Indian majors to tap rural markets

Indian majors to tap rural markets
Published: 23 March 2010

Indian cement makers see overcapacity looming large from the next fiscal and are trying to compensate by targeting the rural heartland, small towns and villages to increase their sales and protect their bottomlines.

Majors such as UltraTech, HeidelbergCement, ACC, Ambuja and mid-level players, including Shree Cement and Binani, have aggressive plans as they focus on the relatively untapped rural market to be the next growth driver. Shree Cement, the largest cement maker of North India, has chalked out an expansive plan for marketing in the villages of Rajasthan, Haryana, Punjab, Chattisgarh, Madhya Pradesh and Gujarat.

HM Bangur, MD of Shree Cement, told ET: "The rural market has been the key driver for the cement sector from the next quarter. We are opening 2,000 new dealers in rural India over the next one year and set a target of 40% revenue from rural market in two years." At present, Shree’s gets 20% of its revenue from rural markets.

Binani Cement, which mainly supplies to Rajasthan, Gujarat and Delhi, is also creating awareness for its cement brand in rural India. It’s increasing its penetration in the rural market and villages through retail outlets. "We are targeting villages with a population of 5,000-12,000 in the districts of Panchmahal, Dahod, Jamnagar, Porbandar, Junaghad in Gujarat and identifying 118 new retailers. The company will reach another 300 villages with a population of 10,000," said Vinod Juneja, MD of Binani Group of Industries.

The government has allotted INR48,000 crore for rural infrastructure programmes under the Bharat Nirman. The hike in excise duty on cement products is negative, but can be overwhelmed by improved demand from greater thrust on infrastructure and the rural sector, said industry experts. Angel Broking cement analyst Rupesh Sankhe said cement makers can see rise in sales up to 30% from rural markets on account of demand for low-cost housing in rural and semi urban areas.

Moreover, good retail demand for cement from semi urban and rural areas, particularly in the North and East, in the coming quarters, Mr Sankhe added.