Cement Industry is Skyrocketing to Make a Skyscraper: ISLAMIC FINANCE RESEARCH
About this ebook
As per ICRA, in FY22, the cement production in India is expected to increase by ~12% YoY, driven by rural housing demand and the government's strong focus on infrastructure development. As per Crisil Ratings, the Indian cement industry is likely to add ~80 million tonnes (MT) capacity by FY24, the highest in the last ten years, driven by increasing spending on housing and infrastructure activities.
When is the best time to put money into this industry?
FDI inflows in the industry related to the manufacturing of cement and gypsum products reached US$ 5.48 billion between April 2000-June 2022. As remote work remains adopted at a fast pace amid the pandemic, the demand for affordable houses, with a ticket size of <Rs. 40-50 lakh (US$ 53,694- 67,118) expects to rise in Tier 2 and 3 cities, leading to increased demand for cement. Currently, the installed cement capacity in India is 500 MTPA, with a production of 298 MTPA. The Cement sector has received suitable investments and support from the government in the recent past.
In the next ten years, India could become the leading exporter of clinker and grey cement to the Middle East, Africa, and other developing nations. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well-armed to face stiff competition from cement plants in the interior of the country. India's cement production capacity expects to reach 550 MT by 2025. The cement demand in India is estimated to touch 419.92 MT by FY 2027, driven by the expanding market of different sectors, i.e., housing, commercial construction, and industrial construction.
How are cement companies regulated?
The Bureau of Indian Standards (BIS), a central body responsible for the standardization, marking, and quality certification of goods, has directed cement manufacturers to refrain from making claims that remain not backed by the relevant Indian standards.
The cement department comes under the Ministry of Consumer Affairs, Food, and Public Distribution. Manufacturers are making objective claims, such as 'Protect Steel in Concrete', 'Protect Concrete from Corrosion', 'Corrosion Resistant', 'Weather Proof', 'Damp Proof' -- for describing their product," the bureau said in a circular on August 28.
"These objective claims are not prescribed and not verifiable as per the relevant Indian Standard for the product," it added.
What is the future of this industry?
India is the second largest cement producer in the world and accounts for over 7% of the global installed capacity. Of the total capacity, 98% lies with the private sector and the rest with the public sector. The top 20 companies account for around 70% of the total cement production in India. As India has a high quantity and quality of limestone deposits, the cement industry promises enormous growth potential.
India's cement production expects to increase at a CAGR of 5.65% between FY16-22, driven by demands in roads, urban infrastructure, and commercial real estate. As a result, cement consumption in India expects to grow to a CAGR of 5.68%.
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Zaid Haji, also known as Zayd Haji, is an author and research student specializing in Business and Market Research. Born on February 1, 1998, coinciding with Eid al-Fitr, he has gained recognition for his work in these fields.
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With a deep-seated passion for Islamic finance and a commitment to uncovering actionable insights, Zayd Haji has founded and nurtured companies like ISLAMIC FINANCE RESEARCH (IFR), ISLAMIC STUDIES RESEARCH (ISR), and ISLAMIC COMMUNITY COUNSEL (ICC), each dedicated to advancing the field of business and market research. However, Zayd is quick to remind others that he is not a scholar but a lifelong student of his craft, continually striving to expand his understanding and refine his approach.
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