Cement sector is one of the core industries which plays a pivotal role in the growth and development of a nation. One of the world’s largest and fastest growing cement industries, the Indian cement industry has been expanding significantly on back of rising infrastructure activities, increasing demand from housing sector, and construction recovery. There is a scenario which will likely lead to increasing demand of cement. The government is positive on infrastructure through development of Smart cities and industrial corridor development including new ports which will give boost to the cement industry. The focus of the government is on rural housing and irrigation schemes, general housing (housing for all by 2022 and additional tax exemption on Housing Interest payment raised from Rs.1,50,000- 2,00,000).
Recently, the Indian cement industry has witnessed significant consolidation. Any steps taken by the government to push infrastructure spending and give impetus to real estate projects will have a positive impact on demand of cement. Therefore meaningful recovery in cement demand is expected to take place from 2015-16 onwards. Our fair value estimate is based on the assumption of an eventual return to more normal conditions as the business cycle improves, and as the Indian government steps up infrastructure spending.