Budget 2022: Cement stocks shine on governments infrastructure push

The cement sector finds itself in a sweet spot with allied sectors like real estate seeing a lot of activity in terms of new sales, pre-sales, and inventory, which are being fast absorbed by the end-users.  

Real estate in India is coming out of a slump after 10-12 years of stagnant prices and the mortgage is low at 6.5 per cent. The infrastructure space has seen many budgetary reforms and policy changes, be it Pradhan Mantri Gram Sadak Yojana (PMGSY) for the roads sector, Pradhan Mantri Awas Yojana (PMAY) for housing, or Mahatma Gandhi National Rural Employment Guarantee Act for rural employment - all expected to drive demand for the cement sector.  

In Budget 2022-23, all eyes were on the government's infra push to continue to the rapid pace of economic expansion. Let us look at some of the announcements made in this space.   

The government announced its aim to expand the national highways network by 15 per cent to Rs 25,000 km in 2022-23, which will be quite a positive move for the cement companies. The target is very ambitious and it is 29 per cent more than what was constructed in the past two fiscals (6,185 km in the first nine months of this fiscal and 13,200 km in fiscal 2021). The execution of national highway projects has been one of the highlights of the Narendra Modi-led government, and companies will hope for higher tendering activity from National Highways Authority of India (NHAI) in the next financial year.  

The ‘Housing for All by 2022’ initiative was launched by the Modi Government within five months of assuming office. It’s all about ensuring a home for every Indian by 2022. In 2022-23, 80 lakh houses will be completed for identified beneficiaries of the Pradhan Mantri Awas Yojana with an allocation of Rs 48,000 crore.   

The shares of cement companies reacted positively post Budget presentation. At 1 pm today, the shares of UltraTech Cement, Ambuja Cement, ACC, and Shree Cement were up by 4.03 per cent, 4.19 per cent, 2.37 per cent & 2.15 per cent, respectively.