Industry will remain volatile in short-term: Dalmia Cement

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Industry will remain volatile in short-term: Dalmia Cement

Puneet Dalmia MD of Dalmia Cement said the demand situation in November has been "unusually" low this time around. "We are still not seeing double-digit growth as expected," he added.

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The monthly sales numbers for cement have not been hugely encouraging. Speaking to CNBC-TV18's Udayan Mukherjee, Puneet Dalmia MD of Dalmia Cement said the demand situation in November has been "unusually" low this time around. "We are still not seeing double-digit growth as expected," he added.

He further reiterated that the capex cycle will take time to gather momentum. "The cement industry will be volatile in the short-term," he confessed adding, "The political volatility has halted decision making process." 

Going forward, he expects marginal downward correction of prices. "The costs are going up while demand is sluggish."

He also informed the company is planning to add five million tonne of production at a cost of Rs 2,500 crore.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Is the market sluggish post monsoon?

A: I think the demand in November has been unusually low and I think the rain across the country has been more than usual. Also we had Diwali falling in November so we lost one week because of that. So I think overall we are seeing a sluggish demand than what we had expected and if I look at the YTD numbers, the YTD numbers are 7% growth all over the country. So I think that is relatively okay but we are still not seeing the double digit growth which everybody expected.

Q: What do you attribute that to, this unusual November weakness as you have phrased it and are you seeing any signs of pick up at all in the last three-four days as December begins?

A: I think so far December continues to be similar but it is too early to call that. I think the capex cycle in India is beginning to start and it will take a little bit of time to gather momentum. As I have always said India is a democratic country and despite announcements it takes time for people to kick-start activity on the ground and start absorbing capital.

My own view is that it will take a little bit longer and let us see how the situation unfolds. Also as there is political volatility-a lot of decision making comes to a stand still and we continue to see that in Andhra Pradesh where the YTD growth is minus 8% this year. The political activity also makes people little cautious about decision-making.

Combine all this, I think it is going to be volatile in the short-term but we still continue to be very bullish in the medium-term to long-term given the fundamental growth drivers of demand that India has in housing, infrastructure and commercial real estate.

Q: There were some price hikes, which were taken in the month of October by many of the cement manufacturers. Have they started to unwind? Have you seen some of the prices come off in November?

A: We saw marginal downward correction in prices in November and I think the current situation is that costs are going up, demand is sluggish and yet, the pricing overall I think is holding up. There were marginal corrections but I think they were not very significant in nature.

Q: Rs 2-5 a bag or more than that?

A: It was about Rs 5 a bag. I want to add to that something regarding the company, our spin-off and restructuring is now complete and we are going to get the cement and energy company listed in December. We are also announcing our capex plan and we are going to add another 5 million tonne at a cost of about 2,500 crore in South and East India.

We have chosen the states where we are going to invest, in East India it is going to be North-East in Meghalaya and in South India it is going to be Karnataka. So I think our own view is that we have to look at the fundamental drivers of the sector and we think this is the right time to start our capex programme. We have been on hold for a while and now we think it is good timing.

This business also requires patient capital and I think with the KKR partnership, we have got access to that patient capital. We are quite happy to say that we are back on track with our expansion plans.