India Ratings maintains 'stable negative' outlook on cement sector

India Ratings has maintained a ‘stable negative’ outlook for the domestic cement sector in FY15 given the slowdown in construction and infrastructure sectors.

Cement demand is expected to remain subdued with growth pegged at around 5-6 per cent in FY15, according to the research house. However, while slower infrastructure and construction activity impact growth, a number of other key drivers will help lift demand going forward. “"The growth will be supported by an expected increase in demand from the rural sector and Tier 2 and 3 cities. There could also be some uptick in demand from the second half of FY15 as the Centre has made a budgetary provision of INR1bn on infrastructure projects spends during the year,” the report said.

The firm expects overall capacity addition will be moderate as incremental demand will be lower than incremental supply. Capacity additions will grow at a CAGR of six per cent from FY13 to FY16, more than a four per cent CAGR increase in demand in the same period.

"A stable outlook could result from formation of a stable government post general elections, which may enable higher investment in infrastructure leading to an improvement in cement demand," India Ratings said.