Cement Industry

Pradnya Girish Jay Kavita Subaraman Prajatka

Cement Industry in India

The history of the cement industry in India dates back to the 1889 when a Kolkata-based company started manufacturing cement from Argillaceous, but the industry started getting the organized shape in the early 1900s.

In 1914, India Cement Company Ltd was established in Porbandar with a capacity of 10,000 tons and production of 1000 installed.

In 1977, government authorized new manufacturing units as well as existing units going for capacity enhancement.

 The cement industry in India has been on a robust growth, led by buoyancy in sectors like real estate and construction. India is the 2nd major cement producing country following China with 137 large and 365 mini cement plants. The large plants have employed approximately 1,20,000 people, according to Cement Manufacturers Association (CMA). Cement in India is produced as per the Bureau of Indian Standards (BIS) specifications and the quality is comparable with the best in the world. Some of the major players in the cement industry include Ultratech Cement, Gujarat Ambuja Cement Limited , JK Cements, ACC Cement, Century Cements and Madras Cements to name a few

Market
The Indian cement industry can be divided into 5 geographical zones North, South, East, West and Central based on localized differentiation in the consumer profile and supply-demand scenario. The target of Cement production in India was 290 MT by end of this year, which it has already achieved, hence they expect capacity to increase up to 320 MT by end of this fiscal year, Cement Manufacturers Association (CMA) is targeting to achieve 550 MT capacity by 2020. About 93 % of the total capacity is based on eco-friendly technology. Progressive liberalization and easing of FDI norms in various sectors led to growing demand for office space from MNCs.

Government Initiatives Union budget 2011-12

Allocation of Rs. 2, 14,000 crore (US$ 46.5 billion) for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. IIFCL to achieve cumulative disbursement target of Rs. 25,000 crore (US$ 5.4 billion) by March 31, 2012.

Under take out financing scheme, seven projects sanctioned with debt of Rs. 1,500 crore (US$ 325.6 million). Another Rs. 5,000 crore (US$ 1.1 billion) will be sanctioned during 2011-12. To boost infrastructure development, tax free bonds of Rs 30,000 crore (US$ 6.5 billion) proposed to be issued by Government undertakings during 2011-12.

Drivers
Growth in domestic cement demand is likely to remain strong, given the revival in the:
Housing markets Constant government spending on the rural sector Rise in the number of infrastructure projects being implemented by the private sector. Infrastructure

Indias cement production will grow at a compound annual growth rate (CAGR) of around 12 % during 2011-12 - 2013-14 to reach 303 Million Metric Tons. A large number of foreign players are also expected to enter this industry in the coming years as 100 per cent FDI is permitted in the cement industry.

Top two companies

Ultractech Cement Ltd
Ambuja Cement
Market Cap

Ultratech Cement
The Aditya Birla Group is the 11th largest cement producer in the world and the seventh largest in Asia. Incorporated on 24 August 2000 as L&T Cement Limited. Cement business of Larsen & Toubro Limited demerged and vested in company in 2004. Grasim acquired management control in July 2004. Together with Grasim, one of the largest cement producers in India. Name changed to UltraTech Cement Limited with effect from 14 October 2004

Annual capacity of 52 million tonnes

Competitive Advantage of Ultratech Cement

Sourcing of Raw Materials: UltraTech's greatest strength is its raw material sourcing. UltraTech's capabilities in identifying, and leasing, higher quality raw material quarries results in significant cost savings for them. Fuel used in Manufacturing Process: The manufacturing process offers no distinct competitive advantage to its largest competitor ACC, though ACC enjoys lower fuel cost. However, this is not sustainable, and since UltraTech has already started switching to coal, ACC's advantage is likely to be neutralized in the near future.

Financial and Human resource advantage: UltraTech, being a part of the Aditya Birla Group, has access to the deep pockets of its promoters, as well as human capital of the highest quality.

Ambuja Cement
Ambuja Cements was set up in 1986. In the last decade the company has grown tenfold. The total cement capacity of the company is 23 million tonnes approx. Its plants are some of the most efficient in the world with environment protection measures that are on par with the finest in the developed world. The Group's principal activity is to manufacture and market cement and clinker for both domestic and export markets.

Competitive Advantage of Ambuja Cement

COMPETITIVE ADVANTAGE: Low Cost Producer Ambuja Cement is the lowest cost producer of cement in the world due to following factors: Freight: The most successful of GACLs innovative strategies of cost cutting was idea of Sea Transportation. Fuel: Fuel strategy was also cost cutting factor Power: They have established their own captive power plant of 178 Megawatts

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