Professional Documents
Culture Documents
Cement Sector
DHIRENDRA C SAROJ
MMS – Finance (2008-10)
Roll No: - 42
ACKNOWLEDGEMENT
1
No endeavor is complete without acknowledging those who have helped to
make this project a success. As such I would like to thank all those who have
helped me to complete this project.
I express my heart filled gratitude to honorable Sir, Shri Ganesh Nair (AVP-
IndiaIfoline Ltd.) Shri Mukesh Patel (SM-Indiainfoline Ltd. & Project Coordinator
), who offered all the possible assistance during our developing period and for
the interest he took in sorting out our difficulties and offering us guidance,
constant encouragement and help.
I would like to thank all the faculties of Thakur Institute of Management Studies
& Research, they provided me with the necessary information and advice, and
many thanks are due for the same. This study could not have been successful
without the valuable inputs of my colleagues.
EXECUTIVE SUMMARY
2
India is the world's second largest producer of cement after China, with cement
companies adding nearly eight million tonnes (MT) capacity in April 2009, taking
the total installed capacity to 219 MT and despatch of 16.65 million tonnes during
April 2009. A few of the leading manufacturers are the UltraTech/Grasim
combine, Dalmia Cements, India Cements, Holcim etc. The cement industry may
add 40-45 MT of capacity this fiscal, a 21 per cent increase over the installed
capacity at 212 MT in 2008-09.
With the boost given by the government to various infrastructure projects, road
networks and housing facilities, growth in the cement consumption is anticipated
in the coming years. Another 50 MT capacity is likely to be added this year,
according to industry sources.
With almost total capacity utilisation levels in the industry, cement despatches
have maintained a 10 per cent growth rate. Total despatches grew to 170 MT
during 2007–08 as against 155 MT in 2006–07.
According to experts, the fourth quarter of the current financial year 2009 will
report a 2-3 per cent growth in margins due to rise in prices and 10-12 per cent
year-on-year growth in sales due to sudden increase in demand this quarter.
OBJECTIVE
3
Main objective of the study “Fundamental Analysis of Cement Sector” is to
examine strengths and future prospects of Cement Sector. In order to examine
the strength of Cement Sector I used the Fundamental Analysis which includes
the study of Economy, Industry and Company Fundamentals. The objectives of
the study are as follows:
• To recommend the best investment points to the retail investor to get high
returns with low risk.
4
1 Introduction 6
2 Types of Cement in India 8
2.1 Clinker Cement
2.2 Ordinary Portland
Cement
2.3 Portland Blast Furnace
Slag Cement
2.4 Portland Pozzolana
Cement
3 Cement Manufacturing 18
Process
4 Cost Structure 23
5 Major Player’s Of The 25
Industry
6 SCENARIO:DEMAND AND 30
SUPPLY
7 SUPPLIE’S ESTIMATE’S 31
8 Factor’s Responsible For The 31
Growth of cement sector
9 Forecast model(fy09-fy12) 36
10 Big Player’s 37
11 ACC Ltd. 38
12 Outlook Of 2008 46
13 Conclusion 49
14 Cement sector to see M&A’s 51
By 2009 end
15 Key Findings 53
16 Indian Cement industry 54
forecast to 2012
17 Bibliography 55
18 Annexure 56
5
INTRODUCTION
The Indian cement industry with a total capacity of about 190 m
tonnes in financial year-2008 is the second largest market after China. Despite the
fact that the Indian cement industry has clocked production of more than 100 m
tonnes for the last five years, registering an average growth of nearly 9%, the
per capita consumption of around 150 kgs compares poorly with the world
average of over 260 kgs and more than 450 kgs in China. This, more than
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anything underlines the tremendous scope for growth in the Indian cement
industry in the long term .Although consolidation has taken place in the Indian
cement industry with the top five players controlling almost 50% of the capacity,
the balance capacity still remains pretty fragmented. Cement, being a bulk
largely a regional play with the industry divided into five main regions viz.
While the southern region always had excess capacity in the past
owing to abundant availability of limestone, the western and northern region are
the most lucrative markets on account of higher income levels. However, with
demand, the demand supply parity has been restored to some extent in the
Southern region for the medium term. Considering the pace at which
infrastructural activity is taking place in different regions, the players have lined
Despite the growth of the Indian cement industry, India’s per capita
production of 115 kilograms per year lags the world average of over 250 kgs and
China’s production of more than 450 kgs per person. Clearly there remains room
for tremendous growth in the industry in India. But if India is to reach its
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potential, the free hand of the market must be left unfettered. For this to happen,
the Indian government must make sure that foreign companies that have a
market shares get fixed, India will be the loser and the gap between India and
China will only grow in the race to become the next economic superpower.
The types of cement in India have increased over the years with the
advancement in research, development, and technology. The Indian cement
industry is witnessing a boom as a result of which the production of different
kinds of cement in India has also increased.
By a fair estimate, there are around 11 different types of cement that are being
produced in India. The production of all these cement varieties is according to
the specifications of the BIS.
• Clinker Cement
• Ordinary Portland Cement
• Portland Blast Furnace Slag Cement
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• Portland Pozzolana Cement
• Rapid Hardening Portland Cement
• Oil Well Cement
• White Cement
• Sulphate Resisting Portland Cement
In India, the different types of cement are manufactured using dry, semi-dry, and
wet processes. In the production of Clinker Cement, a lot of energy is required. It
is produced by using materials such as limestone, iron oxides, aluminum, and
silicon oxides. Among the different kinds of cement produced in India, Portland
Pozzolana Cement, Ordinary Portland Cement, and Portland Blast Furnace Slag
Cement are the most important because they account for around 99% of the total
cement production in India.
The Portland variety of cement is the most common one among the types of
cement in India and is produced from gypsum and clinker. The Ordinary
Portland cement and Portland Blast Furnace Slag Cement are used mostly in the
construction of airports and bridges. The production of white cement in the
country is very less for it is very expensive in comparison to grey cement. In
India, while cement is usually utilized for decorative purposes, marble
foundation work, and to fill up the gaps between tiles of ceramic and marble.
1.Clinker Cement
Clinker Cement has registered a growth over the last few years in India. The
Indian cement industry is growing at a rapid pace and this has given a major
boost to the production and sale of Clinker Cement in India.
9
The various raw materials required for the production of Clinker Cement are:
• Iron Ore
• Bauxite
• Clay
• Limestone
• Quartz
meet the domestic demand and is also exported. In 2001- 2002, 1.76 million tons
of clinker cement were exported. In 2002- 2003, that figure stood at 3.45 million
tons, and in 2003- 2004 5.64 million tons of clinker cement was exported from
India. This shows that the export of clinker cement from India has been
Cement, Blast Furnace Slag Cement, and Silica Fume Cement. If Clinker Cement
is kept in a dry condition, it can be stored for a long period of time without any
loss of its quality. It is for this reason that Clinker Cement is preferred in the
10
Ordinary Portland Cement (OPC) is manufactured in the form of different
grades, the most common in India being Grade-53, Grade-43, and Grade-33. OPC
is manufactured by burning siliceous materials like limestone at 1400 degree
Celsius and thereafter grinding it with gypsum.
Tata Chemicals Limited is a major producer of OPC Grade 43 and 53. The value
of each of these grades of cement has been briefly mentioned below:
Some of the big names involved in OPC manufacture are Tata Chemicals,
Ultratech Cement, and ACC cement. Ordinary Portland Cement is in great
demand in India and will continue to be used in Indian infrastructural
upgradation and other constructions.
11
Portland Pozzolana Cement is manufactured by blending pozzolanic materials,
OPC clinker, and gypsum either grinding them together or separately. Today
Portland Pozzolana Cement is widely in demand for industrial and residential
buildings, roads, dams, and machine foundations.
• Fly ash
• Volcanic ash
• Silica fumes
• Calcined clay
PPC is resistant to harsh water attacks and prevents the formation of calcium
hydroxide at the time of cement setting and hydration. It withstands aggressive
gases, thermal cracks, wet cracking, etc. The BIS quality specifications for
Pozzolana materials used in PPC have been mentioned below:
Shudh cement has 5 percent of the market share and is available abundantly in
Gujarat, penetrating all 3 - primary, secondary, and tertiary markets. Some of the
other big names in the Portland Pozzolana manufacture are Ultratech, Ambuja,
ACC cements, Star Cement, and Birla group.
Portland Pozzolana Cement is highly popular in India and with many cement
plants setting up jetties for transportation, initial costs would gradually decrease
as well.
12
In recent years, there has been a significant growth in the production of Portland
Blast Furnace Slag Cement and its sales have also increased considerably over the
last few years. This has given a major boost to the Indian cement industry.
The Slag Cement of the Portland Blast Furnace is a type of cement that is
hydraulic and is manufactured in a blast furnace where iron ore is reduced to
iron. The molten slag which is tapped is quickly drenched with water, dried, and
then grounded to a fine powder. This fine powder that is produced is commonly
known as the Portland Blast Furnace Slag Cement.
The manufacture of Portland Blast Furnace Slag Cement requires 75% less energy
than that needed for the production of the Portland cement. The low cost of
production of Portland Blast Furnace Slag Cement makes it cheaper than
Portland cement. It is for this reason that in recent years, the sales of Portland
Blast Furnace Slag Cement have increased.
Portland Blast Furnace Slag Cement has a typical light color and an easier 'finish'
ability. Its concrete workability is better and it has a higher flexural and
compressive strength. It is resistant to chemicals and also has more hardened
consistency. This is the reason that Portland Blast Furnace Slag Cement is used in
the construction of dams, bridges, building complexes, and pipes.
The various raw materials required for the production of Portland Blast Furnace
Slag Cement are:
• Limestone
• Iron Ore
• Iron Scrap
• Coke
The major countries where Portland Blast Furnace Slag Cement is exported from
India are:
• South Africa
• UAE
• Sri Lanka
• Nepal
• Bangladesh
• Australia
• Doha-Qatar
The production and use of Portland Blast Furnace Slag Cement have increased
over the years. The Indian government has undertaken several investments in
13
the production of the Portland Blast Furnace Slag Cement so that its quality and
durability can be improved.
As the number of oil wells in India is increasing steadily, the sales of Oil Well
Cement have also increased. This has boosted the Indian cement industry to a
large-extent.
Oil Well Cement is manufactured from the clinker of Portland cement and also
from cements that have been hydraulically blended. Oil Well Cement can resist
high pressure as well as very high temperatures. Oil Well Cement sets very
slowly because it has organic 'retarders' which prevent it from setting too fast. It
is due to all these characteristics that it is used in the building of the oil wells
where the pressure is around 20,000 PSI and the temperature is around 500
degrees-Fahrenheit.
There are 3 grades of Oil Well Cements. Grades O is ordinary and is used
commonly; HSR is high sulphate resistant; and MSR is moderate sulphate
resistant. Each grade is used where it is applicable at a particular range of oil well
sulphate environments, temperatures, pressures, and depths. Oil Well Cement
has proved to be very beneficial for the petroleum industry due to its
characteristics. For it is due to the Oil Well Cement that the oil wells function
properly.
The various raw materials required for the production of Oil Well Cement are:
• Limestone
• Iron Ore
• Coke
• Iron Scrap
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6.Rapid Hardening Portland Cement
Rapid Hardening Portland Cement (RHPC) is a type of cement that is used for
special purposes when a faster rate of early high strength is required. RHPC has
a higher rate of strength development than the Normal Portland Cement (NPC).
The Rapid Hardening Portland Cement should be stored in a dry place, or else its
quality deteriorates due to premature carbonation and hydration. As the Indian
cement industry produces Rapid Hardening Portland Cement in large quantities,
it is able to meet the domestic demand and also export to other countries. The
cement industry in India exports cement mainly to the West Asian countries.
The raw materials required for the manufacture of Rapid Hardening Portland
Cement are:
• Limestone
• Shale
• Gypsum
• Coke
15
7.Sulphate Resisting Portland Cement
Sulphate Resisting Portland Cement (SRC) is a type of Portland cement in
which the quantity of tricalcium alumiante is less than 5%. It can be used for
purposes wherever Portland Pozzolana Cement, Slag Cement, and Ordinary
Portland Cement are used.
The Sulphate Resisting Portland Cement should be kept in a place which is dry
otherwise through premature hydration and carbonation the quality of cement
deteriorates. The cement industry in India manufactures Sulphate Resisting
Portland Cement in large quantities so that it is able to meet the domestic
demand and also export to other countries as well. The Indian cement industry
exports cement chiefly to the West Asian countries.
The raw materials required for the production of Sulphate Resisting Portland
Cement are:
• Coke
• Limestone
• Iron Ore
• Iron Scrap
16
must take steps in order to ensure that its quality is improved and to ensure that
it is readily available in the market.
The Sulphate Resisting Portland Cement should be stored in a dry place, or else
its quality deteriorates due to premature carbonation and hydration. As the
Indian cement industry produces Sulphate Resisting Portland Cement in large
quantities, it is able to meet the domestic demand and also export to other
countries. The cement industry in India exports cement mainly to the West Asian
countries.
8.White Cement
White Cement has registered growth in production and sale in India in the last
few years. The White Cement sector has been growing at the rate of 11% per
year. This has given the Indian cement industry a major boost.
White Cement is much like the ordinary grey cement except that it is white in
color. In order to get this color of the White Cement, its method of production is
different from that of the ordinary cement. However, this modification in its
production method makes White Cement far more expensive then the ordinary
cement.
White Cement is used in architectural projects the use of white cement has been
specified. It is used in decorative works and also wherever vibrant colors are
desired. White Cement is used to fill up the gaps between marble and ceramic
tiles for a smoother and more beautiful finish.
The various raw materials required for the production of White Cement are:
• Limestone
• Sand
17
• Iron Ore
• Nickel
• Titanium
• Chromium
• Vanadium
The major countries where White Cement is exported from India are:
• UAE
• Australia
• South Africa
• Sri Lanka
• Doha- Qatar
• Bangladesh
• Nepal
18
Limestone is obtained from the mines through the process of heavy
blasting conducted under strict supervision and safety precautions. The
limestone herewith obtained at India Cements Ltd. Mines are of very
superior quality.
The limestone in the form on huge stones is loaded in the dumpers and are
transported to the crusher.
The dumper unloads the huge stones into the crusher. This machine is
used to crush the huge stones into smaller chunks of approximately 20mm in
size.
19
Using accurate weighing machines the material is fed into a vertical roller
mill. It is a vertical steel mill with huge rollers used for grinding the material.
The ground raw material is fed into a 6-stage pre heater where it meets the
hot gases rising from the Kiln. Pre-heating of material before calcinations is a
crucial process as it saves a lot of energy.
20
Calcination is the most crucial stage in cement manufacturing process.
The raw materials is fed into a kiln, which is a huge rotating furnace. Using
coal as the fuel the Kiln heats the raw material to a staggering temperature of
1400 degrees Celsius.
Subsequent to the intense heating, the raw material is sent to a cooler that
brings the temperature of the material down to 200 degrees Celsius. The
sudden cooling of the material results in the formation of grey colored
nodules known as clinker.
21
Clinker and gypsum are fed to a cement mill in definite proportions with
the help of weigh feeders. This procedure is popularly known as “Cement
Mill”.
Then cement is packed in the packing plant into cement wags which
weigh 50 kilograms each, with the help of automatic electronic packers and
then are loaded into trucks .
Once the cement is packed in its respective bags i.e different bags are used
for PPC & OPC type cements, they are directly loaded into trucks & train
racks using conveyor belts, this process is also a fully automated process.
22
During this whole manufacturing process, hourly samples are taken from
manufactured cement and is stringently tested at the shift labs in the plant.
These check are to determine the setting time and strength of the cement
manufactured to keep the quality of the cement being manufactured under
constant observation.
COST STRUCTURE
Since the industry operates on fixed cost, higher the capacity sold, the wider the
cost distributed on the same base. The basic reason for not keeping production
low or reducing production and inter-alia utilization is due to the incidence of
high fixed costs. The cement units continue to operate at rated capacities to cover
their costs. This can be gauged by the fact that most units had installed captive
power generation facilities to reduce dependence on the grid.
23
1. 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.
2. 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.
3. Energy: The cement industry is highly energy intensive, with more than 40%
of the manufacturing cost being contributed by energy. In the production of
Clinker Cement, a lot of energy is required. Energy, including the landed cost of
coal (25%) and freight (15%) are the major cost components.
24
5. Raw Material: 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.
6. Other Costs: Excise duties imposed by the government and labor wages are
among the other important cost components involved in the manufacturing of
cement. Interest and depreciation account for 25-30% of costs, depending on
the age and capital structure of the plant.
25
MAJOR PLAYER’S OF THE INDUSTRY
o Jaypee Group.
AMBUJA CEMENT
26
Transportation was to be carried out by three specially designed ships
during the year 1992. During the year 1994, the company's Muller
location 1.5 million tonne cement project with clinkerization facility at
site in H.P and grinding facility both at Suli & Ropar in Punjab was
bespoken. In 1997, Kodinar plant of the company was originated its
commercial production with an enhanced capacity.
In the last decade the company has grown tenfold. It was the first
company in India to introduce the concept of bulk cement movement by
the sea transport. The company's most distinctive attribute, however, is its
approach to the business. Ambuja follows a unique homegrown philosophy
for successful survival. Ambuja is the most profitable cement company in
India, and one of the lowest cost producers of cement in the world.
The company was awarded for its credit, the National Award for commitment
to quality by the Prime Minister of India, National Award for outstanding
pollution control by the Prime Minister of India, Best Award for highest
exports by CAPEXIL and Economic Times - Harvard Business School
Association Award for corporate excellence in different years. The
company was adjudged as the top Indian company in the cement sector
for the Dun and Bradstreet -American Express Corporate Awards 2007.
The company developed a unique homespun channel management model
called Channel Excellence Programme (CEP) for marketing their product.
Over 7000 dealerships and 20,000 retailers across India are covered under this
model.
The company name was changed from Gujarat Ambuja Cements Limited
to Ambuja Cements Limited on April, 2007, the word Gujarat was dropped
to reflect the true geographical presence of the company.
27
HSBC value Ambuja Cements at a target 2010e EV/EBITDA of 5.5x, which is at a
discount to its historical trading range of 7-10x and in line with its industry peers.
“We value Ambuja Cements in line with ACC, which we believe is its closest
stock,”
2004.
28
JAYPEE CEMENT
Jaypee group is the 3rd largest cement producer in the country. The
groups cement facilities are located in the Satna Cluster (U.P), which has one
of the highest cement production growth rates in India.
The group produces special blend of Portland Pozzolana Cement under the
brand name ‘Jaypee Cement’ (PPC). Its Cement Division currently operates
modern computerized process control cement plants with an aggregate
capacity of 13.5 MTPA. The company is in the midst of capacity
expansion of its cement business in Northern, Southern, Central, Eastern and
Western parts of the country and is slated to be a 24.30 MTPA cement
producer by the year 2010 and 26.80 MTPA by 2011 with Captive Thermal
Power Plants totaling 327MW.
Keeping pace with the advancements in the IT industry, all the 140
cement dumps are
networked using TDM/TDMA VSATs along with a dedicated hub to
provide 24/7 connectivity between the plants and all the 120 points of cement
distribution in order to ensure “track – the – truck” initiative and provide
seamless integration. This initiative is the first of its kind in the cement
industry in India.
In the near future, the group plans to expand its cement capacities via
acquisition and
greenfield additions to maximize economies of scale and build on vision to
focus on large size plants from inception.
29
Madras Cements:
India Cements:-
With a worsening macro outlook and likely oversupply in 2009, HSBC value
trading range of 5.5x-8.5x. HSBC gave the target price of Rs 80, with an
Shree Cements:-
The stock has traded in a narrow EV/EBITDA band of 4-6x in the last two years.
30
SCENARIO:DEMAND AND SUPPLY
The table above highlights the fact that consumption of cement has not taken
back seat and industry is growing and has been operating at the near
equilibrium levels. Supply has fallen short only for last monsoon which is
usually a slack period for this industry. It is clearly can be noted from the above
data the production in Jan (08) 5.2% and in Dec (08) production increased to
10.3 % and consumption in Jan(08) 10.8% and in Dec(08) 0.9% and in Jan(09)
31
increased to 11.0% and the supplies in Jan(09) become 0.5% in excess which is a
indicator that cement industry has a significant growth over the year .
SUPPLIE’S ESTIMATE’S
Historically, the sustainable capacity utilisation in the cement industry has been
80-85%. This implies FY09 and FY10 are unlikely to be years of overcapacity
in the traditional sense.
32
FACTOR’S RESPONSIBLE FOR THE GROWTH
OF THE SECTOR
Technological change
been going on in the cement industry. Presently, 93 per cent of the total capacity
technology and only 7 per cent of the capacity is based on old wet and semi-dry
process technology. There is tremendous scope for waste heat recovery in cement
New Investments
• Shree Cements will invest almost US$ 244.12 million this year, of which
and Uttarakhand to augment its capacity. The other half will be towards
• ACC Ltd will spend US$ 575 million on capacity expansion in 2009 and
Gujarat at a cost of US$ 169.40 million. Binani Cement has also initiated
33
talks with a few foreign institutional investors (FIIs) to raise US$ 307.99
Pradesh.
A growing and robust economy was noteworthy in terms of the total number of
mergers and acquisitions (M&A) in India 2007, with the cement sector
Ambuja Cement from 22 per cent to 56 per cent through various open
market transactions with an open offer for a total investment of US$ 1.8
billion. Moreover, it also increased its stake in ACC Cement with US$ 486
• Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset
around 7.5 per cent in India's third-largest cement firm, India Cements
34
• Cimpor, the Portugese cement maker, paid US$ 68.10 million for Grasim
• CRH Plc, the world's second biggest maker and distributor of building
• Vicat SA, a French cement maker acquired a 6.67 per cent stake in
Government Initiatives
sector boom and urban development, continue being the main drivers of growth
• Increased infrastructure spending has been a key focus area over the last
35
• Appointing a coal regulator is looked upon as a positive move as it will
facilitate timely and proper allocation of coal (a key raw material) blocks
Keeping in mind the global meltdown which is impacting the cement companies
in India, the government reimposed the counter-veiling duty (CVD) and special
36
FORECAST MODEL :FY(09) TO FY(12)
The above model is a forcast model for the growing cement sector from FY09 to
FY12 the contributing factor’s taken to consideration are
o Export
o Domestic Consumption
o Average Prices
o Capacity Growth and
o Domestic Demand Growth
The above all factor’s are increasing in a considerable rate indicating a positive
sign towards the growth of the sector.
37
BIG PLAYER’S : CEMENT SECTOR
38
ACC : THE MARKET LEADER
network of factories and marketing offices. Established in 1936, ACC has been a
pioneer and trend-setter in cement and concrete technology. ACC’s brand name
is synonymous with cement and enjoys a high level of equity in the Indian
environment protection as a corporate objective, ACC has won several prizes and
accolades for environment friendly measures taken at its plants and mines.
The company received an award as 'Good Corporate Citizen' for the year
2005-2006. During the year 2007 company acquired 100 % of the equity stake
of Lucky Minmat Private Limited for Rs 35 crores and also acquired 14.3 %
equity stake in Shiva Cement Limited. Meanwhile the company divested its
entire equity shares in Almatis ACC Ltd to the Almatis group. The overseas
contract with YANBU Cement Company in the kingdom of Saudi Arabia is
39
successfully ongoing relationship from last 28 years and has been renewed up
to February 28, 2011.
The manufacturing cost per tonne of ACC Ltd, India’s largest cement
analysts.
ACC’s manufacturing cost is Rs1,529 per tonne against the industry average of
Rs1,056 per tonne. India, the second largest cement market in the world, has a
total installed capacity of 170 million tonnes per annum (mtpa), according to a
40
report on the sector by domestic brokerage Karvy Stock Broking Ltd that was
Demand for cement in the country stood at 154.9mtpa for the year ended March.
Birla Corp. Ltd has the second highest manufacturing cost, Rs1,339 per tonne,
The ACC share closed on Monday on the Bombay Stock Exchange at Rs1,285.95,
gaining 2.83% on a day when the benchmark Sensex rose 639.63 points or 3.47%.
rationale that “the cement price would decline and freight and coal cost would
multiple of ACC stands at 19.52, higher that the industry average of 14.86.
“ACC has the oldest plants,” says Sourav Mallik, associate director (investment
banking) at Kotak Mahindra Capital Co. Ltd, the investment banking arm of
Kotak Mahindra Bank Ltd. “Some plants are inefficient and it is uneconomical to
run them.”
41
ACC has 14 plants at 12 locations nationwide—
• Chamda in Maharashtra,
• Bargarh in Orissa,
• Jamul in Chhattisgarh,
42
ACC : QUALITY PRODUCTION
Product Development has always been an important activity at ACC, arising out
The research complex now renamed as ACC Thane Complex, spread over an
area of 8000 sq m has modern labs with the latest equipment and manned by
highly qualified scientists and technologists who carry out product development
ACC has effectively pledged its reputation as the market leader in the quality of
cement. Maintaining this lead calls for harnessing the resources and expertise of
Accordingly, all ACC factories are equipped with state-of-the-art process control
engineers, chemists and technicians man these. The Central Laboratory at ACC
43
Thane Complex is used as a reference laboratory for diagnosis and resolving
As a result of this focus on quality, ACC cement specifications exceed those set
by BIS by a wide margin. Today, all ACC cement plants have the ISO 9001
44
ACHEIVEMENT’S
2006 Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement
Limited and Tarmac (India) Limited merged with ACC
2006 ACC announces new Workplace policy for HIV/AIDS
2006 Change of name to ACC Limited with effect from September 1, 2006 from
The Associated Cement Companies Limited.
2006 ACC receives Good Corporate Citizen Award 2005-06 from Bombay
Chamber of Commerce and Industry
2006 New corporate brand identity and logo adopted from October 15, 2006
2006 ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at
Wadi in Karnataka– the first ever such project by a private sector company
in India.
2007 ACC partners with Christian Medical College for treatment of HIV/AIDS in
Tamil Nadu
2007 Sumant Moolgaokar Technical Institute completes 50 years and reopens
with new curriculum
2007 ACC commissions Wind energy farm in Tamilnadu.
2008 Ready mixed concrete business hived off to a new subsidiary called ACC
Concrete Limited.
2008 ACC Cement Technology Institute formally inaugurated at Jamul on July 7.
2008 First Sustainable Development Report released on June 5.
2008 ACC wins CNBC-TV18 India Business Leader Award in the category India
Corporate Citizen of the year 2008
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Outlook of 2008
The Cement industry has continued its growth trajectory over the past seven
years. Domestic cement demand growth has surpassed the economic growth rate
of the country for the past couple of years. The growth rate of cement demand
over the past five years at 8.37 % was higher than the rate of growth of supply at
4.84% as also the rate of growth of capacity addition during the same period.
Demand for cement in the country is expected to continue its buoyant ride on the
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back of robust economic growth and infrastructure development in the country.
The key drivers for cement demand are real estate sector, infrastructure projects
and industrial expansion projects. Among these, real estate sector is the key
During the period FY 03 – 07, capacity additions in the country (30.6 mn tonnes)
capacity utilization rates from 81.3% to 93.8% during the same period. This has
exerted pressure on average prices which have increased from Rs. 156 per bag in
FY 03 to Rs. 216 per bag in FY 07. In December 2007, prices stood at Rs. 245 - Rs.
250perbag.
Low capacity addition coupled with higher utilization rate also led to increase in
distances making it a regional market place, with the nation being divided into
07, accounting for about 30% of total domestic cement consumption. During FY
03-07, Southern region has witnessed highest CAGR of cement demand growth
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at 10.4% followed by Northern and Eastern regions at 8.9% and 9%, respectively.
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 tonne in FY 07, at a CAGR of 13.6%,
To reduce the cost of production, the industry has focused on captive power
increased over the years. Also, cement movement by rail has increased over the
years.
Market share of top five players in the industry has increased from 42% in FY 02
Exports have been constant at about 6% of total cement demand for past few
years. With GoI intervention, making cement duty free, cement is being imported
from neighbouring countries. However, due to logistics issues and lack of port
handling capabilities, imports of cement will remain negligible and do not pose a
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Cement demand is expected to remain buoyant driven by boost in construction
urban housing, USD 450 bn will be required in infrastructure related projects and
industrial expansion projects would witness investments of USD 88 over the next
five-years.
for the next 5 years. The current tight demand - supply situation is expected to
We expect prices to remain firm till the end of CY2008 due to tight demand -
supply situation and increase in input costs. Thereafter as new capacities come
CONCLUSION
decent rise in January dispatches for some companies. Industry data show that
The government’s numbers show that all-India growth in cement production was
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up in January—the Aditya Birla group has said that cement production and
despatches are up 9.76% and 7.35%, respectively, ACC Ltd’s production and
The numbers have sparked some hope among analysts that demand for cement
has picked up. The reasons for the higher demand include pre-poll spending and
infrastructure and private house building activity, the cement industry has given
such growth is uncertain, as the real estate segment, which consumes about 55%
of the total cement produced, has still not revived due to overall economic
slowdown. However, we expect that the overall volume growth in FY2009 will
There is, however, also a base effect at work here. According to analysts at
Morgan Stanley, the y-o-y growth in the three-month moving average of cement
dispatches was at a low of 4.9% in January 2008, which is why they expect high
January 2009. In February 2008, however, the three-month moving average went
up to 8%, which means that it’ll be difficult to show high growth in February
2009.
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But perhaps the biggest reason not to set too much store by the rebound in
Grasim management, for example, points out that although cement demand can
be expected to grow in line with the gross domestic product growth, prices and
margins will come under pressure in FY10 as more capacities come on stream.
Mumbai: The 207-million tonne Indian cement industry may witness M&A
activity again by the end of 2009, say industry watchers. However, this time,
valuations will be low and deals will be driven by a strategic desire to exit rather
"Large players or MNCs will make acquisitions when new entrants and small
oversupply, small
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companies may have made expansions at high costs and will have to spend on
brand building; hence, returns may not be up to their expectations and they will
look to be acquired,.
Experts believe companies like Reliance, Holcim and Lafarge are waiting for an
Saurashtra Cement and Andhra Cement are waiting for a good valuation to get
acquired.
"Many sellers are not willing to sell at low valuations. Also, no cement company
is running into losses as yet, though they may have reported de-growth in their
top line and bottom line," said an investment banker on condition of anonymity.
The cement industry witnessed 7 high valuation M&A deals in 2006, which
MNCs, CRH and Vicat, entered India by acquiring stakes in My Home Industries
($462 mn) and Sagar Cement (Rs 70 crore) respectively. The third deal in 2008
was in the RMC space, where Lafarge acquired L&T concrete’s RMC business
($349 mn).
Valuations have dipped to $75-100 per tonne now, from the peak level of $300
per tonne. Incidentally, French cement maker Vicat bought stake in Sagar
Cements for half the value of what a rival had paid a year earlier. Among the
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large global players in the cement industry, Cemex is the only company that is
Key Findings
-Domestic demand for cement has been increasing at a fast pace in India and it
has surpassed the economic growth rate of the country.
-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.
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Indian Cement Industry Forecast to 2012
India is fast emerging on the world map as a strong economy and a global
power. The country is going through a phase of rapid development and growth.
All the vital industries and sectors of the country are registering growth and
thus, luring investors. And cement industry is one of them. To throw light on the
Indian cement industry, RNCOS has launched its report 'Indian Cement Industry
Forecast to 2012' that gives an extensive research and in-depth analysis of the
cement industry in India. This report helps clients to analyze the competitive
industry in India. Based on this analysis, the report gives a future forecast of the
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market that is intended as a rough guide to the direction in which the market is
likely to move.
Bibliography
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Annexure:-
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