Cement players continue to face tough times in South India. Reduced state government spending on infrastructure projects, surplus capacity, rising input costs, and early monsoon this year have all made life tough for the Cement players.
India Cements and Madras Cements, the largest and the fifth largest producers in the south have had a tough time this year so far. India Cements net sales slumped by 8 percent as prices declined in Andhra Pradesh, the biggest market in the South and which contributes to 45 percent of India Cements. Madras Cements too has posted a 9 percent decline this quarter. These were largely due to 10 percent decline in realisations and 23 percent increase in power and fuel costs.
India Cements is looking to reduce its exposure to Southern markets, particularly Andhra Pradesh. The company is planning to foray into the northern regions by commissioning a 1.5 mtpa greenfield plant in Rajasthan. Also, the company is setting up two captive power plants each in Tamil Nadu and Andhra Pradesh. On the other hand, Madras Cements derives 50 percent of its revenue from Tamil Nadu and only 18 percent from Andhra Pradesh. Madras Cements is expected to enjoy better realisations than some of its competitors with greater exposure to the Andhra market.