States included: Chhattisgarh, West Bengal, Bihar, Jharkhand, Odisha, Meghalaya, Assam, Arunachal Pradesh, Sikkim, Mizoram, Nagaland,

Tripura
and Manipur.

Capacity utilisation gradually dipped over the years

The eastern region accounted for close to 30% of the total installed as well as effective capacities between 2011-12 to 2015-16. Over the past 5 years,
demand for cement grew at a healthy CAGR of ~7%, spearheaded by the government's focus on housing and infrastructure projects. However, as
capacity growth outpaced demand growth, operating rates in the eastern region have gradually declined to ~75% in 2015-16 from ~81% in 2011-12.

Demand growth driven by infrastructure projects

The eastern region accounts for ~19% share in terms of cement consumption in India. The region is largely an industrial belt owing to abundant
availability of mineral reserves. Demand in the eastern region has been largely driven by infrastructure and housing development and implementation
of several industrial projects in the mineral resource-rich states such as Odisha, Jharkhand and Chhattisgarh. Demand grew by a healthy 12% y-o-y in
2015-16 in the Eastern region, driven largely by state government induced investments across physical and social infrastructure sector (including rural
housing as well). Further industrial and commercial sectors also exhibited high growth especially in the states of Odisha, Jharkhand, and Chhattisgarh.
Large states like West Bengal also witnessed stable growth; albeit at a slower pace.

East: Cement demand-supply scenario

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Source: Industry, CRISIL Research

In terms of absolute consumption, West Bengal, Bihar and Odisha are the major consumers in the East. Major players in the region are Holcim Group
companies (ACC and Ambuja), Ultratech Cement, Lafarge, Century Textiles and OCL.

Prices in the East

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Source: Industry, CRISIL Research

Eastern region inbound flow of cement is significant

Over the past 3 years (2012-13 to 2015-16), average prices in the eastern region have dipped by an annual rate of ~2%. In 2015-16, prices further fell
by ~4% as capacity additions exerted pressure on prices.

The Eastern region has inbound flow of around 10-15 per cent of its overall cement consumption from states such as Andhra Pradesh, Tamil Nadu,
Rajasthan, Maharashtra and Gujarat. Similarly, cement produced in the Eastern region is sent outbound to states in other regions like Madhya
Pradesh. Uttar Pradesh, Delhi, Andhra Pradesh and Maharashtra. However, the amount of inbound into the region is significantly higher than what the
region sends as outbound.

Source: Industry, CRISIL Research

This document is being provided for the exclusive use of Sourabh Kishanpuria at Indian Institute of Management

No part of this Report may be published/reproduced/distributed in any form without CRISIL's prior written approval