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The Rediff Interview/ B L Jain, President, Cement Manufacturers' Association

'M&As in cement sector will continue'

B L Jain, senior president of Century Cement, has taken over as the president of Cement Manufacturers' Association at a time when the industry holds a healthy promises for growth in the medium and long term. Jain is a chartered accountant and a cement-industry veteran with experience of over 40 years.

In an interview with Rumi Dutta, he says the process of consolidation in the industry will continue but at a slower pace.

What kind of demand growth do you expect during the current fiscal? What will be the key growth drivers?

We are expecting the cement sector to report a 9 per cent demand growth for the current fiscal. The three major growth drivers will be: housing, road construction & infrastructure activities, and government spending.

While not much of action is expected on the government spending front, the current growth, to my mind, would primarily be driven by the housing sector. Rural demand is looking up and is expected to contribute positively to the overall demand growth.

The industry continues to suffer from glut. What is your outlook for the next two years?

With 9-10 per cent demand growth and no new capacity expansion, it is just a matter of a year or two before the demand-supply mismatch disappears.

We are definitely bullish on the long-term prospects of the industry and expect at least a demand growth of over 8 per annum over the next two years.

Despite an expected demand growth of this nature, prices have been under pressure in the first two quarters. What explains this phenomenon: wherein on one hand the demand is increasing and on the hand prices are going down?

Cement prices differ from market to market. While in the north and east, the price levels have stabilised, west and south continue to be disturbed primarily due to the demand-supply dynamics.

Also, new capacities in certain zones such as Gujarat Ambuja's new unit at Chandrapur, in Maharashtra, created temporary turbulence in the market that saw prices dropping.

Do you think that there could be a pricing discipline and few players are in a position to dominate the market in terms of pricing?

No. There are 50-odd players. Though the top five players dominate around 50 per cent of the market share, overall, the industry has not yet reached such a stage where few players are in a position to determine prices.

After a major drive in the recent past, consolidation has come to a standstill. What is your view on this?

Most of the smaller players who were planning to exit the business have reviewed their plans. This is based on expectations that the industry prospects are likely to improve in the near future.

Besides, some of the international majors are currently consolidating their positions in other parts of the world where they have recently made acquisitions.

To my mind, mergers and acquisitions in the sector would continue, but at a milder pace.

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