India Cements, which is the country?s fourth-largest cement manufacturer by capacity, isn?t exactly going through good times. During the April-June quarter, the company?s earnings were far from impressive with a 39% year-on-year decline in net profits at R62 crore. Total sales during the period were at R1,201.4 crore versus last year?s R1,056.8 crore. The company attributes the decline to lower demand, particularly in the Andhra Pradesh market, apart from high input costs and forex losses. The overall cement industry is also going through a hard time with the Competition Commission of India imposing a hefty fine of R660 crore on them for cartelisation. India Cements has been fined with R187.48 crore.

N Srinivasan, vice-chairman and managing director, India Cements, tells FEs R Ravichandran in an interview that the company and the industry have been wrongly fined and they will file an appeal against the order in the competition appellate tribunal shortly. Edited excerpts:

The CCI has imposed a hefty fine on the cement industry for creating shortage of supply in the market by keeping production low so that prices can be kept high. What?s your view on the matter?

It is not fair for me to comment at this point of time. However, we are about to appeal against the CCI order in the Compat. All I can say at this point of time is that India Cements has not indulged in any wrong practice as alleged. I deny all charges made against us by the CCI in their report.

What?s ailing the cement industry currently and how?s the outlook in terms of growth?

The cement industry is known for reinvesting into the business. The industry has grown substantially in the post-decontrol period starting from the early 90s with the total capacity rising from 30-40 mt to around 310 mt. Today, India ranks as the second-largest cement producer globally after China. The current slowdown in the industry is because of its practice of adding capacity in advance in anticipation that growth would continue to be in double digits. However, global and local factors have suppressed demand for the last two years leading to slower growth. Andhra Pradesh, one of the major markets for the industry, has been witnessing a negative growth in the last two years against a robust growth of 24% per annum earlier.

With the constant downward revision of GDP estimates over the last few quarters, higher interest rates, tight credit situation, rising input costs across all areas, it is unlikely that the industry will see its earlier growth momentum of more than 10% two years ago, at least for the next one year.

What are the factors which could trigger demand?

Though the industry?s growth predictions are pegged at 8% to 9% during the current fiscal, I feel it is unlikely that the industry will reach such growth levels. Today the sentiment is not positive for the industry. The revival in demand will be dependent on the policies that would revitalise the economy while creating feel good factor for the investments to take place at a faster pace. Reviving FDI is the need of the hour.

Many feel cement prices have jumped manifold. What is your view?

Given the rising input costs, particularly on coal, power, transportation and wages, the price of the commodity has gone up steadily. The plant are today not working at their full capacities. It is not economically viable for the industry to sell at lower rates as it is reeling under margins pressure because of low capacity utilisation. As we go along and when the utilisation level goes up, there may be a possibility for price reduction.