State of cyclicals: Construction & infrastructure

The construction-materials sector mainly caters to the housing market (accounting for 60 per cent of the total demand) and the infrastructure space. During high economic growth, companies in the sector try to increase their market share by pushing volumes and selling at low prices. It leads to overcapacity. However, during bad times, companies opt for consolidation, with smaller players fading away and bigger players emerging as winners. In recent years, consolidation in the sector has led to the top two players Ultratech and Ambuja cornering a market share of 52 per cent in 2020 (source: IBEF). Despite this, capacity utilisation of the sector has hovered at around 70 per cent during the last few years, owing to the continuous legacy asset build-up but moderate demand. HISTORICAL