India cement pricing power may remain muted amid consolidation moves: Citi

The entry of billionaire Gautam Adani into India’s cement sector appears to have spurred consolidation in the industry. After acquiring Ambuja Cements and ACC to become the nation’s second-largest cement maker, the Adani Group is now said to be in talks to buy the Jaypee Group’s cement businesses.

However, even amid the significant scope for consolidation, cement pricing is expected to remain muted, according to foreign brokerage Citi. It said small cement companies will be bought out, largely by the Adani Group, and its ability to service debt at reasonable EBITDA/tonne levels may not encourage price increases.

The brokerage upgraded Ambuja to a ‘buy,’ and downgraded JK Cement to a ‘sell’ and Dalmia Bharat to ‘neutral’ while changing their share price targets. According to the 89-page report dated October 13, Citi reiterated a ‘buy’ on ACC, Ultratech Cement, Grasim, and Nuvoco.

The brokerage said Adani could be eyeing as much as 80 million tonnes of capacity addition through inorganic growth as it seeks to increase its production capacity.