Report on Cement Industry In India By: Shobhit Chandak

1. INTRODUCTION

The cement industry is one of the main beneficiaries of the infrastructure boom.
With robust demand and adequate supply, the industry has bright future. The Indian
Cement Industry with total capacity of 165 million tones is the second largest after
China. Cement industry is dominated by 20 companies who account for over 70% of
the market. Individually no company accounts for over 12% of the market. The
major players like L&T and ACC have been quiet successful in narrowing the gap
between demand and supply. Private housing sector is the major consumer of
cement (53%) followed by the government infrastructure sector. Similarly northern
and southern region consume around 20%-30% cement while the central and
western region are consuming only 18%-16%.

India is the 2nd largest cement producer in world after china .Right from laying
concrete bricks of economy to waving fly over’s cement industry has shown and
shows a great future. The overall outlook for the industry shows significant growth
on the back of robust demand from housing construction, Phase-II of NHDP (National
Highway Development Project) and other infrastructure development projects.
Domestic demand for cement has been increasing at a fast pace in India. Cement
consumption in India is forecasted to grow by over 22% by 2009-10 from 2007-
08.Among the states, Maharashtra has the highest share in consumption at
12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading
with 14.72% of total production followed by Rajasthan. Cement production grew at
the rate of 9.1 per cent during 2006-07 over the previous fiscal's total production of
147.8 mt (million tons). Due to rising demand of cement the sales volume of
cement companies are also increasing & companies reporting higher production,
higher sales and higher profits. The net profit growth rate of cement firms was 85%.
Cement industry has contributed around 8% to the economic development of India.
Outsiders (foreign players) eyeing India as a major market to invest in the form of
either merger or FDI (Foreign Direct Investment). Cement industry has a long way to
go as Indian economy is poised to grow because of being on verge of development.

The company continues to emphasize on reduction of costs through enhanced

productivity, reduction in energy costs and logistics expenses. The cement sector is
expected to witness growth in line with the economic growth because of the strong
co-relation with GDP. Future drivers of cement demand growth in India would be the
road and housing projects. As per the Working Group report on Cement Industry for
the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per
cent per annum during the 11th Plan and cement production and capacity by the
end of the 11th Plan are estimated to be 269 million tones and 298 million tones,
respectively, with capacity utilization of 90 per cent.

Page | 1
Report on Cement Industry In India By: Shobhit Chandak

Despite the growth of Indian cement industry India lags behind the per capita
production. Supply for cement is expected to remain tight which, in turn, will push
up prices of cement by more than 50%. The most important factor for better prices
is consolidation of the industry. It has just begun and we will see more consolidation
in the coming years. Other budget measures such as cut in import duty from 12.5
per cent to nil etc. are all intended to cut costs and boost availability of cement.

Sadly the adverse effects of global slowdown have not speared this industry too.
Demand is sluggish, the government is keeping an eagle eye on prizes, domestic
coal and pet coke, prizes have increased sharply and utilizations rates are down.
The numbers coming out are a reflection of grim times. ACC the country’s largest
cement company that’s controlled by Swiss giant HOLCIM, registered 2% fall in
august sales. It is the biggest fall since Feb 2007. Production fell by 5%.

To stand against the problematic situation, government as well as cement industry

has taken some steps. Companies are focusing on cost of transportation. One of the
strategy is to decrease dependence on road & opt for sea logistics as that can cut
transportation cost by 30- 50 %. Some plants are adopting futuristic plan such as
setting up captive power plant, moving closer to the customers by creating clicker,
crushing, and capacity in key markets, to be more customer centric to generate
better revenue. India should push for stricter regulations of market place as to
control the prices of big companies and prevent them from forming cartels and
exchanging information. To fight with the high inflation, government wants to import
more cement from Pakistan .However cement prizes are not very much high as
other items but still they are increasing. And the reason of high prize is surging cost
of raw material and transportation cost. Apart from this government also discussed
with cement industry not to have increase in prizes and keep consumer interest in
mind.

Now the question arise in front of the government is whether the demand by the
government is possible to increase through expenditure on infrastructure or not
according to the current state of economy when so many crises are going on or how
the government allocation of US$ 3.23 billion for the National Highway
Development, Project will keep the demand for cement alive? And to what extent
the prizes of cement should be increase so that consumer can’t affect.

Cement industry in India has also made tremendous strides in technological up

gradation and assimilation of latest technology. Presently, 93 per cent of the total
capacity in the industry is based on modern and environment-friendly dry process
technology. The induction of advanced technology has helped the industry
immensely to conserve energy and fuel and to save materials substantially. Indian
cement industry has also acquired technical capability to produce different types of
cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC),
Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening
Page | 2
Report on Cement Industry In India By: Shobhit Chandak

Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. Some of
the major clusters of cement industry in India are: Satna (Madhya Pradesh),
Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh),
Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).

2. CURRENT SCENARIO

The Indian cement industry is the second largest producer of quality cement, which
meets global standards. The cement industry comprises 130 large cement plants
and more than 300 mini cement plants. The industry's capacity at the end of the
year reached 188.97 million tons which was 166.73 million tons at the end of the
year 2006-07. Cement production during April to March 2007-08 was 168.31 million
tons as compared to 155.66 million tons during the same period for the year 2006-
07.Despatches were 167.67 million tons during April to March 2007- 08 whereas
155.26 during the same period. During April-March 2007-08, cement export was
3.65 million tons as compared to 5.89 during the same period.
Cement industry in India is currently going through a consolidation phase. Some
examples of consolidation in the Indian cement industry are: Gujarat Ambuja taking
a stake of 14 per cent in ACC, and taking over DLF Cements and Modi Cement; ACC
taking over IDCOL; India Cement taking over Raasi Cement and Sri Vishnu Cement;
and Grasim's acquisition of the cement business of L&T, Indian Rayon's cement
division, and Sri Digvijay Cements. Foreign cement companies are also picking up
stakes in large Indian cement companies. Swiss cement major Holcim has picked up
14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's
acquisition has led to the emergence of two major groups in the Indian cement
industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla
group through Grasim Industries and Ultratech Cement. Lafarge, the French cement
major has acquired the cement plants of Raymond and Tisco. Italy based
Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries' cement
plant in Andhra Pradesh, and German cement company Heidelberg Cement has
entered into an equal joint-venture agreement with S P Lohia Group controlled Indo-
Rama Cement.

Page | 3
Report on Cement Industry In India By: Shobhit Chandak

3. PROCESS TECHNOLOGY

While adding fresh capacities, the cement manufacturers are very conscious of the
technology used. In cement production, raw materials preparation involves primary
and secondary crushing of the quarried material, drying the material (for use in the
dry process) or undertaking a further raw grinding through either wet or dry
processes, and blending the materials. Clinker production is the most energy-
intensive step, accounting for about 80% of the energy used in cement Production.
Produced by burning a mixture of materials, mainly limestone, silicon oxides,
aluminum, and iron oxides, clinker is made by one of two production processes: wet
or dry; these terms refer to the grinding processes although other configurations
and mixed forms (semi-wet, semi-dry) exist for both types. In the dry process, the
raw materials are ground, mixed, and fed into the kiln in their dry state. In the wet
process, the crushed and proportioned materials are ground with water, mixed, and
fed into the kiln in the form of slurry.

Different types of cement that are produced in India are:

• Ordinary Portland cement (OPC):
OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent
gypsum and other materials. It accounts for 70 per cent of the total consumption.

• Portland Pozzolana Cement (PPC):

PPC has 80 per cent clinker, 15 per cent pozzolana and 5 per cent gypsum and
accounts for 18 per cent of the total cement consumption. It is manufactured
because it uses fly ash/burnt clay/coal waste as the main ingredient.

• White Cement:
White cement is basically OPC - clinker using fuel oil (instead of coal) with iron oxide
content below 0.4 per cent to ensure whiteness. A special cooling technique is used
in its production. It is used to enhance aesthetic value in tiles and flooring. White
cement is much more expensive than grey cement.
Page | 4
Report on Cement Industry In India By: Shobhit Chandak

• Portland Blast Furnace Slag Cement (PBFSC):

PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent
gypsum and accounts for 10 per cent of the total cement consumed. It has a heat of
hydration even lower than PPC and is generally used in the construction of dams
and similar massive constructions.

• Specialized Cement:
Oil Well Cement is made from clinker with special additives to prevent any porosity.

• Rapid Hardening Portland cement:

Rapid Hardening Portland Cement is similar to OPC, except that it is ground much
finer, so that on casting, the compressible strength increases rapidly.

• Water Proof Cement:

Water Proof Cement is similar to OPC, with a small portion of calcium stearate or
non- saponifibale oil to impart waterproofing properties.

4. PROCEDURE

The main raw materials used in the cement manufacturing process are limestone,
sand, shale, clay, and iron ore. The main material, limestone, is usually mined on
site while the other minor materials may be mined either on site or in nearby
quarries. Another source of raw materials is industrial by-products. The use of by-
product materials to replace natural raw materials is a key element in achieving
sustainable development.

Raw Material Preparation

Mining of limestone requires the use of drilling and blasting techniques. The blasting
techniques use the latest technology to insure vibration, dust, and noise emissions
are kept at a minimum. Blasting produces materials in a wide range of sizes from
approximately 1.5 meters in diameter to small particles less than a few millimeters
in diameter.

Material is loaded at the blasting face into trucks for transportation to the crushing
plant. Through a series of crushers and screens, the limestone is reduced to a size
less than 100 mm and stored until required.

Depending on size, the minor materials (sand, shale, clay, and iron ore) may or may
not be crushed before being stored in separate areas until required.

Raw Grinding

Page | 5
Report on Cement Industry In India By: Shobhit Chandak

In the wet process, each raw material is proportioned to meet a desired chemical
composition and fed to a rotating ball mill with water. The raw materials are ground
to a size where the majority of the materials are less than 75 microns. Materials
exiting the mill are called "slurry" and have flowability characteristics. This slurry is
pumped to blending tanks and homogenized to insure the chemical composition of
the slurry is correct. Following the homogenization process, the slurry is stored in
tanks until required.

In the dry process, each raw material is proportioned to meet a desired chemical
composition and fed to either a rotating ball mill or vertical roller mill. The raw
materials are dried with waste process gases and ground to a size where the
majority of the materials are less than 75 microns. The dry materials exiting either
type of mill are called "kiln feed". The kiln feed is pneumatically blended to insure
the chemical composition of the kiln feed is well homogenized and then stored in
silos until required.

Pyroprocessing

Whether the process is wet or dry, the same chemical reactions take place. Basic
chemical reactions are: evaporating all moisture, calcining the limestone to produce
free calcium oxide, and reacting the calcium oxide with the minor materials (sand,
shale, clay, and iron). This results in a final black, nodular product known as
"clinker" which has the desired hydraulic properties.
In the wet process, the slurry is fed to a rotary kiln, which can be from 3.0 m to 5.0
m in diameter and from 120.0 m to 165.0 m in length. The rotary kiln is made of
steel and lined with special refractory materials to protect it from the high process
temperatures. Process temperatures can reach as high as 1450oC during the clinker
making process.

In the dry process, kiln feed is fed to a preheater tower, which can be as high as
150.0 meters. Material from the preheater tower is discharged to a rotary kiln with
can have the same diameter as a wet process kiln but the length is much shorter at
approximately 45.0 m. The preheater tower and rotary kiln are made of steel and
lined with special refractory materials to protect it from the high process
temperatures.

Regardless of the process, the rotary kiln is fired with an intense flame, produced by
burning coal, coke, oil, gas or waste fuels. Preheater towers can be equipped with
firing as well.

Page | 6
Report on Cement Industry In India By: Shobhit Chandak

The rotary kiln discharges the red-hot clinker under the intense flame into a clinker
cooler. The clinker cooler recovers heat from the clinker and returns the heat to the
pyroprocessing system thus reducing fuel consumption and improving energy
efficiency. Clinker leaving the clinker cooler is at a temperature conducive to being
handled on standard conveying equipment.

Finish Grinding and Distribution

The black, nodular clinker is stored on site in silos or clinker domes until needed for
cement production. Clinker, gypsum, and other process additions are ground
together in ball mills to form the final cement products. Fineness of the final
products, amount of gypsum added, and the amount of process additions added are
all varied to develop a desired performance in each of the final cement products.
Each cement product is stored in an individual bulk silo until needed by the
customer. Bulk cement can be distributed in bulk by truck, rail, or water depending
on the customer's needs. Cement can also be packaged with or without color
addition and distributed by truck or rail.

5. DEMAND & SUPPLY

The demand drivers for the cement sector continue to be housing, infrastructure
and commercial construction, etc. We expect the proportion of infrastructure in total
demand to improve further in future, as the thrust on infrastructure development is
on the rise. During April-November 2007, cement demand grew by 10 per cent year-
on-year (y-o-y) propelled by the growth witnessed in end user segments such as
housing, infrastructure etc. CRISIL Research expects demand to remain strong and
grow by over 12 per cent in the next 2 years. Cement demand is expected to
outstrip supply for the next year and a half as no major capacities are coming on-
stream, thus providing enough flexibility to cement manufacturers to further hike
the prices.

Today, cement from Andhra is going all over India, including Assam, Meghalaya,
Jharkhand, Orissa, West Bengal, Chattisgarh, Gujarat and Maharashtra. More cement
is likely to flow into Tamil Nadu from the state in view of cut in sales tax. Any further
increase in demand in the South India will benefit the cement industry here. Cement
movement from Gujarat to Mumbai is also coming down due to exports while

Page | 7
Report on Cement Industry In India By: Shobhit Chandak

cement movement from Orissa into Andhra has stopped and, in fact, cement is
flowing into Orissa as well.

Earlier in 2006-07, the housing sector alone consumed 65 per cent of the total
domestic consumption. With the launch of several infrastructure projects, the
housing consumption may come down to 55 per cent as the infrastructure and other
sectors are expected to move up to 45 per cent from the present 35 per cent. Still,
the main sector of consumption continues to be housing, including commercial
space, occupying more than 60 per cent. The current demand in the state for 2005-
06 is expected to cross 15 million tons (11.5 million tons). We expect the demand
here to go past the 17.5-million mark in 2006-07 in view of irrigation and
infrastructure projects being taken up in the state. Weaker sections’ housing,
construction of public toilets, schools in rural areas apart from several private and
public infrastructure projects will also give tremendous boost to the cement
consumption in the state. Most importantly, irrigation projects, worth nearly Rs 1
lakh crore, will trigger unprecedented demand for the next 5-7 years.
Cement consumptions are as follows:

6. DEMAND DRIVERS
Indian cement demand skewed towards housing
The demand from the housing sector is ~53% of the total Indian cement demand.

Page | 8
Report on Cement Industry In India By: Shobhit Chandak

There are fears of a slowdown in the demand from the housing sector due to a drop
in real estate prices in the country. The worry is that builders may postpone
construction of new buildings if the property prices were to correct.

Infrastructure to give demand a big boost

Our analysis shows that Infrastructure should be the biggest growth driver for
cement demand in the country. If we were to look only at order books of the top
eight construction and manufacturing equipment companies in India, we find that
their combined order book has virtually doubled over the last two years from
INR1,000bn (USD25bn) to INR1,950bn (USD48.75bn) for completion over the next
24-30 months.

7. COST

Page | 9
Report on Cement Industry In India By: Shobhit Chandak

Over the past five years, cost of cement production has grown at a CAGR of 8.4%.
Also, the producers have been able to pass on the hike in cost to consumers on the
back of increased demand. Average realizations have increased from Rs. 1,880 per
tonne in FY 03 to Rs. 3,133 per tons in FY 07, at a CAGR of 13.6%, which has been
reflected in higher profit margins of the industry.

To reduce the cost of production, the industry has focused on captive power
generation. Proportion of cement production through captive power route has
increased over the years. Also, cement movement by rail has increased over the
years. Freight and energy costs are also increasing; however, in the current market
scenario, manufacturers have the flexibility to pass on the increase in costs to end-
consumers. Let us have a look at the cost factors affecting the cement industry

Capacity Utilization: Since the industry operates on fixed cost, higher the
capacity sold, the wider the cost distributed on the same base. But one should also
keep in mind, that there have been instances wherein despite a healthy capacity
utilization, margins have fallen due to lower realizations.

Power: The cement industry is energy intensive in nature and thus power costs
form the most critical cost component in cement manufacturing (about 30% to total
expenses). Most of the companies resort to captive power plants in order to reduce
power costs, as this source is cheaper and results in uninterrupted supply of power.
Therefore, higher the captive power consumption of the company, the better it is for
the company.

Freight: Since cement is a bulk commodity, transporting is a costly affair (over

15%). Companies, which have plants located closer to the markets as well as to the
source of raw materials have an advantage over their peers, as this leads to lower
freight costs. Also, plants located in coastal belts find it much cheaper to transport
cement by the sea route in order to cater to the coastal markets such as Mumbai
and the states of Gujarat and Tamil Nadu.
On account of sufficient reserves of raw materials such as limestone and gypsum,
the raw material costs are generally lower than freight and power costs in the
cement industry. Excise duties imposed by the government and labor wages are
among the other important cost components involved in the manufacturing of
cement.

Operating margins: The company should have a consistent record of

outperforming its peers on the operational performance front i.e. it should have
higher operating margins than its competitors in the industry. Factors such as
captive power plants, effective capacity utilization results in higher operating
margins and therefore these factors should be looked into. Since cement is a
regional play on account of its high freight costs, the company should not have all
its plants concentrated in one region. It should have a geographical spread so that
Page | 10
Report on Cement Industry In India By: Shobhit Chandak

adverse market conditions in one region can be mitigated by high growth in the
other region

8. Government Policies

Government policies have affected the growth of cement plants in India in various
stages. The control on cement for a long time and then partial decontrol and then
total decontrol has contributed to the gradual opening up of the market for cement
producers. The stages of growth of the cement industry can be best described in the
following 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. The installed capacity reached only 27.9
MT by the year 1980-81.

Partial Decontrol (1982-1988)

In February 1982, partial decontrol was announced. Under this scheme, levy cement
quota was fixed for the units and the balance could be sold in the open market. This
resulted in extensive modernization and expansion drive, which can be seen from
the increase in the installed capacity to 59MT in 1988-89 in comparison with the
figure of a mere 27.9MT in 1980-81, an increase of almost 111%.

Total Decontrol (1989)

In the year 1989, total decontrol of the cement industry was announced. By
decontrolling the cement industry, the government relaxed the forces of demand
and supply. In the next two years, the industry enjoyed a boom in sales and profits.
By 1992, the pace of overall economic liberalization had peaked; ironically,
however, the economy slipped into recession taking the cement industry down with
it. For 1992-93, the industry remained stagnant with no addition to existing
capacity.

Government Controls
The prices that primarily control the price of cement are coal, power tariffs, railway,
freight, royalty and cess on limestone. Interestingly, all of these prices are
controlled by government

Page | 11
Report on Cement Industry In India By: Shobhit Chandak

9. REQUIREMENTS

Coal
The consumption of coal in a typically dry process system ranges from 20-25% of
clinker production. This means for per ton clinker produced 0.20-0.25 ton of coal is
consumed. This contributes 35-40% of the production cost. The cement industry
consumes about 10mn tons of coal annually. Since coalfields like BCCL supply a
poor quality of coal, NCL and CCL the industry has to blend high-grade coal with it.
The Indian coal has a low calorific value (3,500-4,000 kcal/kg) with ash content as
high as 25-30% compared to imported coal of high calorific value (7,000-8,000
kcal/kg) with low ash content 6-7%. Lignite is also used as a fuel by blending it with
coal. However this process is not very common.

Electricity
Cement industry consumes about 5.5bn units of electricity annually while one ton of
cement approximately requires 120-130 units of electricity. Power tariffs vary
according to the location of the plant and on the production process. The state
governments supply this input and hence plants in different states shall have
different power tariffs. Another major hindrance to the industry is severe power
cuts. Most of the cement producing states like AP, MP experience power cuts to the
tune of 25-30% every year causing substantial production loss.

Infrastructure
To reduce uncertainty relating to power, most of the leading companies like ACC,
Indian Rayon, and Grasim rely on captive power plants. A few companies are also
considering power-generating windmills.

Limestone
This constitutes the largest bulk in terms of input to cement. For producing one ton
of cement, approximately 1.6 ton of limestone is required. Therefore, the cement
plant location is determined by the location of limestone mines. The major cash
outflow takes place in way of royalty payment to the central government and cess
on royalties levied by the state government. The total limestone deposit in the
country is estimated to be 90 billion tons. AP has the largest share -- 34%,
Karnataka 13%, Gujarat 13%, M.P 8%, and Rajasthan 6.5%. The plants near the
limestone deposit pay less transportation cost than others.

Page | 12
Report on Cement Industry In India By: Shobhit Chandak

Transportation
Cement is mostly packed in paper bags now. It is then transported either by rail or
road. Road transportation beyond 200 kms is not economical therefore about 55%
cement is being moved by the railways. There is also the problem of inadequate
availability of wagons especially on western railways and southeastern railways.
Under this scenario, manufacturers are looking for sea routes, this being not only
cheap but also reducing the losses in transit. Today, 70% of the cement movement
worldwide is by sea compared to 1% in India. However, the scenario is changing
with most of the big players like L&T, ACC and Grasim having set up their bulk
terminals.

Infrastructure for Future

The consumption of cement is determined by factors influencing the level of
housing and industrial construction, irrigation projects, and roads and laying of
water supply and drainage pipes etc. The level and growth of GDP and its sectoral
composition, capital formation, development expenditure, growth in population,
level of urbanization, etc, in turn, determine these factors. But the domestic
demand for cement is mainly from the housing activities and infrastructure
development. The government paved the way for the entry of the private sector in
road projects. It has amended the National Highway Act to allow private toll
collection and identified projects, bridges, expressways and big passes for private
construction. The budget gave substantial incentives to private sector construction
companies. Ongoing liberalization will lead to an increase in industrial activities and
infrastructure development. So it is hoped that Indian cement industry shall boom
again in near future.

Incentives in States
Most state governments, in order to attract investments in their respective states,
offer fiscal incentives in the form of sales tax exemptions/deferrals. In some states,
this applies only to intrastate sales, like Madhya Pradesh and Rajasthan. States like
Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption
from electric duty.

Installed Capacity
India is the world’s second largest cement producing country after China. The
industry is characterized by a high degree of fragmentation that has created intense
competitive pressure on price realizations. Spread across the length and breadth of
the country, there are 120 large plants belonging to 56 companies with an installed
capacity of around 135mn tons as on March 2002.

Page | 13
Report on Cement Industry In India By: Shobhit Chandak

10.OPPORTUNITIES, THREATS, RISKS AND

CONCERNS

The cement industry is going through its boom period with full capacity utilization.
Powered by the GDP growth of 8-9%, the annual demand for cement in the country
continues to grow at 8- 10%. As per NCAER study, under high growth scenario, the
demand for cement (including exports) is expected to increase to 244.82 million
tonnes by 2010-11. As per the study, the demand is expected to be much higher at
311.37 million tonnes, if the optimistic projections of the road and the housing
sectors are met. The industry has responded to this with substantial new capacity
announcements. The materialization of these capacities, however, is likely to be
delayed due to a number of factors including timely delivery of equipment and
construction of the plant due to the heavy order book position of the suppliers. It is
expected that demand growth will outstrip supply till the materialization of such
new capacities. However, the current high level of international crude prices and its
impact on the domestic prices of petroleum products is likely to make a dent in the
profitability but its impact will have to be seen depending upon the ability of the
economy to pass on such cost increase to the consumer.

While the freight cost could be optimized on the imported coal through usage of
company’s own ships for part of the quantity, the international prices of imported
coal and its volatility together with the strengthening of the dollar against rupee
could derail this. This could impact the delivery prices of imported coal and also the
cost of production. The Government has taken steps to increase the availability of
indigenous coal for its expanded capacity across various plants which can mitigate
the impact of such high cost of imported coal for the plants located near the coal
fields in India.

Page | 14
Report on Cement Industry In India By: Shobhit Chandak

The Government’s continuing efforts to rein in cement prices by freeing imports and
banning exports could artificially disable the normal market price mechanisms for
determining the price.

The rise in the price of cement is because of the gap of demand & supply in the
market. The demand for cement is much higher than its actual supply. But with the
production maximization, which can be encountered in next few year, this gap may
narrow down, that may ensure the market to be in equilibrium.

Decreasing per capita consumption doesn’t affect the total consumption for the
cement. It means the infrastructure; contacted housing is using the bulk of the
production. In spite of High price of the product, the hick of demand because of the
increasing rate of infrastructural development.

Domestic price of cement is rising as well as the imported cement price is lowering.
So altogether the supply of the cement, which is affordable, will increase. This may
in decrease the gap between supply and demand.

Major Demand was from the housing sector, which may shift to infrastructure as lots
of infrastructural development processes has already being taken up & due to the
increased price, housing segment started showing a slowdown.

11.Main Companies In India

Associated Cement Companies Ltd (ACCL)

Page | 15
Report on Cement Industry In India By: Shobhit Chandak

Associated Cement Companies Ltd manufactures ordinary Portland cement,

composite cement and special cement and has begun offering its marketing
expertise and distribution facilities to other producers in cement and related areas.
It has twelve manufacturing plants located throughout the country with exports to
SAARC nations. The company plans capital expenditure through expansion of
existing units and/or through acquisitions. Non-core assets are to be divested to
release locked up capital. It is also expected to actively pursue overseas project
engineering and consultancy services.

Birla Corporation Ltd.

Birla Corp's product portfolio includes acetylene gas, auto trim parts, casting, cement,
jute goods, yarn, calcium carbide etc. The cement division has an installed capacity of
4.78 million metric tonnes and produced 4.77 million metric tonnes of cement in 2003-
04. The company has two plants in Madhya Pradesh and Rajasthan and one each in
West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent. It
manufactures Ordinary Portland cement (OPC), Portland pozzolana cement, fly ash-
based PPC, Low-alkali Portland cement, Portland slag cement, low heat cement and
sulphate resistant cement. Large quantities of its cement are exported to Nepal and
Bangladesh. Going forward, the company is setting up its captive power plant to remain
cost competitive.

Century Textiles and Industries Ltd (CTIL)

The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper, shipping,
property & land development, builders and floriculture. Cement is the largest division of
CTIL and contributes to over 40 per cent of the company's revenues. The company has
an installed capacity of 4.7 million tonnes with a total cement production of 5.43 million
tonnes in 2003-04. CTIL has four plants that manufacture cement, one in Chhattisgarh,
two in Madhya Pradesh and one in Maharashtra. Going forward, the company has
scripted a three-pronged strategy closing down its shipping business, continuing with its
chemicals and adhesive division, and focusing on cement, rayon and paper as its long-
term business plan.

Grasim-UltraTech Cemco

Grasim's product profile includes viscose staple fibre (VSF), grey cement, white cement,
sponge iron, chemicals and textiles. With the acquisition of UltraTech, L&T's cement
division in early 2004,
Page | 16
Report on Cement Industry In India By: Shobhit Chandak

Grasim has now become the world's seventh largest cement producer with a combined
capacity of 31 million tonnes. Grasim (with UltraTech) held a market share of around 21
per cent in
2003-04. It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu
and Gujarat among others. The company plans to invest over US$ 9 million in the next
two years to augment capacity of its cement and fibre business. It’s also plans to focus
on its international ventures, ramping up the capacity of Alexandra Carbon Black in
Egypt to 1,70,000 tonne per annum
(from 1, 20,000 tpa) and raising the capacity of the carbon black plant in China from
12,000 tpa to 60,000 tpa.

Gujarat Ambuja Cements Ltd (GACL)

Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of
commercial production at its 2 million tonne plant in Chandrapur, Maharashtra. The
group has clinker manufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra,
Chhattisgarh, Punjab and Rajasthan. The company has a market share of around 10 per
cent, with a strong foothold in the northern and western markets. Its total sales
aggregated US$ 526 million with a capacity of 12.6 million tonnes in 2003-04. Gujarat
Ambuja is India's largest cement exporter and one of the most cost efficient firms. GACL
has a 14.45 per cent stake in ACC, making it the second largest cement group in the
country, after Grasim-UltraTech Cemco. The company has free cash flows that it is likely
to use to grow inorganically. The company is scouting for a capacity of around two
million tonne in the northern and western markets. It has also earmarked around US$
195-220 million for acquisitions

India Cements

India Cements is the largest cement producer in southern India with a total capacity of
8.81 million tonnes and plants in Andhra Pradesh and Tamil Nadu. The company has a
market share of 5.4 per cent with a total cement production of 6.36 million tonnes in
2003-04. Its product portfolio includes ordinary Portland cement and blended cement.
The company has limited its business activity to cement, though it has a marginal
exposure to the shipping business. The company plans to reduce its manpower
significantly and exit non-core businesses to turnaround its fortune. It also expects the
export market to open up, with the Gulf emerging as a major importer.

Jaiprakash Associates Limited

Page | 17
Report on Cement Industry In India By: Shobhit Chandak

Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the
Jaypee group with businesses in civil engineering, hospitality, cement, hydropower,
design consultancy and IT. It has an annual capacity of 4.6 million tonnes with plants
located in Rewa & Bela (Madhya Pradesh) and Sadva Khurd (Uttar Pradesh). The
company has a market share of 3.8 per cent with the cement division contributing US$
172 million to revenue in 2003-04. The company is upgrading its capacity to 6.5 million
tonnes through the modernizing of the existing units and the commissioning of a new
grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163 million. Jaiprakash
Associates has decided to concentrate on its core business of construction and
engineering and leave its cement plant to its subsidiary Jaypee Rewa Cement Ltd. The
company manufactures a wide range of world class cement of OPC grades 33, 43, 53,
IRST-40 and special blends of pozzolana cement.

JK Synthetics

JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in 1962.

Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in 1975), acrylic and
white cement (in 1984). The company has a market share of 2.7 per cent. JK Synthetics
Limited is restructuring its business divisions into two separate entities- JK Cements and
JK Synthetics. After the restructuring, it will be left with a cement plant at Nimbahera in
Rajasthan, with a capacity of 3.26 million metric tonnes and manufacturing white
cement.

Madras Cements

Madras Cements Ltd is one of the oldest cement companies in the southern region and
is a part of the Ramco group. The company is engaged in cement, clinker, dolomite, dry
mortar mix, limestone,
ready mix cement (RMC) and units generated from windmills. The company has three
plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It
has a total capacity of 5.47 million tonnes annually and holds a market share of 3.1 per
cent. Madras Cements plans to expand by putting up RMC plants. As Karnataka is a
promising market, the company is further expanding its capacity from the present 1.5
million tonnes to 3.4 million tonnes through an investment of US$ 9 million.

Holcim

Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million
tonnes. It is a key player in aggregates, concrete and construction related services. It
has a strong market presence in over 70 countries and is a market leader in South
America and in a number of European and overseas markets. Holcim entered India by
means of a long-term strategic alliance with Gujarat Ambuja Cements Ltd (GACL). The
alliance aims to strengthen their clinker and cement trading activities in South Asia, the

Page | 18
Report on Cement Industry In India By: Shobhit Chandak

Middle East and the region adjoining the Indian Ocean. Holcim also intends to use India
as an additional base for its IT operations, R&D projects as well as a procurement
sourcing hub to generate additional synergies and value for the group.

Italcementi Group

The Italecementi group is one of the largest producers and distributors of cement with
60 cement plants, 547 concrete batching units and 155 quarries spread across 19
countries in Europe, Asia, Africa and North America. Italcementi is present in the Indian
markets through a 50:50 joint venture company with Zuari Cements. All initiatives in
southern India are routed through the joint venture company, while Italcementi is free to
buy deals in its individual capacity in northern India. The joint venture company has a
capacity of 3.4 million tonnes and a market share of 2.1 per cent.

Lafarge India

Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5
million tonnes and a clinker capacity of 3 million tonnes in the country. Lafarge
commenced operations in 1999 and currently has a market share of 3.4 per cent. It
exports clinker and cement to Bangladesh and Nepal. It produces Portland slag cement,
ordinary Portland cement and Portland pozzolana cement. The Indian cement plants are
located in Chhattisgarh and Rajasthan. Lafarge Cement has become the largest cement
selling firm in the Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.

Page | 19