The government’s plans to boost spending on infrastructure projects will benefit the second biggest cement maker in India LafargeHolcim, Moody’s Investor Service said today.
LafargeHolcim is best placed European player to benefit from the uneven regional demand, with a much larger scale and more prominent operations in northern India, where it sells almost 42 per cent of its local cement volume, it added.
European cement manufacturers with a presence in India will benefit if the government’s plan to ramp up infrastructure spending comes to fruition in the next 12-18 months, the ratings agency said in a statement.
India’s Budget for 2016-17 includes plans to hike public infrastructure spending, especially on roads, which could revive the stagnant cement demand in the country, it added.
“As the second-largest cement maker in India, Swiss-based LafargeHolcim is in a good position to benefit from any increase in infrastructure spending,” Moody’s said.
While, southern-based HeidelbergCement AG, CRH plc and Italcementi S.p.A. have limited geographic coverage and are more exposed to local overcapacity in this region, the ratings agency said.
Moody’s Senior Vice President Falk Frey said: “Planned infrastructure spending will revive sluggish demand in the Indian cement market and could significantly benefit European players in the sector, though any benefits rely on the projects being effectively and timely executed.”
Moody’s further said India’s 12th Five Year Plan (2012-17) mooted that investment in infrastructure should increase from 7.6 per cent of GDP in 2014 to 9 per cent in 2017.
However, the cement demand for government-funded projects has been weak for the last four years with many construction schemes delayed or put on hold, it said.
As a result, while infrastructure investment will be a key growth driver, the timing of such investment remains uncertain, Moody’s added.