Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Markets / Mark To Market/  Low ROE new normal for cement industry
BackBack

Low ROE new normal for cement industry

It should be noted that cement producers took steep price hikes in April this year in anticipation of improved demand
  • However, price increases failed to sustain as the prolonged monsoon kept a lid on demand
  • According to analysts at IIFL, there is risk of ROE declining in FY21 owing to the likely stabilization of new capacities, resulting in resumption of fight for market share. (Pradeep Gaur )Premium
    According to analysts at IIFL, there is risk of ROE declining in FY21 owing to the likely stabilization of new capacities, resulting in resumption of fight for market share. (Pradeep Gaur )

    The cement industry continues to be dragged down by subdued demand, low utilization levels and weak prices.

    This has impacted the sector’s return on equity (ROE). An analysis by domestic brokerage firm India Infoline Ltd (IIFL) showed that in FY19, the sector’s ROE was at 7.8%. This was an outcome of stiff competition for market share in an environment of subdued demand. The sector’s ROE has been heading lower since FY08, when it stood at more than 30%. Back then, utilizations were at their peak of around 90%. Currently, the industry’s utilization level is estimated to be 70%.

    Graphic by Satish Kumar/Mint
    View Full Image
    Graphic by Satish Kumar/Mint


    It should be noted that cement producers took steep price hikes in April this year in anticipation of improved demand. However, price increases failed to sustain as the prolonged monsoon kept a lid on demand.

    According to analysts at IIFL, there is risk of ROE declining in FY21 owing to the likely stabilization of new capacities, resulting in resumption of fight for market share.

    Cement demand remains tepid across India. Demand is mainly impacted by the sluggish housing sector growth and slowdown in execution of government’s infrastructure projects.

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
    More Less
    Published: 02 Dec 2019, 11:55 PM IST
    Next Story footLogo
    Recommended For You
    GENIE RECOMMENDS

    Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

    Let’s get started
    Switch to the Mint app for fast and personalized news - Get App

    Chat with MintGenie