Demand for cement is primarily driven by higher rural consumption
Shares of India Cements
have been switftly moving higher ever since the Damani’s family increased their stake in the company by over 15 percentage points in the January-March quarter.
The stock today hit a 2-year high of Rs 134.40, up 6 per cent, on the BSE in an otherwise weak market and was trading at its highest level since May 9, 2018. In the past six trading days, it has rallied 33 per cent, as compared to a 1.4 per cent decline in the S&P BSE Sensex.
On May 14, 2020, India Cements
announced that Radhakishan S Damani, promoter of D-Mart supermarkets' chain, along with Gopikishan S Damani, has increased the stake in the company to 19.89 per cent at the end of the March quarter.
Gopikishan Damani and Radhakishan Damani collectively acquired an additional 47 million equity shares, or 15.16 percentage point stake, in the cement and cement products company during the January-March quarter of FY20. The Damani family held 4.73 per cent holding at the end of December quarter, data shows.
Besides, buying sentiment firmed across the sector as volume trends in first two weeks of May came in are better than expectations in the North, Central and East markets.
Demand is being driven by higher rural consumption (e.g., unfinished housing work is getting completed) though construction of roads/highways is also contributing to demand improvement at a few places, data shows.
Besides India Cements, UltraTech Cement, Ambuja Cements, Shree Cements, ACC. Ramco Cements and HeidelbergCement India were trading higher in the range of 1 to 3 per cent in an otherwise weak market today.
Industry sources, however, indicate that the spurt in volumes seen during the one month, after the lockdown restrictions were relaxed, have started to taper off in most of the markets.
Pet coke prices in the US, Saudi Arabia and domestic markets
have corrected by 17-20 per cent in May‘20. Analysts at Emkay Global Financial Services believe that rupee depreciation from Feb‘20 will limit the benefits of lower coal/pet coke prices. The brokerage firm expects savings of Rs 80/ton (including Rs 30/ton benefits factored in for Q4FY20) in energy costs, if the current pet coke/coal prices sustain. "Fly ash prices have increased due to lower electricity generation which will have an impact on variable costs in Q1FY21. However, fly ash availability is expected to improve in the next few weeks," it added.