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Indi projct cement


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Cement Industry-India 4 Players

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Indi projct cement

  1. 1. Somaiya Institute of Management Studies & Research, Mumbai. 2012-14 Study of four major Indian brands in the CEMENT Sector. A comparative analysis. PARNAMOY DUTTA Roll No. : 13 PGDM (IB)
  2. 2. Contents 1. Introduction 1 2. Major Players in India  ACC Limited o History o Slogan and Vision o Major milestones  Ambuja Cements Limited o History o Slogan and Vision o Major milestones  UltraTech Cement Limited o History o Slogan and Vision o Major milestones  JK Cement Limited o History o Slogan and Vision o Major milestones 2 2 2 4 4 6 6 7 7 8 8 9 9 11 11 12 12 3. Comparison  Market Share of Major Companies  Pricing in the last few months  Distribution  Promotions 13 13 13 14 16 4. Observations on: Comparing  Production in MnT (million tonnes)  Profit after TAX in ` Crores  Sales Volume in MnT  Net Worth in ` Crores 18 18 18 19 19 5. Cement Industry: Overview 20 6. Bibliography 24
  3. 3. 2 Introduction India is one of the emerging markets in the global economy. As a result there is a positive growth rate in the infrastructure and housing markets. Regular government spending on the rural sector and infrastructure spend accomplished by rise in the number of infrastructure projects implemented by the private sector will also drive forward the growth in domestic cement demand. According to forecast it is expected that due to this positive vibe in the market India’s cement production will grow at a compound annual growth rate of 12% during 2012-14 to reach 303 million metric ton. Cement Manufacturing Association is targeting to achieve 550 Million metric ton capacities by the year 2020. It can be also assumed that with relaxing of FDI norms a number of foreign players can also enter the industry thereby increasing the competitiveness and quality of the product delivered. Also with the increase of number of production units the advantages of industrialization will also enrich our economical situation. India is the 2nd largest producer of cement in world after China. There are almost 137 large and 365 mini cement plants. Leading players in the industry include ACC limited, UltraTech Cement Limited, Ambuja Cements Limited, JK Cement Limited, etc. Cement acts as an adhesive that holds concrete together and is hence vital for meeting the economy’s needs of housing & accommodation and necessary infrastructure for roads, bridges, schools, hospitals, offices and other utilities. The demand for cement depends on the rate of growth and level of development of the economy. Considering the present scenario of raw materials needed for construction it is well understood that there is no substitute for cement hence the demand for cement is price inelastic. In this report we will look at the major players in the Indian market today. Then we will do a comparative analysis between them. And finally we will decipher the major observation on the major players and the industry as a whole. Let us now look at the major players in India.
  4. 4. 3 Major Players ACC Limited: History: ACC Limited was formed in the 1936 when ten existing companies came together to merge to form a single entity. Hence the name Associated Cement Companies Limited. These companies belong to four prominent business groups Tatas, Khataus, Killick Nixon and F E Dinshaw groups. F E Dinshaw is recognized as the founder of ACC. This merger was the first of its kind even before the term mergers and acquisitions were coined. The Tata group was with the group till 1999. By the end of 2000 the Tata group sold all 14.45 per cent of its shareholding in ACC to subsidiary companies of Gujarat Ambuja Cements Ltd (later called Ambuja Cement Ltd), who then became the largest single shareholder in ACC. In a significant turn of events in 2005 a new association of Holcim group of Switzerland and ACC was formed with the help of Ambuja Cements India Limited (ACIL) after which shareholdings of ACIL increased to 34.69 percent. This is an important event in the history of ACC as Holcim was a world leader in cement production with worldwide operations in 70 countries. ACC's First Board Meeting in 1936 at The Esplanade, Mumbai.
  5. 5. 4 Slogan: “Build with Confidence” a very catchy and apt tagline which caters well to its clients. Vision: “To be one of the most respected companies in India; recognized for challenging conventions and delivering on our promises.” Major Milestones: Year Actions 1936 ACC Limited formed. First board meeting. 1947 India’s first entirely indigenous cement plant set up at Chaibasa, Bihar. 1956 Bulk Cement Depot established at Delhi. 1961 Manufacture of Portland Slag Cement (from Chaibasa plant) and Accocid Cement (resistant to corrosion of acid and chemicals) for the first time in India. 1968 Advent of computers in ACC for data processing and designing management information and control systems. 1973 Take-over of The Cement Marketing Company of India. 1977 ASSOCHAM national award for contribution in rural and agricultural development activities. 1978 Introduction of the energy efficient precalcinator technology for the first time in India. Full scale commercial production based on MFC technology at Wadi in 1979. 1979 ACC wins international contract for operation and management of a cement plant at Yanbu-Ras Biridi in Saudi Arabia.
  6. 6. 5 1982 Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka. 1987 New binder for sub-zero temperatures developed to be used for Indian expedition to Antarctica. 1992 Incorporation of Bulk Cement Corporation of India, a joint venture with the Government of India. 1995 Selected as the most respected company by Business India 1999-2000 Tata Group sells their stake in ACC to the GACL group, who with 14.45% now emerge as the single largest shareholder of ACC. 2004 Listed in London Stock Exchange 2005 Strategic alliance with Holcim group. 2008 CNBC-TV18 India Business Leader Award. 2010 FICCI Award for Outstanding Corporate Vision 2011 World’s largest kiln installed at Wadi Plant, in Karnataka. Major Manufacturing Units: ACC Limited has its major manufacturing sites at the following places:  Bargarh Cement Works  Chaibasa Cement Works  Chanda Cement Works  Damodhar Cement Works  Kudithini Cement Works  Kymore Cement Works  Sindri Cement Works  Wadi Cement Works  Thondebhavi Cement Works  Tikaria Cement Works
  7. 7. 6 Ambuja Cements Limited: History: Ambuja Cements Limited is one of the leading cement manufacturing companies in India. It was founded by Narotam Sekhsaria and Suresh Neotia in 1983. It was previously known as Gujarat Ambuja Cements Ltd. Under Narotam Sekhsaria business acumen and leadership skills the company registered good growth rate. The company commenced cement production in 1986. The global cement major Holcim acquired management control of ACL in 2006. Holcim holds a little over 46% equity in ACL. It has a capacity of 25 million tonnes from its five integrated cement manufacturing plants and eight cement grinding units from across the country. Its environment protection measures are on par with global standards. It is the first cement company to built 3 captive ports along the west coast of India to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers. Cement Manufacturing Unit in Gujarat.
  8. 8. 7 Slogan: With “Viraat Compressive Strength” as their tagline Ambuja Cements Limited the company appeals to its target consumers as the strongest cement available in the market. Vision: “To be the most admired and competitive company in our industry.” Major Milestones: Year Actions 1986 First cement manufacturing plant set up at Ambujanagar, Gujarat worth 0.7 million tonnes capacity commences production. 1988 Undertook the Van-Vihar project to convert a mined area into an environmentally restored and scenic location. 1992 Setting up plants at Ambujanagar, Gujarat and at Suli, Himachal Pradesh. Also the company Kodinar Taluka under its CSR initiative 1996 Achieves highest ever export by any Indian Cement Company. 1997 Setting up of power plants at Gujarat and Himachal Pradesh. 1999 Cement plant set up in Sri Lanka. 2002 Over 100% capacity utilisation achieved at Chandrapur Plant. 2007 Chairman Suresh Neotia is awarded with Padma Bhushan. 2008 Corporate communications department set up. 2011 Achieves water-positive status, as certified by an independent foundation, Det Norske Veritas.
  9. 9. 8 UltraTech Cement Limited: History: One of the most important players in Indian Cement Industry is UltraTech Cement Limited. It belongs to the group of Grasim Industries under the house of Birlas (Aditya Vikram Group). The inception of the company can be traced back to mid 1980s (1983-85) with the establishment of Grasim’s first cement plant at Jawad in Madhya Pradesh. In 2001 with the positive vibe of industrialization and growth of economy the management decide to increase its reach. In the process Grasim acquired a stake in L&T Cement. The stake was further increased to majority stake in 2003 thereby giving them a pan-India presence and increased market share. The demerger of L&T business was completed in 2004 and Grasim acquired a controlling stake in L&T cement Ltd and the name was changed to UltraTech Cement. In 2010 Samrudhhi Cement Ltd was amalgamated with UltraTech Cement in July 2010. In September 2010, UltraTech Cement acquired management control of ETA Star Cement Company, along with its operations in the UAE, Bahrain and Bangladesh, thereby putting UltraTech on the global map. It is now the 10th largest producer of grey cement in the world. Advertisement showing the takeover of L&T Cement
  10. 10. 9 Slogan: With a strong a tagline of “The Engineer’s Choice” UltraTech Cement appeals to its consumers as the cement that is even preferred by Civil and Construction engineers. Vision: Their vision is driven by their values of INTEGRITY: Honesty in Every Action Acting and taking decisions in a manner that these are fair, honest, following the highest standards of professionalism and are also perceived to be so. COMMITMENT: Deliver on the Promise On the foundation of Integrity, doing whatever it takes to deliver value to stakeholders. PASSION: Energised Action A missionary zeal arising out of emotional engagement with the organisation that makes work joyful and inspires each one to give his or her best. SEAMLESSNESS: Boundary Less in Letter and Spirit Thinking and working together across functional silos, hierarchies, businesses and geographies. SPEED: One Step Ahead Always Continuously seeking to crash timelines and choosing the right rhythm to optimise organizational efficiencies. Major Milestones: Year Action 1983 Awarpur Cement Works Plant I acquired. 1987 Awarpur Cement Works Plant II acquired. 1994 Hirmi Cement Works acquired. 1995 (IPVM) National Award By Ministry of Environment & Forests, Government of India.
  11. 11. 10 1998 IMC Ramakrishna Bajaj National Quality Award. Capexil Certificate of Export Recognition - Top Exporter- Cement, Asbestos, Cement Products 1999 Narmada Cement Company Limited acquired. Ratnagiri Cement Works acquired. 2001 Grasim acquires 10 per cent stake in L&T. Subsequently increases stake to 15.3 per cent by October 2002. Durgapur grinding unit becomes functional. 2002 The Grasim Board approves an open offer for purchase of up to 20% of the equity shares of Larsen & Toubro Ltd (L&T), in accordance with the provisions and guidelines issued by the SEBI Regulations, 1997. Grasim increases its stake in L&T to 14.15%. 2004 L&T cement business demerged. New entity formed named as UltraTech Cement. 2006 Narmada Cement Company Limited amalgamated with UltraTech under the provision of Sick Industrial companied Act. 2008 Golden Peacock National Quality Award. 2010 Acquired management control of ETA Star Cement together with its operations in the UAE, Bahrain and Bangladesh. Samrudhhi Cement Limited amalgamated with UltraTech Cement Limited in July 2010. 2011 ASSOCHAM CSR Excellence Award for its "truly outstanding" CSR activities.
  12. 12. 11 JK Cement Limited: History: JK Cement is an affiliate of the J.K. Organization, which was founded by Lala Kamlapat Singhania. Commercial production commenced in May 1975 at our first plant at Nimbahera, Rajasthan. At Nimbahera, we started with a single kiln with a production capacity of 0.3 million tons. After adding two more kilns and precalciner with a capacity of 0.4 million tons in 1988, capacity at Nimbahera increased to 1.54 million tons. During the years 1998 through 2003, continuous implementation of modifications to each of the kilns, increased the aggregate capacity at Nimbahera to 2.8 million tons as of September 30, 2005. Today, J. K. Cement Ltd. is one of the largest cement manufacturers in Northern India. They are also the second largest white cement manufacturer in India by production capacity. While the grey cement is primarily sold in the north Indian market, the white cement enjoys demand in the export market including countries like South Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka, Kenya, Tanzania, UAE and Nepal. Nimbahera Unit, Rajasthan.
  13. 13. 12 Slogan: With their tag line “Deewarien Bol Uthengi” JK Cement Limited emphasizes on their quality and customer satisfaction. Vision: Their vision is expansion through balancing equipment keeping in mind customer satisfaction with a constant focus on quality control. Major Milestones: Year Action 1975 Nimbahera Unit commenced production with initial capacity of 0.3 million tonnes per annum. 1979 Second production line at Nimbahera Unit increased production to 0.72 MnTPA. 1982 Third production line at Nimbahera Unit increased production to 1.14 MnTPA. 1984 Lime-based white cement plant was established at Gotan, with an initial capacity of 0.05 MnTPA. 1987 A captive thermal power plant was installed at Bamania. 1988 A pre-calciner was installed at Nimbahera, increasing the total capacity to 1.54 MnTPA. 1990 The JKSL Cement Division instituted Architect of the Year award. 2000 The total capacity of the white cement plant at Gotan was increased to 0.3 MnTPA. 2005 The Company was listed on the BSE. 2006 JK Cement finalised the issue price of its recently concluded Initial public offering (IPO) at Rs 148 per share. 2009 The installed capacity of grey cement increased to 7.5 MnTPA with the merger of Jaykeycem Ltd.
  14. 14. 13 Comparison Market Share: Company Market Share By installed capacity (%) ACC 10.30 UltraTech 18.30 Ambuja 9.60 JK Cement 3.90 Others 57.90 Prices: The following chart describes the price of cement in various parts of India from Jan, 2012 to April, 2012. RegionMonths Jan(`/50kg) Feb(`/50kg) Mar(`/50kg) Apr(`/50kg) East 290 302 305 310 West 260 280 305 300 North 275 270 280 278 South 288 285 300 300 Central 255 250 270 280
  15. 15. 14 Distribution Network: Export Domestic Cement Plant/Manufacturing Unit Export/ Domestic Transport Agents Transport Agents Railways/ Roadways Railways/ Roadways PORTS Distributors/Dealers End User
  16. 16. 15 ACC Limited Ambuja Cements. UltraTech Cement. JK Cement.
  17. 17. 16 Promotions: ACC Limited: With the tag line of their product “Sada Atoot Raho” they focus on the longevity of their product. With the actors in the commercial as common people they have been successful in reaching the common masses as they could relate to themselves more to the advertisement. Ambuja Cements Limited: With this television commercial Ambuja Cement focuses on its quality and strength of its product. This feature also comics the Indian family problem of division of property. The depth of the advertisement is not only to promote the product but also has the moral of not building walls between relationships.
  18. 18. 17 UltraTech Cement Limited: UltraTech appeals to its masses by conveying the message that it’s the engineer’s choice thereby giving reliability and trustworthiness. Also they were among the front runners in sponsoring the IPL team Rajasthan Royals thereby making its presence felt at the most happening cricket tournament in India. JK Cement Limited: JK Cement in an aggressive promotional action finalized on explosive Indian batsman Virender Sehwag as their brand ambassador. It was a good choice as he is a popular figure in India and also belongs to the northern part of India which is where maximum business of JK Cement comes from.
  19. 19. 18 Observations Cement production (in million tonnes) for the period 2009 to 2011: Profit after TAX in `crores for the period 2009 to 2011: CompanyYear 2009 2010 2011 ACC 21.37 21.14 23.46 UltraTech 15.87 17.64 32.92 Ambuja 18.83 20.13 20.97 JK Cement 4.58 5.5 5.7 CompanyYear 2009 2010 2011 ACC 1607 1120 1325 UltraTech 977 1093 1719 Ambuja 1218 1264 1229 JK Cement 142 226 64.05
  20. 20. 19 Sales volume in million tonnes for the period 2009 to 2011: Net worth in ` crores for the period 2009 to 2011: CompanyYear 2009 2010 2011 ACC 21.5 21.29 23.73 UltraTech 15.8 17.77 33.23 Ambuja 18.79 20 20.91 JK Cement 4.55 5.45 5.7 CompanyYear 2009 2010 2011 ACC 6016 6469 7192 UltraTech 3602 4609 10666 Ambuja 6468 7330 8069 JK Cement 901.62 1082.41 1522.1
  21. 21. 20 Cement Industry: Overview  CMA is targeting to achieve 550 million tonnes capacity by 2020. The data for Capacity and Production for the fiscal period of 2009 to 2011 are as follows:  The data for Cement production and despatch (as % of total capacity) for the previous two Fiscal Year is as follows: Fiscal Year Capacity in MnT Production in MnT 2009 230.6 187.6 2010 266.2 201 2011 285.8 211 Year Cement Production(%) Cement Despatched(%) 2011-2012 98.81 97.84 2010-2011 96.75 96
  22. 22. 21  Being a bulk item transporting cement over long distances can prove to be uneconomical as it attracts very high amount of freight. Thus it has been segmented regionally i.e. Northern, Central, Western, Southern and Eastern. As it is a freight intensive industry, the segment is completely domestic driven and exports account for very negligible percentage of the total cement off take.  India ranks 2nd in the world cement producing countries.  Cement Industry now meets with the pollution standards and is in fact one major consumer of fly ash from Thermal Power Plants and slag from Steel Industry.  The sector operates on high level of fixed cost and therefore volume growth is necessary for good growth margins. It is a highly Capital-Intensive Sector.  Access to raw materials and consuming markets is very necessary as it is a very bulky commodity.  The sector is energy intensive in nature as Power plays an important role in the cost of the product. Hence many companies resort to captive power plant for energy supplies.
  23. 23. 22  Michael Porter’s Five Forces analysis of the Cement Sector:  BCG Matrix of the Companies studied in this article:  It is expected that in 2012-13 subdued demand along with excess capacities would lead to a fall in capacity utilisation.
  24. 24. 23  Capacity utilization (%) for the period of 5 years from 2008-12 is as below:  The demand is expected to grow by 8% YOY in 2012-13. This is likely to be spearheaded by infrastructure and household projects in urban places from the west and the east.  The price of cement is expected to remain constant.  News that would boost the cement market: o Ministry of Roadways, Transport & Highways to roll out $120 billion project to widen National Highways. o DLF & Unitech plans a total of `7,000 crores investment in malls. o Strong balance sheet of the Cement manufacturing companies to fund for future growth. o The penalty at three times the profits made via cartelisation by Competition Commission of India is harsh, subjective in nature and may not materialise.  Major Challenges: o Economic slowdown and high taxation such as sales tax, VAT, royalty, etc. o Price of domestic coal is on the rise as well importing coal for energy is becoming costlier due to the weakening Rupee.  Major relief actions by government: o Overall taxation can be reduced by 20-25% and also by reducing the cross subsidy burden on electricity, railway freight.  Manufacturers need to maximize production of blended cement by using industrial waste & by using efficient machines which lowers input cost.
  25. 25. 24 Bibliography        Annual Report : JKCement 2009-10  Annual Report : JKCement 2010-11  Annual Report : UltraTech Cement 2009-10  Annual Report : UltraTech Cement 2010-11  Annual Report : ACC Limited 2009-10  Annual Report : ACC Limited 2010-11  Annual Report : Ambuja Cement 2009-10  Annual Report : Ambuja Cement 2010-11  Google Images             