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New UserCement dispatches have come off by about 10% in the domestic market: Bina Engineer, Director - Finance, Sanghi Industries
23 Dec 2016
In an interview with ET Now, Bina Engineer, Director Finance, Sanghi Industries, speaks
about the impact of demonetisation on cement demand. Excerpts:
The common belief is that since November 10th, give or take a few days, the
dispatches for cement companies by and large would have come off significantly. Has
that been a case for you?
Bina Engineer: You are right that dispatches have come off and I would say that they have
come off by about 10% in the domestic market, particularly the segment which belongs to
the rural individual house builder area. That segment suffered a major setback because the
resources and working capital were blocked suddenly. They were getting accustomed to the
new banking system, etc. So given this, the demand from the rural segment particularly was
affected. On the other hand, nontrade segment which is the infrastructure and industrial
segment is making best out of this because prices are also soft. So there the volume has
been either maintained or it has even improved slightly. So between the two sectors, major
sectors, user sectors, the house demand has clearly come off and the infra demand is
maintained or slightly improved.
What is your own sense by when can the situation improve because it is really about
timelines now?
Bina Engineer: From our side, we expect that the situation should improve in about at least two months going forward because most of
this demonetisation impact is expected to wear off by December. Since cement is the long term usage commodity where the demand does
not disappear, it is not an impulsive demand and therefore as Mr Ladiwala said the demand is pent up today and wherever the projects
even either real estate or individual house building are already on the way, either already under taken or about to be undertaken they are
not going to go off their plans but this pentup demand is going to come back in the coming quarter. So we expect that beginning from
FebruaryMarch we should see an uptick in the demand also.
Would you be betting on government spend on infrastructure to bring back the demand because housing, I mean while the
general expectation is that yes demonetisation pain could wear off, we do not quite know because this is an unprecedented
event so to say, we do not have history to figure out that whether it will happen in Jan or Feb or March. So are you betting on
government spend on infrastructure and that leading to a bit of a demand coming back?
Bina Engineer: Yes that is right because even on a long term forecast, it is expected that housing which currently forms about say 60
65% of the overall demand is going to come down to about 55 over next three to four years and the infrastructure which is about say 20%
demand is going to go up to about 30% of demand. So it is expected that in next five years infrastructure demand is really going to shoot
up. We have already seen that the road projects have almost doubled in terms of the investment size. We are seeing lot of new metro
railways as well as expansion of existing metro railways, irrigation projects are going to take up Rs 50,000 crores allocation and they are
all identified and smart city projects are also coming up in large scale. So all these segments are expected to see higher consumption and
therefore the share of infra within the overall sector demand is definitely going to increase and you are right that because it will grow faster,
it will drive the future demand.
SOurce:ET