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Cherry Sweesty, Machine Operator at cosmot nigeria limited if you dont

mind... please can you guide me on how to write a report on prediction of machine
capacity in manufacturing industry( case study Nigeria cement industry).. am a final
year student of nnamdi azikiwe university, Nigeria,studying industrial/production
engineering.. i will be very grateful if u can grant me that... 11 months ago Reply
Are you sure you want toYesNo
Your message goes here
Cherry Sweesty, Machine Operator at cosmot nigeria limited am

speechless....... you are the boss.. i love this 11 months ago Reply
Vishal Bhandari Thanks bro :* 1 year ago Reply

yellapragada srinivasa rao, quality control manager at national cement

company ltd this details are very useful for process engineers and very good 1 year
ago Reply
Nikita Chamria thanx its really helpful. 2 years ago Reply

Swati Sweet itsrealt a good report by naveen u yakkundi 2 years ago Reply
chetan1706 Very Very Interesting and deep research report 2 years ago Reply
arushi0007 Awesome report 2 years ago Reply

Deepakbhoj11 gd report 2 years ago Reply

hclcdc123 Excellent..and very helping report 2 years ago Reply

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Indian cement industry report Document Transcript

1. 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
Chinas 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 demandsupply 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. 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. 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. 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, 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
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 Indias 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 2005.39.61 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 sectors 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.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. 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 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 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
Tonnes2008-09Apr-Nov 09Domestic Consumption178100Year-on-Year Growth
(%)8.412.5 Source: Cement Manufacturers Association (CMA), ICRA
Research TABLE 2.1 2.4 Key Drivers of Cement Industry Buoyant
real estate market Increase in infrastructure spending Various
governmental programmes like National Rural Employment Guarantee Lowcost 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 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 Franais, 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 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 its
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.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. 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.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 demandsupply 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. 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. 4.2
PORTERS FIVE FORCES 4.3 CONCENTRATION RATIO: 4.3.1HerfindahlHirschman 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 MAJOR PLAYERS IN THE NORTH: TOTAL
SALES for the year 2009 = Rs. 33589.02 Cr Name of the CompanyNet Sales in
Cr. (2009)Percentage (%)ACC7,942.6623.64659642Ambuja
Cem.7,040.7020.96131414Birla Corpn.1,790.195.329688095J K
Cements1,664.424.955250257JK Lakshmi Cem.1,223.903.643750249Shree
Cement2,716.468.08734521UltraTech Cem.6,385.5019.0106767 TABLE
4.1 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 Name of thecompanyNet Sales inCr.
(2009)Percentage (%)Andhra Cements369.363.278534281Chettinad
Cement1,137.6710.09825129Dalmia Cement1,758.6815.61049564India
Cements3,358.3429.8094889Madras Cement2,530.9022.46491881Rain
Commodities1,111.019.861610277zuari Cements438.723.894191466 TABLE
4.2 lefttopGRAPH 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 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):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 nonsaponifibale 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). 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 750C.
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 1,450-1,500C. 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. 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 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. 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 worlds 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. GRAPH 4.5 GRAPH 4.6 4.8 COST
ANALYSIS 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 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 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 havent
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. LIMESTONELimestone 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 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 GYPSUMGypsum 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. 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 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 70s 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. 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: Low Technology Plants Modern Plants
Global Technology Mining & Material Handling Conventional Computer aided
Computer aided Crushing Two stage Single stage In-pit crushing & conveying
Conveying of Limestone Dumpers/Ropeway/ Tippers Belt conveyors Pipe conveyors,
Belt conveyors Grinding Ball Mills with / without conventional classifier VRMs Roll
Presses with dynamic classifier VRMs, Roll Presses, Horo Mills with dynamic
classifier Pyro Processing Wet Semi Dry Dry - 4 stage preheater - Conventional
cooler - Single channel burner Dry - 5/6 stage preheater - High Efficiency Cooler Multi Channel Burner Dry - 6 stage preheater - High Efficiency Cooler - Multi Channel
Burner - Co-processing of WDF - Co-generation of power - Low NOx/SO2 emission
technologies Blending & Storage Batch-Blending Silos Continuous Blending silos Continuous Blending - Multi-Chamber Silos - Dome silos Packing & Despatch Bag Bag - Bulk - Bulk - Palletizing & Shrink Wrapping Process Control Relay Logic / Hard
Wired / PLC - DDC - Fuzzy Logic expert system - DDC - Neurofuzzy expert system
Plant Size, TPD 300-1800 3000-6000 6000-12000 TABLE 4.3 The
directions in which the modernization activities are proceeding are as illustrated
below: Mining 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 VRMs 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 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 The industrys average consumption in 2005-06 was 725
kcal/kg clinker thermal energy and 82 kWh/t cement electrical energy. It is expected
that the industrys 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. 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 DriversFavourable demography and higher disposable incomeNuclear
families and urbanizationDEMAND 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 Indias
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 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),
e 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%. 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). GRAPH 4.10 4.12 RISK & CONCERNS Rising input costsPOWER & FUELPrices 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 COSTRising
fuel cost resulting in higher road and rail transportation cost.Lower than expected
growth in demandAny 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. Large scale capacities
addition in gulf countriesIndias major cement exporting destination, Middle East, is
adding huge cement capacities that are estimated to be around 70 mtpa. This will
significantly affect Indias cement exports to gulf countries. MRTPC alleges on
14 cement manufacturersIndia'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. Access to FinanceCement 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. 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 countrys 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. ACCs brand name is 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 Companys 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 Companys 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,
companys operations/performance, stock movements etc. 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
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. 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. 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, ISO14001:1998 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, 53grade and 33-grade OPC. The cement products are marketed and sold under the
brand names of J.K. Cement and Sarvashaktiman for OPC 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. 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 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. UltraTechs
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 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: RATIOSYear
2009 Year 2008 Year 2007 ROE (%)29.3626.0835.12ROACURRENT
RATIO0.780.880.93DEBT-EQUITY RATIO0.100.090.17INTEREST COVERAGE
RATIO22.9339.2024.28DEBTORS TURNOVER RATIO33.9627.4731.19INVENTORY
TURNOVER RATIO11.1010.8011.58FIXED ASSETS TURNOVER RATIO1.381.461.53P/E
RATIO10.687.8114.00 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: 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 companys 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
companys debt burden got decreased to a great extent. But in 2009 it got
decreased to 22.93. In the FY 2009, the companys 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 debtors 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
companys 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 companys inability to generate revenue from
fixed assets in the consequent years of its 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. AMBUJA
CEMENTS LIMITED: RATIOSYear 2009 Year 2008 Year 2007
ROE20.0422.7229.02ROA0.1567840.193870.316693CURRENT
RATIO1.061.151.05DEBT-EQUITY RATIO0.040.060.15INTEREST COVERAGE
RATIO67.1637.3326.14DEBTORS TURNOVER RATIO40.9838.2254.29AVERAGE
COLLECTION PERIOD8.919.556.72INVENTORY TURNOVER
RATIO9.529.3112.92INVENTORY TURNOVER PERIOD38.3439.2128.25FIXED ASSETS
TURNOVER RATIO1.291.291.31P/E RATIO13.667.8813.32 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 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 FY07, FY08 & FY09. The ratio also below 1
for all the three years, which reflects companys 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 dont have to pay
interest to the debenture holders. INTEREST COVERAGE RATIO 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
companys growth. DEBTORS TURNOVER RATIO The debtors turnover
ratio indicates the efficiency of the company to collect debts. The efficiency of the
company decreased in FY08 & it increased in FY09. This shows the companys
efficiency was increasing but due to economic downturn in FY08, companys
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. INVENTORY TURNOVER
RATIO 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
FY08 as compared to FY07, but the ratio increased in FY09. 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. 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 This
ratio indicates the companys ability to generate net sales revenue from fixed
assets of 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 FY07 to
FY08 was just .02 but there was no decrease in FY09 as compared to FY08. So the
utilization of fixed assets in FY09 was same as compared to FY08. 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 RATIOSYear 2009 Year 2008 Year
2007 ROE0.160.340.34CURRENT RATIO1.791.661.87DEBT-EQUITY
RATIO0.640.841.31INTEREST COVERAGE RATIO5.287.776.15DEBTORS TURNOVER
RATIO34.0230.3628.25AVERAGE COLLECTION PERIOD111110INVENTORY TURNOVER
RATIO14.9716.1515.77FIXED ASSETS TURNOVER RATIO1.772.152.24P/E
RATIO2.014.405.80 TABLE 6.3 ANALYSIS RETURN ON EQUITY
RATIO 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. INTEREST COVERAGE RATIO: The interest coverage ratio was 15.77 in 2007 which rose to 16.15 in 2008 so this
proves that the companys 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 companys 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. DEBTORS TURNOVER RATIO: The
debtors 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 debtors turnover ratio is growing higher
which implies that the efficiency of the company is increasing. AVERAGE
COLLECTION PERIOD: In 2007 the debtors 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. INVENTORY
TURNOVER RATIO 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. FIXED ASSETS TURNOVER: 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 companys 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 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 RATIOSYear 2009 Year 2008 Year 2007
ROE0.270.370.44ROA0.170.230.23CURRENT RATIO0.610.650.7DEBT-EQUITY
RATIO0.620.741.08INTEREST COVERAGE RATIO11.8419.3114.43DEBTORS
TURNOVER RATIO35.5531.4230.8AVERAGE COLLECTION PERIOD1099INVENTORY
TURNOVER RATIO11.8419.3114.43INVENTORY TURNOVER PERIOD31 days19 days25
daysFIXED ASSETS TURNOVER RATIO1.161.291.17P/E RATIO7.19.7412.37 TABLE 6.4 ANALYSIS RETURN ON EQUITY RATIO 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 FY09 was comparatively higher than that of FY08 because
economic downturn also affected the profits of the company. RETURN ON
ASSETS RATIO 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 companys 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. INTEREST COVERAGE RATIO: In 2007, the interest
coverage ratio is 14.43 which raised to 19.31 in 2008 so this proves that the
companys debt burden got decreased to some extent and by 2009 it got decreased
to 11.84. So the companys performance got declined by 2009 and the companys
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. DEBTORS TURNOVER RATIO: The debtors 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: 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. FIXED ASSETS TURNOVER: 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 RATIOSYear 2009Year
2008Year 2007ROE0.140.200.21ROA0.1350.1850.15CURRENT
RATIO1.421.882.20DEBT EQUITY RATIO0.680.961.55INTEREST COVERAGE
RATIO7.498.694.28DEBTORS TURNOVER RATIO11.5512.4410.43AVERAGE
COLLECTION PERIOD (days)343236INVENTORY TURNOVER
RATIO10.3511.8711.29FIXED ASSETS TURNOVER RATIO0.891.011TAX BURDEN
RATIO0.670.750P/E RATIO8.3410.519.66 TABLE 6.5 ANALYSIS RETURN ON EQUITY RATIO 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 FY08 there is an increase in net income of the
company but in FY09 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 FY08 but still
there was decline the current ratio because of increase in its liabilities by 127%. In
FY09 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 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 FY07, FY08 &
FY09. The ratio also slips below 1, which reflects companys 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 dont have to
pay interest to the debenture holders. The increase in shareholders funds in FY08
was about 50% while in the FY09 it was only 15%, so the decrease in ratio in FY09
was comparatively low. INTEREST COVERAGE RATIO 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 FY08. But in the FY09 the coverage period decreased to
7.49 from 8.6 which show a healthy sign for companys growth. DEBTORS
TURNOVER RATIO The debtors turnover ratio indicates the efficiency of the
company to collect debts. The efficiency of the company increased in FY08 by
19.27% & it decreased in FY09 by 7.15%. This shows the companys efficiency was
increasing but due to economic downturn in FY09, companys efficiency
declined. AVERAGE COLLECTION PERIOD The average collection period
of the company reduced from 36 days to 32 days in FY08. 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. INVENTORY TURNOVER RATIO 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 FY08, but the ratio
decreased by 14% in FY09. 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 FY09 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 This ratio indicates the companys ability to generate net
sales revenue from fixed assets of 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 FY07 to FY08 was just .01 but there was a decrease in FY09. So the
utilization of fixed assets in FY09 was lower as compared to FY07 & FY08. TAX BURDEN RATIO There is no tax paid by the company in FY07 because
during the previous year company made a loss of 262.53crores. In FY07 company
had a profit of 46.57crores so company paid tax of 14.8crores in FY08. 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 FY08. 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 shareholders equity is calculated to see the
profitability of owners investment. The shareholders equity or net worth will
include paid up share capital, share premium and reserves and surplus less
accumulated losses. ROE indicates how well the firm has used the resources of
owners. Industry Aggr. = 0.24 COMPANYROEACC ltd0.267Ambuja Cements
ltd0.188J K Cements ltd0.157Ultratech Cement ltd0.27India Cements ltd0.14 TABLE 7.1 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 companys assets are in generating revenue. It gives an
indication of the capital intensity of the company. Industry Aggr. = 0.178 COMPANYROAACC ltd0.188Ambuja Cements ltd0.16J K Cements ltd0.121UltraTech
Cement ltd0.17India Cements ltd0.135 TABLE 7.2 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 COMPANYCURRENT RATIOACC LTD0.78Ambuja
Cements ltd1.06J K Cements ltd1.79UltraTech Cement ltd0.61India Cements
ltd1.42 TABLE 7.3 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 COMPANYD/E RATIOACC LTD0.1Ambuja
Cements ltd0.04J K Cements ltd0.64UltraTech Cement ltd0.62India Cements
ltd0.68 TABLE 7.4 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 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 COMPANYINTEREST COVERAGE RATIOACC LTD22.93Ambuja Cements
ltd67.16J K Cements ltd5.28UltraTech Cement ltd11.84India Cements ltd7.49 TABLE 7.5 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. DEBTORS TURNOVER RATIO 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 COMPANYDEBTORS
TURNOVER RATIOACC LTD33.96Ambuja Cements ltd34.02J K Cements
ltd40.98UltraTech Cement ltd35.55India Cements ltd11.55 TABLE 7.6 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 Average collection period is inversely
related to debtors turnover ratio. Formula for average collection period =
360/receivables turnover ratio. Industry aggr. = 13 COMPANYAVERAGE
COLLECTION PERIODACC LTD11Ambuja Cements ltd9J K Cements ltd11UltraTech
Cement ltd10India Cements ltd34 TABLE 7.7 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 companys policies. INVENTORY TURNOVER RATIO 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 COMPANYINVENTORY TURNOVER RATIOACC
LTD11.1Ambuja Cement ltd9.52J K Cements ltd14.97UltraTech Cement ltd11.84India
Cements ltd10.35 TABLE 7.8 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 COMPANYFIXED ASSET TURNOVER RATIOACC LTD1.38Ambuja Cements ltd1.29J K
Cements ltd1.77UltraTech Cement ltd1.16India Cements ltd0.89 TABLE 7.9 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 investors
judgement or expectations about the firms 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. COMPANYP/E RATIOACC
LTD10.68Ambuja Cements ltd13.66J K Cements ltd2.01UltraTech Cement ltd7.1India
Cements ltd8.34 TABLE 7.10 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. ACC LTD: 200920082007Net
Sales7942.667165.796880.66PAT1606.731212.791438.59Profitability Trend
(%)20.2291216.9247220.90773 TABLE 7.11 GRAPH 7.11 Ambuja
Cements Ltd: 200920082007Net
(%)17.3046722.7356731.60287 TABLE 7.12 GRAPH 7.12 J K
(%)8.55192816.6192413.29374 TABLE 7.13 GRAPH 7.13 UltraTech
Cement Ltd: 200920082007Net
(%)15.300618.2803315.93647 TABLE 7.14 GRAPH 7.14 India
(%)12.8688620.9424321.23217 TABLE 7.15 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 companys interest in developing new technology. R&D Focus
(%) = R&D Expense / Net Sales ACC Ltd: 200920082007R & D
Expenses3.253.293.05Net Sales7942.667165.796880.66R & D Focus

(%)0.0409180.0459130.044327 TABLE 7.16 GRAPH 7.16 Ambuja
Cement Ltd: 200920072008R & D Expenses1.290.250.24Net
Sales7040.76167.715597.91R & D Focus (%)0.0183220.0040530.004287 TABLE 7.17 GRAPH 7.17 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 doesnt 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 analyzedACC Ltd: For the year, 2009 20.11% 2008
25.74% 2007 29.37% GRAPH 7.18 Ambuja Cements Ltd: For the year, 2009 22.06% 2008 24.13% 2007 29.16% GRAPH 7.19 J K Cements Ltd: For the year, 2009 36.21% 
2008 45.61% 2007 55.85% GRAPH 7.20 UltraTech Cement
ltd: For the year, 2009 19.65% 2008 20.61% 2007
23.53% GRAPH 7.21 India Cements ltd: For the year, 2009
23.64% 2008 27.22% 2007 24.73% 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 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 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. Indias 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 Indias 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 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
e 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/industrialsectors/Cement.htm http://www.ibef.org/industry/cement.aspx http://business.mapsofindia.com/cement/ http://www.icra.in/Files/PDF/SpecialComments/2010-January-CementIndustry.pdf http://india.mapsofindia.com/indian-economy/major-economicsectors.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-indiaslargest-employer-census_10054253.html http://www.rrfinance.com/Research/Fundamental%20Research/Cement
%20Industry.html http://www.emtindia.net/cement_code/2007/Chapter_2.html http://www.equitymaster.com/research-it/sector-info/cement/ http://www.tradechakra.com/indian-economy/industries/cementindustry.html 
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