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UltraTech market-share focus to pay off when cement prices rise

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ET Intelligence Group: Intense competition and demand that has often not reflected the pace of broader economic expansion have prevented cement manufacturers from raising prices.

In this battle of attrition, the undisputed leader UltraTech has focused on gaining market share rather than experiment with pricing.

It has been unwaveringly following this strategy for the past two years.

The story in the December quarter is not structurally distinct. In the December quarter, Ultra-Tech's sales volume grew by 14 per cent to 18 MT in comparison with the same quarter last year.

Its cement realisations did not show any noticeable improvement on quarter, a clear indication that the company has been unable to gain any pricing power. A large part of the stable demand for cement, although not great in value terms, still comes from non-trade or institutional segment.

This segment comprises infrastructure and low cost housing (both from government and private).

It is estimated that the low-cost housing programme of the government –Pradhan Mantri Awas Yojana - Gramin (PMAY) has generated 28-30MT demand of cement. Besides this, more road projects across states is fuelling demand.

This means that demand is coming at a price point that is not high enough to boost earnings and margins.

In terms of sales, UltraTech derives 64 per cent from the trade segment and 36 per cent from non-trade.




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