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Cement report

  1. 1. Report on Indian Cement IndustryExternal GuideMr. Vempati Karthik(Assistant Vice President - Non Agri Dept.)SUBMITTED BY:Yamini Bakshi (Enrollment No. R590210024)An Internship Report Submitted in Partial Fulfillment of RequirementsForMBA Energy TradingBatch 2010-2012University of Petroleum and Energy StudiesInternal Guide:
  2. 2. Acknowledgment
  3. 3. Table of Contents
  4. 4. Company ProfileTransGraph Consulting Pvt Ltd. is a leader in Market Analysis & Price Outlook and PriceRisk Management services, tracking commodity and currency markets worldwide andproviding knowledge based decision enabling services to clients spread across the globe.TransGraph Consulting has paved its way forward for the last Six years. Trans Graphestablished in the year 2003 in Hyderabad. Trans Graph has made a remarkable growth andpenetrated the market as one of the Mentor’s in the field of Research and Consultancythrough “Market Analysis & Price Outlook” and Price Risk Management Services, trackingthe Commodity and Forex business worldwide successfully and providing the convenience inthe decision making to its clients spread across the globe.TransGraph’s strength and expertise lie in the areas of Price Analysis and Forecasting,Statistical Analysis & Econometric Modeling, Risk Analysis, Quantification and Mitigation,Value Chain Assessment, Trading Advisory, Procurement and Supply Chain Metrics, andRisk Management Software solutions. TransGraph Consulting Pvt. Ltd. expertise in the formof Trading Consultancy would enable its clients to take reliable decisions on the ‘timing ofpurchase’ or ‘timing of buy / sell’ in their trades.The service is aimed to cater ‘market analysis and ‘price forecasting’ needs of the trading /procurement departments of a company. The service delivery is primarily through decisionenabling market mentor reports and through the telephonic interaction with its research team.TransGraph Consulting through its Business Consulting service offerings can assist thecorporate decision-making process and strategy formulation aimed at achieving operationalefficiencies and for long run strategy development.TransGraph Consulting Private Limited is promoted by Mr. Nagaraj Meda, currently thechairman and Managing Director of the company. Mr. Meda started his career as acommodity and currency derivatives trader and graduated to the level of portfolio manager.
  5. 5. Achievements of TransGraph• Successfully applying forecasting methodology ‘Mapping the market thought’ tovarious commodities from crude derivatives to vegetable oils.• TransGraph has created the service delivery mode in such a way that the forecast getsimplemented with its unique methodology of institutionalizing the decision makingprocess at client’s place.• TransGraph are credited for its innovative hedging models through which it haspioneered the change management in sourcing function at various manufacturing andFMCG companies. It’s simple to understand and practical hedging models havetransformed the purchase departments from ‘hand to mouth’ buying to ‘strategic buying’.‘Strategic buying’ involves spatial, temporal and exposure management dimensions.• TransGraph renders these knowledge-based services with India cost advantage.Vision of Trans GraphThe vision of the Trans Graph consulting is to create a world-class business, with richknowledge resources and efficient servicing abilities to cater to the needs of marketparticipants in the commodities, derivatives and agri-business segments.Key Factors of TransGraphDiversified skill set analyst team with focused research efforts striving to provide decisionenabling research support and analytical, practical solutions and strategies for the clients. Thecompetency of our consulting team can be summarized in three dimensions. Enabling to gainin-depth understanding on varied business process and critical drivers of performance.• Capabilities in:• Price analysis& forecasting.• Statistical analysis & econometrics modelling.• Value chain assessment.• Demand analysis & forecasting.• Procurement & supply chain.
  6. 6. • Risk analysis, qualification & mitigation plans.• Flair with technology & devising customized software solutions.• Trading advice & portfolio management.• Diversified Skilful Human Resources & Positive Attitude:• Best academic qualification.• Vibrant work exposure.• Active interaction & servicing.• Shouldering of the challenging responsibilities.• Intensive & interaction training.• Open mindedness to learn.
  7. 7. Executive summary
  8. 8. Research MethodologyThe research methodology can be descriptive research as well as exploratory research.a) Descriptive research tells some understanding of the nature of the problem and dealswith the who, what, where, when, how…but not the why? In this report I have tried tounderstand the economic indicators & has featured out their impacts .b) Exploratory research helps to diagnose a situation and discover the new ideas. In thisreport I have tried to forecast data with the help of correlation & regression model & thenwith reference to it analysis has been done. So overall, In this project both descriptive andexploratory research have done.Data Collection research data will be collected and data can be two types:-• Primary data will be collected through the discussions, observation case-studies,diaries, critical incidents, portfolios etc. In this report technique of discussion is been usedmainly, I have consulted experts from this field• Mr. Saurabh Ritesh , (Trans Graph)o He guided me regarding the basic outline of this project, the economy atInternational level & also the analysis part. Also the major factors which areactually reliable for study the economy of any country. He also told me thathow I can relate my project with my field.• Mrs. K. Deepa (M.A. Economics)o She guided me regarding the basic concepts of the economy. She also sharedme the constraints of using economic indicators & what factors necessary forfuture analysis• Secondary data: will be collected from the published journal, books and researchpaper, from the various websites, magazine, etc. or any other source which has beencollected by third party.
  9. 9. INTRODUCTIONIndia is the second fastest growing economy in the world after China. Various industries arecontributing for this growth. They are Agriculture, Infrastructure, Energy & Power, Banking& Finance and service sector. In India, Construction is the second largest economic activityafter agriculture and is poised for continuous growth due to industrialization, urbanizationand economic development with expectations of improved living standards of people inIndia. It accounts for nearly 65 percent of the total investment in infrastructure, employs 33million people approximately and accounts for 6-8 percent of GDP. The Constructionindustry is primarily driven by Government of India investment on core infrastructureprojects and creation of urban infrastructure, industrial capital expenditure by corporatesector and development activities of real estate or housing sector in urban as well as ruralareas.The Indian economy is booming, with rates of Gross Domestic Product (GDP) growthexceeding an average of ~7% every year since 2003/04. This ongoing growth is due torapidly developing services and manufacturing sectors, increasing consumer demand (largelydriven by increased spending by India’s middle class) and government commitments torejuvenate the agricultural sector and improve the economic conditions of India’s ruralpopulation. The production of industrial machinery has also been on the rise – and theincreasing flow of goods has spurred increases in rail, road and port traffic, necessitatingfurther infrastructure improvements.As per the Tweflth Five Year Plan, Rs. 41 lakh crores worth of investment is planned to flowinto India’s infrastructure during this five year plan. Construction projects account for asubstantial portion of the proposed investments, making the E&C sector one of the biggestbeneficiaries of the infrastructure boom in India. The regulatory environment is relaxing toencourage further foreign direct investment (FDI).
  10. 10. Projected Investment in infrastructure during the Twelfth five year plan:Particulars FY12 FY13 FY14 FY15 FY16 FY17 TotalGDP at FY07Prices (Rs. Cr.)6314265 6882549 7501978 8177156 8913100 9715280 41190063InfrastructureInvestment as% of GDP8.37% 9.00% 9.50% 9.90% 10.30% 10.70% 9.95%InfrastructureInvestment (Rsin CurrentPrices)721781 888572 1073470 1280315 1524526 1812581 6579463Growth drivers in construction industryGrowth in Infrastructure1. Approximately 10 lakh crores is to be spent in the next five years on infrastructure. While50% investments in infrastructure will be done by the government through cash contracts,the remaining will be either pure private investments or PPP projects.2. In the total investment on Infrastructure, minimum 45 % is towards construction and 20 %spend will be for modernization of the construction industry.Growth in Building sector1. Industrial sector sees a steady growth and contributes to the construction sector in thenon-residential segment.2. IT growth would continue to create a demand for commercial facilities. STPs and SEZsare being built by real estate developers.3. Hospitality and Tourism industry is driving the demand for hotels and resorts.4. Retail growth on account of increasing consumer disposable incomes is driving thedemand for commercial area development on a large scale.Growth in Housing1. The current trend in real estate market is that after making investments in land the project
  11. 11. construction is mainly retail financed.2. The real estate developers traditionally employed contractors for construction of projects.Several large contractors are transitioning towards becoming real estate developers aswell.Industry segmentationConstruction sector can be broadly classified into 2 sub-segments:1. Real estate (Residential, Commercial/Corporate, Industrial and Special Economic Zones(SEZs))2. Infrastructure (Transportation, Urban development, Rural development, Utilities)
  12. 12. Figure1: Construction Industry StructureIndian Real Estate SectorThe real estate and construction sectors are playing a crucial role in the development ofIndias core infrastructure. The real estate industrys growth is depends on the developmentsin the retail, hospitality and entertainment (hotels, resorts, cinema theatres), hospitals, schoolsand IT enabled services. It has greater prominence in India with the liberalization ofeconomy, increase in business opportunities and labour migration.The Government of India has allowed FDI up to 100 percent in the automatic route intownships, housing, built-up infrastructure and construction development projects to increaseinvestment, generate economic activity, and create new employment opportunities. TheUnion Budget 2012-13 shown more importance on accelerating the pace of investment ininfrastructure, as this is critical for sustain and accelerating an overall growth.Major Projects in Real estate sector in India Mumbai based Wadhwa Group to invest Rs 9-10 billion to develop 1.6 million sq. ft. Ofoffice space in Bandra Kurla Complex, Mumbai. The project will consist of two officetowers and is due to be completed by 2014. Bangalore-based Embassy Property Developments is in talks with global financialservices group, JP Morgan to raise Rs. 500 crore for two projects – premium villa projectand a IT-cum-residential development on Bellary Road. Kochi-base Asten Realtors has proposed to invest Rs 1,000 crore in the next three years invarious projects in central Kerala. Avalon Group has made the initiative to start up Rs 200 crore project named "AvalonRegal Court" in Bhiwadi, Rajasthan. The project is being planned on tweleve-acre spaceconsisting of eight hundred housing units and is expected to be completed over the nextthree years.Driving Forces Growth in the economy. Indias emergence as an attractive offshore destination and availability of pool of highly
  13. 13. skilled technicians and engineers. Developments of large captive units of major players include GE, Prudential, HSBC,Bank of America, Standard Chartered and American Express. Rise in disposable income and growing middle class, increasing the demand for qualityresidential real estate and real estate as an investment. Entry of professional players equipped with expertise in real estate development. Relaxation of legal rulings and processes by the governing bodies encouraginginvestments in real estate. Improvement in infrastructure facilities.Infrastructure Sector in IndiaPerformance of core industriesSector weight 2007-08 2008-09 2009-10 2010-11 2011-12 Apr-Nov2011-12Apr-Nov2012-13Jan2012Jan2013Coal 4.38 6.3 8 8.1 -0.2 1.2 -4 6.7 7.7 2.3Crude oil 5.22 0.4 -1.8 0.5 11.9 1 2.9 -0.5 -2 -0.2Natural gas 1.71 2.1 1.3 44.6 10 -8.9 -8.5 -13.1 -10.4 -16.8Refinery products 5.94 6.5 3 -0.4 3 3.1 4.4 7.2 -4.6 10.5Fertilisers 1.25 -7.9 -3.9 12.7 0 0.4 -0.7 -3.3 4 -9.1Steel 6.68 6.8 1.9 6 13.2 7 8.9 3.4 4.5 9.4cement 2.41 8.1 7.2 10.5 4.5 6.7 4.8 6.7 10.9 -6.6electricity 10.32 6.3 2.7 6.2 5.6 8.1 9.4 4.6 3.2 5.9Overall index 37.9 5.2 2.8 6.6 6.6 4.4 4.8 3.5 2.2 3.9Source: Press Information Bureau, Government of India Ministry of Commerce & Industry.
  14. 14. Industries which support the infrastructure are crude oil, petroleum, refinery products, coal,electricity, cement and finished steel having weight of 37.9 % in the index of IndustrialProduction(IIP) and shown the cumulative growth rate of 3.9 % in Jan 2013 increased from2.2 % in Jan 2012. The most affected sector whose growth hampered adversely in FY13 (Jan2013) was natural gas with a growth rate of -16.8 % (FY12 -10.4 %) followed by crude oilwith growth rate of -0.2 % (Jan 2012 -2.0%), Cement -6.6% (Jan 2012 10.9 %) and Coal 2.3% (Jan 2012 7.7 %), Fertilizers with growth rate of -9.1 % (Jan 2012 4.0%) and remainingsectors shown the growth moderately. These include Refinery Products 10.5 % (Jan 2012-4.6%), steel with growth rate of 9.4% (Jan 2012 .5 %), Electricity with growth rate of 5.9 %(Jan 2012 3.2).Cement production registered to growth of (-) 6.6 % in January 2013 against its 10.9 %growth in January 2012. The cumulative growth of cement production was 6.7 % during Apr– Jan 2012-13 compared to its 4.8 % growth during the same period of 2011-12.The manufacturing industry growth depends on the inputs from these core industriesespecially on electricity. Therefore it is of utmost importance to amplify core sectorsproduction. Indian Government taking much future plan of actions immediately and quicklytowards it. The union budget for 2012-13 has given full exemption from basic customs dutyto fuels such as natural gas, liquefied natural gas; steam coal and uranium concentrateimported for power generation. Viability gap funding has been extended to capital investmentin fertilizer industry, oil and gas storage and pipeline facilities for supporting the scheme ofpublic private partnership (PPP).The Union Budget 2013-14 give more impetus to infrastructure sector - Infrastructure Debt Funds (IDF) to be encouraged. IIFCL to offer credit enhancement. Infrastructure tax-free bond of 50,000 crore in 2013-14. Build roads in North Eastern states and connect them to Myanmar with assistance fromWB & ADB.
  15. 15.  Raising corpus of Rural Infrastructure Development Fund (RIDF) to 20,000 crore and5,000 crore to NABARD to finance construction for warehousing. Window to Panchayats to finance construction of go downs.Roads 3000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and UttarPradesh will be awarded in the first six months of 2013-14. Target of covering length of 8,800 kms under National Highway DevelopmentProgramme (NHDP) during FY13. Allocation of the Road Transport and HighwaysMinistry enhanced by 14% to Rs.253.6 billion.Ports Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh. A new outer harbour to be developed in the VOC port at Thoothukkudi, Tamil Naduthrough PPP at an estimated cost of 7,500 crore.Source: Twelfth Five Year Plan (2012-2017)Planned Infrastructure InvestmentsIndias economy has been growing at a rapid pace, and to maintain the momentum of its
  16. 16. growth, the Government has strengthened its focus on infrastructure development in thecountry. It has increased its infrastructure spend as a percentage of the countrys GDP from5.15 % during the Tenth Five Year Plan (2002-2007) to 7.55 % during the Eleventh Five YearPlan (2007-2012). This is expected to increase to over 9.00 % during the Twelfth Five YearPlan (2012-2017). The Government plans to double its investment in infrastructure to INR40.9 trillion during the Twelfth Five Year Plan from INR 20.5 trillion during the EleventhFive Year Plan period, as compared to planned infrastructure investments of INR 8.7 trillionduring the Tenth Five Year Plan period. It should however be noted that actual investmentsduring the Tenth Five Year Plan period had met the target, and that of the Eleventh Planperiod may realize 80 % of the target.The telecom sector has been witnessing increasing investment over the past 10 years. Duringthe Twelfth Plan Period, almost 25 % of investments are expected to be invested in thissector. While the roads & bridges sector has remained flat (17%) as a percentage of theoverall pie, the telecom sector is expected to witness a CAGR of ~10 % from 2002 to 2017.Another sector, which has gained increasing prominence is the oil and gas segment – with theGovernments spend on the sector expected to increase from 3.5 % of its total infrastructurespend during the Tenth plan to 6.4% in the Twelfth Plan.The Planning commission has targeted an ambitious investment of Rs. 65 lack crores for the12thfive year plan. To achieve the target infrastructure investment has to be raised to 10% of
  17. 17. GDP from current 8%. The average growth rate of India’s gross domestic savings has beenover 30% in past 4-5 years.Roads & HighwaysIndia has the worlds second - largest road network, comprising a total length of 4.2 millionkm, and accounting for 87 % passenger traffic. Total investment in the Twelfth Five Year Planis estimated to be 9,14,536 crores. The National Highway Development Programme (NHDP)has planned a high expenditure. It seeks to award 29,000 km of roads from FY 2011 to FY2015 – out of this, 7,300 km were awarded in FY12. (PPP mode) Till August 2011, 247 PPPprojects were awarded under NHDP.RailwaysIndian Railways network spans over 64,000 route km, making it the worlds third largest railnetwork in terms of size besides being the largest passenger carrier and the fourth – largestrail freight carrier globally. In the Twelfth Five Year Plan total investment is estimated to be6,43,379 crores (including MRTS). Rail projects in India have been typically the domain ofthe public sector. However, based on the success of PPP in other infrastructure sectors, theIndian Railways has begun to take steps to explore the PPP route. Mass Rapid Transit System(MRTS) is expected to comprise major portion of total planned investments in coming years.During the Twelfth Plan period, private sector spending is expected in MRTS systems incities such as Mumbai, Bangalore, Hyderabad and Kolkata. The Indian Railways is alsoexpected to initiate PPP projects to maintain & develop railway stations. It has identified 22stations across India that will be modernized into world – class facilities.PortsIndia has 13 major ports and around 200 non-major ports, accounting for 95 % of thecountrys total trade in terms of volume, and round 70 % in terms of value. During 2006 – 11,cargo traffic at Indian ports increased at a CAGR of 7.98 % from 8.7 million tons to 883million tons. In the Twelfth Five Year Plan total investment is estimated to be 1,97,781crores. The National Maritime Development Programme seeks to add 230 million tonnes perannum in capacity in 10 years. To achieve this, the Ministry of Shipping (MoS) plans toaward 24 capacity expansion projects at major ports. These projects include a mega containerterminal at Chennai port and a mechanized berth at Vishakhapatnam. However, the only
  18. 18. project that has been awarded so far is the Jawaharlal Nehru Port Trust Terminal.AirportsIndia has a total of 136 airports with 9 owned by the Airport Authority of India. During 2007–11, passenger and freight traffic at Indian airports increased at a CAGR of 10.44 % & 10.9 %,respectively, despite global slowdown. In the Twelfth Five Year plan total investment isestimated to be 87,714 crores. With prospects for growth in tier II and tier III cities lookingbright, the Ministry of Civil Aviation (MoCA) has approved new Greenfield airports. TheNavi Mumbai airport is to be the largest Greenfield airport in terms of cost and capacity, andis expected to be bid out this year. The nodal agency CIDCO is in the process of finalizingthe bid mechanism. However, feasibility of such large projects continues to be a concern.Infrastructure linkages are also immensely important, since provision of adequate road, railand water transport facilities will be critical for the success of large scale airport developmentplans.PowerIndias total installed power generation capacity stood at 2,11,766.22 MW as on 31-01-2013.Robust economic growth and enhanced industrial activity has significantly increased thedemand for power in the country, leading to as much as 12 % peak hour power shortages.This makes a compelling case for further large scale investments in the sector. In the TwelfthFive Year plan total investment is estimated to be 15,01,666 crores. With the announcementof 14 Ultra mega power projects (UMPPs). Out of these, four (Ssn, Mundra, Krishna Patnamand Tilaiya) have already been awarded to private players.Oil & GasIndias oil & gas sector continues to grow steadily, boosted by enhanced investments,increased production and rise in private participation. In the next five years, plannedadditions include 60.3 MMTPA of refinery capacity. 7.05 MMTPA of new LNG terminals. Inthe Twelfth Five Year plan total investment to be 1,48,993 crores. Projects include an 18MMTPA refinery being setup by Indian Oil Corporation and a cracker unit of 5 MMTPAcapacity by Reliance Industries Limited in Jamngar.
  19. 19. Infrastructure Performance: (Growth in %)Sector FY 08 FY 09 FY 10 FY 11 FY12(April-DecPower 6.3 2.5 6.8 5.7 9.3Railway revenue-earning freight traffic 9 4.9 6.6 3.6 4.7Cargo handled at major ports 12 2.2 5.7 1.6 0.4Civil AviationExport Cargo handled 7.5 3.4 10.4 13.4 -1.1Import cargo handled 19.7 -5.7 7.9 20.6 1.4Passengers handled internationalterminals11.9 3.8 5.7 11.5 7.2Passengers handled at domesticterminals20.6 -12.1 14.5 16.1 17.5TelecommunicationCell phone connections 38.3 80.9 47.3 18 -51Roads *NHAI 164.6 30.9 21.4 -33.3 8.9NH(o) & BRDB 12.5 17.3 4 -6.8 -36.5Source: Ministry of Statistics and Programme Implementation (MOSPI) and D&B Research* Indicates Widening to four lanes & two lanes and strengthening of existing weak pavementonly.Notes: NH(O) stands for National Highways Organization and BRDB for the Border RoadsDevelopment BoardThe Infrastructure sector during FY 2012 for the period April to December noted a moderategrowth. The growth rate of power sector during FY 2012 was higher than the growth of FY11. Railway sector has also shown slight growth in revenue from freight traffic. Civil aviationpassengers handled at domestic terminals grew marginally while passengers at internationalterminals as well as export import cargo handled declined severely. In road sector upgradation of highways by NH (O) & BRDB depicted a negative growth.Raw materials, equipment and technology
  20. 20. Construction materials and equipment sector accounts for approximately 8.6% of Indias GDPand accounts for nearly two-third of the total construction cost on an average. The share ofconstruction materials in project costs ranges from 40-60% and the corresponding cost forconstruction equipment ranges from 5 to 25%. Construction component comprises nearly 60-80 % of project cost of infrastructure projects like roads, housing etc. In projects like powerplants, industrial plants, etc. The share, though lower, is critical. Construction materials andequipment sector comprises of various sub-industries such as: Cement Steel Paints & Chemicals Petroleum Products and resins Fixtures & fittings Aggregates such as concrete and asphalt Timber Tiles and ceramics Aluminium, Glass & Plastics.Since most of the materials are either manufactured locally, in cottage or small scale industry,data available for quantifying the exact nature of linkages with construction is not veryaccurate. On the other hand, linkages of products such as paints and petro-products wouldagain be difficult due to their stronger linkages with other sectors. Where as in case of cementand steel, almost 100% of cement production is consumed in construction and 40 – 60% ofsteel production goes into construction.Urban Construction Strategies -Large size precast piers are used in the construction of flyovers over existing roads orother utility services that are too important to be closed or dismantled for the constructionwork of the flyovers. These massive precast structures are erected at site with large capacitycranes that are themselves not to restrict the flow of traffic. In addition, the Indian Society of
  21. 21. Trench less Technology (INDSTT) introduced the trench – less pipe laying technology toassist in interruption free construction in urban environments. Besides project design,development, implementation and monitoring are gradually getting transferred to thecomputers by consultants, project owners and contractors. Some leading corporate agenciesare planning initiatives for web – enabled design, control and monitoring of constructionprojects.Nanotechnology in Cement Industry -Nanotechnology can play a significant role in the construction industry and stands at eighthposition in terms of most significant areas of applications in nanotechnology.Nanoengineering of cement based materials can result in outstanding or smart properties.Introduction of nanotechnology in cement industry has the potential to address some of thechallenges such as CO2 emissions, poor crack resistance, long curing time, low tensilestrength, high water absorption, low durability and many other mechanical performances. Aremarkable improvement in the mechanical properties and durability of cementitiousmaterials can be observed with incorporation of nanomaterials such as nno-SiO2, ZnO2,Al2O3, TiO2, carbon nanotubes, nano-days, carbon nanofibers and other nanomaterials.Demand Drivers of Construction Materials Industry:Government initiatives in the infrastructure sector, coupled with the housing sectorboom and urban development, continue being the main drivers of growth for the Indianconstruction materials industry.• Individual Housing Demand – Primary drivers -◦ Efforts by the government to boost the demand for houses in the below Rs20-lakh category in stimulus packages.◦ Decrease of land prices and steel prices◦ Increase in minimum support price (MSP)◦ Increase in pay for workers under the flagship rural job guarantee scheme.◦ Implementation of debt waiver scheme.◦ Implementation of the Sixth Pay Commission.• Huge infrastructure investment planned for Twelfth Five Year Plan (2012-17)amounting to Rs. 56.32 lakh crores is also expected to drive the demand for
  22. 22. construction material industry.Construction Equipment – Success Factors1. Ability to introduce India specific products that include low priced multipurposeequipment to attract new customers and to increase mechanisation in important areasadding features to products that make suitable for use in India and launching newapplications and products for missing applications.2. Ability to capture exports opportunities in areas such as engineering and designservices that leverage the Indias technical prowess3. Quality, delivery and pricing of after – sales service.4. Ability to provide end-to-end services including equipment selection, financing,maintenance, training and repairs.5. Introduction of newer services such as rentals and financings to catalyse latentdemand particularly from rural areas and small towns.6. Strengthening of dealer and channel network to address buyer fragmentationfollowing the trend of sub – contracting and geographic expansion of demand.Construction Equipment – Risk Factors1. Competition from low-cost producers.2. Tax burden and anomalies- India has one of the highest indirect taxes on constructionequipment.3. Dependence on import for certain critical components.4. Volatility of steel prices impacting production costs.Benefits of the construction industry to the society-1. Absorbs rural labour and unskilled workers (in addition to semi-skilled and skilled)2. Provides opportunity for seasonal employment thereby supplementing workersincome from farming.3. Permits large-scale participation of women workers.4. Development of Infrastructure, thereby sustaining the growth of economy.
  23. 23. Indian cement industryCement industry plays a crucial role in the development of the infrastructure in any country.Due to the various construction activities undertaken by the central government, stategovernments, public sector and other organizations to meet the needs of the massivepopulation in the country generate huge demand for cement. And also provision for housingis the first and foremost requirement of every household and, therefore, market demand ofcement for private consumption is increasing constantly. According to the Ministry, theliberalization process provided the much desired demand to the cement industry and, thegrowth was quite visible leading to noticeable growth in terms of 100 million tonnes capacityaddition during the decade 1999 to 2009.Key points -• Cement Industry is now the second largest cement producer in the world after china.• 183 large cement plants and more than 360 mini cement plants• 328 million tonnes a year installed capacity.• 97 percent of the installed capacity is accounted for by large producers (~42)• 21 top companies control 90 percent of the market.• 40 percent of the market is controlled by two groups, Holcim and Aditya BirlaGroup.Invention of Cement -Ever since the civilizations first started to build, the world has sought a man – made bondingmaterial that would bind stones into a solid formed mass. During the palcolithic age, menwere used to enjoy the adequate shelters provided by nature. The bronze age has witnessedthe use of building materials from the clay based mixture and air handling lime. TheEgyptians advanced to the discovery of lime & gypsum mortar as a binding agent forbuilding such structures as the pyramids. The Greeks have made further improvements andfinally, the Romans have developed the cement that produced structures of remarkabledurability. The secret of roman success in making cement was traced to the mixing of slaked
  24. 24. lime with pozzolona, volcanic ash from Mount Vesuvius. The cement produced on thisprocess was capable of hardening under the water. This art was somehow lost during themiddle age periods.In the 18thcentury, big efforts were started in Europe to understand why some lines havehydraulic properties. John smeaton concentrated his work in this field and he made the firstmodern concrete by adding pebbles as a coarse aggregate along with mixing powered brickinto the cement in the year 1759. A number of discoveries have followed. It was in the year1817 louis ricat has conducted the work as the hydraulic nature of the lime – volcanic ashmixture. He was the first person to accurately determine the proportions of lime stone andsilica required to make the mix of cement. Finally, in the year 1824, joseph aspdin patentedthe basic process of slower setting cement. He addressed this as Portland cement due to thefact that in appearance and hardness, it resembled the upper Jurassic rock found in the regionof Portland in southern England.Global Production of CementThe world combined cement production all over the world accounted for 3.78 billion tonnesin the year 2012 (3.60 billion tonnes in 2011). Out of which, china has contributed
  25. 25. substantially to the world production. China and India virtually have reached the stage of self– sufficiency related to production of cement.Global Top Consumers –China leads the way in cement consumption and production around the world due to the largescale developments and infrastructure build-up projects that the Chinese government isundertaking. Some of the slowdowns in production are due to dramatic downward demandshifts in the residential housing markets of the United States and Europe. However, publicprojects are keeping the total cement production around the world on the rise. It is interestingto note that production is concentrated in developing nations. With the exception of the US,Japan and Spain, all other nations are still in a developing phase. While the majority of theproduction is locally consumed, a good chunk of the cement produced is exported. Thismeans that come production has shifted to these nations – whether it is because of cheaperlabour, less strict environmental regulations, or subsidies.Export of Cement Globally-Indian cement accounts for not more than 0.2% of total world cement exports. The sectorsrelatively insulated from international markets. Given by bulky nature of the commodity andinadequacy of transport infrastructure in the country, international trade has been limited toneighbouring states in small quantities. Even that mini scale volume of exports took a beatingafter the south East Asian crisis, though the situation has improved gradually and the exportof cement (total) increased considerably to 3.61 million tonnes in 2010-11 from 2.69 milliontonnes in 2009-10. Exports of cement in 2010-11 were mainly to Nepal (49%), Sri Lanka(26%), Iraq (5%), Egypt & Maldives (3 % each).Import of Cement-Cement imports in 2010-11 decreased sharply to 1.1 million tonnes from 2.11 million tonnesin 2009-10. Main suppliers in 2010-11 were Pakistan (54%), Bangladesh (26%) and China(16%).Porters Five Forces -Porters five forces provide a competitive framework that allows us to better understand thedifferent dimensions that govern market competition.Porters five forces are:1. Internal Rivalry2. Threat of substitutes
  26. 26. 3. Buyers bargaining power4. Supplier bargaining power and5. Entry and exit barriersRivalry within the cement industry is moderate. The structure of the market tends to beoligopolistic in different regions around the world. In other words only a few firms controlthe market in many different countries. This is due to the high fixed cost. This creates ahighly concentrated firm environment with limited rivalry. On the other hand, cementproducts are not differentiated. This means that competition between existing firms can getintense. When consumers do not bare a cost by switching from one firm to another (lowswitching costs) and when the product lacks differentiation, this creates haven forcompetition and intense rivalry. The combinations of the above factors result in moderaterivalry within the global cement industry.The second force is the threat of substitutes. Lack of substitutes – other products that are notwithin the same industry but can be used instead. This means that the industry does not face acredible threat of competition. This represents the reality of cement industry. No productexists to date that can substitute effectively for cement. While construction firms can uselesscement in exchange for using other materials that have some cementitious quality, thatsubstitution effect is negligible on the market price of cement. An industry is only threatenedif another industry produces a similar product or if consumers of that product can decreasethe ratio of their use of that product and use another product (minimal partial substitution).Both of these choices are virtually non – existent to cement consumers, hence the threat ofsubstitutes is very low.Buyer bargaining power – Pure buyer power exists when only one buyer exists in the market(monopsony). In this case power is entirely in the hands of the buyer. In the cement industry,facts suggest that this effect is minimal. The power of consumers is limited due to the lack ofsubstitutes, the small number of cement firms (oligopoly), and the inelastic demand thatconsumers have for the product. Buyers are said to be powerful if they are highlyconcentrated, purchase a large amount of the product, or if there is product standardisation.The last effect exists but its impact is weak because of persistent shortages in the cementmarket. Given the fact that the buyers in the cement market lack the characteristics that give
  27. 27. them power over producing firms, the competitive level of the industry judged through thisforce is very low. Firms have an easier time setting price while buyers act generally as pricetakers.Suppliers if powerful can extract some of the profits that producing firms are making off ofconsumers by raising the prices of raw materials. In the inputs market for the cementindustry, suppliers are concentrated - but buyers are also concentrated. This means that initialbargaining is practically on equal footing. Suppliers of cement industry are divided into twocategories – 1.Suppliers of transportation and 2.Suppliers of raw materials (clinker). Cementmanufacturers have argued that price hikes in the cement industry are due to increases in theprice of both transportation and raw materials. This means that suppliers are powerful enoughto force new process to the cement industry. However, the weakness of the final product. Ingeneral suppliers are powerful if there is a credible forward integration threat (suppliers canbuy producing firms), suppliers are concentrated (no switching opportunity), the cost isprohibitive to switch suppliers, and if a supplier can rally up the final consumer. In this caseof cement the power of suppliers comes from their concentration regionally and from the highcost in switching between suppliers. It is not easy for a cement firm to buy clinker from chinaand ship it to India or vice versa. This means that local raw material production must beutilized and that local or regional suppliers have high barraging power.High barriers to entry mean that firms already in the industry do not fear outside competition.That means rivalry amongst firms is not intense. In fact incentives for intra-industrycooperation or backhanded collusions such as cartels are highly plausible. Barriers to exit onthe other hand means that firms already in the market are locked in. This can result from thefirms inability to sell the assets if it decides to leave the industry. Barriers to entry and exitcan be seen in four different ways. First, government creates barriers by limiting the numberof licenses it sells for production. Cement is energy intensive as wee as highly polluting;therefore entry to such a market has to be highly regulated in the eyes of many governments.Second, patents create entry barriers. Patents on new production methods or machines createdifficulties for firms to enter. However, the cement industry is not a patent dependentindustry, unlike other industries such as pharmaceuticals. Third, assets needed to producecement cannot be easily utilized for another industry (the cement industry is highly assetspecific). This means that if a firm decides to enter into the market it must realize that a cease
  28. 28. in its production will be very costly. Finally, economies of scale can prevent entry. Forcement firms, neutralizing the high fixed costs require minimum efficient scale of productionthat creates a strong barrier to entry. Overall, the cement industry has high barriers to entryand high barriers to exit.Note: The above diagram explains Porters five competitive forces as they relate to thecement industry. "E" represents the force has an effect on the cement industry in intensifyingrivalry, "O" represents that it plays an opposing role, and "N" represents the force has neutralor no relevance to the industry.Rivalry is moderate, the effect of substitutes is weak, buyer power is minimal, supplier power
  29. 29. is high, and entry/exit barriers are both high. In essence, the vertical supply chain has pricingpower over final consumers, whereas the horizontal dimension of competition is lacking dueto lack of the possibility of differentiated advantages in production. Inelastic demandneutralizes the consumer power associated with product standardization, whereas proximityof raw materials to production sites generates regional cement clusters.Evaluation of cement industry:Era Year Remarks about capacity, Growth, ConsumptionDominantImports1914-1924 Cement consumption was around 2 million tonnes during this periodof 10 years; 50 % was through imports. Production in the year 1914was 10,000 tonnes and in 1924 production was around 0.26 milliontonnes a year against capacity of half million tonne.Struggle andSurvival1924-1941 Indigenous production went from 3.66 lakh tones in 1925 to 18.30lakh tonne in 1941. Imports contributed to less than 7 % of totalcement consumption during 1924-1942.Price in Control 1942-1951 Production stepped up from 1.8 million tonnes in 1942 to 3.28million tonnes in 1951. Imports dwindled to less than 2 % of totalconsumption.Planning andControl1951-1982 Growth in cement capacity but not at requisite pace. Capacity was29.26 million tonnes in 1981-82.Partial Decontrol 1982-88 Quantum jump in capacity and production during 1982-88. (57.47Million tonnes in 1987-88) Cement became surplus from 1987onwards.Total Decontrol March1989onwardsDuring the period 2009-10 capacity rose to 236 million tonnes.The industry structure changed over the years. During the year 1914-24 most of therequirement was met through imports before indigenous production started. SubsequentlyGovernment played a major role in Planning & Control. After the industry was decontrolledthe capacity grew manifold and by the end of 2009 the annual capacity was around 219 MT.The selling strategy of firms and the buying behaviour of customers also saw a major change.
  30. 30. Cement from being a pure commodity dependent on price alone is being recognized as aproduct who’s pricing and demand could be varied through various marketing promotions.Brands started emerging after total decontrol in the year 1989 and certain brands startedcommanding premium due to quality perceptions. Therefore positioning of cement brands inthe customers minds play a vital role.Globalization of Indian Cement IndustryThe Globalization of Indian Cement Industry has helped the industry to restructure itself tocope up with the alterations in the global economic and trading system. The Indian cementindustry is one of the oldest industries. It has been catering to Indias cement requirementssince its emergence during the British Raj in India. Though the majority of the players in theIndian 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 constructionactivities has led to the increase in the demand for updated quality building materials andother allied products. Cement being one of the major elements in the construction work, thereis a growth in the cement industry in India. The consumption of cement has increased in Indiaby nearly 7.5%. With the globalization of Indian cement industry many foreign cementmanufacturers are engaging themselves in agreements and deals with their India counter partsto have a share of the growth.Globalization of Indian Cement Industry includes several foreign companies engaging inmergers and acquisitions of Indian cement companies, like• Heidelberg Cement - Indorama Cement Ltd. Heidelberg Cement Company enteredinto an agreement for a 50% joint venture with the Indorama Cement Ltd., situated inMumbai, originally possessed by the Indorama S P Lohia Group. Heidelberg CementCompany is the leading German cement manufacturing company. The HeidelbergCement was set up in 1873 and has a long and prosperous history. Being one of thebest in the world the Heidelberg Cement Company has its bases in different countries.The Heidelberg Cement Company has two manufacturing units in India. A grindingplant in Mumbai and a cement terminal near Mumbai harbor. A clinker plant iscoming up in the state of Gujarat• Holcim Cement - Gujarat Ambuja Cements (GACL) Holcim Cement signed anagreement of 14.8% take over with the Gujarat Ambuja Cements (GACL). With newproducts, skilled personnel, superb management, and an outstanding market strategy
  31. 31. gives this tie up good edge over the other competitors. Holcim Cement Company isamong the leading cement manufacturing and supplying companies in the world. It isone of the major employers in the world; having a work force of 90,000.The HolcimCement Company has units in excess of 70 countries all over the world.• Italcementi cement - Zuari Cement Limited Italcementi Cement Company with thehelp of the Cements Français, a subsidiary for its global activities, has acquired sharesof the famous Indian cement manufacturer - Zuari Cement Limited. The acquisitionwas of 50% shareholding and the deal was of about 100 million Euros. ItalcementiCement is the 5th largest cement manufacturing company in the world. Theproduction capacity of the Italcementi cement company is about 70 million tons in ayear. With the construction boom in India the company looks for a stable future. In2001 the Italcementi cement entered the Indian market scenario. It took over the plantof the Zuari Cement Limited in Andhra Pradesh in southern India. The joint ventureearned revenues of around 100 million Euros and an operating profit of 4 millionEuros.• Lafarge India is the subsidiary of the Lafarge Cement Company of France. It wasestablished 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 inJharkhand which is used for the purpose of grinding and the other two are in Chhattisgarhused for manufacturing. The Lafarge Cement Company was set up in the year 1833 by LeonPavin. Lafarge Cement Company situated in France is the leading cement producingcompany in the world. It has plans for increasing the cement production throughtechnological innovations and maximization of the capacity of the plant. It has a largenetwork of distributors in the eastern part of India. The Lafarge Cement Company ispresently producing nearly 5.5 million tons of cement for the Indian cement market.Structure of the indian cement industry• It is a fragmented industry. There are 59 cement companies in India, operating 183large and 365 mini plants, where majority of the production of cement (90%) in the country isby large plants (40).• One of the other defining features of the Indian cement industry is that the location oflimestone reserves in select states has resulted in it’s evolving in the form of clusters.
  32. 32. • Since cement is a high bulk and low value commodity, competition is also localizedbecause the cost of transportation of cement to distant markets often results in the productbeing uncompetitive in those markets.• Another distinguishing characteristic comes from it being cyclical in nature as themarket 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 themonth of August and September. The cyclical nature of this industry has meant that onlylarge players are able to withstand the downturn in demand due to their economies of scale,operational efficiencies, centrally controlled distribution systems and geographicaldiversification.Cement Capacity, Production and Utilization in India -In India, after the adaption of price decontrol policy for cement industry, it has been showingphenomenal growth since early 1980s. In 1950-51 the capacity was 3.28 MT. And surged to acapacity of 296.48 MT in 2010-11. Similarly, production of cement increased from 2.20 MTin 1950-51 to 216.28 MT in 2010-11. Capacity utilization, which was 92 % during 1955 -56,gradually decreased to 66.83 % in 1980 – 81 and later it took reverse direction in the eightiesand started increasing slowly. The capacity utilization in the year 2010-11 and 2011-12 is73% and 75% respectively.The industry saw significant capacity additions during the year 2008 to 2012. Overall,Cement demands not been able to keep pace with the additional supply in the market.Although the pace of capacity additions has slowed down considerably, the demand-supplymismatch that has already been created in certain regions may continue for few quartersthereby affecting cement prices and realizationsTypes of cementThe types of cement in India have increased over the years with the advancement in research,development and technology. The Indian cement industry is witnessing a boom as a result ofwhich the production of different kinds of cement in India has also increased.Ordinary Portland cement (OPC) -This type of cement is manufactured in the form of different grades, the most common inIndia being Grade-53, Grade-43, and Grade-33. OPC is manufactured by burning siliceousmaterials like limestone at 1400 Degree Celsius and thereafter grinding it with gypsum. OPCgives enough comprehensive strength after soaking in water for 3 days, 7 days, and 28 days.
  33. 33. This is suitable for all types of modern civil engineering construction.Portland Blast Furnace Slag Cement -Blast furnace slag, which is a waste product of the pig iron furnace, can be used to produceslag cement. However, blast furnace slag does not have cementitious properties if it is cooledslowly and ground finely; hence, it is cooled quickly or quenched and subsequently ground toacquire cementitious properties. The quenching process is called "granulation", and the slagis known as granulated blast furnace slag. Granulated blast furnace slag is mixed with lime orOPC clinker and ground to form slag cement. Portland blast furnace slag cement (PBFSC) isthe most widely used slag cement, and contains 25-65 percent of slag, 5-6 percent of gypsumand Portland cement clinker. Apart from having OPC properties, PBFSC has other propertiessuch as lower heat of hydration and higher sulphate resistance. Super sulphate cement,another type of slag cement, is prepared by grinding granulated slag, anhydrite and clinker inthe proportion of 70:15:15. This cement is more sulphate-resistant than PBFSC or SRC.Portland Pozzolana Cement (PPC) -It is greyish in colour and made by grinding of lime stone and clay. Burning of lime stone andclay at very high temperature and cooling the resultant product is called clinker, grinding theclinker with of gypsum in ball mill to a finally ground powder. This is known as Portlandcement. This cement is produced by adding 10 – 25 % pozzolanic materials to the OPCclinker then grinding together. PPC is manufactured by blending pozzolanic materials, OPCclinker, and gypsum either grinding them together or separately. Today PPC is widely indemand for industrial and residential buildings, roads, dams, and machine foundations.Rapid Hardening Portland cement (RHPC) -RHPC is a type of cement that is used for special purposes when a faster rate of early highstrength is required. RHPC has a higher rate of strength development than the NormalPortland Cement. This type of cement gives the desired strength in 3,7 and 28 days, if soakedin water. But sometimes cement is required high strength in 24 hours as is given by ordinaryPortland cement at 3 days. This sets and hardens much quickly than ordinary Portlandcement.Low Heat cement -This type of cement is used for larger mass concrete works in dams, piers etc. It is necessaryto have a much lower heat of hydration, so that chances of developing contraction cracks areminimized. This can be done either by adding some pozzolanic material and granulated blastfurnace slag to the cement while grinding or by changing the chemical composition of the
  34. 34. cement.Hydrophobic Cement -It is obtained by adding water repellent firm forming substance such as Stearic Acid andOleic Acid by grinding Portland Cement Clinker. This type of cement reduces wetting abilityof cement grains. Hence it impact more time for mixing transporting compacting & finishingetc.White Cement -White Cement has registered growth in production and sale in India in the last few years. Thewhite cement sector has been growing at the rate of 11 % per year. This has given the Indiancement industry a major boost. White cement is Portland cement made from speciallyselected raw materials, usually pure chalk and white clay, containing very small quantities ofiron oxides and manganese oxides. The chemical complexes formed with iron oxide presentin the cement raw meal give OPC cement its grey colour. However, if the proportion of ironoxides is reduced to less than 0.4 percent, cement becomes white in colour. Iron oxideimproves the burning of raw meal. It can be used in all types of construction where OPC isused. However, its usage is limited, as it is more expensive than OPC.Sulphate Resistance Portland cement -Sulphate Resisting Portland Cement (SRPC) is type of Portland cement in which the quantityof tricalcium aluminates is less than 5 % of C3A. It can be used for purposes wherever PPC,Slag cement, and OPC are used. The use of Portland Sulphate Resisting Cement has provedbeneficial, particularly in conditions where there is a risk of damage to the concrete fromsulphate attack. SRPC is recommended in places where the concrete is in contact with thesoil, ground water, exposed to seacoast, and sea water. In all these conditions, the concrete isexposed to attack from sulphate that is present in excessive amounts, which damage thestructure.Quick Setting Cement -The percentage of gypsum added is reduced, which accelerate the setting action of thiscement is very fast. This type of cement is used for the underwater construction wherepumping is involved.Oil Well Cement (OWC) -As the name suggests, is used for the grouting of the oil wells, also known as the cementingof the oil wells. This is done for both, the off-shore and on-shore oil wells. As the number of
  35. 35. oil wells in India is increasing steadily, the sales of Oil Well Cement have also increased. Thishas boosted the India cement industry to a large extent.OWC is manufactured from theclinker of Portland cement and also from cements that have been hydraulically blended.OWC can resist high pressure as well as very high temperatures. OWC sets very slowlybecause it has organic retarders which prevent it from setting too fast.Clinker Cement -The cement industry in India is highly technologically intensive and as a result, the quantityof clinker cement that is produced in India is of a very high grade and is often consideredamong the best in the world. The production of clinker cement requires a lot of energybecause it needs to be manufactured at the temperature of round 1400-1450 degree celsius.Expansive Cement/ Shrinkage Compensated Cement -Concrete prepared from Portland cement or blended cement shrinks on setting and hardening.Cement should expand on setting and hardening when it is used for pre – stressed, pre-fabricated concrete products and as a grout for filling cracks. This cement is prepared byincreasing the proportion of gypsum and aluminous cement clinker to Portland cementclinker while grinding.Super high strength cement -This type of cement is required for urgent repairs of important concrete structures likefoundation pillars. It is prepared in jet mills by finely grinding portland cement clinker withhigher proportion of tricalcium silicate.
  36. 36. Trends in Variety wise cement production -Production of different varieties of cement as a percentage to total is as given -The type of cement that is manufactured in huge quantity is the Portland Pozzolona Cement(PPC) which accounts for about 61% of the total cement manufactured.Ready Mix Concrete (RMC) -RMC is a mixture of cement, aggregate, water and other ingredients, which are weighed andbatched at a centrally located plant and directly placed at the construction site withoutundergoing any further treatment. The operations are carried in factory like conditions andare completely automated. Hence, RMC is a value-added, semi-finished product and resultsin superior quality concrete.
  37. 37. Factors Delaying Entry/Growth of RMC in India -• RMC is highly mechanized activity and entails initial high cost especially due toimport of basic equipment and machinery.• Smaller size of construction in unorganized sector highly competitive and costconscious.• Availability of abundant cheap labour for making and transporting concrete.• Differential taxation between RMC and SMC. Especially before 1997 when exciseduty @16 % also existed.Advantages -• Assured and Uniform Quality of concrete.• Speedier construction through mechanised operations• Need for ordering and storing cement, aggregates and sand on site totally eliminated• Lower labour and supervisory costs• Minimisation of cement wastage through bulk handling and storage.• Cleaner working environment.• Eco-friendly productManufacturing Technology Status -Raw material Preparation Process – Currently mining is generally done with semi-mechanized methods. Computerized mine lining is now being used by few modern plants.Most of the crushing operation is performed with multistage crushers of small capacity. Newplants are now shifting to single stage impact crushers. Transportation of the material fromthe mines is generally with dumpers. Some of the plants are now shifting to belt conveyorsusing in pit crushing. Grinding technology has progressed from the use of open circuit ballmills to close circuit ball mills with high efficiency separators and improved mill internals.Vertical roller mills have now firmly established themselves for these operations. Use ofcomputerized on line X-ray analyzers for raw mix optimization has become an essentialfeature for modern plants.Burning Process – All plants commissioned after 1970 have been on dry process kilns. From
  38. 38. conventional 4-stage pre heater kiln system the current trend has been towards NewSuspension Pre heater (NSP) kilns with pre calcinatory having 5-stge pre heater systems. Ofthe total capacity 44 % is accounted by NSPO kilns, 25 % by SP kilns, and 16 % by long wetprocess kilns and balance by other. Most of the modern plants have now adoptedcomputerized kiln control system with few of them having gone for expert systems.Clinker Grinding – Currently most of the plants are using lose circuit ball mills for cementgrinding with mechanical separators. Many are shifting to high efficiency separators,improved mill internals and modified flow control diaphragms.Present Status of Technology of Indian Cement Industry -Pre 1970 Plants 1970-90 Plants 1990 onwardsPlantsGlobal TechnologyMining & MaterialHandlingConventional Conventional Computer aided andsurface minersComputer aided andsurface minersCrushing Two stage Two stage Two stage in-pitcrushing& conveyingIn-pit crushing &conveyingLimestoneConveyingDumpers/Ropeway/TippersBelt conveyors Belt conveyors,Pipe conveyorsPipe conveyorsBelt conveyorsGrinding Ball mills with /withoutConventionalclassifierBall mills,VRMs,Roller presseswithstatic/dynamicclassifierBall mills withimproved classifier,VRMs, Roll presses,with conventionaland dynamicclassifierBall mill withimproved classifier,VRMs, roll presses,horo mills withdynamic classifierPyro processing Wet- single channelburnerWetSemi dryDry- 4 stage preheater-conventionalcoolerDry-5/6 stage pre heater-high efficiencycooler-multi channel burner-co-generation ofpowerDry-5/6 stage pre heater- High efficiencycooler- Multi channelburner-lownox calciner
  39. 39. - single channelburner-co processing ofWDF-co-generation ofpower-co-processing ofWDF-low NO x/SO2emissiontechnologiesBlending &StoragePre-blendingBatch blendingsilospre-blending -continuous blending-multi chamber silos-continuousblending-multi hampersilos dome silosPacking &DispatchBag Bag Bag/Bulk BulkPalletizing & ShrinkWrappingProcess Control Relay logic/Hard WiredFuzzy logiccontrolSystemMicro processorbased DDCNeurofuzzy expertsystemMicro processorbased DDCNeurofuzzy expertsystemPlant size, TPD 300-600 600-3000 3000-12000 6000-12000Inputs of Cement -• Lime stone• Coal• Power• TransportationLime stone – It is the basic raw material for producing cement. Approximately 1.5 – 1.6tonnes of lime stone are required for making one tonnes of cement. Generally limestone isavailable of an average size of about six inches and after feeding into the crusher its sizes isreduced into small chips of half an inch. Since, the plants near limestone deposits pay lesstransportation cost than others; the location of cement plant is determined by the location of
  40. 40. limestone mines. The total limestone deposit in the country is estimated to more than 90billion tonnes, with Andhra Pradesh enjoying the largest share of 34%, followed byKarnataka (13%), Gujarat (13%), Madhya Pradesh (8%) and Rajasthan (6.5 %).Coal – In the manufacturing of cement coal is important input as it has a dual function. It is afuel and raw material and the consumption of coal in a typically dry process system rangesfrom 20-25 % of clinker production. This means for per ton clinker produced 0.20-0.25 ton ofcoal is consumed. The cement industry consumes about 10 million tonnes of coal annuallyand is the fourth largest user of coal after steel, power and railways. Since coalfields likeBharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL) supply poor qualitycoal, the industry has to blend high-grade coal with it. However, non-coking coal andpetroleum coke attracts a customs duty of 5%, which increases the cost of production in thesector.Power – Cement industry consumes about 5.5 billion units of electricity annually with onetonne of cement requiring approximately 120-130 units of electricity. Since stategovernments supply electricity in India and since different states have different tariffstructure, the power tariffs vary according to the location of the plant and on the productionprocess. Most of the cement producing states such as Andhra Pradesh, Madhya Pradesh,Gujarat experience power cuts to the tonnes of 25-30 % every year causing substantialproduction loss.Transportation – Transportation influences cement production directly as both its inputmaterials and output have to be transported to and from the plants. Cement is mostly packedin paper bags now. It is then transported either by rail or road. Road transportation beyond200 kms is not economical therefore about 55 % cement is carried by the railways. Due to theinadequate of wagons there is a need to encourage transportation through sea. Today, 70 % ofthe cement movement worldwide is by sea compared to 1 % in India.
  41. 41. Cement manufacturing process:
  42. 42. There are two general processes for producing clinker and cement in India – a dry processand a wet process. In general, the dry process is much more energy efficient than the wetprocess, and the semi-wet somewhat more energy efficient than the semi-dry process. Thesemi-dry process has never played an important role in Indian cement production. Over thelast decade, increased preference is being given to the energy efficient dry process technologyso as to obtain a cost advantage in a competitive market. Moreover, since the initiation of thedecontrol process, many manufactures have switched over from the wet technology to the drytechnology by making suitable modifications in plants. Due to new, even more efficienttechnologies, the wet process is expected to be completely phased out in the near future. In1960, around 94% of the plants in India used wet process kilns. These kilns have been phasedout over the past 46 years and at present, 97 % of the kilns are dry process, 2 % are wet, andonly 1 % are semi-dry process.dry process kilns are typically larger, with capacities in Indiaranging from 300-8,000 tonnes per day or tpd. While capacities in semi-dry kilns range from600-1200 tpd, capacities in wet process kilns range from 200-750 tpd.Process Wise Capacity in Indian Cement Industry (%)
  43. 43. Dry Process – In dry process production, limestone is crushed to a uniform and usable size,blended with certain additives such as bauxite, iron ore and discharged on to a vertical rollermill where the raw materials are ground to fine powder. An electrostatic precipitator deductsthe raw mill gases and collects the raw meal for a series of further stages of blending. Thehomogenized raw meal thus extracted is pumped to the top of pre heater by air lift pumps. Inthe pre heaters the material is heated to 750 degree celsius. Subsequently, the raw mealundergoes a process of calcinations in a pre calcinatory. The remaining calcinations andclinkerization reactions are completed in the kiln where the temperature is raised to 1,450 –1,500 degree celsius. The clinker formed is cooled and conveyed to the clinker silo fromwhere it is extracted and transported to the cement mills for producing cement. For producingOPC, clinker and gypsum are used and for producing PPC, clinker, gypsum and fly ash areused.Wet Process – The wet process differs mainly in the preparation of raw meal where water isadded to raw materials to produce slurry. The chemical composition is corrected and theslurry is then pumped to the kiln where evaporation of moisture, preheating, calcinations andsintering reaction takes place. The clinker is cooled and transported, as in the ase of otherplant, with suitable conveyors to cement mills for grinding. The wet process is more energyintensive. And thus becomes expensive when power and energy prices are high.Major players in the india:TOTAL SALES for the year 2013 = Rs. 73600.81 Cr
  44. 44. HHI = 1211.415HHI indicates moderate concentration that implies the size of the firm in relationship to theoverall cement industry in India is medium.
  45. 45. Value chain of the Cement Industry –Source: IMaCS analysis; *Ready Mix ConcreteSourcingCementitiousMaterials(mineralcomponents)Others(sand,Gravel,Stone,RecycledAggregatesProcessingCement &AlliedAggregatesManufacturingCementRMC*ClinkerMorterAsphaltConcreteTransactionalChannelSellingDirect SalesTradersWholesalersRetailersEndUsersContractorsMasons/SelfBuildersCivil EngineersApplicationsInfrastructureHousingCommercial/Industrial
  46. 46. Regional Analysis -Cement being largely a regional play with the industry divided into five main regions(Eastern, Southern, Western, Northern and Central) with very high mount of freight charges.These high charges re due to the bulky nature and low value commodity, transporting it overlong distances will require high technology products and it will be uneconomical. As it isfreight intensive industry, the segment is completely domestic driven and exports account forvery negligible percent of the total cement off take.12%41%13%13%Region-wise Capacity - 2010-11Eastern RegionSouthern RegionWestern RegionCentral Region6%3%79%4%1%1%6%Northern Region - Capacity - 2010-11Mahayana/HaryanaPunjabRajasthanHimachal PradeshDelhiJammu & KashmirUttarakhand
  47. 47. 1%6%3%12%22%16%40%Eastern Region - Capacity - 2010-11AssamMeghalayaBiharJharkhandOdishaWest BengalChattisgarh49%36%15%1%Southern Region-Capacity-2010-11Andhra PradeshTamil NaduKarnatakaKerala
  48. 48. 61%39%Western Region - Capacity - 2010-11GujaratMaharashtra27%73%Central Region - Capacity - 2010-11Uttar PradeshMadhya Pradesh
  49. 49. Southern region in the country is the biggest contributor in cement production with installedcapacity of 96.56 MT. India has total capacity of 238.40 MT (excluding the ACC Ltd, havingannual installed capacity 27.08 MT. and Ambuja Cements Ltd having annual installedcapacity of 25 MT.) As of 2010-11 comprised of Northern region 51.56 MT, Eastern Region29.14 MT, Western Region 30.52 MT and Central Region 30.61 MT. Rajasthan, AndhraPradesh, Tamil Nadu, Madhya Pradesh and Gujarat are the prominent cement industrycontributor states. The western and northern regions re generally has more demand thanavailability.Region wise break down of Capacity and Utilization -Region 2006-07 2007-08 2008-09 2009-10 2010-11Capacity (million tonnes)North 33.77 47.47 50.27 48.77 51.56East 25.34 28.98 31.28 27.09 29.14South 54.1 61.81 79.5 92.11 96.56West 29.27 32.17 32.72 28.62 30.52Central 25.3 27.64 27.64 26.01 30.61Grand Total 167.78 198.07 221.41 222.6 238.4Regional Capacity as % of TotalNorth 20.13% 23.97% 22.70% 21.91% 21.63%East 15.10% 14.63% 14.13% 12.17% 12.22%South 32.24% 31.21% 35.91% 41.38% 40.50%West 17.45% 16.24% 14.78% 12.86% 12.80%Central 15.08% 13.95% 12.48% 11.68% 12.84%All India 100.00% 100.00% 100.00% 100.00% 100.00%Growth Capacity (Y-o-Y)North 23% 6% -3% 5%East 13% 7% -15% 7%South 12% 22% 14% 5%West 9% 2% -14% 6%
  50. 50. Central 8% 0% -6% 15%All India 15% 11% 1% 7%Region wise Utilization (%)North 95% 77% 82% 70% 74%East 87% 82% 83% 79% 79%South 93% 88% 75% 64% 61%West 93% 89% 87% 73% 71%Central 95% 91% 94% 96% 86%All India 93% 85% 82% 72% 71%Region 2006-07 2010-11Capacity Production Consumption Surplus Capacity Production Consumption SurplusNorth 33.77 32.09 29.52 2.57 51.56 37.94 26.82 11.12East 25.34 22.08 23.98 -1.9 29.14 23.16 28.11 -4.95South 54.1 50.15 43.88 6.27 96.56 59.95 36.06 23.89West 29.27 27.28 28.25 -0.97 30.52 21.71 31.35 -9.64Central 25.3 24.04 22.41 1.63 30.61 26.24 27.38 -1.14Total 167.78 155.64 148.04 7.6 238.4 169 149.72 19.28There exist regional surplus/shortages in the Indian cement industry. South India leads in bothcement production & consumption followed by North India. The oversupply is largely in thesouthern and northern regions and there is a supply shortage in eastern & western regions.There is significant inter-regional movement of cement, which plays a crucial role in theregional demand supply dynamics. Most of the cement movement across regions takes placefrom north to central, south to west, central to north and central to east.Cement Market Division in India -Limestone is the basic raw material needed for the manufacturing of cement. In India,limestone is found in abundance. The total limestone reserves in India are estimated to beapproximately 95,623,07 million metric tonnes (MMT), of which about 32 % of total reservesare found in state of Andhra Pradesh itself. Cement industry is the largest consumer of
  51. 51. limestone in India, accounting for over 70-80% of total limestone that is mined out. Formaking cement, limestone with a minimum CaO content of 44% is necessary. Typically 1.4-1.5 million tonnes of limestone is required for producing 1 MT of clinker. Thus for a 1.0MMT cement plant, assured availability of cement grade limestone reserves of the order of50-60 MMT in the close vicinity is vital.The Cement industry is fragmented into five different regions because of the followingreasons:• Bulky nature of cement and limestone (key ingredient in manufacturing cement)makes it very hard to transport over long distances.• High freight costs involved in transportation of these commodities.• A cement plant is generally located near limestone deposits and cement produced in aparticular region is mainly consumed in that region.
  52. 52. Place of concentration of large cement plants & their Capacity –The following table gives company wise Annual Installed CapacitiesCompany Plant No. ofPlantsAnnual installedCapacity(million tonnes)ACC Ltd. Chaibasa, Chanda, Jamul, Kymore, Lakheri,Thondebhavi, Madukkarai, Sindri, Wadi I & II,Gagal I & II, Damodr cement works, Tikaria (G),Bargarh cement works, Kudithini.17 28.68Birla Corp, Ltd Birla Vikas & Satna, Birla Cement & Chanderia,Durgpur (G), Rae Bareli (G), Durga Hitech (G)7 5.78CCI Ltd. Adilbad, Akaltara, Bokajan, Charkhi-Dadri,Kurkunta, Mandhar, Neemuch, Rajban, Tandur,Delhi (G)10 3.85Andhra Cements Vizag (G), Nadikude–Durga Cement 2 1.42J.K. Group Nimbaher, Mangrot, Gotn, Muddapur, LakshmiCement, Lakshmi cement – Kalol (G)6 12.27Century Textiles Century Cement, Maihar Cement, ManikgarhCement3 7.8India Cement Sankarnagar, Sankaridurg, Chilamkur Works,Dalavoi, Visaka Cement, Yerraguntla, RaasiCement, Vallur(G), Parli(G), Trinetra Cement10 15.85Tamilnadu Cement Alangulam, Ariyalur 2 0.9Madras Cements Ramasamyaraja Nagar, Jayantipuram, Alathiyurworks I & II, Ariylur, Uthiramerur(G),Salem(G),Kolaghat(G)7 12.72Mehta Group Saurashtra Cement, Gujarat Sidhee Cement 2 2.7HMP Cements Ltd Porbandar, Shahabad 2 0.67Ultra Tech CementsLtdRajashree, Hotgi(G), Vikram, Aditya I & II,Rawan, Reddipalyam, CW, JCW(G), HCW,22 48.75
  53. 53. Gujarat, APCW-I & II, Jafrabad, Magdalla(G),Ratnagiri(G), ARCW(G), Bhatindia(G),WBCW(G), Dadri(G), Panipat(G), Ginigera(G),Kotputli, Aligarh(G)Ambuja Cements Ltd. Ambuja Cement, Gajambuja Cement, AmbujaCement – Himachal Pradesh, Ropar(G),Rabriyawas, Bhatindia (G), Maratha Cement,Ambuja cement Roorkee(G), Bhatapara,Sankrail(G), Magdella(G), Farakka (G)13 27.35Jaypee Cement Ltd. Jaypee Rewa, Bela, Sadva Khurd (G), Ayodhya(G), Dalla, Wanakbori (G), Roorkee(G), Bagheri,Bhilai Jaypee13 22.95Kesoram Industries Kesoram Cement, Vasvadatta Cement 2 7.25Mangalam Cement Mangalam Cement, Neer Shree Cement 2 2Orient PaperIndustriesOrient Cement, Orient Cement-Jalgoan(G) 2 5Penna Cement Penna Tadippatri I & II, Penna Ganeshpahad,Penna-Boyareddypalli Ltd. Penna - Tandur4 6.5Prism Cement Prism Cement I & II 1 5.6Lafarge India(P) Ltd. Arasmeta, Sonadh, Jojobera(G), Mejia(G) 4 6.55Malabar Cements Malabar Cements, Malabar Cements(G) 2 0.62Binani Cement Binani Cement Sirohi, Binani Cement Sikar(G) 2 6.25Rain cements Ltd. Rain Comdt. Unit I, Rain Comdt. Unit LN-1 &LN-22 4KCP Ltd. KCP Ltd – Macherla, Maktyala 2 2.35OCL India Ltd OCL India-Rajgangpur, OCL India-Kapilas(G) 2 5.35Dalmia Cements Dalmia-Dalmiapuram, Kadapa, Ariyur 3 9Cement Manu Co.LtdCement Manu Co. Ltd, Megha T&E(p) Ltd(G) 2 1.27Chettinad Cement Chettinad – Karur, Karikkali, Ariyalur 3 10.5
  54. 54. Zuari Cement Ltd Zuari Cement, Sri Vishnu Cement 2 3.4Heidelberg CementLtdHCIL- Ammansandra, Damoh, Jhansi(G),Dolvi(G)4 3.1Shree Cement Shri-Beawar, Ras, Khushkhera(G), Suratgarh(G),Roorkee(G), Jaipur(G)6 13.39Others* Shree Digvijay-Sikka, Khyber Lnds. (P) Ltd,Lemos Cement, Kistna, Bagalkot Cement & Ind.Ltd, J&K Ltd, Kalyanpur Cement, KCP Ltd,Mawmiuh Cherra, Panyam Cements, Sone Valley,Meghalaya Cements Ltd, Shriram Cements,Sanghi Industries Ltd, My home Industries,Meghalaya Cements Ltd, Anjani PortlandCements12 11.29Grand Total 171 294.43Source: Indian Minerals Year Book-2011, Part-II, 50thedition. * In addition, the followingplants produced white cement – (1) Grasim Industries Ltd, Kharia, Khangar, Jodhpur district,Rajasthan (560000 tpy). (2).J.K. White cement works, Gotan, Nagapur district, Rajasthan(400000 tpy) and (3). Travancore Cements Ltd, muhmma, Alappuzha districu, Kerala (30,000tpy).Capacity Trends Region-wise in India -
  55. 55. New/Expansion Projects -1. Chettinad Cement has been expanding its plants, with new plants in North Karnatakaand Andhra Pradesh. The companys expansion will increase production capacity from11.5 MTPA to an estimated 15 MTPA by 2015. The company plans to construct anintegrated cement unit with production capacity of 3.5 MTPA in Guntur District, aswell as a 2 MTPA grinding unit in Visakhapatnam and also it is planning to open a 2.5MTPA cement plant in Karnataka and a grinding unit in Sholapur, Maharashtra.2. Ambuja Cement plans to invest Rs. 2000 crore to enhance its cement capacities in
  56. 56. Rajasthan and northern region and it will add 5 MT capacity to the total cementproduction of India.3. Dalmia Cement plans to invest Rs 1800 crore to increase the companys cementmanufacturing capacity over the next 2 years. The company also plans to set up a 2.5MT Greenfield unit in Karnataka.4. Heidelberg Cement has commissioned Phase-I of its Jhansi grinding unit. Thecompany currently executing its Rs 1400 crore expansion with the capacity of 2.7MT. The company also aims to accelerate the operational capacity at its Dmoh plantin Madhya Pradesh to 6 MT.5. India cements is planning to expand capacity at its Rajasthan unit, with possibleinvestment of Rs 650-700 crore. The present capacity of the plant is 1.3 MT and thecompany is planning to add one more line with similar capacity. India Cementscurrent manufacturing capacity is 15.5 MT with plants in Tamil Nadu, AndhraPradesh and Rajasthan.6. Vicat Group is likely to sell 4.5 million tonnes of cement in India. Apart from thenewly-commissioned Rs 1800 crore joint venture cement plant, Vicat-Sagar Cementat Chattrasal, Gulbarga district of Karnataka, Vicat owns 51 percent stake in BharatiCement.7. Amrit Cement India Ltd (ACIL) is launching Amrut Cement in North-Eastern marketwith production of 5 MT by 2015 through capacity addition i North-East and addingfresh capacities in Nepal and Bihar.8. Jindal Steel & Power is planning a cement manufacturing project in Chhattisgarh withcapacity of 2 MTPA and total estimated cost of Rs 6050 millions.9. Shree Vinayak Cement Company belonging to the Sandhu group of companies isplanning to expand its grinding unit in Dhanbad, Jharkhand with the cost of Rs 70millions.10. Abhijeet Cement is planning an integrated cement project – Cement (2MTPA) andCaptive power project (50 MW) in Madhya Pradesh.11. Gulbarga Cement (Zuari cement group) is planning an integrated cement project –OPC/PPC/PSC cement plant (3.2 MTPA), Clinker plant (2 MTPA) and Coal bsedcaptive power plant with total estimated cost of Rs 16000 millions.
  57. 57. Production Region-wise Trends in India -The Indian cement industry currently supplies all most all the cementitious materialrequirements of the Indian market from its manufacturing plants within India. Cementitiousmaterials include all types of cement and other materials sold to supplement cement concrete.In 2012, the Industry• 183 large cement plants, over 365 mini cement plants and 42 players in theindustry.• Current Capacity 324 MTPA and operates at 75-80 percent utilization.
  58. 58. Consumption Region-wise Trends in India -Per Capita Consumption -Indian cement industry an attractive investment destination with the combination of alower per capita consumption and a faster growth rate. The Indian cement Industry hasregistered a production of more than 100 million tonnes since 2001-02. Despite having highdemand in India. Per capita cement consumption is very low, where the world average is 396kg, in India being the country of young population has a huge potential and its ushering social& economic base will improve the domestic consumption.
  59. 59. Despite higher cement prices realized occasionally, the margins continue to be under severepressure particularly over the last couple of years due to steep hike in cost of all major inputslike raw material, fuel, power and freight, which together account for around 70 percent ofthe cost of productionProjects -1. The public works Department (PWD) is to execute road development projects acrossKerala in the next 3 years. The cost of the project is estimated to be Rs 10,600 croreand involves construction of phase – II of the Kerala state Transport project worth Rs2,005 crore, Rs 3500 crore thiruvananthapuram model road development projectinvolving seven cities and construction of 1,204 KM network worth Rs 5,100 crore.2. Godrej properties is going to launch a commercial project at Bandra – Kurla Complexin Mumbai, the project involves construction of a commercial building at cost of Rs2,000 – 2,500 crore and will be spread across 1.3 million square feet. Godrejproperties expect to complete the construction of the building by 2015.3. The Union government cleaned 3000 km of new projects to the countrys six primestates. The projects will be executed at Gujarat, Maharashtra, Madhya Pradesh, UttarPradesh and two north eastern states.4. The Union government has sanctioned the construction of strategic border roads in theIndo-China region. The project involves construction of 27 strategic border roads at acost of Rs 1937 crore.5. The central government has approved Rs 820 crore for developing road networks inAssam. The project is being implemented under the Pradhan Mantry Gram SadakYogna (PMGSY) and involves construction of 689 KM of roads and 347 bridges.6. The states of Andhra Pradesh and West Bengal are all set to get two new port projects.The new ports will add capacity of 100 MT.
  60. 60. Demand and supply scenario of cement industryDemand sourcesThe demand for cement in India has been influenced mainly by the Housing,Infrastructure, Irrigation, Roads and Defence. The following diagram shows the contributionof the important demand driven factors:Demand from residential housing sector:Housing demand accounts for 53% of total cement demand and 90% of total real estatedemand. Housing demand has supported the cement industry even in times of lowinfrastructure or industrial demand.The growth in the residential real estate market in India has been largely driven by risingdisposable incomes, a rapidly growing middle class, low interest rates, fiscal incentives onboth interest and principal payments for housing loans and heightened customer expectations,as well as increased urbanisation.A large proportion of the demand for houses, especially in urban centres such as Mumbai,Housing 53.00%Infrastructure 15.00%Irrigation 23.00%Roads 5.00%Defense 4.00%Sector wise Demand Contribution
  61. 61. Bangalore, Delhi (Gurgaon, Noida), Hyderabad and Pune, is likely to come from high-riseresidential buildings. Since this is a fairly new segment, the growth of the high-rise segmentwill be faster as compared to the growth of the urban housing segment. The reasons for theconstruction of high rise apartment buildings are the lack of space in cities and proximity tooffices and IT parks.• Growth Driverso Favourable demography and higher disposable incomeo Continued growth in population and change in population profile.o Decrease in number of people per household with breakdown of the joint familysystem into nuclear families.o Fiscal incentives provided by Government and easy availability of finance.o Growth in Tourism.Demand from infrastructure sector:The Indian economy is all set to grow at a pace of over 7% in the current fiscal. Increasedemphasis on infrastructure development made it achievable. Infrastructure has beenwitnessing extraordinary growth across all sectors such as roads, railways, irrigation, power,water supply urban infrastructure, ports and airports. However, in order to achieve this kindof growth on a sustainable basis, a further impetus is required to be given to the Infrastructuredevelopment in the country. GOI, recognizing this fact has planned to spend around INR73,793 crores on infrastructure development for the next five year.Out of total proposed expenditure, a construction activity are expected to account for morethan 50% of total investment and is expected to be the biggest beneficiary of the surge ininfrastructure investment over the next five years.This would imply a construction opportunity will more in the next 5 years. In light of suchhuge expenditure on construction activities, the demand for cement from infrastructure sectoris expected to grow.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
  62. 62. construction. Within office space construction activity, almost 70-75 per cent of the demandcomes from IT/BPO/call centres. The other key demand drivers include banking and financialservices, FMCG and telecom.This dependency on IT/ITES is expected to continue due to India’s emergence as a preferredoutsourcing destination, despite China and Russia also emerging as strong contenders. Theindustrial and commercial sector comprises of all the major industrial set ups, commercialoffices, IT & ITES parks and organized retail formats.The increase in disposable incomes, demographic changes (such as the increasing number ofworking women, who spend more, the rising number of nuclear families and higher incomelevels within the urban population), the change in the perception of branded products, thegrowth in retail malls, the entry of international players and the availability of cheap financewill drive the growth in organized retail.We expect cement consumption from this sector to register a CAGR of 9-10% driven bylarge-scale construction activities.Details of PPP projects by Sector-Sector Projects in Pipeline Projects Under ImplementationNo. of Projects Projet Cost(Rs. Cr)No.of Projects Project Cost(Rs. Cr)Roads 167 115822 133 102775Ports 47 35902 50 62058Airports 7 4120 3 19277Railways 53 90312 5 5217Power 34 62032 15 29448UrbanInfrastructure65 45708 69 18690Other 31 22534 17 3575Total 404 376430 292 241040Overall DemandDriven by a strong residential housing demand, growing industrial and commercial activitiesand the continued momentum in infrastructure investment, the cement consumption isexpected to witness a CAGR of more than 10% in line with the economic growth because of
  63. 63. the strong co-relation with GDP and the increased activity in the construction sector. Wefurther believe that due to huge expenditure by GOI on infrastructure the proportionatedemand from infrastructure sector will move northwards and we expect the total share ofcement demand from infrastructure will increase in coming years.Demand-Supply mismatch:Though India is the second largest cement manufacturer, it is among the lowest cementconsuming countries. In India per capita cement consumption is 156 kg, which is far belowthe world average of approximately 396 kg. Hence, the cement industry has been in a surplusposition since a long time.There exist regional surplus/shortages in the Indian cement industry. The oversupply islargely in the Southern and Northern regions. By contrast, there is a supply shortage inEastern and Western regions. There is significant inter-regional movement of cement, whichplays a crucial role in the regional demand-supply dynamics. Most of the cement movementacross regions takes place from North to Central, South to West, Central to North, andCentral to East.Factors influence cement demand-
  64. 64. Factors affecting cement supply:
  65. 65. Major players and their performancesACC Ltd -ACC limited is a partner company of Holcim group and it is the best cement company andlargest producer of cement in India. Also, ACC limited is a major player in the area of ready mixconcrete company. ACC limited has substantially held the market leadership and they achieved thesales volume of 24.11 MT cement in the year 2012. Companys headquarter is located in Mumbai andhas 16 cement manufacturing plants within the country with 21 sales offices and several zone officesemploying more than 9000 people. The Mumbai based company is also the largest user of limestonefor its high volume operations in the field of mining.UltraTech Cement -Ultratech Cement is Indis largest cement company. Part of the Aditya Birla Group thecompany has annual capacity of 72 million tonnes. The company has an employee strength of133000 employees makes it one of the best employees in India. The employees belong to 42nationalities from 36 countries. The company sells its white cement under the brand name ofBirla White. The company the biggest manufacturer of cements in India and 15 the biggest inthe world.Dec08 Dec09 Dec10 Dec11 Dec120.00%5.00%10.00%15.00%20.00%25.00%16.28%19.80%12.23%10.66%9.57%ACC LtdProfitability Trend
  66. 66. Ambuja Cements -Ambuja Cement a company founded in 1983 by NarotamSekhsaria and SureshNeotia. The company has five integrated cement plants and eight grinding units across thecountry. The company is also a part of the Halcim Group and has a capacity to produce about27 MT of cement per annum and is a benchmark for cement industries in India. The companyhas three captive terminals on the west coast to timely deliver the order of the customers.Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%UltraTech CementProfitability TrendDec08 Dec09 Dec10 Dec11 Dec120.00%5.00%10.00%15.00%20.00%25.00%Ambuja CementProfitability Trend
  67. 67. Shree Cement -Shree cement is a well known company in the area of cement manufacturing. Thebeawar, Rajasthan based company is one of the biggest producers of cement in North India.The company has plants located in baewar, Ras, Suratgarh and Khsuhkhera and other places.The company has a different strategy, it sells its brands under different brand names such asShree Ultra, Bangur and Rockstrong. The capacity of the company is around 13.5 MTPA.Shree cement also has 560 MW of installed power capacity, providing a steady stream of cashflows. Presently the company is planning to expand further at a similarly aggressive pace inpresent regions of operations and new regions.Prism Cement -Prism cement plant is located at Mankhari in Satna district, which is largest solitarykiln cement plant in the country. Company has earned the respect of investors and potentialgrowth in cement manufacturing made one of the top cement manufactures in the country.The company produces excellent quality of cement and thus is a premium price segmentcompany. The company is ISO certified and every product manufactured by the companycarries the BIS certification. The quality of the cement produced makes it a preferred choicein high-rise buildings, bridges, pipes, poles and manufacturing AC sheets.Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%25.00%Shree CementProfitability Trend
  68. 68. India Cements -India cement is one of the oldest cement manufacturers in India and was establishedin 1996 with first plant setup in 1940 in Sankarnagar, Tamil Nadu. Since then it has setuptotal 9 plants with a capacity to produce about 14 million tons of cement per annum. Withregional offices in all southern states and 3 plants in Tamil Nadu and 4 in Andhra Pradesh, thecompany is the largest producer of cement in South India.Mar08 Mar09 Mar10 Mar11 MAr120.00%5.00%10.00%15.00%20.00%25.00%India CementProfitability TrendJun08 Mar09 Mar10 Mar11 Mar12-5.00%0.00%5.00%10.00%15.00%20.00%25.00%30.00%Prism CementProfitability Trend
  69. 69. Madras Cement -Madras Cements Limited is launched in 1961 and part of Ramco group, the companystarted production in 1962. The company has a plant at Alathiyur, Tamil Nadu. which is saidto be the most modern plant in the country due to its 30.50 lakh tons per annum. Thecompany is also one of the largest wind energy producers in the country. This has helpedthem to have an image of eco-friendly Company. Madras Cement has been very aggressivewith capacity additions in the last few years, its cement capacities increased to 12.5 MTPAwith a marginal capacity in East India. While the company is not much efficient in terms ofcosts, it enjoys a very strong brand franchise in the south, leading to higher realizations thanmost of the pan-India players operating in the south region. Unlike many of its peers, thecompany primarily focuses on the retail or individual house builder demand.J.K.Cement -JK cement is among the top cement manufactures in India. It started the cementmanufacturing in the year 1975 at Nimbahera in Rjasthan, since then it has total 4 greycement plants with a capacity to produce 7.5 MTPA. JK cement is second largest whitecement manufacturers after UltraTech with a capacity of 3 lacks tons per annum. Thecompany is one of the major exporters of white cement to countries like South Africa,Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka, Kenya, UAE and Nepal. The companyhas reserves of limestone to meet their requirements for the next 40 years.Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%25.00%Madras CementProfitability Trend
  70. 70. Chettinad Cement -Chettinad Cement Corporation limited is established in 1962 to cater to growingdemand of cement in the country. The total cement manufacturing capacity of the company is11 MTPA at its four units at Puliyur, Karikkali and Ariyalur in Tamil Nadu and ChincholiTaluk in Karnataka. It has its own captive power plants to cater its own plants.Mar08 Mar09 Mar10 Mar11 Mar120.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%16.00%18.00%J K CementProfitability TrendMar08 Mar09 Mar10 Mar11 Mar12-5.00%0.00%5.00%10.00%15.00%20.00%Chettinad CementProfitability Trend
  71. 71. Mangalam Cement –Mangalam Cement is established in 1976 by Shri B.K.Birla and having commenced cementproduction in 1981. Being a part of B.K. Birla group of companies has emerged as a leadingintegrated manufacturer of world class cement in North India.If we look at all the above companies’ performance, we can see that UltraTech Cement, ShreeCement, India Cement, Madras Cement, J.K.Cement and Chettinad Cement are performingwell in comparison with other companies. There is an increase in profitability trend whencompared with the profits in the year 2012 and 2011. Where there is a decrease or moderategrowth in profitability trend for all the remaining companies when compared with the profitsin the year 2012 and 2011.Indicator 2005 2006 2007 2008 2009 2010 2011Sales growth of cement companies 15.6 18.5 41.5 18.6 12.4 12.9 11.6PAT growth of cement companies 327.3 42.3 163.2 20.8 -12.4 14.7 -40.4PAT margin of cement companies 6.5 9.6 17.8 17.8 14 14.3 7.4Source: CMIE database.Profitability of cement sector has considerably eroded in the last two years with a moderationin demand, low capacity utilization and increase in wages. As per the above table, rate ofgrowth of profit after tax turned negative in 2010-11 and as percentage to income, this ratiodeclined from a peak of 17.8% in 2006-08 to 7.4% in 2010-11.Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%25.00%Mangalam CementProfitability Trend
  72. 72. Cost analysisThe energy costs and cement freight costs are the two most important elements in the coststructure of a cement company. While, the share of power and freight costs has increasedmarginally in its share of total operating costs. The share of costs on account of material andother (repair and maintenance, employees and selling) expenses have more or less remainedstable.Limestone- Due to limited resources of limestone, there are talks with National Council forcement and Building Materials (NCCBM) for R&D of Geopolymeric Cement which requiresome chemical bonding instead of Lime to avoid paucity of lime and soil erosion.Fly Ash & Slag- To reduce consumption of limestone and to conserve it, substitutes are beingused like substitution of clinker by using fly ash and blast furnace slag. Utilization of fly ashprocured from power plants and slag generated from steel plants reduces dust emission by9800 tones/annum and CO2 emission by 33.6 million tones/annum. Concerns have beenraised for depriving to use own fly ash being produced by captive power plants of cementindustry as cement industries are compelled to supply 20% of their own fly ash to