Shares of cement companies like Ramco Cements Ltd. and Dalmia Bharat Ltd. are witnessing selling pressure in Wednesday’s trading session. The stocks declined between 4% to as high as 8%.

The Tamil Nadu government has imposed ₹160 per tonne royalty on limestone that is mined.

The increased tax will be applicable from February 20, 2025.

Earlier, it was proposed and now this particular proposal has been passed.

That is why this is viewed negatively for these two companies in particular because they have a high percentage of their total clinker mix in Tamil Nadu.

Ramco Cements has one of the largest clinker capacities in Tamil Nadu.

Dalmia Bharat and Ramco Cements have approximately 20%-50% of their clinker capacity in Tamil Nadu.

How much of Clinker capacity is in Tamil Nadu?

What happens next?

This could set a precedent for other states to implement royalty on limestone.

No, companies might try to pass it on via price hikes to customers.

Meanwhile, global brokerage firm CLSA is constructive on the cement sector, as earnings visibility for the sector has improved and pockets of opportunity arised for companies.

In a note released earlier this year, CLSA had upgraded Dalmia Bharat to ‘Outperform’ from its earlier rating of ‘Hold’. The brokerage had also raised its price target on the stock to ₹2,110 from ₹1,835 earlier.

CLSA had a ‘Reduce’ rating on Ramco Cements but raised its price target higher to ₹855 from ₹710. The foreign brokerage said that it has remained cautious on the stock as it awaits more visibility on the medium-term growth outlook for the company.