Indian Cement Industry Report

CEMENT INDUSTRY
EXECUTIVE SUMMARY
In the race to become the most economic superpower, China has generally outperformed
India, and with exception of telecom & IT, India has had trouble slaying the Chinese dragon.
But now we can add another sector to the Indian success story, i.e., Cement. In last ten years,
this sector has recorded a CAGR of 8%, against the world cement industry average of 3.5%
and China’s cement industry growth rate of 7.2%. Today this industry not only outshines that
of developed countries such as US and Japan but also has become the second largest cement
producer in the world after China.
The cement industry has continued its growth trajectory over the past ten years. Domestic
cement demand growth has surpassed the economic growth rate for the past three years.
Cement demand in the country grows at roughly 1.5 times the GDP growth rate. The industry
had a turnover of around US$ 7.8 billion in 2003-04 and according to CRISIL is expected to
grow at a CAGR of around 7 per cent in the next five years.
The key drivers for cement demand are real estate sector, infrastructure and industry
expansion projects. Among these real estate sector is the key driver of cement demand. The
demand for cement is closely related to the growth in the construction sector. Consequently,
cement demand has been posting a healthy growth rate of around 8 per cent since 1997-98,
propelled by the increased thrust on infrastructure development, and the higher demand from
the housing sector and industrial projects.
Cement is bulky commodity and cannot be easily transported over long distances making it a
regional market place, with the nation being divided into five regions. Each region is
characterized by its own demand-supply dynamics. Over the past few years the cost of
cement production has grown at a CAGR of 8.4%.
With increase in infrastructure development activity with projects such as state and national
highways, and global demand has led Indian cement industry to increase their production
capacity. This inturn has attracted the top cement companies in the world to enter the Indian
market and take the advantage of growth in demand.
The cement sector continues to emphasize on cost cutting through enhanced productivity,
reduction in energy costs and logistic expenses.
ALLIANCE BUSINESS SCHOOL Page 1

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The government has considered spending more than US $500 billion on infrastructure in the
11th five year plan. Apart from this railways, urban infrastructure, ports, airports, IT sector,
organized retailing, malls and multiplexes will be the main sectors driving the demand of
cement in the country. So we can see that cement industry is moving towards both challenges
and opportunities poised by the presence of domestic and global players in the Indian market.
This trend is likely to continue in the coming years.

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1.1 SECTOR ANALYSIS

Indian Economy grew by 5.4 per cent in 2001-02, which is considered to be one of the
highest growth rates in the world for the year. This growth is supported by a growth rate of
5.7 per cent in agriculture and allied sectors, 3.3 percent in industry and 6.5 per cent in
services.
Overall agricultural output is estimated to increase by nearly 7 per cent in 2001-02. Food
grains production is expected to rise to 209 million tons compared with 196 million tons in
2000-01. Prospects of agricultural production in 2001-02 are considered to be bright as a
result of normal monsoon and relatively favorable distribution of rainfall over time and
regions.
While the Indian industry sector grew by 3.3 per cent, with in industry sector segments like
construction showed a lower growth in 2000-01, there was marked improvement in the
growth rates of manufacturing (from 4.2 per cent in 1999-00 to 6.7 per cent in 2000-01) and
mining and quarrying (from 2 per cent to 3.3 per cent during the same period). The growth
rate of electricity, gas and water supply remained almost invariant at around 6.2 per cent for
both 1999-2000 and 2000-01. During 1993-94 to 1999-2000 the service sector had achieved
consistently high growth rates in the range of 7.1 per cent to 10.5 per cent. But for the first
time in 2000-01, the growth rate of the service sector declined to 4.8 per cent due to poor
performance by financial sector, trade hotels and restaurants, and community and social
services.
Agriculture
The agriculture sector, for so long the mainstay of the Indian Economy, now accounts for
only about 20 per cent of GDP, yet employs over 50 per cent of the population. For some
years after independence, India depended on foreign aid to meet its food needs, but in the last
35 years, food production has risen steadily, mainly due to the increase in irrigated areas and
widespread use of high-yield seeds, fertilizers, and pesticides. The Country has large grain
stockpiles (around 45 million tons) and is a net exporter of food grains.
Cash crops, especially tea and coffee, are the major export earners. India is the world's
largest producer of tea, with annual production of around 470 million tons, of which 200
million tons is exported. India also holds around 30 per cent of the world spice market, with
exports around 120,000 tons per year.

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With a view to strengthening the sector, building infrastructure for handling, transportation,
and storage of food grains has been granted "infrastructure status" and will be eligible for a
tax holiday. Further, processors of food and vegetables are exempt from excise duty.
Manufacturing Sector
After a decade of reforms, the manufacturing sector is now gearing up to meet challenges for
the new millennium. Investment in Indian companies reached record levels by 1994 and
many multinationals decided to set up shop in India to take advantage of the improved
financial climate. In an effort to provide a further boost to the industrial manufacturing sector,
Foreign Direct Investment (FDI) has been permitted through the automatic route for almost
all the industries with certain restrictions. Structural reforms have been undertaken in the
excise duty regime with a view to introduce a single rate and simplify the procedures and
rules. Indian subsidiaries of multinationals have been permitted to pay royalty to the parent
company for license of international brands, etc. Over the period 1992-93 to 1999-2000, the
manufacturing sector has recorded an average annual growth rate of 6.3 per cent and in 2001-
02; it recorded a growth of 2.8 per cent.
Companies in the manufacturing sector have consolidated around their area of core
competence by tying up with foreign companies to acquire new technologies, management
expertise, and access to foreign markets. The cost benefits associated with manufacturing in
India, has positioned India as a preferred destination for manufacturing and sourcing for
global markets.
Financial Sector
An extensive financial and banking sector supports the rapidly expanding Indian Economy.
India boasts of a wide and sophisticated banking network. The sector also has a number of
national and state level financial institutions. These include foreign and institutional
investors, investment funds, equipment leasing companies, venture capital funds, etc. Further,
the Country has a well-established stock market, comprising 23 stock exchanges, with over
9,000 listed companies. Total market capitalization, on the two dominant stock exchanges,
the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), stood at Rs.
6,926 billion and Rs. 7,604 billion respectively, at the end of December 2000. The Indian
capital markets are rapidly moving towards a market that is modern in terms of infrastructure
as well as international best practices such as derivative trading with stock index futures,

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addition to the list of compulsory Demat trading and rolling settlement in certain specified
shares, commencement of internet based trading, etc.
The last year witnessed several Indian companies, mobilizing resources by tapping the world
market through the ADR/GDR route. So as to improve the liquidity in the ADR/GDR market
and to give opportunity to Indian shareholders to divest their shareholding in the ADR/GDR
market abroad, measures such as two-way fungibility in ADR/GDR issues of Indian
companies has been introduced and sponsorship of ADR/ GDR offerings against existing
shareholding. In addition to the above, 26 per cent foreign equity has been allowed in the
insurance sector and investment and divestment by venture capital funds and companies
registered with SEBI has been simplified.
FII inflows were USD 2.34 billion (January 2001 to June 2001) compared to USD 1.5 billion
for 2000, showing an upward trend despite depressed stock market indices. Net cumulative
FII inflows crossed USD 14 billion (June 2001).
Services Sector
The main thrust to industrial growth has come from the services sector. Services contribute to
41 per cent of the GDP. Rapidly, the quality and complexity of the type of services being
marketed is on the rise to match worldwide standards. Whether it is financial services,
software services or accounting services, this sector is highly professional and provides a
major impetus to the Economy . Interestingly, this sector is populated with a range of players
who cater to a niche market.
India is fast becoming a major force in the Information Technology sector. According to the
National Association of Software and Service Companies (NASSCOM), over 185 Fortune
500 companies use Indian software services. The world's software giants such as Microsoft,
Hughes and Computer Associates who have made substantial investments in India are
increasingly tapping this potential. A number of multi-nationals have leveraged the relative
cost advantage and highly skilled manpower base available in India, and have established
shared services and call centers in India to cater to their worldwide needs.
The software industry was one of the fastest growing sectors in the last decade with a
compound annual growth rate exceeding 50 per cent. Software service exports increased from
US$ 4.02 billion in 1999-2000 to US$ 6.3 billion in 2000-01, thereby registering a growth of
57 per cent. India's success in the software sector can be largely attributed to the industry's

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ability to cultivate superior knowledge through intensive R&D efforts and the expertise in
applying the knowledge in commercially viable technologies.
1.2 Contribution of Manufacturing Sector towards the Indian Economy
An estimated 100.9 million people were employed in 41.8 million establishments in India,
growing at 2.78 percent and 4.69 percent, respectively from 1998-2005, shows the official
Economic Census for 2005. Non-farm sector continued to be the principal source of
employment, employing 90 million people, compared to 10.9 million in agriculture sector,
said the census released here Thursday.
“Retail and manufacturing establishments continue to be the key employment providers in

India,” said S.K. Nath, director general of the Central Statistical Organisation (CSO), which
compiled the census.
“It is a significant pointer that India has a great deal of potential for growth in these two
sectors,” he said.
Manufacturing sector employed 25.5 million people or 25.25 percent of the total workforce,
followed by 25.1 million or 24.91 percent, respectively for retail trade sector, showed the
survey.
This was the fifth in the series of the economic censuses conducted by CSO, an agency under
the ministry of statistics and programme implementation. The first census of its kind was
launched in 1977.
“This census gives us a complete picture of India’s economic situation. We must interpret the
data intelligently. There has been a rapid growth in small-scale industries,” said Statistics and
Programme Implementation Secretary Pranob Sen.
Following are some of the key census findings:
 100.90 million People employed in 41.83 establishments in India.

 41.83 million Establishments, 25.54 million in rural and 16.29 million in urban areas,
operated in 2005.

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 39.61 million Establishments under private ownership.

 26.96 million Units were own establishments, without hired workers.
 35.75 million Non-agricultural establishments engaged 89.99 million workers, while
agriculture sector’s 6.08 million units had 10.91 million workers.
 Employment growth rate at 2.78 percent between 1998 and 2005.
 Males accounted for 78.3 million of the workforce; women accounted for 20.2
million, children 2.4 million.
 Manufacturing sector was the largest employer (25.5 million people); the retail sector
came next (25.1 million people); farming was third (9.2 million people).
 95 percent establishments had 1-5 workers; 3.42 percent had 6-9 workers; only 1.51
percent employed 10 or more workers.

CEMENT INDUSTRY
2.1 INDUSTRY BACKGROUND
Pre Independence
The first endeavor to manufacture cement dates back to 1889 when a Calcutta based company
endeavored to manufacture cement from Argillaceous (kankar).
But the first endeavor to manufacture cement in an organized way commenced in Madras.
South India Industries Limited began manufacture of Portland cement in 1904.But the effort
did not succeed and the company had to halt production.
Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India
Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons and
production of 1000 installed. The First World War gave the impetus to the cement industry
still in its initial stages. The following decade saw tremendous progress in terms of
manufacturing units, installed capacity and production. This phase is also referred to as the
Nascent Stage of Indian Cement Industry.
During the earlier years, production of cement exceeded the demand. Society had a biased
opinion against the cement manufactured in India, which further led to reduction in demand.
The government intervened by giving protection to the Industry and by encouraging
cooperation among the manufacturers.
In 1927, the Concrete Association of India was formed with the twin goals of creating a
positive awareness among the public of the utility of cement and to propagate cement
consumption.
Post Independence
The growth rate of cement was slow around the period after independence 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.
In 1956, the price and distribution control system was set up to ensure fair prices for both the
manufacturers and consumers across the country and to reduce regional imbalances and reach
self sufficiency.

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Period of Restriction (1969-1982)
The cement industry in India was severely restrained by the government during this period.
Government hold over the industry was through both direct and indirect means. Government
intervened directly by exercising authority over production, capacity and distribution of
cement and it intervened indirectly through price control.
In 1977 the government authorized higher prices for cement manufactured by new units or
through capacity increase in existing units. But still the growth rate was below par.
In 1979 the government introduced a three tier price system. Prices were different for cement
produced in low, medium and high cost plants.
However the price control did not have the desired effect. Rise in input cost, reduced profit
margins meant the manufacturers could not allocate funds for increase in capacity.
Partial Control (1982-1989)
To give impetus to the cement industry, the Government of India introduced a quota system
in 1982.A quota of 66.60% was imposed for sales to Government and small real estate
developers. For new units and sick units a lower quota at 50% was affected. The remaining
33.40% was allowed to be sold in the open market.
These changes had a desired effect on the industry. Profitability of the manufacturers
increased substantially, but the rising input cost was a cause for concern.
Post Liberalization
In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges
of free market competition due to the impending policy of liberalization. In 1991 the industry
was de licensed.
This resulted in an accelerated growth for the industry and availability of state of the art
technology for modernization. Most of the major players invested heavily for capacity
expansion.
To maximize the opportunity available in the form of global markets, the industry laid greater
focus on exports. The role of the government has been extremely crucial in the growth of the
industry.

CEMENT INDUSTRY
Cement is one of the core industries which plays a vital role in the growth and expansion of a
nation. It is basically a mixture of compounds, consisting mainly of silicates and aluminates
of calcium, formed out of calcium oxide, silica, aluminium oxide and iron oxide. The demand
for cement depends primarily on the pace of activities in the business, financial, real estate
and infrastructure sectors of the economy. Cement is considered preferred building material
and is used worldwide for all construction works such as housing and industrial construction,
as well as for creation of infrastructures like ports, roads, power plants, etc. Indian cement
industry is globally competitive because the industry has witnessed healthy trends such as
cost control and continuous technology upgradation.
2.2 CURRENT SCENARIO
The Indian cement industry is the second largest producer of quality cement. Indian Cement
Industry is engaged in the production of several varieties of cement such as Ordinary Portland
Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement
(PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland
Cement, White Cement, etc. They are produced strictly as per the Bureau of Indian Standards
(BIS) specifications and their quality is comparable with the best in the world.
The Indian cement industry is the second largest in the world. It comprises of 140 large and
more than 365 mini cement plants. The industry's capacity at the beginning of the year 2009-
10 was 217.80 million tonnes. During 2008-09, total cement consumption in India stood at
178 million tonnes while exports of cement and clinker amounted to around 3 million tonnes.
The industry occupies an important place in the national economy because of its strong
linkages to other sectors such as construction, transportation, coal and power. The cement
industry is also one of the major contributors to the exchequer by way of indirect taxes.
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.
Over the last few years, the Indian cement industry witnessed strong growth, with demand
reporting a compounded annual growth rate (CAGR) of 9.3% and capacity addition a CAGR

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of 5.6% between 2004-05 and 2008-09. The main factors prompting this growth in demand
include the real estate boom during 2004-08, increased investments in infrastructure by both
the private sector and Government, and higher Governmental spending under various social
programmes. With demand growth being buoyant and capacity addition limited, the industry
posted capacity utilisation levels of around 93% during the last five years. Improved prices in
conjunction with volume growth led to the domestic cement industry reporting robust growth
in turnover and profitability during the period 2005-09.
2.3 Consumption Growth during 2008-09
Even during the economic slowdown in 2008-09, growth in cement demand remained at a
healthy 8.4%. In the current fiscal (2009-10) cement consumption has shot up, reporting, on
an average, 12.5% growth in consumption during the first eight months with the growth being
aided by strong infrastructure spending, especially from the govt sector. The trends in all-
India consumption and the growth in consumption in the major cement-consuming States
over the last five years are presented in below table:
Growth in Cement Demand
Figures in Million Tonnes
2008-09 Apr-Nov 09
Domestic Consumption 178 100
Year-on-Year Growth (%) 8.4 12.5
Source: Cement Manufacturers Association (CMA), ICRA Research
TABLE 2.1

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2.4 Key Drivers of Cement Industry
 Buoyant real estate market
 Increase in infrastructure spending
 Various governmental programmes like National Rural Employment Guarantee
 Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru
National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana
2.5 Globalization of Indian Cement Industry
The Globalization of Indian Cement Industry has helped the industry to restructure itself to
cope up with the alterations in the global economic and trading system. The Indian cement
industry is one of the oldest industries. It has been catering to India's cement requirements
since its emergence during the British Raj in India. Though the majority of the players in the
Indian cement industry were private sector organizations, the industry was highly regulated.
With the rapid growth rate of the Indian economy after the 1990s, the infrastructural
developments within the country has been tremendous. The increase in the construction
activities has led to the increase in the demand for updated quality building materials and
other allied products. Cement being one of the major elements in the construction work, there
is a growth in the cement industry in India. The consumption of cement has increased in India
by nearly 7.5%. With the globalization of Indian cement industry many foreign cement
manufacturers are engaging themselves in agreements and deals with their India counter parts
to have a share of the growth.
Globalization of Indian Cement Industry includes several foreign companies engaging in

mergers and acquisitions of Indian cement companies, like
 Heidelberg Cement - Indorama Cement Ltd. Heidelberg Cement Company entered

into an agreement for a 50% joint venture with the Indorama Cement Ltd., situated in
Mumbai, originally possessed by the Indorama S P Lohia Group. Heidelberg Cement
Company is the leading German cement manufacturing company. The Heidelberg
Cement was set up in 1873 and has a long and prosperous history. Being one of the

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best in the world the Heidelberg Cement Company has its bases in different countries.
The Heidelberg Cement Company has two manufacturing units in India. A grinding
plant in Mumbai and a cement terminal near Mumbai harbor. A clinker plant is
coming up in the state on Gujarat
 Holcim Cement - Gujarat Ambuja Cements (GACL) Holcim Cement signed an

agreement of 14.8% take over with the Gujarat Ambuja Cements (GACL). With new
products, skilled personnel, superb management, and a outstanding market strategy
gives this tie up good edge over the other competitors. Holcim Cement Company is
among the leading cement manufacturing and supplying companies in the world. It is
one of the major employers in the world; having a work force of 90,000.The Holcim
Cement Company has units in excess of 70 countries all over the world.
 Italcementi cement - Zuari Cement Limited Italcementi Cement Company with the
help of the Ciments Français, a subsidiary for its global activities, has acquired shares
of the famous Indian cement manufacturer - Zuari Cement Limited. The acquisition
was of 50% shareholding and the deal was of about 100 million Euros. Italcementi
Cement is the 5th largest cement manufacturing company in the world. The
production capacity of the Italcementi cement company is about 70 million tons in a
year. With the construction boom in India the company looks for a stable future. In
2001 the Italcementi cement entered the Indian market scenario. It took over the plant
of the Zuari Cement Limited in Andhra Pradesh in southern India. The joint venture
earned revenues of around 100 million Euros and an operating profit of 4 million
Euros.
 Lafarge India is the subsidiary of the Lafarge Cement Company of France. It was
established in 1999 in India with the acquisition of the Tisco and the Raymond
cement plants. Lafarge Cement presently has three cement manufacturing units in
India. One of them is in Jharkhand which is used for the purpose of grinding and the
other two are in Chhattisgarh used for manufacturing. The Lafarge Cement Company
was set up in the year 1833 by Leon Pavin. Lafarge Cement Company situated in
France is the leading cement producing company in the world. It has plans for
increasing the cement production through technological innovations and
maximization of the capacity of the plant. It has a large network of distributors in the

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eastern part of India. The Lafarge Cement Company is presently producing nearly 5.5
million tons of cement for the Indian cement market.
2.6 STRUCTURE OF THE INDIAN CEMENT INDUSTRY
 It is a fragmented industry. There are 56 cement companies in India, operating 124

large and 300 mini plants, where majority of the production of cement (94%) in the
country is by large plants.
 One of the other defining features of the Indian cement industry is that the location of
limestone reserves in select states has resulted in it’s evolving in the form of clusters.
 Since cement is a high bulk and low value commodity, competition is also localized
because the cost of transportation of cement to distant markets often results in the
product being uncompetitive in those markets.
 Another distinguishing characteristic comes from it being cyclical in nature as the
market and consumption is closely linked to the economic and climatic cycles. In
India, cement production is normally at its peak in the month of March while it is at
its lowest in the month of August and September. The cyclical nature of this industry
has meant that only large players are able to withstand the downturn in demand due
to their economies of scale, operational efficiencies, centrally controlled distribution
systems and geographical diversification.

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3.1 OBJECTIVES OF THE STUDY
• To analyze the evolution of cement industry.
• To compare the global market with Indian cement industry.
• To estimate the level and analyze the trends in market concentration in the cement
industry.
• To assess the profitability, liquidity and other financial ratios of the firms when
compared to the industry.
• To find out the efficiency and economic size of cement manufacturing firms.
3.2 METHODOLOGY OF THE STUDY
• No field work in collection of primary data for the study and the study is going to be
descriptive and analytical.
• Secondary information is obtained by the medium of internet, journals, articles and

magazines.
• The five companies have been chosen based on market share, production capacity and
net profits for the previous years.
3.3 SOURCES OF DATA
Only secondary data was collected from the internet, company websites, magazines and
various articles. Capitaline databases have been the main source of information for company
analysis.

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3.4 LIMITATIONS OF THE STUDY:
 The study is limited to the top five cement companies in India.

 Only three years’ data is used for comparing the performance of these companies.
 The financial ratios used for analysis of performance of each company are limited.

CEMENT INDUSTRY
4.1 SWOT ANALYSIS

a) Strengths:
Second largest in the world in terms of capacity: In India there are approximately 124
large and 300 mini plants with installed capacity of 200 million tonnes.
Low cost of production: due to the easy availability of raw materials and cheap labour.
b) Weakness:
Effect of global recession on real estate: The real estate prices are stabilizing and facing
steady slowdown especially in metros. There are approximately one hundred thousand
completed flats without occupancy in Bangalore. There has been drastic reduction in property
prices due to reduced demand and increased supply.
Demand-Supply gap, overcapacity: The capacity additions distort the demand-supply

equilibrium in the industry thereby affecting profitability.
Increasing cost of production due to increase in coal prices.
High Interest rates on housing: The re-pricing of the interest rates in the last four years
from 7% to 12% has resulted in the slowdown in residential property market.
c) Opportunities:
Strong growth of economy in the long run: Indian economy has been one of the stars of
global economics in the recent years, growing 9.2% in 2007 and 9.6% in 2006. However,
India is facing tough economic times in 2008.
Increase in infrastructure projects: Infrastructure accounts for 35% of cement consumption

in India. And with increase in government focus on infrastructure spending, such as roads,
highways and airports, the cement demand is likely to grow in future.
Growing middle class: There has been increase in the purchasing power of emerging
middle-class with rise in salaries and wages, which results in rising demand for better quality
of life that further necessitates infrastructure development and hence increases the demand
for cement.

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Technological changes: The Cement industry has made tremendous strides in technological
up gradation and assimilation of latest technology. At present ninety three per cent of the total
capacity in the industry is based on modern and environment-friendly dry process technology
and only seven per cent of the capacity is based on old wet and semi-dry process technology.
The induction of advanced technology has helped the industry immensely to conserve energy
and fuel and to save materials substantially and hence reduce the cost of production.
d) Threats:
Imports from Pakistan affecting markets in Northern India: In 2007, 130000 tonnes in
2008, 173000 Metric tones of cement was exported to India. This was done to keep the price
of cement under check.
Excess overcapacity can hurt margins, as well as prices.

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4.2 PORTER’S FIVE FORCES

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4.3 CONCENTRATION RATIO:
4.3.1Herfindahl-Hirschman Index (HHI)
The H index is a far more precise tool for measuring concentration. Named after economists
Orris C. Herfindahl and Albert O. Hirschman, it is an economic concept widely applied
in competition law, antitrust and also technology management. It is obtained by squaring the
market-share of each of the players, and then adding up those squares
The formula for this index is:
Where,
H = Herfindahl Index.
si = Contribution of each individual firm to Industry sales.
n = Number of firms
Here %S stands for the percentages of the market owned by each of the larger companies, so
that %S1 is the percentage owned by the largest company, %S2 by the second, and so
on. n stands for the total number of firms you are counting.
It can range from 0 to 10,000, moving from a huge number of very small firms to a
single monopolistic producer. Increases in the Herfindahl index generally indicate a decrease
in competition and an increase of market power, whereas decreases indicate the opposite.
 A HHI index below 0.01 (or 100) indicates a highly competitive index.
 A HHI index below 0.1 (or 1,000) indicates an unconcentrated index.
 A HHI index between 0.1 to 0.18 (or 1,000 to 1,800) indicates moderate
concentration.
 A HHI index above 0.18 (above 1,800) indicates high concentration

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MAJOR PLAYERS IN THE NORTH:
TOTAL SALES for the year 2009 = Rs. 33589.02 Cr
Name of the Net Sales in Percentage

Company Cr. (2009) (%)
ACC 7,942.66 23.64659642
Ambuja Cem. 7,040.70 20.96131414
Birla Corpn. 1,790.19 5.329688095
J K Cements 1,664.42 4.955250257
JK Lakshmi Cem. 1,223.90 3.643750249
Shree Cement 2,716.46 8.08734521
UltraTech Cem. 6,385.50 19.0106767
TABLE 4.1
Market Share
others; 14.37
ACC; 23.65
ACC
Ambuja Cem.
UltraTech Cem.; 19.01
Birla Corpn.
J K Cements
Ambuja Cem.; 20.96 JK Lakshmi Cem.
Shree Cement
UltraTech Cem.
others
Shree Cement; 8.09

JK Lakshmi Cem.; 3.64
J K Cements; 4.96 Birla Corpn.; 5.33
GRAPH 4.2
HHI = 0.149173
HHI indicates moderate concentration that implies the size of the firm in relationship to the
overall cement industry in North is medium.
MAJOR PLAYERS IN SOUTH:
TOTAL SALES for the year 2009 = Rs. 11266.01 Cr

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Name of the Net Sales in Percentage (%)

company Cr.(2009)
Andhra Cements 369.36 3.278534281
Chettinad Cement 1,137.67 10.09825129
Dalmia Cement 1,758.68 15.61049564
India Cements 3,358.34 29.8094889
Madras Cement 2,530.90 22.46491881
Rain Commodities 1,111.01 9.861610277
zuari Cements 438.72 3.894191466
TABLE 4.2
Market Share
others; 4.98 Andhra Cements; 3.28
zuari Cements; 3.89 Chettinad Cement; 10.09
Rain Commodities; 9.86
Andhra Cements
Dalmia Cement; 15.61 Chettinad Cement
Dalmia Cement
India Cements
Madras Cement; 22.46 Madras Cement
Rain Commodities
India Cements; 29.81 zuari Cements
others
GRAPH 4.2
HHI = 0.186167
HHI indicates moderate concentration that implies the size of the firm in relationship to the
overall cement industry in South is medium.
4.4 Life Cycle Analysis

Cement is a typical cyclical industry, characterized by the boom-and bust syndrome. A huge
potential market and rapid growth in the early stages lead to a surge in interest and a flurry of
research. The projected growth rates point to a lucrative market. The buoyant markets and
huge profits raked in by players tempt more players into the market. Capacities increase in

CEMENT INDUSTRY
excess of demand and a glut in capacity is created. Competition increases, prices fall and
margins come under pressure. Capacity addition comes to a halt; weaker players shut shop or
sell off to larger ones. Demand catches up and the cycle is repeated all over again. Perhaps, of
all the cyclical industries, the Indian cement industry exhibits this boom-and-bust cycle most
visibly. Buoyed by booming economy with amplified demand for enhanced infrastructure
housing & commercial space, we believe the cement industry is showing the boom, at
present.
COMPOSITION OF CEMENT
Cement is a mixture of limestone, clay, silica and gypsum. It is a fine powder which when
mixed with water sets to a hard mass as a result of hydration of the constituent compounds. It
is the most commonly used construction material.
DIFFERENT TYPES OF CEMENT

There are different varieties of cement based on different compositions according to specific
end uses namely Ordinary Portland Cement, Portland Pozolona Cement, Portland Blast
Furnace Slag Cement, White Cement and Specialized Cement. The basic difference lies in
the percentage of clinker used.
 Ordinary Portland Cement (OPC):

OPC, popularly known as grey cement, has 95% clinker and 5% of gypsum and other
materials. It accounts for 70% of the total consumption. White cement is a variation of
OPC and is used for decorative purposes like rendering of walls, flooring etc. It
contains a very low proportion of iron oxide.
 Portland Pozolona Cement (PPC):
PPC has 80% clinker, 15% pozolona and 5% gypsum and accounts for 18% of the
total cement consumption. Pozolona has siliceous and aluminous materials that do not
possess cementing properties but develop these properties in the presence of water. It
is cheaply manufactured because it uses fly ash/burnt clay/coal waste as the main
ingredient. It has a lower heat of hydration, which helps in preventing cracks where
large volumes are being cast.
 Portland Blast Furnace Slag Cement (PBFSC):

CEMENT INDUSTRY
PBFSC consists of 45% clinker, 50% blast furnace slag and 5% gypsum and accounts
for 10% of the total cement consumed. It has a heat of hydration even lower than PPC
and is generally used in construction of dams and similar massive constructions.
 White Cement:
Basically, it is OPC: clinker using fuel oil (instead of coal) and with iron oxide
content below 0.4% to ensure whiteness. Special cooling technique is used. It is used
to enhance aesthetic value, in tiles and for flooring. White cement is much more
expensive than grey cement.
 Specialized Cement:
Oil Well Cement: is made from clinker with special additives to prevent any porosity.
Rapid Hardening Portland cement: It is similar to OPC, except that it is ground much
finer, so that on casting, the compressible strength increases rapidly.
Water Proof Cement: OPC, with small portion of calcium stearate or non-saponifibale
oil to impart waterproofing properties.
4.5 MANUFACTURING PROCESSES

There are two general processes for producing clinker and cement in India: a dry process and
a wet process. In general, the dry process is much more energy efficient than the wet process,
and the semiwet somewhat more energy efficient than the semi-dry process. The semi-dry
process has never played an important role in Indian cement production and accounts for less
than 0.2% of total production.
Over the last decade, increased preference is being given to the energy efficient dry process
technology so as to obtain a cost advantage in a competitive market. Moreover, since the
initiation of the decontrol process, many manufactures have switched over from the wet
technology to the dry technology by making suitable modifications in their plants. Due to
new, even more efficient technologies, the wet process is expected to be completely phased
out in the near future. In 1960, around 94% of the cement plants in India used wet process
kilns. These kilns have been phased out over the past 46 years and at present, 96.3% of the
kilns are dry process, 3% are wet, and only 1% are semidry process. Dry process kilns are
typically larger, with capacities in India ranging from 300- 8,000 tonnes per day or tpd
(average of 2,880 tpd). While capacities in semi-dry kilns range from 600-1,200 tpd (average
521tpd), capacities in wet process kilns range from 200-750 tpd (average 425 tpd).

CEMENT INDUSTRY
FIG 4.3
DRY PROCESS
In dry process production, limestone is crushed to a uniform and usable size, blended with
certain additives (such as iron ore and bauxite) and discharged on to a vertical roller mill
where the raw materials are ground to fine powder. An electrostatic precipitator dedusts the
raw mill gases and collects the raw meal for a series of further stages of blending. The
homogenized raw meal thus extracted is pumped to the top of a preheater by air lift pumps. In
the preheaters the material is heated to 750°C. Subsequently, the raw meal undergoes a
process of alcinations in a precalcinator (in which the carbonates present are reduced fed to
the kiln. The remaining alcinations and clinkerization reactions are completed in the kiln
where the temperature is raised to 1,450-1,500°C. The clinker formed is cooled and conveyed
to the clinker silo from where it is extracted and transported to the cement mills for producing
cement. For producing OPC, clinker and gypsum are used and for producing PPC, clinker,
gypsum and fly ash are used.

CEMENT INDUSTRY
WET PROCESS
The wet process differs mainly in the preparation of raw meal where water is added to raw
materials to produce slurry. The chemical composition is corrected and the slurry is then
pumped to the kiln where evaporation of moisture, preheating, calcinations and sintering
reaction takes place. The clinker is cooled and transported, as in the case of other plants, with
suitable conveyors to cement mills for grinding. The wet process is more energy intensive,
and thus becomes expensive when power and energy prices are high.
GRAPH 4.4
4.6 GOVERNMENT POLICIES
Government policies have affected the growth of cement plants in India in various stages.
The control on cement for a long time and then partial decontrol and then total decontrol has

CEMENT INDUSTRY
contributed to the gradual opening up of the market for cement producers. The stages of
growth of the cement industry can be best described in the following stages:
 Price and Distribution Controls (1940-1981)
During the Second World War, cement was declared as an essential commodity under
the Defence of India Rules and was brought under price and distribution controls
which resulted in sluggish growth. The installed capacity reached only 27.9 MT by
the year 1980-81.
 Partial Decontrol (1982-1988)
In February 1982, partial decontrol was announced. Under this scheme, levy cement
quota was fixed for the units and the balance could be sold in the open market. This
resulted in extensive modernization and expansion drive, which can be seen from the
increase in the installed capacity to 59MT in 1988-89 in comparison with the figure of
a mere 27.9MT in 1980-81, an increase of almost 111%.
 Total Decontrol (1989)
In the year 1989, total decontrol of the cement industry was announced. By
decontrolling the cement industry, the government relaxed the forces of demand and
supply. In the next two years, the industry enjoyed a boom in sales and profits. By
1992, the pace of overall economic liberalization had peaked; ironically, however, the
economy slipped into recession taking the cement industry down with it. For 1992-93,
the industry remained stagnant with no addition to existing capacity.
GOVERNMENT CONTROLS
The prices that primarily control the price of cement are coal, power tariffs, railway, freight,
royalty and cess on limestone. Interestingly, government controls all of these prices.
TAX STRUCTURE
The Indian Cement industry is one of the highest taxed one. At the price level of Rs. 200 per
bag, total tax burden, as a percentage of ex-factory realization works out to 45%. The cement
industry has been continuously representing to the Government for more rational tax regime.

CEMENT INDUSTRY
The Central Government in its budget presented on 28th February 2007, for the first time,
announced a dual excise duty structure for cement industry. Excise duty was increased to Rs.
600 per MT on cement with Retail Sale Price (RSP) exceeding Rs. 190. per bag and Rs. 350
per MT for cement with RSP of Rs.190 per bag and below as against specific excise duty of
Rs. 400 per MT so far. This dual structure not only enhanced taxation burden further on the
industry but also complicated its effective implementation. Government, however, having
realized difficulty of the industry and the consequent burden to the consumer, has
subsequently revised the structure w.e.f. 31st May 2007. It has now levied an advalorem duty
of 12% on cement with. RSP exceeding Rs. 190 per bag while retaining specific duty of Rs.
350 per MT on cement sold Rs. 190 per bag and below.
4.7 INDUSTRY STRUCTURE AND NATURE OF COMPETITION
INSTALLED CAPACITY
India is the world’s second largest cement producing country after China. The industry is
characterized by a high degree of fragmentation that has created intense competitive pressure
on price realizations. Spread across the length and breadth of the country, there are
approximately 130 large cement plants owned by around 52 companies and 365 mini-cement
plants with an installed capacity of around 172.08mtpa as on June 2007. Large cement plants
accounted for 94% of the total installed capacity in India.
CAPACITY CLUSTERS
Cement and its raw materials namely coal and limestone, are all bulky items that make
transportation difficult and uneconomical. Given this, cement plants are located close to both,
sources of raw materials and markets. Most of limestone deposits in India are located in
Madhya Pradesh, Rajasthan, Andhra Pradesh, Maharashtra and Gujarat, leading to
concentration of cement units in these states. This has resulted in ‘clusters’. There are eight
such clusters in the country and account for 81% of the cement capacity. There is a trade-off
between proximity to markets and proximity to raw materials due to which some cement
plants have been set up near big markets despite lack of raw materials.

CEMENT INDUSTRY
GRAPH 4.5
GRAPH 4.6
4.8 COST ANALYSIS

CEMENT INDUSTRY
The energy costs and cement freight costs are the two most important elements in the cost
structure of a cement company. While, the share of energy costs has increased marginally,
freight cost has experienced a decline in its share of total operating costs. The share of other
costs (such as stores & spares, manufacturing overheads, and administrative expenses) has
declined. The share of costs on account of material, repair and maintenance, employees and
selling expenses have more or less remained stable.
GRAPH 4.7
Power & Fuel

The cement industry is one of the most energy-intensive sectors within the Indian economy.
Clinker production is the most energy intensive step, accounting for nearly 75% of the energy
used in cement production. In India, an estimated 90-94% of the thermal energy requirement
in cement manufacturing is met by coal. The remaining is met by fuel oil and high-speed
diesel oil. Despite recent increase in coal prices the industry has been able to control the
expenditure on this account by investing in captive power plants – freeing themselves from
the tariff hike by SEB and reducing the energy consumption required to produce a tonne of
cement. However, Government is planning to phase out supplies of subsidized coal to
cement, steel and paper industry. The proposed decision if implemented could result in cost
escalation of almost 30-40%, as the prices of coal under auction system are 30-40% higher
than the notified prices.
COAL

CEMENT INDUSTRY
Coal is an important input in cement manufacture and accounts for 15-20% of the total cost.
Coal serves a dual role in cement manufacture. Firstly, the heat value in coal provides the
thermal energy required for the operation of the kiln. Secondly, the mineral content in coal
(basically, silica content) acts as a constituent in clinker. Cement accounts for around 4.5% of
India's coal demand.
Consumption of coal for production of cement has not increased proportionately with cement
production because of the switch to the dry process; efficiency improvements in cement kilns
and the increased use of fly ash produced in power plants and granulated slag produced in
blast furnaces of steel plants in the production of cement. However, over the years, there has
been deterioration in the quality of coal. In particular, the ash content has increased implying
lower calorific values for coal, and improper and inefficient burning, etc. Therefore, coal
consumption has started to increase, resulting in higher fuel and transportation costs. In order
to reduce these problems, the cement industry started implementing coal washeries, which
reduce the ash content of the coal at the mine itself. Cement companies are also resorting to
importing coal, or using alternative fuel such as lignite or petcoke.
POWER
Cement is a power intensive industry requiring on an average 90-105 units of power in the
wet process, and 100-110 units of power in the dry process to produce one tonne of cement
produced. Significantly power accounts for 15-20% of the variable cost of cement
manufacturing. Cement manufacturing consumes power mainly for three purposes: raw meal
grinding, kiln rotation and clinker grinding. Each stage accounts for roughly one third of the
total power consumption. A dry process plant typically has an average connected load of 15
MW. Based on the present installed capacity of 172 mtpa of cement, the total industry
requirement is roughly 2520 MW. This is just around 2% of India's total current power
generating capacity.
However, with the increase in the frequency of power cuts and rising power tariffs, many
cement companies are meeting 60-100% of their power requirement through captive
facilities. The captive power generation capacity of cement plants is presently estimated at
around 1,800 MW. During FY2005, roughly 43% of the total domestic cement production
was undertaken using captive power as against only 21% in FY1995. Thus, the share of
cement production using captive power has only increased over the years.
TRANSPORTATION

CEMENT INDUSTRY
Outward freight on cement is an important element in the operating cost of a cement plant. It
accounts for around one third of the total variable costs. Most of the cement plants in India
are located in and around the limestone clusters. These clusters are distant from the collieries
and the markets for cement. Cement has an average lead of around 535 km. Thus, cement
companies have to rely on extensive transportation for moving coal from the coal pitheads to
the cement plants and for dispatching cement from the plant to the markets. Both coal and
cement are of low value and bulky in nature, freight costs are considerably high for cement
plants. Cement companies use both road and rail transport to transport cement and to receive
coal. Although rail transportation is more economical for distances beyond 250-300 km,
cement companies have started preferring road transportation even for longer distances
because of insufficient wagon supply to the cement industry. Presently, Rail dispatches
amount for about 33% while roads carry the balance 66%. The balance 1% is accounted by
Sea transportation. The share of road over rail has only gone up over the years. For coal
transportation, the dependence on rail network is still very high and accounts for around 70%
of coal movement.
Over the past 12-15 months freight cost on cement has jumped more than 20%. This was
largely because of the Supreme Court ruling that banned overloading of cement trucks.
Further increasing diesel haven’t helped the cause. This has induced many cement companies
to shift a portion of their cargo to rail. However, with Indian Railways facing shortage of
wagons, we do expect that it will gradually increase freight charges, which in turn could push
up the freight cost again.
RAW MATERIALS
Cement is usually used in mortar or concrete. It is mixed with inert material (called
aggregate), like sand and coarse rock. Portland cement consists of compounds of lime mixed
with oxides like silica, alumina and iron oxide. There are three major raw materials for
cement.
A) LIMESTONE
Limestone is the main raw material and is the source of calcium carbonate. Calcium
carbonate is burnt to obtain calcium oxide (CaO). Limestone is the most abundant source of
CaO. Cement is the biggest limestone user in India accounting for over 75-80% of limestone
produced in India. The composition of limestone used by the various sectors varies. For
cement, the CaO content of limestone should be a minimum of 44%. Typically, 1.4-1.5

CEMENT INDUSTRY
tonnes of limestone are required per tonne of clinker. Thus, for a 1 million tone cement plant,
assured availability of cement grade limestone reserves of the order of 50-60 mt in the close
vicinity is important.
As on 31 March 2006, the country's estimated gross reserves of cement grade limestone stand
at 97430 mn.t. Out of total limestone reserves, over 45% of the inventory of cement grade
limestone is in the Southern region, followed by the Northern region with 21.84%, the
Western region with 12.34% and the Eastern region with 15.82% and rest 3.64% with central
region. Andhra Pradesh has the privilege of possessing about 31% of the country's total
proved equilanet reserves of limestone.
GRAPH 4.8
B) GYPSUM
Gypsum is used as a retarding agent. Ground clinker, on contact with water, tends to set
instantaneously because of the very fast reaction between tri-calcium alluminate and water. In
the presence of gypsum, the desired setting time can be achieved. Gypsum is added to the
extent of 5% during the clinker grinding stage. Gypsum is naturally available in abundance in
Rajasthan, Gujarat and Tamilnadu.
C) GRANULATED BLAST FURNACE SLAG (GBFS)

The other raw materials that are also used in the manufacture of cement are blast furnace slag
(a waste product obtained from iron-smelting furnaces) and flyash (leftover ash from a
thermal power station). Limestone contains about 52% of lime and about 80% of this lime is

CEMENT INDUSTRY
lost during ignition of the raw materials. Similarly, Clay contributes about 57% silica of
which about 25% is lost during ignition.
GBFS is obtained by granulation of slag obtained as a by-product during the manufacture of
steel. It is a complex calcium aluminum silicate and has latent hydraulic properties. That is
why it is used in the manufacture of Portland blast furnace slag cement.
4.9 TECHNOLOGICAL ANALYSIS
Modernization and technology up-gradation is a continuous process for any growing industry
and is equally true for the cement industry. The Indian cement industry today is by and large
comparable to the best in the world in respect of quality standards, fuel & power
consumption, environmental norms, use of latest technology and capacity. The productivity
parameters are now nearing the theoretical bests and alternate means, like alternate fuels and
raw materials have to be found to ensure further improvement in productivity and reduce
production costs.
Cement industry being energy intensive, the energy conservation and alternate cheaper,
renewable and environmentally friendly sources of energy have assumed greater importance
for improving productivity. The major challenges confronting the industry today are raging
insecurity in indigenous fuel availability, perennial constraints like higher ash content, erratic
variations in quality of indigenous coal and inconsistent power supply with unpredicted
power cuts. Keeping these challenges in view, the efforts by the industry towards energy
conservation and finding alternate cheaper, renewable and environmentally friendly sources
of energy are given utmost importance.
Review of Technological Status
Process Profile
The Cement Industry today comprises mostly of Dry Suspension Preheater and Dry-
Precalciner plants and a few old wet process and semi-dry process plants. Till late 70’s the
Cement Industry had a major share of production through the inefficient wet process
technology. The scenario changed to more efficient large size dry process technology since
early eighties. In the year 1950, there were, only 33 kilns out of which 32 were based on wet
process and only one based on semi-dry process. Today, there are 162 kilns in operation out
of which 128 are based on dry process, 26 on wet process and 8 on semi-dry process.

CEMENT INDUSTRY
Kiln Capacity and Size
The economic unit capacity for cement plants in India till early sixties was about 300 TPD. In
mid sixties this was standardized at around 600 TPD for both wet and dry process plants.
About a decade later, i.e. from mid seventies, the new plants installed were of 1200 TPD
capacity. The advent of precalciner technology in mid eighties provided an opportunity to the
industry to modernize and increase the capacity of existing dry process plants, to convert
plants from wet to dry process as well as to set up large capacity plants incorporating the
latest technological advancements. This led to installation of single line kilns of 3000 TPD (1
MTPA) capacity and more. The present trend indicates the preference of still larger kilns of
about 6000 TPD capacity and above. Already there are nine kilns of 8000 tpd capacity in
operation and three kilns of capacity 10000 – 12000 TPD are under installation. The green-
field plants being installed now are based on most advanced and the best available
technology.
Average annual installed capacity per plant in India is about 1.2 MTPA as against more than
2.1 MTPA in Japan. This is due to blend of small and large plants coming up at various
stages and still operating in India as against smaller plants having been decommissioned in
Japan.
Present Status of Technology
A comparison of the status of the modernization in equipment and also the technologies
absorbed or implemented by the Indian cement industry along with status of Global
Technology is as under:

CEMENT INDUSTRY
Low Technology Plants Modern Plants Global Technology

Mining & Conventional Computer aided Computer aided
Material
Handling
Crushing Two stage Single stage In-pit crushing &
conveying
Conveying Dumpers/Ropeway/ Tippers Belt conveyors Pipe conveyors, Belt
of conveyors
Limestone
Grinding Ball Mills with / without VRM’s Roll Presses VRM’s, Roll Presses,
conventional classifier with dynamic Horo Mills with
classifier dynamic classifier
Pyro Wet Dry Dry
Processing Semi Dry - 5/6 stage preheater - 6 stage preheater
Dry - High Efficiency - High Efficiency Cooler
- 4 stage preheater Cooler - Multi Channel Burner
- Conventional cooler - Multi Channel - Co-processing of WDF
- Single channel burner Burner - Co-generation of
power
- Low NOx/SO2
emission technologies
Blending & Batch-Blending Silos Continuous Blending - Continuous Blending
Storage silos - Multi-Chamber Silos
- Dome silos
Packing & Bag - Bag - Bulk
Despatch - Bulk - Palletizing & Shrink
Wrapping
Process Relay Logic / Hard Wired / PLC - DDC - DDC
Control - Fuzzy Logic expert - Neurofuzzy expert
system system
Plant Size, 300-1800 3000-6000 6000-12000
TPD
TABLE 4.3
The directions in which the modernization activities are proceeding are as illustrated below:
Mining

CEMENT INDUSTRY
For rational exploitation of the raw material source, a systematic mine plan is developed by
cement plants. Computer-aided techniques for raw material deposit assessment to arrive at
proper extraction sequence of mining blocks, keeping in view the blending operational
requirements, are envisaged and put to use in number of units.
Crushing
Mobile crushers have come in use in some of the newer plants, keeping in view the split
location of limestone deposits and long conveying distances. The mobile crushing plant is
stationed at the mine itself and raw material is crushed at the recovery site.
Grinding
Vertical Roller Mills (VRM) has given the real breakthrough in the area of grinding. The
VRM draws 20-30 % less electrical energy as compared to the corresponding ball mill
system, apart from its ability to give much higher drying capacity. These mills can accept
larger feed size and hence mostly be used with single stage crushing. VRMs are now being
used in clinker and slag grinding and also as pre-grinder to existing grinding installations.
Another breakthrough that has come with the application of high pressure grinding rolls
(HPGR) has been widely adopted in Indian cement industry. The HPGR is being used as pre-
grinder for upgrading the existing ball mill systems. Such installations could achieve an
increase in capacity upto 200% and savings in power consumption to the extent of 30 to 40%
as compared to ball mills.
High efficiency separators are now widely used for better classification of product and help in
increasing the mill capacity besides reducing the specific power consumption. The new
classifier designs include two stage separation integrating primary and secondary separation.
High efficiency separators are also used now with VRM’s for further improvement in their
performance.
A new mill system called Horizontal roller mill has been developed which is capable of
producing uniform raw meal and have advantages in processing raw materials containing
higher percentage of quartz.
4.10 Fuel Requirements and Alternate Sources of Energy
Fuel

CEMENT INDUSTRY
Coal continues to be the main fuel for the Indian cement industry and will remain so in the
near future as well. The industry is mainly using coal from various coalfields in the country.
It is also procuring coal through open market and direct imports. Lignite from deposits in
Gujarat and Rajasthan is also being used by cement plants. Pet coke has also been
successfully utilized by some cement plants, mainly in Gujarat, Rajasthan and MP, thereby
substituting main fossil and conventional fuel coal upto 100% in some plants. In the recent
past, waste derived fuels including hazardous combustible wastes have also been tried due to
economic pressures in cement manufacturing process owing to tough competition in domestic
and global markets as well as ecological reasons on account of waste disposal and co-
processing in cement rotary kilns being most effective mode of waste treatment.
Use of Industrial Wastes
• Cement plants in India utilized about 19% of flyash generated by power plants and
100% of granulated slag generated by steel plants (year 2005-06), as compared to
almost 100% flyash and 84% of granulated slag in the Japanese cement industry.
• Recycling of Industrial wastes in manufacture of cement is highest in Japan followed
by India.
Use of Alternate Fuels
• Use of hazardous and refuse derived combustibles and Municipal Solid Waste (MSW)
as fuel is common in countries like Canada, EU, Japan and Korea, but regulations do
not yet permit in India.
• CPCB is actively engaged in plant level trials in respect of wastes viz. used tyres,
refinery sludge, paint sludge, Effluent Treatment Plant (ETP) sludge and Toluene Di-
Isocyanite (TDI) tar waste from petroleum industries and in formulation of guidelines
for use of these wastes as fuel by cement industry.
Energy Management

CEMENT INDUSTRY
The industry’s average consumption in 2005-06 was 725 kcal/kg clinker thermal energy and
82 kWh/t cement electrical energy. It is expected that the industry’s average thermal energy
consumption by the end of Year 2011-12 will come down to about 710 kcal/kg clinker and
the average electrical energy consumption will come down to 78 kWh/t cement.
The improvements in energy performance of cement plants in the recent past have been
possible largely due to:
 Retrofitting and adoption of energy efficient equipment

 Better operational control and Optimization
 Upgradation of process control and instrumentation facilities
 Better monitoring and Management Information System
4.11 DEMAND AND SUPPLY SCENARIO OF CEMENT INDUSTRY

DEMAND SOURCES
Cement demand in the country emanates from three major sources viz. Housing Sector
accounts for 60% of total cement demand, infrastructure projects 20% and industrial projects
20%.
GRAPH 4.9
DEMAND FROM RESIDENTIAL HOUSING SECTOR

Housing demand accounts for 60% of total cement demand and 90% of total real estate
demand. Housing demand has supported the cement industry even in times of low
infrastructure or industrial demand.

CEMENT INDUSTRY
The growth in the residential real estate market in India has been largely driven by rising
disposable incomes, a rapidly growing middle class, low interest rates, fiscal incentives on
both interest and principal payments for housing loans and heightened customer expectations,
as well as increased urbanisation and nuclearisation.
A large proportion of the demand for houses, especially in urban centres such as Mumbai,
Bangalore, Delhi (Gurgaon, Noida) and Pune, is likely to come from high-rise residential
buildings. Since this is a fairly new segment, the growth of the highrise segment will be faster
as compared to the growth of the urban housing segment. The reasons for the construction of
high rise apartment buildings are the lack of space in cities and proximity to offices and IT
parks.
 Growth Drivers
o Favourable demography and higher disposable income
o Nuclear families and urbanization
DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTOR

Commercial construction comprises construction of office space, hotels, hospitals, schools,
stadiums etc. In India, most of the investment in this segment is driven by office space
construction. Within office space construction activity, almost 70-75 per cent of the demand
comes from IT/BPO/call centres. The other key demand drivers include banking and financial
services, FMCG and telecom.
This dependency on IT/ITES is expected to continue due to India’s emergence as a preferred
outsourcing destination, despite China and Russia also emerging as strong contenders. The
industrial and commercial sector comprises of all the major industrial set ups, commercial
offices, IT & ITES parks and organized retail formats.
The growth in the sector will translate into substantially higher demand for commercial
space, adding to the overall investment in construction activities. CRIS INFAC, believes the
growth in IT/ITES is likely to translate into construction investments of Rs 148 billion (118
million sq ft) by 2007-08 as compared with investments of Rs 74 billion (61 million sq ft) in
the last 3 years. The investments are based on the manpower/workspace requirement in the
sector.
Retail boom to result in construction investments of Rs 112 billion over the next 5 years
CRIS INFAC, estimates that retail spending in India in fiscal 2005 was Rs. 9.9 trillion, of

CEMENT INDUSTRY
which organised retail accounted for Rs. 349 billion, or approximately 3.5%. The organised
retail segment in India is expected to grow at a rate of 25% to 30% over the next five fiscal
years. The growth of organised retail is expected to be driven by demographic factors,
increasing disposable incomes, changes in shopping habits, the entry of international retailers
into the market and the growing number of retail malls.
CRIS INFAC, believes the current spark in mall construction activity across India will result
in around 105 million sq ft of mall space by 2010. This would translate into construction
investment of Rs 112 billion over the next 5 years.
The increase in disposable incomes, demographic changes (such as the increasing number of
working women, who spend more, the rising number of nuclear families and higher income
levels within the urban population), the change in the perception of branded products, the
growth in retail malls, the entry of international players and the availability of cheap finance
will drive the growth in organized retail.
We expect cement consumption from this sector to register a CAGR of 9-10% driven by
large-scale construction activities.
DEMAND FROM INFRASTRUCTURE SECTOR

The Indian economy is all set to grow at a pace of over 7% in the current fiscal. Increased
emphasis on infrastructure development made it achievable. Infrastructure has been
witnessing extraordinary growth across all sectors such as roads, railways, irrigation, power,
water supply urban infrastructure, ports and airports. However, in order to achieve this kind
of growth on a sustainable basis, a further impetus is required to be given to the Infrastructure
development in the country. GOI, recognizing this fact has planned to spend around Rs. 13.2
trillion on infrastructure development for the next five year.
However, this figure has been revised upwards to Rs.19.2 trillion. Out of total proposed
expenditure, a construction activity are expected to account for more than 50% of total
investment and is expected to be the biggest beneficiary of the surge in infrastructure
investment over the next five years. Planning commission projected that the total spending by
the central government, state government, PSUs and through the Public-Private partnership
(PPP) would be around Rs19.3 trillion ($470 billion) for the next 5 years as against Rs. 7.7
trillion spend during Xth Five Year Plan, a jump of over 150%.
This would imply a construction opportunity of over Rs.11.2 trillion for the next 5 years. In
light of such huge expenditure on construction activities, the demand for cement from
infrastructure sector is expected to grow at a CAGR of 24-25%.

CEMENT INDUSTRY
Overall Demand
Driven by a strong residential housing demand, growing industrial and commercial activities
and the continued momentum in infrastructure investment, the cement consumption is
expected to witness a CAGR of more than 12% in line with the economic growth because of
the strong co-relation with GDP and the increased activity in the construction sector. We
further believe that due to huge expenditure by GOI on infrastructure the proportionate
demand from infrastructure sector will move northwards and we expect the total share of
cement demand from infrastructure to be close to 25% in 2010. However, proportionate
demand from housing sector will move southwards and will come down to around 55% while
remaining 20% will be from commercial sector.
DEMAND-SUPPLY MISMATCH
Though India is the second largest cement manufacturer, it is among the lowest cement
consuming countries. In India per capita cement consumption is 122 kg, which is far below
the world average of approximately 320 kg. Hence, the cement industry has been in a surplus
position since a long time.
There exist regional surplus/shortages in the Indian cement industry. The oversupply is
largely in the Southern and Northern regions. By contrast, there is a supply shortage in
Eastern and Western regions. There is significant inter-regional movement of cement, which
plays a crucial role in the regional demand-supply dynamics. Most of the cement movement
across regions takes place from North to Central (3.35 mt), South to West (5.20 mt), Central
to North (2.45 mt), and Central to East (2.51 mt).

CEMENT INDUSTRY
GRAPH 4.10
4.12 RISK & CONCERNS
1) RISING INPUT COSTS

 POWER & FUEL
Prices and Quantity are regulated and are revised upwards regularly. Further, given
the shortage of energy future de-regulation of coal sector could be a risk factor.
Adding to this, electricity prices are also witnessing pressure.
 TRANSPORTATION COST
Rising fuel cost resulting in higher road and rail transportation cost.
2) Lower than expected growth in demand

Any lower than anticipated cement demand growth will result in overcapacity in the industry,
thereby prices may head southwards. This will significantly affect earnings of cements
manufacturers.

CEMENT INDUSTRY
3) Large scale capacities addition in gulf countries

India’s major cement exporting destination, Middle East, is adding huge cement capacities
that are estimated to be around 70 mtpa. This will significantly affect India’s cement exports
to gulf countries.
4) MRTPC alleges on 14 cement manufacturers

India's trade practices regulator MRTPC had ordered a probe into the business practices of 14
leading cement manufacturers. The companies that are to be investigated include all the big
guns like ACC, Ambuja Cement, India Cement, Ultra tech cement, Grasim and other smaller
players like Sanghi Industries, Birla Corporation, Zuari Cement, Binani Industries, NCL
Industries, Saurashtra Cement and JK Cement. The Director General of Investigation and
Registration (DGIR) which is MRTPC's investigative wing submitted its preliminary report
alleging that these manufacturers colluded to hike cement prices. The companies have time
till October 25 2007 to reply to these charges.
5) Access to Finance
Cement is a capital-intensive industry; Rs.3500/tonne is required for capacity addition.
Cement industry has planned huge capex in the coming years, for which they will require
huge capital. However, rising interest rates have created concern for the industry.

CEMENT INDUSTRY
ACC LIMITED:
ACC Limited is India's foremost manufacturer of cement and concrete. ACC's 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. It has a workforce of about 10,000
persons and a countrywide distribution network of over 9,000 dealers.
Since inception in 1936, the company has been a trendsetter and important benchmark for the
cement industry in many areas of cement and concrete technology. ACC has a unique track
record of innovative research, product development and specialized consultancy services. The
company's various manufacturing units are backed by a central technology support services
centre - the only one of its kind in the Indian cement industry.
ACC has rich experience in mining, being the largest user of limestone. As the largest cement
producer in India, it is one of the biggest customers of the domestic coal industry, of Indian
Railways, and a considerable user of the country’s road transport network services for inward
and outward movement of materials and products.
Among the first companies in India to include commitment to environmental protection as

one of its corporate objectives, the company installed sophisticated pollution control
equipment as far back as 1966, long before pollution control laws came into existence. Today
each of its cement plants has state-of-the art pollution control equipment and devices.
ACC plants, mines and townships visibly demonstrate successful endeavours in quarry
rehabilitation, water management techniques and ‘greening’ activities. The company actively
promotes the use of alternative fuels and raw materials and offers total solutions for waste
management including testing, suggestions for reuse, recycling and co-processing.
ACC has taken purposeful steps in knowledge building. We run two institutes that offer
professional technical courses for engineering graduates and diploma holders which are
relevant to manufacturing sectors such as cement. The main beneficiaries are youth from
remote and backward areas of the country.
ACC has made significant contributions to the nation building process by way of quality
products, services and sharing expertise. Its commitment to sustainable development, its high
ethical standards in business dealings and its on-going efforts in community welfare
programmes have won it acclaim as a responsible corporate citizen. ACC’s brand name is

CEMENT INDUSTRY
synonymous with cement and enjoys a high level of equity in the Indian market. It is the only
cement company that figures in the list of Consumer SuperBrands of India.
CORPORATE GOVERNANCE
The importance of Corporate Governance has always been recognised in ACC. Much before
Corporate Governance guidelines became applicable and mandatory for listed companies;
ACC had systems in place for effective strategic planning and processes, risk management,
human resources development and succession planning. The Audit Committee in ACC was
constituted as far back as in 1986. The Shareholders-Investors Grievance Committee was
formed way back in 1962 and the Compensation Committee was convened since 1993. The
Company’s core values are based on integrity, respect for the law and strict compliance
thereof, emphasis on product quality and a caring spirit. Corporate Governance therefore in
ACC is a way of life.
ACC is a professionally managed Company with a majority of its Directors being

Independent Directors. The Board of Directors has always consisted of persons who are
professionals in their respective fields and with unquestionable integrity and reputation. The
role, responsibility and accountability of the Board of Directors is clearly defined. Members
of the Board have full freedom to express their views on matters placed before them for
deliberation and consideration.
It is the continuous endeavour of the Board of Directors to achieve the highest standards of
Corporate Governance through the adoption of a strategic planning process, succession
planning for attracting, motivating and energizing human resources, identification of major
risks and the way and means to manage such risks, an effective communication policy and
integrity of Company’s internal control systems. The Board of Directors are also constantly
looking at ways and means to ensure that the most effective use is made of the scarce
resources at its disposal and that the management and employees have the freedom to take the
Company forward within the framework of effective accountability.
The Annual Reports, press releases and other communication have always made full
disclosures on various facets of importance to the stakeholders, particularly with regard to
information relating to financial matters, company’s operations/performance, stock
movements etc.

CEMENT INDUSTRY
GUJARAT AMBUJA CEMENTS LTD.
Ambuja Cements Limited, formerly known as Gujarat Ambuja Limited is a major Cement
producing company in India. The Group's principal activity is to manufacture and market
cement and clinker for both domestic and export markets.
The Company also operates a hotel through its subsidiary GGL Hotel and Resort Company. It
has shown innovation in utilizing measures like sea transport, captive power plants, and
imported coal and availing of govt. sops and subsidies to constantly check the costs.
The company has entered into a strategic partnership with Holcim, the second largest cement
manufacturer in the world. Holcim had, in January, bought a 14.8 per cent promoters` stake
in the GACL for INR 21.4 billion.
The Joint Venture between the public sector Gujarat Industrial Investment Corporation
(GIIC) and Narottam Sekhsaria & Associates was the reason for confinement of the
company. The company was incorporated in the year 1981 as Ambuja Cements Pvt Ltd and it
was rehabilitated into a public limited company on 19th March 1983 as Gujarat Ambuja
Cements Ltd, cement production is the role of the company in nature and a cost efficient
cement manufacturer in the country. It is a National Quality ISO 9002 certified company, the
only cement company have this so. It's also the first to receive the same and also have ISO
14000 Certification for environmental systems. The total cement capacity of the company is
18.5 million tonnes (MT), having five cement plants at Ambuja Nagar Gujarat (5 MT),
Darlaghat Himachal Pradesh (6 MT), Upperwahi Maharashtra (2.5 MT), Rabriyawas
Rajasthan (2 MT) and in Chhaattisharh West Bengal (3 MT). It is also having three Bulk
Cement Terminals at Surat with a storage capacity of 15,000 tonnes has bulk cement
unloading facility, Panvel with a storage capacity of 17,500 tonnes has a bulk cement
unloading facility and in Galle 120 kms from Colombo, Sri Lanka. It handles million tonnes
of cement annually. The port terminal of the company Muldwarka Gujarat, all weather port, 8
kms from Ambuja Nagar plant, handles ships with 40,000 DWT. Is also equipped to export
clinker and cement and import coal and furnace oil. A fleet of seven ships with a capacity of
20500 DWT ferry bulk cement to the packaging units.
The company's cement plant was commissioned in 1985, had set up in technical collaboration
with Krupp Polysius, Germany, Bakau Wolf and Fuller KCP. The 12.6 MW diesel-generating
sets were commissioned during the year, which were imported in the year 1988-89. The

CEMENT INDUSTRY
company got necessary approvals for setting up another cement plant with 1 million tonne
capacity per annum at Himachal Pradesh in the year 1991. The Company undertook bulk
cement transportation, by sea, to the major markets of Mumbai, Surat and other deficit zones
on the West Coast. Transportation was to be carried out by three specially designed ships
during the year 1992. During the year 1994, the company's Muller location 1.5 million tonne
cement project with clinkeriation facility at site in H.P and grinding facility both at Suli &
Ropar in Punjab was bespoken. In 1997, Kodinar plant of the company was originated its
commercial production with an enhanced capacity.
Ambuja Cements had set up a $20 million clinker Grinding unit in Sri Lanka in the year
1998. In the year of 2000 cement giants Larsen & Tubro (L&T) and Gujarat Ambuja
Cements entered a unique agreement to reduce transportation costs in dispatching bulk
cement in Gujarat and also in the same year the company has entered into an annual contract
with a Soinhalese firm, Mahaveli Marine Cement, to supply around 2.5 lakh tonnes of
cement. The company has kick started its operations in Sri Lanka with help of a cement
terminal in the port of Galle, in the south of the island country, which was started by the
company. The commercial production of Maratha Cement Works plant of the company was
started in the year 2002, a new 2-million tonne Greenfield cement plant at Chandrapur,
Maharashtra has started its commercial production on June of the year and the merger of
Ambuja Cement Rajasthan with the company was happened in the same year. Again in the
year 2004, the company merged Ambuja Cement Rajasthan with itself.
In the last decade the company has grown tenfold. The first company in India introduced the
concept of bulk cement movement by the sea transport. The company's most distinctive
attribute, however, is its approach to the business. Ambuja follows a unique homegrown
philosophy for successful survival. Ambuja is the most profitable cement company in India,
and one of the lowest cost producers of cement in the world.
The company's most distinctive attribute, however, is its approach to the business. Ambuja
follows a unique homegrown philosophy of giving people the authority to set their own
targets, and the freedom to achieve their goals. This simple vision has created an environment
where there are no limits to excellence, no limits to efficiency, and has proved to be a
powerful engine of growth for the company.
As a result, Ambuja is the most profitable cement company in India, and one of the lowest
cost producer of cement in the world.

CEMENT INDUSTRY
JK CEMENTS
J K Cement Limited (JK Cement) is one of the largest cement manufacturers in Northern
India and also the second largest white cement manufacturer in India by production capacity.
It is an affiliate of the J.K. Organization, which was founded by Lala Kamlapat Singhania in
the year 1994. The Company produces 53-grade, 43-grade and 33-grade Ordinary Portland
Cement (OPC) grey cement, Portland Pozzolana Cement ('PPC') under grey and white
cement. JK Water proof is another product from JK Cements used for flooring, wall
application and other specialized applications. The products are marketed under the brand
names J.K. Cement and Sarvashaktiman for OPC products, J.K. Super for PPC products and
J.K. White and Camel for white cement products.
Jaykaycem Limited became a wholly owned subsidiary of the company in the year 2006 and
acquired land to set up a Greenfield Grey Cement plant at Mudhol, Karnataka. In the year of
2006-07, the company had sanctioned enhancement in working capital Facility (both funded
and non-funded) to Rs. 105 crores from Rs.65 crores. Started all the captive power projects
i.e. 10MW turbine, 20MW Petcoke based Captive Power Plant & Waste Heat Recovery
power plant. The Company had acquired from IDBI the assets of Nihon Nirmaan Ltd at
Gotan during the year 2007, for Rs.42 crores and decided to utilize this facility to produce
Grey cement.
From enhancing the domestic footprint, the company had taken steps to go beyond national
boundaries. Entered into a Memorandum of Understanding (MoU) with Fujairah
Municipality during November of the year 2007 in the United Arab Emirates, through the
subsidiary J K Cement Works (Fujairah) FZC, to set up a 2.25 MTPA grey cement plant to
service the steadily increasing demand in the GCC region. During the year 2007-08, the
company formed a wholly owned subsidiary under the name and style of J.K.Cement
(Fujairah) FZ to undertake the business of cement and investment in the state of UAE. This
Company has formed another subsidiary company under the name and style of J.K.Cement
Works (Fujairah) FZC under which it is proposed to set up a green field cement plant at
Fujairah, UAE. The 10 MW of the Waste Heat Recovery Power Plant of the company was
commissioned at Nimbahera in March of the year 2008.

CEMENT INDUSTRY
Company Strengths
J K Cement enjoys certain vital advantages that have helped them in becoming one of the
leading names in the field of cement manufacturing in India and abroad. First the company
has proximity to huge reserves of premium quality limestone, as essential ingredient for
cement manufacturing. Based on certain studies undertaken, it is estimated that the limestone
reserves of the company are sufficient to support the planned production capacity for
approximately 40 years.
Second the company has an extensive marketing network for grey and white cement both
within and outside India. The company's distribution network for grey cement consist of
more than 40 feeder depots, serviced by seven regional sales office located at Delhi, Haryana,
Uttar Pradesh, Punjab, Gujarat, Madhya Pradesh and Rajasthan. J K cement's white cement
distribution network comprises of 20 feeder depots and 13 regional offices. Besides, the
company also has a total of more than 4000 retail stores, 22 sales promoters and four
handling agents.
J K Cement Production Plants
The company has three major production plants located in the states of Rajasthan and
Gujarat. The first plant of J K Cement was set up in Nimbahera, Rajasthan in the year 1975
with an initial capacity of 0.3 million ton per annum. With the incorporation of newer
technology and modern equipment, the production capacity was enhanced to 2.8 million ton
per annum. The Gotan unit located at Gujarat which manufacturers white cement started
production commercially in 1984 with a production capacity of 0.05 million ton per annum.
Currently the unit has a capacity utilization of around 75% and an operating profit of 30%
consistently. The unit has ISO-9001:2000 QMS, ISO-14001:1998 EMS and OHSAS-
18001:2005 recognition.
J K Cement Products
The major products of J K Cement are grey and white cement. The grey cement produced by
the company Ordinary Portland cement or OPC and Portland Pozzolana Cement or PCC. The
OPC range of products has three grades which are differentiated by their compressive
strength, they consist of 43-grade, 53-grade and 33-grade OPC. The cement products are
marketed and sold under the brand names of J.K. Cement and Sarvashaktiman for OPC

CEMENT INDUSTRY
products, J.K. Super for PPC products and J.K. White and Camel for white cement products.
Some other products manufactured by the company consist of:
 J K Wall Putty
 Grey Cement
 J K White Cement
 J K Water Proof
J K Cement's manufacturing unit at Nimbahera was chosen by the World Bank and the
Danish International Development Agency as one of the four training centers in India to serve
as the Regional Training Center in North India. The operation of the training center gives the
company access to state of art training aids, live working models, and technical expertise
developed by well known national and international cement producers.

CEMENT INDUSTRY
ULTRATECH CEMENT LIMITED
UltraTech Cement Limited, a Grasim subsidiary was incorporated in 24th August 2000 as
L&T Cement Limited, has an annual capacity of 17 million tonnes. It manufactures and
markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland
Pozzolana Cement. As part of the eighth biggest cement manufacturer in the world,
UltraTech Cement has five integrated plants, five grinding units as well as three terminals of
its own (one overseas, in Colombo, Sri Lanka). All the plants have ISO 9001 certification,
and all but one have ISO 14001 certification, while two of the plants have already received
OSHAS 18001 certification. The export market comprises of countries around the Indian
Ocean, Africa, Europe and the Middle East. Export is a thrust area in the company's strategy
for growth.
The Grasim acquired 10 per cent stake in L&T in the year of 2001. During the same year the
Durgapur grinding unit was came to existence. The Company bagged Indo-German
Greentech Environment Excellence Award from the Greentech Foundation, New Delhi
during the period of 2000-2001. The value of stake increased to 15.3 per cent by October
2002. The Grasim Board approved an open offer for purchase of up to 20 per cent of the
equity shares of Larsen & Toubro Ltd (L&T) during the year 2002, in accordance with the
provisions and guidelines issued by the Securities & Exchange Board of India (SEBI)
Regulations, 1997. Again the Grasim increased its stake in L&T to 14.15 per cent in 2002
and the Arakkonam grinding unit was started.
During the year 2003, the board of Larsen & Toubro Ltd (L&T) decided to demerger of its
cement business into a separate cement company (CemCo). Grasim decided to acquire an 8.5
per cent equity stake from L&T and then made an open offer for 30 per cent of the equity of
CemCo, to acquire management control of the company. The Company received State and
Zonal level I prize for overall performance in Mines safety 2003-2004 Energy efficient unit
award from CII. In 2004, L&T completed the implementation process to demerger of the
cement business and the Grasim also completed open offer, with the latter acquiring
controlling stake in the newly formed company UltraTech.
Grasim acquired management control in July 2004 and the name of the company was
changed to UltraTech Cement Limited with in 14th October 2004. The Company enhanced
its capacity utilisation across its plants. Cement is an energy intensive industry with coal and

CEMENT INDUSTRY
power being the major cost contributors. Use of alternative fuels auctioned, while over
Rs.600 crores has been committed for the installation of captive power plants throughout the
year 2004-05. Narmada Cement Company Limited (NCCL) was amalgamated with the
company in May of the year 2006.
With an eye on the growing Ready Mix Concrete business, the Company has commenced
setting up Ready Mix Concrete plants in various places in the country during the year 2007.
The Captive Power Plants being set up at your Company's Units in Andhra Pradesh,
Chattisgarh and Gujarat, are on track. It may be to go on stream between FY08 and FY09.
UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTechCeylinco (P) Limited.
As part of the eighth biggest cement manufacturer in the world, UltraTech Cement has five
integrated plants, five grinding units as well as three terminals of its own (one overseas, in
Colombo, Sri Lanka). These facilities gradually came up over the years, as indicated below:
2006
:: Narmada Cement Company Limited amalgamated with UltraTech pursuant to a Scheme
of Amalgamation being approved by the Board for Industrial & Financial Reconstruction
(BIFR) in terms of the provision of Sick Industrial Companies Act (Special Provisions)
2004
:: Completion of the implementation process to demerge the cement business of L&T and
completion of open offer by Grasim, with the latter acquiring controlling stake in the
newly formed company UltraTech
2003
:: The board of Larsen & Toubro Ltd (L&T) decides to demerge its cement business into a
separate cement company (CemCo). Grasim decides to acquire an 8.5 per cent equity
stake from L&T and then make an open offer for 30 per cent of the equity of CemCo, to
acquire management control of the company.
INDIA CEMENTS

CEMENT INDUSTRY
The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar
in Tamilnadu in 1949. Since then it has grown in stature to seven plants spread over
Tamilnadu and Andhra Pradesh. The capacities as on March 2002 have increased multifold to
9 million tons per annum.
The Founders
Shri Sankaralinga Iyer was a pioneer of heavy industry in the South. Primarily a banker, he
ventured into the field of industry with a rare devotion and confidence with the prime
objective of developing major industries in the state. With his banking experience and interest
in exploring the mineral potential of South India, he went ahead boldly with his scheme of
building a cement plant in the vicinity of Thalaiyuthu, where extensive deposits of limestone
were assuredly available. Shri Sankaralinga Iyer with his energy and drive gave the cement
project a realistic form and content.
Company Highlights
 The Company is the largest producer of cement in South India.
 The Company's plants are well spread with three in Tamilnadu and four in Andhra
Pradesh which cater to all major markets in South India and Maharashtra.
 The Company is the market leader with a market share of 28% in the South. It aims to
achieve a 35% market share in the near future. The Company has access to huge
limestone resources and plans to expand capacity by de-bottlenecking and
optimisation of existing plants as well as by acquisitions.
 The Company has a strong distribution network with over 10,000 stockists of whom
25% are dedicated.
 The Company has well established brands- Sankar Super Power, Coromandel Super
Power and Raasi Super Power.
 Regional offices in all southern states and Maharasthra offices/representative in every

district.
6.1 ACC LIMITED:

CEMENT INDUSTRY
RATIOS Year Year 2008 Year 2007

2009
ROE (%)
29.36 26.08 35.12
ROA
CURRENT RATIO
0.78 0.88 0.93
DEBT-EQUITY RATIO
0.10 0.09 0.17
INTEREST COVERAGE RATIO
22.93 39.20 24.28
DEBTORS TURNOVER RATIO
33.96 27.47 31.19
INVENTORY TURNOVER RATIO
11.10 10.80 11.58
FIXED ASSETS TURNOVER
RATIO 1.38 1.46 1.53
P/E RATIO
10.68 7.81 14.00
TABLE 6.1
ANALYSIS:
RETURN ON EQUITY RATIO
The ROE of the company decreased considerably from 2007 to 2008. This shows that
company is unable to satisfy its shareholders by proper utilization of funds. The ratio
increased in the financial year 2009. This means that the company was in a better position to
satisfy its shareholders compared to the previous financial year 2008.
CURRENT RATIO
The current ratio in 2007 was 0.93 and it gradually decreased to 0.88 in 2008 and 0.78 in
2009. Since the ideal ratio is 2:1 so it signifies that the company is in a better position to pay
the current debts with a margin of safety in current assets.
DEBT-EQUITY RATIO:

CEMENT INDUSTRY
In 2007, the debt equity ratio was 0.16 and by 2008 it was 0.08 and by 2009 it is 0.10. So the
debt equity ratio shows a decrease in the financial year 2008. This shows that the company’s
debt is decreasing, thereby making the company unfavourable in the view of the lenders i.e.
the amount of debt used effectively by the company is declining from 2007 to 2008. But in
the FY 2009, we can see that this ratio has increased to 0.10.
INTEREST COVERAGE RATIO:
In 2007, the interest coverage ratio is 24.28 which increased to 39.20 in 2008. This means
that the company’s debt burden got decreased to a great extent. But in 2009 it got decreased
to 22.93. In the FY 2009, the company’s performance declined considerably and the company
is not generating enough profit to pay the interest to the debts. Consequently, the financial
position of the company is growing weak.
DEBTORS TURNOVER RATIO:
The debtor’s turnover ratio was 31.19 in 2007 and it decreased to 27.47 by the financial year
2008 and then it again increased to 33.96 in the FY 2009. As we know that the debtors
turnover ratio explains the number of times the debtors turned over a period of a financial
year. Thus, by looking at the ratio in the FY 2009 we can say that the efficiency of
management of debtors of the firm is growing high in comparison to the previous years.
INVENTORY TURNOVER RATIO:
The inventory turnover ratio was 11.58 in 2007, 10.80 in 2008 and then a slight increase to
11.10 in 2009. The inventory turnover ratio measures the velocity of conversion of stock into
sales. In the FY 2007, the firm was managing its inventories efficiently which was then
reduced in the FY 2008. But again in FY 2009 the company is able to control its inventories.
FIXED ASSETS TURNOVER:
This ratio indicates the company’s ability to generate net sales revenue from fixed assets of
the company, such as property, building and other equipments. The higher the ratio, the better
it is for the company.
The above table indicates that the fixed assets turnover ratio of 1.53 in 2007 declined to 1.46
in the FY 2008 and consequently declined to 1.38 in the FY 2009 which shows the
company’s inability to generate revenue from fixed assets in the consequent years of its

CEMENT INDUSTRY
operations. The company, thus, has to utilise its fixed assets in order to maintain efficiency in
revenue generation.
PRICE/EARNINGS RATIO:
Higher the P/E ratio, the more the market is willing to pay for each rupee of annual earnings.
Companies with high P/E ratios are more likely to be considered “risky” investments than
those with low P/E ratios, since a high P/E ratio signifies high expectation.
From the above table, we know that the ratio has decreased considerably from the FY 2007 to
the FY 2008. The reason for this decline was the economic downturn in the FY 2008. But in
the FY 2009, the company recorded a rise in the ratio i.e. from 7.81 to 10.68 meaning that the
company was in a better position as compared to the previous year.

CEMENT INDUSTRY
AMBUJA CEMENTS LIMITED:
RATIOS Year 2009 Year 2008 Year 2007
ROE 20.04 22.72 29.02
ROA 0.156784 0.19387 0.316693
CURRENT RATIO 1.06 1.15 1.05
DEBT-EQUITY RATIO 0.04 0.06 0.15
INTEREST COVERAGE RATIO 67.16 37.33 26.14
DEBTORS TURNOVER RATIO 40.98 38.22 54.29
AVERAGE COLLECTION PERIOD 8.91 9.55 6.72
INVENTORY TURNOVER RATIO 9.52 9.31 12.92
INVENTORY TURNOVER PERIOD 38.34 39.21 28.25
FIXED ASSETS TURNOVER RATIO 1.29 1.29 1.31
P/E RATIO 13.66 7.88 13.32
TABLE 6.2
ANALYSIS:
RETURN ON EQUITY
Return on equity is net profits to equity share capital. The ratio is decreasing each year which
shows the company is unable to increase profits in accordance to the increase in shareholders’
funds.
RETURN ON ASSETS
It is always said that higher the ratio the better it is. When looking at the previous three years
ROA has been decreasing. The reason for this is that the operating profit has been decreasing
continuously though there has been increase in the total assets for past three years.
CURRENT RATIO

CEMENT INDUSTRY
The current ratio of company, though declining from the year 2008, but it is still able to
sustain the ratio above 1, which shows company is able to pay its liabilities. If the ratio slips
down below 1, then company may face problems to pay its liabilities. The liabilities of the
company are increasing every year, so company should take measures to reduce liabilities.
DEBT-EQUITY RATIO
The debt equity ratio shows a positive trend for FY’07, FY’08 & FY’09. The ratio also
below 1 for all the three years, which reflects company’s dependence on the debt finance, is
very low. The main reason behind decrease in ratio is, increase in total shareholders’ funds.
The majority of financing of the company is done by equity, and at the same time risk factor
is also reducing because they don’t have to pay interest to the debenture holders.
Interest coverage ratio shows how much revenue is being earned in relation to its finance
cost. Ambuja Cements were unable to decrease the coverage period but on the contrary
coverage period increased every year, which is not a healthy sign for company’s growth.
The debtors’ turnover ratio indicates the efficiency of the company to collect debts. The
efficiency of the company decreased in FY’08 & it increased in FY’09. This shows the
company’s efficiency was increasing but due to economic downturn in FY’08, company’s
efficiency declined.
AVERAGE COLLECTION PERIOD
In 2009, the ratio has gone down which shows that the collection period has become more
powerful and company is able to collect its money from debtors more efficiently when
compared to the previous year where it was 9 days.
The ratio shows how many times a company's stock is sold and replaced over a period of
time. There is a difference in the percentage of ratio for FY’08 as compared to FY’07, but the
ratio increased in FY’09. A low turnover implies poor sales and, therefore, excess inventory.
The net sales of the company increased considerably in the year 2009. So, accordingly there
was an increase in the inventory turnover.

CEMENT INDUSTRY
INVENTORY TURNOVER PERIOD
The ratio has gone down which shows that demand for the product in the market has
increased which is a good sign for the company.
FIXED ASSETS TURNOVER RATIO
the company, such as property, building and other equipments. A higher fixed asset turnover
ratio shows that the company has been more effective in utilizing the revenue invested in
fixed assets for generating net sales.
The above table indicates that the change in the fixed assets turnover from FY’07 to FY’08
was just .02 but there was no decrease in FY’09 as compared to FY’08. So the utilization of
fixed assets in FY’09 was same as compared to FY’08.
P/E RATIO
From the data above, we can see that in 2009 the ratio has increased significantly because of
the increase in market price and earnings per share which is good for the company.
JK CEMENTS

CEMENT INDUSTRY

2009
ROE 0.16 0.34 0.34
AVERAGE COLLECTION PERIOD 11 11 10
FIXED ASSETS TURNOVER 1.77 2.15 2.24

RATIO
P/E RATIO 2.01 4.40 5.80
TABLE 6.3
ANALYSIS
The ROE of the company was same for the year 2007 and 2008 and it was at 0.34. But it has
declined in the year 2009 and came to 0.16. The decline may be due to the economic
slowdown which has affected almost all the companies.
CURRENT RATIO
Net working capital should always be positive. In short, the higher the net working capital,
the greater is the degree of overall short-term liquidity. Means current ratio indicates the
liquidity of the enterprise. Min. Expected even for a new unit in India is 1.33:1 therefore we
can see that the ratios in all the years are well over 1.33 which ensures us that the company is
in a good condition and has ample liquidity.

CEMENT INDUSTRY
The interest coverage ratio was 15.77 in 2007 which rose to 16.15 in 2008 so this proves that
the company’s debt burden got decreased to some extent. But in 2009 it decreased to 14.97.
The performance of the company got declined in 2009 and the company’s debt burden was
increasing.
DEBT EQUITY RATIO
Debt equity ratio should not exceed 3:1 and it has not in the case of JK Cements. This means
that the company has fewer debts which is good for the company. There is a sharp
deterioration in this ratio so; we have to be on guard, as the financial risk for the company
increases to that extent.
The debtor’s turnover ratio is increasing in from the past three years as it can be seen from
the table. It was at 28.25 in 2007 and it increased to 30.36 in 2008 and then it gradually
increased to 34.02 in 2009. The debtor’s turnover ratio is growing higher which implies that
the efficiency of the company is increasing.
AVERAGE COLLECTION PERIOD:
In 2007 the debtor’s velocity was only 10 days, but there was an increase of 1 day i.e. it
became 11 days in the year 2008 and remained the same in 2009, which is good for the
company.
This should not be less than 9:1 and should if possible be higher and we can see that the
ratios are well above 9 which clearly state that the company is doing good and is in a good
condition and has converted its inventory into sales in a very efficient manner.
In 2007, the fixed assets turnover was 2.24, but it decreased to 2.15 in 2008. It again declined
to 1.77 in 2009. As the company’s fixed asset was increasing year on year hence its turnover
was decreasing and also sales were not increasing in the same proportion.
P/E RATIO

CEMENT INDUSTRY
The P/E ratio is gradually declining for all the 3 years i.e. from 5.80 in 2007 to 4.40 in 2008
and then to 2.01 in 2009. This shows that the performance of the company is declining and
the management should look into the causes that have resulted into the fall of this ratio.
ULTRATECH CEMENT LIMITED

CEMENT INDUSTRY

2009
ROE 0.27 0.37 0.44
ROA 0.17 0.23 0.23
AVERAGE COLLECTION PERIOD 10 9 9
INVENTORY TURNOVER PERIOD 31 days 19 days 25 days
FIXED ASSETS TURNOVER 1.16 1.29 1.17

RATIO
P/E RATIO 7.1 9.74 12.37
TABLE 6.4
ANALYSIS
The ROE of the company decreased each year from 2007 to 2009. This shows that company
is unable to satisfy its shareholders by proper utilization of funds. The decline in return on
equity ratio in FY’09 was comparatively higher than that of FY’08 because economic
downturn also affected the profits of the company.
RETURN ON ASSETS RATIO

CEMENT INDUSTRY
In 2008, the assets and the profit of the company increased showing a consistent return of
0.23 as in 2007. But by 2009 it got declined to 0.17. Since there is a tremendous increase in
total assets, the return on assets got declined.
CURRENT RATIO
The current ratio in 2007 is 0.7 and it gradually decreased to 0.65 in 2008 and 0.61 in 2009.
Since the ideal ratio is 2:1 so it signifies that the company is in comfort to pay the current
debts with a margin of safety for possible in current assets.
DEBT-EQUITY RATIO:
In 2007, the debt equity ratio was 1.08 and by 2008 it was 0.74 and by 2009 it is 0.62. So the
debt equity ratio is decreasing constantly and it shows that the company’s debt is decreasing,
and so the company is not in a favourable position in the view point of the lenders i.e. the
amount of debt used effectively by the company is declining from 2007 to 2009.
In 2007, the interest coverage ratio is 14.43 which raised to 19.31 in 2008 so this proves that
the company’s debt burden got decreased to some extent and by 2009 it got decreased to
11.84. So the company’s performance got declined by 2009 and the company’s debt burden is
increasing i.e the company is not generating enough profit to pay the interest to the debts and
the financial position of the company is growing weak.
The debtor’s turnover ratio was 30.8 in 2007 and it slightly increased to 31.42 by 2008 and
then it gradually increased to 35.55 by 2009. Generally debtors turnover ratio explains the
number of times the debtors turned over a period of a financial year. The debtors turnover
ratio is growing higher which implies that the efficiency of management of debtors of the
firm is growing high when compared to the previous years.
AVERAGE COLLECTION PERIOD:

CEMENT INDUSTRY
In 2007 and 2009 the debtors velocity was only 9 days and it was favourable to the company
and the bargaining power of the company was high when compared to 2009 were the debtors
velocity was 10 days.
INVENTORY TURNOVER RATIO:
The inventory turnover ratio was 14.43 in 2007 and it got gradually increased to 19.31 in
2008 and then a steep decrease to 11.84 in 2009. Generally the inventory turnover ratio
measures the velocity of conversion of stock into sales. Here from 2007 to 2008 the firm was
managing efficiently the inventories and by 2009 the company is overstocking the finished
goods intended for sale.
The fixed assets turnover was 1.17 in 2007 and it is increased to 1.29 by 2008 and by 2009 it
got declined to 1.16. In 2008 there is a decrease in fixed assets and so the turnover gradually
increased because the company effectively utilised the fixed assets while 1n 2009 the
company had increased the fixed assets to 50% than the previous year but the sales revenue
was not in tandem with the increase in fixed assets so the fixed assets turnover got declined to
1.54.
PRICE/EARNINGS RATIO:
The P/E ratio is gradually declining for all the 3 years i.e. from 12.37 in 2009 to 9.74 in 2008
and then to 7.1 in 2007. This shows that the performance of the company is declining and the
management should look into the causes that have resulted into the fall of this ratio.
INDIA CEMENTS LIMITED

CEMENT INDUSTRY
RATIOS Year 2009 Year 2008 Year 2007
ROE 0.14 0.20 0.21
ROA 0.135 0.185 0.15
DEBT EQUITY RATIO 0.68 0.96 1.55
AVERAGE COLLECTION PERIOD (days) 34 32 36
FIXED ASSETS TURNOVER RATIO 0.89 1.01 1
TAX BURDEN RATIO 0.67 0.75 0
P/E RATIO 8.34 10.51 9.66

TABLE 6.5
ANALYSIS
Return on equity is net profits to equity share capital. The ratio is decreasing each year which
shows the company is unable to increase profits in accordance to the increase in shareholders’
funds.
RETURN ON ASSETS RATIO
Though in FY’08 there is an increase in net income of the company but in FY’09 there is a
decline on the net income so that also affects the ROA, because lesser the income there will
be lesser rate of return on assets and also shows company inefficiency in utilization of assets.
CURRENT RATIO
The current assets of the company increased by 25% in the FY’08 but still there was decline
the current ratio because of increase in its liabilities by 127%. In FY’09 the assets decreased
by 1% but the liabilities increased by 17%, so there is a decline in current ratio. The current
ratio of company, though declining every year from the year 2007, but it is still able to

CEMENT INDUSTRY
sustain the ratio above 1, which shows company is able to pay its liabilities. If the ratio slips
down below 1, then company may face problems to pay its liabilities. The liabilities of the
company are increasing every year, so company should take measures to reduce liabilities.
DEBT EQUITY RATIO
The debt equity ratio shows a positive trend for FY’07, FY’08 & FY’09. The ratio also slips
below 1, which reflects company’s dependence on the debt finance has decreased. The main
reason behind decrease in ratio is, increase in total shareholders’ funds. The majority of
financing of the company is done by equity, and at the same time risk factor is also reducing
because they don’t have to pay interest to the debenture holders. The increase in
shareholders’ funds in FY’08 was about 50% while in the FY’09 it was only 15%, so the
decrease in ratio in FY’09 was comparatively low.
Interest coverage ratio shows how much revenue is being earned in relation to its finance
cost. India cements were unable to decrease the coverage period but on the contrary
coverage period increased in the FY’08. But in the FY’09 the coverage period decreased to
7.49 from 8.6 which show a healthy sign for company’s growth.
DEBTOR’S TURNOVER RATIO
The debtors’ turnover ratio indicates the efficiency of the company to collect debts. The
efficiency of the company increased in FY’08 by 19.27% & it decreased in FY’09 by 7.15%.
This shows the company’s efficiency was increasing but due to economic downturn in
FY’09, company’s efficiency declined.
The average collection period of the company reduced from 36 days to 32 days in FY’08.
This indicates the improvement in liquidity of the company. The average collection period of
the company increased in the year 2009 by 5%. But the trend has not deviated and the change
is nominal.
The ratio shows how many times a company's stock is sold and replaced over a period of
time. There is a slight difference in the percentage of ratio for FY’08, but the ratio decreased

CEMENT INDUSTRY
by 14% in FY’09. A low turnover implies poor sales and, therefore, excess inventory. The
net sales of the company increased considerably in the year 2008. So, accordingly there was
an increase in the inventory turnover. In the FY’09 there was increase in net sales but the
increase in inventory was also considerably higher due to which the ratio decreased to 10.35
from 11.87.
FIXED ASSETS TURNOVER RATIO
the company, such as property, building and other equipments. A higher fixed asset turnover
ratio shows that the company has been more effective in utilizing the revenue invested in
fixed assets for generating net sales. The above table indicates that the change in the fixed
assets turnover from FY’07 to FY’08 was just .01 but there was a decrease in FY’09. So the
utilization of fixed assets in FY’09 was lower as compared to FY’07 & FY’08.
TAX BURDEN RATIO
There is no tax paid by the company in FY’07 because during the previous year company
made a loss of 262.53crores. In FY’07 company had a profit of 46.57crores so company paid
tax of 14.8crores in FY’08. The tax paid by the company substantially increased in the year
2009, because there was a major rise in the profits of the company in FY’08.
P/E RATIO
The dividend paid by the company in the year 2007 was 26.04crores. The dividend given by
the company in the year 2008 was 56.37crores which is 116% higher than the latter year. So
the share prices also increased. Though in the year 2009 the dividend paid by the company
was at par, the share prices tumbled down because of economic downturn in the country.
7.1 INTERCOMPANY ANALYSIS:
RETURN ON EQUITY
Return on shareholder’s equity is calculated to see the profitability of owner’s investment.

The shareholder’s equity or net worth will include paid – up share capital, share premium and

CEMENT INDUSTRY
reserves and surplus less accumulated losses. ROE indicates how well the firm has used the
resources of owners. Industry Aggr. = 0.24
COMPANY ROE
ACC ltd 0.267
Ambuja Cements ltd 0.188
J K Cements ltd 0.157
Ultratech Cement ltd 0.27
India Cements ltd 0.14
TABLE 7.1
ROE
0.3
0.25
0.2
0.15
0.1
0.05
0
ACC Ambuja J K Cements UltraTech India Cements
GRAPH 7.1
It is always said that higher the ROE is better for the company and when looked at the
investors point of view. When compared with the industry average only ACC ltd and
Ultratech Cement ltd is performing well. But in case of Ambuja Cements ltd this decrease is
because of the decrease in profit after tax in the year 2009 when compared with the year
2008, though there was increase in sales in 2009. Similar is the case with both the other
companies. This was because to keep up with the competition in the market the three
companies had to reduce their prices by increasig the sales.
RETURN ON ASSETS
It shows how profitable a company’s assets are in generating revenue. It gives an indication
of the capital intensity of the company. Industry Aggr. = 0.178
COMPANY ROA

CEMENT INDUSTRY
ACC ltd 0.188

UltraTech Cement ltd 0.17
TABLE 7.2
ROA
0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
GRAPH 7.2
Here we can see that only ACC ltd could go in par with the industry average. And UltraTech
is in close range with the industry average. Whereas in case other three companies though
their total assets has been increasin gyear after year there was decrease in operating profit in
the year 2009 when compared with 2008. Hence we can say as per investors point of view
companies ACC ltd and UltraTech Cement ltd are the best companies to invest right now out
of all the five companies.
CURRENT RATIO
Current ratio indicates the extent to which a company can pay back its current and short term
liabilities using its current assets. It is merely an index. Industry Aggr. = 0.85
COMPANY CURRENT RATIO

ACC LTD 0.78

CEMENT INDUSTRY

TABLE 7.3
CURRENT RATIO
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
GRAPH 7.3
The current ratio of companies ACC ltd and UltraTech Cement ltd is below the industry
average that is because the current assets of the companies has gone down when compared to
previous year, i.e., 2008. But for the other companies it is above the industry average. Even
having higher current ratio is not good for the company.
DEBT-EQUITY RATIO
Debt – Equity ratio indicates the component of debt to the component of equity of a
company. Higher the ratio, higher is the debt for the company and vice versa. It is merely an
index. Industry Aggr. = 1.60
COMPANY D/E RATIO

ACC LTD 0.1

CEMENT INDUSTRY

TABLE 7.4
D/E RATIO
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Category 1 Ambuja J K Cements UltraTech India Cements
GRAPH 7.4
Here we can see that the debt – equity ratio is less than the industry average which is good for
the company as the percentage of debt component with respect to increase in percentage of
equity component is decreasing for all the companies when compared with the previous year.
But one point what needs to be taken into consieration is tax component as we know that
debt acts as a tax shield to the company.
Interest Coverage ratio indicates the number of times interest is covered by the profits
available to pay interest charges. It is an index of the financial strength of an enterprise. It is
merely an index. Industry Aggr. = 6.29
COMPANY INTEREST COVERAGE RATIO

ACC LTD 22.93

CEMENT INDUSTRY

TABLE 7.5
Interest Coverage Ratio
70
60
50
40
30
20
10
0
Category 1 Ambuja J K Cements UltraTech India Cements
GRAPH 7.5
When comparing with the industry average, all the companies are having a higher interest
coverage ratio. This shows that all the five companies are having enough cash to payoff their
interests. ACC and Ambuja are having almost three and ten times more than the industry
avrage respectively. This shows that the financial strength of both the companies. That is why
both are still the major two players in this sector.
This indicates the efficiency of collection of receivables and contributes to the liquidity of the
system. but this depends upon so many factors such as, type of industry like capital goods,
consumer goods – capital goods, this would be less and consumer goods, this would be
significantly higher. Conditions of the market – monopolistic or competitive – monopolistic,
this would be higher and competitive it would be less as you are forced to give credit.
Whether new enterprise or established – new enterprise would be required to give higher
credit in the initial stages while an existing business would have a more fixed credit policy
evolved over the years of business. Industry Aggr. = 29.57

CEMENT INDUSTRY
COMPANY DEBTORS TURNOVER RATIO

ACC LTD 33.96
TABLE 7.6
Debtors Turnover Ratio
45
40
35
30
25
20
15
10
5
0
GRAPH 7.6
This basically shows the quality of debtors the company holds. Except India cements the
debtors turnover ratio is higher for all the companies when compared with the industry
average. This indicates the speed with which debtors repay back their debt to the company.
When looking at ratios of all the companies the speed with which their debotrs repay back
their debt is high.
Average collection period is inversely related to debtors’ turnover ratio. Formula for average
collection period = 360/receivables turnover ratio. Industry aggr. = 13
COMPANY AVERAGE COLLECTION PERIOD

ACC LTD 11
Ambuja Cements ltd 9
J K Cements ltd 11
UltraTech Cement ltd 10
India Cements ltd 34
TABLE 7.7

CEMENT INDUSTRY
Average Collection Period
35
30
25
20
15
10
0
GRAPH 7.7
This basically shows the number of days the debtors takes to pay back their debt. Except
India Cements ltd all the other four companies reduced the number of days when compared
with the industry average, i.e., 13 days. Out of which Ambuja brouth down their average
collectio period to 9 days w.r.t industry. This also depends on each company’s policies.
Inventory Turnover ratio is a measure of how efficiently a company is able to manage its
inventory and how it impacts the revenue for the firm. It is merely an index.
Industry Aggr. = 10.94
COMPANY INVENTORY TURNOVER RATIO

ACC LTD 11.1
Ambuja Cement ltd 9.52
TABLE 7.8

CEMENT INDUSTRY
Inventory Turnover Ratio
16
14
12
10
0
ACC Ambuja J K Cements UltraTech India cements
GRAPH 7.8
This shows how efficiently the company could turnover the inventory into sales. Ambuja and
India Cements are having inventory turnover ratio less than the industry average which is
10.94. While other three companies ACC, J K cements, and UltraTech Cement ltd are having
ratios greater than the industry average which shows that these three companies are able to
efficiently manage their inventories.
FIXED ASSET TURNOVER RATIO
Fixed Asset Turnover ratio indicates how well a company utilizes its fixed assets in
generating the revenue. It is merely an index. Industry Aggr. = 1.06
COMPANY FIXED ASSET TURNOVER RATIO

ACC LTD 1.38
TABLE 7.9

CEMENT INDUSTRY
Fixed Asset Turnover Ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
ACC Ambuja J K Cements UltraTech
GRAPH 7.9
All the four cement companies except India Cements ltd fixed turnover ratio is higher
comopared to the industry average. In case of India cements ltd fixed turnover ratio is 0.89,
i.e., 16% decrease when compared with the industry average. This shows that India Cements
is not able to utilize their fixed assets efficiently. Whle comparing beetween the other four
companies J K Cements ltd is having higher ratio of 1.77 which shows how efficiently the
company is utilizing their fixed assets.
PRICE – EARNING RATIO
This indicates investor’s judgement or expectations about the firm’s performance. This shows
the relationship between market value of the share and the EPS. The higher the PE the
stronger is the recommendation to sell the share and the lower the PE, the stronger is the
recommendation to buy the share.
COMPANY P/E RATIO

ACC LTD 10.68
TABLE 7.10

CEMENT INDUSTRY
P/E RATIO
14
12
10
0
GRAPH 7.10
For the investors to get a higher return on the shares they have actually invested, is better to
sell when the P/E ratio is high and buy when it is less. We can see that ACC, Ambuja and
India Cementsltd are having a higher P/E ratio when compared with other two, i.e., J K
Cements and UltraTech Cement ltd. It is now the best time to buy the shares of J K Cements
and UltraTech Cement ltd as their performance when compared to last year is increasing.
And hence the P/E ratio will increase in the near future.
7.2 TREND ANALYSIS
PROFITABILITY TREND
Profitability gives us the earnings available to the investors and owners of the company after
taking into account all the expenses incurred during the business operations. Profitability is
calculated as:
Profitability (%) = Profit after Tax (PAT) / Net Sales
The trend in terms of percentage in profit of the companies are considered and analyzed over
the period of study.

CEMENT INDUSTRY
ACC LTD:
2009 2008 2007

Net Sales 7942.66 7165.79 6880.66
PAT 1606.73 1212.79 1438.59
Profitability Trend (%) 20.22912 16.92472 20.90773
TABLE 7.11
PROFITABILITY TREND
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2007 2008 2009
GRAPH 7.11
AMBUJA CEMENTS LTD:
2009 2008 2007

Net Sales 7040.7 6167.71 5597.91
PAT 1218.37 1402.27 1769.1
TABLE 7.12

CEMENT INDUSTRY
Profitability Trend
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2007 2008 2009
GRAPH 7.12
J K CEMENTS LTD:
2009 2008 2007

Net Sales 1664.42 1595.56 1343.64
PAT 142.34 265.17 178.62
TABLE 7.13
Profitability Trend
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2007 2008 2009
GRAPH 7.13
ULTRATECH CEMENT LTD:

CEMENT INDUSTRY
2009 2008 2007

Net Sales 6385.5 5511.99 4908.74
PAT 977.02 1007.61 782.28
TABLE 7.14
Profitability Trend
19
18
17
16
15
14
13
2007 2008 2009
GRAPH 7.14
INDIA CEMENTS LTD:
2009 2008 2007

Net Sales 3358.34 3044.25 2255.21
PAT 432.18 637.54 478.83
TABLE 7.15

CEMENT INDUSTRY
Profitability Trend
25
20
15
10
0
2007 2008 2009
GRAPH 7.15
If we look at all the five companies, we can see that ACC ltd is performing well in
comparison with other four companies. There is an increase in profitability trend when
compared with the profits in the year 2009 and 2008. Whereas there is a decrease in
profitability trend for all the other four companies when compared with the profits in the year
2009 and 2008.
In House R&D:
This ratio provides an insight to the company’s interest in developing new technology.
R&D Focus (%) = R&D Expense / Net Sales
ACC Ltd:
2009 2008 2007

CEMENT INDUSTRY
R & D Expenses 3.25 3.29 3.05

Net Sales 7942.66 7165.79 6880.66
R & D Focus (%) 0.040918 0.045913 0.044327
TABLE 7.16
R & D Focus
0.05
0.05
0.05
0.04
0.04
0.04
0.04
0.04
0.04
0.04
2007 2008 2009
GRAPH 7.16
Ambuja Cement Ltd:
2009 2007 2008

R & D Expenses 1.29 0.25 0.24
Net Sales 7040.7 6167.71 5597.91
R & D Focus (%) 0.018322 0.004053 0.004287
TABLE 7.17
R & D Focus
0.02
0.02
0.02
0.01
0.01
0.01
0.01
0.01
0
0
0
2007 2008 2009
GRAPH 7.17

CEMENT INDUSTRY
If we look at the above two graphs we can see that both ACC and Ambuja cements gives
importance to R&D. For the last three years Ambuja cements has been constantly spending
more money on R&D of the company whereas ACC reduced their R&D expenses in 2009
compared to the last year ,i.e., 2008.
When we look at other companies, i.e., UltraTech cement ltd., India cements ltd, J K cements
ltd they doesn’t focus towards the R&D of their company and hence their R&D Expense is
zero.
GROWTH ANALYSIS
The growth of the companies in a particular industry is calculated and analyzed on the basis
of the industries sales growth rate, i.e., compounded annual growth rate (CAGR).
Sn = S0 (1 + r) n
Where,
Sn = Net Sales during Year n or the last year considered for analysis.
S0 = Net Sales during Year 0 or the starting year considered for analysis.
r = Compounded Annual Growth Rate.
n = Number of years the company is analyzed
ACC Ltd:
For the year, 2009 – 20.11%
2008 – 25.74%
2007 – 29.37%

CEMENT INDUSTRY
GROWTH ANALYSIS
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2007 2008 2009
GRAPH 7.18
Ambuja Cements Ltd:
For the year, 2009 – 22.06%
2008 – 24.13%
2007 – 29.16%
GROWTH ANALYSIS
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2007 2008 2009
GRAPH 7.19
J K Cements Ltd:
For the year, 2009 – 36.21%
2008 – 45.61%
2007 – 55.85%

CEMENT INDUSTRY
GROWTH ANALYSIS
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2007 2008 2009
GRAPH 7.20
UltraTech Cement ltd:
For the year, 2009 – 19.65%
2008 – 20.61%
2007 – 23.53%
GROWTH ANALYSIS
24.00%
23.00%
22.00%
21.00%
20.00%
19.00%
18.00%
17.00%
2007 2008 2009
GRAPH 7.21
India Cements ltd:
For the year, 2009 – 23.64%
2008 – 27.22%
2007 – 24.73%

CEMENT INDUSTRY
GROWTH ANALYSIS
28.00%
27.00%
26.00%
25.00%
24.00%
23.00%
22.00%
21.00%
2007 2008 2009
GRAPH 7.22
If we look at the growth of each company under the cement industry which is taken into
consideration for the analysis, there is a decline in the percentage in growth. Though there is
always an increase in sales for each company every year but the change in percentage of sales
for a particular year compared to the previous year is always less.
8.1 FINDINGS & RECOMMENDATIONS
During FY09, the industry maintained volume growth of around 10% YoY. The industry
added nearly 30 MT in FY09 over the previous year taking the total capacity to nearly 212
MTPA. India owing to its locational advantage has been catering to the cement requirements
of the Middle East and the South East Asian nations. However, the exports were curtailed in

CEMENT INDUSTRY
FY09 in order to satisfy the domestic demand and contain inflation. While demand growth
stood at 10% YoY, average industry cement realizations (average of price per bag of cement)
were higher by about 5% YoY. The growth in realizations slowed down as additional
capacities coming on stream eased the supply pressures.
The overheated real estate sector has cooled off now. Considering the financial turmoil
witnessed globally, financial institutions have tightened their credit norms. This cautious
stance has led to a credit crunch and the same has impacted upcoming projects. On account of
general economic slowdown and these issues, the demand for cement has moderated.
However, stimulus packages announced by the government and agricultural income gave a
fillip to the demand for the commodity.
The industry volumes and realizations were higher during FY09 that boosted top line growth.
However, cost of operation did also witnessed northward movement that exerted pressure on
margins. The cement industry on an average maintains two months inventory of fuel and such
costs. The crude prices have only started cooling off November 2008 onwards, the benefit of
which should start flowing in starting quarter ended March 2009 onwards. Smooth supply of
state grid power is another problem. To ensure smooth functioning of plants and lower costs,
industry has opted to set up captive power plants based on coal. This has resulted in increase
in demand for coal. But coal linkages for the industry are poor. Recently the ratio has
dropped below 50%. So the players either have to purchase it from open market or import it.
This has increased cost of operation. The industry had lined up huge capex plans with that
depreciation costs have moved up. All of this dented profitability.
8.2 FUTURE OUTLOOK
Despite apprehensions about the impact of inflation and a slowdown in industrial production
and overall economic scenario, the outlook for the cement sector remains positive in respect
of growth in demand in the foreseeable future. Infrastructure and housing are still moving

CEMENT INDUSTRY
apace. However what is of concern to the industry are staggering rise in input costs and
pressures to cap selling prices at the same time. Unless the industry is able to recover cost
increases, through suitable adjustments in selling prices through rational economic
considerations, the cement industry will be under pressure.
Buoyed by the strong demand from realty and infrastructure companies in India, cement
companies have embarked on massive expansion plans for the coming years. India’s cement
industry is expanding capacity to meet increasing demand. The industry plans to invest
around Rs 50,000 crore in order to increase production from 198 MTPA to about 275 MTPA
over next two to three years.
These capacities, according to such announcements, are expected to be commissioned over

three-year period and may create an imbalance in demand and supply, resulting in impact on
realization.
A large number of foreign players are also expected to enter the cement sector in the next 10
years, owing to the profit margins, constant demand, and right valuation. Consolidation of the
cement sector too will take place and cement plants producing less than 1 million tonnes will
find it difficult to survive in this market. Cement companies will go for global listings either
through the FCCB route or the GDR routes.
The industry experts project the sector to grow by 9 to 10% for the current financial year
provided India's GDP grows at 7%. With help from the government in terms of friendlier
laws, lower taxation, and more infrastructure spending, the sector will grow and will take
India’s economy forward along with it.
8.3 CONCLUSION
In the present scenario of hectic competition it has been seen that the biggest player in the
market remains big and does not allow other companies to rise. The cement industry is
expected to grow steadily in 2009-2010 and increase capacity by another 50 million tons in

CEMENT INDUSTRY
spite of the recession and decrease in demand from the housing sector. In the analysis it has
been seen that the ACC LTD is over shadowing all other companies in terms of performance.
During Financial year 2007 inflationary conditions enabled all to perform well and generate
profits resulting in boom in share prices. In 2008 all companies underperformed
comparatively due to economic downturn. During this period investors have an opportunity
to gain by paying lower prices for shares and receiving high dividends in future. The effect of
recession in 2008 could be seen in the year 2009 where the growth of the company has been
decreased. But now slowly all the companies are picking up. So recommendations to other
companies will include increasing their customer base and decrease their cost of productions
and improve their performance with respect to credit sales, financial prudence and capacity
utilization.
REFERENCES
http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/Cement.htm
http://www.ibef.org/industry/cement.aspx

CEMENT INDUSTRY
http://business.mapsofindia.com/cement/
http://www.icra.in/Files/PDF/SpecialComments/2010-January-Cement-Industry.pdf
http://india.mapsofindia.com/indian-economy/major-economic-sectors.html
http://capitaline.com/
http://www.jkcement.com/
http://www.indiacements.co.in/
http://www.ultratechcement.com/
http://www.gujaratambuja.com/
http://www.acclimited.com/
http://www.thaindian.com/newsportal/business/manufacturing-sector-is-indias-largest-
employer-census_10054253.html
http://www.rrfinance.com/Research/Fundamental%20Research/Cement%20Industry.html
http://www.emt-india.net/cement_code/2007/Chapter_2.html
http://www.equitymaster.com/research-it/sector-info/cement/
http://www.tradechakra.com/indian-economy/industries/cement-industry.html

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CEMENT INDUSTRY

ALLIANCE BUSINESS SCHOOL Page 1

ALLIANCE BUSINESS SCHOOL Page 2

1.1 SECTOR ANALYSIS

ALLIANCE BUSINESS SCHOOL Page 3

ALLIANCE BUSINESS SCHOOL Page 4

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1.2 Contribution of Manufacturing Sector towards the Indian Economy

“Retail and manufacturing establishments continue to be the key employment providers in

Following are some of the key census findings:

 100.90 million People employed in 41.83 establishments in India.

ALLIANCE BUSINESS SCHOOL Page 6

 39.61 million Establishments under private ownership.

ALLIANCE BUSINESS SCHOOL Page 7

2.1 INDUSTRY BACKGROUND

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Period of Restriction (1969-1982)

Partial Control (1982-1989)

ALLIANCE BUSINESS SCHOOL Page 9

2.2 CURRENT SCENARIO

ALLIANCE BUSINESS SCHOOL Page 10

2.3 Consumption Growth during 2008-09

Growth in Cement Demand

Figures in Million Tonnes

Domestic Consumption 178 100

Year-on-Year Growth (%) 8.4 12.5

Source: Cement Manufacturers Association (CMA), ICRA Research

ALLIANCE BUSINESS SCHOOL Page 11

2.4 Key Drivers of Cement Industry

 Buoyant real estate market

 Increase in infrastructure spending

 Various governmental programmes like National Rural Employment Guarantee

2.5 Globalization of Indian Cement Industry

Globalization of Indian Cement Industry includes several foreign companies engaging in

 Heidelberg Cement - Indorama Cement Ltd. Heidelberg Cement Company entered

ALLIANCE BUSINESS SCHOOL Page 12

 Holcim Cement - Gujarat Ambuja Cements (GACL) Holcim Cement signed an

ALLIANCE BUSINESS SCHOOL Page 13

2.6 STRUCTURE OF THE INDIAN CEMENT INDUSTRY

 It is a fragmented industry. There are 56 cement companies in India, operating 124

ALLIANCE BUSINESS SCHOOL Page 14

3.1 OBJECTIVES OF THE STUDY

• To analyze the evolution of cement industry.

• To compare the global market with Indian cement industry.

3.2 METHODOLOGY OF THE STUDY

• Secondary information is obtained by the medium of internet, journals, articles and

3.3 SOURCES OF DATA

ALLIANCE BUSINESS SCHOOL Page 15

3.4 LIMITATIONS OF THE STUDY:

 The study is limited to the top five cement companies in India.

ALLIANCE BUSINESS SCHOOL Page 16

4.1 SWOT ANALYSIS

Demand-Supply gap, overcapacity: The capacity additions distort the demand-supply

Increasing cost of production due to increase in coal prices.

Increase in infrastructure projects: Infrastructure accounts for 35% of cement consumption

ALLIANCE BUSINESS SCHOOL Page 17

Excess overcapacity can hurt margins, as well as prices.

ALLIANCE BUSINESS SCHOOL Page 18

4.2 PORTER’S FIVE FORCES

ALLIANCE BUSINESS SCHOOL Page 19

4.3 CONCENTRATION RATIO:

4.3.1Herfindahl-Hirschman Index (HHI)

The formula for this index is:

 A HHI index below 0.1 (or 1,000) indicates an unconcentrated index.