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Cement march-2015

India is the second largest cement producer in the world, with production expected to reach 550 million tonnes by 2020. The industry is dominated by private players and large cement plants. The largest markets are in South and West India where 77 of the 188 large plants are located. Cement demand is expected to grow robustly due to infrastructure development and the initiative to build 100 smart cities. The long-term potential remains strong with the market characterized by oligopoly and low substitutes. Emerging regions like the North-East offer attractive investment opportunities. Major players are increasing capacity to meet rising demand.

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Second largest cement market • With nearly 350 million tonnes of cement production capacity, India is the second largest cement producer in the world. By 2020, cement production will reach to 550 million tonnes Dominated by private players • Of the total capacity, 98 per cent lies with the private sector and the rest with public sector, with the top 20 companies accounting for around 70 per cent of the total production Higher share of large plants • 188 large cement plants together account for 97 per cent of the total installed capacity, while 365 small plants account for the rest Large concentration in South and West • Of the total 188 large cement plants in India, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu Source: Planning Commission, Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division)
Growing demand Source: Edelweiss, Notes: FY20E – Estimated market size for 2020 ^Ministry of External Affairs (Investment and Technology Promotion Division), * December 2014 Robust demand • Robust infrastructure growth during 12th Five Year Plan to drive growth • Demand is expected to be boosted by growth in real estate sector, initiative to build 100 smart cities to give a further stimulus Long-term potential • Oligopoly market, where large players have partial pricing control • Low threat from substitutes Attractive opportunities • The North-East, which is witnessing a construction boom, offers attractive investment opportunities • Large planned investments in infrastructure and housing is likely to boost demand for cement in the coming years as well Increasing investments • Robust investments are being made by the existing players to expand their capacity • Increasing presence of Tier II cement players • Use of alternate fuels to lower production costs and emissions FY15* Production capacity: 366 million tonnes^ FY20E Production capacity: 550 million tonnes Advantage India
Source: Cement Manufacturers‘ Association (CMA), Planning Commission, Aranca Research Notes: mtpa - Million Tonnes Per Annum, mt – Million Tonnes ^Planning Commission estimates, **December 2014 Cement industry (FY15**) Mini and white cement plantsLarge cement plants • Cement plants: 188 • Installed capacity: 366 mtpa^ • Cement production: 223.7mt (April 2014-January 2015) • Cement plants: 365 • Installed capacity: 11.1 mtpa • Cement production: 6.0 mt*
Top cement producers in 2014, (million tonnes) Source: International Cement Review, USGS Mineral Resources Report, Aranca Research India is the 2nd largest cement producer as well as consumer in the world led by the enormous growth in the infrastructure and construction sector for the last two decades India is already the second largest producer of cement, accounting for around 7 per cent of world‘s output Top cement consumers in 2012, (million tonnes) 2,160 242 79 69 63 59 58 55 53 51 China India USA Brazil Russia Iran Turkey Indonesia SaudiArabia Egypt 2,500 280 83 72 71 70 66 57 50 56 China India USA Iran Turkey Brazil Russia Japan Egypt Indonesia
Per capita cement consumption in 2012 (kg) Source: International Cement Review, Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division) Note: PPP – Purchase Power Parity As India‘s current per capita consumption of cement is much lesser than the developed and other developing economies, there is a significant business opportunity to cater the unmet and rising demand In order to meet the rising demand, cement companies are expected to pent up production by around 56 MT in the next three years Cement intensity (grams per USD of PPP GDP) Source: International Cement Review, Aranca Research 1,683 1,581 911 770 744 616 546 330 329 232 202 191 129 Saudi Arabia China SouthKorea Iran Turkey Malaysia Italy Brazil Japan USA Indonesia India Pakistan 197 110 93 74 59 56 53 51 47 43 42 41 37 China SouthKorea Turkey Italy Iran Mexico Japan Malaysia India Indonesia Colombia Chile Brazil
Production of cement (million tonnes) Source: Department of Industrial Policy & Promotion 12th Five Year Plan, Aranca Research Cement production increased at a CAGR of 7.3 per cent to 256 million tonnes over FY07–14 As per the 12th Five Year Plan, production is expected to reach 407 million tonnes by FY17 Availability of fly-ash (from thermal power plants) and use of advance technology has increased production of blended cement The environment-friendly blended cement is more cost-efficient to produce, as it requires lesser input of clinker and energy 11% 11% 8% 8% 7% 19% 26% 50% 67% 65% 70% 63% 42% 25% 28% FY95 FY00 FY05 FY08 FY12 Portland Slag Portland Pozzolana Ordinary Portland Share of blended cement in total cement production has increased (%) Source: Cement Vision 2025, CRISIL, AT. Kearney 156 168 182 207 229 247 251 256 332 368 407 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E CAGR: 10.1%
Domestic cement consumption (million tonnes) Source: Working group for 12th Five Year Plan, Aranca Research Notes: E – Estimate, CAGR - Compound Annual Growth Rate Domestic cement consumption is expected to have reach 265 million tonnes in FY13 from 222 million tonnes in FY11 The consumption is further expected to increase at a CAGR of 10.2 per cent during FY11-17 and reach 398 million tonnes Demand will be supported by infrastructure development in tier 2 and tier 3 cities The country‘s per capita consumption is around 190 kg, which is lower than the World average which is around 500 Kg, providing further room for demand in the industry 222 242 265 293 324 359 398 FY11 FY12 FY13E FY14E FY15E FY16E FY17E CAGR: 10.2%
Cement production capacity (million tonnes) Source: Working group for 12th Five Year Plan, Aranca Research Notes: E - Estimate, CAGR - Compound Annual Growth Rate Cement production capacity reached 333 million tonnes in FY14 from 323 million tonnes in FY11 Production capacity is expected to increase at a CAGR of 6.8 per cent during FY11-17 and reach 479 million tonnes 323 336 315 333 405 441 479 FY11 FY12 FY13 FY14 FY15E FY16E FY17E CAGR: 6.8%
Cement capacity (million tonnes) and utilisation rate (%) Source: Working group for 12th Five Year Plan, Aranca Research Notes: E - Estimate, CAGR - Compound Annual Growth Rate Cement capacity utilisation rate is expected to touch around 85 per cent in FY17 from 71 per cent in FY11 The utilisation rate is at 73 per cent in FY14 60% 65% 70% 75% 80% 85% 90% 150 200 250 300 350 400 450 500 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Capacity -LHS Production-LHS Utilisation rate (%)
Source: Department of Industrial Policy & Promotion, Aranca Research Currently, India has 188 large cement plants across states and is among the top ten exporters both by value and volume Andhra Pradesh is the leading state with 40 large cement plants, followed by Tamil Nadu and Rajasthan having 21 and 19 plants, respectively Major cement clusters include - Satna (Madhya Pradesh), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (Andhra Pradesh) and Chandoria (Rajasthan) 37 19 21 1112 11 10 10 11 5 5 4 8 3 3 5 3 2 2 1 1 1 31.2% 35.9% 41.4% 40.5% 39.6% 24.0% 22.7% 21.9% 21.6% 21.5% 14.6% 14.1% 12.2% 12.2% 13.4% 14.0% 12.5% 11.7% 12.8% 13.0% 16.2% 14.8% 12.9% 12.8% 12.5% FY08 FY09 FY10 FY11 FY12 South North East Central West Regional share of total installed capacity (%) Source: Cement Manufacturer‘s Association (CMA)
Source: Indian Minerals Year Book by Indian Bureau of Mines, Aranca Research Notes: mtpa - Million Tonnes Per Annum, FY14* - Data from Centrum Cement Report Cement industry South North East West Central 132.7 mtpa 80.3 mtpa 47.7 mtpa 54.8 mtpa 46.3 mtpa Tamil Nadu, Andhra Pradesh and Karnataka Rajasthan, Punjab, Haryana and the NCR West Bengal, Chhattisgarh, Orissa and Jharkhand West Bengal, Chhattisgarh, Orissa and Jharkhand Uttar Pradesh, Madhya Pradesh Installed capacity (FY14)* Key markets
Shares in total capacity in Northern region (2012) Source: Indian Minerals Year Book by Indian Bureau of Mines, Aranca Research Rajasthan has the highest installed capacity in North India, accounting for a 77.7 per cent share in capacity in the region in 2012 Chhattisgarh leads the Eastern region with a share of 35.5 per cent of total installed capacity in the region in 2012 Another factor that adds to the growth is the availability of coal and limestone in the concerned states Shares in total capacity in Eastern region (2012) 77.7% 5.6% 3.3% 5.7% 5.7% 1.0% 1.0% Rajasthan Himachal Pradesh Punjab Uttarakhand Haryana Jammu & Kashmir Delhi 35.5% 20.4% 19.4% 14.6% 6.4% 3.0% 0.6% Chhattisgarh Jharkhand Orissa West Bengal Meghalaya Bihar Assam
Shares in total capacity in Southern region (2012) Source: Indian Minerals Year Book by Indian Bureau of Mines, Aranca Research Andhra Pradesh has the highest installed capacity in South India (48.9 per cent share of total installed capacity) Madhya Pradesh leads the Central region in installed capacity, while Gujarat leads the Western region Shares in total capacity in Central region (2012) Shares in total capacity in Western region (2012) 48.9% 35.6% 14.8% 0.6% Andhra Pradesh Tamil Nadu Karnataka Kerala 29.5% 70.5% Uttar Pradesh Madhya Pradesh 61.3% 38.7% Gujarat Maharashtra
All India (million tonnes) Total demand for cement is expected to grow at a CAGR of 10.2 per cent to 265.9 million tonnes during FY08-13 Cement demand from the Eastern and Central regions during FY08-13 is expected to grow at a CAGR of 13.5 per cent and 12.1 per cent, respectively. Central (million tonnes) East (million tonnes) 163.4 177.5 196.4 210.2 236.3 265.9 FY08 FY09 FY10 FY11F FY12F FY13F 23.8 26.2 30.8 34.3 38.2 42.0 FY08 FY09 FY10 FY11F FY12F FY13F 24.7 28.0 33.0 37.3 41.7 46.6 FY08 FY09 FY10 FY11F FY12F FY13F CAGR: 10.2% CAGR: 12.1% CAGR: 13.5% Source: Cement Manufacturer's Association (CMA)
32.7 34.5 38.8 41.4 45.4 49.8 FY08 FY09 FY10 FY11F FY12F FY13F 33.6 35.1 38.3 40.8 48.6 51.0 FY08 FY09 FY10 FY11F FY12F FY13F 48.6 53.8 55.5 56.4 62.1 63.9 FY08 FY09 FY10 FY11F FY12F FY13F South (million tonnes) Cement demand from Western, Northern and Southern regions is expected to grow at a CAGR of 8.8, 8.7 and 5.6 per cent, respectively, during FY08-13 North (million tonnes) West (million tonnes) CAGR: 5.6% CAGR: 8.7% CAGR: 8.8% Source: Cement Manufacturer's Association (CMA)
All India Source: Cement Manufacturer's Association (CMA) UltraTech Cement, a major player in India, accounted for 15.0 per cent of the total market share in terms of installed capacity in 2011 South East 10.2% 5.9% 9.9% 8.3% 7.1% 8.0% 50.6% India Cement Madras Cement Ultratech Cement Chettinad Cement Dalmia Cement ACC Others 14.2% 6.2% 12.1% 9.8% 5.5% 52.1% Lafarge India ACC Ultratech OCL India Ltd Ambuja Cement Others 10.0% 7.5% 15.0% 1.4%66.1% Ambuja Cement ACC Ultratech Cement Jaypee Cement Others
North Jaypee Cement led the Central region in terms of installed capacity, with 33.5 per cent of the market share; the Western region was dominated by UltraTech cement with 29.0 per cent of market share in 2011 Ambuja Cements accounted for 28.9 per cent of the total market share in terms of installed capacity in the Northern region in 2011 Central West 28.9% 16.6% 14.2% 13.8% 11.1% 7.3% 5.5% 2.5% Ambuja Cement Shree Cement Others Ultratech Cement J K Cement ACC Jaypee Cement Birla Cement 33.5% 12.3% 12.1% 42.1% Jaypee Cement Ultratech Cement ACC Others 29.0% 10.9% 12.5% 47.6% Ultratech Cement Jaypee Cement Ambuja Cement Others Source: Cement Manufacturer's Association (CMA)
Increasing presence of small and mid-size cement players • Presence of small and mid-size cement players across regions is increasing, which helps to diminish market concentration of industry leaders • Small and mid-size players have been constantly increasing their installed capacity to cater to increasing cement demand as increased needs of housing spurt demand Cost reduction through the use of alternate fuels • Major cement manufacturers in India are increasingly using alternate fuels, especially bioenergy, to fire their kilns • This is not only helping to reduce production costs of cement companies, but is also proving effective in reducing emissions Increasing sale of blended cement • The proportionate sales of blended varieties of cement—Portland Pozzolana Cement (PPC) and Portland Blast Furnace Slag Cement (PBFC)—has risen over the years • During FY13, blended cement accounted for 75 per cent of total cement production in the country, compared to merely 24 per cent in FY01* Note: * Source: Emkay Global Financial Services
ACC • The subsidiary of Holcim, has plans for a USD500 million capacity expansion in India • ACC will upgrade and expand its Jamul unit in Chattisgarh and its grinding unit in Jharkhand. This will increase ACC‘s capacity to 38 million tonnes per annum (mtpa) from 30 mtpa in a phased manner by 2016 and 55 million tonnes per annum (MTPA) in 2020 Ambuja Cements • Ambuja Cements is targeting an investment of USD580 million for capacity expansion in Rajasthan, Madhya Pradesh and Uttar Pradesh • The proposed project in Rajasthan is expected to add 5 million tonnes (MT) to Ambuja Cements‘ existing production capacity of 27.5 mtpa Dalmia Cement • Dalmia Cement is planning an investment of USD333.3 million to ramp up its manufacturing capacity to 21 mtpa from the existing 17 mtpa over the next two years. • Dalmia has plans to set up a 2.5 million tonne (MT) greenfield unit at Belgaum in Karnataka. It also plans to scale up its two plants in North-East India for a total value of USD239 million and USD9.2 million, respectively Source: Aranca Research Note: * - still waiting for approval from European Commission Holcim • In April 2014, Holcim, a Switzerland-based cement company, announced acquisition of Lafarge to create the biggest cement group in the world* • In India, Holcim‘s subsidaries (ACC and Ambuja Cements) have a combined capacity of 45 mtpa, while Lafarge has a capacity of 8 mtpa in the country
Heidelberg Cement • Heidelberg Cement, a Germany-based cement manufacturer has commissioned Phase-I of its Jhansi grinding unit • The company has undertaken an investment worth USD259.4 million for expanding its capacity to 2.9 million tonnes (MT) • Heidelberg aims to ramp up the operational capacity to 6 MT at its Damoh plant in Madhya Pradesh, striving to add an additional 9 MT by 2017 Vicat Group • France-based, Vicat Group plans to invest USD600 million for 5.5 MT capacity by FY19 • It is negotiating an acquisition of uncontrolled 47 per cent stake in the joint venture Vicat Sagar Cement (Chattrasal, Karnataka) for an enterprise value of about USD680 million • The joint venture Vicat Sagar currently has 2.75 MT capacity Amrit Cement • Amrit Cement India Ltd (ACIL) has announced the launch of Amrit Cement in the North- Eastern market • The company plans to achieve a production level of 5 million tonnes per annum by 2015– 16 through capacity expansion in North-Eastern Bihar and Nepal Source: Aranca Research
Source: Aranca Research • High – Huge capital investments required present substantial barriers to entry and achieving economies of scale • Moderate – Cement players have to depend on the railways for carriage outward and local coal companies for fuel, although diversification of freight options and fuel sources is diminishing the suppliers‘ power • Low – Substantial market concentration among large players ensures low bargaining power of buyers • Low – Although there are partial substitutes such as asphalt, glass, steel, wood, etc; practically cement has no direct substitutes • Low – The Indian cement market is oligopolistic in nature, characterised by tacit collusion, where large players partially control supply for better price discipline Positive Neutral PositivePositive Positive Market attractiveness
Source: ^Livemint: ‗Cement firms scout for overseas mines to secure gypsum supplies‘ data sourced from Confederation of Indian Industry and AT Kearney; **Cement Vision 2025, CRISIL, AT. Kearney • Given the surplus capacity and long-gestation period for green-field expansion, companies prefer inorganic route for growth • Gives them access to newer markets, newer technology and skill set from new partners in Indian context • Because domestic supply of gypsum is limited, Indian cement companies are looking to acquire gypsum mines in Thailand, Oman, Iran and other countries in close proximity to India^ • The current domestic availability of gypsum can provide for the next seven-eight years of demand^ • Companies are trying to develop a niche market for RMC (Ready Mix Concrete) • Penetration of RMC has been low at about 8 per cent (USA: 88 per cent; China: 33 per cent; Brazil: 32 per cent) because retail sales comprise mostly of bag cement** Inorganic growth/consolidation Overseas expansion for gypsum Ready-mix concrete
Source: McKinsey Quarterly Report, Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division) Housing growth Infrastructure growth Commercial real estate growth • The Housing segment accounts for a major portion of the total domestic demand for cement in India • Real estate market is expected to grow at a CAGR of 17.2 per cent over 2011–15 to USD126 billion • Growing urbanisation, an increasing number of households and higher employment are primarily driving the demand for housing, accounting for 67 per cent of the total consumption • Initiatives by the government are expected to provide an impetus to construction activity in rural and semi- urban areas through large infrastructure and housing development projects respectively • The government is strongly focused on infrastructure development to boost economic growth and is aiming for 100 smart cities • It plans to increase investment in infrastructure to USD1 trillion in the 12th Five Year Plan (2012–17), compared with USD514 billion under the 11th Five Year Plan (2007–12) • Infrastructure projects such as Dedicated Freight Corridors as well as new and upgraded airports and ports are expected to further drive construction activity, • The government intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation costs • The government is strongly focused on infrastructure development to boost economic growth • It plans to increase investment in infrastructure to USD1 trillion in the 12th Five Year Plan (2012–17), compared with USD514 billion under the 11th Five Year Plan (2007–12) • Infrastructure projects such as Dedicated Freight Corridors as well as new and upgraded airports and ports are expected to further drive construction activity • The government intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation costs
Major cement demand drivers (FY15*) Source: Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division), ^Cement Vision 2025, CRISIL, AT. Kearney Note: * December 2014 Demand for cement is highly correlated with cyclical activities like construction and development Housing sector accounts for a significant 67 per cent of the total cement demand (USA: 22 per cent; China: 25 per cent; Brazil 56 per cent)^ Real estate market is expected to grow at a CAGR of 17.2 per cent during 2011–15 to USD126 billion The rapidly increasing real estate industry in India is expected to push the demand for cement Residential real estate demand is driven by rising population and growing urbanisation Rising income levels are leading to higher demand for luxury projects Demand for affordable housing is growing in order to meet the demand from lower income groups Commercial real estate demand will be driven by growth in IT/ITeS sector and organised retail 67% 13% 11% 9% Housing sector Infrastructure Commercial & Institutional Industrial
Infrastructure spending as % of GDP Source: Working group for 12th Five Year Plan Note: Additional capacity creation estimates are based on increase in base lines, roads, housing and fiscal support Investment in infrastructure is the main growth driver for the cement industry The Planning Commission estimates total infrastructure spending to be about of 10 per cent of the GDP during the 12th Five- Year Plan (2012–17), up from 7.6 per cent during the previous Five-Year Plan (2007–12) India‘s investment in infrastructure is estimated to double to about USD1 trillion during the 12th plan (2012–17) compared to the previous plan Infrastructure spending in % during 11th and 12th Five-Year Plan 75.7 69.4 89.5 101.6 101.9 157.4 181.2 206.0 233.5 264.4 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY17E 5.2% 6.4% 7.2% 7.5% 7.9% 8.4% 7.6% 10.0% 10th Five year plan FY08 FY09 FY10 FY11 FY12 11th Five year plan 12th Five year plan 12th Plan 11th Plan
North Source: CMA (Cement Manufacturers Association), Centrum Report, Aranca Research Note: F- Forecast South East West Central All India 79% 81% 86% FY15F FY16F FY17F 75% 78% 84% FY15F FY16F FY17F 85% 79% 81% FY15F FY16F FY17F 81% 85% 90% FY15F FY16F FY17F 60% 63% 67% FY15F FY16F FY17F 73% 75% 80% FY15F FY16F FY17F
12.8 13.5 23.6 31.9 35.5 38.7 FY12 FY13E FY14E FY15E FY16E FY17E Capacity creation as per the 12th Five Year Plan (million tonnes) Source: Working group for 12th Five Year Plan, DIPP (Department of Industrial Policy and Promotion) Notes: Additional capacity creation estimates are based on increase in base lines, roads, housing and fiscal support, E – Estimates Total capacity of 336 million tonnes is estimated to have been generated in FY12 The strong momentum in capacity addition is not surprising given the sharp growth in construction, infrastructure and real estate in Indian economy Hence, the 12th Five Year Plan is estimated to have an additional capacity requirement of 156.0 million tonnes by FY17 The total FDI in cement and gypsum products had totaled USD2.9 trillion between April 2000-September 2014
Strategy BenefitsCompany/Plant Madras Cement's Alathiyur plant India Cements Ltd's Dalavoi plant UltraTech's Gujarat Cement Works Lafarge's Arasmeta plant Use bioenergy through burning of coffee husk and cashew nut shells Use Low Sulphur Heavy Stock (LSHS) sludge as alternate fuel Use tyre chips and rubber dust as alternate fuel Substitute 10 per cent of coal used in kilns with rice husk Annual cost savings of USD1.7 million Annual savings of USD6,500 approx Reduction of about 30,000 tonnes of carbon emissions annually Higher energy savings and lower carbon emissions Source: CMA, Aranca Research
Source: Industry Sources, Aranca Research Note: mtpa - Million Tonnes Per Annum 5.2 3.0 Estimated Demand Available Supply NE India: Cement demand NE India: Cement supply NE India: Cement demand-supply gap Deficit of 2.2 mtpa • The North Eastern (NE) region has consistently been in cement deficit for several years • At present, cement demand in the NE is about 5.2 mtpa • Cement manufactured locally is inadequate to meet the local demand for cement • The deficit is met through cement purchased from other parts of India • High transportation costs cause the landed costs of cement to increase considerably
NE states projected GDP growth at constant prices The Government has approved a package of fiscal incentives and other concessions for the North Eastern Region, namely the North East Industrial and Investment Policy, 2007, effective from 1 April, 2007 The major policy and fiscal initiatives are expected to catalyse infrastructure and industrial development in the region, spurring the demand for cement Dungsam cement, A Bhutan-based player, is entering the Indian market, targeting mainly north-east market NE states projected per capita income growth 10.0% 13.7% 16.4% XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan 8.6% 12.4% 15.2% XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan
1.4 1.4 1.5 3.0 3.6 3.7 3.6 1.8 0.3 0.2 0.2 0.3 0.4 0.5 0.4 0.2 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15* Revenue and Profit After Tax (PAT) in USD billion Source: Company website (www.grasim.com), Aranca Research Notes: RMC – Ready-Mix Concrete, *CAGR is calculated in India Rupees, FY15* - Up till Q2 2015 UltraTech is India's largest exporter of cement clinker spanning export markets in countries across the Indian Ocean, Africa, Europe and the Middle East UltraTech and its subsidiaries have a presence in five countries through 11 integrated plants, one white cement plant, one clinkerisation plant, 15 grinding units, two rail and three coastal terminals, and 101 RMC plants It has an annual capacity of 54 MT Projects: Mumbai Metro, Bangalore Metro Rail, Kolkata Metro Rail, Monorail, Coastal Gujarat Power Milestones • 2004 – Acquisition of L&T‘s Cement Business: UltraTech Cement Ltd • 2006 – Narmada Cement Company Limited amalgamated with UltraTech • 2010 – Samruddhi Cement Limited amalgamated with UltraTech Cement Limited • 2012 – Acquisition of Adhunik Cement‘s Meghalaya plant • 2013 – Buys Jaypee Cement‘s Gujarat unit CAGR*: 24.1%
Revenue (USD billion) Source: Company website, Aranca Research Notes: mtpa – Million Tonnes Per Annum, *CAGR is calculated in India Rupees Ambuja Cements Ltd (ACL) is one of the leading cement manufacturing companies in India. The company, initially called Gujarat Ambuja Cements Ltd, was founded by Narotam Sekhsaria in 1983 Ambuja Cements is the second largest cement manufacturer in India, with nearly 10 per cent of the market share of total installed capacity It is the market leader in Northern India with 29 per cent of the total installed capacity Milestones • 2010 – Started cement plant at Nalagarh, Himachal Pradesh and Dadri, Uttar Pradesh with a capacity of 1.5 million tonnes • 2011 – Acquired 85 per cent stake in Nepal-based Dang Cement • 2012 – Expansion of Sankrail Grinding Unit, thereby increasing the capacity from 1.5 mtpa to 2.4 mtpa • 2013 – Acquiring Holderind Investments Ltd, Mauritius (Holcim), These transactions will result in Ambuja holding 50.01 per cent stake in ACC 1.4 1.5 1.6 1.6 1.8 1.8 1.6 1.2 2007 2008 2009 2010 2011 2012 2013 9MCY15 CAGR*: 8%
Cement Manufacturers' Association CMA Tower, A-2E, Sector 24 NOIDA – 201 301 Uttar Pradesh, India Phone: 91-120-2411955, 2411957, 2411958 Fax: 91-120-2411956 E-mail: cmand@vsnl.com Website: www.cmaindia.org/index.html
Indian Concrete Institute Ocean Crest 79, Third Main Road, Gandhi Nagar, Adyar, Chennai – 600 020 Phone: 91-44-24912602 Fax: 91-44-24455148 E-mail: ici3@vsnl.in, ici4@airtelmail.in, vj6314@gmail.com Website: www.indianconcreteinstitute.org National Council for Cement and Building Materials 34th Milestone, Delhi-Mathura Road, Ballabgarh – 121 004 Haryana, India Phone: 91-129-2242051/52/53/54/55/56; 4192222 Fax: 91-129-2242100; 2246175 E-mail: nccbm@vsnl.com; info@ncbindia.com
CMA: Cement Manufacturers' Association GDP: Gross Domestic Product GoI: Government of India INR: Indian Rupee MTPA: Million Tonnes Per Annum NE India: North-East India FY: Indian Financial Year (April to March) So FY10 implies April 2009 to March 2010 USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number
Year INR equivalent of one USD 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 2013-14 60.28 Exchange rates (Fiscal Year) Year INR equivalent of one USD 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 58.44 Q12014 61.58 Q22014 59.74 Q32014 60.53 Exchange rates (Calendar Year) Average for the year 2013* - from January to October 2013
India Brand Equity Foundation (―IBEF‖) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEF‘s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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Cement march-2015

  • 2.
  • 3.
    Second largest cement market •With nearly 350 million tonnes of cement production capacity, India is the second largest cement producer in the world. By 2020, cement production will reach to 550 million tonnes Dominated by private players • Of the total capacity, 98 per cent lies with the private sector and the rest with public sector, with the top 20 companies accounting for around 70 per cent of the total production Higher share of large plants • 188 large cement plants together account for 97 per cent of the total installed capacity, while 365 small plants account for the rest Large concentration in South and West • Of the total 188 large cement plants in India, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu Source: Planning Commission, Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division)
  • 5.
    Growing demand Source: Edelweiss, Notes:FY20E – Estimated market size for 2020 ^Ministry of External Affairs (Investment and Technology Promotion Division), * December 2014 Robust demand • Robust infrastructure growth during 12th Five Year Plan to drive growth • Demand is expected to be boosted by growth in real estate sector, initiative to build 100 smart cities to give a further stimulus Long-term potential • Oligopoly market, where large players have partial pricing control • Low threat from substitutes Attractive opportunities • The North-East, which is witnessing a construction boom, offers attractive investment opportunities • Large planned investments in infrastructure and housing is likely to boost demand for cement in the coming years as well Increasing investments • Robust investments are being made by the existing players to expand their capacity • Increasing presence of Tier II cement players • Use of alternate fuels to lower production costs and emissions FY15* Production capacity: 366 million tonnes^ FY20E Production capacity: 550 million tonnes Advantage India
  • 7.
    Source: Cement Manufacturers‘Association (CMA), Planning Commission, Aranca Research Notes: mtpa - Million Tonnes Per Annum, mt – Million Tonnes ^Planning Commission estimates, **December 2014 Cement industry (FY15**) Mini and white cement plantsLarge cement plants • Cement plants: 188 • Installed capacity: 366 mtpa^ • Cement production: 223.7mt (April 2014-January 2015) • Cement plants: 365 • Installed capacity: 11.1 mtpa • Cement production: 6.0 mt*
  • 8.
    Top cement producersin 2014, (million tonnes) Source: International Cement Review, USGS Mineral Resources Report, Aranca Research India is the 2nd largest cement producer as well as consumer in the world led by the enormous growth in the infrastructure and construction sector for the last two decades India is already the second largest producer of cement, accounting for around 7 per cent of world‘s output Top cement consumers in 2012, (million tonnes) 2,160 242 79 69 63 59 58 55 53 51 China India USA Brazil Russia Iran Turkey Indonesia SaudiArabia Egypt 2,500 280 83 72 71 70 66 57 50 56 China India USA Iran Turkey Brazil Russia Japan Egypt Indonesia
  • 9.
    Per capita cementconsumption in 2012 (kg) Source: International Cement Review, Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division) Note: PPP – Purchase Power Parity As India‘s current per capita consumption of cement is much lesser than the developed and other developing economies, there is a significant business opportunity to cater the unmet and rising demand In order to meet the rising demand, cement companies are expected to pent up production by around 56 MT in the next three years Cement intensity (grams per USD of PPP GDP) Source: International Cement Review, Aranca Research 1,683 1,581 911 770 744 616 546 330 329 232 202 191 129 Saudi Arabia China SouthKorea Iran Turkey Malaysia Italy Brazil Japan USA Indonesia India Pakistan 197 110 93 74 59 56 53 51 47 43 42 41 37 China SouthKorea Turkey Italy Iran Mexico Japan Malaysia India Indonesia Colombia Chile Brazil
  • 10.
    Production of cement(million tonnes) Source: Department of Industrial Policy & Promotion 12th Five Year Plan, Aranca Research Cement production increased at a CAGR of 7.3 per cent to 256 million tonnes over FY07–14 As per the 12th Five Year Plan, production is expected to reach 407 million tonnes by FY17 Availability of fly-ash (from thermal power plants) and use of advance technology has increased production of blended cement The environment-friendly blended cement is more cost-efficient to produce, as it requires lesser input of clinker and energy 11% 11% 8% 8% 7% 19% 26% 50% 67% 65% 70% 63% 42% 25% 28% FY95 FY00 FY05 FY08 FY12 Portland Slag Portland Pozzolana Ordinary Portland Share of blended cement in total cement production has increased (%) Source: Cement Vision 2025, CRISIL, AT. Kearney 156 168 182 207 229 247 251 256 332 368 407 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E CAGR: 10.1%
  • 11.
    Domestic cement consumption(million tonnes) Source: Working group for 12th Five Year Plan, Aranca Research Notes: E – Estimate, CAGR - Compound Annual Growth Rate Domestic cement consumption is expected to have reach 265 million tonnes in FY13 from 222 million tonnes in FY11 The consumption is further expected to increase at a CAGR of 10.2 per cent during FY11-17 and reach 398 million tonnes Demand will be supported by infrastructure development in tier 2 and tier 3 cities The country‘s per capita consumption is around 190 kg, which is lower than the World average which is around 500 Kg, providing further room for demand in the industry 222 242 265 293 324 359 398 FY11 FY12 FY13E FY14E FY15E FY16E FY17E CAGR: 10.2%
  • 12.
    Cement production capacity(million tonnes) Source: Working group for 12th Five Year Plan, Aranca Research Notes: E - Estimate, CAGR - Compound Annual Growth Rate Cement production capacity reached 333 million tonnes in FY14 from 323 million tonnes in FY11 Production capacity is expected to increase at a CAGR of 6.8 per cent during FY11-17 and reach 479 million tonnes 323 336 315 333 405 441 479 FY11 FY12 FY13 FY14 FY15E FY16E FY17E CAGR: 6.8%
  • 13.
    Cement capacity (milliontonnes) and utilisation rate (%) Source: Working group for 12th Five Year Plan, Aranca Research Notes: E - Estimate, CAGR - Compound Annual Growth Rate Cement capacity utilisation rate is expected to touch around 85 per cent in FY17 from 71 per cent in FY11 The utilisation rate is at 73 per cent in FY14 60% 65% 70% 75% 80% 85% 90% 150 200 250 300 350 400 450 500 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Capacity -LHS Production-LHS Utilisation rate (%)
  • 14.
    Source: Department ofIndustrial Policy & Promotion, Aranca Research Currently, India has 188 large cement plants across states and is among the top ten exporters both by value and volume Andhra Pradesh is the leading state with 40 large cement plants, followed by Tamil Nadu and Rajasthan having 21 and 19 plants, respectively Major cement clusters include - Satna (Madhya Pradesh), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (Andhra Pradesh) and Chandoria (Rajasthan) 37 19 21 1112 11 10 10 11 5 5 4 8 3 3 5 3 2 2 1 1 1 31.2% 35.9% 41.4% 40.5% 39.6% 24.0% 22.7% 21.9% 21.6% 21.5% 14.6% 14.1% 12.2% 12.2% 13.4% 14.0% 12.5% 11.7% 12.8% 13.0% 16.2% 14.8% 12.9% 12.8% 12.5% FY08 FY09 FY10 FY11 FY12 South North East Central West Regional share of total installed capacity (%) Source: Cement Manufacturer‘s Association (CMA)
  • 15.
    Source: Indian MineralsYear Book by Indian Bureau of Mines, Aranca Research Notes: mtpa - Million Tonnes Per Annum, FY14* - Data from Centrum Cement Report Cement industry South North East West Central 132.7 mtpa 80.3 mtpa 47.7 mtpa 54.8 mtpa 46.3 mtpa Tamil Nadu, Andhra Pradesh and Karnataka Rajasthan, Punjab, Haryana and the NCR West Bengal, Chhattisgarh, Orissa and Jharkhand West Bengal, Chhattisgarh, Orissa and Jharkhand Uttar Pradesh, Madhya Pradesh Installed capacity (FY14)* Key markets
  • 16.
    Shares in totalcapacity in Northern region (2012) Source: Indian Minerals Year Book by Indian Bureau of Mines, Aranca Research Rajasthan has the highest installed capacity in North India, accounting for a 77.7 per cent share in capacity in the region in 2012 Chhattisgarh leads the Eastern region with a share of 35.5 per cent of total installed capacity in the region in 2012 Another factor that adds to the growth is the availability of coal and limestone in the concerned states Shares in total capacity in Eastern region (2012) 77.7% 5.6% 3.3% 5.7% 5.7% 1.0% 1.0% Rajasthan Himachal Pradesh Punjab Uttarakhand Haryana Jammu & Kashmir Delhi 35.5% 20.4% 19.4% 14.6% 6.4% 3.0% 0.6% Chhattisgarh Jharkhand Orissa West Bengal Meghalaya Bihar Assam
  • 17.
    Shares in totalcapacity in Southern region (2012) Source: Indian Minerals Year Book by Indian Bureau of Mines, Aranca Research Andhra Pradesh has the highest installed capacity in South India (48.9 per cent share of total installed capacity) Madhya Pradesh leads the Central region in installed capacity, while Gujarat leads the Western region Shares in total capacity in Central region (2012) Shares in total capacity in Western region (2012) 48.9% 35.6% 14.8% 0.6% Andhra Pradesh Tamil Nadu Karnataka Kerala 29.5% 70.5% Uttar Pradesh Madhya Pradesh 61.3% 38.7% Gujarat Maharashtra
  • 18.
    All India (milliontonnes) Total demand for cement is expected to grow at a CAGR of 10.2 per cent to 265.9 million tonnes during FY08-13 Cement demand from the Eastern and Central regions during FY08-13 is expected to grow at a CAGR of 13.5 per cent and 12.1 per cent, respectively. Central (million tonnes) East (million tonnes) 163.4 177.5 196.4 210.2 236.3 265.9 FY08 FY09 FY10 FY11F FY12F FY13F 23.8 26.2 30.8 34.3 38.2 42.0 FY08 FY09 FY10 FY11F FY12F FY13F 24.7 28.0 33.0 37.3 41.7 46.6 FY08 FY09 FY10 FY11F FY12F FY13F CAGR: 10.2% CAGR: 12.1% CAGR: 13.5% Source: Cement Manufacturer's Association (CMA)
  • 19.
    32.7 34.5 38.8 41.4 45.4 49.8 FY08 FY09 FY10FY11F FY12F FY13F 33.6 35.1 38.3 40.8 48.6 51.0 FY08 FY09 FY10 FY11F FY12F FY13F 48.6 53.8 55.5 56.4 62.1 63.9 FY08 FY09 FY10 FY11F FY12F FY13F South (million tonnes) Cement demand from Western, Northern and Southern regions is expected to grow at a CAGR of 8.8, 8.7 and 5.6 per cent, respectively, during FY08-13 North (million tonnes) West (million tonnes) CAGR: 5.6% CAGR: 8.7% CAGR: 8.8% Source: Cement Manufacturer's Association (CMA)
  • 20.
    All India Source: CementManufacturer's Association (CMA) UltraTech Cement, a major player in India, accounted for 15.0 per cent of the total market share in terms of installed capacity in 2011 South East 10.2% 5.9% 9.9% 8.3% 7.1% 8.0% 50.6% India Cement Madras Cement Ultratech Cement Chettinad Cement Dalmia Cement ACC Others 14.2% 6.2% 12.1% 9.8% 5.5% 52.1% Lafarge India ACC Ultratech OCL India Ltd Ambuja Cement Others 10.0% 7.5% 15.0% 1.4%66.1% Ambuja Cement ACC Ultratech Cement Jaypee Cement Others
  • 21.
    North Jaypee Cement ledthe Central region in terms of installed capacity, with 33.5 per cent of the market share; the Western region was dominated by UltraTech cement with 29.0 per cent of market share in 2011 Ambuja Cements accounted for 28.9 per cent of the total market share in terms of installed capacity in the Northern region in 2011 Central West 28.9% 16.6% 14.2% 13.8% 11.1% 7.3% 5.5% 2.5% Ambuja Cement Shree Cement Others Ultratech Cement J K Cement ACC Jaypee Cement Birla Cement 33.5% 12.3% 12.1% 42.1% Jaypee Cement Ultratech Cement ACC Others 29.0% 10.9% 12.5% 47.6% Ultratech Cement Jaypee Cement Ambuja Cement Others Source: Cement Manufacturer's Association (CMA)
  • 22.
    Increasing presence of smalland mid-size cement players • Presence of small and mid-size cement players across regions is increasing, which helps to diminish market concentration of industry leaders • Small and mid-size players have been constantly increasing their installed capacity to cater to increasing cement demand as increased needs of housing spurt demand Cost reduction through the use of alternate fuels • Major cement manufacturers in India are increasingly using alternate fuels, especially bioenergy, to fire their kilns • This is not only helping to reduce production costs of cement companies, but is also proving effective in reducing emissions Increasing sale of blended cement • The proportionate sales of blended varieties of cement—Portland Pozzolana Cement (PPC) and Portland Blast Furnace Slag Cement (PBFC)—has risen over the years • During FY13, blended cement accounted for 75 per cent of total cement production in the country, compared to merely 24 per cent in FY01* Note: * Source: Emkay Global Financial Services
  • 23.
    ACC • The subsidiaryof Holcim, has plans for a USD500 million capacity expansion in India • ACC will upgrade and expand its Jamul unit in Chattisgarh and its grinding unit in Jharkhand. This will increase ACC‘s capacity to 38 million tonnes per annum (mtpa) from 30 mtpa in a phased manner by 2016 and 55 million tonnes per annum (MTPA) in 2020 Ambuja Cements • Ambuja Cements is targeting an investment of USD580 million for capacity expansion in Rajasthan, Madhya Pradesh and Uttar Pradesh • The proposed project in Rajasthan is expected to add 5 million tonnes (MT) to Ambuja Cements‘ existing production capacity of 27.5 mtpa Dalmia Cement • Dalmia Cement is planning an investment of USD333.3 million to ramp up its manufacturing capacity to 21 mtpa from the existing 17 mtpa over the next two years. • Dalmia has plans to set up a 2.5 million tonne (MT) greenfield unit at Belgaum in Karnataka. It also plans to scale up its two plants in North-East India for a total value of USD239 million and USD9.2 million, respectively Source: Aranca Research Note: * - still waiting for approval from European Commission Holcim • In April 2014, Holcim, a Switzerland-based cement company, announced acquisition of Lafarge to create the biggest cement group in the world* • In India, Holcim‘s subsidaries (ACC and Ambuja Cements) have a combined capacity of 45 mtpa, while Lafarge has a capacity of 8 mtpa in the country
  • 24.
    Heidelberg Cement • HeidelbergCement, a Germany-based cement manufacturer has commissioned Phase-I of its Jhansi grinding unit • The company has undertaken an investment worth USD259.4 million for expanding its capacity to 2.9 million tonnes (MT) • Heidelberg aims to ramp up the operational capacity to 6 MT at its Damoh plant in Madhya Pradesh, striving to add an additional 9 MT by 2017 Vicat Group • France-based, Vicat Group plans to invest USD600 million for 5.5 MT capacity by FY19 • It is negotiating an acquisition of uncontrolled 47 per cent stake in the joint venture Vicat Sagar Cement (Chattrasal, Karnataka) for an enterprise value of about USD680 million • The joint venture Vicat Sagar currently has 2.75 MT capacity Amrit Cement • Amrit Cement India Ltd (ACIL) has announced the launch of Amrit Cement in the North- Eastern market • The company plans to achieve a production level of 5 million tonnes per annum by 2015– 16 through capacity expansion in North-Eastern Bihar and Nepal Source: Aranca Research
  • 26.
    Source: Aranca Research •High – Huge capital investments required present substantial barriers to entry and achieving economies of scale • Moderate – Cement players have to depend on the railways for carriage outward and local coal companies for fuel, although diversification of freight options and fuel sources is diminishing the suppliers‘ power • Low – Substantial market concentration among large players ensures low bargaining power of buyers • Low – Although there are partial substitutes such as asphalt, glass, steel, wood, etc; practically cement has no direct substitutes • Low – The Indian cement market is oligopolistic in nature, characterised by tacit collusion, where large players partially control supply for better price discipline Positive Neutral PositivePositive Positive Market attractiveness
  • 28.
    Source: ^Livemint: ‗Cementfirms scout for overseas mines to secure gypsum supplies‘ data sourced from Confederation of Indian Industry and AT Kearney; **Cement Vision 2025, CRISIL, AT. Kearney • Given the surplus capacity and long-gestation period for green-field expansion, companies prefer inorganic route for growth • Gives them access to newer markets, newer technology and skill set from new partners in Indian context • Because domestic supply of gypsum is limited, Indian cement companies are looking to acquire gypsum mines in Thailand, Oman, Iran and other countries in close proximity to India^ • The current domestic availability of gypsum can provide for the next seven-eight years of demand^ • Companies are trying to develop a niche market for RMC (Ready Mix Concrete) • Penetration of RMC has been low at about 8 per cent (USA: 88 per cent; China: 33 per cent; Brazil: 32 per cent) because retail sales comprise mostly of bag cement** Inorganic growth/consolidation Overseas expansion for gypsum Ready-mix concrete
  • 30.
    Source: McKinsey QuarterlyReport, Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division) Housing growth Infrastructure growth Commercial real estate growth • The Housing segment accounts for a major portion of the total domestic demand for cement in India • Real estate market is expected to grow at a CAGR of 17.2 per cent over 2011–15 to USD126 billion • Growing urbanisation, an increasing number of households and higher employment are primarily driving the demand for housing, accounting for 67 per cent of the total consumption • Initiatives by the government are expected to provide an impetus to construction activity in rural and semi- urban areas through large infrastructure and housing development projects respectively • The government is strongly focused on infrastructure development to boost economic growth and is aiming for 100 smart cities • It plans to increase investment in infrastructure to USD1 trillion in the 12th Five Year Plan (2012–17), compared with USD514 billion under the 11th Five Year Plan (2007–12) • Infrastructure projects such as Dedicated Freight Corridors as well as new and upgraded airports and ports are expected to further drive construction activity, • The government intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation costs • The government is strongly focused on infrastructure development to boost economic growth • It plans to increase investment in infrastructure to USD1 trillion in the 12th Five Year Plan (2012–17), compared with USD514 billion under the 11th Five Year Plan (2007–12) • Infrastructure projects such as Dedicated Freight Corridors as well as new and upgraded airports and ports are expected to further drive construction activity • The government intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation costs
  • 31.
    Major cement demanddrivers (FY15*) Source: Aranca Research, Ministry of External Affairs (Investment and Technology Promotion Division), ^Cement Vision 2025, CRISIL, AT. Kearney Note: * December 2014 Demand for cement is highly correlated with cyclical activities like construction and development Housing sector accounts for a significant 67 per cent of the total cement demand (USA: 22 per cent; China: 25 per cent; Brazil 56 per cent)^ Real estate market is expected to grow at a CAGR of 17.2 per cent during 2011–15 to USD126 billion The rapidly increasing real estate industry in India is expected to push the demand for cement Residential real estate demand is driven by rising population and growing urbanisation Rising income levels are leading to higher demand for luxury projects Demand for affordable housing is growing in order to meet the demand from lower income groups Commercial real estate demand will be driven by growth in IT/ITeS sector and organised retail 67% 13% 11% 9% Housing sector Infrastructure Commercial & Institutional Industrial
  • 32.
    Infrastructure spending as% of GDP Source: Working group for 12th Five Year Plan Note: Additional capacity creation estimates are based on increase in base lines, roads, housing and fiscal support Investment in infrastructure is the main growth driver for the cement industry The Planning Commission estimates total infrastructure spending to be about of 10 per cent of the GDP during the 12th Five- Year Plan (2012–17), up from 7.6 per cent during the previous Five-Year Plan (2007–12) India‘s investment in infrastructure is estimated to double to about USD1 trillion during the 12th plan (2012–17) compared to the previous plan Infrastructure spending in % during 11th and 12th Five-Year Plan 75.7 69.4 89.5 101.6 101.9 157.4 181.2 206.0 233.5 264.4 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY17E 5.2% 6.4% 7.2% 7.5% 7.9% 8.4% 7.6% 10.0% 10th Five year plan FY08 FY09 FY10 FY11 FY12 11th Five year plan 12th Five year plan 12th Plan 11th Plan
  • 33.
    North Source: CMA (CementManufacturers Association), Centrum Report, Aranca Research Note: F- Forecast South East West Central All India 79% 81% 86% FY15F FY16F FY17F 75% 78% 84% FY15F FY16F FY17F 85% 79% 81% FY15F FY16F FY17F 81% 85% 90% FY15F FY16F FY17F 60% 63% 67% FY15F FY16F FY17F 73% 75% 80% FY15F FY16F FY17F
  • 34.
    12.8 13.5 23.6 31.9 35.5 38.7 FY12 FY13E FY14EFY15E FY16E FY17E Capacity creation as per the 12th Five Year Plan (million tonnes) Source: Working group for 12th Five Year Plan, DIPP (Department of Industrial Policy and Promotion) Notes: Additional capacity creation estimates are based on increase in base lines, roads, housing and fiscal support, E – Estimates Total capacity of 336 million tonnes is estimated to have been generated in FY12 The strong momentum in capacity addition is not surprising given the sharp growth in construction, infrastructure and real estate in Indian economy Hence, the 12th Five Year Plan is estimated to have an additional capacity requirement of 156.0 million tonnes by FY17 The total FDI in cement and gypsum products had totaled USD2.9 trillion between April 2000-September 2014
  • 35.
    Strategy BenefitsCompany/Plant Madras Cement's Alathiyurplant India Cements Ltd's Dalavoi plant UltraTech's Gujarat Cement Works Lafarge's Arasmeta plant Use bioenergy through burning of coffee husk and cashew nut shells Use Low Sulphur Heavy Stock (LSHS) sludge as alternate fuel Use tyre chips and rubber dust as alternate fuel Substitute 10 per cent of coal used in kilns with rice husk Annual cost savings of USD1.7 million Annual savings of USD6,500 approx Reduction of about 30,000 tonnes of carbon emissions annually Higher energy savings and lower carbon emissions Source: CMA, Aranca Research
  • 37.
    Source: Industry Sources,Aranca Research Note: mtpa - Million Tonnes Per Annum 5.2 3.0 Estimated Demand Available Supply NE India: Cement demand NE India: Cement supply NE India: Cement demand-supply gap Deficit of 2.2 mtpa • The North Eastern (NE) region has consistently been in cement deficit for several years • At present, cement demand in the NE is about 5.2 mtpa • Cement manufactured locally is inadequate to meet the local demand for cement • The deficit is met through cement purchased from other parts of India • High transportation costs cause the landed costs of cement to increase considerably
  • 38.
    NE states projectedGDP growth at constant prices The Government has approved a package of fiscal incentives and other concessions for the North Eastern Region, namely the North East Industrial and Investment Policy, 2007, effective from 1 April, 2007 The major policy and fiscal initiatives are expected to catalyse infrastructure and industrial development in the region, spurring the demand for cement Dungsam cement, A Bhutan-based player, is entering the Indian market, targeting mainly north-east market NE states projected per capita income growth 10.0% 13.7% 16.4% XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan 8.6% 12.4% 15.2% XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan
  • 40.
    1.4 1.4 1.5 3.0 3.63.7 3.6 1.8 0.3 0.2 0.2 0.3 0.4 0.5 0.4 0.2 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15* Revenue and Profit After Tax (PAT) in USD billion Source: Company website (www.grasim.com), Aranca Research Notes: RMC – Ready-Mix Concrete, *CAGR is calculated in India Rupees, FY15* - Up till Q2 2015 UltraTech is India's largest exporter of cement clinker spanning export markets in countries across the Indian Ocean, Africa, Europe and the Middle East UltraTech and its subsidiaries have a presence in five countries through 11 integrated plants, one white cement plant, one clinkerisation plant, 15 grinding units, two rail and three coastal terminals, and 101 RMC plants It has an annual capacity of 54 MT Projects: Mumbai Metro, Bangalore Metro Rail, Kolkata Metro Rail, Monorail, Coastal Gujarat Power Milestones • 2004 – Acquisition of L&T‘s Cement Business: UltraTech Cement Ltd • 2006 – Narmada Cement Company Limited amalgamated with UltraTech • 2010 – Samruddhi Cement Limited amalgamated with UltraTech Cement Limited • 2012 – Acquisition of Adhunik Cement‘s Meghalaya plant • 2013 – Buys Jaypee Cement‘s Gujarat unit CAGR*: 24.1%
  • 41.
    Revenue (USD billion) Source:Company website, Aranca Research Notes: mtpa – Million Tonnes Per Annum, *CAGR is calculated in India Rupees Ambuja Cements Ltd (ACL) is one of the leading cement manufacturing companies in India. The company, initially called Gujarat Ambuja Cements Ltd, was founded by Narotam Sekhsaria in 1983 Ambuja Cements is the second largest cement manufacturer in India, with nearly 10 per cent of the market share of total installed capacity It is the market leader in Northern India with 29 per cent of the total installed capacity Milestones • 2010 – Started cement plant at Nalagarh, Himachal Pradesh and Dadri, Uttar Pradesh with a capacity of 1.5 million tonnes • 2011 – Acquired 85 per cent stake in Nepal-based Dang Cement • 2012 – Expansion of Sankrail Grinding Unit, thereby increasing the capacity from 1.5 mtpa to 2.4 mtpa • 2013 – Acquiring Holderind Investments Ltd, Mauritius (Holcim), These transactions will result in Ambuja holding 50.01 per cent stake in ACC 1.4 1.5 1.6 1.6 1.8 1.8 1.6 1.2 2007 2008 2009 2010 2011 2012 2013 9MCY15 CAGR*: 8%
  • 43.
    Cement Manufacturers' Association CMATower, A-2E, Sector 24 NOIDA – 201 301 Uttar Pradesh, India Phone: 91-120-2411955, 2411957, 2411958 Fax: 91-120-2411956 E-mail: cmand@vsnl.com Website: www.cmaindia.org/index.html
  • 44.
    Indian Concrete Institute OceanCrest 79, Third Main Road, Gandhi Nagar, Adyar, Chennai – 600 020 Phone: 91-44-24912602 Fax: 91-44-24455148 E-mail: ici3@vsnl.in, ici4@airtelmail.in, vj6314@gmail.com Website: www.indianconcreteinstitute.org National Council for Cement and Building Materials 34th Milestone, Delhi-Mathura Road, Ballabgarh – 121 004 Haryana, India Phone: 91-129-2242051/52/53/54/55/56; 4192222 Fax: 91-129-2242100; 2246175 E-mail: nccbm@vsnl.com; info@ncbindia.com
  • 45.
    CMA: Cement Manufacturers'Association GDP: Gross Domestic Product GoI: Government of India INR: Indian Rupee MTPA: Million Tonnes Per Annum NE India: North-East India FY: Indian Financial Year (April to March) So FY10 implies April 2009 to March 2010 USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number
  • 46.
    Year INR equivalentof one USD 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 2013-14 60.28 Exchange rates (Fiscal Year) Year INR equivalent of one USD 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 58.44 Q12014 61.58 Q22014 59.74 Q32014 60.53 Exchange rates (Calendar Year) Average for the year 2013* - from January to October 2013
  • 47.
    India Brand EquityFoundation (―IBEF‖) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEF‘s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.