SCHOOL OF BUSINESS

A Study on Indian cement industry

Guided By:Prof. Samik shome

Submitted By:AMIT KUMAR YADAV

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Acknowledgement
Knowledge is an experience gained in life, it is the choicest possession, which should not be shelved but should be happily shared with others. It is the supreme art of the teacher to awaken joy in creative expression and knowledge. The feeling of a task well done is incomplete without giving the acknowledgment where due, so before we proceed further We wish to spend some time in expressing our gratitude to all those who have been involved in guiding us and helping us out during our report. We would like to give special thanks to Prof. Samik Shome for his guidance during the report. Despite of his demanding schedule, he bestowed every possible support to us, so as to carry on the report work without any hindrance. We would like to thank valuable works of publishers and authors whose work helped me during the project.

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Table of Contents

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Topic Executive summary 1. 1.1 Current Scenario 1.2 2. 3 3.1 3.2 3.3 Review of Literature Analysis Introduction Major players in Indian Cement Industry & Nature of Competition Market Segmentation 3.3. Geographical Segmentation 1 3.3. Customer Segmentation 2 3.4 PESTEL Analysis on Indian Cement Industry 3.4. Political 1 3.4. Economic 2 3.4. Social 3 3.4. Technological 4 3.4. Environmental Introduction to Indian cement industry History of the Indian Cement Industry

Page No. 1 2 2 4 6 14 14 14 22 22 24 26 26 27 28 29 30
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EXECUTIVE SUMMARY
The cement industry is one of the key industries in India. Cement industry is a rapidly growing sector heavily taxed by the government. The Indian cement industry is one of the largest user of power, is the third largest consumer of coal in the country. As Limestone is found in abundance all over the country, the cement industry has a huge potential to grow. The Indian Cement Industry comprises 148 large cement plants with around 46 member companies. The major players areGrasim Industries Ltd, ACC Ltd, Udaipur Cement Works Ltd, Ambuja Cements Ltd, Century Textiles & Inds. Ltd, India Cements Ltd, Shree Cement Ltd, Madras Cements Ltd, Birla Corporation Ltd, Dalmia Cement(Bharat) Ltd. The industry is growing manifold due to increased industrial activity, real estate business, growing construction activity, and expansion in the infrastructure sector. The production and consumption of cement to a large extent indicate a countrys progress. The global cement has always been a good indicator of economic activity, as industry growth patterns consistently point to the direction in which the economy is likely to move. India is the second largest cement producer in the world after China and has got a huge cement industry. With the government of India giving boost to various infrastructure projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace. Cement industry plays a vital role in the economic development of the country. Domestic cement manufacturing industry is going through a tumultuous phase. It is battling profitability woes. This overall growth in cement industry has a significant impact on the overall level of anthropogenic greenhouse gas emissions. The production of each tone of cement leads to emissions of roughly 1.25 tons of carbon dioxide.
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1.

Introduction to Indian Cement Industry

Cement Industry is one of the most important industries with respect to national growth and development. Cement is a mixture of silicates and aluminates of calcium, formed out of calcium oxide, silica, aluminum oxide and iron oxide. The demand for cement is correlated with the momentum of activities in the financial, real estate and infrastructure sectors of the nation. Due to cost control measures and technology up gradation, the Indian cement industry is globally competitive. The Indian Cement Industry is one of the largest users of power in the country. It is also the third largest consumer of coal in the country. Since limestone is found in abundance all over the country, it has huge opportunities for growth and development.

1.1.

History of Indian Cement Industry

The first manufacturer of cement was by a Calcutta-based company in 1889. But the first endeavor to manufacture cement in an organized way commenced in Madras. In the year 1904, South India Industries Limited began manufacturing Portland cement. However, the company had to stop the production as it was not successful.
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The first licensed cement manufacturing unit was set up by India Cement Company Ltd at Porbandar, Gujarat in 1914. During the First World War, a huge growth was seen in the cement industry. After the war in the later years the industry witnessed high growth rate especially in terms of manufacturing units, installed capacity and production. This phase is referred to as the Nascent Stage of Indian Cement Industry. During the earlier years, demand of the cement was low and the supply was much more than the market demand. The Indian public at first did negative opinion against the cement manufactured in India until government had to come in between and provided protection to the producers by encouraging cooperation among the manufacturers. In 1927, the Concrete Association of India was formed with the objective of making cement more popular among the public in a positive manner and to increase cement consumption. Later in 1930, the Cement Marketing Company of India (CMI) was formulated to promote the sale and distribution of cement at regulated prices. The Indian cement industry witnessed a new beginning when 11 cement companies amalgamated to form the Associated Companies Limited ACC. Post independence the growth in the cement industry was very low due to various factors like low prices, slow growth in additional capacity and rising cost. The government intervened several times to boost the industry, by increasing prices and providing financial incentives. But it had little impact on the industry.
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In 1956, the price and distribution control system was set up to ensure fair prices to reduce regional imbalances and reach self sufficiency. The government severely held back the cement industry during 1969-1982 .It intervened directly by exercising control over production, capacity and distribution of cement and indirectly by controlling prices. In 1977, the government set higher prices for cement but still the growth rate was not up to the mark. In 1982, the government introduced a quota system. A 66.60% of quota was created for sales to government and real estate developers.50% quota was imposed for new and sick units, and the remaining 33.40% was left to be sold in the open market. In 1989, after liberalization, the cement industry was given full freedom to meet the challenges in open market which led to an accelerated growth in the industry.

1.2. Current Scenario

The Indian cement industry is the second largest producer of quality cement and occupies a strategic place in the national economy due to its importance in other sectors like construction, transportation, coal and power. It is engaged in the production of different varieties of cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Oil Well Cement, Sulphate Resisting Portland Cement, White Cement, etc.

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The Indian Cement industry comprises 148 large cement plants with around 46 member companies. The installed capacity of large cement plants was estimated to be 219.17 million tonne during 2009-10 (as on March 2009).There are 365 mini and white cement plants with an installed capacity of 11.10 million tonne . Table 1: Cement Production & Despatches Description Cement Production Cement Despatches Sep10 12.54 12.56 Aug- Sep09 12.8 5 12.8 2 09 11.83 11.74 2010 2009-11 81.5 4 81.1 0 2010 (Apr-Sep) 77.22 76.50

Source: Cement Manufacturers' Association

Cement production during April to January 2009-10 was 130.67 million tonnes as compared to 115.52 million tonnes during the same period for the year 2008-09. Despatches were estimated at 129.97 million tonnes during April to January 2009-10 whereas during the same period for the year 2008-09, it stood at 115.07 million tonnes.

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2. Review of Literature
Cement proves to be an area of interest for many researchers because of its overall impact on the economic development on the country. There is a lot of research work done on cement industry. Cement industry has been analyzed by many individuals and researchers. They found many valuable insights in the industry and made the data available to all. There were many studies conducted to know the environmental impacts of
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cement

production,

the

current

market

trends,

Trade

perspective of Indian cement industry and detecting cartels in the cement industry. For the purpose of the current study, a lot of articles, research papers and reports have been studied and analyzed to gain the knowledge about cement industry as a whole. The following articles have been taken to get an in depth knowledge and insight about the cement industry. According to L. G. Burange and ShrutiYamini (2008), the Cement industry is a rapidly growing sector heavily taxed by the government. The industry is growing manifold due to increased industrial activity, real estate business, growing construction activity, and expansion in the infrastructure sector. The issue here lies in the technology used, fuel efficiency and power efficiency. Since, cement is a high bulk and low value commodity, competition is localized because the cost of transportation of cement to distant markets resulting in the product being uncompetitive in those markets. In 1989, all price and distribution controls on sale of cement were withdrawn and in 1991 the industry was de-licensed in order to accelerate growth and induce modernization. The industry has also witnessed a number of mergers and acquisitions and entry of foreign majors in the cement market. According to Arindam Chakrabarti, et.al (2008), the domestic cement manufacturing industry is going through a tumultuous phase. While it is battling profitability woes on one hand, it also has to contend with the increasing level of environmental activism that is keenly scrutinizing its various actions and their
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impact on environment and society. Thus cement industry has to proactively engage itself in three dimensions of profitability, environmental consciousness and social obligations that will earn the industry the right to grow and the license to operate. The cement companies have to embark upon a set of proactive activities that impacts all three dimensions of balanced growth. They suggested a set of proactive actions that companies may adopt according to their suitability such as: Look to consolidate where long term players may look to grow their operations either organically or inorganically, proactively change product mix with which they suggest the companies to focus upon Ready Mix Concrete usage and enter RMC business as it helps in reducing pollution. The other suggestions are to develop a logistics models to support changing product mix, look for alternate fuel sources as power and fuel cost is the second most important element of operations cost after raw material cost. By optimally utilizing the existing limestone quarries, companies can save precious resources. Finally, the author suggests the companies to undertake a continuing dialog with the affected community so that it creates a community friendly image across the society. Actions suggested above impact the three dimensions. This will help companies to gain advantage over their competitors. According to C. A. Hendricks, et.al (2004) cement is the most important building material. Cement consumption and production is closely related to construction. It is also one of the most produced materials in the world it is the most
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important construction material. Cement production is highly energy consumption process also production of cement produces greenhouse gases like CO2. It contributes to about 5% total global carbon dioxide. And about half of it comes from calcinations and half from combustion process. A wide range of options exist to reduce CO2 emission. Technological advancements are adding to reduction of carbon dioxide from cement production. According to Paul (2008), Cement Industry has always been a good indicator of economic activity, as industry growth patterns consistently point to the direction in which the economy is likely to move. The article examines present drivers of growth in of cement industry and some special demands placed upon maintaining the standards imported and by the cement automation suppliers dealing with emerging markets. Pressure multinationals, three main trends are to be observed on the marketplace: productivity, safety environmental responsibility. Cement plant operators have four primary productivity goals: the reduction of downtime, the reduction of energy consumption, improvements in product quality and the intelligent use of maintenance resources. Cement plant operators are investing heavily in systems aimed at improving plant safety. The main attention has been on improved monitoring of processes and the installation of modern technology aimed at lessening the risk of extraordinary events, such as explosions. By lowering the amount of time needed to maintain the plant, and ensuring that maintenance cycles
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around the plant are optimized, plant operators can reap significant cost savings. ICRA Limited(January 2010), in its report Indian Cement Industry says that with 153 cement plants and a total installed capacity of around 209 million tonnes per annum (MTPA) both as of March 2009, the Indian cement industry is the second largest in the world, the largest being China. Demand for cement reported strong growth during the period 2002-03 to 2007-08 even as capacity addition remained moderate. The Indian cement industry witnessed strong growth, with demand reporting a compounded annual growth rate (CAGR) of 9.3% and capacity addition a CAGR of 5.6% between 2004-05 and 2008-09. This led to tightening of the supply-demand situation and hardening of prices, which remained strong till the first half (H1) of 2009-10. But due to capacity additions, capacity utilizations have been pushed down to 83% from around 90% in 2008-09, due to which cement prices have come under pressure since the 3rd quarter of 2009-10. ICRA believes that the extent to which pressures will be felt will depend on two factors, both of which are to some extent under control of manufacturers. One, the phasing out or deferment of the announced capacity additions. And two, the extent to which the shift towards Ordinary Portland Cement (OPC) reduces the effective capacity of the industry. While ICRA expects all cement manufacturers to face pressures on realisations and margins in the medium term, the impact will
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not be the same for all companies. Those with leaner cost structures, location advantages, strong capital structures, and geographically dispersed plants would be in a better position to absorb the impact of the anticipated softening in prices and declined in capacity utilisation. According to Ernst Worrell and Christina Galitsky (March 2008), energy efficiency is an important component of a companys environmental strategy. As the U.S. manufacturers face an increasingly competitive global business environment, they seek opportunities to reduce production costs without negatively affecting product yield or quality. This report reflects an in-depth analysis of the cement industry, and identifies energy savings and carbon dioxide emissions reduction potentials. In their analysis, the cement industry includes establishments engaged in manufacturing hydraulic cements, including Portland, natural, masonry, and pozzolana cements. The historic trends for energy efficiency in the U.S. cement industry and the cost-effective energy and carbon dioxide savings that can be achieved in the near future are analyzed in this report. The cost of energy as part of the total production costs in the cement industry is significant. Coal and coke are currently the primary fuels for the sector. Most recently, there is a slight increase in the use of waste fuels, including tires. Between 1970 and 1999, primary physical energy intensity for cement production dropped 1%/year from 7.3 MBtu/short ton to 5.3 MBtu/short ton. Carbon dioxide intensity due to fuel
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consumption and raw material calcinations dropped 16%, from 609 lb. C/ton of cement (0.31 tc/tonne) to 510 lb. C/ton cement (0.26 tc/tonne). Despite the historic progress, there is ample room for energy efficiency improvement. a relatively large potential for improved energy management practices exists. From the impact of trade perspective (2009), Cement is the industry which beckons the countrys economy and has resulted in construction of small buildings to that of the multi storied building. It consists of grinded limestone, clay and silica which is being dried and mixed into a composite mass. Semifinished form of Clinker is being formed when this mixture is being heated, then this clinker is grounded and cooled in air to form cement. With liberalization and globalization of the economy alterations were being made to survive in the global economy. Manpower costs were reduced, technologies were being implemented and modernization was also done. Till January 2007 was the import duty was 12.5% and after which this reduced to nil and still its into effect. From 2011 there will be an import duty on cement and cement clinkers called as the Clean Energy Cess, which will be collected as a duty of excise from coalmines. According to Environmental Agency of Bristol (2005), the objective is to deliver the performance of the industry in such a way that it results in the environmental benefit. The plan includes the statutory and non-statutory activities with set of high level objectives to be fulfilled. The Cement Industry uses
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this plan in England and Wales to perform environmental targets, to compare the performance against the targets and report to public at large through the British Cement Association (BCA).The key aspects were concentrated Use and on Key of Environmental Issues, Raw materials, Use and disposal of manufactured cement products, disposal manufactured cement products. According to Lloyd Timberlake (2007), Cement industry is responsible for the sustainable development. It clearly has an impact over the present and the future. Manufacturing process involves emissions of gases with climate change. Action by individual companies, the CSI has: Produced and updated a protocol for reporting and make an account of CO2 emissions that has been established all CO2 emissions from the cement industry, set of guidelines on the use of fuels and materials and a consistent approach for sustainable development. Monitoring and reporting the common emissions of protocol that identifies measurement methods for nitrogen oxides, sulfur compounds, and particulates and defines to obtain a how to obtain fingerprint of key micro-pollutant emissions. CSI has established a Senior Advisory Board to advise the CSI leaders on critical issues. According to Rejie George Pallathitta (2008) Can Ultratech Be The Next Market Leader. Cement industry is a homogenous industry with 125 large cement plants and more than 300 small cement plants in India. Large companies are acquiring smaller ones. Aditya Birla Group (ABG) acquired management control
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of L&T Cement on 17th June 2003, and renamed it UltraTech. It became the second largest cement producer and third in terms of profitability. Both Ultratech and ACC have increased sales growth and capacity utilization. Ultratech has an advantage of its raw materials with leases higher quality of raw materials. Both ACC and Ultratech enjoy lower fuel cost. Ultratech started to switch to coal as fuel. So, ACC may lose its advantage in near future. Ultratech is a part of Aditya Birla Group which has more promoters, highest quality human capital, higher operating leverage and better quality limestone than ACC. Acc enjoys cost advantage over Ultratech in terms of power. Because Ultratech uses Naphtha and Fuel Oil based Power Plants which are of higher cost and ACC uses coal based plants. It manages good relationships with importers, exporters, distributors, warehouse providers, wholesalers, retailers and dealers. According to Mr. Sumit Banerjee (2009), mainly there are 3 types of processes to produce cement wet, semi-dry, and dry processes. The dry and semi-wet processes are more fuelefficient. Different varieties of cements are Ordinary Portland Cement (gray cement) account for 70% of total consumption, Portland Pozzolana Cement account for 18% of total consumption, White Cement, Portland Blast Furnace Slag Cement and Specialised Cement. Asia accounting for 66% of the global demand. China was the worlds largest consumer of cement in 2008 and accounted for 48.7% of total cement

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consumption. India has the lowest level of per capita cement consumption. The current study on Indian cement industry is different from the previous studies in the following manner. An in depth analysis of the Indian cement industry is done. The top 10 companies are analyzed. Also the industry is analyzed in terms of political, environmental, technological and economical analysis. The impact of the cement industry on the economic development is analyzed. The impact of how other related sectors like construction and real estate sectors impact this sector was analyzed. The main thing about the report is that it does not concentrate on single topic. This report is giving information on different aspects related to cement industry.

Objective of the Study

The cement industry has been considered as the backbone of a nations economy, it is because, the almost all other industries are directly or indirectly inter-related to this industry. As mentioned above, it is base of all other industries, so it would be very interesting and important to know the effect of this industry i.e. cement industry on other industries like power, real estate, transport, mining etc. At the same time, it is also important to know the contribution of cement industry in the National economy by using different parameters like export related activities, role of technology etc. In addition to this, we
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also wanted to know about the no. of players in the concerned market, and their respective market share in order to know the intensity and the depth of the industry. Cement is one of the industry, where lot of research and development can be done with the advancement in technology, which further makes the health of the industry more robust. Apart from this, we also wanted to know about the dominance of Indian cement industry in the global market, which plays an important role in the political as well as the economical relation of India with rest of the world.

3. Analysis of Cement industry

3.1 Introduction
Cement industry is one of the core industries in any country, so in depth analysis of cement industry is very important. There are different aspect for our study, which will cover Market share and Nature of competition, Market segmentation, Policy framework (PESTEL analysis), Business diversification, Mergers & acquisition, International exposure, Technology intensity, Marketing initiatives, Future outlook and Comparison with other countries. All these aspects will provide in depth knowledge about the cement industry.

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3.2. Major players in Indian Cement Industry & Nature of Competition

Figure 1 :Top 10 Major player in Indian Cement Industry 2008-09
(Source: Prowess, CMIE)

3.2.1. ACC LIMITED

ACC is India's leading manufacturer of cement and concrete. ACCs has 16 modern cement factories and more than 40 ready mix concrete plants throughout the country. The distribution channel has 20 sales office, 9000 dealers and several zonal offices. The human capital involved in ACC is around 9,000 persons throughout the country. ACC manufactures ordinary Portland cement, composite cement and special cement. Company has begun offering its marketing expertise to gain the market share. ACC is largest producer of cement and also the largest user of limestone, coal industry and railways. The company is committed towards environment and installing environment friendly equipment in cement plants to reduce the pollution.

3.2.2. Grasim Industries Ltd

Grasim Industries Limited is a flagship company of the Aditya Birla Group, ranks among India's largest private sector companies. Grasim started as a textiles manufacturer in 1948,
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now it has Grasim's businesses comprise viscose staple fibre (VSF), cement, chemicals and textiles. Its core businesses are VSF and cement, which contribute to over 90 per cent of its revenues and operating profits Grasim is a global leader and a major player in viscose stable fibre. Aditya Birla Group is the worlds largest producer of VSF which has 21% global market share. Grasim has a global market share of 10% and also 2nd largest producer of caustic soda in India. Grasim is a subsidiary UltraTech Cement Limited, which is a leading player in India. In July 2004, Grasim acquired a majority stake in Ultratech; this acquisition catapulted the Aditya Birla Group to the top of the league in India. The amalgamation of Samruddhi Cement Limited (SCL) with UltraTech on 1 July 2010 restructured the cement industry.

3.2.3. Ambuja Cements Ltd.

Ambuja Cements Ltd. (ACL) is one of the top cement manufacturing companies in India. It was formerly known as Gujarat ambuja cement. The Company commenced cement production in 1986. The global cement major Holmic has taken over management control of ACL in 2006. Holcim holds little over 46% equity in ACL. Company is growing at faster rate the current installed capacity is about 25 million tonnes. The Company has 5 integrated cement manufacturing plants and 8 cement grinding units in the country.

3.2.4. Century Textiles & Industries Ltd

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Century Textiles & Industries ltd was incorporated in 1897 but till 1951, it operated only one Cotton Textile Mill in Mumbai. 97% of the profit comes from cement, textile and paper & pulp segments. Among these cement contributes 57% of the total profit. In 1974, the Company diversified into production of Cement by establishing its first cement plant at Baikunth to produce 0.60 million Tonnes of Portland Cement. The present capacity is 2.10 million TPA. The total present cement manufacturing capacity is 7.80 million TPA (4 plants).

3.2.5 India Cements Ltd

The India Cements Ltd was the largest producer of cement in south India which was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949. Now there are seven plants 3 in Tamilnadu and 4 in Andhra Pradesh. It is a market leader with a market share of 28% in the South which aims to achieve a 35% market share in the near future. The Company has access to huge limestone resources and plans to expand its capacity. The Company has a strong distribution network. Its well established brands are Sankar Super Power, Coromandel Super Power and Raasi Super Power. Its products are ready mix concrete, Coromandel King-Sankar Sakthi- Raasi Gold, Coromandel-Sankar-Raasi, Blended Cement and Sulphate Resisting Portland Cement (SRC).

3.2.6. Shree Cement Ltd

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Shree Cement is the largest cement manufacturer in North India and among the top five cement manufacturing groups in the country. It has increased its capacity 4 times in the last 5 years to reach present cement capacity (i.e. 12 million tons p.a.) with manufacturing plants at Beawar, Ras, Khushkhera and highly Suratgarh in Rajasthan and brands of Laksar Ultra, (Roorkee) Bangur in and Uttarakhand. The Company follows a multi-brand strategy. Its recognized Shree Rockstrong which together enjoy largest market share in high value markets of Rajasthan, Delhi & Haryana. Shree is also into the power sector and is an energy efficient and environment friendly company and received many awards. it is an active participant at Climate change forums and is the first Indian cement company to join the Cement Sustainability Initiative of the World Business Council for Sustainable Development.

3.2.7. Madras Cements Ltd

Madras Cements Ltd contributes most of the profits to Ramco Group, and is well recognized of South India which is located at Chennai. The first plant of MCL at Raja Nagar, near Virudhunagar in Tamil Nadu commenced its production in 1962 with a capacity of 200 tonnes,. The major product of the company is Portland cement. The cement capacity is 10.49 million tons per annum. The company is the fifth largest cement producer in the country. Ramco Supergrade is the most popular cement brand in South India. It also produces Ready

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Mix Concrete and Dry Mortar products. It gives best return to its investors.

3.2.8. Birla Corporation Ltd

Birla Corporation Limited is the flagship Company of the M.P. Birla Group. manufacturer It is incorporated as Birla Jute Manufacturing It was transferred from a to a leading multi-product of jute goods Company Limited in 1919.

corporation with widespread activities. After it crossed the Rs. 1300 crore turnover mark and the name was changed to Birla Corporation Limited in 1998.The Company showed an impressive growth record in 2008-09 and 2009-10. Present chairman is Mr H V Lodha. It has products ranging from cement to jute goods, PVC floor covering, as well as auto trims.

3.2.9. Dalmia Cement (Bharat) Ltd

Dalmia Cement (Bharat) Ltd. was founded in 1935 by Jaidayal Dalmia. DCBL experienced a 7 decades of growth. The cement division of DCBL was established in 1939. It is headquartered in New Delhi with cement, sugar, travel agency, magnetite, refractory and electronic operations spread across the country. The Dalmia Group had established four cement plants. It had made strategic investment in Orissa Cements Limited (OCL). DCBL has been and continues to be an industry leader in the niche market segment.

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3.2.10 Nature of competition in cement industry

Competition is a process of rivalry between different market players to attract customers. In their pursuit to be the best, market players may adopt unfair means like cartelization. There are goods which are tradable only in limited markets, Cement being a good example of this. Due to its bulky nature, it is not possible to transport it to distant places therefore, geographical segments of a national market can be easily cartelized. World over it has adopted illegal ways, India is no exception. Cartelization in India is an open secret. The weak provisions in the MRTP Act, along with weak investigation capacity are the major reasons for cartel formation continuing for years. Cement doesnt have any substitutes; this makes its demand inelastic. Also since transportation cost eats up a major chunk of the total cost, companies serve the regional markets and do not operate out of their region. This typical nature of cement industry has allegedly driven the firm to form cartels. Since the majority of the market share is in the hands of large companies, they can come together and collude, leading to a decline in competition. The industry has witnessed more than a dozen take overs in domestic region in the last few years.

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The Builders Association of India (BAI) has alleged that Indias cement industry, the worlds second largest, is operating as a cartel. The recent allegation has come on the back of a continuous rise in cement prices from February by up to Rs 15-20 for a 50 kg bag. The association said top players like ACC, Ambuja Cements, Grasim, UltraTech and Jaypee Cement, which control almost half the domestic cement market, are in a dominant position to determine and monitor prices, the release issued by BAI said.

Table 2 : Price Trend for Cement

Region State Rate per North West Delhi Punjab Haryana Rajasthan Maharashtra (Rs 50 Rate (Rs 50 per kg kg bag)2004-05 190-220 200-230

bag)2004-05 150-155 160-165 160-165 145-150 170-175

(Mumbai) Maharashtra (Pune 145-150 ) East West Bengal Orissa Bihar South Tamil Nadu Andhra Pradesh Kerala Karnataka Centra Uttar Pradesh l
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165-170 140-145 140-145 145-150 120-150 155-160 155-160 150-155

200-230 210-265

Madhya Pradesh

140-140 135-140

or

(Source-Projectmonitor.com, financial express)

Factors

Price variation,

Demand, Production, Expense to sales ratio, Capacity utilisation, Capacity enhancement As the above price table shows that price is drastically changing from 130 to 250 around 100% increase in 5-6 years, give the sign of cartelisation in cement industry as large companies are gaining economics of scale in production, which is reducing the cost. But the prices are increasing. Factors that point towards cartelization are the structure of Indian cement industry with few large firms dominating the industry and the falling cost/expense to sales ratio in the last years despite rising prices. The large players are not restricting new players to enter in the market. All these things conclude that cartel exists in Indian cement industry and companies are getting profit out of it without disclosing anything.

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3.3. Market segmentation

Market segmentation can be divided in two parts(1) Geographical segmentation, (2) Customer segmentation.

3.3.1. Geographical Segmentation

Figure 2 : Geographical Segmentation CEMENT INDUSTRY

EAST

WEST

CENTRAL

NORTH

SOUTH 30 | P a g e

The cement industry in India can be divided into the five geographical zones of India North, South, East, West and central based on localised variations in the consumer profile and supply-demand scenario. Figure 3 : Regional share of installed capacity (2009)

The South zone is the largest market, with the highest installed capacity of 67 million tonnes, followed by the North zone with about 48 million tonnes, in 2009.
Source (CMIE; Ernst & Young analysis)

Table 3 : Cement consumption (in million tonnes) Region 2009 East West l North South 35.12 31.96 33.52 31.52 29.88 39.37 27.06 44.45 24.26 49.16 22.86 54.26
(Sources:
CMIE; Ernst & Young analysis.)

2008 25.35 32.23 23.76

2007 23.99 28.27 22.40

2006 22.66 25.91 20.57

2005 20.33 24.56 20.41

2004 17.47 22.52 18.97

28.21 33.97

Centra 26.24

Table 4 : Cement production (in million tonnes)

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Region 2009 East West l North South

analysis.)

2008 23.85 28.75 25.00 36.46 54.23

2007 22.07 27.30 24.00 32.10 49.81

2006 20.04 24.93 22.30 29.67 44.88

2005 18.73 22.76 20.40 26.70 36.97

2004 16.67 21.00 18.50 25.22 36.06

25.99 28.46

Centra 26.10 41.18 59.47

(Sources: CMIE; Ernst & Young

Above table describes about the production and consumption. Key markets in northern India include the states of Rajasthan, Punjab, Haryana and the National Capital Region (NCR). Demand in this region is being driven by infrastructure, residential and commercial projects. The state of Maharashtra and Gujarat are the key markets in East region. The demand for cement has grown in this region primarily due to an increase in the number of housing and infrastructure projects. In central region, Uttar Pradesh is the key market. Over the past few years, growth in housing and commercial real estate has augmented the demand for cement in this region. The key markets in the East are the states of West Bengal, Orissa and Bihar. Growth in housing and industrial activity is primarily driving demand for cement in this region. In the southern region Key markets are the states of Tamil Nadu, Andhra Pradesh and Karnataka. The South zone has vast reserves of limestone. Growth in the real estate market in the region,
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coupled with the development of key infrastructure projects such as airport and metro rail, has resulted in increased demand for cement in this region.

3.3.2. CUSTOMER SEGMENTATION

Customer segmentation can be divided in three parts Figure 4 : Customer Segments

HOUSING

INFRASTRUCTURE

REAL ESTATE

3.3.2.1. Housing
A major portion of domestic demand of cement accounts for housing segment. As the per capita income and standard of living is increasing, the demand for housing sector is also increasing. In eleventh five year plan (2007-12), the demand for housing sector is estimated to improve from 24 million units to over 26 million unit till the end of plan. Urbanisation is taking place in India, which is driving the demand for more households.
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3.3.2.2. Infrastructure
The govt. has formulated the policy of special economic zone in India to develop industrial growth in particular area, which will need good infrastructure to boost ht Indian economy. The Govt. of India is estimated to spend around US$ 350 billion on infrastructure projects und eleventh plan. Govt. is concentrating more for infrastructure, so it is demanding more cement. The demand for cement is rapidly increasing from past few years. Infrastructure projects such as the Dedicated Freight Corridors (DFCs) and upgraded and Greenfield airports and ports are expected to drive construction activity in India.

3.3.2.3. Real estate

As, the Indian economy is growing with rapid rate, the commercial real estate sector is also booming with the help of projects like retail, office, schools, hospitals and multiplexes .Service sectors such as telecom and financial services, as well as the IT sector (which accounts for the maximum commercial office space in the country) are growing. Manufacturing sectors (pharmaceuticals, biotechnology, and automotives) and fast moving consumer goods (FMCG), are likely to drive the demand for office space.

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3.4. PESTEL Analysis on Indian Cement Industry

PESTEL stands nalysis for is the study of uncontrollable social, external environment, which affects companies in any industry. PESTEL political, economic, technological, environmental & legal. PESTEL analysis helps company to form the policies to grow in the industry.

3.4.1. Political
3.4.1.1. SEZ Act to improve Infrastructural

Development
SEZ is special economic zone. The govt. has formulated the policy of special economic zone in India to develop industrial growth in particular area. SEZs are proposed as duty free area for the point of trade, operations, duty and tariffs. SEZ units are independent and incorporated having their own infrastructure and support services. Infrastructure development solely depends on the cement industry, so political environment of India is in favour of cement industry.

3.4.1.2. Government participation

Cement price is basically depends on the price of raw material such as power tariff, freight, cess on limestone and railway tariff. The Government is controlling all these prices, on the
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other hand govt. is consuming a huge amount of cement in the country. Many state govt. is making attractive policies (such as fiscal incentive in the form of sales tax exemption) to attract the investment within the state. Haryana is providing freeze on power tariff for 5 years, on the other side Gujarat provides release from electric duty.

3.4.1.3. Political stability

Countries with political stability attain a higher growth, compare to political instable country. The political stability in India is good. The political instability came in the picture last 20 years ago, so political stability provides a good platform to Indian cement companies to develop the policies to come up with flying colours.

3.4.2. Economic
The Indian economy is the fourth largest economy of the world on the basis of Purchasing Power Parity (PPP)*1. The factors like Huge manpower base, strong macro-economic fundamentals and diversified resource base are the reasons that many other countries is attracted towards the investment opportunities and business.

1 Purchasing power parity (PPP) is a theory of long-term equilibrium exchange rates based on relative price
levels of two countries.

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3.4.2.1.

Growth

in

Construction

Activity

improving GDP Growth

Currently, Indian cement industry is growing at higher rate with the help of many infrastructure and housing projects. Indian cement industry is contributing to Indias GDP to grow with a faster rate.

3.4.2.2. Increase in Per Capita Income

In India per capita income is increasing with a good pace, which will result high in increase in housing development, as the disposable income will be high and standard of living will be

3.4.2.3. Rate hikes unlikely to slow down growth

Cement prices are increasing from past year at rapid pace. In 2004, cement prices were rs.130-150. Cement price in current scenario is around Rs.230-250, so rate hike will unlikely to slow down the growth. 3.4.2.4. FDI Liberalization to enhance industry growth In 1989, deregulation took place in Indian industry, which helped the industry to grow. In India, there is 100% foreign direct investment is allowed in cement industry. The first foreign company to enter in Indian market was Lafarge cement. As foreign investment is permitted, it will boost the cement industry in India.
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3.4.3. Social
3.4.3.1. Shifting consumption pattern to fuel industry growth
There is a drastic change in the consumption pattern of cement. In past, consumer purchases the cement as commodity, now it is changed from commodity to brands. Due to marketing initiative of companies, brand came into the picture. Now Indian consumer goes only for branded cement like, Jaypee cement, Ultratech etc.

3.4.3.2. Creation of direct and indirect jobs each year

With a population of more than 100 billion people, the main problem is to provide job to each and every one. The Indian cement industry is providing job opportunities to many people.

3.4.3.3. Lifestyle and standard of living

Standard of living in India is increasing, as the per capita income is increasing. The increase in lifestyle and standard of living will affect the demand of housing sector in India. This will lead to grow the cement industry.

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3.4.4. Technology
The technology up gradation has helped the cement industry to increase the capacity of plant, decline in thermal energy consumption, decline in electrical energy consumption, decline in cost of production of cement, decline in energy cost through co-processing and reduction in the CO2 emission through blended cement and energy conservation. Currently, all the cement plants are using dry process with most effectual pollution control measure to accomplish the terms provided by the Pollution Control Authorities.

New technology adopted by industry

Advanced control systems with soft sensors All fans (including HT) with variable speed drives, preferably VFDs* Integrated computerised quality control systems Mines planning Bulk analyser Raw mix design and blending

3.4.5. Environmental
3.4.5.1. Easing environment norms

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Entrepreneurs in India are required to acquire environmental clearance introduced from the Ministry of Environment. Recently (EMS) Environmental Management Systems

certification is a mechanism by which cement companies can acquire the label of environmentally sound enterprises and also derive the benefits of improved performance. The EMS does not lay down specific environmental performance criteria but requires an organisation to formulate policies and objectives, taking into account information about significant environmental effects for continual improvement. ISO 14000 environmental management standards have been established to help companies : Minimize those operations which adversely affect the environment ( air, water or land) Comply with applicable laws and regulations Continually improve in the above The major objective of the ISO 14000 series of norms is "to promote more effective and efficient environmental management in organizations and to provide useful and usable tools - ones that are cost effective, system-based, flexible and reflect the best organizations and the best organizational practices available for gathering, interpreting and communicating environmentally relevant information" Acts which concern cement industry from the environmental viewpoint are: Air (Prevention & Control of Pollution) Act, 1986 The Environmental (Protection) Act 1986
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 Forest (Conservation) Act, 1980 Water (Prevention & Control of Pollution) Cess Act, 1974 Water (Prevention & Control of Pollution) Cess Act, 1977 The Public Liability Insurance Act, 1991

3.4.6. Legal
In India, the Department of Industrial Policy and Promotion (DIPP), under the Ministry of Commerce and Industry, is the nodal agency for the development of cement industries, that is, it is involved in monitoring their performance at regular intervals and suggesting suitable policy incentives, as per the requirement. The Department is responsible for formulation and implementation of promotional and developmental measures for growth of entire industrial sector in general and of some selected industries like cement, light engineering, leather, rubber, light machine tools, etc. in particular. It is involved in framing and administering overall industrial policy and foreign direct investment (FDI) policy as well as promoting FDI inflow into the country. It plays an active role in investment promotion through dissemination of information on investment climate and opportunities in India as well as by advising prospective investors about various policies and procedures. Some of the rules and orders, administered by DIPP, relating to the cement industry are:

Cement Control Order, 1967

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Cement Cess Rule, 1993 Cement (Quality Control) Order,1995 Cement (Quality Control) Order, 2003

3.5.

Business

Diversification:

Conglomerate or Standalone
The following group of industries are conglomerate

3.5.1. Grasim industries

Grasim's business started as a textile manufacturer in 1948, today it encompasses viscose staple fiber (VSF), cement, chemicals and textiles; VSF and cement, contributing to over 90 per cent of its revenues and operating profits. Through its subsidiary UltraTech Cement Limited, it has a capacity of 52 million ton Per annum and is a leading player in India. UltraTech Cement Limited manufactures and markets-Ordinary Portland cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement, ready mix concrete (RMC).

3.5.2. Century Textiles and Industries Ltd

Century Textiles and Industries Ltd. was incorporated in 1897 and has made rapid progress in expanding and diversifying its activities. The details of activities presently being carried on by the Company are as follows:-

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Figure 5 :

Revenue mix of Century Textiles and

Industries Ltd. 2008-09.

(I) Business Segment Textiles Cotton Textiles, Yarn and Denim Century Rayon - VFY, CSY & Rayon Tyre Yarn (II) Business Segment - Cement In 1974, the Company diversified into production of Cement by setting up its first cement plant at Baikunth, near Raipur (Chhattisgarh) to produce Portland cement. The current capacity is 2.10 million TPA. (III) Business Segment Century Pulp and Paper

3.5.3. Jaypee Group

The Jaypee group is a diversified infrastructure conglomerate and has a terrific presence in Engineering & construction along with interests in power, cement and hospitality, real estate & expressway. The engineering & construction of Jaypee group in the construction of multi-purpose River Valley and Hydropower projects. Engineering and Construction of the Group is an
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acknowledged leader. The group has the largest share in Indian Hydropower. Jaypee group has 4 five star hotels. The Group is a pioneer in the development of Indias first golf centric Real Estate. Jaypee Greens - a world class fully integrated complex consists of an 18 hole Greg Norman Golf Course. Stretching over 452 acres, it also includes residences, commercial spaces, corporate park, entertainment and nature in abundance.

3.5.4. Dalmia Cement (Bharat) Limited (DCBL)

Dalmia have cement plants in southern states of Tamil Nadu and Andhra Pradesh and eastern regions of the country, with a capacity of 9 million tonnes per annum. Since 1939, DCBL is a major cement player with a double digit market share and a leader in super specialty cements used for Oil wells, Railway sleepers and Air strips. Dalmia started manufacturing sugar in the mid-Nineties Ramgarh Chini Mills (Distt. Sitapur) UP. The sale of sugar forms a major part of Dalmias revenues and uses state-of-the-art technology which ensures high productivity. The following companies are standalone-

3.5.5. ACC Limited

ACC (ACC Limited) is India's primary manufacturer of cement and concrete. Its operations are spread throughout the country with 16 modern cement factories, more than 40 ready mix concrete plants, 20 sales offices, and several zonal offices, a

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workforce of around 9,000 persons and the distribution network comprising over a 9000 dealers. Since the start in 1936, the company has been a trendsetter and has set benchmark in many areas of cement and concrete technology. It has an excellent track record of innovative research, product development and specialized consultancy services. The company's different manufacturing units are backed by a central technology support services centre - the only one of its kind in the Indian cement industry. ACC has extensive experience in mining, being the largest user of limestone. It is one of the biggest customers of the domestic coal industry, of Indian Railways, and of the countrys road transport network services for inward and outward movement of materials and products. The company promotes the use of other alternative fuels and raw materials and offer solutions for waste management and like testing, suggestions is for reuse, recycling co-processing, thereby environment

consciousness.

3.5.6. Ambuja Cements Ltd

Ambuja Cements Ltd. (ACL) is one of the major cement manufacturing companies in India. The Company started cement production in 1986, and was acquired by the global cement major Holcim in 2006.Today, Holcim holds a little over 46% equity in ACL. ACL has grown significantly over the past decade, and current cement capacity is about 25 million tonnes. It is the first
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cement manufacturers in India to build a captive port with three terminals along the countrys western coastline to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers and has its own fleet of ships. It also initiated the development of the multiple biomass co-fired technology for generating greener power in its captive plants. 3.5.7. India Cements Ltd The India Cements Ltd was established in 1946 and was setup at Sankarnagar in Tamilnadu in 1949 and is the largest producer of cement in South India. The Company has access to huge limestone reserves and plans to expand volumes by debottlenecking and optimisation of existing plants as well as by acquisition.

3.5.8. J.K. Cement

J.K. Cement is an affiliate of the J.K. Organization, founded by Lala Kamlapat Singhania. The J.K. Organization is an association of industrial and commercial companies which have operations in a number of industries. J.K Cement commenced commercial production in May 1975 at Nimbahera in the state of Rajasthan. It is one of the largest cement manufacturers in Northern India, the second largest white cement manufacturer in India by production capacity. While the grey cement is majorly sold in the northern India market, the white cement is exported to countries like South
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Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka, Kenya, Tanzania, UAE and Nepal.

3.5.9. Lafarge
Lafarge India is a subsidiary of the French Building Materials major Lafarge and entered the Indian market in 1999, with the acquisition of the cement business of Tata Steel. This was followed by the purchase of the Raymond Cement facility in 2001. Lafarge is the world leader in building materials comprising cement, aggregates & concrete and gypsum.It has 4 cement plants in India: two integrated plants in the state of Chhattisgarh , one grinding station each in Jharkhand & West Bengal. Total cement production capacity currently stands at about 6.5 million tons. Lafarge India produces different types cements- Portland Slag Cement, Portland Pozzolana Cement. Its brands Lafarge Cement and Lafarge Concreto Cement have a good reputation in India and are amongst the highest priced brands.

3.6.

Consolidation

Mergers

&

Acquisitions
The globalization of Indian cement industry has encouraged many foreign cement manufacturers to invest in the rapidly growing Indian cement market. This has been possible through various mergers and acquisitions deals. Some of the major M&A
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deals between domestic and foreign cement manufacturers in recent years are as follows:

3.6.1. Holcim buys AP-based Encore Cements

Holcim, the Swiss cement giant, acquired a 100 per cent stake in Encore Cements & Additives Private Ltd, an Andhra-based coastal cement plant with a 200,000 tonnes capacity slag grinding unit in Vishakapatnam, through its Indian arm, ACC in January 2010.This acquisition led to setting up of ACCs first plant in Andhra Pradesh which helped the company in strengthening its presence in coastal Andhra Pradesh. Though deals size was not officially disclosed, but according to industry analysts, the deal size was in the range of Rs.40 crore and Rs.50 crore.

3.6.2. Holcim Cement - Gujarat Ambuja Cements (GACL)

Holcim Cement entered into a crucial partnership with GACL, in 2006, to acquire 14.8% in GACL to enter into in the Indian Cement Industrys dynamic growth. Both the partners wanted to expand their operations in South Asia, Middle East and the adjoining regions in Indian Ocean. They wanted to enrich each other by exchanging experiences in product development, Human Resources and Information Technology. a better position in the cement industry.
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In addition,

Holcim desired to use India as a base for its IT & R&D, to create

3.6.3 Lafarge India

Lafarge India is a subsidiary of the Lafarge Cement Company of France and was established in India with the acquisition of the Tisco and the Raymond cement plants. Tisco was acquired for a value of Rs.550 crores in November 1999.Tiscos premium quality Portland slag cement in the Eastern Indian states of West Bengal and Bihar, high grade ordinary Portland cement in Madhya Pradesh strengthened the position of Lafarge in Eastern India. The contract also required to provide Tiscos high quality slag. This acquisition was followed by another acquisition of the Raymond Cement facility in 2001 for Rs.785 crores in an all cash deal. This deal was aimed at enhancing Lafarges position in Eastern India. Huge deposits of limestone with Raymond helped in increasing the production capacity in coming years. This unit was 100 kms away from the Tisco plant, a strategic move by Lafarge. Part of the proceeds was used by Raymond in paying off debts and investment in areas textiles, distribution and retailing. These acquisitions signaled that Lafarge was all ready to expand its wings in becoming a leading cement manufacturer in the world.

3.6.4. Heidelberg Cement - Indorama Cement Ltd

Heidelberg Cement is a leading German company in the fields of cement, concrete and is one of the worlds largest manufacturers of building materials. It entered into a 50:50
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joint venture with Indorama Cement Ltd in March 2006.This was a big step for Heidelberg Cement in establishing itself a long-term market position in Mumbai and Pune. In August 2006, Heidelberg Cement acquired a major share in the cement manufacturer Mysore Cements, and took over operations in central and southern India. This led to greater synergies and managerial efficiencies

3.6.5. Italcementi cement - Zuari Cement Limited

Italcementi Cement is among the largest cement manufacturing companies in the world. In 2001, Italcementi Cement Company with the help of the Ciments Franais, a subsidiary for its global activities, entered into a 50:50 agreement with Zuari Cement Limited in Andhra Pradesh, southern India. This gave the company a strong foothold in India. The deal was of about 100 million euros. In 2002, Zuari Cement limited took over Sri Vishnu Cement Limited, a 1.2 Million Tonne capacity plant at Sitapuram. The cement business then grew from 1.7 to 3 million tonnes per annum. In 2006, the Italcementi Group acquired full control of Zuari Cement for Rs 600 crore, to strengthen its presence in India. The company's net sales in the Indian market were roughly Euro 116 million in 2006. In 2007, Sri Vishnu Cement Limited merged into Zuari and the same year a total production capacity of 3.5 million tonnes was achieved. Present capacity is almost around 6 million tones.

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3.6.6. Mergers and Acquisitions before 2006

Gujarat Ambuja took over 14% stakes in ACC Gujarat Ambuja took over DLF cements and Modi Cement India Cement took control over Raasi Cement and Sri Vishnu Cement Grasim's acquired L&T, Sri Digvijay Cement.

3.7. International Exposure of Indian Cement Industry

Cement is one core industries in India. For the past seven years there has been an immense growth in the cement industry. Domestic cement demand growth has surpassed the economic growth rate of the country for the past couple of years. Over the past five years the growth rate of cement demanded grew up to 8.37 % which was higher than the rate of growth of supply at 4.84% and also the rate of growth of capacity addition during the same period. As it is known that it is the basic material in all types of construction activities throughout the globe, the growth and expansion of a nations economy depends upon it, as it supports the expansion of other industries, hence we can say that the export and import aspects of cement is a quite sensitive issue. The export and import of cement depends upon various factors, like prices, government rules and regulation,
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availability of raw materials etc. In India, the export of cement took place basically after the liberalisation of the economy, which further boosted the industrys performance in the later years. The major markets of Indian cement industry are Middle East and South East Asia due to an abundant presence of raw materials, location advantage & production of quality cement with latest technology. As per the data released by CMA, Gujarat Ambuja Cements Ltd. & Jaypee Industries are the top exporters of cement from India. In addition to this, the western part of the country accounts for approximately 92% of the total export of cement from the country, out of which Gujarat alone holds 75% share. Gujarat based Sanghi Cement realised 33% of its total sales from exports where as realised 24% of its sales. Although India has been considered as one of the most preferred location for export of cement, in the last few years, the export of cement has been affected by the various government policies. For example, mid-April 2008, Government of India imposed a ban on export of cement and clinker to its neighbouring countries including Nepal in order to preserve the countrys foreign exchange reserve. The government imposed ban on the export of cement in order to boost the supplies and contain prices of commodities in order to keep inflation under check. But surprisingly this ban did not have much impact on the cement industry, because when the recession came to an end, huge investments were made in construction and
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Saurashtra Cement

infrastructure sector. **In the fiscal year 2009-2010, the cement export of India declined by 29% to 2.27 million tonnes, even though the cement production was increased about 11% in the same fiscal year, which again proved that the demand of cement in domestic market had increased over the last 2 years. The major importers of the Indian cement are Sri Lanka and Middle East countries, where real estate sectors have boomed in the last 2 years. Cement making is being imported duty free, from With neighbouring countries cement

Government of India intervention. However, imports of cement will remain negligible and will not pose a threat to domestic industry due to logistics issues and lack of port handling capabilities. When we talk about the imports of cement in India, then we cant leave Pakistan. Pakistan has been considered as one of the traditional importer of cement to India. Cement import from Pakistan started from 2007, when India lifted import duty and some of the additional custom duties, since then the Pakistani firms have exported ***1,242,588 tonnes of cement to India. But in 2009, questions on the quality of Pakistani cement started to arise. Later on, 24 Pakistani cement companies got BIS {Indian Bureau of Standard} to export cement to India. Till 2008, India imported 4.57 million tons of cement from Pakistan. India banned the export of cement in order to keep a check on inflation. India plans to increase its import of cement from
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Pakistan, and buy a total of seven million tons this fiscal year. With effect from May 1(2008), 21 lakhs (2.1 million) tones of cement from Pakistan are being imported. In total, increase in imports of about seven million tons of cement by 2010, is being expected. The abolition of import duty on coal is being demanded by the cement industry since it is a very vital raw material in the production of cement. The current import duty on coal and pet coke is 5%. Major cement producers depend on imports of this fuel since domestic availability is limited. Cement can be imported without duty; however duty has to be paid by cement manufacturers on the imports of inputs. According to Cement Manufacturers Association (CMA), due to the shortage, coal and pet coke has to be imported. Initially, India did not allow any imports through the Wagah border. However Pakistan allowed Afghanistan to export to India through the Wagah border. Since August 2007, 16 manufacturers have been given license for selling cement in India. About 50,000 tons of cement has entered the country, largely through the rail route. According to the figures announced by Cement Manufacturers Association of India, cement consumption was at its peak during 2009-2010. It registered 8.6 % year on year growth.

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The major players like Shree Cement, Jaiprakash Associates, Dalmia Cement and Grasim Cement reported high growth rates of 28.4 percent, 28 percent, 23.7 percent and 21.3 percent year-on-year, respectively. Madras Cement and Ultratech Cement also reported good growth that is higher than the industry average. In comparisons from that of the 2007 result Ambuja cement has contracted only half of the exports which results to 0.6 million tones. In spite of the recession having a negative impact on many industries all over the world, the cement industry stood strong and continued at a steady growth rate. Although both steel and cement are vital ingredients for infrastructural development, the VAT on cement was 12.5 per cent but only 4 per cent on steel. To make cement available, import duty was reduced to nil from 12.5%. The government introduced a dual exercise duty on cement wherein Rs.600 per million tonnes of cement with more than Rs.190 per bag and exercise duty of Rs.300 million tonnes on cement with less than rs.190 per bag. In response to Pakistans ban on the export of onions, the government is planning on imposing an import ban of cements from that country. The export and import of cement is going to increase as long as there is an increase in the demand for cement and infrastructural activities.

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3.8. Technology Intensity

Technology plays an important role in the growth of any industry. It is also true in the case of cement industry. From past few years Indian cement industry is continuously adopting new technology. The technology up gradation has helped the cement industry to increase the capacity of plant, decline in thermal energy consumption, decline in electrical energy consumption, decline in cost of production of cement, decline in energy cost through co-processing and reduction in the CO2 emission through blended cement and energy conservation. Modernization at plant process has also helped to reduce the human capital need for creation of cement. At present, the quality of cement in India is meeting with benchmark and dextrous to compete with the international players.

3.8.1. Cement Production Process

Production of cement is three step process Preparing raw materials: Mixing/homogenising, grinding and preheating (drying) produces the raw meal. Burning of raw meal to form cement clinker in the kiln: The components of the raw meal react at high temperatures (900-1500 C) in the precalciner and in the rotary kiln, to give cement clinker. Finish grinding of clinker and mixing with additives: After cooling the clinker is ground together with additives.
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The process of production of cement is energy intensive. The heat is used to combine the raw material, chemically to create a compound with binding properties. These can be ground as a dry mixture or combined with water to form slurry. At this stage, mixture of water plays an important implication in production process. There are 4 different cement manufacturing practices are: (1) dry process, (2) semi-wet process (3) semi-dry process and (4) wet process. The dry process is contemporary and more energy-efficient compared to other process. The wet process requires 0.28 tonnes of coal and 110 kWh of power to manufacture one tonne of cement, whereas the dry process requires only 0.18 tonnes of coal and 100 kWh of power. Over last few years, Indian industry is giving preference to dry process (energy efficient) to gain the cost efficiency in the market. Since the commencement of the decontrol process, in India manufacturers have shifted to dry technology by modifying the plant. 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 semidry process technology. There is tremendous scope for waste heat recovery in cement plants and thereby reduction in
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emission level. One project for co-generation of power utilising waste heat in an Indian Cement plant is being implemented with Japanese assistance under the Green Aid Plan. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially. Some cement plants have set up dedicated jetties for promoting bulk transportation and export. (Dipp.nic.in)

3.8.2. Adoption of Latest Technologies

The roller mill has replaced the ball mills, which is used for grinding raw material and coal. The industry is also employing pre blending stockpile and constant homogenizing silos for homogenization of raw meal. For energy efficient grinding, industry started using roller press and high efficiency separators. For packing purpose, electronic packing machines is taking place, which will enhance the weight reliability and effectiveness. The industry has also adopted the packed bag loading machine, which will save the time. Currently, all the cement plants are using dry process with most effectual pollution control measure to accomplish the terms provided by the Pollution Control Authorities. All the

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plants are adopting pollution control instruments, such as ESP2, fabric bag dust collectors. Some of the new technologies are Advanced control systems with soft sensors

All fans (including HT) with variable speed drives, preferably VFDs*3

Integrated computerised quality control systems Mines planning Bulk analyser Raw mix design and blending Alternative Fuels Indian cement industry has started utilising alternative fuels such as Pet coke, biomass, etc. The industry can also discover other opportunities, like Utilising worn tyres, paint sludge, municipal solid waste.

3.8.3. Research and Development

Research & development plays an important role for growth of any industry. R&D performance helps in the adaption and

2 An electrostatic precipitator (ESP), or electrostatic air cleaner is a particulate collection device that removes
particles from a flowing gas (such as air) using the force of an induced electrostatic charge. Electrostatic precipitators are highly efficient filtration devices that minimally impede the flow of gases through the device, and can easily remove fine particulate matter such as dust and smoke from the air stream.

3 A variable-frequency drive (VFD) is a system for controlling the rotational speed of an alternating
current (AC) electric motor by controlling the frequency of the electrical power supplied to the motor.

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absorption of technology. In India, the main organisations dedicated to research and development activities are National Council for Cement and Building Materials (NCB) Central Research Station (CRS) of ACC Limited Dalmia Institute of Scientific and Industrial Research (DISIR) The machinery suppliers for the industry also carry out the work of research and development. The key machinery supplier with own R&D division are Larsen & Turbo Walchandnagar industries Limited With the cement plants, the centralised R&D Centre is established by Cement Corporation of India. It helps the industry to adopt the new imported technology and to develop new technology to increase the efficiency of industry. The main area of research is energy preservation, production optimisation, quality enrichment, creation of new type of cement, waste heat recovery and computerized methods for quarry planning. Current technologies used in industry are not sufficient for more efficient production of cement in environment friendly way. Future R&D Efforts

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Maximising consumption of alternate fuels, fly ash, slag and other raw material that will lead to less energy consumption.

NANO TECHNOLOGY4

in cement manufacture and use-

nanotechnology can be the key for reducing CO2 emission in the production of cement may hold the key to reducing carbon dioxide emissions in the production of cement. Nano modification of concrete is potentially dextrous of significantly improving its tensile power, toughness, ductility, and durability properties. Better combustion efficiency technologies.

Table 5 : Current Investment in R&D activity Company name Ambuja cement ACC Limited J.K. cement Ultratech cement Birla cement J.K. laxshmi Prism cement Andrha cement Rs. In crores 2010) 1.29 (December 2009) 3.25 0 0 0 0.31 0.8 0 (March

4* The term "nanotechnology" has evolved over the years via terminology drift to mean "anything

smaller than micro technology," such as nano powders, and other things that are nanoscale in size, but not referring to mechanisms that have been purposefully built from nanoscale components

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India cement Madras cement Binani cement Shree cement

CAPITALINE.COM)

0 0 0 6.39
(Source-

The current status for research & development shows, that Indian companies are not making use of research & development to grow in the industry. India can become number one in the world, if Indian industry will make use of R&D to produce with more capacity with the help of new technology without harming the environment.

3.9. Marketing Initiatives

As competition is increasing in the cement industry because foreign players are entering the domestic market, marketing becomes an essential task for cement companies to survive. In the past cement was more of a commodity which required minimum marketing effort but with changes in buyer behaviour cement has evolved as a brand which requires extensive marketing efforts. Cement companies are fallowing the strategy of brand building to differentiate themselves. Celebrity endorsement and extensive coverage are the key elements that cement companies are focusing to have top recall among users.
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Binani Cements Ltd started by signing film personality Amitabh Bachhan as its brand ambassador it posted 56% growth in profit before tax at Rs 244.84 crore in 2007-08.According to The Economic Times the companies extensive advertising campaign was one of the main reasons behind the growth in sales. Similarly JK Lakshmi had signed actor Om Puri. CS Sadasivan, Chief of Marketing, JK Lakshmi Cement, said that cement is no longer just a commodity and to ensure long term profitability, all companies have to build its brand. French multinational Lafarge has signed cricketer Mahendra Singh Dhoni as the brand ambassador for their brand, Concreto. As per Vinod Juneja, MD of Binani Cement Ltd. because of such promotional methods there has been a steep rise in the sales of the companies specially in rural markets where the impact of brand ambassadors are high. On the other side we have companies like Ultratech which does not believe in celebrity endorsement, it promoted its phrase, Ultratech, the engineers choice emphasizing that its cement is most preferred by engineers in the country. Ultratech Cement was also one of the main sponsorers for Rajasthan Royals, the Jaipur franchise of the Indian Premier League. The companies deal with Rajasthan Royals was in the range of $2 million. India Cement Ltd bagged Chennais IPL team with an aim to improve its brand visibility and recall would help it build itself
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as a brand as it expands into new markets. According to India Cement the companys brands (Coromandel, Sankar and Rasi) were household names in the South but in Maharashtra, where it is a new entrant, the Coromandel cement bags sport the tag line, from the house of Chennai Super Kings. The company was confident that CSK would support it into the markets where it is new like Gujarat, Madhya Pradesh and Rajasthan in future. Cements are no more being sold in markets as commodities but as brands to which people can relate. Most of the cement companies relate their product with strength which can be justified by the following tag lines Sagar Cement- Solid cement solid home

Ultratech Cement- the engineers choice

Buland Cement- shakti Vishal rakcha ki dhal JP Cement- Andar se solid Table 6 : Expenditure on Marketing Company name Ambuja Cement ACC J.K. Cement Ultratech Cement Birla Cement J.K. Laxshmi Prism Cement Rs. 59.65 2009) 53.16 26.31 134.05 7.03 0 33.15
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In

crores (December

(March 2010)

Andrha Cement India Cement Madras Cement Binani Cement Shree Cement Dalmia Cement Century Cement Lafarge Cement

0.71 30.16 8.71 28.64 73.97 7.5 7.56 44.31

(source: capitaline.com)

At current companies are investing a lot in marketing activities. The above table shows that Ultratech is investing around 134 crore on advertising. After that, there is a huge difference between the investments of companies. Marketing is playing an important role for cement companies to expand the sale of companies.

3.10. Future Outlook

The future of an industry like cement basically depends upon the pace in sectors like infrastructure & construction, manufacturing, transportation. Because when these industry will grow up the demand of the cement would increase with the time, and finally the growth of the industry i.e. cement industry will take place. Apart from this, as it is well known that, cement is such a product which plays a major role in growth and expansion of almost each and every sector, so the future
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demand of the industry will always be on dynamic way, which further boost the industry also. As far as the future of the Indian cement industry is concerned, the industry is expected to grow at a CAGR of around 10.5% during 2010-11-2013-14. According to the ACCthe largest cement company of countrygovernments continued thrust on infrastructure will help the industry to grow at the rate of around 9-10% annually in the next two years. The different governments initiative by both, central as well as state governments, like NREGA, JNNURM, Indira Aawas Yojna etc. has acted as the key driver of cement industry in last few years and they are expected to do so in the forth coming years. At present, around 55-60% of the total cement is consumed by housing sector. This is expected to change in the coming years, because, when the infrastructure developments like road, railways, power plants, bridges etc. will take place the significant percentage of cement will be consumed by these sectors. The demand of cement is also going to increase in the agriculture sector. For example, construction of new godowns, silos, warehouses will boost the demand of cement. According to the research report named Indian cement industry forecast 2012 by PR log, almost all major cement company in the country have decided to expand their production capacity in the coming 2-3 years { few of them have already expanded}, which clearly indicates that, the demand of
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the cement is going to increase in the forthcoming years. The expansion plan of cement companies will not only help them to increase their domestic presence, it will also enable them to look for future export opportunities. The availability of various types of cement like white cement, Portland cement, oil well cement etc. is a distinct aspect of Indian cement industry, which plays an important role in the business of cement in its respective market. In the coming years, it is expected that Indian cement industry would lead due to the different types and varieties of product. According to Mr. Vinod juneja, MD, Braj Binani Group, in the next 10 years, India will become one of the major exporters of clinker and grey cement to middle east, Africa & other developing nations. In addition to this the increasing number of plants near the ports has also added an advantage to the export of the cement from country. Actually these data clearly indicates that, India is going to become one of the major exporters of cement in the world. It is also expected that, many foreign companies will invest in the cement sector in India because of constant demand and right valuation of the product. Indian companies will also go global through FCCB or GDR route.

3.11. Comparison with Other Countries

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Comparison with the US Cement Industry

USA is the third largest manufacturer of cement along with China and India. It comprises 39 cement companies with 115 cement plants spread in 36 states. CEMEX, SAB being in top cement companies of the US. In the US cement trade is patterned as the maximum consumption is between May and October. Most of the industry is concentrated in a particular region as cost of transportation is high than its actual value. The domestic production is always short of demand, therefore, depended on imports to a large extent. Whereas, in India, demand has an edge over supply, and the rate of exports are high. In terms of employment, the cement industry in the US has gained efficiency through automation and closure of outdated units. This has led to a dramatic decrease in the levels of employment. In India, cement industry being a booming industry, more and more people are joining this sector. Due to growing infrastructure projects, working in this industry is considered a lucrative option for the freshers and youngsters. The US cement industry is less energy intensive as compared to Indian cement industry which is extremely industry intensive and uses coal in large quantities.

Comparison with the Chinese Cement Industry

Since 1985, Chinas cement industry has been ranked as no.1 with a high growth rate. It is roughly double the production

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capacity of India i.e. chinas production capacity is 300 million tonnes, whereas Indias production is 151.2 million tones. China has adopted various ways of eliminating backward cement capacity. It is focusing on reduction of carbon emissions. Thats why it has adopted dry manufacturing process to form cement which is more fuel efficient. The dry process requires only 0.18 tonnes of coal and 100 kWh of power. The Chinese government processes wastes produced in the cement industry. Over 200 projects have been started to reduce environment pollution. India is the second largest producer of cement in the world. It has a huge growth prospects due to various infrastructure projects, housing facilities and road networks. Though, India needs to work on mining and environmental issues. Otherwise industrial growth would be rendered valueless and slow the pace of the growth.

3.12. Conclusion
It can be concluded that Indian cement industry plays an important role in the development of country. The prices of cement is rising from past few year, so its responsibility of Govt. to take the charge and try to find out that cartel exists in cement industry or not. The price hike in the cement industry is affecting the lower class people in India, so it is necessary to stabilise the price at the benefit of companies as well as
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consumers.

India

can

become

number

one

in

cement

production, when there will be no corruption and industry will concentrate on Research & development. The demand for cement will grow in the future, as population is increasing. The Indian cement industry is expected to grow rapidly in coming years due to heavy demand from housing, retail and infrastructure industry.

4. Reference

C.A.Hendricks, et.al (2009); Greenhouse Gases from

Emission the Cement

Reduction Industry,

of IEA

Greenhouse gas R&D Programme, UK

Senthilkumar S., et.al (2009); Developmental Issues in Indian Cement Industry; SCMS Journal Of Indian Management, April-May, 2009

Ritu Raj Arora and Runa Sarkar(2007); Detecting Cartels in the Indian cement industry: An Analytical Framework; Industrial and Management Engineering Department, IIT Kanpur

L. G. Burange and Shruti Yamini (2008); Performance of Indian Cement Industry The competitive landscape Arindam Chakrabarti, et.al (2008); Balanced Growth: A Strategic Imperative for Indian Cement Industry; Tata Strategic Management Group
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Paul limpilaw and Siemens AG (2008); Cement plant Automation In Emerging markets, Emerging Markets Report.

Rejie George Pallathitta(2008) Can Ultratech be next market leader Improving environmental performance (2005)- Bristlol Environmental Agency, V-1 Ernst Worrell and Christina Galitsky (2008); Energy Efficiency Improvement and Cost Saving Opportunities for Cement Making.

Shivani Anand (2009); Identifying Cartel using Economic Evidence A case study of Indian Cement IndustryCompetition Commission Of India

Various Websites Capitaline.com Indiainbusiness.nic.in Financialexpress.com

www.ibef.org/industry/cement.aspx www.economywatch.com Business And Economy www.business.mapsofindia.com www.etintelligence.com http://www.brighthub.com/engineering/civil/articles/47509. aspx http://www.marketwire.com/press-release/Probing-the-USCement-Industry-1167662.htm

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http://www.articlesbase.com/business-articles/the-indiancement-industry-1042800.html http://www.thehindubusinessline.com/2009/06/28/stories/ 2009062851270200.htm http://economictimes.indiatimes.com/news/news-byindustry/services/advertising/ultratech-to-sponsor-forrajasthan-royals-in-ipl/articleshow/4370209.cms

http://www.financialexpress.com/news/cement-makersstep-up-brand-building-drive/329127/0 http://www.business-standard.com/india/news/cementfirms-jumpthe-brandwagon/356316/ http://economictimes.indiatimes.com/news/news-byindustry/services/advertising/For-Binani-Cement-AmitabhBachchan-is-a-big-Burden/articleshow/3464554.cms

http://marketingpractice.blogspot.com/2010/01/binanicement-sadiyon-ke-liye.html http://www.lafarge-cement.co.in/wps/portal/ http://www.saveondish.com/forum/ultratech-tcs-sponsorfor-rajasthan-royals-ipl-t-11839.html http://www.hinduonnet.com/businessline/2000/04/29/sto ries/14291201.htm http://www.financialexpress.com/old/fe/daily/20000429/f co29031.html http://www.heidelbergcement.com/global/en/company/gr oup_areas/asia_pacific/india.htm http://www.financialexpress.com/news/italcementisnaps-up-zuari-for-rs-600-cr/168663/3
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http://www.business-standard.com/india/news/holcimbuys-ap-based-encore-cements/384086/

Telephonic conversation with Mr.G.Y. Narayan (Joint Secretary, CMA)

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