Fundamental Analysis of

Cement Sector

DHIRENDRA C SAROJ
MMS – Finance (2008-10)
Roll No: - 42

ACKNOWLEDGEMENT

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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.

First it is our pleasure to thank Dr. M A Kohojkar (Director, Thakur Institute of

Management Studies & Research) for granting us the opportunity to present out
project report – “Fundamental Analysis of Cement Sector”.

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

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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.

Moreover, cement despatches were 18.12 MT in March 2009, showing a growth

of 10.35 per cent as compared to 16.42 MT in March 2008. During March 2009,
cement production was 18.10 MT, registering a growth of 10.43 per cent as
compared to 16.39 MT in March 2008.

Despite concerns of slowdown, led by a change in economic scenario along with

excess supply pressure, the cement industry has ended FY 2008-09 on a strong
note.

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

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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 analyze the fundamentals to acquire in-depth knowledge of the cement

Sector.
• To find out how the judgment is taken by the analyst on the basis of
fundamental analysis of the company.
• To study the demand of cement particularly Infrastructure including
Housing and Construction.
• To analyze the impact of union budget 2008-09 on cement industry.

• To recommend the best investment points to the retail investor to get high
returns with low risk.

• To study the future prospect of Indian Cement Industry.

Sr. No. CONTENT Page No.

Executive Summary

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 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

2.5 Rapid Hardening Portland

Cement
2.6 Oil Well Cement

2.7 White Cement

2.8 Sulphate Resisting Portland

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

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 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

commodity, is a freight intensive industry and transporting cement over long

distances can prove to be uneconomical. This has resulted in cement being

largely a regional play with the industry divided into five main regions viz.

north, south, west, east and the central region.

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

capacity addition taking place at a slower rate as compared to growth in

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

up expansion plans accordingly.

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

history of price fixing and market collusion receive appropriate regulation. If

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.

Types of Cement in India

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.

Some of the various types of cement produced in India are:

• 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.

The different types of cement in India have registered an increase in production

in the last few years. Efforts must be made by the cement industry in India and
the government of India to ensure that the cement industry continues innovation
and research to come up with more and more varieties in the near future.

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.

The cement industry in India is highly technologically intensive and as a result,

the quality of clinker cement that is produced in India is of a very high grade and
is often considered among the best in the world. The production of Clinker
Cement requires a lot of energy because it needs to be manufactured at the
temperature of around 1400-1450 degree Celsius.

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The various raw materials required for the production of Clinker Cement are:

• Iron Ore
• Bauxite
• Clay
• Limestone
• Quartz

Clinker Cement in India is produced in such large quantities that it is able to

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

increasing gradually but steadily.

Clinker Cement is usually ground with calcium sulphate so that it becomes

Portland cement. It is also ground with other ingredients to produce Pozzolanic

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

construction of houses, bridges, and complexes.

2.Ordinary Portland Cement

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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:

Ordinary Portland Cement-Grade 43: Having been certified with IS

8112:1989 standards, Grade 43 is in high demand in India and is largely used for
residential, commercial, and other building construction purposes. It has a
compressive strength of 560 kg per square cm. Today OPC 43 is most widely
available in Gujarat through an extensive distribution network.

• Ordinary Portland Cement-Grade 53: Having been certified with

IS12269:1987 standards, Grade 53 is known for its rich quality and is
highly durable. Hence it is used for constructing bigger structures like
building foundations, bridges, tall buildings, and structures designed to
withstand heavy pressure. Expert opinions and directions from
technicians and engineers are a must in this regard. With a good
distribution network this cement is available most abundantly in Gujarat.

As such, Ordinary Portland Cement is used for quite a wide range of

applications. Some of the Ordinary Portland applications are in pre-stressed
concrete, dry-lean mixes, durable pre-cast concrete, and ready mixes for general
purposes. The chemical components of Ordinary Portland Cement are
Magnesium (MgO), Alumina (AL2O3), Silica (SiO2), Iron (Fe2O3), and Sulphur
trioxide(SO3).

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.

3.Portland Pozzolana Cement

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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.

Pozzolana is an important ingredient in PPC which is commonly used in the

form of:

• 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:

• Fly ash - IS 3812:1981

• Calcined clay - IS 1344:1981

PPC is used in heavy load infrastructure and constructions such as marine

structures, hydraulic structures, mass concreting works, plastering, masonry
mortars, and all applications of ordinary Portland cement. One of the top Indian
brands of Portland Pozzolana is 'Shudh Cement' manufactured by Tata
Chemicals Limited.

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.

4.Portland Blast Furnace Slag Cement

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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

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the production of the Portland Blast Furnace Slag Cement so that its quality and
durability can be improved.

5.Oil Well Cement

Oil Well Cement as the name suggests, is used for the grouting of the oil wells,
also known as the cementing of the oil wells. This is done for both, the off-shore
and on-shore oil wells.

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's better strength performance is achieved

by increasing the refinement of the product. This is the reason that its use is
increasing-in-India.

Rapid Hardening Portland Cement is manufactured by fusing together limestone

(which has been finely grounded) and shale, at extremely high temperatures to
produce cement clinker. To this cement clinker, gypsum is added in small
quantities and then finely grounded to produce Rapid Hardening Portland
Cement. It is usually manufactured using the dry process technology.

Rapid Hardening Portland Cement is used in concrete masonry manufacture,

repair work which is urgent, concreting in cold weather, and in pre-cast
production of concrete. Rapid Hardening Portland Cement has proved to be a
boon in the places where quick repairs are required such as airfield and highway
pavements, marine structures, and bridge decks.

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

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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 use of Portland Sulphate Resisting Cement has proved beneficial,

particularly in conditions where there is a risk of damage to the concrete from
sulphate attack. The use of Sulphate Resisting Portland Cement is recommended
in places where the concrete is in contact with the soil, ground water, exposed to
seacoast, and sea water. In all these conditions, the concrete is exposed to attack
from sulphates that are present in excessive amounts, which damage the
structure. This is the reason that the use of the Sulphate Resisting Portland
Cement have increased in India.

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 various uses of Sulphate Resisting Portland Cement are:

• Underground and basements structures

• Works in coastal areas
• Piles and foundations
• Water and sewage treatment plants
• Sugar, chemical, and fertilizers factories
• Petrochemical and food processing industries

The raw materials required for the production of Sulphate Resisting Portland
Cement are:

• Coke
• Limestone
• Iron Ore
• Iron Scrap

Sulphate Resisting Portland Cement has proved beneficial for construction

purposes in India due to its climatic conditions. The cement industry in India

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.

The production of White Cement requires exact standards and so it is a product

which is used for specialized purposes. White Cement is produced at
temperatures that hover around 1450-1500 degrees Celsius. This temperature is
more than what is required by the ordinary grey cement. As more energy is
required during the manufacture of White Cement, it goes to make it more
expensive than the ordinary grey 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

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 • 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

CEMENT MANUFACTURING PROCESS

Lime stone is the basic raw material used in cement production.

Good quality lime stone‟s are abundantly available in the mines owned by
India Cements Ltd.

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 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.

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 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.

Powdered form of different grades is mixed homogenously in the

blending silo.

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.

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 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.

Clinker which is prestructured reinforced cement concrete, is now sent to

the clinker silo to avoid weathering effects.

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 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.

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 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.

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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.

4. Transportation: Since cement is a bulk commodity, transporting is a costly

affair (over 15 per cent). Companies that 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.

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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.

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MAJOR PLAYER’S OF THE INDUSTRY

This section provides the overview and financial information on prominent

players in the Indian cement sector, like

o Associated Cement Company Ltd. (ACC),

o Grasim Industries Ltd.,

o Ambuja Cements Ltd.,

o UltraTech Cement Ltd.,

o J.K. Cement Limited,

o Madras Cements Ltd.,

o Jaypee Group.

o Binani Cement Limited

o Prism Cement Limited

AMBUJA CEMENT

The company's cement plant was commissioned in 1985. It was set up in

technical collaboration with Krupp Polysius, Germany, Bakau Wolf and
Fuller KCP. The company got necessary approvals for setting up another
cement plant with 1 million tonne capacity per annum at Himachal
Pradesh in the year 1991. The Company undertook bulk cement
transportation, by sea, to the major markets of Mumbai, Surat and other
deficit zones on the West Coast.

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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.

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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

comparable. Our target price is Rs 50 and we have an Underweight rating on the

stock,”

ULTRATECH CEMENT LTD.

UltraTech Cement Limited was incorporated as a public limited company on

24th August 2000, as “L&T Cement Limited” a 100% Subsidiary of Larsen &
Toubro Limited. The name of the Company was changed to UltraTech
Cement Co. Limited with effect from 19th November 2003 after the Aditya
Birla group owned Grasim Industries acquired it. The name of the company
was again changed to UltraTech Cement Limited with effect from 11 Octoberth

2004.

UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It

manufactures and markets Ordinary Portland Cement, Portland Blast Furnace
Slag Cement and Portland Pozzolana Cement. It also manufactures ready
mix concrete (RMC). UltraTech Cement Limited has five integrated plants,
six grinding units and three terminals — two in India and one in Sri Lanka.
UltraTech Cement is the country’s largest exporter of cement clinker. The
export markets span countries around the Indian Ocean, Africa, Europe and
the Middle East.

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:

HSBC value Madras Cements at 4x EV/EBITDA. HSBC is underweight on the

stock with a target price of Rs 60.

India Cements:-

With a worsening macro outlook and likely oversupply in 2009, HSBC value

India Cements at 4.5x 2010e EV/EBITDA, which is at a discount to its historical

trading range of 5.5x-8.5x. HSBC gave the target price of Rs 80, with an

Underweight rating on the stock.

Shree Cements:-

The stock has traded in a narrow EV/EBITDA band of 4-6x in the last two years.

A concentration of the company’s operations in northern India could make it

more vulnerable to potential oversupply in 2009; “We therefore value it at the

lower band of its EV/EBITDA range, i.e.3.5x.

30
 SCENARIO:DEMAND AND SUPPLY

Production (% Consumption (% Capacity Excess

Date
change) change) utilisation (%) supply(%)
Jan-08 5.2 10.8 102.4 1.0
Feb-08 (0.9) 5.4 101.2 0.1
Mar-
11.2 (0.3) 104.1 1.8
08
Apr-
(8.3) 10.7 91.9 (1.1)
08
May-
(0.9) (9.8) 89.1 0.4
08
Jun-08 (1.5) 2.0 86.5 (0.2)
Jul-08 (0.1) (1.3) 86.4 0.0
Aug-
(10.2) (2.5) 77.3 (1.1)
08
Sep-08 5.6 (9.5) 81.6 1.0
Oct-08 6.2 4.9 86.3 1.2
Nov-
(2.9) 3.1 83.3 0.4
08
Dec-
10.3 0.9 91.7 1.7
08
Jan-09 2.0 11.0 93.4 0.5

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

HISTORICAL : DEMAND SUPPLY MODEL

Historical cement demand supply

model
(m tonnes)
Year-end installed capacity FY04 FY05 FY06 FY07 FY08 FY09
Actual effective capacity 144 152 158 166 199 222
(-) Mothballed capacity 144 152 158 166 180 207
Effective installed capacity 8.5 8.2 8.5 8.3 5.7 4.9
Domestic consumption 136 143 150 158 174 202
Export (cement + clinker) 114 121 136 149 164 178
Domestic consumption + 9 10.1 9.2 8.9 6 6.1
Export
Surplus / deficit) 123 131 145 158 170 184
% surplus (wrt effective 13 12 5 0 4 18
capacity)
Actual utilization 10% 9% 3% 0% 2% 9%
Average prices 86% 88% 95% 99% 97% 91%
Change in average price 141 153 163 206 231 239
Capacity growth 3% 8% 6% 27% 12% 4%
Domestic demand growth 5% 6% 4% 6% 10% 16%
5.80% 6.40% 12.00% 9.90% 10.10% 8%

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

Continuous technological upgrading and assimilation of latest technology has

been going on in the cement industry. Presently, 93 per cent of the total capacity

in the industry is based on modern and environment-friendly dry process

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

plants and thereby reduction in emission level.

 New Investments

• Shree Cements will invest almost US$ 244.12 million this year, of which

half will be invested towards setting up two grinding units at Rajasthan

and Uttarakhand to augment its capacity. The other half will be towards

the two power plants in Bangur.

• ACC Ltd will spend US$ 575 million on capacity expansion in 2009 and

2010. ACC is expanding capacity by a third to 30 MT by 2010.

• Binani Cement has signed a memorandum of understanding with the

Gujarat government to set up a 2.5 MTPA greenfield cement plant in

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

million for its new projects.

• Bheema Cements Ltd is planning to invest US$ 116.42 million in setting up

a new manufacturing line of 1.5 MT capacity at its plant in Andhra

Pradesh.

 Mergers and Acquisitions (M&As)

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

contributing to 7 per cent to the total deal value.

• Holcim strengthened its position in India by increasing its holding in

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

million, being the single largest acquirer in the cement sector.

• Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset

Management Fund and Emerging Market Fund have together bought

around 7.5 per cent in India's third-largest cement firm, India Cements

(ICL), for US$ 124.91 million.

34
 • Cimpor, the Portugese cement maker, paid US$ 68.10 million for Grasim

Industries' 53.63 per cent stake in Shree Digvijay Cement.

• CRH Plc, the world's second biggest maker and distributor of building

materials, acquired a 50 per cent stake in My Home Industries Ltd for

almost US$ 372.64 million.

• Vicat SA, a French cement maker acquired a 6.67 per cent stake in

Hyderabad-based Sagar Cement for US$ 14.35 million.

 Government Initiatives

Government initiatives in the infrastructure sector, coupled with the housing

sector boom and urban development, continue being the main drivers of growth

for the Indian cement industry.

• Increased infrastructure spending has been a key focus area over the last

five years indicating good times ahead for cement manufacturers.

• The government has increased budgetary allocation for roads under

National Highways Development Project (NHDP).

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

to the core sectors, cement being one of them.

Keeping in mind the global meltdown which is impacting the cement companies

in India, the government reimposed the counter-veiling duty (CVD) and special

CVD on imported cement in January. This is likely to provide a level playing

field to domestic companies.

36
 FORECAST MODEL :FY(09) TO FY(12)

Table 3: Forecast cement demand supply model

(m tonnes) FY09 FY10E FY11E FY12E
Year-end installed capacity 224 250 287 300
Actual effective capacity 207 231 257 283
(-) Mothballed capacity 4.9 4.9 4.9 4.9
Effective installed capacity 202 226 252 278
Domestic consumption 178 187 205 226
Export (cement + clinker) 6.1 5 8 9
Domestic consumption + export 184 192 213 235
Surplus / (deficit) 18 35 38 43
% surplus (wrt effective capacity) 9% 15% 15% 15%
Actual utilisation 91% 85% 85% 85%
Average prices 239 240 240 240
Change in average price 3% 0% 0% 0%
Capacity growth 16% 12% 11% 10%
Domestic demand growth 8% 5% 10% 10%

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

From the above chart we can see that

o ACC contibuted 11.8% to the sector

o L&T 11.3%
o Grasim 9.6%
o Gujrat Ambuja 7.6%
o India Cement 6.9%
o Madras 3.3%
And other’s 49.5% to the sector . So, ACC being the sector leader
contributing a major part of supplies.

38
 ACC : THE MARKET LEADER

ACC Limited is India’s foremost manufacturer of cement with a countrywide

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

market. Among the first companies in India to include commitment to

environment protection as a corporate objective, ACC has won several prizes and

accolades for environment friendly measures taken at its plants and mines.

A prominent overseas presence and figuring on the elite list of consumer

super brands of India but most importantly ACC has been amongst the first
Indian companies to make environmental protection, it is a cornerstone of its
corporate objectives. The historic merger of ten existing cement companies
led to the establishment of ACC –melding into a cohesive organization in
the year 1936 at Maharashtra. It’s a big company in cement manufacturing
and offers the services of Ready mixed concrete and Consultancy service.
This company is listed by Bombay Stock Exchange, National Stock
Exchange and in London Stock Exchange.

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 company has developed comprehensive expansion plans to meet the

requirements of its agenda for growth with a view to attain leadership
position in the cement industry, for that company made a project for
augmentation of clinkering and cement grinding. As a result with this the
capacity of Gogal works stands increased to 4.4 Metric Tonnes Per Annum.
ACC planed to expand the unit of Bargarh works capacity to 2.14 MTPA
together with 30MW captive power plant is underway.

Ready mix concrete business has been identified as an area of strategic

priority. ACC commissioned a Wind Energy Farm in Tamil Nadu to promote
clean and green technology. The company foresees substantial scope for
growth of this business in India and has accordingly finalized plans to
expand Ready Mix business in major cities including Tier1 and Tier 2
cities.ACC realizes the growth potential of Ready Mix, the company has 26
plants for the same and enhance to 46 in 2008. The company has major capital
expenditure projects in hand, as a result of these projects the total cement
capacity of the company will increase to about 30.4 MTPA by end of 2010 with
total outlay of Rs 4,000 crores.

The manufacturing cost per tonne of ACC Ltd, India’s largest cement

manufacturer by capacity, is the highest in the Indian cement industry, say

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

released last week.

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,

followed by UltraTech Cement Ltd, at Rs1,240 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%.

The Karvy report has an “underperformer” rating on ACC, based on the

rationale that “the cement price would decline and freight and coal cost would

increase, which would lead to de-rating of valuation”. The price-earnings

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—

• Madukkarai in Tamil Nadu,

• Wadi (two) in Karnataka,

• Chamda in Maharashtra,

• Bargarh in Orissa,

• Damodhar in West Bengal,

• Sindri and Chaibasa in Jharkhand,

• Jamul in Chhattisgarh,

• Kymore in Madhya Pradesh,

• Tikaria in Uttar Pradesh,

• Lakheri in Rajasthan, and

• Gagal (two) in Himachal Pradesh.

The company has a manufacturing capacity of around 21mtpa and hopes to

expand it to 27mtpa by 2009.

42
 ACC : QUALITY PRODUCTION

Product Development has always been an important activity at ACC, arising out

of a focus on quality and process improvement. It has been a constant partner,

driving research, innovation and evaluation. In 1964, a centralized research

facility - the Central Research Station (CRS) was established in Thane.

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

work in cement and allied fields.

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

the company - from applied research and production to marketing.

Accordingly, all ACC factories are equipped with state-of-the-art process control

instrumentation and associated quality control and testing laboratories. Trained

engineers, chemists and technicians man these. The Central Laboratory at ACC

43
Thane Complex is used as a reference laboratory for diagnosis and resolving

specific trouble-shooting cases.

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

Quality Systems certification. This demonstrates our tradition of providing

reliable and consistent quality through the application of modern technology,

and justifies the preferences of a nationwide customer base.

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

45
 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

46
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

driver and accounted for almost 55% in FY 07.

During the period FY 03 – 07, capacity additions in the country (30.6 mn tonnes)

were at a slower rate compared to demand growth leading to higher average

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

proportion of production of blended cements in product mix. Blended cement

accounted for 68% of product mix in FY 07 as compared to 49% in FY 03.

Cement is a bulky commodity and cannot be easily transported over long

distances making it a regional market place, with the nation being divided into

five regions. Each region is characterised by its own demand-supply dynamics.

The Southern region dominated the cement consumption at 44.5 mn tonnes in FY

07, accounting for about 30% of total domestic cement consumption. During FY

03-07, Southern region has witnessed highest CAGR of cement demand growth

47
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%,

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.

Market share of top five players in the industry has increased from 42% in FY 02

to 56% in FY 07. In FY 07, Holcim group captured a leadership position with

market share of 22.6% followed by Aditya Vikram Birla group at 19.4%.

Domestic Cement industry is highly insulated from global cement markets.

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

threat to domestic industry.

48
Cement demand is expected to remain buoyant driven by boost in construction

sector in the country. As per estimates, investment of USD 25 bn is required in

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.

We estimate domestic cement demand to grow at a CAGR of approximately 10%

for the next 5 years. The current tight demand - supply situation is expected to

extend up to end of calendar year 2008 owing to delays in capacity expansion

programmes by various companies.

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

in, we may witness a softening in prices in some regions.

CONCLUSION

Cement production: too early to say worst is over

The shares of cement companies have been moving up again, on the back of a

decent rise in January dispatches for some companies. Industry data show that

cement production and despatches increased by 12.6% and 12.7% year-on-year

(y-o-y) in December, after growing by 9.8% and 12% y-o-y in November.

The government’s numbers show that all-India growth in cement production was

8.7% in November and 11.6% in December. The momentum is likely to be kept

49
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

despatches for January are up 12% and 12.5%, respectively.

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

strong rural demand.

A research report by broking firm Sharekhan.com says, “With the revival of

infrastructure and private house building activity, the cement industry has given

an impressive performance in the last two consecutive months. But sustaining

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

be certainly ahead of street expectations. Further, cement companies are also

expected to benefit from softening coal and crude prices.”

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

growth of 11.4% in the three-month moving average of cement despatches for

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.

50
But perhaps the biggest reason not to set too much store by the rebound in

cement despatches is the opinion of the cement producers themselves. The

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.

Cement sector to see M&As' by 2009-end'

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

than financial compulsion to restructure, they opine.

"Large players or MNCs will make acquisitions when new entrants and small

companies start feeling margin pressures." Apart from issues relating to

oversupply, small

51
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

appropriate time to consolidate. It is also understood that Gujarat Sidhee,

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

reduced to 2 in 2007. In 2008, however, the number of deals increased to 3; two

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

52
large global players in the cement industry, Cemex is the only company that is

not present in India.

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.

-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.

-Housing sector is expected to remain the largest cement consumer in coming

years.

53
 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

dynamics and emerging opportunities critical to the success of the cement

industry in India. Based on this analysis, the report gives a future forecast of the

54
market that is intended as a rough guide to the direction in which the market is

likely to move.

Bibliography

55
Annexure:-

56
57