May lifting of lockdown could see U-shaped recovery in Indian cement

India-based Yes Securities has provided an outlook for the Indian cement industry following the impact of COVID-19. The research house reports that following the lifting of the lockdown, a minimum of 15 days will be required to streamline operations. Furthermore, recovery will be gradual as it may take labour time to return.

Pricing discipline is expected to be hard to maintain once lockdown is lifted as smaller players are expected to undercut prices. The south remains susceptible to subdued pricing, but new government projects in Andhra Pradesh were signed in FY20.

The east part of India has seen intense competitive pressure with new capacity of 10-12Mta coming on-stream in FY21, which have kept prices in check. It is unknown if new players will keep new capacities under utilised and maintain pricing discipline or whether they might dump volumes to gain incremental market share.

North, central and west India remain concentrated markets, but poor pricing in the south and east is expected to eventually drag prices down in other regions. It is possible that transportation of cement from Andhra Pradesh to Uttar Pradesh will increase, as has historically been the case when price differences exist between these regions.


Yes Securities believes it is important that the Indian government does not incur higher expenditure on infrastructure given the pressing need to revive growth. Accordingly, the research house forecasts a U-shape recovery in the cement sector once lockdown is lifted in India. If a lockdown extends to mid-May 2020, the industry is not expected to witness growth of more than 6-7 per cent YoY for FY21E, while CARG over FY20R-FY22E will hover at about 4.7 per cent.

In a bear scenario with lockdown extending over 1QFY21, the cement sector might witness a decline of roughly 20-22 per cent YoY for FY21E, while CAGR over FY20E would hover at around 3.5 per cent.