Southern cement sector poised for growth amid industry consolidation: Rakesh Arora
«And with this acquisition of India Cements by UltraTech and now Orient by Ambuja Cement, it is getting to the levels where the other regions are. So, very positive for the southern cement companies and also on India Cements,» says Rakesh Arora, Go India Stocks
Just talking about now this value at 10,400 crores, given that it has now the third largest position in the South, what do you make of this further consolidation within the cement sector?
Rakesh Arora: You have two large players who are trying to gain market share and consolidation has been going on pretty strongly. And I think this is the right step for the industry, especially South India has been highly fragmented. In other regions, the top five players have 80% capacity share. In South India, it was closer to 50%. And with this acquisition of India Cements by UltraTech and now Orient by Ambuja Cement, it is getting to the levels where the other regions are. So, very positive for the southern cement companies and also on India Cements.
Whatever we may say about consolidation, the grain of the truth here is that cement prices are not going higher. Cement demand is lacklustre and pricing power is still with the buyer, not the seller, despite the fact that we have seen a massive consolidation in last three years and a solid economic growth. Why is that happening?
Rakesh Arora: So, I tend to disagree with that statement. Cement prices are lower because of the intense competition between UltraTech and Adanis to acquire capacity. It could also be a
