labels: cement, investment - general
Investor wealth in Indian cement sector zooms to Rs 33,000 crorenews
Nisha Das
29 December 2003

Mumbai: The investor wealth in the Indian cement sector has zoomed up to nearly Rs 33,000 crore during the past six-month period.

Seven leading cement corporates like Grasim, Larsen & Toubro, Gujarat Ambuja, ACC, India Cement, Madras Cement and Shree Cement alone have added over Rs 20,000 crore to their market capital as the combined market cap has touched a massive Rs 31,724.40 crore as against Rs 16,480.70 crore in June 2003.

The rise was actually fuelled by the Grasim-L&T deal after which a consolidation was expected in the cement sector, benefiting the cement companies in a big way. In absolute terms, L&T has created the highest amount of wealth.

The market capital of the company has shot up to Rs 12,166.10 crore from Rs 5,954.40 crore. The Grasim market capital has also moved up from Rs 3,723.60 crore to Rs 8,943.30 crore. Similarly, Gujarat Ambuja has gained with its market cap at Rs 4,644.20 crore from its June market capital of Rs 3,010.30 crore.

Says an analyst with IDBI Capital: "Following the takeover of L&T's cement division by Grasim in June, the formation of a cartel among the cement firms had lead to a hike in prices of the commodity considerably. This has resulted in increased activities in most of the cement companies."

Ambreesh Baliga of Karvy Consultancy says though the growth in the cement sector is not great as the mismatch between demand and supply still exists, the 'cartel strategy' of the cement players has emerged as a single-point attraction for the investors.

Last week, manufacturers in Gujarat had increased cement prices to Rs 120-125 per bag citing a pick-up in demand. This comes in the wake of a sharp decline in realisations for manufacturers, with prices in many pockets in the state falling to below the Rs 100-per-bag level.

Gujarat is among the largest cement producing states with a capacity of around 15 million tonnes. The total cement demand is, however, only around 6 MT, and the excess output finds its way to states like Maharashtra, Rajasthan and Kerala.

Analysts say the price increase in Gujarat is likely to have an impact on cement prices in the adjoining states as well. "We expect this to have a ripple effect on cement prices in Mumbai as well," says an analyst with UTI Securities.

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Investor wealth in Indian cement sector zooms to Rs 33,000 crore