Fm cement assignment 1


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Fm cement assignment 1

  1. 1. India Vivek Narang (91)9844001232 Sector Review – XXXX vivek14narang@gmail 18 May 2012 Sector Overview The cement industry in India is experiencing a boom on account of overall growth of the Indian economy. India is the second largest producer of cement on the globe after china. In total, India manufactures 251.2 Million Tonnes of cement per year. Market Segments The cement industry in India is divided into four zones namely North, East, West and Central- based on the differentiation in the consumer profile and supply- demand scenario. Major Players of Cement Industry 1) ACC Limited 2) Ambuja Cements Limited 3) Ultra Tech Cement Limited 4) India Cement Limited 5) Shree Cement Limited 6) Rain Cement Limited 7) Prism Cement Limited 8) Madras Cement Limited 9) Birla Cement Limited 10) JK Cement Limited Cost analysis The energy costs and cement freight costs are the two important elements in the cost structure of a cement company. While, the share of energy costs has increased marginally, freight costs has experienced a decline in its share of total operating costs. Foreign Investments FDI Inflows to cement and gypsum Products industry in India has registered significantly growth in the last few years due to the incentives that have been provided by the government of India. This has helped in the growth and development of the industry.Please see important notice on last page Page 1 of 4
  2. 2. India Sector Review 09 May 2011 Government Policies Government policies have affected the growth of cement plants in India in various stages. Price and Distribution controls (1940-1981) During the second world war, cement was declared as an essential commodity under the defense of India Rules and was brought under price and distribution controls which resulted in sluggish growth. Partial Decontrol (1982-1988) Under this scheme, levy cement quota was fixed for the units and the balance could be sold in the open market. Swot Analysis a) Strength Second largest in the world in terms of capacity: In India there are approximately 124 large and 300 mini plants with installed capacity of 200 million tonnes. Low cost of production: Due to easy availability of raw materials and cheap labour. b) Weakness Effect of global recession on real estate: The real estate prices are stabilizing and facing steady slowdown especially in metros. Demand supply gap, overcapacity: the capacity additions distort the demand- supply equilibrium in the industry thereby affecting profitability. Increasing cost of production due to increase in coal prices High interest rate on housing: the re-pricing of the interest rates in the last four years from 7% to 12% has resulted in the slowdown in residential property market. c) Opportunities Strong growth of economy in the long run Increase in infrastructure projects Growing middle class Technological change d) Threats Imports from Pakistan affecting markets in Northern India Excess overcapacity can hurt margins, as well as prices.Please see important notice on last page Page 2 of 4
  3. 3. India Sector Review 09 May 2011 Future of the sector The annual demand for cement in India is consistently growing at 8-10%. The demand for cement in the country is expected t increase to 244.82 million tonnes by 2012. The government has taken measures to increase the availability of indigenous coal for cement manufacturers Conclusion The success of the firm in the Indian Cement industry is dependent on the degree of integration between various functions of marketing- distribution, pricing, segmentation, differentiation and integrated communication Program.Please see important notice on last page Page 2 of 4
  4. 4. India Sector Review 09 May 2011 Key to EDUCORPORATEBRIDGE investment rankings: BUY = Expected to outperform the local market by >10%; O-PF = Expected to outperform the local market by 0-10%; U-PF = Expected to underperform the local market by 0-10%; SELL = Expected to underperform the local market by >10%. Performance is defined as 12-month total return (including dividends). ©2011 EDUCORPORATEBRIDGE, India. Note: In the interests of timeliness, this document has not been edited. Other disclosures will come xXXXXXXXXXXXXXXXXXXXXXXXXXPlease see important notice on last page Page 2 of 4