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CEMENT
BUDGET HIGHLIGHTS & IMPACT
n Continued focus on infrastructure creation
Impact: Positive. Cement demand is expected gain momentum, after witnessing
subdued demand in FY11, with continuous thrust of government on
infrastructure creation. With cement demand having direct correlation with
infrastructure investments as well as GDP growth, we expect it to grow at a
CAGR of 9.9% between FY11-FY13.
n Change in excise duty structure
Impact: Negative. Existing excise duty rates have been changed for cement
sector to composite rate structure having an ad valorem and specific component.
For cement selling below Rs 190 per bag, new duty is at 10% ad valorem plus
Rs 80 per tonne as against Rs 290 per tonne earlier. For cement selling above
Rs 190 per bag, new duty is 10% ad valorem plus Rs 160 per tonne. Since
current average selling price in India is above Rs 260 per bag, we believe that
this change in the duty structure would result in increasing the overall excise
outgo by Rs 1.5-2 per bag. Ad valorem rate would be arrived at by taking
the ex factory price plus freight. Though cement companies are expected to
pass on the hikes to the end user but it will be difficult for companies to sustain
these price hikes in the present prevailing oversupply situation.
n Reduction in gypsum and pet coke customs duty
Impact: Positive. Customs duty on gypsum and pet coke has been reduced
from 5% to 2.5% now. This is expected to be positive for companies like Shree
Cement which are dependent upon pet coke. Overall impact of reduction in
gypsum and pet coke customs duty is approx Rs 1-1.5 per bag.
BUDGET IMPACT: NEGATIVE
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CEMENT
BUDGET HIGHLIGHTS & IMPACT
n Continued focus on infrastructure creation
Impact: Positive. Cement demand is expected gain momentum, after witnessing
subdued demand in FY11, with continuous thrust of government on
infrastructure creation. With cement demand having direct correlation with
infrastructure investments as well as GDP growth, we expect it to grow at a
CAGR of 9.9% between FY11-FY13.
n Change in excise duty structure
Impact: Negative. Existing excise duty rates have been changed for cement
sector to composite rate structure having an ad valorem and specific component.
For cement selling below Rs 190 per bag, new duty is at 10% ad valorem plus
Rs 80 per tonne as against Rs 290 per tonne earlier. For cement selling above
Rs 190 per bag, new duty is 10% ad valorem plus Rs 160 per tonne. Since
current average selling price in India is above Rs 260 per bag, we believe that
this change in the duty structure would result in increasing the overall excise
outgo by Rs 1.5-2 per bag. Ad valorem rate would be arrived at by taking
the ex factory price plus freight. Though cement companies are expected to
pass on the hikes to the end user but it will be difficult for companies to sustain
these price hikes in the present prevailing oversupply situation.
n Reduction in gypsum and pet coke customs duty
Impact: Positive. Customs duty on gypsum and pet coke has been reduced
from 5% to 2.5% now. This is expected to be positive for companies like Shree
Cement which are dependent upon pet coke. Overall impact of reduction in
gypsum and pet coke customs duty is approx Rs 1-1.5 per bag.
BUDGET IMPACT: NEGATIVE
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