The government has lifted the ban on cement exports nine months after stopping it following spiralling prices and rising inflation rate.
Recent events like the cut in central excise duty from 12 per cent to 8 per cent and sharp fall in prices of coal and crude oil from their July peak, and cut in diesel prices, have significantly moderated the cost pressures on cement companies over last one year.
The Director General of Foreign Trade under the Commerce Ministry said in a notification that it has allowed cement exports "with immediate effect".
“We estimate that total cost of sales of cement to have come down by Rs 461 per tonne, a reduction of Rs 23 per 50 kg bag as compared to last year. According to our estimate that profitability of cement companies have improved by at least Rs8-10 per bag. This would result in a significant 20 per cent improvement in profitability of cement in the fourth quarter,” said Ajit Motwani of Emkay Research.
According to the Cement Manufacturers’ Association of India, cement output was 14.34 million tonnes in November, less than the 14.76 million tonnes produced in October.
Construction activity has slowed down in recent months as prospective buyers deferred planned purchases amid high interest and inflation rates.
The real estate industry has sought fiscal and monetary support from the government, including lower interest rates for houses priced above Rs 20 lakh. Government-owned banks had recently announced lower interest rates for sub-Rs 20 lakh houses.
Over past month cement stocks have underperformed broader market, but analyst projected a turnaround in the coming weeks.
“We believe that the recent moderation in cost pressures has improved business fundamentals and on account of the same sector valuations which are close to multi year lows are due for re-rating,” said chartered financial analyst Chirag Dhaifule.