See Rs 160-180/bag price range next qtr: Cement dealer

Excerpts from Bazaar on CNBC-TV18 Watch the full show »

There has been a lot of excitement in the cement space. First there was news two days back that prices in the southern part of the country are going up by as much as Rs 30 a bag. That led to frenzied buying into southern cement companies. Subsequently, there has been a correction in many of those names.

But are those reports indeed true? Can such a large price hike be pushed through? Will it sustain? In an interview with CNBC-TV18's managing editor Udayan Mukherjee, HN Vyas, one of the leading South India-based cement dealer, said the time is absolutely ripe for a price hike. However, he added the price hike would be in a phased manner.

Going forward, he believed the southern-based cement companies will be able to curb their loss making ways. "They will be selling the cement between Rs 160-180 range," he said.   

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

Q: What is the reality is such a price hike been contemplated by the Andhra Pradesh cement producers?

A: It's an appropriate time for them to increase the price because last six-eight months the price has gone drastically down. They have to increase the price. They have no other option because due to the heavy cash losses and variable losses they have to increase the price.

Q: By how much are they trying to increase the prices?

A: Their target is around Rs 200 and presently they increased by Rs 40-50 but this impact will come only by mid-October because right festivals are going on and after completion of monsoon definitely the price will increase.

Q: Will it stick though? Will the market absorb Rs 40-50 price hike given demand conditions at this point?

A: At a time this is not at all possible that the market will accept the Rs 50-40 increase. But I am sure by Rs 10-10 the market will go increasing and the prices will not come of 2008 but the prices will be between the ranges of Rs 160-180.

Q: How are demand conditions right now in the southern market, have they picked up at all or do they still remaining fairly weak?

A: Right now there is no demand at all in the market because of heavy rains in Andhra Pradesh as well as due to the political scenario and no delegation of the government buying. The demand is not at all there in Andhra Pradesh-it's fallen by 18% this year whereas in Karnataka it is hiked by 12%. After the completion of festivals definitely the market will go up and the buying will be there.

Q: It almost seems like a cartelized kind of an attempt to raise prices in the absence of demand but are there smaller players, fringe players, who might not play along with this price hike and might disturb the plans of raising prices by Rs 30-40?

A: The small players have become major now. This is their need to increase the price because they are facing the variable losses, cash losses, because of the interest rate and all on the new plants. They are insisting the big players, A group companies, to increase the price and jointly they are making the upwards of cartelizing and even before it was happened. We hope so that something will happen because the prices are drastic, very low in the market.

Q: So you think from next quarter onwards southern cement companies will be selling cement at a price which at least they do not incur a cash loss?

A: Definitely from the next quarter because this quarter they are having heavy losses but in the next quarter definitely they will be selling the cement between Rs 160-180 range.