well for all sectors, including cement, he added.
In the first quarter this fiscal, Shree Cements had reported a 13 percent contraction in volumes, but a 400 bps increase in margins. The company expects the trend to continue.
“Shree Cements was selling in good quantity, but the rate difference between the market leader and us was high, and we wanted to correct that rate difference. So we did a course correction, and it was the right thing to do as our margins increased. This quarter we will be with the market and our margins will still remain high. We do expect a little drop in margins, but a much higher increase in volumes so the overall result is better,” Bangur told CNBC-TV18.Elaborating on the company’s expansion plans, Bangur told CNBC-TV18 that after the completion of the new facilities in Orissa and Maharashtra, Shree Cements “will slow down a little and consolidate on these expenses”.