A report by British wealth management firm Investec said competition in the Indian cement industry has intensified with the entry of Adani Group in September 2022, with top manufacturers raising discounts to maintain market share.
The December 8 report showed that the average discount per tonne of cement offered by UltraTech Cement, Shree Cement and Dalmia Bharat continued to increase in FY23 and FY24. The data shows that Ramco Cement’s discounts fell sharply in FY2023 and then increased in FY2024.
However, Ambuja Cement and ACC, which the Adani Group acquired to enter the cement business, gradually reduced their discounts during the same period. Ambuja and ACC’s discount rates will decline at a CAGR of 18% and 13%, respectively, between FY22 and FY24.
Investec analysts pointed out: “In addition, companies such as (Shree Cement) not only increased discounts, but also increased credit days, which can be seen even on a 1HFY basis in 2025, which reflects the intensity of competition.” Data shows that Shree Cement will increase from 2022 The increase from 15 days in fiscal year to 20 days in fiscal year 2023 then slows to 17 days in fiscal year 2024.
Cement companies offer discounts to their distributors and dealers, who then pass these discounts on to the end buyers. These include cash discounts based on prompt payment by dealers, discounts based on purchase quantity and special discounts, the report said.
The impact of discounts
Ritesh Shah, head of mid-market research and ESG at Investec, said the discount “shows increased competition in the space, which is having an impact on margins”.
“It’s an unfortunate reality that steel mills don’t want to lose market share, even if it means hurting profits (or) rates of return. That means operating at a RoIC (return on invested capital) to match the WACC (weighted average cost of capital) or potentially lower, which is a value-dilutive proposition.
Investec analysts pointed out in the report that the oversupply situation is further exacerbated as large cement manufacturers such as UltraTech and Adani Group are acquiring smaller cement plants and increasing their capacity utilization levels, resulting in increased production of the same assets.
UltraTech, Adani, Dalmia Bharat and Shree did not respond MintEmail seeking comment. Ramco Cement could not be contacted.
The discounts are only expected to intensify after cement makers have sought to raise prices in recent weeks.
“Against the current backdrop of attempts to raise prices, we are seeing increased discounts from steel mills who may claim a partial increase in the price equalizer without changing channel economics,” analysts noted.
India’s top cement manufacturers include Aditya Birla Group flagship UltraTech Cement, Adani Cements, Shree Cement, Dalmia Bharat, Nuvoco Vistas and Ramco Cement.