The cement industry is a vital part of India’s economy, providing employment to more than a million people, directly or indirectly. The Indian cement industry has been attracting huge investment from Indian and foreign investors, ever since it was deregulated in 1982. The country has a lot of potential in the infrastructure and construction sector as development in them will largely benefit the cement industry. Over the years, suitable government policies have led to several large foreign players such as LafargeHolcim and Heidelberg Cement setting up manufacturing units in the country and investing large sums of money in the promotion of the cement industry. A significant factor which has aided the growth of the cement industry has been the ready availability of coal and limestone, which are the essential raw materials for the production of cement. Real estate or the housing sector is the biggest demand driver of cement accounting for about 65% of the total consumption, while other major consumers like public infrastructure and industrial development account for 20% and 15%, respectively. There are around 210 large cement plants in the country, accounting for a cumulative installed capacity of over 350 million tonnes and a third of the cement plants are located in Andhra Pradesh, Rajasthan and Tamil Nadu. With the new government in place after a massive electoral mandate, analysts expect sectors like infrastructure including housing etc., to be a key focus area for them to kick start the economy and create employment. In the cement industry, Ambuja Cement is a market leader and well entrenched in the Indian cement space for a very long time. Ambuja Cement Ltd is a part of the global conglomerate LafargeHolcim, having a cement capacity of around 30 million tonnes, with five integrated cement manufacturing facilities around the country. The company benefits its customers to a large extent by facilitating timely, cost effective and cleaner shipments of bulk cement as it has a captive port with four terminals. Ambuja Cement reported a 35% increase in its consolidated net profit at Rs 695 crore for the quarter ending March 2019, with the total income climbing up by 8.36% to Rs 7,093 crore. The quarter ended March 2019 saw a steady growth in the top line on the back of innovative and environment friendly products introduced in the market by Ambuja. The management expects that higher outlay on infrastructure and affordable housing should accelerate construction activity and spur cement demand in the next few years. The Ambuja Cement Ltd stock quoting at Rs 232 is a good fundamental buy for 18 months, for a 25% price appreciation target.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.