CEMENT SURVEY

ANALYSIS

INTRODUCTION

The Indian cement industry with a total capacity of about190 m tonnes in financial year-2008 is the

second largest market after China. Despite the fact that the Indian cement industry has clocked

production of more than 100 m tonnes for the last five years, registering an average growth of

nearly 9%, the per capita consumption of around 150 kgs compares poorly with the world average

of over 260 kgs and more than 450 kgs in China. .

Although consolidation has taken place in the Indian cement industry with the top five players controlling

almost 50% of the capacity, the balance capacity still remains pretty fragmented. This has resulted in

cement being largely a regional play with the industry divided into five main regions viz. north, south, west,

east and the central region. While the southern region always had excess capacity in the past owing to

abundant availability of limestone, the western and northern region are the most lucrative markets on

account of higher income levels. However, with capacity addition taking place at a slower rate as

compared to growth in demand, the demand supply parity has been restored to some extent in the

Southern region for the medium term. Considering the pace at which infrastructural activity is taking place

in different regions, the players have lined up expansion plans accordingly.

The cement industry in India is estimated at rs. 24-25 billion in value terms and 114 million tonnes by

volume. the domestic cement industry is highly fragmented, with over 50 cement players and more than

120 manufacturing plants.

• Cement sector is characterized by the following:

1. Units concentrated near raw material sources or markets

2. High freight costs

3. Small value chain

4. Regional variation and volatility in prices and margins

5. High debt levels

6. Regional distribution of demand

7. Seasonality of demand and cyclicality of the industry

8. High entry barriers

Historically, the sustainable capacity utilisation in the cement industry has been 80-85%. This implies FY09 and FY10 are unlikely to be years of overcapacity in the traditional sense

Historical cement demand supply model             Year-end installed capacity FY04 FY05 FY06 FY07 FY08 FY09Actual effective capacity 144 152 158 166 199 222(-) Mothballed capacity 142 152 158 166 180 207Effective installed capacity 8.5 8.2 8.5 8.3 5.7 4.9Domestic consumption 136 143 150 158 174 202Export (cement + clinker) 114 121 136 149 164 178Domestic consumption 9 10.1 9.2 8.9 6 6.1Export Surplus / deficit) 123 131 145 158 170 184% surplus (wrt effective capacity) 13 12 5 0 4 18Actual utilisation 10% 9% 3% 0% 2% 9%Average prices 86% 88% 95% 99% 97% 91%Change in average price 141 153 163 206 231 239Capacity growth 3% 8% 6% 27% 12% 4%Domestic demand growth 5% 6% 4% 6% 10% 16%  5.80% 6.40% 12.00% 9.90% 10.10% 8.00%

• CEMENT BRANDS :

• ACC CEMENT

• BIRLA WHITE CEMENT

• BIRLA SUPER CEMENT

• BIRLA SUPREME

• BIRLA COASTAL

• JK LAXSHMI CEMENT

• GUJRAT AMBUJA CEMENT

• MANIKGADH CEMENT

• KAMDHENU CEMENT

• COROMANDEL CEMENT

• BIRLA STAR

• ULTRATECH CEMENT

• BIRLA GOLD

• BIRLA EVEREST CEMENT

• VIKRAM CEMENT

• VASODATTA CEMENT

• BINANI CEMENT

• SPAN CEMENT

• ORIENT CEMENT

• DALMIA CEMENT

• CHETTINAD CEMENT

• DHANDAPANI CEMENT

Current Price Trend for Grade A Cement

Region State Rate (Rs 50 per kg bag)

North Delhi 250-255  Punjab 260-265  Haryana 260-265West Rajasthan 245-250  Maharashtra

(Mumbai)270-275

  Maharashtra (Pune) 265-270East West Bengal 265-270  Orissa 240-245  Bihar 240-245South Tamil Nadu 245-250  Andhra Pradesh 220-250  Kerala 255-260  Karnataka 255-260Central Uttar Pradesh 250-255  Madhya Pradesh 235-240• (Prices for Grade B is Rs 10 to Rs 12 less than the Grade A and

Prices for Grade C is Rs 20 less than the Grade A) • Grades for cement vary from market to market

• Mechanics of Distribution Channels of Sector

• Companies invariably hire C&F agents or transport cements to own or government

warehouses either via roadway or railways.

• Incase of exports, cement reaches the nearest port via roadways or railways and is

then transferred to the importing country.

• Domestically, from C&F agents or warehouses the cement is transported to the

dealers/distributors and in turn to sub dealers who finally sell it to the end users.

There may or may not be physical ownership of goods.

• In the second case, dealers and sub dealers take order from buyers and place it to

the companies, co ordinate and monitor the timely dispatch of said orders,

transportation of goods and final delivery.

• Distributor network in cement industry is highly dominating and companies are

compelled to hire as they do not really have that rapport and touch with the end

consumer of their product. Apart, from this, the distributors have storage facilities

as well which help control well in the entire supply chain as they are the ones who

bring orders and therefore are directly responsible for the business that a

manufacturer would do.

MAIN DISTRIBU

TION CENTRE

REGIONAL DISTRIBUTION CENTRE

WARE HOUSE-PUNE

DHAKKA,KHADKI DHAKKA,LONI

DHAKKA.

DISTRIBUTORS

DEALERS

Primary distribution Secondary

distribution

End users

End users

Tertiary distribution

DISTRIBUTION MODEL OFCEMENT :

OBSERVATIONS

• SHOP ANALYSIS Weight of one bag: 50 kgs. cost of one bag: 265 rs Margin earned by dealers: 3- 4%

• OPERATING COST STRUCTURE OF LTV

CEMENT GODOWNS

KEY FINDINGS :• There are three types of players in market: large seller, medium scale

seller, small scale seller. • There are two types of cement category available in the market OPC

(ordinary Portland cement ) and PPC (pozzalana Portland cement ) which is graded as- GRADE A and GRADE B.The main difference is between the concreting hours -

CEMENT CATEGORY

GRADED CONCRETING CAPACITY

COMPOSITION

Grade A 53 graded

8 hours Coal + clinker

Grade B 43 graded

24 hours Made from fly ash

• Opc category includes - Birla super Binani ACC Vasodatta,etc.

• Ppc category includes - Birla shakti, Birla gold etc

OWNERS EXPENSE : It includes various shop expenses

(Electricity, Refreshments, tax), (Drivers salary, Insurance, Vehicles Maintenance cost, Fuel cost, Tyre cost, Emi), Promotional/advertising cost of shop(optional),Payment to sales manager, Employee.

• Distributor Margin earned per bag is 3 – 4%.

& incase of shortage 7-10 %.

• Peak season is from –November to June

• Off season is from-July to October.

• Loading/unloading charges is Rs.1 per bag.

EXPENSES

Electricity Rs.500

Telephone expense Rs. 1000

Refreshment Rs.1000

VAT 12.50%

Supervisor salary Rs.5000

Helper Rs.1000

Total 8500

Note: promotional activity are optional

• CHARGING PATTERN:

Charging patterns km

1.5 to 2 ton

truck 3w Category

Maximum carried   20 bags 36 BAGS

Free home delivery 5-10 km radius ----  

Note : free deliver is given to those who are regular customers or to those who buy in large bulks.

 

Charged delivery as per km

3-7 km Rs.100 Rs.160

  7-10 km Rs.150 Rs.250

  Above 15 km Rs.200 Rs.400

 

Charge as per bag For 3 -7 km Rs.4-5 per bag Rs.5 per bag

  For 7-10 km Rs.7 per bag Rs.7-8 per bag

  15 km and above Rs.10 per bag Rs.12 per bag

• Average inventory :retailers Standards no.

of bags keptSales per day Liquidator Reorder

purchase pattern

(In terms of no. of days taken to finish the stock)

Micro retailer Below 75 50 1 Purchase order is given to the company when the stock is at 70 % of finishing edge

Small retailer 200 100 1

Medium retailer

400 250 1-2

Large retailer 600 above 300-350 1-2

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