It’s a myth that trade margins are always higher vs. non-trade: A meeting with the sales head of one of the largest cement manufacturers of the country revealed that trade and non-trade (direct sales to housing companies, developers and government institutions) margins can largely be the same given that the market is operating in ideal market conditions where the gap between trade and non-trade prices generally do not exceed Rs40/bag.
1.A material portion of the non-trade sales are ex-factory. Sales delivered on sites are charged extra freight in most cases.
2.Trade sales involve a large distribution chain which includes distributor, dealer, and also warehousing (in certain cases). As a result, ancillary costs involved in case of trade sales are higher by Rs 25-40/bag (Rs 10/bag freight + Rs 10-15 distributor commission Rs 10/bag retailer commission + Rs 5/bag warehousing and other costs). This may exclude the bonus and year-end incentives cement manufacturers provide to their channel partners.
3.Very importantly, one cost which tends to be omitted is the handling cost (for loading/unloading/delivery etc.). Obviously the whole of these costs are not passed on to cement manufacturers, but it is fair to assume that 25-40% of these costs are on the books of cement manufacturers. These costs can be as high as Rs35-40/bag.
4.In non-trade sales, the cement manufacturers are pretty safe and free of hassles of additional ancillary costs, which are otherwise involved with trade sales.
5.Consequently, given that the markets are operating in ideal conditions, the margin gap in trade and non-trade is not necessarily wide. On the contrary, in certain cases (very recently) margins in non-trade sales were actually higher than trade sales.
Non-trade margins are more dependent on product variety and customer profile: A large deciding variable for non-trade margins is the customer profile and the product variety sold. Significant portion of non-trade sales are to housing companies, developers and government institutions. Margins for sales to government institutions tend to be low as these are generally cheap, fixed-price contracts. However,for other non-trade customers, margins are not always low. Government typically buys OPC (ordinary portland cement) only while other customers’ choices vary. Margins tend to be higher in PPC sales vs. OPC, especially in the non-trade segment. As of now, the overall mix of the country in terms of trade:non-trade is around 70:30.
Infrastructure projects supply will generally dent margins: Infrastructure projects tend to be highly dependent on OPC as most of them have their own RMX plants where they procure fly ash and other additives separately to produce the required grade of concrete. As discussed earlier, OPC sales in non-trade (in most cases) have lower margins than PPC supplies. As a result, margins in the infrastructure segment tend to be lower and may be a marginal dent to overall margins of any cement company that tends to supply more to this segment.
However, infrastructure projects will normally have a multiplier effect: A leading manufacturer of the country said that though supply to infrastructure projects may result in inferior margins, such supplies help generate incremental demand for other projects such as housing in and around the development of infrastructure. Also, since this sector is amongst the largest generator of employment, a boost in infrastructure leads to higher income levels, invariably leading to a boost in housing demand. Supplies to such projects also lead to creating brand equity for the cement manufacturer and give a boost to their trade sales in nearby areas.
Larger players are always in for better pricing: Almost everybody suggested that tier-1 cement manufacturers will always be the last ones to announce price falls. Price falls always follow a reverse pattern — they are initiated by tier-3 brands, flowing in to tier-2, and then finally tier-1. Larger players always understand the need for better pricing.
Price discipline is dependent on fear; intermittent jerks and blips will continue: Smaller cement manufacturers operate at a given capacity utilization only with a feeling of fear. The fear obviously is of drastic price falls, working capital funding, falling into the red and ultimately being taken over by bankers or larger cement manufacturers.
Pricing strategies/markets are inter-dependent on each other: Pricing strategies in different markets are inter-dependent. For example, tier-1 and tier-3 brand prices in Hyderabad are at Rs 280 and Rs 230, respectively,while in Mumbai they are at Rs 330 and Rs 280. Assuming that the tier-3 brand in Hyderabad wants to supply to Mumbai, with freight of about Rs 50/bag the price will be at Rs 280. However this tier-3 manufacturer of Andhra Pradesh is well aware that he will continue to trade at a steep discount to the tier-1 brand of Mumbai and he will also not be the preferred pick in Mumbai’s tier-3 category. The existing tier-3 suppliers will be the preferred choice. As a result, this tier-3 supplier from Andhra Pradesh will search for space in Mumbai markets and the below-the-radar negotiations begin. In such a scenario, the existing tier-1 and tier-3 brands in Mumbai will increase their prices say by Rs 10-20 per bag, to keep their spreads at same levels and give some space to the new tier-3 brand. Basically, the brands are aware of what premium/discount they should get in different markets and this gap generally remains more or less the same. Brand premium depends on various aspects such as supply guarantees, product quality guarantee, flexibility to meet customer needs, payment terms, etc.
Consolidation moves still very much likely: Industry consolidation will continue. Small-scale cement manufacturers clearly lack sincerity and will seek an exit sooner or later. Many of the small manufacturers now understand that growing big in this business is difficult. All small manufacturers are either satisfied or have very minimal growth ambitions or plans for future. A couple also suggested that they are seeking an immediate exit if the valuations are reasonable (say US$ 100-120 EV/tonne).
Current valuations are driven by sheer optimism. Execution and delivery of developmental activities with creation of mass housing / infrastructure is a must for valuations to sustain. However, it seems that the probability of success and positive results is high.
Assuming a positive outcome from the initiatives of the new government, the valuation gap between mid-cap and large-cap manufacturers should ideally bridge. Mid-cap manufacturers such as JK Cement, JK Lakshmi Cement, and Dalmia Bharat should move closer to replacement cost while large-cap manufacturers are likely to continue to trade at a premium of 50-100% to replacement cost. Other smaller manufacturers such as OCL India, HeidelbergCement India, and Mangalam Cement may move closer to the US$ 100 EV/tonne mark. India Cements will continue to remain a play on demand revival in South India (especially Andhra Pradesh and the creation of infrastructure in Telangana).
As proven historically, stock prices of listed cement manufacturers won’t move in isolation. Stocks may outperform / underperform each other, but it is unlikely that there will be an isolated stock price movement of any listed cement manufacturer. Such a movement within the sector could occur only due to serious issues such as corporate governance or lack of management commitment.
Delhi Development Authority (DDA):
1.DDA Housing Scheme 2014 & DDA Housing Scheme 2016 – more than 4,000 houses to be built.
Haryana Urban Development Authority (HUDA):
1.HUDA Faridabad Residential Plots Scheme
2.HUDA Palwal Residential Plots Scheme
3.HUDA Fatehabad Residential Plots Scheme
4.HUDA Ambala Residential Plots Scheme
5.HUDA Jind Sector-9 Residential Plots Scheme – 300 residential plots in Sector-9, Jind
6.HUDA Bahadurgarh Sector-10 Residential Plots Scheme – 378 residential plots in Sector-10, Bahadurgarh
7.HUDA Faridabad Sector-75 Residential Plots Scheme – 349 residential plots in Sector-75, Faridabad
8.HUDA Faridabad Sector-80 Residential Plots Scheme – 595 residential plots in Sector-80, Faridabad
9.HUDA Karnal Sector-32 Residential Plots Scheme – 461 residential plots in Sector-32, Karnal
10.HUDA Karnal Sector-33 Residential Plots Scheme – 1056 residential plots in Sector-33, Karnal
11.HUDA Sonepat Sector-5 Residential Plots Scheme – 254 residential plots in Sector-5, Sonepat
12.HUDA Sonepat Sector-19 Residential Plots Scheme – 107 residential plots in Sector-19, Sonepat
13.HUDA Fatehabad Sector-9 Residential Plots Scheme – 1831 residential plots in Sector-9, Fatehabad
14.HUDA Fatehabad Sector-11 Residential Plots Scheme – 949 residential plots in Sector-11, Fatehabad
15.HUDA Rewari Sector-5 Residential Plots Scheme – 223 residential plots in Sector-5, Rewari
16.HUDA Rewari Sector-7 Residential Plots Scheme – 475 residential plots in Sector-7, Rewari
17.HUDA Dadri Sector-8 Residential Plots Scheme – 320 residential plots in Sector-8, Dadri
18.HUDA Dadri Sector-9 Residential Plots Scheme – 455 residential plots in Sector-9, Dadri
19.HUDA Jagadhari Sector-22 Residential Plots Scheme – 315 residential plots in Sector-22, Jagadhari
20.HUDA Jagadhari Sector-24 Residential Plots Scheme – 841 residential plots in Sector-24, Jagadhari
21.HUDA Mahendergarh Sector-9 Residential Plots Scheme – 141 residential plots in Sector-9, Mahendergarh
22.HUDA Mahendergarh Sector-10 Residential Plots Scheme – 101 residential plots in Sector-10, Mahendergarh
23.HUDA Safidon Sector-7 Residential Plots Scheme – 315 residential plots in Sector-7, Safidon
24.HUDA Safidon Sector-8 Residential Plots Scheme – 841 residential plots in Sector-8, Safidon
25.HUDA Safidon Sector-9 Residential Plots Scheme – 841 residential plots in Sector-9, Safidon
26.HUDA Agroha Sector-6 Residential Plots Scheme – 854 residential plots in Sector-6, Agroha
27.HUDA Palwal Sector-12 Residential Plots Scheme – 489 residential plots in Sector-12, Palwal
28.HUDA Nuh Sector-1 Residential Plots Scheme – 12 residential plots in Sector-1, Nuh
29.HUDA Nuh Sector-2 Residential Plots Scheme – 12 residential plots in Sector-2, Nuh
30.HUDA Nuh Sector-9 Residential Plots Scheme – 15 residential plots in Sector-9, Nuh
31.HUDA Tarawadi Sector-1 Residential Plots Scheme – 763 residential plots in Sector-1, Tarawadi
32.HUDA Panchkula Residential Plots Scheme – 635 residential plots in Panchkula
33.HUDA Panipat Residential Plots Schem`e – 278 residential plots in Panipat
34.HUDA Bhiwani Residential Plots Scheme – 228 residential plots in Sector 23, Bhiwani (6 plots of one kanal, 40 plots of 10 marla, 46 plots of 8 marla, 84 plots of 6 marla, and 52 plots of 4 marla.) A marla is 272.25 square feet, 30.25 square yards, or 25.2929 square metres. It is exactly one 160th of an acre. A kanal is equivalent to 5,445 square feet or one-eighth of an acre.
Ghaziabad Development Authority (GDA):
1.GDA Multi-storey 840 Flats Scheme – Multi-storeyed residential flats in Ghaziabad, Uttar Pradesh
Yamuna Expressway Industrial Development Authority (YEIDA):
1.YEIDA Residential Plots Scheme YEA-02/2014: The Yamuna Expressway Industrial Development Authority will launch a new residential plots scheme soon. The plots sizes would be of 60 square meters, 90 square meters, 120 square meters, 162 square meters, and 200 square meters and the allotment rate would be Rs. 11,800 per square meter. YEIDA Residential Plots Scheme YEA-02/2014 is likely to have about 1500+ residential plots.
Greater Noida Industrial Development Authority (GNIDA):
1.Residential Plots Scheme RPS-03 (RPS-03/2014): Scheme to Offer: Leasehold Residential Plots – The Greater Noida Industrial Development Authority will launch a new residential plots scheme in Sector-10 and Sector-10A soon. The plots sizes would be of 120 square meters and 200 square meters and the allotment rate would be Rs. 20,250 per square meter. GNIDA Residential Plots Scheme RPS-03 is likely to have about 700+ residential plots.
Mussoorie Dehradun Development Authority (MDDA) :
1.MDDA ISBT Housing Scheme Dehradun
West Bengal Housing Board (WBHB)
1.West Bengal Housing Board Sunray HIG Flats Scheme – 630 HIG Flats in New Town, Rajarhat
2.West Bengal Housing Board Prantik HIG Flats Scheme – 576 HIG Flats in Thakurpukur, Kolkata
3.West Bengal Housing Board Purbasha Phase-2 HIG Flats Scheme – 36 HIG Flats in Maniktala, Kolkata
4.West Bengal Housing Board Krishnanagar MIG Flats Scheme – 80 MIG Flats in Krishnanagar, Nadia
5.West Bengal Housing Board Eastern Green Housing Scheme – Residential Plots, Apartments, and Individual Bungalows in New Town, Rajarhat
Chandigarh Housing Board (CHB):
1.Chandigarh Housing Board Housing Scheme in Sector-53, Sector-54, and Sector-55 – 1,100 Three-Bedroom Flats, 2,200 Two-Bedroom Flats, and 1,200 One-Bedroom Flats (Total 4,500 residential units) – The Chandigarh Administration has earmarked 90 acre (435,600 square yard) of land in Sector-53 (19.5 acre land), Sector-54 (30.94 acre land), and Sector-55 (39.53 acre land) for development of a General Housing Scheme by Chandigarh Housing Board.
2.Chandigarh Housing Board Housing Scheme Maloya-1 – 1,500 freehold built-up flats
3.Chandigarh Housing Board Housing Scheme Maloya-2 – 464 freehold built-up flats
4.Chandigarh Housing Board Housing Scheme Dhanas – 1,400 freehold built-up flats
5.Chandigarh Housing Board Housing Scheme in Sector-26 (East) – 940 freehold built-up flats for the economically weaker section (EWS)
Jodhpur Development Authority (JDA)
1.Jodhpur Development Authority Mogra Kallan Housing Scheme – residential plots exclusively for Rajasthan government employees – The proposed JDA Jodhpur Mogra Kallan Housing Scheme will be on the Jodhpur-Pali Road on Khasra No. 213 of Village Mogra Kallan, Jodhpur
2.Jodhpur Development Authority Lordi Pandit Ji Housing Scheme – Residential Plots for the Rajasthan government teaching staff of university, engineering college, medical college, ITI, polytechnic. The proposed JDA Jodhpur Lordi Pandit Ji Housing Scheme will be on the Jodhpur- Bhopalgarh Road in Village Lordi Pandit Ji, Jodhpur. Lordi Pandit Ji is about 20kms from main Jodhpur city.
3.Jodhpur Development Authority Palari Khichiyan Housing Scheme. Residential plots for the employees and staff of Rajasthan police, CRPF, IB, ITBPF, home guard, etc. The proposed JDA Jodhpur Palari Khichiyan Housing Scheme will be on the Jodhpur-Pali Road on Khasra No. 80 and 93 of Village Palari Khichiyan, Jodhpur
Odisha State Housing Board (OSHB)
1.Odisha State Housing Board Dumuduma Bhubaneswar Apartments Scheme – LIG and EWS Flats in Dumuduma, Bhubaneswar
2.Odisha State Housing Board Ranasinghpur Bhubaneswar Multi-Storeyed Apartments Scheme – Multi-Storeyed 2 BHK and 3 BHK Flats in Ranasinghpur, Bhubaneswar – Ranasinghpur, Bhubaneswar project will come up over 4.65 acres area. It will be a Public-Private-Partnership (PPP) project
3.Odisha State Housing Board Suango (Phase-II) Bhubaneswar
Integrated Housing Scheme: Multi-Storeyed Flats in Suango (Phase-II), Bhubaneswar Suango (Phase-II), Bhubaneswar project will come up over 10 acres area.
4.Odisha State Housing Board Nandighosha (Phase-II) in Ranasinghpur, Bhubaneswar Apartments Scheme – Multi-Storeyed Flats in Nandighosha (Phase-II) in Ranasinghpur,Bhubaneswar
5.Odisha State Housing Board Ramagarh Cuttack Housing Scheme – Multi-Storeyed Flats and Plots in Ramagarh, Cuttack
6.Odisha State Housing Board Bidyadharpur Cuttack Multi-Storeyed Apartments Scheme – 1008 multi-storeyed apartments for LIG Category in Bidyadharpur, Cuttack – Bidyadharpur, Cuttack project will be in Public-Private-Partnership (PPP) mode and will be spread over 11.38 acres area.
7.Odisha State Housing Board Mahisapat Dhenkanal Housing Scheme – Plots and Flats in Mahisapat, Dhenkanal
8.Odisha State Housing Board Angul Housing Scheme – Plots and Flats in Angul, Odisha – Angul, Odisha project will be in Public-Private-Partnership (PPP) mode and will be spread over 6.50 acres area.
9.Odisha State Housing Board Nayagarh Housing Scheme – Plots and Flats in Nayagarh, Odisha
Housing Board Haryana (HBH)
1.Built-up multi-storey flats scheme in Hissar – Built-up multistoried flats on hire-purchase basis
Pathankot Improvement Trust (PIT) – Upcoming Residential Projects and Schemes
1.Pathankot Improvement Trust MIG Multistoried Flats Scheme 2014 – Freehold MIG Multistoried Flats (Site Location: Back Side of Cheli Mata Mandir, Pathankot)
2.Pathankot Improvement Trust HIG, MIG, and LIG Multistoried Flats Scheme : freehold HIG, MIG, and LIG Multistoried Flats (Site Location: Back Side of Indian Oil Depot in Daulatpur, Pathankot)
Bhubaneswar Development Authority (BDA)
1.Duplex Houses Scheme Pokhariput, Bhubaneswar
2.HIG Duplex Housing Scheme Pokhariput, Bhubaneswar
3.Housing Scheme Paikarapur, Bhubaneswar
4.Residential Plots Scheme Sanpalla, Khurda (Bhubaneswar)
5.Prachi Enclave Phase-II Scheme Chandrashekhapur, Bhubaneswar
Cuttack Development Authority (CDA)
1.Housing Scheme Sector-1, Cuttack
2.Residential Apartments Scheme Sector-8, Cuttack
3.Residential Scheme Sector-12, Cuttack
4.Residential Complex Scheme near Raghunath Jew Temple at Talatelenga Bazaar, Cuttack
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