Price hike may continue due to better demand: JK Lakshmi

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Price hike may continue due to better demand: JK Lakshmi

Cement prices have been raised by Rs 10 for 50 kilo bag in Delhi and by Rs 5 in Gujarat, rise in coal price should to be blamed for this, says Sudhir Bidkar, chief financial officer of JK Lakshmi Cement.

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Cement prices have been raised by Rs 10 for 50 kilo bag in Delhi and by Rs 5 in Gujarat, rise in coal price should to be blamed for this, says Sudhir Bidkar, chief financial officer of JK Lakshmi Cement .

"The idea was to pass on some impact of the coal price increase. There has been almost 7-8% increase in the coal cost," he said.

Cement companies witnessed subdued demand in first two quarters. But, demand was robust in third quarter and is expected to be so in next quarter as well, so cement players can pass on some part of price increase, he explained.

Below is the edited transcript of Bidkar's interview with CNBC-TV18. Also watch the accompanying video.

Q: Is this right that cement prices have been raised in Delhi and in Gujarat if you are serving that market? Where else have cement prices been raised?

A: Prices have basically gone up. The idea was to pass on some impact of the coal price increase. In the first two quarters the cement companies were not able to pass on the price hike. There has been almost 7-8% increase in the coal cost.

Due to subdued demand in the first two quarters, we were not able to pass them on. Going by the fact that the demand has been good in the third and it will continue to be robust in Q4, gave an opportunity to cement players to pass on some part of the cost increase.

Q: Can you detail exactly where all prices have been raised and by how much?

A: In the northern market it has gone up by about Rs 10 and in Gujarat it's about Rs 5-7. We operate in North India, Gujarat and Rajasthan.

Q: Is this the first of the price hike to come, is there more in the offing?

A: That will be governed by how demand shapes up. This is because they have still not been able to pass on all the cost increase, which happened in the first two quarters. Power and fuel costs are hitting all cement players badly. If opportunity comes then we may see, the call will be taken on the basis of demand.

Q: How does this shape up in terms of your margins for the second half especially for the Q4?

A: First half has been bad for the entire industry, since the demand was low, so the operating margins for all the companies were in the range of about 12-15. Third quarter with the increase in demand which has been around 10% as against 5% in the first two quarters, margins has improved in excess of over maybe 20% and 20-25% has been the range. We will be able to maintain that 20-25% in the current quarter.

Q: I think up to June you should be able to do that till the monsoons?

A: No, there maybe some softening in the demand. Generally, after Holi people take leave and there is some dullness in the construction activity because of the festivity. That may impact demand somewhere in the first fortnight of March. After that it should pickup and going forward we hope to see that sustaining.