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Second largest Cementmarket
Dominated by privateplayers
Higher share of largeplants
Large concentration inSouth and West
• With nearly 300 million tonne of cement production capacity, India is the second largestcement producer in the world
• Of the total capacity, 98 per cent lies with the private sector and the rest with public sector
• 185 large cement plants together account for 97 per cent of the total installed capacity,while 365 small plants account for the rest
• Of the total 185 large cement plants in India, 77 are located in the states of AndhraPradesh, Rajasthan and Tamil Nadu
Source: Planning Commission, Aranca Research
FY12•
Productioncapacity:
247 milliontonnes •
Growing demandRobust demandRobust infrastructure growth •
during 12th Five Year Plan to drivegrowth
•Demand is expected to be
boosted by growth in real estatesector
AdvantageIndia
Increasing investments
Long-term potential FY20E
Oligopoly market, where largeplayers have partial pricing control Production
capacity:Low threat from substitutes 407 million
tonnes
Attractive opportunities• Robust investments are being
made by the existing players toexpand their capacity
• Increasing presence of Tier IIcement players
• Use of alternate fuels to lowerproduction costs and emissions
• The engineering sector is delicensed;• The North-East, which is witnessing
a construction boom, offersattractive investment opportunities
• Due to policy support, there was• Large planned investments inn into
infrastructure and housing is likelytoboost demand for cement in thetalcoming years as wellthat period
Source: EdelweissNotes: FY20E - Estimated market size for 2020
Cement Industry(FY13)
Large Cement Plants
• Cement plants: 185
• Installed capacity: 339.5 mtpa
• Cement production: 168.3 mtpa*
Mini And White Cement Plants
• Cement plants: 365
• Installed capacity: 11.1 mtpa
• Cement production: 6.0 mtpa*
Source: Cement Manufacturers’ Association (CMA),Planning Commission, Aranca ResearchNote: mtpa - Million Tonnes Per Annum, * FY12 data
India is the 2nd largest cement producer as well as consumer in the world led by the enormous growth in the infrastructureand construction sector for the last two decades
Top Cement Consumers in 2011 (million Top Cement Producer in 2011 (milliontonnes) tonnes)
2,0482,058
22972 65 58 56 56 50 49 48 222 66 66 64 63 56 56 52 49
Source: International Cement Review, Aranca Research
Cement production increased at a CAGR of 9.7 per cent to272 million tonnes over FY06-13
As per the 12th Five Year Plan, production is expected toreach 407 million tonnes by FY17
Production of Cement (million tonnes)
407368
CAGR:10.0% 332
2
72
300
229247
207182
142 156 168
Source: Department of Industrial Policy and Promotion,Working group for 12th Five Year Plan, Aranca Research
Notes: E - Estimate, CAGR - Compound Annual Growth Rate
Domestic cement consumption is expected to reach 265million tonnes in FY13 from 222 million tonnes in FY11
The consumption is further expected to increase at a CAGRof10.2 per cent during FY11-17 and reach 398 milliontonnes
Domestic Cement Consumption (million tonnes)
398CAGR:10.2%
324 359
265 293222 242
FY11 FY12 FY13E FY14E FY15E FY16E FY17E
Source: Working group for 12th Five Year Plan, Aranca ResearchNotes: E - Estimate, CAGR - Compound Annual Growth Rate
Cement production capacity reached 350 million tonnes inFY13 from 323 million tonnes in FY11
Production capacity is expected to increase at a CAGR of6.8 per cent during FY11-17 and reach 479 million tonnes
Cement Production Capacity (million tonnes)
479
441
CAGR:6.8% 405
373
350336
323
FY11 FY12 FY13E FY14E FY15E FY16E FY17E
Source: Working group for 12th Five Year Plan, Aranca ResearchNotes: E - Estimate, CAGR - Compound Annual Growth Rate
Cement capacity utilisation rate is expected to touch around78 per cent in FY13 from 71 per cent in FY11
The utilisation rate is expected to further reach 85 per centby FY17
500
450
400
350
300
250
200
150
Cement capacity (million tonnes) and utilisationrate (%)
90%
85%
80%
75%
70%
65%
60%FY11 FY12 FY13E FY14E FY15E FY16E FY17E
Capacity -LHS Production-LHS Utilisation rate (%)
Source: Working group for 12th Five Year Plan, Aranca ResearchNotes: E - Estimate, CAGR - Compound Annual Growth Rate
Currently, India has 185 large cement plants spread acrossall states
Andhra Pradesh is the leading state with 37 large cementplants, followed by Rajasthan and Tamil Nadu having 21 3
and 19 plants, respectively3
21
12
10
11
2
2
5
3
1
11
11
105
37
19
1
48
1
5
Source: Working group for 12th Five Year Plan, Aranca Research
CementIndustry
Installed capacity (2011)
South 126.9 mtpa
North 66.4 mtpa
East 43.5 mtpa
West 44.1 mtpa
Central 37.3 mtpa
Key markets
Tamil Nadu, AndhraPradesh and Karnataka
Rajasthan, Punjab,Haryana and the NCR
West Bengal,Chhattisgarh, Orissa and
Jharkhand
West Bengal,Chhattisgarh, Orissa and
Jharkhand
Uttar Pradesh, MadhyaPradesh
Source: Department of Industrial Policy and Promotion, Aranca ResearchNote: mtpa - Million Tonnes Per Annum
Rajasthan has the highest installed capacity in North India, accounting for a 66.5 per cent share in capacity in the region in2011
Chhattisgarh leads the Eastern region with a share of 32.6 per cent of total installed capacity in the region in 2011
Shares in Total Capacity in NorthernRegion (2011)
0.8% 0.8%
4.5% Rajasthan6.0%
Shares in Total Capacity in Eastern Region(2011)
0.5%2.3%
7.5% Assam
Meghalaya
7.2%
14.2%
66.5%
Himachal Pradesh 32.6%
19.5%Punjab
Uttarakhand
Haryana
Jammu & Kashmir 16.8% 20.8%
Delhi
Bihar
Jharkhand
Orissa
West Bengal
Chhattisgard
Source: International Cement Review, Aranca Research
Andhra Pradesh has the highest installed capacity in South India (53.5 per cent share of total installed capacity)
Madhya Pradesh leads the Central region in installed capacity, while Gujarat leads the West
Shares in total capacityin Southern region (2011)
0.5%
18.0%
53.5%
28.0%
Andhra Pradesh Tamil Nadu
Karnataka Kerala
Shares in total capacityin Central region (2011)
34.4%
65.6%
Uttar Pradesh Madhya Pradesh
Shares in total capacityin Western region (2011)
45.0%
55.0%
Gujarat Maharashtra
Source: International Cement Review, Aranca Research
Total demand for cement is expected to grow at a CAGR of 10.2 per cent to 265.9 million tonnes during FY08-13
Cement demand from the Eastern and Central regions during FY08-13 is expected to grow at a CAGR of 13.5 per centand 12.1 per cent, respectively.
All India (million tonnes)
265.9
CAGR: 10.2% 236.3
210.2
196.4
177.5163.4
FY08 FY09 FY10 FY11F FY12F FY13F
Central (million tonnes)
42.0
38.2
CAGR: 12.1%
34.3
30.8
26.2
23.8
FY08 FY09 FY10 FY11F FY12F FY13F
East (million tonnes)
46.6
41.7CAGR: 13.5%
37.3
33.0
28.0
24.7
FY08 FY09 FY10 FY11F FY12F FY13F
Source: International Cement Review, Aranca Research
Cement demand from Western, Northern and Southern regions is expected to grow at a CAGR of 8.8, 8.7 and 5.6 percent, respectively, during FY08-13
South (million tonnes)
63.9
62.1CAGR: 5.6%
56.4
North (million tonnes)
48.6
CAGR: 8.7%
40.8
West (million tonnes)
51.049.8
CAGR: 8.8% 45.4
41.4
53.8
48.6
FY08 FY09
55.5
FY10 FY11F FY12F FY13F
38.3
35.1
33.6
FY08 FY09 FY10 FY11F FY12F FY13F
38.8
34.532.7
FY08 FY09 FY10 FY11F FY12F FY13F
Source: International Cement Review, Aranca Research
UltraTech Cement, a major player in India, accounted for 15.0 per cent of the total market share in terms of installedcapacity in 2011
It is a leading player in the Southern and Eastern regions, accounting for 50.6 and 52.1 per cent of total market share,respectively, in terms of installed capacity in 2011
All India
10.0%
7.5%
15.0%
66.1% 1.4%
Ambuja Cement ACC
Ultratech Cement Jaypee Cement
Others
South
10.2%
5.9%
9.9%
50.6%
8.3%
7.1%
8.0%
India Cement Madras CementUltratech Cement Chettinad Cement
Dalmia Cement ACCOthers
East
14.2%
6.2%
52.1% 12.1%
9.8%
5.5%
Lafarge India ACCUltratech OCL India Ltd
Ambuja Cement Others
Source: International Cement Review, Aranca Research
Jaypee Cement led the Central region in terms of installed capacity, with 33.5 per cent of the market share; the Westernregion was dominated by UltraTech cement with 29.0 per cent of market share in 2011
Ambuja Cements accounted for 28.9 per cent of the total market share in terms of installed capacity in the Northern regionin 2011
North
2.5%5.5%
7.3%28.9%
11.1%
13.8%16.6%
14.2%
Ambuja Cement Shree CementOthers Ultratech Cement
J K Cement ACCJaypee Cement Birla Cement
Central
33.5%
42.1%
12.3%12.1%
Jaypee Cement Ultratech Cement
ACC Others
West
29.0%
47.6%
10.9%
12.5%
Ultratech Cement Jaypee Cement
Ambuja Cement Others
Source: International Cement Review, Aranca Research
• Presence of small and mid-size cement players across regions is increasing, which helpsIncreasing presence of
small and mid-sizecement players
Cost reduction throughthe use of alternate
fuels **
Increasing sale ofblended cement
to diminish market concentration of industry leaders
• Small and mid-size players have been constantly increasing their installed capacity tocater to increasing cement demand
• Major cement manufacturers in India are increasingly using alternate fuels, especiallybioenergy, to fire their kilns
• This is not only helping to reduce production costs of cement companies, but is alsoproving effective in reducing emissions
• The proportionate sales of blended varieties of cement—Portland Pozzolana Cement(PPC) and Portland Blast Furnace Slag Cement (PBFC)—has risen over the years
• During 2011, blended cement accounted for 75 per cent of total cement production in thecountry
Notes: ** The Success Stories section includes cases of successful employmentof alternate fuels in cement production to reduce production costs
• Holcim, a Switzerland-based major cement company has plans for capacity expansion inIndia through its subsidiary ACC cement
ACC
Ambuja Cements
Dalmia Cement
• The construction of the company’s new plant at Jamul, Chhattisgarh is under process.This plant will increase ACC’s capacity to 35 million tonnes per annum (mtpa) from 30
mtpa in a phased manner by 2015
• Ambuja Cements is targeting an investment of USD370.4 million for capacity expansion inRajasthan and Northern India
• The proposed project in Rajasthan is expected to add 5 million tonnes (MT) to AmbujaCements’ existing production capacity
• Dalmia Cement is planning an investment of USD333.3 million to ramp up itsmanufacturing capacity to 21 mtpa from the existing 17 mtpa over the next two years.• Dalmia has plans to set up a 2.5 million tonne (MT) greenfield unit at Belgaum in
Karnataka. It also plans to scale up its two plants in North-East India for a total value ofUSD239 million and USD9.2 million, respectively
Source: Aranca Research
• Heidelberg Cement, a Germany-based cement manufacturer has commissioned Phase-Iof its Jhansi grinding unit
Heidelberg Cement
Vicat Group
Amrit Cement
• The company has undertaken an investment worth USD 259.4 million for expanding itscapacity to 2.7 million tonnes (MT)
• Heidelberg aims to ramp up the operational capacity to 6 MT at its Damoh plant in MadhyaPradesh
• Vicat Group, a France-based company plans to sell 4.5 MT of cement in India in FY 2013• The company has recently commissioned a joint venture cement plant Vicat Sagar
Cement at Chattrasal, Karnataka, for a total value of USD333.3 million• Vicat Sagar will have a 2.8 MT of capacity in the first phase
• Amrit Cement India Ltd (ACIL) has announced the launch of Amrit Cement in the North-Eastern market.
• The company plans to achieve a production level of 5 million tonnes per annum by 2015-16 through capacity expansion in North-Eastern Bihar and Nepal
Source: Aranca Research
• High - Huge capital investments requiredpresent substantial barriers to entry andachieving economies of scale
• Low - The Indian cement marketis oligopolistic in nature,characterised by tacit collusion,where large players partiallycontrol supply for better pricediscipline
• Low - Cement, practically,has no substitutes
Positive
Positive Neutral
Market
Attractiveness
Positive Positive
• Moderate - Cement players haveto depend on the railways forcarriage outward and local coalcompanies for fuel, althoughdiversification of freight optionsand fuel sources is diminishingthe suppliers’ power
• Low - Substantial market
concentration among largeplayers ensures low bargainingpower of buyers
Source : Aranca Research
Housing Growth
• The Housing segment accounts fora major portion of the total domestic
demand for cement in India
• Real estate market is expected togrow at a CAGR of 17.2 per centover 2011-15 to USD126 billion
• Growing urbanisation, an increasing
number of households and higheremployment are primarily driving thedemand for housing
• Initiatives by the government areexpected to provide an impetus to
construction activity in rural andsemi-urban areas through largeinfrastructure and housingdevelopment projects respectively
Infrastructure Growth
• The government is strongly focusedon infrastructure development to
boost economic growth
• It plans to increase investment ininfrastructure to USD1 trillion in the12th Five Year Plan (2012-17),compared with USD514 billionunder the11th Five Year Plan(2007-12)
• Infrastructure projects such asDedicated Freight Corridors as wellas new and upgraded airports andports are expected to further driveconstruction activity
• The government intends to expandthe capacity of the railways and thefacilities for handling and storage to
ease the transportation of cementand reduce transportation costs
Commercial Real EstateGrowth
• The government is strongly focusedon infrastructure development to
boost economic growth
• It plans to increase investment ininfrastructure to USD1 trillion in the12th Five Year Plan (2012-17),compared with USD514 billionunder the11th Five Year Plan(2007-12)
• Infrastructure projects such asDedicated Freight Corridors as wellas new and upgraded airports andports are expected to further driveconstruction activity
• The government intends to expandthe capacity of the railways and thefacilities for handling and storage to
ease the transportation of cementand reduce transportation costs
Source : McKinsey Quarterly Report, Aranca Research
Demand for cement is highly correlated with cyclicalactivities like construction and development
Housing sector accounts for 64 per cent of the total cementdemand
Real estate market is expected to grow at a CAGR of 17.2per cent during 2011-15 to USD126 billion
The rapidly increasing real estate industry in India isexpected to push the demand for cement
Residential real estate demand is driven by risingpopulation and growing urbanisation
Rising income levels are leading to higher demandfor luxury projects
Demand for affordable housing is growing in order tomeet the demand from lower income groups
Commercial real estate demand will be driven by growth inIT/ITeS sector and organised retail
Major cement demand drivers (FY12)
6%
Housing sector
13% Infrastructure
17%64% Commercial &Institutional
Industrial
Source: Aranca Research
Investment in infrastructure is the main growth driver for the cement industryThe Planning Commission estimates total infrastructure spending to be about of 10 per cent of the GDP during the 12th
Five-Year Plan (2012-17), up from 7.6 per cent during the previous five-year plan (2007-12)India’s investment in infrastructure is estimated to double to about USD1 trillion during the 12th plan (2012-17) comparedto the previous plan
Infrastructure Spending As % Of GDP
12th Five year plan
11th Five year plan 7.6%
FY12 8.4%
FY11 7.9%
Infrastructure Spending in % during 11th
And 12th Five-year Plan
12th Plan 264.410.0%233.5
206.0
181.2157.4
11th Plan
101.6 101.9FY10
FY09
FY08
10th Five year plan
75.7 89.57.5% 69.4
7.2%
6.4%
5.2%
Source: Working group for 12th Five Year PlanNotes: Additional capacity creation estimates are based on increase in base lines, roads, housing and fiscal support
North
88%82% 84%
FY11F FY12F FY13F
West
79% 77% 80%
FY11F FY12F FY13F
South
73%67% 68%
FY11F FY12F FY13F
Central
90% 87%
85%
FY11F FY12F FY13F
East
91%87%
81%
FY11F FY12F FY13F
All India
82%78% 77%
FY11F FY12F FY13F
Source: CMA, Kotak Institutional Equities, Aranca ResearchNote: F- Forecast
Total capacity of 336 million tonnes is estimated to havebeen generated in FY12
The strong momentum in capacity addition is not surprisinggiven the sharp growth in construction, infrastructure andreal estate in Indian economy
Hence, the 12th Five Year Plan is estimated to have anadditional capacity requirement of 156.0 million tonnes byFY17
Capacity creation as per the 12th Five Year Plan(million tonnes)
38.7
35.531.9
23.6
12.813.5
FY12 FY13E FY14E FY15E FY16E FY17E
Source: Working group for 12th Five Year PlanNotes: Additional capacity creation estimates are based onincrease in base lines, roads, housing and fiscal support,E - Estimates
Company/Plant
Madras Cement'sAlathiyur plant
India Cements Ltd'sDalavoi plant
UltraTech's GujaratCement Works
Lafarge's Arasmetaplant
Strategy
Use bioenergy throughburning of coffee huskand cashew nut shells
Use Low Sulphur HeavyStock (LSHS) sludge as
alternate fuel
Use tyre chips andrubber dust as alternate
fuel
Substitute 10% of coalused in kilns with rice
husk
Benefits
Annual cost savings of USD1.7 million
Annual savings of USD6500 approx
Reduction of about 30,000 tonnes ofcarbon emissions annually
Higher energy savings and lowercarbon emissions
Source: CMA, Aranca Research
UltraTech is India's largest exporter of cement clinkerspanning export markets in countries across the IndianOcean, Africa, Europe and the Middle East
UltraTech and its subsidiaries have a presence in fivecountries through 11 integrated plants, one white cementplant, one clinkerisation plant, 15 grinding units, two rail andthree coastal terminals, and 101 RMC plants
It has an annual capacity of 52 MTProjects: Mumbai Metro, Bangalore Metro Rail, Kolkata
Revenue and Profit after Tax (PAT) in USD billion
CAGR: 23.5% 4.0 3.9
3.0
1.5Metro Rail, Monorail, Coastal Gujarat Power
MILESTONES
1.4 1.41.1
0.2 0.3 0.20.3 0.5 0.5
0.2
• 2004 - Acquisition of L&T’s Cement Business: UltraTechCement Ltd
• 2006 - Narmada Cement Company Limited amalgamatedwith UltraTech
• 2010 - Samruddhi Cement Limited amalgamated withUltraTech Cement Limited
• 2012 - Acquisition of Adhunik Cement’s Meghalaya plant
FY07 FY08 FY09 FY10 FY11 FY12 FY13
Source: Company Website (www.grasim.com, Aranca ResearchNotes: RMC - Ready-Mix Concrete
Ambuja Cements Ltd (ACL) is one of the leading cementmanufacturing companies in India.
The company, initially called Gujarat Ambuja Cements Ltd,was founded by Narotam Sekhsaria in 1983
Ambuja Cements is the second largest cementmanufacturer in India, with nearly 10 per cent of the marketshare of total installed capacity
Revenue (USD billion)
1.8
CAGR: 5.2%
1.6
1.5
1.8
1.41.4
It is the market leader in Northern India with 29 per cent ofthe total installed capacity
MILESTONES• 2010 - Started cement plant at Nalagarh, Himachal
Pradesh and Dadri, Uttar Pradesh with a capacityof 1.5 million tonnes
• 2011 - Acquired 85 per cent stake in Nepal-based DangCement
• 2012 - Expansion of Sankrail Grinding Unit, therebyincreasing the capacity from 1.5 mtpa to 2.4 mtpa
FY07 FY08 FY09 FY10 FY11 FY12
Source: Company Website, Aranca ResearchNote: mtpa - Million Tonnes Per Annum
NE India: Cement demand
• The North Eastern (NE) region hasconsistently been in cement deficit for
several years
• At present, cement demand in the NE isabout 5.2 mtpa
NE India: Cement supply
• Cement manufactured locally is inadequateto meet the local demand for cement
• The deficit is met through cementpurchased from other parts of India
• High transportation costs cause the landedcosts of cement to increase considerably
NE India: Cement demand-supply gap
Deficit of 2.2 mtpa
5.2
3.0
Estimated Demand Available Supply
Source: Industry Sources, Aranca ResearchNote: mtpa - Million Tonnes Per Annum
The Government has approved a package of fiscal incentives and other concessions for the North Eastern Region, namelythe North East Industrial and Investment Policy, 2007, effective from 1 April, 2007
The major policy and fiscal initiatives are expected to catalyse infrastructure and industrial development in the region,spurring the demand for cement
NE States Projected GDP Growth atConstant Prices
16.4%
13.7%
10.0%
XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan
NE States Projected Per Capita IncomeGrowth
15.2%
12.4%
8.6%
XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan
Cement Manufacturers' AssociationCMA Tower, A-2E, Sector 24 NOIDA - 201 301Uttar Pradesh, India
Phone: 91-120-2411955, 2411957, 2411958Fax: 91-120-2411956
E-mail: cmand@vsnl.com
Website: www.cmaindia.org/index.html
Indian Concrete InstituteOcean Crest 79, Third Main Road, Gandhi Nagar, Adyar, Chennai - 600 020Phone: 91-44-24912602
Fax: 91-44-24455148E-mail: ici3@vsnl.in, ici4@airtelmail.in, vj6314@gmail.com
Website: www.indianconcreteinstitute.org
National Council for Cement and Building Materials34th Milestone, Delhi-Mathura Road, Ballabgarh - 121 004 Haryana, India
Phone: 91-129-2242051/52/53/54/55/56; 4192222Fax : 91-129-2242100; 2246175
E-mail: nccbm@vsnl.com; info@ncbindia.com
CMA: Cement Manufacturers' Association
GDP: Gross Domestic Product
GoI: Government of India
INR: Indian Rupee
MTPA: Million tonnes per annum
NE India: North-East India
FY: Indian financial year (April to March)
So FY10 implies April 2009 to
March 2010
USD: US DollarWherever applicable, numbers have been rounded off to the nearest whole number
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Year INR equivalent of one USD Year INR equivalent of one USD
2004-05 44.95 2005 45.55
2005-06 44.28 2006 44.34
2006-07 45.28 2007 39.45
2007-08 40.24 2008 49.21
2008-09 45.91 2009 46.76
2009-10 47.41 2010 45.32
2010-11 45.57 2011 45.64
2011-12 47.94 2012 54.69
2012-13 54.31 2013 54.45
Average for the year
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