The document provides an overview of the Indian cement industry, including its structure, key players, production levels, demand drivers, major projects, pricing, and costs. Some of the key points summarized are: - The Indian cement industry is dominated by large private players and is one of the largest in the world. Production has grown significantly from 50 MT/year in 1992 to over 320 MT/year currently. - Demand is driven by infrastructure development, the housing sector, and economic growth. The government plans to invest $1 trillion in infrastructure over the next five years. - Major projects underway include roads, ports, airports, railways, and power. The 2013-14 budget also aims to boost infrastructure

1. Indian Cement Industry-Future
Perspective

2. Structure of Construction Industry

3. Real Estate Sector
• The real estate industry's growth is depends on the developments in the retail,
hospitality and entertainment (hotels, resorts, cinema theatres), hospitals, schools and
IT enabled services
• The Government of India has allowed FDI up to 100 percent in the automatic route
in townships, housing, built-up infrastructure and construction development projects
to increase investment, generate economic activity, and create new employment
opportunities.
• Driving Forces –
• 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
quality residential real estate and real estate as an investment.

4. Core Sectors Performance
• 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 Industrial Production(IIP) and shown the cumulative growth rate of 3.9 % in
Jan 2013 increased from 2.2 % in Jan 2012.
• The most affected sector whose growth hampered adversely in FY13 (Jan 2013) was
natural gas with a growth rate of -16.8 % (FY12 -10.4 %) followed by crude oil with
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
remaining sectors shown the growth moderately.

5. Benefits of the construction industry to the society-
• Absorbs rural labour and unskilled workers (in addition to semi-skilled and skilled)
• Provides opportunity for seasonal employment thereby supplementing worker's
income from farming.
• Permits large-scale participation of women workers.
• Development of Infrastructure, thereby sustaining the growth of economy.

6. Overview of Indian Cement Industry
Cement Industry
Major Cement Plants
- Companies: 59
- Plants: 183
- Installed capacity per plant: ~1.5mtpa
- Total Installed Capacity: ~330mtpa
- Production: 168.3mtpa
- All India Reach through Multiple Plants
- Export to Bangladesh, Nepal, Sri Lanka, UAE
- Strong marketing network, tie ups with
customers, and contractors
- Wide spread distribution network
- Sales primarily through the dealer channel
Mini Cement Plants
- Companies: 365
- Installed Capacity: ~11mtpa
- Production: ~6.2mtpa
- These re meant to tap scattered
limestone reserves.
- Most are set up in Andhra Pradesh
- Most use Vertical kiln technology
- Production Cost: Rs 1000- Rs 1400
(per tonne)

7. Key Points
•
Second largest cement producer in the world after china, and has grown at a very fast
pace in recent years.
•
Since 1992, India's cement production has increased from ~50 MT/year to ~320
MT/year in 2013.
•
97 percent of the installed capacity is accounted by large producers(around 42).
•
21 top companies control 90 percent of the market.
•
40 percent of the market is controlled by two groups Holcim (ACC Ltd & Ambuja
Cements) and Aditya Birla Group (Grasim industries & UltraTech Cement).
•
The industry is self sufficient and imports of cement are negligible.

8. Evaluation of Cement Industry in India
Era Year Remarks about capacity, Growth, Consumption
Dominant Imports 1914-1924 Cement consumption was around 2 million tones during this period of 10 years; 50
% was through imports. Production in the year 1914 was 10,000 tonnes and in
1924 production was around 0.26 million tonnes a year against capacity of half
million tonne.
Struggle and
Survival
1924-1941 Indigenous production went from 3.66lakh tones in 1925 to 18.30lakh tonne in
1941. Imports contributed to less than 7 % of total cement consumption during
1924-1942.
Price in Control 1942-1951 Production stepped up from 1.8 million tonnes in 1942 to 3.28 million tonnes in
1951. Imports dwindled to less than 2 % of total consumption.
Planning and
Control
1951-1982 Growth in cement capacity but not at requisite pace. Capacity was 29.26 million
tonnes in 1981-82.
Partial Decontrol 1982-88 Quantum jump in capacity and production during 1982-88. (57.47 Million tonnes
in 1987-88) Cement became surplus from 1987 onwards.
Total Decontrol March
1989
onwards
During the period 2009-10 capacity rose to 236 million tonnes.

9. Global cement industry
• The world combined cement production all over the world accounted for 3.78 billion
tonnes in the year 2012 (3.60 billion tonnes in 2011).
• China has contributed substantially to the world production. China and India
virtually have reached the stage of self – sufficiency related to production of cement.
US
Brazil
China
India
Iran
Japan
Pakistan
Russia
Turkey
Vietnam
0
500000
1000000
1500000
2000000
2500000

10. Top Cement Consumers
• China leads the way in cement consumption and production around the world due to
the large scale developments and infrastructure build-up projects
• The majority of the production is locally consumed, a good chunk of the cement
produced is exported.

11. Exports
• Indian cement accounts for not more than 0.2% of total world cement exports.
• The export of cement (total) increased considerably to 3.61 million tonnes in
2010-11 from 2.69 million tonnes in 2009-10. Exports of cement in 2010-11
were mainly to Nepal (49%), Sri Lanka (26%), Iraq (5%), Egypt & Maldives (3
% each).
Imports
• Cement imports in 2010-11 decreased sharply to 1.1 million tonnes from 2.11
million tonnes in 2009-10. Main suppliers in 2010-11 were Pakistan (54%),
Bangladesh (26%) and China (16%).

14. Cement Market Division in India -
The Cement industry is fragmented into five different regions because of the following
reasons:
• 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
a particular region is mainly consumed in that region.

16. Industry Segments
Cement
Industry
North
South
East
West
Central
Installed Capacities Key Markets
66.4
126.9
43.5
44.1
37.3
Rajasthan, Punjab,
Haryana
Tamil Nadu, Andhra
Pradesh, Karnataka
West Bengal,
Chhattisgarh,
Orisha and Jharkhand
Maharashtra and Gujarat
Uttar Pradesh and
Madhya Pradesh

17. Structure of the Industry
•The private sector dominates the
Indian cement industry, both in terms
of size and numbers. About 3% of
this installed capacity is owned by
the Union and state government while
the lions share 97% lies with the
private sector.
•UltraTech cement, the country's
largest firm in terms of cement
capacity, holds ~25%of the domestic
market, with ACC(50%-owned by
Holcim) and Ambuja (50% owned by
Holcim) having 15% and 11% shares
respectively.
24.82
15.43
13.22
6.11
7.97
5.71
4.44
3.45
2.79
3.11
UltraTech
ACC
Ambuja
Prisam
Shree
India
Madras
J K Cement
Chettinad
Birla Corp

18. Profitability of Cement Companies
ACCLtd
UltraTech
Ambuja
Shree
Prism
India
Madras
JKCement
Chettinad
Mangalam
-2
0
2
4
6
8
10
12
14
16
Profitability (%)
• Profitability of cement sector has considerably eroded in the last two years with a
moderation in demand, low capacity utilization and increase in wages.
• The Indian cement industry has undergone ritual changes through technological up-
gradation in the pursuit of cost efficiency. Modernization at the plants and the
improvement of plant processes have helped reduce manpower requirements.
UltraTech and Ambuja Cements are the most cost efficient firms in the India.

19. Types of Cement
•Cement is categorized into different
varieties based on its composition
and its specific end use.
•Cement is broadly classified,
depending on the percent of clinker
used, under portland, blended and
specialty cement.

20. •The investment in the sector lead to
adoption of new generation technology
like dry process technology, which cut
the energy consumption of cement
companies and enabled them to set up
large capacity plants.
•Single kiln with capacity of 3000 TPD.
•Dry process kilns Capacities in ranging
from 300-8,000 tpd. While capacities in
semi-dry kilns range from 600-1200 tpd,
capacities in wet process kilns range
from 200-750 tpd.

21. Per capita consumption
• Indian cement industry an attractive investment destination with the combination of a
lower per capita consumption and a faster growth rate.
• Despite having high demand in India. Per capita cement consumption is very low,
where the world average is 396 kg, in India being the country of young population
has a huge potential and its ushering social & economic base will improve the
domestic consumption.

22. •Cement consumption varies across regions due to the differences in the demand-supply
balance, per capita income, the level of industrial development and Government
involvement in each state.
•In 2010-11, south India accounted for the highest proportion of cement consumption
followed by western India, Eastern India, Central India and Northern India.
•Demand in the South, West and North have been driven by the Urbanization and
housing sector. Where as East region has been driven mostly by road construction.

23. Cement Capacity, Production and Utilization in India
1950-51
1955-56
1960-61
1965-66
1973-74
1978-79
1984-85
1989-90
1996-97
2001-02
2006-07
2007-08
2008-09
2009-10
2010-11
0
50
100
150
200
250
300
350
0
10
20
30
40
50
60
70
80
90
100
3.28
5.02
9.3
12
19.76
22.58
42
61.37
105.26
145.99
177.83
209.4
230.61
276.77
296.48
2.2
4.6
7.97
10.97
14.66
19.42
30.13
45.42
76.22
106.9
161.66
172.31
185.61
204.95
216.28
67
92
86
91
74
86
72 74 72 73
91
82 80
74 73
Capacity (M.t.) Production (M.t.) Capacity
Utilization (%)

24. Cement Consumption
63
20
13
4
Cement Consumption (%)
Residential Real-estate Infrastructure Commercial Real estate Industrial Construction

26. Demand Drivers
• Long term GDP growth of ~7% leading to multiplier effect for cement demand
growth of ~8%.
• The government of India plans to increase its investment in infrastructure to US $ 1
trillion in the twelfth five year plan.
Infrastructure-

Construction linked sector account for 8.3% of 12th
five year plan spend ~850 bn.

Infrastructure development – Roads, ports, power etc.

Increased investment in infrastructure by Government expected investments of 1
trillion USD in five year plan.

Projects in the pipeline such as dedicated freight corridors, development of new
industrial cities under the Delhi – Mumbai industrial corridor, National investment &
manufacturing zones under the national manufacturing policy, up gradation of
existing and the new ports & airports.

27. Demand Drivers (Cond..)
Commercial/Industrial-

High growth In retail, commercial and institutional sector In Urban and semi-urban
areas.

High growth in industry segment.

More than 500 SEZ proposals.
Housing-

Population growth

Favourable demography and higher disposable income

Urbanization

Decrease in number of people per household with breakdown of the joint family
system into nuclear families.

Thrust by Government o Rural/low cost/ mass housing.

28. PPP Projects
Sector Projects in pipeline Projects under implementation
No. of Projects Project Cost (Cr.) No. of Projects Project Cost (Cr.)
Roads 167 115822 133 102775
Ports 47 35902 50 62058
Airports 7 4120 3 19277
Railways 53 90312 5 5217
Power 34 62032 15 29448
Urban Infra 65 45708 69 18690
Other 31 22534 17 3575
Total 404 376430 292 241040

29. The Union Budget 2013-14 give more impetus to infrastructure sector -
• 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
from WB & ADB.
• Raising corpus of Rural Infrastructure Development Fund (RIDF) to 20,000 crore
and 5,000 crore to NABARD to finance construction for warehousing.
• Window to Panchayats to finance construction of go downs.

30. Major Projects Sector Wise
• Roads & Highways-
• 3000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan
and Uttar Pradesh will be awarded in the first six months of 2013-14.
• Target of covering length of 8,800 kms under National Highway Development
Programme (NHDP) during FY13.
• 247 PPP projects were awarded under NHDP.
• Railways
• Indian railways is going to initiate PPP projects to maintain & develop railway
stations. it has identified 22 stations across India that will be modernized into
world class facilities.
• 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
Nadu through PPP at an estimated cost of 7,500 crore.

31. Major Projects Sector Wise (cond..)
• Power
• Government of India announced 14 Ultra mega power projects to meet 12 %
peak hour power shortages.
• Oil & Gas
• Projects include an 18 MMTPA refinery being setup by Indian Oil Corporation
and a cracker unit of 5 MMTPA capacity by Reliance Industries Limited in
Jamngar.
• Airports-
• With prospects for growth in tier II and tier III cities, the Ministry of Civil
Aviation (MoCA) has approved new Greenfield airports.
• The Navi Mumbai airport is to be the largest Greenfield airport in terms of
cost and capacity.

32. • Price is not uniform throughout the country and varies from region to region. Price of
cement also depends on the distribution channel – whether it is sent directly to the
project customer or through the dealers outlets.
• Predicting change in prices of cement is difficult as supply and demand of cement in
a particular region greatly influences price. Input materials that go into the
manufacture of cement are mainly controlled by the government and hence there is
no scope for negotiation.

33. • All India prices at Rs 294/bag declined by ~Rs 4/bag or -1.3 percent m-o-m in
March. Sharp decline seen in south India (-3.2 percent m-o-m) & central region (-2.8
percent m-o-m) followed by east (-1 percent m-o-m).

34. Cost Analysis
• Major cost compresses of the cement industry are energy (power & fuel), raw
materials, indirect taxes and distribution cost. These components add more than 50 %
of the total cost of the industry.
• According to industry estimates about 90Kwh of power & 250 kg of coal are needed
to produce 1 tonne of cement.
• 1.5 tonnes of limestone is needed to produce 1 tonne cement.
• The cost associated with moving limestone from the mine the production site is huge
& adds to the raw material cost.
• Governments royalty & cess on limestone makes it more expensive to the cement
producers.

36. Excise duty structure
Sl.
No.
Item Rs./tonne of cement
1. Average Excise duty 490
2. VAT 500
3. Royalty & Cess on limestone 84
4. Royalty on Coal 84
5. Electricity Duty 23
6. Others 30
Total 1160
• Cement is highly taxed commodity in India (30 %) compared to 19 % in China and
almost negligible in Thailand.
• Excise duty on cement is currently being levied at mixed rates i.e. Ad valorem (on
transaction value) plus specific (specific rate to be charged on the basis of MRP)
• There is no import duty for import of cement into the country.
• The rate of VAT charged on cement is 12.5 % even up to 15 % in some of the states
on cement and clinker.

37. Recommendations
• All manufacturers should Endeavour to set up and strengthen R&D
infrastructure particularly aimed at absorbing /adapting/developing
newer technologies for better energy efficiency, quality enhanced and
optimum operating efficiency.
• Cement industry should be provided with access to inputs, particularly
coal, pet coke and gypsum at nil rates of customs duty
• The import of duty of cement should also have a duty.
• Being energy intensive, the energy conservation and alternate cheaper,
renewable and environment friendly sources of energy have assumed
greater importance for improving productivity.

38. • The application of nanotechnology to cement and concrete is expected
to result in development of eco-friendly, high performance cements /
binders and concrete with improved durability characteristics.
• To sustain the level of competitiveness, government needs to provide
level playing field in terms of
• Improved Infrastructure
• Lower Taxes
• Ensure quality coal
• Consistent power supply
• Exploring export market

39. Future outlook
• Despite apprehensions about the impact of inflation and a slowdown in
industrial production and overall economic scenario, the outlook for
the cement sector remains positive in respect of growth in demand in
the foreseeable future. Infrastructure and housing are still moving
apace. However what is of concern to the industry are staggering rise
in input costs and pressures to cap selling prices at the same time.
• Consolidation of the cement sector too will take place and cement
plants producing less than 1 million tonnes will find it difficult to
survive in this market. Cement companies will go for global listings
either through the FCCB route or the GDR routes.
• The companies have to get a higher share of sales in the market. This
would require multi-product entities. Indian companies need to focus
on products other than just cement like RMC (Ready Mix Concrete),
and research new building materials that will create a niche for them in
the market

40. Future Outlook (Cond..)
• To gain a high visibility in the market and pose stiff competition to
most multinational brands, research is going to be the key. Research to
develop newer, cheaper and more efficient technologies for creating
cement and other products. Niche products like cement with fragrance,
pre-collared plasters can also be developed for increased consumption.
• With the general elections slated in FY14. The government may dole
out higher benefits to the low and middle income groups. The increase
in the disposable income of these groups might trickle down to higher
housing demand in FY14-15.
• In the next 3-5 years, the thrust of the government on infrastructure
construction along with rising real-estate penetration could lead India
to be one of the most lucrative cement markets in the world.
• With the pace of infrastructure development in the overall economy
expected to increase over the next 3 to 5 years
• Many global players are very small players in India and hence they
may use inorganic route to establish their presence on one of the
largest and fastest growing markets.