Apart from leaders like L&T, ACC, Gujarat Ambuja and India Cements, prices of the second rung cement stocks like Century Textiles, Madras Cements, Priyadarshini Cements are also on the comeback trail.

According to an analyst, the rise in the stock prices are driven by a re-rating of cement stocks. Order book positions are growing with a large number of small-sized orders coming from semi-urban and rural areas. More, the market sees politics playing its role in cementing the forces. ``The coming elections would induce the local governments and municipalities to kick-start a large number of projects which were on hold for a long time,'' says the analyst.

T V Swaminathan, senior general manager (operations), India Cements Ltd shares the optimismwhen he says ``demand has shown a significant jump in the last few months. The increase in offtake has been due to both seasonal factors and increased spending by the various state government in view of forthcoming elections. It looks like industry has seen the worst.''

A V Dharmakrishnan, vice-president (finance), Madras Cements Ltd says realisations have improved significantly and is the highest in the last three months. ``With more and more infrastructure projects taking off and no fresh capacity addition in the next few years, the demand-supply gap is likely to be bridged. Consequently, the industry will do reasonably better this year.''

Analysts believ L&T has a very big order book position to be executed in the next couple of months. It also has a large number of construction projects going which will also result into some substantial offtake from the company itself. This, according to analysts, is one of the major reasons why the scrip is of late being fancied by the domestic and the foreigninstitutions. For the last few days, the L&T scrip has been hitting the upper end of the circuit filter on BSE. Coupled with the rise in prices, the daily volumes in the counter has also been very high.

Since L&T is a profit making company, the company's decision to effect any hike in the price of cement, with the freight rate remaining unchanged, would directly add to its bottomline. The same holds true for other big cement companies like ACC, India Cements and Gujarat Ambuja Cements. And with the cement companies doing the same, the market expects these cement manufactrers to report good results for the next two or three quarters.

The smaller players are not far behind on the bourses. Two-penny cement stocks are on a dream run. But for a different reason: The possibility of bigger companies or foriegn majors acquiring these companies is what has generated interest at counters like Kakatiya Cement, Panchmahal Cement, Priyadarshni Cement, Saurashtra Cement and DLF Cement.

These companies have relativelynew plants and analysts feel the cost of setting up a new plant will be much higher than their acquisition cost per tonne, even if the acquisition cost is assumed at four times the current market capitalisation of these companies. DLF Cement has an annual capacity of 1.6 million tonne, while Priyadharshini Cements is in the process of hiking its capacity upto 2 million tonnes, Saurashtra Cements have an installed capacity of 1.2 million tonnes and Kakatiya Cements has a capacity of 1.98 lakh tonne.

What has proved to be the stimulus for interest in these stocks is financial institutions' decision to part-finance takeovers in the cement sector. ``Thus those companies which had identified possible takover targets but did not have enough funds could now strenghten their positions by going ahead with their acquisitons,'' says an annalyst.

This is what generated interest in the cement stocks which are trading at throw away prices. For instance, Priyadharshani Cement, the scrip on last Thursday was trading atRs 18.7 but closed at Rs 24.2 on Tuesday. Kakatiya Cement which had been changing hands at Rs 16.6 on May 28 closed at Rs 20.25 on Mumbai stock exchange on Tuesday. The counter has been witnessing higher volumes of over 2500 shares as against daily average of 300 shares.

Panchmahal Cement has provided maximum returns. The scrip at beginning of the month was trading at Re 0.80 but in less than four trading sessions the scrip has doubled to Rs 1.6. At the counter on Friday 80,000 shares changed hands, and it was not one day phenomen. On Monday and Tuesday, 85,700 and 57100 shares respectively were traded at the counter.

Scrip of DLF Cement in the last 10 trading sessions has risen from Rs 7.15 to Rs 11.15. On Tuesday during trading session the scrip touched its 52 week high of Rs 11.55, however closed lower at Rs 11.15.

Although the process of consolidation started in Indian cement industry in 1998-99 with many big companies taking over smaller ones but analyst expect the merger and acquisition (M&A)game to continue in the industry till there are only 15-18 player left. On the national level only 5-6 players are expected to survive, accounting for more than 70-75 per cent to total capacity.

India has 56 players plus many mini-cement plants with a national consumption of over 91 million tonnes, according to a Jardine Fleming research report.

This is in contrast to Korea and Japan whose national consumption is 60 and 70 million tonnes respectively, but has only 11 and 19 players, the report said adding even in emerging markets like Mexico and Thailand, the number of competitors ranged between five to seven.

With the global cement major Lafarge recently taking over two cement plants of Tata Steel company other foreign companies are also waiting to enter. According to an annalyst with a Mumbai based leading foriegn brokerage house, ``Others like British construction major, Blue Circle and Switzerland's giant, Holderbank were looking at Indian markets for possible acquisitions as the cement plants areavialable cheap here.''