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Cement
The cement sector has over the past four quarters suffered due to subdued demand growth and substantial
capacity additions, which have resulted in low utilisation levels. Margins are expected to remain under pressure
despite the improvement in prices due to spiraling prices of coal and other raw materials such as limestone and fly
ash. The sector will benefit considerably if the government announces new schemes that would involve an
additional spend on infrastructure projects.
Also, the sector, which is among the top three contributors to the government exchequer in terms of duties and
taxes, will be hoping for the fulfillment of some of its long unfulfilled demands on the duties front.
The industry will be well served by rationalisation of the excise duty structure, reduction of VAT on cement from
12.5% to 4% (as is the case with steel) and elimination of import duty on key raw materials (such as coal, pet coke
and gypsum). We expect these measures (if announced in the budget) to ultimately be passed on to the final
consumer; hence, we expect their overall impact to be Neutral on the sector.
Budget Expectations
Head Current Status Wish List Potential Impact
Excise duty on cement
Excise duty charged at
10% on cement price above
`190/bag; and `250/tonne
for cement price below
The NCAER has
recommended a 55%
abatement on excise duty
With the industry expected to face a demand- supply
mismatch , the pricing power is low for manufacturers.
Hence, the reduction in excise duty will benefit
manufacturers as well as consumers. Positive for all
cement companies.
`190/bag
However, there is a possibility that the excise duty
might be raised to 8%, which would act as a positive
for cement players.
Government spend on `173,552cr under various
Higher government spend on
Increased government spend on infrastructure will
result in cement demand remaining healthy at 9-10%
infrastructure schemes in the Union
Budget FY2010-11.
infrastructure
as against 7% currently. Positive for all cement
companies.
Import duty on coal
Import duty of 5.1% is
currently charged on
thermal coal. Clean energy Abolition of import duty on
The elimination of import duty will result in a reduction
in power and fuel cost, as rising fuel prices negatively
cess of `50/tonne for
imported and domestic
coal.
coal and clean energy cess
affect operating margins. Positive for all cement
companies.
Top Picks
Grasim
India Cements
Madras Cements
JK Lakshmi Cement
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cement
The cement sector has over the past four quarters suffered due to subdued demand growth and substantial
capacity additions, which have resulted in low utilisation levels. Margins are expected to remain under pressure
despite the improvement in prices due to spiraling prices of coal and other raw materials such as limestone and fly
ash. The sector will benefit considerably if the government announces new schemes that would involve an
additional spend on infrastructure projects.
Also, the sector, which is among the top three contributors to the government exchequer in terms of duties and
taxes, will be hoping for the fulfillment of some of its long unfulfilled demands on the duties front.
The industry will be well served by rationalisation of the excise duty structure, reduction of VAT on cement from
12.5% to 4% (as is the case with steel) and elimination of import duty on key raw materials (such as coal, pet coke
and gypsum). We expect these measures (if announced in the budget) to ultimately be passed on to the final
consumer; hence, we expect their overall impact to be Neutral on the sector.
Budget Expectations
Head Current Status Wish List Potential Impact
Excise duty on cement
Excise duty charged at
10% on cement price above
`190/bag; and `250/tonne
for cement price below
The NCAER has
recommended a 55%
abatement on excise duty
With the industry expected to face a demand- supply
mismatch , the pricing power is low for manufacturers.
Hence, the reduction in excise duty will benefit
manufacturers as well as consumers. Positive for all
cement companies.
`190/bag
However, there is a possibility that the excise duty
might be raised to 8%, which would act as a positive
for cement players.
Government spend on `173,552cr under various
Higher government spend on
Increased government spend on infrastructure will
result in cement demand remaining healthy at 9-10%
infrastructure schemes in the Union
Budget FY2010-11.
infrastructure
as against 7% currently. Positive for all cement
companies.
Import duty on coal
Import duty of 5.1% is
currently charged on
thermal coal. Clean energy Abolition of import duty on
The elimination of import duty will result in a reduction
in power and fuel cost, as rising fuel prices negatively
cess of `50/tonne for
imported and domestic
coal.
coal and clean energy cess
affect operating margins. Positive for all cement
companies.
Top Picks
Grasim
India Cements
Madras Cements
JK Lakshmi Cement
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