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|February 28, 2001||Feedback|
Impact on companies in the Cement sector
Post-budget show - Underperformed
The Business Standard Cement Index underperformed the BSE Sensex , falling by 0.57 per cent as against a rise of 4.3 per cent in the Sensex. The cement industry, which is highly dependent on the infrastructure activities, will benefit from the thrust given to the housing and road development sectors. The reduction in customs duty is not expected to affect domestic prices, as cement is difficult to move in bulk.
The reduction in customs duty will not impact cement prices, due to logistics and environmental constraints. ACC will hardly be affected since it has a strong presence in North India which is a land locked area and imported cement will be difficult to transport. Also the increase in import duty on HSD will not affect ACC since most of its plants are coal operated.
Any increased activity in the infrastructure and housing sector will help enhance the bottomline of the company.
Gujarat Ambuja Cements
GACL will benefit if there is pick up in the infrastructure and housing sector, given the tax holidays for infrastructure and tax incentives for the housing sector. Excise exemption for supplies to the earthquake-hit state of Gujarat will help in the short-term period. GACL will also benefit by the reduction in surcharge of customs duty on coal. Increase in import duty on HSD will not affect GACL since its plants are fuel oil-based.
Any spurt in the infrastructure and construction activities in the country will greatly benefit Birla Corp which has a good presence in the central and north-eastern regions. Given its entrenched position inthese regions, it is unlikely that the company will be affected in any way by the imports of cement ( provided the imports do take place).
India Cements has a strong presence in Southern India, which will be benefited from various infrastructure projects. The reduction in import duty will not be a threat due to lack of bulk cement handling capabilities at ports and inadequate transportation infrastructure. The removal of surcharge on imports of coal will reduce the cost of power.
Madras Cement will not be affected by the reduction in import duty on cement because the southern region is already over supplied and the earlier plans by a couple of cement companies to import cement from the ports in the South were brought to a standstill by high court orders due to environmental conditions.
The company will benefit from the removal of surcharge on customs duty for coal and from infrastructure development plans.
Shree Cements, which has a major presence in Rajasthan, will benefit to a great extent from the removal of surcharge of 10 per cent on customs duty on coal, as it is largely dependent on imported coal for its power needs. The company will also benefit from heightened infrastructure activities.
Source: Business Standard