hemadri cements ltd share price Management discussions

Global Economy

The global cement market size was valued at US$ 326.81 BN in 2021 which is projected to grow from $340.61 billion in 2022 to $481.73 billion by 2029, at a CAGR of 5.1% in forecast period, 2022-2029.The rising population and demand for infrastructural development surge a demand for cement across the globe. The growing demand for public expenditure for non-residential buildings which forms part of construction of hospitals, colleges, health care centers created opportunity and demand for the product (cement). The global arena for expanding construction sector in the current market trend will be on the rising demand for the product.

Indian Economy

The Central Government prioritised Capital Expenditure by allocating ?10.0 Lakh Crores, an increase of 33% over previous year. The FDI inflows in the industry related to manufacturing of cement, and gypsum products reached to US $ 5.49 BN upto Dec.2022. At present, the installed capacity of cement in India is 500 MTPA with production of 298 MTPA. The Central Government also had strong focus on projects promoting Infrastructure Development with the belief that increased investments in infrastructure will propel growth in other industries.

The cement industrys production capacity is expected to reach 550 million tons by 2025, driven by the infrastructure policy of government and spending in the real estate sectors growth is the boon for development. The cement industry in India facing several challenges, including mines and land acquisition, environmental concerns, operating and logistics issues. The industry is a significant contributor to carbon emissions, which is being monitored and controlled by the government by implementing several measures to reduce its environmental impact. The industrys another challenge is related to land acquisition which process can be time-consuming and expensive. The biggest challenge of operating and Logistics is combined with transportation costs account for a significant portion of the overall cost of cement production. The industry is adopting new methodologies with technical advancements to address these challenges and become successful over the years. The governments focus on infrastructure development and the real estate sectors growth expects to drive demand for cement in the coming years.

Cement Industry - outlook and opportunities

The union budget FY2022 had allocated Rs.48,000 Crores which is increased by 66% totaling to Rs.79,000 crores for FY 2023 towards the Pradhan Mantri Awas Yojana to build affordable houses in urban and rural India. Investments for FY 2023-24, totaling Rs.75,000 crores (Rs.15,000 crores from private sources) will be made in about 100 vital transportation infrastructure projects to provide last and first mile connectivity for the coal, ports, food grain, steel, and fertiliser grains sectors.

As per the Union Budget 2023-24, the government approved an outlay of Rs.2,70,435 Crores (US$ 32.67 billion) for the Ministry of Road Transport and Highways, these steps are likely to boost the demand for cement. This is 25% higher than the revised estimates for 2022-23. The highest expenditure (60% of the total expenditure) is towards NHAI. In 2023-24, NHAI had allocated Rs 1,62,207 crore, all of which is budgetary support.

Company Perspective

During the financial year 2022-2023, the company once again witnessed obstacles due to unseasoned weather conditions and rains, sluggish market conditions which had impacted the operations and revenues of the Company. During the last quarter of the financial year, the coal price has increased multi-fold accompanied by acute shortage in supply of Coal. This has impacted margins of the company. We are sourcing coal from Singareni collieries on advance payment. Imported coal from private parties with short-term credit. We have advantage of Limestones are sourced from our own mines. Gypsum is purchased from local market. The Companys policy is to adhere all statutory norms and in ensuring the occupational health & safety of all its employees.

With un-certain market conditions mainly on pricing front, the company is planning for minimal additional investment in revamping KLIN and Cement Mill with a strategic cost reducing measures and plan for increasing the life of the plant and machinery and thereby reducing Coal Consumption.

Significant Changes in key financial ratios along with detailed explanations thereof forms part of the Financial Statements.