Cement Industry Report

8/7/2019 Cement Industry Report

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CEMENT INDUSTRY

EXECUTIVE SUMMARY

In the race to become the most economic superpower, China has generally outperformed

India, and with exception of telecom & IT, India has had trouble slaying the Chinese dragon.

But now we can add another sector to the Indian success story, i.e., Cement. In last ten years,

this sector has recorded a CAGR of 8%, against the world cement industry average of 3.5%

and China’s cement industry growth rate of 7.2%. Today this industry not only outshines that

of developed countries such as US and Japan but also has become the second largest cement

producer in the world after China.

The cement industry has continued its growth trajectory over the past ten years. Domestic

cement demand growth has surpassed the economic growth rate for the past three years.

Cement demand in the country grows at roughly 1.5 times the GDP growth rate. The industry

had a turnover of around US$ 7.8 billion in 2003-04 and according to CRISIL is expected to

grow at a CAGR of around 7 per cent in the next five years.

The key drivers for cement demand are real estate sector, infrastructure and industry

expansion projects. Among these real estate sector is the key driver of cement demand. The

demand for cement is closely related to the growth in the construction sector. Consequently,

cement demand has been posting a healthy growth rate of around 8 per cent since 1997-98,

propelled by the increased thrust on infrastructure development, and the higher demand from

the housing sector and industrial projects.

Cement is bulky commodity and cannot be easily transported over long distances making it a

regional market place, with the nation being divided into five regions. Each region is

characterized by its own demand-supply dynamics. Over the past few years the cost of

cement production has grown at a CAGR of 8.4%.

With increase in infrastructure development activity with projects such as state and national

highways, and global demand has led Indian cement industry to increase their production

capacity. This inturn has attracted the top cement companies in the world to enter the Indian

market and take the advantage of growth in demand.

The cement sector continues to emphasize on cost cutting through enhanced productivity,reduction in energy costs and logistic expenses.

ALLIANCE BUSINESS SCHOOL Page 1



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The government has considered spending more than US $500 billion on infrastructure in the

11th five year plan. Apart from this railways, urban infrastructure, ports, airports, IT sector,

organized retailing, malls and multiplexes will be the main sectors driving the demand of

cement in the country. So we can see that cement industry is moving towards both challenges

and opportunities poised by the presence of domestic and global players in the Indian market.

This trend is likely to continue in the coming years.




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1.1 SECTOR ANALYSIS

Indian Economy grew by 5.4 per cent in 2001-02, which is considered to be one of the

highest growth rates in the world for the year. This growth is supported by a growth rate of

5.7 per cent in agriculture and allied sectors, 3.3 percent in industry and 6.5 per cent in

services.

Overall agricultural output is estimated to increase by nearly 7 per cent in 2001-02. Food

grains production is expected to rise to 209 million tons compared with 196 million tons in

2000-01. Prospects of agricultural production in 2001-02 are considered to be bright as a

result of normal monsoon and relatively favorable distribution of rainfall over time and

regions.

While the Indian industry sector grew by 3.3 per cent, with in industry sector segments like

construction showed a lower growth in 2000-01, there was marked improvement in the

growth rates of manufacturing (from 4.2 per cent in 1999-00 to 6.7 per cent in 2000-01) and

mining and quarrying (from 2 per cent to 3.3 per cent during the same period). The growth

rate of electricity, gas and water supply remained almost invariant at around 6.2 per cent for

both 1999-2000 and 2000-01. During 1993-94 to 1999-2000 the service sector had achieved

consistently high growth rates in the range of 7.1 per cent to 10.5 per cent. But for the first

time in 2000-01, the growth rate of the service sector declined to 4.8 per cent due to poor

performance by financial sector, trade hotels and restaurants, and community and social

services.

Agriculture

The agriculture sector, for so long the mainstay of the Indian Economy, now accounts for

only about 20 per cent of GDP, yet employs over 50 per cent of the population. For some

years after independence, India depended on foreign aid to meet its food needs, but in the last

35 years, food production has risen steadily, mainly due to the increase in irrigated areas and

widespread use of high-yield seeds, fertilizers, and pesticides. The Country has large grain

stockpiles (around 45 million tons) and is a net exporter of food grains.

Cash crops, especially tea and coffee, are the major export earners. India is the world's

largest producer of tea, with annual production of around 470 million tons, of which 200

million tons is exported. India also holds around 30 per cent of the world spice market, with

exports around 120,000 tons per year.


http://india.mapsofindia.com/indian-economy/


http://india.mapsofindia.com/the-country/index.html

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With a view to strengthening the sector, building infrastructure for handling, transportation,

and storage of food grains has been granted "infrastructure status" and will be eligible for a

tax holiday. Further, processors of food and vegetables are exempt from excise duty.

Manufacturing Sector

After a decade of reforms, the manufacturing sector is now gearing up to meet challenges for

the new millennium. Investment in Indian companies reached record levels by 1994 and

many multinationals decided to set up shop in India to take advantage of the improved

financial climate. In an effort to provide a further boost to the industrial manufacturing

sector, Foreign Direct Investment (FDI) has been permitted through the automatic route for

almost all the industries with certain restrictions. Structural reforms have been undertaken in

the excise duty regime with a view to introduce a single rate and simplify the procedures and

rules. Indian subsidiaries of multinationals have been permitted to pay royalty to the parent

company for license of international brands, etc. Over the period 1992-93 to 1999-2000, the

manufacturing sector has recorded an average annual growth rate of 6.3 per cent and in 2001-

02; it recorded a growth of 2.8 per cent.

Companies in the manufacturing sector have consolidated around their area of core

competence by tying up with foreign companies to acquire new technologies, managementexpertise, and access to foreign markets. The cost benefits associated with manufacturing in

India, has positioned India as a preferred destination for manufacturing and sourcing for

global markets.

Financial Sector

An extensive financial and banking sector supports the rapidly expanding Indian Economy.

India boasts of a wide and sophisticated banking network. The sector also has a number of

national and state level financial institutions. These include foreign and institutional

investors, investment funds, equipment leasing companies, venture capital funds, etc. Further,

the Country has a well-established stock market, comprising 23 stock exchanges, with over

9,000 listed companies. Total market capitalization, on the two dominant stock exchanges,

the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), stood at Rs.

6,926 billion and Rs. 7,604 billion respectively, at the end of December 2000. The Indian

capital markets are rapidly moving towards a market that is modern in terms of infrastructure

as well as international best practices such as derivative trading with stock index futures,
















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addition to the list of compulsory Demat trading and rolling settlement in certain specified

shares, commencement of internet based trading, etc.

The last year witnessed several Indian companies, mobilizing resources by tapping the world

market through the ADR/GDR route. So as to improve the liquidity in the ADR/GDR market

and to give opportunity to Indian shareholders to divest their shareholding in the ADR/GDR

market abroad, measures such as two-way fungibility in ADR/GDR issues of Indian

companies has been introduced and sponsorship of ADR/ GDR offerings against existing

shareholding. In addition to the above, 26 per cent foreign equity has been allowed in the

insurance sector and investment and divestment by venture capital funds and companies

registered with SEBI has been simplified.

FII inflows were USD 2.34 billion (January 2001 to June 2001) compared to USD 1.5 billion

for 2000, showing an upward trend despite depressed stock market indices. Net cumulative

FII inflows crossed USD 14 billion (June 2001).

Services Sector

The main thrust to industrial growth has come from the services sector. Services contribute to

41 per cent of the GDP. Rapidly, the quality and complexity of the type of services being

marketed is on the rise to match worldwide standards. Whether it is financial services,

software services or accounting services, this sector is highly professional and provides a

major impetus to the Economy . Interestingly, this sector is populated with a range of players

who cater to a niche market.

India is fast becoming a major force in the Information Technology sector. According to the

National Association of Software and Service Companies (NASSCOM), over 185 Fortune

500 companies use Indian software services. The world's software giants such as Microsoft,

Hughes and Computer Associates who have made substantial investments in India are

increasingly tapping this potential. A number of multi-nationals have leveraged the relative

cost advantage and highly skilled manpower base available in India, and have established

shared services and call centers in India to cater to their worldwide needs.

The software industry was one of the fastest growing sectors in the last decade with a

compound annual growth rate exceeding 50 per cent. Software service exports increased

from US$ 4.02 billion in 1999-2000 to US$ 6.3 billion in 2000-01, thereby registering agrowth of 57 per cent. India's success in the software sector can be largely attributed to the






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industry's ability to cultivate superior knowledge through intensive R&D efforts and the

expertise in applying the knowledge in commercially viable technologies.

1.2 Contribution of Manufacturing Sector towards the Indian Economy

An estimated 100.9 million people were employed in 41.8 million establishments in India,

growing at 2.78 percent and 4.69 percent, respectively from 1998-2005, shows the official

Economic Census for 2005. Non-farm sector continued to be the principal source of

employment, employing 90 million people, compared to 10.9 million in agriculture sector,

said the census released here Thursday.

“Retail and manufacturing establishments continue to be the key employment providers in

India,” said S.K. Nath, director general of the Central Statistical Organisation (CSO), which

compiled the census.

“It is a significant pointer that India has a great deal of potential for growth in these two

sectors,” he said.

Manufacturing sector employed 25.5 million people or 25.25 percent of the total workforce,

followed by 25.1 million or 24.91 percent, respectively for retail trade sector, showed the

survey.

This was the fifth in the series of the economic censuses conducted by CSO, an agency under

the ministry of statistics and programme implementation. The first census of its kind was

launched in 1977.

“This census gives us a complete picture of India’s economic situation. We must interpret the

data intelligently. There has been a rapid growth in small-scale industries,” said Statistics and

Programme Implementation Secretary Pranob Sen.

Following are some of the key census findings:

• 100.90 million People employed in 41.83 establishments in India.

• 41.83 million Establishments, 25.54 million in rural and 16.29 million in urban areas,

operated in 2005.




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• 39.61 million Establishments under private ownership.

• 26.96 million Units were own establishments, without hired workers.

• 35.75 million Non-agricultural establishments engaged 89.99 million workers, while

agriculture sector’s 6.08 million units had 10.91 million workers.• Employment growth rate at 2.78 percent between 1998 and 2005.

• Males accounted for 78.3 million of the workforce; women accounted for 20.2

million, children 2.4 million.

• Manufacturing sector was the largest employer (25.5 million people); the retail sector

came next (25.1 million people); farming was third (9.2 million people).

• 95 percent establishments had 1-5 workers; 3.42 percent had 6-9 workers; only 1.51

percent employed 10 or more workers.




CEMENT INDUSTRY

2.1 INDUSTRY BACKGROUND

Pre Independence

The first endeavor to manufacture cement dates back to 1889 when a Calcutta basedcompany endeavored to manufacture cement from Argillaceous (kankar).

But the first endeavor to manufacture cement in an organized way commenced in Madras.

South India Industries Limited began manufacture of Portland cement in 1904.But the effort

did not succeed and the company had to halt production.

Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India

Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons and

production of 1000 installed. The First World War gave the impetus to the cement industry

still in its initial stages. The following decade saw tremendous progress in terms of

manufacturing units, installed capacity and production. This phase is also referred to as the

Nascent Stage of Indian Cement Industry.

During the earlier years, production of cement exceeded the demand. Society had a biased

opinion against the cement manufactured in India, which further led to reduction in demand.

The government intervened by giving protection to the Industry and by encouraging

cooperation among the manufacturers.

In 1927, the Concrete Association of India was formed with the twin goals of creating a

positive awareness among the public of the utility of cement and to propagate cement

consumption.

Post Independence

The growth rate of cement was slow around the period after independence due to various

factors like low prices, slow growth in additional capacity and rising cost. The government

intervened several times to boost the industry, by increasing prices and providing financial

incentives. But it had little impact on the industry.

In 1956, the price and distribution control system was set up to ensure fair prices for both the

manufacturers and consumers across the country and to reduce regional imbalances and reach

self sufficiency.




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Period of Restriction (1969-1982)

The cement industry in India was severely restrained by the government during this period.

Government hold over the industry was through both direct and indirect means. Government

intervened directly by exercising authority over production, capacity and distribution of

cement and it intervened indirectly through price control.

In 1977 the government authorized higher prices for cement manufactured by new units or

through capacity increase in existing units. But still the growth rate was below par.

In 1979 the government introduced a three tier price system. Prices were different for cement

produced in low, medium and high cost plants.

However the price control did not have the desired effect. Rise in input cost, reduced profit

margins meant the manufacturers could not allocate funds for increase in capacity.

Partial Control (1982-1989)

To give impetus to the cement industry, the Government of India introduced a quota system

in 1982.A quota of 66.60% was imposed for sales to Government and small real estate

developers. For new units and sick units a lower quota at 50% was affected. The remaining

33.40% was allowed to be sold in the open market.

These changes had a desired effect on the industry. Profitability of the manufacturers

increased substantially, but the rising input cost was a cause for concern.

Post Liberalization

In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges

of free market competition due to the impending policy of liberalization. In 1991 the industry

was de licensed.

This resulted in an accelerated growth for the industry and availability of state of the art

technology for modernization. Most of the major players invested heavily for capacity

expansion.

To maximize the opportunity available in the form of global markets, the industry laid greater

focus on exports. The role of the government has been extremely crucial in the growth of the

industry.




CEMENT INDUSTRY

Cement is one of the core industries which plays a vital role in the growth and expansion of a

nation. It is basically a mixture of compounds, consisting mainly of silicates and aluminates

of calcium, formed out of calcium oxide, silica, aluminium oxide and iron oxide. The demand

for cement depends primarily on the pace of activities in the business, financial, real estate

and infrastructure sectors of the economy. Cement is considered preferred building material

and is used worldwide for all construction works such as housing and industrial construction,

as well as for creation of infrastructures like ports, roads, power plants, etc. Indian cement

industry is globally competitive because the industry has witnessed healthy trends such as

cost control and continuous technology upgradation.

2.2 CURRENT SCENARIO

The Indian cement industry is the second largest producer of quality cement. Indian Cement

Industry is engaged in the production of several varieties of cement such as Ordinary

Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag

Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting

Portland Cement, White Cement, etc. They are produced strictly as per the Bureau of IndianStandards (BIS) specifications and their quality is comparable with the best in the world.

The Indian cement industry is the second largest in the world. It comprises of 140 large and

more than 365 mini cement plants. The industry's capacity at the beginning of the year 2009-

10 was 217.80 million tonnes. During 2008-09, total cement consumption in India stood at

178 million tonnes while exports of cement and clinker amounted to around 3 million tonnes.

The industry occupies an important place in the national economy because of its strong

linkages to other sectors such as construction, transportation, coal and power. The cement

industry is also one of the major contributors to the exchequer by way of indirect taxes.

Cement production during April to January 2009-10 was 130.67 million tonnes as compared

to 115.52 million tonnes during the same period for the year 2008-09. Despatches were

estimated at 129.97 million tonnes during April to January 2009-10 whereas during the same

period for the year 2008-09, it stood at 115.07 million tonnes.

Over the last few years, the Indian cement industry witnessed strong growth, with demandreporting a compounded annual growth rate (CAGR) of 9.3% and capacity addition a CAGR




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of 5.6% between 2004-05 and 2008-09. The main factors prompting this growth in demand

include the real estate boom during 2004-08, increased investments in infrastructure by both

the private sector and Government, and higher Governmental spending under various social

programmes. With demand growth being buoyant and capacity addition limited, the industry

posted capacity utilisation levels of around 93% during the last five years. Improved prices in

conjunction with volume growth led to the domestic cement industry reporting robust growth

in turnover and profitability during the period 2005-09.

2.3 Consumption Growth during 2008-09

Even during the economic slowdown in 2008-09, growth in cement demand remained at a

healthy 8.4%. In the current fiscal (2009-10) cement consumption has shot up, reporting, on

an average, 12.5% growth in consumption during the first eight months with the growth

being aided by strong infrastructure spending, especially from the govt sector. The trends in

all-India consumption and the growth in consumption in the major cement-consuming States

over the last five years are presented in below table:

Growth in Cement Demand

Figures in Million Tonnes

2008-09 Apr-Nov 09

Domestic Consumption 178 100

Year-on-Year Growth (%) 8.4 12.5

Source: Cement Manufacturers Association (CMA), ICRA Research

TABLE 2.1




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2.4 Key Drivers of Cement Industry

• Buoyant real estate market

•

Increase in infrastructure spending

• Various governmental programmes like National Rural Employment Guarantee

• Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru

National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana

2.5 Globalization of Indian Cement Industry

The Globalization of Indian Cement Industry has helped the industry to restructure itself to

cope up with the alterations in the global economic and trading system. The Indian cement

industry is one of the oldest industries. It has been catering to India's cement requirements

since its emergence during the British Raj in India. Though the majority of the players in the

Indian cement industry were private sector organizations, the industry was highly regulated.

With the rapid growth rate of the Indian economy after the 1990s, the infrastructuraldevelopments within the country has been tremendous. The increase in the construction

activities has led to the increase in the demand for updated quality building materials and

other allied products. Cement being one of the major elements in the construction work, there

is a growth in the cement industry in India. The consumption of cement has increased in

India by nearly 7.5%. With the globalization of Indian cement industry many foreign cement

manufacturers are engaging themselves in agreements and deals with their India counter parts

to have a share of the growth.

Globalization of Indian Cement Industry includes several foreign companies engaging in

mergers and acquisitions of Indian cement companies, like

• Heidelberg Cement - Indorama Cement Ltd. Heidelberg Cement Company entered

into an agreement for a 50% joint venture with the Indorama Cement Ltd., situated in

Mumbai, originally possessed by the Indorama S P Lohia Group. Heidelberg Cement

Company is the leading German cement manufacturing company. The Heidelberg

Cement was set up in 1873 and has a long and prosperous history. Being one of the




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best in the world the Heidelberg Cement Company has its bases in different countries.

The Heidelberg Cement Company has two manufacturing units in India. A grinding

plant in Mumbai and a cement terminal near Mumbai harbor. A clinker plant is

coming up in the state on Gujarat

• Holcim Cement - Gujarat Ambuja Cements (GACL) Holcim Cement signed an

agreement of 14.8% take over with the Gujarat Ambuja Cements (GACL). With new

products, skilled personnel, superb management, and a outstanding market strategy

gives this tie up good edge over the other competitors. Holcim Cement Company is

among the leading cement manufacturing and supplying companies in the world. It is

one of the major employers in the world; having a work force of 90,000.The Holcim

Cement Company has units in excess of 70 countries all over the world.

• Italcementi cement - Zuari Cement Limited Italcementi Cement Company with the

help of the Ciments Français, a subsidiary for its global activities, has acquired shares

of the famous Indian cement manufacturer - Zuari Cement Limited. The acquisition

was of 50% shareholding and the deal was of about 100 million Euros. Italcementi

Cement is the 5th largest cement manufacturing company in the world. The

production capacity of the Italcementi cement company is about 70 million tons in a

year. With the construction boom in India the company looks for a stable future. In

2001 the Italcementi cement entered the Indian market scenario. It took over the plant

of the Zuari Cement Limited in Andhra Pradesh in southern India. The joint venture

earned revenues of around 100 million Euros and an operating profit of 4 million

Euros.

• Lafarge India is the subsidiary of the Lafarge Cement Company of France. It was

established in 1999 in India with the acquisition of the Tisco and the Raymond

cement plants. Lafarge Cement presently has three cement manufacturing units in

India. One of them is in Jharkhand which is used for the purpose of grinding and the

other two are in Chhattisgarh used for manufacturing. The Lafarge Cement Company

was set up in the year 1833 by Leon Pavin. Lafarge Cement Company situated in

France is the leading cement producing company in the world. It has plans for

increasing the cement production through technological innovations and

maximization of the capacity of the plant. It has a large network of distributors in the




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eastern part of India. The Lafarge Cement Company is presently producing nearly 5.5

million tons of cement for the Indian cement market.

2.6 STRUCTURE OF THE INDIAN CEMENT INDUSTRY

• It is a fragmented industry. There are 56 cement companies in India, operating 124

large and 300 mini plants, where majority of the production of cement (94%) in the

country is by large plants.

• One of the other defining features of the Indian cement industry is that the location of

limestone reserves in select states has resulted in it’s evolving in the form of clusters.

• Since cement is a high bulk and low value commodity, competition is also localized

because the cost of transportation of cement to distant markets often results in the

product being uncompetitive in those markets.

• Another distinguishing characteristic comes from it being cyclical in nature as the

market and consumption is closely linked to the economic and climatic cycles. In

India, cement production is normally at its peak in the month of March while it is at

its lowest in the month of August and September. The cyclical nature of this industry

has meant that only large players are able to withstand the downturn in demand due

to their economies of scale, operational efficiencies, centrally controlled distribution

systems and geographical diversification.




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3.1 OBJECTIVES OF THE STUDY

•To analyze the evolution of cement industry.

• To compare the global market with Indian cement industry.

• To estimate the level and analyze the trends in market concentration in the cement

industry.

• To assess the profitability, liquidity and other financial ratios of the firms when

compared to the industry.

• To find out the efficiency and economic size of cement manufacturing firms.

3.2 METHODOLOGY OF THE STUDY

• No field work in collection of primary data for the study and the study is going to be

descriptive and analytical.

• Secondary information is obtained by the medium of internet, journals, articles and

magazines.

• The five companies have been chosen based on market share, production capacity and

net profits for the previous years.

3.3 SOURCES OF DATA

Only secondary data was collected from the internet, company websites, magazines and

various articles. Capitaline databases have been the main source of information for company

analysis.




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3.4 LIMITATIONS OF THE STUDY:

• The study is limited to the top five cement companies in India.

• Only three years’ data is used for comparing the performance of these companies.

• The financial ratios used for analysis of performance of each company are limited.




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4.1 SWOT ANALYSIS

a) Strengths:

Second largest in the world in terms of capacity: In India there are approximately 124

large and 300 mini plants with installed capacity of 200 million tonnes.

Low cost of production: due to the easy availability of raw materials and cheap labour.

b) Weakness:

Effect of global recession on real estate: The real estate prices are stabilizing and facing

steady slowdown especially in metros. There are approximately one hundred thousand

completed flats without occupancy in Bangalore. There has been drastic reduction in property

prices due to reduced demand and increased supply.

Demand-Supply gap, overcapacity: The capacity additions distort the demand-supply

equilibrium in the industry thereby affecting profitability.

Increasing cost of production due to increase in coal prices.

High Interest rates on housing: The re-pricing of the interest rates in the last four years

from 7% to 12% has resulted in the slowdown in residential property market.

c) Opportunities:

Strong growth of economy in the long run: Indian economy has been one of the stars of

global economics in the recent years, growing 9.2% in 2007 and 9.6% in 2006. However,

India is facing tough economic times in 2008.

Increase in infrastructure projects: Infrastructure accounts for 35% of cement

consumption in India. And with increase in government focus on infrastructure spending,

such as roads, highways and airports, the cement demand is likely to grow in future.

Growing middle class: There has been increase in the purchasing power of emerging

middle-class with rise in salaries and wages, which results in rising demand for better quality




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of life that further necessitates infrastructure development and hence increases the demand

for cement.

Technological changes: The Cement industry has made tremendous strides in technological

up gradation and assimilation of latest technology. At present ninety three per cent of the

total capacity in the industry is based on modern and environment-friendly dry process

technology and only seven per cent of the capacity is based on old wet and semi-dry process

technology. The induction of advanced technology has helped the industry immensely to

conserve energy and fuel and to save materials substantially and hence reduce the cost of

production.

d) Threats:

Imports from Pakistan affecting markets in Northern India: In 2007, 130000 tonnes in

2008, 173000 Metric tones of cement was exported to India. This was done to keep the price

of cement under check.

Excess overcapacity can hurt margins, as well as prices.




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4.2 PORTER’S FIVE FORCES






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A HHI index above 0.18 (above 1,800) indicates high concentration

MAJOR PLAYERS IN THE NORTH:

TOTAL SALES for the year 2009 = Rs. 33589.02 Cr

Name of the

Company

Net Sales in

Cr. (2009)

Percentage

(%)

ACC 7,942.66 23.64659642

Ambuja Cem. 7,040.70 20.96131414

Birla Corpn. 1,790.19 5.329688095J K Cements 1,664.42 4.955250257

JK Lakshmi Cem. 1,223.90 3.643750249

Shree Cement 2,716.46 8.08734521

UltraTech Cem. 6,385.50 19.0106767TABLE 4.1

GRAPH 4.2

HHI = 0.149173

HHI indicates moderate concentration that implies the size of the firm in relationship to the

overall cement industry in North is medium.




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MAJOR PLAYERS IN SOUTH:

TOTAL SALES for the year 2009 = Rs. 11266.01 Cr

Name of the

company

Net Sales in

Cr.(2009)

Percentage (%)

Andhra Cements 369.36 3.278534281

Chettinad Cement 1,137.67 10.09825129

Dalmia Cement 1,758.68 15.61049564

India Cements 3,358.34 29.8094889

Madras Cement 2,530.90 22.46491881

Rain Commodities 1,111.01 9.861610277

zuari Cements 438.72 3.894191466TABLE 4.2

GRAPH 4.2

HHI = 0.186167

HHI indicates moderate concentration that implies the size of the firm in relationship to the

overall cement industry in South is medium.

4.4 Life Cycle Analysis


Andhra Cements,

3.28Chettinad

Cement, 10.09

Dalmia Cement,

15.61

India Cements,

29.81

Madras Cement,

22.46

Rain Commodities,

9.86

zuari Cements,

3.89others,

4.98

Market Share

Andhra Cements

Chettinad Cement

Dalmia Cement

India Cements

Madras Cement

Rain Commodities

zuari Cements

others



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Cement is a typical cyclical industry, characterized by the boom-and bust syndrome. A huge

potential market and rapid growth in the early stages lead to a surge in interest and a flurry of

research. The projected growth rates point to a lucrative market. The buoyant markets and

huge profits raked in by players tempt more players into the market. Capacities increase in

excess of demand and a glut in capacity is created. Competition increases, prices fall and

margins come under pressure. Capacity addition comes to a halt; weaker players shut shop or

sell off to larger ones. Demand catches up and the cycle is repeated all over again. Perhaps,

of all the cyclical industries, the Indian cement industry exhibits this boom-and-bust cycle

most visibly. Buoyed by booming economy with amplified demand for enhanced

infrastructure housing & commercial space, we believe the cement industry is showing the

boom, at present.

COMPOSITION OF CEMENT

Cement is a mixture of limestone, clay, silica and gypsum. It is a fine powder which when

mixed with water sets to a hard mass as a result of hydration of the constituent compounds. It

is the most commonly used construction material.

DIFFERENT TYPES OF CEMENT

There are different varieties of cement based on different compositions according to specific

end uses namely Ordinary Portland Cement, Portland Pozolona Cement, Portland Blast

Furnace Slag Cement, White Cement and Specialized Cement. The basic difference lies in

the percentage of clinker used.

• Ordinary Portland Cement (OPC):

OPC, popularly known as grey cement, has 95% clinker and 5% of gypsum and other

materials. It accounts for 70% of the total consumption. White cement is a variation

of OPC and is used for decorative purposes like rendering of walls, flooring etc. It

contains a very low proportion of iron oxide.

• Portland Pozolona Cement (PPC):

PPC has 80% clinker, 15% pozolona and 5% gypsum and accounts for 18% of the

total cement consumption. Pozolona has siliceous and aluminous materials that do not

possess cementing properties but develop these properties in the presence of water. It

is cheaply manufactured because it uses fly ash/burnt clay/coal waste as the main






CEMENT INDUSTRY

(average of 2,880 tpd). While capacities in semi-dry kilns range from 600-1,200 tpd (average

521tpd), capacities in wet process kilns range from 200-750 tpd (average 425 tpd).

FIG 4.3

DRY PROCESS

In dry process production, limestone is crushed to a uniform and usable size, blended with

certain additives (such as iron ore and bauxite) and discharged on to a vertical roller mill

where the raw materials are ground to fine powder. An electrostatic precipitator dedusts the

raw mill gases and collects the raw meal for a series of further stages of blending. The

homogenized raw meal thus extracted is pumped to the top of a preheater by air lift pumps. In

the preheaters the material is heated to 750°C. Subsequently, the raw meal undergoes a

process of 25alcinations in a precalcinator (in which the carbonates present are reduced fed to

the kiln. The remaining 25alcinations and clinkerization reactions are completed in the kiln

where the temperature is raised to 1,450-1,500°C. The clinker formed is cooled and conveyed

to the clinker silo from where it is extracted and transported to the cement mills for producing








CEMENT INDUSTRY

TAX STRUCTURE

The Indian Cement industry is one of the highest taxed one. At the price level of Rs. 200 per

bag, total tax burden, as a percentage of ex-factory realization works out to 45%. The cement

industry has been continuously representing to the Government for more rational tax regime.

The Central Government in its budget presented on 28th February 2007, for the first time,

announced a dual excise duty structure for cement industry. Excise duty was increased to Rs.

600 per MT on cement with Retail Sale Price (RSP) exceeding Rs. 190. per bag and Rs. 350

per MT for cement with RSP of Rs.190 per bag and below as against specific excise duty of

Rs. 400 per MT so far. This dual structure not only enhanced taxation burden further on the

industry but also complicated its effective implementation. Government, however, having

realized difficulty of the industry and the consequent burden to the consumer, has

subsequently revised the structure w.e.f. 31st May 2007. It has now levied an advalorem duty

of 12% on cement with. RSP exceeding Rs. 190 per bag while retaining specific duty of Rs.

350 per MT on cement sold Rs. 190 per bag and below.

4.7 INDUSTRY STRUCTURE AND NATURE OF COMPETITION

INSTALLED CAPACITY

India is the world’s second largest cement producing country after China. The industry is

characterized by a high degree of fragmentation that has created intense competitive pressure

on price realizations. Spread across the length and breadth of the country, there are

approximately 130 large cement plants owned by around 52 companies and 365 mini-cement

plants with an installed capacity of around 172.08mtpa as on June 2007. Large cement plants

accounted for 94% of the total installed capacity in India.

CAPACITY CLUSTERS

Cement and its raw materials namely coal and limestone, are all bulky items that make

transportation difficult and uneconomical. Given this, cement plants are located close to both,

sources of raw materials and markets. Most of limestone deposits in India are located in

Madhya Pradesh, Rajasthan, Andhra Pradesh, Maharashtra and Gujarat, leading to

concentration of cement units in these states. This has resulted in ‘clusters’. There are eight

such clusters in the country and account for 81% of the cement capacity. There is a trade-off




CEMENT INDUSTRY

between proximity to markets and proximity to raw materials due to which some cement

plants have been set up near big markets despite lack of raw materials.

GRAPH 4.5

GRAPH 4.6




CEMENT INDUSTRY

4.8 COST ANALYSIS

The energy costs and cement freight costs are the two most important elements in the cost

structure of a cement company. While, the share of energy costs has increased marginally,

freight cost has experienced a decline in its share of total operating costs. The share of other costs (such as stores & spares, manufacturing overheads, and administrative expenses) has

declined. The share of costs on account of material, repair and maintenance, employees and

selling expenses have more or less remained stable.

GRAPH 4.7

Power & Fuel

The cement industry is one of the most energy-intensive sectors within the Indian economy.

Clinker production is the most energy intensive step, accounting for nearly 75% of the energy

used in cement production. In India, an estimated 90-94% of the thermal energy requirement

in cement manufacturing is met by coal. The remaining is met by fuel oil and high-speed

diesel oil. Despite recent increase in coal prices the industry has been able to control the

expenditure on this account by investing in captive power plants – freeing themselves from

the tariff hike by SEB and reducing the energy consumption required to produce a tonne of

cement. However, Government is planning to phase out supplies of subsidized coal to

cement, steel and paper industry. The proposed decision if implemented could result in cost

escalation of almost 30-40%, as the prices of coal under auction system are 30-40% higher

than the notified prices.




CEMENT INDUSTRY

COAL

Coal is an important input in cement manufacture and accounts for 15-20% of the total cost.

Coal serves a dual role in cement manufacture. Firstly, the heat value in coal provides the

thermal energy required for the operation of the kiln. Secondly, the mineral content in coal

(basically, silica content) acts as a constituent in clinker. Cement accounts for around 4.5% of

India's coal demand.

Consumption of coal for production of cement has not increased proportionately with cement

production because of the switch to the dry process; efficiency improvements in cement kilns

and the increased use of fly ash produced in power plants and granulated slag produced in

blast furnaces of steel plants in the production of cement. However, over the years, there has

been deterioration in the quality of coal. In particular, the ash content has increased implying

lower calorific values for coal, and improper and inefficient burning, etc. Therefore, coal

consumption has started to increase, resulting in higher fuel and transportation costs. In order

to reduce these problems, the cement industry started implementing coal washeries, which

reduce the ash content of the coal at the mine itself. Cement companies are also resorting to

importing coal, or using alternative fuel such as lignite or petcoke.

POWER

Cement is a power intensive industry requiring on an average 90-105 units of power in the

wet process, and 100-110 units of power in the dry process to produce one tonne of cement

produced. Significantly power accounts for 15-20% of the variable cost of cement

manufacturing. Cement manufacturing consumes power mainly for three purposes: raw meal

grinding, kiln rotation and clinker grinding. Each stage accounts for roughly one third of the

total power consumption. A dry process plant typically has an average connected load of 15

MW. Based on the present installed capacity of 172 mtpa of cement, the total industry

requirement is roughly 2520 MW. This is just around 2% of India's total current power

generating capacity.

However, with the increase in the frequency of power cuts and rising power tariffs, many

cement companies are meeting 60-100% of their power requirement through captive

facilities. The captive power generation capacity of cement plants is presently estimated at

around 1,800 MW. During FY2005, roughly 43% of the total domestic cement production

was undertaken using captive power as against only 21% in FY1995. Thus, the share of

cement production using captive power has only increased over the years.






CEMENT INDUSTRY

cement, the CaO content of limestone should be a minimum of 44%. Typically, 1.4-1.5

tonnes of limestone are required per tonne of clinker. Thus, for a 1 million tone cement plant,

assured availability of cement grade limestone reserves of the order of 50-60 mt in the close

vicinity is important.

As on 31 March 2006, the country's estimated gross reserves of cement grade limestone stand

at 97430 mn.t. Out of total limestone reserves, over 45% of the inventory of cement grade

limestone is in the Southern region, followed by the Northern region with 21.84%, the

Western region with 12.34% and the Eastern region with 15.82% and rest 3.64% with central

region. Andhra Pradesh has the privilege of possessing about 31% of the country's total

proved equilanet reserves of limestone.

GRAPH 4.8

B) GYPSUM

Gypsum is used as a retarding agent. Ground clinker, on contact with water, tends to set

instantaneously because of the very fast reaction between tri-calcium alluminate and water.In the presence of gypsum, the desired setting time can be achieved. Gypsum is added to the

extent of 5% during the clinker grinding stage. Gypsum is naturally available in abundance in

Rajasthan, Gujarat and Tamilnadu.

C) GRANULATED BLAST FURNACE SLAG (GBFS)

The other raw materials that are also used in the manufacture of cement are blast furnace slag

(a waste product obtained from iron-smelting furnaces) and flyash (leftover ash from a

thermal power station). Limestone contains about 52% of lime and about 80% of this lime is




CEMENT INDUSTRY

lost during ignition of the raw materials. Similarly, Clay contributes about 57% silica of

which about 25% is lost during ignition.

GBFS is obtained by granulation of slag obtained as a by-product during the manufacture of

steel. It is a complex calcium aluminum silicate and has latent hydraulic properties. That is

why it is used in the manufacture of Portland blast furnace slag cement.

4.9 TECHNOLOGICAL ANALYSIS

Modernization and technology up-gradation is a continuous process for any growing industry

and is equally true for the cement industry. The Indian cement industry today is by and large

comparable to the best in the world in respect of quality standards, fuel & power

consumption, environmental norms, use of latest technology and capacity. The productivity

parameters are now nearing the theoretical bests and alternate means, like alternate fuels and

raw materials have to be found to ensure further improvement in productivity and reduce

production costs.

Cement industry being energy intensive, the energy conservation and alternate cheaper,

renewable and environmentally friendly sources of energy have assumed greater importance

for improving productivity. The major challenges confronting the industry today are raging

insecurity in indigenous fuel availability, perennial constraints like higher ash content, erratic

variations in quality of indigenous coal and inconsistent power supply with unpredicted

power cuts. Keeping these challenges in view, the efforts by the industry towards energy

conservation and finding alternate cheaper, renewable and environmentally friendly sources

of energy are given utmost importance.

Review of Technological Status

Process Profile

The Cement Industry today comprises mostly of Dry Suspension Preheater and Dry-

Precalciner plants and a few old wet process and semi-dry process plants. Till late 70’s the

Cement Industry had a major share of production through the inefficient wet process

technology. The scenario changed to more efficient large size dry process technology since

early eighties. In the year 1950, there were, only 33 kilns out of which 32 were based on wet

process and only one based on semi-dry process. Today, there are 162 kilns in operation outof which 128 are based on dry process, 26 on wet process and 8 on semi-dry process.




CEMENT INDUSTRY

Kiln Capacity and Size

The economic unit capacity for cement plants in India till early sixties was about 300 TPD. In

mid sixties this was standardized at around 600 TPD for both wet and dry process plants.

About a decade later, i.e. from mid seventies, the new plants installed were of 1200 TPD

capacity. The advent of precalciner technology in mid eighties provided an opportunity to the

industry to modernize and increase the capacity of existing dry process plants, to convert

plants from wet to dry process as well as to set up large capacity plants incorporating the

latest technological advancements. This led to installation of single line kilns of 3000 TPD (1

MTPA) capacity and more. The present trend indicates the preference of still larger kilns of

about 6000 TPD capacity and above. Already there are nine kilns of 8000 tpd capacity in

operation and three kilns of capacity 10000 – 12000 TPD are under installation. The green-

field plants being installed now are based on most advanced and the best available

technology.

Average annual installed capacity per plant in India is about 1.2 MTPA as against more than

2.1 MTPA in Japan. This is due to blend of small and large plants coming up at various

stages and still operating in India as against smaller plants having been decommissioned in

Japan.

Present Status of Technology

A comparison of the status of the modernization in equipment and also the technologies

absorbed or implemented by the Indian cement industry along with status of Global

Technology is as under:






CEMENT INDUSTRY

For rational exploitation of the raw material source, a systematic mine plan is developed by

cement plants. Computer-aided techniques for raw material deposit assessment to arrive at

proper extraction sequence of mining blocks, keeping in view the blending operational

requirements, are envisaged and put to use in number of units.

Crushing

Mobile crushers have come in use in some of the newer plants, keeping in view the split

location of limestone deposits and long conveying distances. The mobile crushing plant is

stationed at the mine itself and raw material is crushed at the recovery site.

Grinding

Vertical Roller Mills (VRM) has given the real breakthrough in the area of grinding. The

VRM draws 20-30 % less electrical energy as compared to the corresponding ball mill

system, apart from its ability to give much higher drying capacity. These mills can accept

larger feed size and hence mostly be used with single stage crushing. VRMs are now being

used in clinker and slag grinding and also as pre-grinder to existing grinding installations.

Another breakthrough that has come with the application of high pressure grinding rolls

(HPGR) has been widely adopted in Indian cement industry. The HPGR is being used as pre-grinder for upgrading the existing ball mill systems. Such installations could achieve an

increase in capacity upto 200% and savings in power consumption to the extent of 30 to 40%

as compared to ball mills.

High efficiency separators are now widely used for better classification of product and help

in increasing the mill capacity besides reducing the specific power consumption. The new

classifier designs include two stage separation integrating primary and secondary separation.

High efficiency separators are also used now with VRM’s for further improvement in their

performance.

A new mill system called Horizontal roller mill has been developed which is capable of

producing uniform raw meal and have advantages in processing raw materials containing

higher percentage of quartz.

4.10 Fuel Requirements and Alternate Sources of Energy

Fuel




CEMENT INDUSTRY

Coal continues to be the main fuel for the Indian cement industry and will remain so in the

near future as well. The industry is mainly using coal from various coalfields in the country.

It is also procuring coal through open market and direct imports. Lignite from deposits in

Gujarat and Rajasthan is also being used by cement plants. Pet coke has also been

successfully utilized by some cement plants, mainly in Gujarat, Rajasthan and MP, thereby

substituting main fossil and conventional fuel coal upto 100% in some plants. In the recent

past, waste derived fuels including hazardous combustible wastes have also been tried due to

economic pressures in cement manufacturing process owing to tough competition in

domestic and global markets as well as ecological reasons on account of waste disposal and

co-processing in cement rotary kilns being most effective mode of waste treatment.

Use of Industrial Wastes

• Cement plants in India utilized about 19% of flyash generated by power plants and

100% of granulated slag generated by steel plants (year 2005-06), as compared to

almost 100% flyash and 84% of granulated slag in the Japanese cement industry.

• Recycling of Industrial wastes in manufacture of cement is highest in Japan followed

by India.

Use of Alternate Fuels

• Use of hazardous and refuse derived combustibles and Municipal Solid Waste

(MSW) as fuel is common in countries like Canada, EU, Japan and Korea, but

regulations do not yet permit in India.

• CPCB is actively engaged in plant level trials in respect of wastes viz. used tyres,

refinery sludge, paint sludge, Effluent Treatment Plant (ETP) sludge and Toluene Di-

Isocyanite (TDI) tar waste from petroleum industries and in formulation of guidelines

for use of these wastes as fuel by cement industry.

Energy Management




CEMENT INDUSTRY

The industry’s average consumption in 2005-06 was 725 kcal/kg clinker thermal energy and

82 kWh/t cement electrical energy. It is expected that the industry’s average thermal energy

consumption by the end of Year 2011-12 will come down to about 710 kcal/kg clinker and

the average electrical energy consumption will come down to 78 kWh/t cement.

The improvements in energy performance of cement plants in the recent past have been

possible largely due to:

• Retrofitting and adoption of energy efficient equipment

• Better operational control and Optimization

• Upgradation of process control and instrumentation facilities

• Better monitoring and Management Information System

4.11 DEMAND AND SUPPLY SCENARIO OF CEMENT INDUSTRY

DEMAND SOURCES

Cement demand in the country emanates from three major sources viz. Housing Sector

accounts for 60% of total cement demand, infrastructure projects 20% and industrial projects

20%.

GRAPH 4.9

DEMAND FROM RESIDENTIAL HOUSING SECTOR

Housing demand accounts for 60% of total cement demand and 90% of total real estate

demand. Housing demand has supported the cement industry even in times of lowinfrastructure or industrial demand.




CEMENT INDUSTRY

The growth in the residential real estate market in India has been largely driven by rising

disposable incomes, a rapidly growing middle class, low interest rates, fiscal incentives on

both interest and principal payments for housing loans and heightened customer expectations,

as well as increased urbanisation and nuclearisation.

A large proportion of the demand for houses, especially in urban centres such as Mumbai,

Bangalore, Delhi (Gurgaon, Noida) and Pune, is likely to come from high-rise residential

buildings. Since this is a fairly new segment, the growth of the highrise segment will be faster

as compared to the growth of the urban housing segment. The reasons for the construction of

high rise apartment buildings are the lack of space in cities and proximity to offices and IT

parks.

• Growth Drivers

o Favourable demography and higher disposable income

o Nuclear families and urbanization

DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTOR

Commercial construction comprises construction of office space, hotels, hospitals, schools,

stadiums etc. In India, most of the investment in this segment is driven by office space

construction. Within office space construction activity, almost 70-75 per cent of the demand

comes from IT/BPO/call centres. The other key demand drivers include banking and

financial services, FMCG and telecom.

This dependency on IT/ITES is expected to continue due to India’s emergence as a preferred

outsourcing destination, despite China and Russia also emerging as strong contenders. The

industrial and commercial sector comprises of all the major industrial set ups, commercial

offices, IT & ITES parks and organized retail formats.

The growth in the sector will translate into substantially higher demand for commercial

space, adding to the overall investment in construction activities. CRIS INFAC, believes the

growth in IT/ITES is likely to translate into construction investments of Rs 148 billion (118

million sq ft) by 2007-08 as compared with investments of Rs 74 billion (61 million sq ft) in

the last 3 years. The investments are based on the manpower/workspace requirement in the

sector.

Retail boom to result in construction investments of Rs 112 billion over the next 5 years

CRIS INFAC, estimates that retail spending in India in fiscal 2005 was Rs. 9.9 trillion, of






CEMENT INDUSTRY

Overall Demand

Driven by a strong residential housing demand, growing industrial and commercial activities

and the continued momentum in infrastructure investment, the cement consumption is

expected to witness a CAGR of more than 12% in line with the economic growth because of

the strong co-relation with GDP and the increased activity in the construction sector. We

further believe that due to huge expenditure by GOI on infrastructure the proportionate

demand from infrastructure sector will move northwards and we expect the total share of

cement demand from infrastructure to be close to 25% in 2010. However, proportionate

demand from housing sector will move southwards and will come down to around 55% while

remaining 20% will be from commercial sector.

DEMAND-SUPPLY MISMATCH

Though India is the second largest cement manufacturer, it is among the lowest cement

consuming countries. In India per capita cement consumption is 122 kg, which is far below

the world average of approximately 320 kg. Hence, the cement industry has been in a surplus

position since a long time.

There exist regional surplus/shortages in the Indian cement industry. The oversupply is

largely in the Southern and Northern regions. By contrast, there is a supply shortage in

Eastern and Western regions. There is significant inter-regional movement of cement, which

plays a crucial role in the regional demand-supply dynamics. Most of the cement movement

across regions takes place from North to Central (3.35 mt), South to West (5.20 mt), Central

to North (2.45 mt), and Central to East (2.51 mt).




CEMENT INDUSTRY

GRAPH 4.10

4.12 RISK & CONCERNS

1) RISING INPUT COSTS

• POWER & FUEL

Prices and Quantity are regulated and are revised upwards regularly. Further, given

the shortage of energy future de-regulation of coal sector could be a risk factor.

Adding to this, electricity prices are also witnessing pressure.

• TRANSPORTATION COST

Rising fuel cost resulting in higher road and rail transportation cost.

2) Lower than expected growth in demand

Any lower than anticipated cement demand growth will result in overcapacity in the industry,

thereby prices may head southwards. This will significantly affect earnings of cements

manufacturers.








CEMENT INDUSTRY

synonymous with cement and enjoys a high level of equity in the Indian market. It is the only

cement company that figures in the list of Consumer SuperBrands of India.

CORPORATE GOVERNANCE

The importance of Corporate Governance has always been recognised in ACC. Much before

Corporate Governance guidelines became applicable and mandatory for listed companies;

ACC had systems in place for effective strategic planning and processes, risk management,

human resources development and succession planning. The Audit Committee in ACC was

constituted as far back as in 1986. The Shareholders-Investors Grievance Committee was

formed way back in 1962 and the Compensation Committee was convened since 1993. The

Company’s core values are based on integrity, respect for the law and strict compliance

thereof, emphasis on product quality and a caring spirit. Corporate Governance therefore in

ACC is a way of life.

ACC is a professionally managed Company with a majority of its Directors being

Independent Directors. The Board of Directors has always consisted of persons who are

professionals in their respective fields and with unquestionable integrity and reputation. The

role, responsibility and accountability of the Board of Directors is clearly defined. Members

of the Board have full freedom to express their views on matters placed before them for deliberation and consideration.

It is the continuous endeavour of the Board of Directors to achieve the highest standards of

Corporate Governance through the adoption of a strategic planning process, succession

planning for attracting, motivating and energizing human resources, identification of major

risks and the way and means to manage such risks, an effective communication policy and

integrity of Company’s internal control systems. The Board of Directors are also constantly

looking at ways and means to ensure that the most effective use is made of the scarce

resources at its disposal and that the management and employees have the freedom to take

the Company forward within the framework of effective accountability.

The Annual Reports, press releases and other communication have always made full

disclosures on various facets of importance to the stakeholders, particularly with regard to

information relating to financial matters, company’s operations/performance, stock

movements etc.






CEMENT INDUSTRY

89. The company got necessary approvals for setting up another cement plant with 1 million

tonne capacity per annum at Himachal Pradesh in the year 1991. The Company undertook

bulk cement transportation, by sea, to the major markets of Mumbai, Surat and other deficit

zones on the West Coast. Transportation was to be carried out by three specially designed

ships during the year 1992. During the year 1994, the company's Muller location 1.5 million

tonne cement project with clinkeriation facility at site in H.P and grinding facility both at Suli

& Ropar in Punjab was bespoken. In 1997, Kodinar plant of the company was originated its

commercial production with an enhanced capacity.

Ambuja Cements had set up a $20 million clinker Grinding unit in Sri Lanka in the year

1998. In the year of 2000 cement giants Larsen & Tubro (L&T) and Gujarat Ambuja

Cements entered a unique agreement to reduce transportation costs in dispatching bulk

cement in Gujarat and also in the same year the company has entered into an annual contract

with a Soinhalese firm, Mahaveli Marine Cement, to supply around 2.5 lakh tonnes of

cement. The company has kick started its operations in Sri Lanka with help of a cement

terminal in the port of Galle, in the south of the island country, which was started by the

company. The commercial production of Maratha Cement Works plant of the company was

started in the year 2002, a new 2-million tonne Greenfield cement plant at Chandrapur,

Maharashtra has started its commercial production on June of the year and the merger of Ambuja Cement Rajasthan with the company was happened in the same year. Again in the

year 2004, the company merged Ambuja Cement Rajasthan with itself.

In the last decade the company has grown tenfold. The first company in India introduced the

concept of bulk cement movement by the sea transport. The company's most distinctive

attribute, however, is its approach to the business. Ambuja follows a unique homegrown

philosophy for successful survival. Ambuja is the most profitable cement company in India,

and one of the lowest cost producers of cement in the world.

The company's most distinctive attribute, however, is its approach to the business. Ambuja

follows a unique homegrown philosophy of giving people the authority to set their own

targets, and the freedom to achieve their goals. This simple vision has created an environment

where there are no limits to excellence, no limits to efficiency, and has proved to be a

powerful engine of growth for the company.

As a result, Ambuja is the most profitable cement company in India, and one of the lowest

cost producer of cement in the world.






CEMENT INDUSTRY

Company Strengths

J K Cement enjoys certain vital advantages that have helped them in becoming one of the

leading names in the field of cement manufacturing in India and abroad. First the company

has proximity to huge reserves of premium quality limestone, as essential ingredient for

cement manufacturing. Based on certain studies undertaken, it is estimated that the limestone

reserves of the company are sufficient to support the planned production capacity for

approximately 40 years.

Second the company has an extensive marketing network for grey and white cement both

within and outside India. The company's distribution network for grey cement consist of

more than 40 feeder depots, serviced by seven regional sales office located at Delhi, Haryana,

Uttar Pradesh, Punjab, Gujarat, Madhya Pradesh and Rajasthan. J K cement's white cement

distribution network comprises of 20 feeder depots and 13 regional offices. Besides, the

company also has a total of more than 4000 retail stores, 22 sales promoters and four

handling agents.

J K Cement Production Plants

The company has three major production plants located in the states of Rajasthan and

Gujarat. The first plant of J K Cement was set up in Nimbahera, Rajasthan in the year 1975

with an initial capacity of 0.3 million ton per annum. With the incorporation of newer

technology and modern equipment, the production capacity was enhanced to 2.8 million ton

per annum. The Gotan unit located at Gujarat which manufacturers white cement started

production commercially in 1984 with a production capacity of 0.05 million ton per annum.

Currently the unit has a capacity utilization of around 75% and an operating profit of 30%

consistently. The unit has ISO-9001:2000 QMS, ISO-14001:1998 EMS and OHSAS-

18001:2005 recognition.

J K Cement Products

The major products of J K Cement are grey and white cement. The grey cement produced by

the company Ordinary Portland cement or OPC and Portland Pozzolana Cement or PCC. The

OPC range of products has three grades which are differentiated by their compressive

strength, they consist of 43-grade, 53-grade and 33-grade OPC. The cement products are

marketed and sold under the brand names of J.K. Cement and Sarvashaktiman for OPC




CEMENT INDUSTRY

products, J.K. Super for PPC products and J.K. White and Camel for white cement products.

Some other products manufactured by the company consist of:

• J K Wall Putty

• Grey Cement

• J K White Cement

• J K Water Proof

J K Cement's manufacturing unit at Nimbahera was chosen by the World Bank and the

Danish International Development Agency as one of the four training centers in India to

serve as the Regional Training Center in North India. The operation of the training center

gives the company access to state of art training aids, live working models, and technical

expertise developed by well known national and international cement producers.




CEMENT INDUSTRY

ULTRATECH CEMENT LIMITED

UltraTech Cement Limited, a Grasim subsidiary was incorporated in 24th August 2000 as

L&T Cement Limited, has an annual capacity of 17 million tonnes. It manufactures and

markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland

Pozzolana Cement. As part of the eighth biggest cement manufacturer in the world,

UltraTech Cement has five integrated plants, five grinding units as well as three terminals of

its own (one overseas, in Colombo, Sri Lanka). All the plants have ISO 9001 certification,

and all but one have ISO 14001 certification, while two of the plants have already received

OSHAS 18001 certification. The export market comprises of countries around the Indian

Ocean, Africa, Europe and the Middle East. Export is a thrust area in the company's strategy

for growth.

The Grasim acquired 10 per cent stake in L&T in the year of 2001. During the same year the

Durgapur grinding unit was came to existence. The Company bagged Indo-German

Greentech Environment Excellence Award from the Greentech Foundation, New Delhi

during the period of 2000-2001. The value of stake increased to 15.3 per cent by October

2002. The Grasim Board approved an open offer for purchase of up to 20 per cent of the

equity shares of Larsen & Toubro Ltd (L&T) during the year 2002, in accordance with the

provisions and guidelines issued by the Securities & Exchange Board of India (SEBI)

Regulations, 1997. Again the Grasim increased its stake in L&T to 14.15 per cent in 2002

and the Arakkonam grinding unit was started.

During the year 2003, the board of Larsen & Toubro Ltd (L&T) decided to demerger of its

cement business into a separate cement company (CemCo). Grasim decided to acquire an 8.5

per cent equity stake from L&T and then made an open offer for 30 per cent of the equity of

CemCo, to acquire management control of the company. The Company received State andZonal level I prize for overall performance in Mines safety 2003-2004 Energy efficient unit

award from CII. In 2004, L&T completed the implementation process to demerger of the

cement business and the Grasim also completed open offer, with the latter acquiring

controlling stake in the newly formed company UltraTech.

Grasim acquired management control in July 2004 and the name of the company was

changed to UltraTech Cement Limited with in 14th October 2004. The Company enhanced

its capacity utilisation across its plants. Cement is an energy intensive industry with coal and










CEMENT INDUSTRY

In 2007, the debt equity ratio was 0.16 and by 2008 it was 0.08 and by 2009 it is 0.10. So the

debt equity ratio shows a decrease in the financial year 2008. This shows that the company’s

debt is decreasing, thereby making the company unfavourable in the view of the lenders i.e.

the amount of debt used effectively by the company is declining from 2007 to 2008. But in

the FY 2009, we can see that this ratio has increased to 0.10.

INTEREST COVERAGE RATIO:

In 2007, the interest coverage ratio is 24.28 which increased to 39.20 in 2008. This means

that the company’s debt burden got decreased to a great extent. But in 2009 it got decreased

to 22.93. In the FY 2009, the company’s performance declined considerably and the

company is not generating enough profit to pay the interest to the debts. Consequently, the

financial position of the company is growing weak.

DEBTORS TURNOVER RATIO:

The debtor’s turnover ratio was 31.19 in 2007 and it decreased to 27.47 by the financial year

2008 and then it again increased to 33.96 in the FY 2009. As we know that the debtors

turnover ratio explains the number of times the debtors turned over a period of a financial

year. Thus, by looking at the ratio in the FY 2009 we can say that the efficiency of

management of debtors of the firm is growing high in comparison to the previous years.

INVENTORY TURNOVER RATIO:

The inventory turnover ratio was 11.58 in 2007, 10.80 in 2008 and then a slight increase to

11.10 in 2009. The inventory turnover ratio measures the velocity of conversion of stock into

sales. In the FY 2007, the firm was managing its inventories efficiently which was then

reduced in the FY 2008. But again in FY 2009 the company is able to control its inventories.

FIXED ASSETS TURNOVER:

This ratio indicates the company’s ability to generate net sales revenue from fixed assets of

the company, such as property, building and other equipments. The higher the ratio, the better

it is for the company.

The above table indicates that the fixed assets turnover ratio of 1.53 in 2007 declined to 1.46

in the FY 2008 and consequently declined to 1.38 in the FY 2009 which shows the

company’s inability to generate revenue from fixed assets in the consequent years of its








CEMENT INDUSTRY

The current ratio of company, though declining from the year 2008, but it is still able to

sustain the ratio above 1, which shows company is able to pay its liabilities. If the ratio slips

down below 1, then company may face problems to pay its liabilities. The liabilities of the

company are increasing every year, so company should take measures to reduce liabilities.

DEBT-EQUITY RATIO

The debt equity ratio shows a positive trend for FY’07, FY’08 & FY’09. The ratio also

below 1 for all the three years, which reflects company’s dependence on the debt finance, is

very low. The main reason behind decrease in ratio is, increase in total shareholders’ funds.

The majority of financing of the company is done by equity, and at the same time risk factor

is also reducing because they don’t have to pay interest to the debenture holders.

INTEREST COVERAGE RATIO

Interest coverage ratio shows how much revenue is being earned in relation to its finance

cost. Ambuja Cements were unable to decrease the coverage period but on the contrary

coverage period increased every year, which is not a healthy sign for company’s growth.

DEBTORS TURNOVER RATIO

The debtors’ turnover ratio indicates the efficiency of the company to collect debts. The

efficiency of the company decreased in FY’08 & it increased in FY’09. This shows the

company’s efficiency was increasing but due to economic downturn in FY’08, company’s

efficiency declined.

AVERAGE COLLECTION PERIOD

In 2009, the ratio has gone down which shows that the collection period has become more

powerful and company is able to collect its money from debtors more efficiently when

compared to the previous year where it was 9 days.

INVENTORY TURNOVER RATIO

The ratio shows how many times a company's stock is sold and replaced over a period of

time. There is a difference in the percentage of ratio for FY’08 as compared to FY’07, but the

ratio increased in FY’09. A low turnover implies poor sales and, therefore, excess inventory.

The net sales of the company increased considerably in the year 2009. So, accordingly therewas an increase in the inventory turnover.






CEMENT INDUSTRY

RATIOS Year

2009

Year 2008 Year 2007

ROE 0.16 0.34 0.34

CURRENT RATIO 1.79 1.66 1.87

DEBT-EQUITY RATIO 0.64 0.84 1.31

INTEREST COVERAGE RATIO 5.28 7.77 6.15

DEBTORS TURNOVER RATIO 34.02 30.36 28.25

AVERAGE COLLECTION PERIOD 11 11 10

INVENTORY TURNOVER RATIO 14.97 16.15 15.77

FIXED ASSETS TURNOVER

RATIO

1.77 2.15 2.24

P/E RATIO 2.01 4.40 5.80

TABLE 6.3

ANALYSIS

RETURN ON EQUITY RATIO

The ROE of the company was same for the year 2007 and 2008 and it was at 0.34. But it has

declined in the year 2009 and came to 0.16. The decline may be due to the economic

slowdown which has affected almost all the companies.

CURRENT RATIO

Net working capital should always be positive. In short, the higher the net working capital,

the greater is the degree of overall short-term liquidity. Means current ratio indicates the

liquidity of the enterprise. Min. Expected even for a new unit in India is 1.33:1 therefore we

can see that the ratios in all the years are well over 1.33 which ensures us that the company is

in a good condition and has ample liquidity.





CEMENT INDUSTRY

The interest coverage ratio was 15.77 in 2007 which rose to 16.15 in 2008 so this proves that

the company’s debt burden got decreased to some extent. But in 2009 it decreased to 14.97.

The performance of the company got declined in 2009 and the company’s debt burden was

increasing.

DEBT EQUITY RATIO

Debt equity ratio should not exceed 3:1 and it has not in the case of JK Cements. This means

that the company has fewer debts which is good for the company. There is a sharp

deterioration in this ratio so; we have to be on guard, as the financial risk for the company

increases to that extent.


The debtor’s turnover ratio is increasing in from the past three years as it can be seen from

the table. It was at 28.25 in 2007 and it increased to 30.36 in 2008 and then it gradually

increased to 34.02 in 2009. The debtor’s turnover ratio is growing higher which implies that

the efficiency of the company is increasing.

AVERAGE COLLECTION PERIOD:

In 2007 the debtor’s velocity was only 10 days, but there was an increase of 1 day i.e. it

became 11 days in the year 2008 and remained the same in 2009, which is good for the

company.

INVENTORY TURNOVER RATIO

This should not be less than 9:1 and should if possible be higher and we can see that the

ratios are well above 9 which clearly state that the company is doing good and is in a good

condition and has converted its inventory into sales in a very efficient manner.


In 2007, the fixed assets turnover was 2.24, but it decreased to 2.15 in 2008. It again declined

to 1.77 in 2009. As the company’s fixed asset was increasing year on year hence its turnover

was decreasing and also sales were not increasing in the same proportion.

P/E RATIO




CEMENT INDUSTRY

The P/E ratio is gradually declining for all the 3 years i.e. from 5.80 in 2007 to 4.40 in 2008

and then to 2.01 in 2009. This shows that the performance of the company is declining and

the management should look into the causes that have resulted into the fall of this ratio.

ULTRATECH CEMENT LIMITED






CEMENT INDUSTRY

In 2008, the assets and the profit of the company increased showing a consistent return of

0.23 as in 2007. But by 2009 it got declined to 0.17. Since there is a tremendous increase in

total assets, the return on assets got declined.

CURRENT RATIO

The current ratio in 2007 is 0.7 and it gradually decreased to 0.65 in 2008 and 0.61 in 2009.

Since the ideal ratio is 2:1 so it signifies that the company is in comfort to pay the current

debts with a margin of safety for possible in current assets.

DEBT-EQUITY RATIO:

In 2007, the debt equity ratio was 1.08 and by 2008 it was 0.74 and by 2009 it is 0.62. So the

debt equity ratio is decreasing constantly and it shows that the company’s debt is decreasing,

and so the company is not in a favourable position in the view point of the lenders i.e. the

amount of debt used effectively by the company is declining from 2007 to 2009.


In 2007, the interest coverage ratio is 14.43 which raised to 19.31 in 2008 so this proves that

the company’s debt burden got decreased to some extent and by 2009 it got decreased to

11.84. So the company’s performance got declined by 2009 and the company’s debt burden

is increasing i.e the company is not generating enough profit to pay the interest to the debts

and the financial position of the company is growing weak.


The debtor’s turnover ratio was 30.8 in 2007 and it slightly increased to 31.42 by 2008 and

then it gradually increased to 35.55 by 2009. Generally debtors turnover ratio explains the

number of times the debtors turned over a period of a financial year. The debtors turnover

ratio is growing higher which implies that the efficiency of management of debtors of the

firm is growing high when compared to the previous years.

AVERAGE COLLECTION PERIOD:




CEMENT INDUSTRY

In 2007 and 2009 the debtors velocity was only 9 days and it was favourable to the company

and the bargaining power of the company was high when compared to 2009 were the debtors

velocity was 10 days.

INVENTORY TURNOVER RATIO:

The inventory turnover ratio was 14.43 in 2007 and it got gradually increased to 19.31 in

2008 and then a steep decrease to 11.84 in 2009. Generally the inventory turnover ratio

measures the velocity of conversion of stock into sales. Here from 2007 to 2008 the firm was

managing efficiently the inventories and by 2009 the company is overstocking the finished

goods intended for sale.


The fixed assets turnover was 1.17 in 2007 and it is increased to 1.29 by 2008 and by 2009 it

got declined to 1.16. In 2008 there is a decrease in fixed assets and so the turnover gradually

increased because the company effectively utilised the fixed assets while 1n 2009 the

company had increased the fixed assets to 50% than the previous year but the sales revenue

was not in tandem with the increase in fixed assets so the fixed assets turnover got declined

to 1.54.

PRICE/EARNINGS RATIO:

The P/E ratio is gradually declining for all the 3 years i.e. from 12.37 in 2009 to 9.74 in 2008

and then to 7.1 in 2007. This shows that the performance of the company is declining and the

management should look into the causes that have resulted into the fall of this ratio.

INDIA CEMENTS LIMITED




CEMENT INDUSTRY

RATIOS Year 2009 Year 2008 Year 2007

ROE 0.14 0.20 0.21

ROA 0.135 0.185 0.15

CURRENT RATIO 1.42 1.88 2.20

DEBT EQUITY RATIO 0.68 0.96 1.55

INTEREST COVERAGE RATIO 7.49 8.69 4.28

DEBTORS TURNOVER RATIO 11.55 12.44 10.43

AVERAGE COLLECTION PERIOD (days) 34 32 36

INVENTORY TURNOVER RATIO 10.35 11.87 11.29

FIXED ASSETS TURNOVER RATIO 0.89 1.01 1

TAX BURDEN RATIO 0.67 0.75 0

P/E RATIO 8.34 10.51 9.66

TABLE 6.5

ANALYSIS

RETURN ON EQUITY RATIO

Return on equity is net profits to equity share capital. The ratio is decreasing each year which

shows the company is unable to increase profits in accordance to the increase in

shareholders’ funds.

RETURN ON ASSETS RATIO

Though in FY’08 there is an increase in net income of the company but in FY’09 there is a

decline on the net income so that also affects the ROA, because lesser the income there will

be lesser rate of return on assets and also shows company inefficiency in utilization of assets.

CURRENT RATIO

The current assets of the company increased by 25% in the FY’08 but still there was decline

the current ratio because of increase in its liabilities by 127%. In FY’09 the assets decreased

by 1% but the liabilities increased by 17%, so there is a decline in current ratio. The current

ratio of company, though declining every year from the year 2007, but it is still able to








CEMENT INDUSTRY

reserves and surplus less accumulated losses. ROE indicates how well the firm has used the

resources of owners. Industry Aggr. = 0.24

COMPANY ROE

ACC ltd 0.267

Ambuja Cements ltd 0.188

J K Cements ltd 0.157

Ultratech Cement ltd 0.27

India Cements ltd 0.14

TABLE 7.1

GRAPH 7.1

It is always said that higher the ROE is better for the company and when looked at the

investors point of view. When compared with the industry average only ACC ltd and

Ultratech Cement ltd is performing well. But in case of Ambuja Cements ltd this decrease is

because of the decrease in profit after tax in the year 2009 when compared with the year

2008, though there was increase in sales in 2009. Similar is the case with both the other

companies. This was because to keep up with the competition in the market the three

companies had to reduce their prices by increasig the sales.

RETURN ON ASSETS

It shows how profitable a company’s assets are in generating revenue. It gives an indication

of the capital intensity of the company. Industry Aggr. = 0.178

COMPANY ROA






CEMENT INDUSTRY


UltraTech Cement ltd 0.61

India Cements ltd 1.42TABLE 7.3

GRAPH 7.3

The current ratio of companies ACC ltd and UltraTech Cement ltd is below the industry

average that is because the current assets of the companies has gone down when compared to

previous year, i.e., 2008. But for the other companies it is above the industry average. Evenhaving higher current ratio is not good for the company.

DEBT-EQUITY RATIO

Debt – Equity ratio indicates the component of debt to the component of equity of a

company. Higher the ratio, higher is the debt for the company and vice versa. It is merely an

index. Industry Aggr. = 1.60

COMPANY D/E RATIO

ACC LTD 0.1





CEMENT INDUSTRY




GRAPH 7.4

Here we can see that the debt – equity ratio is less than the industry average which is good

for the company as the percentage of debt component with respect to increase in percentage

of equity component is decreasing for all the companies when compared with the previousyear. But one point what needs to be taken into consieration is tax component as we know

that debt acts as a tax shield to the company.

INTEREST COVERAGE RATIO

Interest Coverage ratio indicates the number of times interest is covered by the profits

available to pay interest charges. It is an index of the financial strength of an enterprise. It is

merely an index. Industry Aggr. = 6.29

COMPANY INTEREST COVERAGE RATIO

ACC LTD 22.93

Ambuja Cements ltd 67.16J K Cements ltd 5.28










CEMENT INDUSTRY

GRAPH 7.8

This shows how efficiently the company could turnover the inventory into sales. Ambuja and

India Cements are having inventory turnover ratio less than the industry average which is

10.94. While other three companies ACC, J K cements, and UltraTech Cement ltd are having

ratios greater than the industry average which shows that these three companies are able to

efficiently manage their inventories.

FIXED ASSET TURNOVER RATIO

Fixed Asset Turnover ratio indicates how well a company utilizes its fixed assets in

generating the revenue. It is merely an index. Industry Aggr. = 1.06

COMPANY FIXED ASSET TURNOVER RATIOACC LTD 1.38








CEMENT INDUSTRY

GRAPH 7.9

All the four cement companies except India Cements ltd fixed turnover ratio is higher

comopared to the industry average. In case of India cements ltd fixed turnover ratio is 0.89,

i.e., 16% decrease when compared with the industry average. This shows that India Cements

is not able to utilize their fixed assets efficiently. Whle comparing beetween the other four

companies J K Cements ltd is having higher ratio of 1.77 which shows how efficiently the

company is utilizing their fixed assets.

PRICE – EARNING RATIO

This indicates investor’s judgement or expectations about the firm’s performance. This shows

the relationship between market value of the share and the EPS. The higher the PE the

stronger is the recommendation to sell the share and the lower the PE, the stronger is the

recommendation to buy the share.

COMPANY P/E RATIO

ACC LTD 10.68




India Cements ltd 8.34

TABLE 7.10




CEMENT INDUSTRY

GRAPH 7.10

For the investors to get a higher return on the shares they have actually invested, is better to

sell when the P/E ratio is high and buy when it is less. We can see that ACC, Ambuja and

India Cementsltd are having a higher P/E ratio when compared with other two, i.e., J K

Cements and UltraTech Cement ltd. It is now the best time to buy the shares of J K Cements

and UltraTech Cement ltd as their performance when compared to last year is increasing.

And hence the P/E ratio will increase in the near future.

7.2 TREND ANALYSIS

PROFITABILITY TREND

Profitability gives us the earnings available to the investors and owners of the company after

taking into account all the expenses incurred during the business operations. Profitability iscalculated as:

Profitability (%) = Profit after Tax (PAT) / Net Sales

The trend in terms of percentage in profit of the companies are considered and analyzed over

the period of study.






CEMENT INDUSTRY

GRAPH 7.12

J K CEMENTS LTD:

2009 2008 2007

Net Sales 1664.42 1595.56 1343.64

PAT 142.34 265.17 178.62

Profitability Trend (%) 8.551928 16.61924 13.29374TABLE 7.13

GRAPH 7.13

ULTRATECH CEMENT LTD:








CEMENT INDUSTRY

R & D Expenses 3.25 3.29 3.05

Net Sales 7942.66 7165.79 6880.66

R & D Focus (%) 0.040918 0.045913 0.044327TABLE 7.16

GRAPH 7.16

Ambuja Cement Ltd:

2009 2007 2008

R & D Expenses 1.29 0.25 0.24

Net Sales 7040.7 6167.71 5597.91

R & D Focus (%) 0.018322 0.004053 0.004287TABLE 7.17

GRAPH 7.17




CEMENT INDUSTRY

If we look at the above two graphs we can see that both ACC and Ambuja cements gives

importance to R&D. For the last three years Ambuja cements has been constantly spending

more money on R&D of the company whereas ACC reduced their R&D expenses in 2009

compared to the last year ,i.e., 2008.

When we look at other companies, i.e., UltraTech cement ltd., India cements ltd, J K cements

ltd they doesn’t focus towards the R&D of their company and hence their R&D Expense is

zero.

GROWTH ANALYSIS

The growth of the companies in a particular industry is calculated and analyzed on the basis

of the industries sales growth rate, i.e., compounded annual growth rate (CAGR).

Sn = S0 (1 + r) n

Where,

Sn = Net Sales during Year n or the last year considered for analysis.

S0 = Net Sales during Year 0 or the starting year considered for analysis.

r = Compounded Annual Growth Rate.

n = Number of years the company is analyzed

ACC Ltd:

For the year, 2009 – 20.11%

2008 – 25.74%

2007 – 29.37%




CEMENT INDUSTRY

GRAPH 7.18

Ambuja Cements Ltd:

For the year, 2009 – 22.06%

2008 – 24.13%

2007 – 29.16%

GRAPH 7.19

J K Cements Ltd:

For the year, 2009 – 36.21%

2008 – 45.61%

2007 – 55.85%




CEMENT INDUSTRY

GRAPH 7.20

UltraTech Cement ltd:

For the year, 2009 – 19.65%

2008 – 20.61%

2007 – 23.53%

GRAPH 7.21

India Cements ltd:

For the year, 2009 – 23.64%

2008 – 27.22%

2007 – 24.73%








CEMENT INDUSTRY

apace. However what is of concern to the industry are staggering rise in input costs and

pressures to cap selling prices at the same time. Unless the industry is able to recover cost

increases, through suitable adjustments in selling prices through rational economic

considerations, the cement industry will be under pressure.

Buoyed by the strong demand from realty and infrastructure companies in India, cement

companies have embarked on massive expansion plans for the coming years. India’s cement

industry is expanding capacity to meet increasing demand. The industry plans to invest

around Rs 50,000 crore in order to increase production from 198 MTPA to about 275 MTPA

over next two to three years.

These capacities, according to such announcements, are expected to be commissioned over

three-year period and may create an imbalance in demand and supply, resulting in impact on

realization.

A large number of foreign players are also expected to enter the cement sector in the next 10

years, owing to the profit margins, constant demand, and right valuation. Consolidation of the

cement sector too will take place and cement plants producing less than 1 million tonnes will

find it difficult to survive in this market. Cement companies will go for global listings either

through the FCCB route or the GDR routes.

The industry experts project the sector to grow by 9 to 10% for the current financial year

provided India's GDP grows at 7%. With help from the government in terms of friendlier

laws, lower taxation, and more infrastructure spending, the sector will grow and will take

India’s economy forward along with it.

8.3 CONCLUSION

In the present scenario of hectic competition it has been seen that the biggest player in the

market remains big and does not allow other companies to rise. The cement industry is

expected to grow steadily in 2009-2010 and increase capacity by another 50 million tons in




CEMENT INDUSTRY

spite of the recession and decrease in demand from the housing sector. In the analysis it has

been seen that the ACC LTD is over shadowing all other companies in terms of performance.

During Financial year 2007 inflationary conditions enabled all to perform well and generate

profits resulting in boom in share prices. In 2008 all companies underperformed

comparatively due to economic downturn. During this period investors have an opportunity

to gain by paying lower prices for shares and receiving high dividends in future. The effect of

recession in 2008 could be seen in the year 2009 where the growth of the company has been

decreased. But now slowly all the companies are picking up. So recommendations to other

companies will include increasing their customer base and decrease their cost of productions

and improve their performance with respect to credit sales, financial prudence and capacity

utilization.

REFERENCES

http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/Cement.htm

http://www.ibef.org/industry/cement.aspx






CEMENT INDUSTRY

http://business.mapsofindia.com/cement/

http://www.icra.in/Files/PDF/SpecialComments/2010-January-Cement-Industry.pdf

http://india.mapsofindia.com/indian-economy/major-economic-sectors.html

http://capitaline.com/

http://www.jkcement.com/

http://www.indiacements.co.in/

http://www.ultratechcement.com/

http://www.gujaratambuja.com/

http://www.acclimited.com/

http://www.thaindian.com/newsportal/business/manufacturing-sector-is-indias-largest-

employer-census_10054253.html

http://www.rrfinance.com/Research/Fundamental%20Research/Cement%20Industry.html

http://www.emt-india.net/cement_code/2007/Chapter_2.html

http://www.equitymaster.com/research-it/sector-info/cement/

http://www.tradechakra.com/indian-economy/industries/cement-industry.html







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