Cement majors to tap rural markets as overcapacity threatens to dent profits

CEMENT makers see overcapacity looming large from the next fiscal and are trying to compensate by targeting the rural heartland, small towns and villages to increase their sales and protect their bottomlines.      Cement majors — UltraTech, HeidelbergCement, ACC, Ambuja — and midlevel players, such as Shree Cement, Binani, have aggressive plans as they focus on the relatively untapped rural market to be the next growth driver. Shree Cement, the largest cement maker of North India, has chalked out an expansive plan for marketing in the villages of Rajasthan, Haryana, Punjab, Chattisgarh, Madhya Pradesh and Gujarat.      HM Bangur, MD of Shree Cement, told ET: "The rural market has been the key driver for the cement sector from the next quarter. We are opening 2,000 new dealers in rural India over the next one year and set a target of 40% revenue from rural market in two years." At present, Shree's gets 20% of its revenue from rural markets.      Binani Cement, which mainly supplies to Rajasthan, Gujarat and Delhi, is also creating awareness for its cement brand in rural India. It's increasing its penetration in the rural market and villages through retail outlets. "We are targeting villages with a population of 5,000-12,000 in the districts of Panchmahal, Dahod, Jamnagar, Porbandar, Junaghad in Gujarat and identifying 118 new retailers. The company will reach another 300 villages with a population of 10,000," said Vinod Juneja, MD of Binani Group of Industries.      The government has allotted Rs 48,000 crore for rural infrastructure programmes under the Bharat Nirman. The hike in excise duty on cement products is negative, but can be overwhelmed by improved demand from greater thrust on infrastructure and the rural sector, said industry experts. Angel Broking cement analyst Rupesh Sankhe said cement makers can see rise in sales up to 30% from rural markets on account of demand for low-cost housing in rural and semi urban areas.      Moreover, good retail demand for cement from semi urban and rural areas, particularly in the North and East, in the coming quarters, Mr Sankhe added.      UltraTech, ACC, Ambuja, HeidelbergCement also ramping up their rural retail outlets network, said cement dealers. UltraTech said that rural market will be the key driver for cement sector. The company is planning various initiatives, which will help grow in rural markets. It is providing technical assistance to masons and contractors, teaching them more cost-efficient construction methods and usage of eco-friendly cement and cement products. The Aditya Birla Group controls UltraTech and Grasim that together account for almost a fifth of the Indian cement market.      HeidelbergCement said that the government focuses on the rural and infrastructure growth is big boost for the industry. The country's cement consumption grew by over 10% in 2009, driven by robust demand from infrastructural sector and rural markets, it added.      ACC also expects demand for cement to increase in rural markets. ACC managing director Sumit Banerjee recently said that demand is mostly driven by the rural and infrastructure sectors, while demand from the housing and commercial sectors has not picked up yet. Holcim-controlled ACC will invest Rs 1,400 crore next year to expand its production capacity to 30 MT by 2010-end and will raise Rs 300 crore to retire some of its long-term debt.  CONCRETE MOVE  UltraTech is planning various initiatives that will help grow in rural markets  ACC expects demand for cement to rise in rural markets  Shree Cement chalks out marketing plans for villages of Rajasthan, Haryana, Punjab, Chattisgarh, MMP and Gujarat  Binani Cement is creating awareness for its cement brand in rural India by increasing setting up more outlets