Southern Cement Makers To Lag Peers In March Quarter: India Ratings

Cement makers in the north and the south of the country are expected to post contrasting growth, again.

Worst hit by demonetisation, northern companies have since recovered partially and their volumes are expected to jump 10-12 percent in the quarter ended March compared to the previous three months, according to Amey Joshi, associate director of India Ratings. That's three times the estimated growth of their southern peers, which were least impacted by the note ban, Joshi told BloombergQuint.

Political instability in Tamil Nadu may hurt the performance of south-based companies, he said. Cement makers in the region may report a flattish volume growth in the absence of any price hikes even as their northern peers increased prices by 10-15 percent, he said.

The southern cement market had managed to cushion the impact of demonetisation. Volumes of south-based companies grew 21 percent in the three months ended December, according to India Ratings. Northern, central and pan-India cement makers, however, saw their volumes decline during the period. North-based players were the worst hit as their volumes contracted 6 percent.

They have since recovered. Cement companies in west India are also expected to grow as much as their northern rivals in the fourth quarter, followed by pan-India players.

Shares of northern cement companies such as JK Cement Ltd., JK Lakshmi Cement Ltd. and Mangalam Cement Ltd. rose the most in the past month, while south-based companies were among the worst performers.

Brokerage India Infoline said in a report that cement prices in the north went up by Rs 10-30 per bag, led by improvement in infrastructure activities, particularly in the road segment in Rajasthan and project works in Madhya Pradesh. Prices in south India touched a 28-month low in March-end, driven by a decline in prices across southern states.