Cement Industry

India is the second largest producer of cement in the world. Cement production increased at a
compound annual growth rate (CAGR) of 9.7 per cent in the period 2006 2013, producing 272
million tonnes (MT). The production capacity is projected to reach 550 MT by FY 2020.
The cement industry has been expanding on the back of increasing infrastructure activities and
demand from the housing sector. The Department of Industrial Policy and Promotion (DIPP), report
says that cement and gypsum products attracted foreign direct investment (FDI) worth Rs 13,370.32
crore (US$ 2.24 billion) between April 2000 and February 2014.
The housing segment accounts for a major portion of the total domestic demand for cement in
India. In the 12
th
Five Year Plan of the Government, there is a strong focus on infrastructure
development and the Government plans to increase investment in infrastructure to an amount of
US$ 1 trillion. The industry is expected to add a capacity of 150 MT during the Plan period.
Some major initiatives of the Government to boost the cement industry are as follows:
An expert appraisal committee under Ministry of Environment, Government of India, has
provided approval to India Cements to double its capacity and set up a 40 megawatt (MW)
power plant at one of its facilities in Tamil Nadu. The proposed expansion project will come
up at Dalavoi in Ariyalur district.
The Competition Commission of India (CCI) has approved the proposed acquisition of
cement plants of Jaypee Cement Corporation Ltd, comprising an integrated cement unit at
Sewagram and grinding unit at Wanakbori in Gujarat by Ultratech Cement Ltd.
Giving impetus to green initiatives, Goa State Pollution Control Board (GSPCB) has signed a
memorandum of understanding (MoU) with Vasavadatta Cement, a company with its plant
in Karnataka. The cement manufacturer will use the plastic waste collected from Goa as fuel
for its manufacturing plant.
The cement industry in India is globally competitive as the industry continues to witness positive
trends such as cost control, continuous technology upgradation and increased construction
activities.
Major cement manufacturers in India are also increasingly using alternate fuels, especially
bioenergy, to fire their kilns. This is not only helping to bring down production costs of cement
companies, but is also proving effective in reducing emissions.
With the ever-increasing industrial activities, real estate, construction and infrastructure, in addition
to the onset of various Special Economic Zones (SEZs) being developed across the country, there is
remains a growing demand for cement.



Cement Sector Analysis Report
The Indian cement industry is the 2nd largest market after China accounting for about 8% of
the total global production. It had a total capacity of about 347 m tonnes (MT) as of financial year
ended 2012-13. Cement is a cyclical commodity with a high correlation with GDP. The housing sector
is the biggest demand driver of cement, accounting for about 67% of the total consumption. The
other major consumers of cement include infrastructure (13%), commercial construction (11%) and
industrial construction (9%).
The Indian cement industry grew at a commendable rate in the last decade, registering a
compounded growth of about 8%. However, the growth has slowed down in recent years owing to
the sluggishness in the economy. Moreover, the per capita consumption of cement in India still
remains substantially poor when compared with the world average. This underlines the tremendous
scope for growth in the Indian cement industry in the long term.
Cement, being a bulk commodity, is a freight intensive industry and transporting it over long
distances can prove to be uneconomical. 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.
The Southern region of India has the highest installed capacity, accounting for about one-third of the
country's total installed cement capacity.
Given the high potential for growth, quite a few foreign transnational companies have
ventured into the Indian markets. Already, while companies like Lafarge, Heidelberg and Italicementi
have made a couple of acquisitions, Holcim has increased its stake in domestic companies Ambuja
Cements and ACC to over 50% to gain controlling interest. Consolidation has taken place with the
top two cement groups controlling nearly one-third of the total domestic capacity. However, the
balance capacity still remains quite fragmented.
Key Points
Supply The demand-supply situation is highly skewed with the latter being significantly
higher.
Demand Housing sector acts as the principal growth driver for cement. However, industrial
and infrastructure sectors have also emerged as demand drivers.
Barriers to entry High capital costs and long gestation periods. Access to limestone reserves (key
input) also acts as a significant entry barrier.
Bargaining
power of
suppliers
Licensing of coal and limestone reserves, supply of power from the state grid etc
are all controlled by a single entity, which is the government. However, nowadays
producers are relying more on captive power, but the shortage of coal and
volatile fuel prices remain a concern.
Bargaining
power of
Cement is a commodity business and sales volumes mostly depend upon the
distribution reach of the company. However, things are changing and few brands
customers have started commanding a premium on account of better quality perception.
Competition Intense competition with players expanding reach and achieving pan India
presence. The industry is a lot more consolidated than a couple of decades ago
with a few large players controlling substantial market share.

Financial Year '13


During the financial year 2012-13 (FY13), India's cement production grew by 5% year-on-year
(YoY). The subdued growth was mainly attributable to slowdown in construction activities,
regulatory delays in infrastructural projects and the overall downturn in the economy. As such, the
supply glut resulted in lower capacity utilisation levels.

The industry witnessed high operating costs, including all major cost heads such as raw materials,
energy and freight. The steep depreciation of the rupee and hike in rail freight and diesel prices
further aggravated the concerns.

Prospects


Slowdown in demand, high inflation, government deficits and weaknesses in the global economy
have resulted in a slowdown in India's GDP growth. Cement demand is closely linked to the overall
economic growth, particularly the housing and infrastructure sector. As such, cement demand is
likely to remain sluggish over the medium term. However, the long term growth prospects remain
intact given the huge untapped housing demand and positive demographics.

However, the long term drivers for cement demand remain intact. Higher government spending on
infrastructure, robust growth in rural housing and rising per capita incomes are likely to augur well
for the cement industry. The government plans to spend US$ 1 trillion on infrastructure in the 12th
five year plan period (2012-17). The same during the 11th plan period was US$ 514 bn. The focus
on infrastructure development is expected to boost cement demand.


UltraTech Cement appoints Atul Daga as Chief Financial Officer
22 October 2014
India: UltraTech Cement has appointed Atul Daga as Chief Financial Officer of the company
in place of KC Birla with effect from 1 December 2014. The decision was made at a board of
directors meeting on 18 October 2014. The term of appointment of the managing director OP
Puranmalka was extended for a period of one year until 31 March 2016.


Cement
Last Updated: Sept 20, 2014
Introduction
The cement industry of any nation plays an important role in its development through the
construction of infrastructure. India's cement production has increased at a compound annual
growth rate (CAGR) of 9.7 per cent to reach 272 million tonnes (MT) during FY 06-13.
Presently, India is the second largest producer of cement in the world with a current capacity
of around 370 MT which is expected to grow to 550 MT by FY 20.
India has huge potential in infrastructure and construction and the cement sector in India is
set to receive a major boost. The Government of India is allocating funds to several
infrastructure projects in the urban as well as rural areas, as per the Union Budget being
announced recently in July 2014.
Also, many foreign companies are looking for investing in the Indian cement industry to cash
in on the opportunities in this market. For instance, Holcim Ltd and Lafarge SA are involved
in major discussions to form a potential global merger which could result in the formation of
the largest cement maker in India, overtaking the current market leaders, Ulltratech.
In addition, there are a number of notable infrastructural projects already coming up in the
country. For instance, Indian engineers are working in the Himalayas to build the world's
highest railway bridge which is expected to be 35 metres taller than the Eiffel Tower when
completed in 2016.
Market size
Cement is a cyclical commodity with a high correlation with GDP. The housing sector is the
biggest demand driver of cement, accounting for about 67 per cent of the total consumption.
The other major consumers of cement include infrastructure at 13 per cent, commercial
construction at 11 per cent and industrial construction at 9 per cent.
The cement industry in India is divided into five regions, viz, north, south, west, east and the
central region. The southern region of India has the highest installed capacity, accounting for
about one-third of the country's total installed cement capacity.
The cement sector in India is expected to witness positive growth in the coming years, with
demand set to increase at a CAGR of more than 8 per cent during FY 14-16, as per 'Indian
Cement Industry Outlook 2016'.
The Indian cement industry is dominated by a few companies. The top 20 cement companies
account for almost 70 per cent of the total cement production of the country. Ultratech
Cement followed by Ambuja Cements and ACC occupy the top three spots in the Indian
cement marketspace.
Investments
The cement industry has been expanding on the back of increasing infrastructure activities
and demand from the housing sector over the past many years. According to data released by
the Department of Industrial Policy and Promotion (DIPP), cement and gypsum products
attracted foreign direct investment (FDI) worth Rs 13,546.47 crore (US$ 2.23 billion)
between April 2000 and June 2014.
Some of the major investments and developments in the Indian cement industry are as
follows:
To consolidate its cement operations, India Cements Ltd plans to merge with its subsidiary
Trinetra Cements Ltd and sell large portions of land near its plants in Tamil Nadu and Andhra
Pradesh and focus on real estate development, through its real estate arm.
Ambuja Cement, part of the Holcim Group, plans to invest Rs 802 crore (US$ 132.57
million) in 2014 in various ongoing projects. The company has proposed to fund the entire
capital expenditure (capex) through internal accruals, as per Ambuja Cement's annual report.
UltraTech Cement Limited, India's largest manufacturer of ready-mix concrete recently
supplied whitetopping concrete for the Nandi Infrastructure Corridor Enterprise (NICE) Road
in Bangalore, Karnataka. The 9.5 km link road and 4 km peripheral road will connect to the
proposed 111 km Bangalore Mysore Industrial Corridor (BMIC) expressway which is
expected to reduce the 3-hour drive between the two cities to an hour.
Dalmia Bharat Group Foundation (DBGF) has partnered with New and Renewable Energy
Development Corporation of Andhra Pradesh, Limited (NREDCAP) - a State Government
Company, for the promotion of biogas plants in Kadapa district.
Prism Cement Ltd has recently started production at the Prism Coal Mine in Chindwara,
Madhya Pradesh. The company has been granted all statutory clearance for the operation of
the mine and the mined coal will be used for captive consumption at the cement plant located
at Satna, Madhya Pradesh.
Government Initiatives
The Government of India's keen focus on the development of infrastructure in the country has
given a big boost to the cement industry in India. In its 12th Five Year Plan, the government
plans to increase investment in infrastructure to the tune of US$ 1 trillion and increase the
industry's capacity to 150 MT.
The government incorporated the Cement Corporation of India (CCI) in 1965 to achieve self-
sufficiency in cement production in the country. Currently, CCI has 10 units spread over
eight states in India.
In order to help the private sector companies thrive in the industry, the government has been
approving their investment schemes. Some such initiatives are as follows:
Ambuja Cements Ltd's Concrete Futures Laboratory (CFL) has received accreditation for
tests in concrete from National Accreditation Board for Testing and Calibration Laboratories
(NABL) under the Department of Science & Technology, Government of India. The
company received accreditation for 13 tests.
An expert appraisal committee under the Ministry of Environment, Government of India, has
given its approval to India Cements to double its capacity and set up a 40 megawatt (MW)
power plant at one of its facilities in Tamil Nadu. The proposed expansion project will come
up at Dalavoi in Ariyalur district.
Road Ahead
The Indian cement industry, being the second largest in the world, is globally competitive.
With the Government of India providing enough scope in infrastructure development, there is
a lot of hope for the cement sector.
Following the release of the Union Budget in July 2014, cement companies are hoping for
some reforms like reduction in excise duties, which will go a long way in the betterment of
this sector.
In addition, with the ever-increasing industrial activities, real estate, construction and
infrastructure, and with the Special Economic Zones (SEZs) being developed across the
country, the demand for cement in India is slated to increase in the upcoming years.
References: Media Reports, India in Business, Cement Corporation of India, Department of
Industrial Policy and Promotion (DIPP), Cement Manufacturers Association (CMA)
http://indiainbusiness.nic.in/newdesign/index.php?param=industryservices_landing/333/1
Challenging outlook for Indias cement
industry
Indian ratings agency ICRA has reported that the outlook for the cement industry continues to
remain challenging, with pricing pressures, weak demand and cost headwinds negatively
affecting the sector.
Production
ICRA reported that cement production has remained subdued during FY14, increasing by
3.7% during April December 2013, primarily due to weak demand from end-user
industries. Delays in environmental clearances for industrial and infrastructure projects and
sand unavailability in some states contributed to slow growth. The demand was sluggish
during 2Q14 due to a slowdown in construction activities during the monsoon season.
Cement demand failed to pick up even in the post monsoon season due to continuing weak
demand from the infrastructure and real estate sectors.
However, cement demand is expected to recover in the last quarter, driven by rural housing
demand following increased rural incomes due to good monsoons and pre-election spending
by state governments, primarily on road strengthening and improvements, state highways and
power transmission, ICRA said.
Cement prices and rising costs
Cement prices continued to remain under pressure in 3Q14. Though cement manufacturers
made a few attempts to raise prices during the quarter, most of the price hikes undertaken by
the industry were partially or fully reversed.
Furthermore, Indian cement producers continue to face rising input costs. Freight costs have
significantly increased over the past two years, as a result of a rise in freight rates by
railways, diesel prices and dependence on expensive road transport (due to a shortage of
railway wagons), ICRA reported.
The rise in domestic coal prices has resulted in an increase in the cost of power and fuel.
Prices of raw materials such as limestone and gypsum have also increased.