Cement Industry in India

And
Its Contribution to Indian GDP
 Inputs by:

 Kunal Ramesh Khandagale

 MMS 1st year
 Roll No. 9126
 Div A
 Oriental Institute of Management Studies
Introduction

 Cement industry, in any country, plays a major role in the growth of the
nation.

 India is the second largest producer of cement after China.

 Total production capacity is of 151.2 million tonnes (MT).

 Due to boost in various infrastructure projects, housing facilities and road

networks, the cement industry in India is currently growing at an enviable
pace.

 Cement production in India would rise to 236.16 MT in FY11 and is

expected to rise to 262.61 MT in FY12.
Industry Background

 First unit was setup in Kolkata in 1889.

 But the industry started getting the organized shape in the early
1900s.
 India Cement Company Ltd. was established in 1914 with production
capacity of around 10,000 tonnes.
 World War I gave a major impetus for the industry in India.
 Price and distribution control system in the year 1956 was established
to ensure fair price model for consumers as well as manufacturers.
 Later a three tier pricing system was introduced in the industry for
cement produced in high, medium and low cost plants
Industry Background (Contd.)

 Earlier this industry was under full control of Government of India.

 Deregulated after the economic reforms
 But government interference, especially in the pricing, is still evident
in India.
 India falls in the list of lowest per capita consumption of cement with
125 kg.
 But a fast developing country like India, potential for this sector is
phenomenal.
 Around 20 companies dominate 70% production of cement in India.
FII’s Investment in Cement Sector

Company FII stake as on FII stake as on

Dec 31, 2009 Mar 31, 2010
(in %) (in %)
Prism Cement 2.10 4.43
Shree Cement 4.17 4.87
Ultratech 4.83 10.93
ACC 11.08 12.56
Ambuja 22.91 24.14
India Cements 27.48 27.70
(Source: BSE)
Cement Production and Growth

 Domestic demand plays a major role in the growth of the sector

 Demand has surpassed economic growth rate in India.
 Consumption is expected to rise more than 22% in 2009-10
 Production grew at the rate of 9.1% against the total production of 147.8
MT during 2006-07
 During October 2009, production was 12.37 Mt as compared to 11.61
MT in the same month previous year.
 Companies have seen a net profit growth of 85%
 Cement Industry has contributed almost 8% to India’s economic
development
Cement Dispatches

2008-09 2007-08
(Apr-Oct) (Apr-Oct)
 Industry has successfully
(in MT) in MT
maintained almost total
capacity utilization.
Production 101.04 95.05
 Maintained a growth rate of
10% yoy. Dispatches 100.24 94.33
(Excluding
Export)
 In 2006-07, the total dispatch Export 1.46 2.16
was 155 MT, which rose up to
170 MT in 2007-08. Capacity 85 93
Utilization
(%)
Major Players In Cement Industry

Company Productio Installed Company Production Installed

n Capacity Capacity
ACC 17902 18640 India 8434 8810
Cements

Gujrat 15094 14860 JK Group 6174 6680

Ambuja

Ultratech 13707 17000 Jaypee 6316 6531

Group

Grasim 14649 14115 Century 6636 6300

Role of Cement Industry in India's GDP
Role of Cement Industry in India GDP-
Facts

 The infrastructure development of the country in the recent years is

the demand driver for the cement industry

 The Indian Cement Industry is experiencing the entry of many foreign

players in the Indian market

 The average monthly capacity utilization during the year 2006-07 was
94%

 The cement dispatches in the year 2006-07 was 155 million tonnes

 The growth of the cement sector pertaining to the total output was
10% in 2006-07
Role of Cement Industry in India GDP-
Production

 India ranks second in the production of cement in the world

 The growth rate of the production of cement during the year 2006-07
was 9.1%
 The export of the cement in the year 2006-07 was 9.3 million tonnes
 The cement industry in India constitutes of 365 small cement
manufacturing units and 130 large cement manufacturing units
 The total installed capability of the cement manufacturing is 165
million tonnes per year
 The large manufacturing units accounts for 94% of the total output of
cement
SWOT Analysis of the sector.
SWOT Analysis of the sector.

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 labor.
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.
SWOT Analysis of the sector.

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

supply equilibrium in the industry thereby affecting profitability.
 Increasing cost of production due to increase in coal prices.
 High Interest rates on housing: The re-pricing of the interest rates in the last
four years from 7% to 12% has resulted in the slowdown in residential property
market.
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.
SWOT Analysis of the sector.

 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.
SWOT Analysis of the sector.

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.
Conclusion

 Naturally, cement industry is the part and parcel of constructional

activities.

 With out this industry’s share, the economic growth of the country
cannot be too good, because it is the second largest industry after iron
and steel. The Indian

 Cement industry has an increased capacity of over five times in the last
two decades, there by supporting a three-fold growth in per capita
consumption, with the satisfactory available capacity which is more
than the demand.