5 INDIACATORS AFFECTING CEMENT INDUSTRY

1) Global Players Rapid urbanization and the booming infrastructure have lead to an increase in construction and development across India, attracting even the global players. The recent years have witnessed asurge of foreign direct investment in the cement sector. International players like France's Lafarge,Holcim from Switzerland, Italy's Italcementi and Germany's Heidelberg Cements hold more than aquarter pie of the total capacity.

Holcim, one of the world's leading suppliers of cement, has 24 plants in the country andenjoys a market share of about 23-25 per cent. It will further invest about US$ 2.49 billion inthe next five years to set up plants and raise capacity by 25 mt in the country. Holcim has aglobal sale worth about US$ 20 billion, where India contributes US$ 22.5 billion.

Italcementi Group, the fifth largest producer of cement in the world acquired full stake inthe K.K. Birla promoted Zuari Industries' cement, to strengthen its presence in India lining upUS$ 300 million investment to increase the capacity of Zuari Industries from 1.7 mtpa toabout 6-7 mtpa. Moreover, it plans to invest US$ 174 million over the next two years invarious greenfield and acquisition projects.

The French cement major, Lafarge, acquired the cement plants of Raymond and Tisco withan installed capacity of 6 mtpa. It plans to double its capacity to 12 mt over the next fiveyears by adopting the greenfield expansion route.

Heidelberg Cement has entered into an equal joint-venture agreement with S P Lohia Groupcontrolled Indo-Rama Cement. It aims at a 50 per cent controlling stake in Indo-Rama'sgrinding plant of 0.75 mtpa at Raigad in Maharashtra. Heidelberg is also taking over MysoreCement of S K Birla group at a consideration of US$ 93 million

2) Mergers and Acquisitions (M&As) A growing and robust economy was noteworthy in terms of the total number of mergers andacquisitions (M&A) in India 2007, with the cement sector contributing to 7 per cent to the total dealvalue. Increased activity in infrastructure and a booming real estate market have seen foreign firmsvying to acquire a share of the pie.

Holcim strengthened its position in India by increasing its holding in Ambuja Cement form 22per cent to 56 per cent through various open market transactions with an open offer for atotal investment of US$ 1.8 billion. Moreover it also increased its stake in ACC Cement withUS $ 486 million, being the single largest acquirer in the cement sector.

Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund andEmerging Market Fund have together bought around 7.5 per cent in Indias thirdlargestcement firm India Cements (ICL) for US$ 148.19 million.

Cimpor the Portugese cement maker paid US$ 75.76 million for Grasim Industries 53.63 percent stake in Shree Digvijay Cement.Some of the other major mergers and acquisitions in the recent past include CRH acquiring MyHome Industries for US$ 462 million, Lafarge buying L&T Concretes ready-mix concrete (RMC)business for US$ 349 million and Heidelberg consolidating its business with Mysore Cement andIndorama, and Italcementi acquiring 100 per cent stake in Zuari Cement and 95 per cent stake Shree Vishnu among others.

3) Government initiatives Government initiatives in the infrastructure sector, coupled with the housing sector boom and urbandevelopment, will continue being the main drivers of growth for the Indian cement industry.Moreover, the Union Budget for 2008-09 has sought measures to increase availability and reduceprices.

Increased infrastructure spending has been a key focus area over the last five yearsindicating good times ahead for cement manufacturers. The government has increased budgetary allocation for roads under NHDP. This coupledwith government's initiatives on the infrastructure and housing sector fronts would continueto remain the key drivers.

Appointing a coal regulator is looked upon as a positive move as it will facilitate timely andproper allocation of coal (a key raw material) blocks to the core sectors, cement being one of them.

Other budget measures such as cut in import duty from 12.5 per cent to nil, removal of 16per cent countervailing duty, 4 per cent additional customs duty on portland cement anddifferential excise duty are all intended to cut costs and boost availability.To summarise in the words of an industry analyst, 'The allocation of US$ 3.23 billion for the NationalHighway Development Project will keep the demand for cement alive

4) TECHNOLOGICAL ADVANCEMNTS Modernization and technology up-gradation is a continuous process for any growing industry and isequally true for the cement industry. At present, the quality of cement and building materialsproduced in India meets international standards and benchmarks and can compete in internationalmarkets. The productivity parameters are now nearing the theoretical bests and alternate means.Substantial technological improvements have been brought about and today, the industry canlegitimately be proud of its state-of-the-art technology and processes incorporated in most of itscement plants. This technology up gradation is resulting in increased capacity, reduction in cost of production of cement