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Table of Contents

• Summary
• Segment-Wise Demand
  
• Region-Wise Demand
  
• Capacity Additions
• Operating Rates
  
• Long Term Outlook
  
• Costs & profitability
  
• Quarterly review

Summary

Cement demand witnesses revival led by release of pent up demand and pick up in infrastructure activities

Rural segment to drive volumes in FY21 while infrastructure and urban housing on steady revival

Cement demand growth is expected to witness contraction of 3-6% in fiscal 2021 following lockdown measures taken by Indian government to curb the spread of global pandemic in our country. Demand momentum suffered the brunt of pan-India shutdown in late Q4FY20 as well as Q1FY21 as construction activities came to grinding halt with lockdown imposition from March-end. April was a complete demand 'washout' period amid supply chain disruptions, extended local lockdowns and unavailability of labour dampening demand scenario, however pent-up and pre-monsoon construction demand in May and early June cushioned demand decline to (30-32)%. Lower capex by government, given diversion of funds towards health and public welfare (government-led projects account for 35-40% of cement demand) weighed on demand growth. Demand weakened further with onset of seasonally weak period of monsoon in June, which culled end-use construction demand across regions. The only silver lining was spurt in rural housing demand on back of reverse migration and healthy agricultural income amid government spending. Rural housing received government thrust through PMAY-G andMGNREGA schemes as government utilized its potential to engage rural workforce and drive employment. Demand rebooted from September onwards on back of pent-up demand and post monsoon construction demand leading to surprising demand growth of 3-4% in Q2FY21. Easing restrictions in urban settlements and pick up in construction activities ahead of festive season aided demand recovery. With increased government spending on infrastructure projects and traction in urban housing and real estate demand, cement demand to ride on faster recovery orbit in second half of the fiscal.

Recovery in demand expected in later half of the fiscal led by gradual pick up in govts spending on infrastructure and affordable housing projects in urban belts and as worker shortage reduces with migrants returning back to construction sites. Key infrastructure projects especially roads, irrigation, and metros to drive growth. Direct transfer of money under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and better Rabi yield on back of healthy monsoon ensuring decent surplus in the hands of rural population, is expected to further support rural economy. Hence, rural housing and government spending on key infrastructure projects will be the saving grace for the sector in the second half of the fiscal. Government spending will remain a key monitorable as fiscal discipline weakens on back of measures taken to combat Covid-19 breakout.