Credit quality of cement firms improves in H1FY18
Credit quality of cement companies has improved sharply in the first half of FY18 (HIFY18), an analysis by Care Ratings Ltd showed. As the following chart shows, modified credit ratio (MCR) for the sector has risen steadily over the years. An increase in MCR denotes an increase in upgrades vis-àvis downgrades, whereas a decrease in MCR shows the reverse. In the said period, Care Ratings has taken rating actions on nearly 25 companies operating in cement and related sectors.
After witnessing a slowdown in demand and production on account of demonetization during FY17, the cement sector has started exhibiting signs of revival, with all-india production witnessing a year-on-year increase of 1.9% for the month of May 2017 vis-à-vis May 2016. On the pricing front, although, cement prices witnessed a shortlived decline post demonetization, on an annual basis, the average cement prices witnessed growth during FY17 primarily on account of increased prices in the Northern markets, it added.