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In the race to become the most economic superpower, China has generally outperformed India, and with exception of telecom & IT, India has had trouble slaying the Chinese dragon. But now we can add another sector to the Indian success story, i.e., Cement. In last ten years, this sector has recorded a CAGR of 8%, against the world cement industry average of 3.5% and China’s cement industry growth rate of 7.2%. Today this industry not only outshines that of developed countries such as US and Japan but also has become the second largest cement producer in the world after China.
The cement industry has continued its growth trajectory over the past ten years. Domestic cement demand growth has surpassed the economic growth rate for the past three years. Cement demand in the country grows at roughly 1.5 times the GDP growth rate. The industry had a turnover of around US$ 7.8 billion in 2003-04 and according to CRISIL is expected to grow at a CAGR of around 7 per cent in the next five years. The key drivers for cement demand are real estate sector, infrastructure and industry expansion projects. Among these real estate sector is the key driver of cement demand. The demand for cement is closely related to the growth in the construction sector. Consequently, cement demand has been posting a healthy growth rate of around 8 per cent since 1997-98, propelled by the increased thrust on infrastructure development, and the higher demand from the housing sector and industrial projects. Cement is bulky commodity and cannot be easily transported over long distances making it a regional market place, with the nation being divided into five regions. Each region is characterized by its own demand-supply dynamics. Over the past few years the cost of cement production has grown at a CAGR of 8.4%. With increase in infrastructure development activity with projects such as state and national highways, and global demand has led Indian cement industry to increase their production capacity. This inturn has attracted the top cement companies in the world to enter the Indian market and take the advantage of growth in demand.
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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.
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1.1 SECTOR ANALYSIS
Indian Economy grew by 5.4 per cent in 2001-02, which is considered to be one of the highest growth rates in the world for the year. This growth is supported by a growth rate of 5.7 per cent in agriculture and allied sectors, 3.3 percent in industry and 6.5 per cent in services. Overall agricultural output is estimated to Food grains production is expected to rise to increase by nearly 7 per cent in 2001-02. 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
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Cash crops. are the largest producer of tea. it recorded a growth of 2. the manufacturing sector is now gearing up to meet challenges for the new millennium. Companies in the manufacturing sector have consolidated around their area of core competence by tying up with foreign companies to acquire new technologies. but in the last 35 years. of which 200 million tons is exported. especially tea and coffee. has positioned India as a preferred destination for manufacturing and sourcing for global markets. Indian subsidiaries of multinationals have been permitted to pay royalty to the parent company for license of international brands. The cost benefits associated with manufacturing in India. with exports around 120. with annual major export earners. 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. and pesticides. With a view to strengthening the sector.8 per cent. India is the world's production of around 470 million tons. and access to foreign markets. mainly due to the increase in irrigated areas and widespread use of high-yield seeds. Foreign Direct Investment (FDI) has been permitted through the automatic route for almost all the industries with certain restrictions. Manufacturing Sector After a decade of reforms. India depended on foreign aid to meet its food needs.3 per cent and in 2001-02.CEMENT INDUSTRY years after independence. building infrastructure for handling. Structural reforms have been undertaken in the excise duty regime with a view to introduce a single rate and simplify the procedures and rules. processors of food and vegetables are exempt from excise duty. The Country has large grain stockpiles (around 45 million tons) and is a net exporter of food grains. transportation. food production has risen steadily. the manufacturing sector has recorded an average annual growth rate of 6. Page 3 ALLIANCE BUSINESS SCHOOL . India also holds around 30 per cent of the world spice market. fertilizers. Over the period 1992-93 to 1999-2000. In an effort to provide a further boost to the industrial manufacturing sector.000 tons per year. etc. Further. management expertise. and storage of food grains has been granted "infrastructure status" and will be eligible for a tax holiday.
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. Services Sector The main thrust to industrial growth has come from the services sector. In addition to the above. 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. 6. comprising 23 stock exchanges. this sector is highly professional and provides a ALLIANCE BUSINESS SCHOOL Page 1 . The last year witnessed several Indian companies. equipment leasing companies. 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. the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). stood at Rs. India boasts of a wide and sophisticated banking network.000 listed companies. Further.5 billion for 2000. 7. the Country has a well-established stock market. Rapidly. showing an upward trend despite depressed stock market indices. The sector also has a number of national and state level financial institutions. Total market capitalization. FII inflows were USD 2. etc. venture capital funds. software services or accounting services. on the two dominant stock exchanges. Net cumulative FII inflows crossed USD 14 billion (June 2001). 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. the quality and complexity of the type of services being marketed is on the rise to match worldwide standards. at the end of December 2000. with over 9.604 billion respectively. Services contribute to 41 per cent of the GDP. investment funds.926 billion and Rs. mobilizing resources by tapping the world market through the ADR/GDR route. These include foreign and institutional investors. Whether it is financial services. etc. commencement of internet based trading. addition to the list of compulsory Demat trading and rolling settlement in certain specified shares.CEMENT INDUSTRY Financial Sector An extensive financial and banking sector supports the rapidly expanding Indian Economy.34 billion (January 2001 to June 2001) compared to USD 1.
A number of multi-nationals have leveraged the relative cost advantage and highly skilled manpower base available in India.69 percent.02 billion in 1999-2000 to US$ 6. respectively from 1998-2005.8 million establishments in India. India is fast becoming a major force in the Information Technology sector. According to the National Association of Software and Service Companies (NASSCOM). ALLIANCE BUSINESS SCHOOL Page 2 . thereby registering a growth of 57 per cent.CEMENT INDUSTRY major impetus to the Economy . growing at 2. “Retail and manufacturing establishments continue to be the key employment providers in India. The software industry was one of the fastest growing sectors in the last decade with a compound annual growth rate exceeding 50 per cent. said the census released here Thursday. Non-farm sector continued to be the principal source of employment. Nath. The world's software giants such as Microsoft.K.3 billion in 2000-01. 1.2 Contribution of Manufacturing Sector towards the Indian Economy An estimated 100. compared to 10.78 percent and 4. director general of the Central Statistical Organisation (CSO). Interestingly. this sector is populated with a range of players who cater to a niche market. “It is a significant pointer that India has a great deal of potential for growth in these two sectors. shows the official Economic Census for 2005. over 185 Fortune 500 companies use Indian software services. 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.9 million people were employed in 41.” said S. which compiled the census. Software service exports increased from US$ 4.” he said. Hughes and Computer Associates who have made substantial investments in India are increasingly tapping this potential. and have established shared services and call centers in India to cater to their worldwide needs.9 million in agriculture sector. employing 90 million people.
1 million people).5 million people or 25. Following are some of the key census findings: • • • • • 100. • • • • ALLIANCE BUSINESS SCHOOL Page 1 .51 percent employed 10 or more workers.2 million people). 3. women accounted for 20.5 million people). Manufacturing sector was the largest employer (25.83 establishments in India. This was the fifth in the series of the economic censuses conducted by CSO.08 million units had 10. 26.CEMENT INDUSTRY Manufacturing sector employed 25. Employment growth rate at 2.91 percent. We must interpret the data intelligently.29 million in urban areas. showed the survey.25 percent of the total workforce. children 2. 39. respectively for retail trade sector. “This census gives us a complete picture of India’s economic situation.90 million People employed in 41.42 percent had 6-9 workers.3 million of the workforce.61 million Establishments under private ownership. The first census of its kind was launched in 1977. 41. There has been a rapid growth in small-scale industries. followed by 25. only 1.2 million. 25. without hired workers.78 percent between 1998 and 2005.96 million Units were own establishments. 95 percent establishments had 1-5 workers.99 million workers.75 million Non-agricultural establishments engaged 89. operated in 2005.91 million workers.1 million or 24. Males accounted for 78. the retail sector came next (25. an agency under the ministry of statistics and programme implementation.4 million. 35. farming was third (9.83 million Establishments.54 million in rural and 16.” said Statistics and Programme Implementation Secretary Pranob Sen. while agriculture sector’s 6.
This phase is also referred to as the Nascent Stage of Indian Cement Industry. installed capacity and production.But the effort did not succeed and the company had to halt production. ALLIANCE BUSINESS SCHOOL Page 2 . But the first endeavor to manufacture cement in an organized way commenced in Madras.CEMENT INDUSTRY 2.000 tons and production of 1000 installed. 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. The First World War gave the impetus to the cement industry still in its initial stages.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). South India Industries Limited began manufacture of Portland cement in 1904. The following decade saw tremendous progress in terms of manufacturing units.
However the price control did not have the desired effect. Post Independence The growth rate of cement was slow around the period after independence due to various factors like low prices. In 1956. Government hold over the industry was through both direct and indirect means. But it had little impact on the industry. ALLIANCE BUSINESS SCHOOL Page 1 . Rise in input cost. Prices were different for cement produced in low.CEMENT INDUSTRY During the earlier years. In 1977 the government authorized higher prices for cement manufactured by new units or through capacity increase in existing units. Period of Restriction (1969-1982) The cement industry in India was severely restrained by the government during this period. capacity and distribution of cement and it intervened indirectly through price control. In 1979 the government introduced a three tier price system. The government intervened several times to boost the industry. But still the growth rate was below par. In 1927. Government intervened directly by exercising authority over production. 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. which further led to reduction in demand. 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. reduced profit margins meant the manufacturers could not allocate funds for increase in capacity. by increasing prices and providing financial incentives. The government intervened by giving protection to the Industry and by encouraging cooperation among the manufacturers. slow growth in additional capacity and rising cost. Society had a biased opinion against the cement manufactured in India. production of cement exceeded the demand. medium and high cost plants.
The remaining 33. as well as for creation of infrastructures like ports. Profitability of the manufacturers increased substantially. but the rising input cost was a cause for concern.CEMENT INDUSTRY Partial Control (1982-1989) To give impetus to the cement industry. real estate and infrastructure sectors of the economy. Cement is one of the core industries which plays a vital role in the growth and expansion of a nation. Indian cement industry is globally competitive because the industry has witnessed healthy trends such as cost control and continuous technology upgradation. For new units and sick units a lower quota at 50% was affected. The demand for cement depends primarily on the pace of activities in the business. formed out of calcium oxide. In 1991 the industry was de licensed. To maximize the opportunity available in the form of global markets.40% was allowed to be sold in the open market. the industry laid greater focus on exports. Post Liberalization In 1989 the cement industry was given complete freedom. power plants. Cement is considered preferred building material and is used worldwide for all construction works such as housing and industrial construction. The role of the government has been extremely crucial in the growth of the industry. This resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. etc. the Government of India introduced a quota system in 1982. Most of the major players invested heavily for capacity expansion.60% was imposed for sales to Government and small real estate developers.A quota of 66. consisting mainly of silicates and aluminates of calcium. It is basically a mixture of compounds. roads. ALLIANCE BUSINESS SCHOOL Page 1 . to gear it up to meet the challenges of free market competition due to the impending policy of liberalization. These changes had a desired effect on the industry. silica. financial. aluminium oxide and iron oxide.
Despatches were estimated at 129. They are produced strictly as per the Bureau of Indian Standards (BIS) specifications and their quality is comparable with the best in the world. Portland Blast Furnace Slag Cement (PBFS). and higher Governmental spending under various social programmes. During 2008-09.07 million tonnes. Oil Well Cement.67 million tonnes as compared to 115.3% and capacity addition a CAGR of 5. total cement consumption in India stood at 178 million tonnes while exports of cement and clinker amounted to around 3 million tonnes.52 million tonnes during the same period for the year 2008-09. Indian Cement Industry is engaged in the production of several varieties of cement such as Ordinary Portland Cement (OPC). The industry's capacity at the beginning of the year 200910 was 217.80 million tonnes.CEMENT INDUSTRY 2. White Cement. Portland Pozzolana Cement (PPC). With demand growth being buoyant and capacity addition limited. the industry posted capacity utilisation levels of around 93% during the last five years. increased investments in infrastructure by both the private sector and Government. transportation.2 CURRENT SCENARIO The Indian cement industry is the second largest producer of quality cement. Cement production during April to January 2009-10 was 130. Rapid Hardening Portland Cement. ALLIANCE BUSINESS SCHOOL Page 2 . Sulphate Resisting Portland Cement. it stood at 115. The industry occupies an important place in the national economy because of its strong linkages to other sectors such as construction. The cement industry is also one of the major contributors to the exchequer by way of indirect taxes. The Indian cement industry is the second largest in the world. etc. with demand reporting a compounded annual growth rate (CAGR) of 9. It comprises of 140 large and more than 365 mini cement plants. coal and power.6% between 2004-05 and 2008-09. 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. The main factors prompting this growth in demand include the real estate boom during 2004-08. the Indian cement industry witnessed strong growth.97 million tonnes during April to January 2009-10 whereas during the same period for the year 2008-09. Over the last few years.
on an average. reporting.4 Apr-Nov 09 100 12. growth in cement demand remained at a healthy 8. The trends in all-India consumption and the growth in consumption in the major cement-consuming States over the last five years are presented in below table: Growth in Cement Demand Figures in Million Tonnes 2008-09 Domestic Consumption Year-on-Year Growth (%) 178 8.5% growth in consumption during the first eight months with the growth being aided by strong infrastructure spending.5 Source: Cement Manufacturers Association (CMA). especially from the govt sector.CEMENT INDUSTRY 2.4 Key Drivers of Cement Industry • • • Buoyant real estate market Increase in infrastructure spending Various governmental programmes like National Rural Employment Guarantee ALLIANCE BUSINESS SCHOOL Page 1 .4%.3 Consumption Growth during 2008-09 Even during the economic slowdown in 2008-09. ICRA Research TABLE 2. In the current fiscal (2009-10) cement consumption has shot up.1 2. 12.
The Heidelberg Cement Company has two manufacturing units in India. The Heidelberg Cement was set up in 1873 and has a long and prosperous history. With the rapid growth rate of the Indian economy after the 1990s. The consumption of cement has increased in India by nearly 7.CEMENT INDUSTRY • Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana 2.5%. Though the majority of the players in the Indian cement industry were private sector organizations. Cement being one of the major elements in the construction work. 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. the industry was highly regulated. Heidelberg Cement Company entered into an agreement for a 50% joint venture with the Indorama Cement Ltd. there is a growth in the cement industry in India.. Globalization of Indian Cement Industry includes several foreign companies engaging in mergers and acquisitions of Indian cement companies. Being one of the best in the world the Heidelberg Cement Company has its bases in different countries. A clinker plant is coming up in the state on Gujarat ALLIANCE BUSINESS SCHOOL Page 1 . The Indian cement industry is one of the oldest industries. A grinding plant in Mumbai and a cement terminal near Mumbai harbor.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. It has been catering to India's cement requirements since its emergence during the British Raj in India. The increase in the construction activities has led to the increase in the demand for updated quality building materials and other allied products.Indorama Cement Ltd. the infrastructural developments within the country has been tremendous. like • Heidelberg Cement . originally possessed by the Indorama S P Lohia Group. situated in Mumbai. Heidelberg Cement Company is the leading German cement manufacturing company.
8% take over with the Gujarat Ambuja Cements (GACL).The Holcim Cement Company has units in excess of 70 countries all over the world.Gujarat Ambuja Cements (GACL) Holcim Cement signed an agreement of 14. It was established in 1999 in India with the acquisition of the Tisco and the Raymond cement plants. The Lafarge Cement Company is presently producing nearly 5. ALLIANCE BUSINESS SCHOOL Page 1 . With the construction boom in India the company looks for a stable future.CEMENT INDUSTRY • Holcim Cement . a subsidiary for its global activities. Holcim Cement Company is among the leading cement manufacturing and supplying companies in the world. It took over the plant of the Zuari Cement Limited in Andhra Pradesh in southern India. superb management. and a outstanding market strategy gives this tie up good edge over the other competitors.Zuari Cement Limited. It has plans for increasing the cement production through technological innovations and maximization of the capacity of the plant. The acquisition was of 50% shareholding and the deal was of about 100 million Euros. • Italcementi cement . It is one of the major employers in the world. The Lafarge Cement Company was set up in the year 1833 by Leon Pavin. In 2001 the Italcementi cement entered the Indian market scenario. skilled personnel. The production capacity of the Italcementi cement company is about 70 million tons in a year. Lafarge Cement Company situated in France is the leading cement producing company in the world. With new products. Italcementi Cement is the 5th largest cement manufacturing company in the world.5 million tons of cement for the Indian cement market. It has a large network of distributors in the eastern part of 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.000. has acquired shares of the famous Indian cement manufacturer . Lafarge Cement presently has three cement manufacturing units in India. • Lafarge India is the subsidiary of the Lafarge Cement Company of France.Zuari Cement Limited Italcementi Cement Company with the help of the Ciments Français. having a work force of 90. The joint venture earned revenues of around 100 million Euros and an operating profit of 4 million Euros.
6 STRUCTURE OF THE INDIAN CEMENT INDUSTRY • It is a fragmented industry. ALLIANCE BUSINESS SCHOOL Page 2 . where majority of the production of cement (94%) in the country is by large plants. operating 124 large and 300 mini plants. centrally controlled distribution systems and geographical diversification. competition is also localized because the cost of transportation of cement to distant markets often results in the product being uncompetitive in those markets. • One of the other defining features of the Indian cement industry is that the location of limestone reserves in select states has resulted in it’s evolving in the form of clusters. There are 56 cement companies in India. In India.CEMENT INDUSTRY 2. • Since cement is a high bulk and low value commodity. • Another distinguishing characteristic comes from it being cyclical in nature as the market and consumption is closely linked to the economic and climatic cycles. 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. operational efficiencies. 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.
1 OBJECTIVES OF THE STUDY • • • To analyze the evolution of cement industry. To compare the global market with Indian cement industry. • Secondary information is obtained by the medium of internet.3 SOURCES OF DATA Only secondary data was collected from the internet. Capitaline databases have been the main source of information for company analysis.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. production capacity and net profits for the previous years. 3. articles and magazines.CEMENT INDUSTRY 3. To estimate the level and analyze the trends in market concentration in the cement industry. journals. company websites. liquidity and other financial ratios of the firms when compared to the industry. magazines and various articles. 3. • To find out the efficiency and economic size of cement manufacturing firms. ALLIANCE BUSINESS SCHOOL Page 2 . • The five companies have been chosen based on market share. • To assess the profitability.
The financial ratios used for analysis of performance of each company are limited. Only three years’ data is used for comparing the performance of these companies.CEMENT INDUSTRY 3. ALLIANCE BUSINESS SCHOOL Page 2 .4 LIMITATIONS OF THE STUDY: • • • The study is limited to the top five cement companies in India.
There are approximately one hundred thousand completed flats without occupancy in Bangalore. growing 9. 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. Demand-Supply gap. ALLIANCE BUSINESS SCHOOL Page 2 . Low cost of production: due to the easy availability of raw materials and cheap labour. 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.CEMENT INDUSTRY 4. 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. b) Weakness: Effect of global recession on real estate: The real estate prices are stabilizing and facing steady slowdown especially in metros. There has been drastic reduction in property prices due to reduced demand and increased supply.6% in 2006.2% in 2007 and 9. India is facing tough economic times in 2008. However.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.
the cement demand is likely to grow in future. highways and airports.CEMENT INDUSTRY Increase in infrastructure projects: Infrastructure accounts for 35% of cement consumption in India. 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. And with increase in government focus on infrastructure spending. Excess overcapacity can hurt margins. as well as prices. such as roads. 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. 173000 Metric tones of cement was exported to India. 130000 tonnes in 2008. d) Threats: Imports from Pakistan affecting markets in Northern India: In 2007. which results in rising demand for better quality of life that further necessitates infrastructure development and hence increases the demand for cement. Growing middle class: There has been increase in the purchasing power of emerging middle-class with rise in salaries and wages. This was done to keep the price of cement under check. ALLIANCE BUSINESS SCHOOL Page 3 . Technological changes: The Cement industry has made tremendous strides in technological up gradation and assimilation of latest technology.
CEMENT INDUSTRY 4.2 PORTER’S FIVE FORCES ALLIANCE BUSINESS SCHOOL Page 4 .
CEMENT INDUSTRY ALLIANCE BUSINESS SCHOOL Page 1 .
it is an economic concept widely applied in competition law.18 (or 1.3. si = Contribution of each individual firm to Industry sales. ➢ A HHI index below 0. ➢ A HHI index above 0.CEMENT INDUSTRY 4.18 (above 1. Herfindahl and Albert O.3 CONCENTRATION RATIO: 4. antitrust and also technology management.000. Increases in the Herfindahl index generally indicate a decrease in competition and an increase of market power. and then adding up those squares The formula for this index is: Where.01 (or 100) indicates a highly competitive index. It is obtained by squaring the market-share of each of the players. moving from a huge number of very small firms to a single monopolistic producer.800) indicates high concentration ALLIANCE BUSINESS SCHOOL Page 2 .800) indicates moderate concentration. H = Herfindahl Index.000) indicates an unconcentrated index.000 to 1. ➢ A HHI index below 0.1 (or 1.1 to 0. and so on. whereas decreases indicate the opposite. Named after economists Orris C. %S2 by the second.1Herfindahl-Hirschman Index (HHI) The H index is a far more precise tool for measuring concentration. so that %S1 is the percentage owned by the largest company. ➢ A HHI index between 0. It can range from 0 to 10. Hirschman. n = Number of firms Here %S stands for the percentages of the market owned by each of the larger companies. n stands for the total number of firms you are counting.
385.01 Cr Name of the Net Sales in Percentage (%) ALLIANCE BUSINESS SCHOOL Page 1 .329688095 4.955250257 3.46 6. Birla Corpn.223.70 1.149173 HHI indicates moderate concentration that implies the size of the firm in relationship to the overall cement industry in North is medium.90 2.790.2 HHI = 0.942.664. J K Cements JK Lakshmi Cem.643750249 8.42 1.02 Cr Name of the Company ACC Ambuja Cem. 33589. Net Sales in Percentage Cr.19 1.66 7. Shree Cement UltraTech Cem.CEMENT INDUSTRY MAJOR PLAYERS IN THE NORTH: TOTAL SALES for the year 2009 = Rs.716. 11266.0106767 GRAPH 4. MAJOR PLAYERS IN SOUTH: TOTAL SALES for the year 2009 = Rs.040.1 (%) 23. (2009) 7.64659642 20.08734521 19.50 TABLE 4.96131414 5.
758. the Indian cement industry exhibits this boom-and-bust cycle most visibly. A huge potential market and rapid growth in the early stages lead to a surge in interest and a flurry of research.(2009) 369. Capacities increase in excess of demand and a glut in capacity is created.861610277 3.111.34 2. Demand catches up and the cycle is repeated all over again. Buoyed by booming economy with amplified demand for enhanced infrastructure housing & commercial space. Capacity addition comes to a halt. prices fall and margins come under pressure.2 3.67 1.2 GRAPH 4.46491881 9.61049564 29.137.09825129 15. we believe the cement industry is showing the boom. The buoyant markets and huge profits raked in by players tempt more players into the market. The projected growth rates point to a lucrative market.894191466 HHI = 0.530.4 Life Cycle Analysis Cement is a typical cyclical industry.358.8094889 22. Perhaps. 4.CEMENT INDUSTRY company Andhra Cements Chettinad Cement Dalmia Cement India Cements Madras Cement Rain Commodities zuari Cements Cr.90 1. Competition increases. ALLIANCE BUSINESS SCHOOL Page 1 .278534281 10. of all the cyclical industries.68 3. characterized by the boom-and bust syndrome. at present.36 1.01 438.72 TABLE 4.186167 HHI indicates moderate concentration that implies the size of the firm in relationship to the overall cement industry in South is medium. weaker players shut shop or sell off to larger ones.
clay. It is a fine powder which when mixed with water sets to a hard mass as a result of hydration of the constituent compounds. Special cooling technique is used. It contains a very low proportion of iron oxide. • Portland Blast Furnace Slag Cement (PBFSC): PBFSC consists of 45% clinker.CEMENT INDUSTRY COMPOSITION OF CEMENT Cement is a mixture of limestone. It is used ALLIANCE BUSINESS SCHOOL Page 2 . It accounts for 70% of the total consumption. silica and gypsum. Pozolona has siliceous and aluminous materials that do not possess cementing properties but develop these properties in the presence of water. White cement is a variation of OPC and is used for decorative purposes like rendering of walls. which helps in preventing cracks where large volumes are being cast. 50% blast furnace slag and 5% gypsum and accounts for 10% of the total cement consumed. popularly known as grey cement. It is the most commonly used construction material. White Cement and Specialized Cement. Portland Pozolona Cement. The basic difference lies in the percentage of clinker used. 15% pozolona and 5% gypsum and accounts for 18% of the total cement consumption.4% to ensure whiteness. has 95% clinker and 5% of gypsum and other materials. • Portland Pozolona Cement (PPC): PPC has 80% clinker. flooring etc. it is OPC: clinker using fuel oil (instead of coal) and with iron oxide content below 0. It has a heat of hydration even lower than PPC and is generally used in construction of dams and similar massive constructions. It is cheaply manufactured because it uses fly ash/burnt clay/coal waste as the main ingredient. • Ordinary Portland Cement (OPC): OPC. • White Cement: Basically. Portland Blast Furnace Slag Cement. It has a lower heat of hydration. DIFFERENT TYPES OF CEMENT There are different varieties of cement based on different compositions according to specific end uses namely Ordinary Portland Cement.
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).
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DRY PROCESS In dry process production, limestone is crushed to a uniform and usable size, blended with certain additives (such as iron ore and bauxite) and discharged on to a vertical roller mill where the raw materials are ground to fine powder. An electrostatic precipitator dedusts the raw mill gases and collects the raw meal for a series of further stages of blending. The homogenized raw meal thus extracted is pumped to the top of a preheater by air lift pumps. In the preheaters the material is heated to 750°C. Subsequently, the raw meal undergoes a process of alcinations in a precalcinator (in which the carbonates present are reduced fed to the kiln. The remaining alcinations and clinkerization reactions are completed in the kiln where the temperature is raised to 1,450-1,500°C. The clinker formed is cooled and
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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.
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however. This resulted in extensive modernization and expansion drive. • Partial Decontrol (1982-1988) In February 1982. In the next two years. ironically. The installed capacity reached only 27. partial decontrol was announced. • Total Decontrol (1989) In the year 1989. By 1992. the industry remained stagnant with no addition to existing capacity. levy cement quota was fixed for the units and the balance could be sold in the open market. the industry enjoyed a boom in sales and profits. 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. an increase of almost 111%. the government relaxed the forces of demand and supply.CEMENT INDUSTRY 4.6 GOVERNMENT POLICIES Government policies have affected the growth of cement plants in India in various stages. total decontrol of the cement industry was announced. By decontrolling the cement industry.9MT in 1980-81. ALLIANCE BUSINESS SCHOOL Page 2 . 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 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.9 MT by the year 1980-81. For 199293. Under this scheme. the economy slipped into recession taking the cement industry down with it. the pace of overall economic liberalization had peaked.
CEMENT INDUSTRY GOVERNMENT CONTROLS The prices that primarily control the price of cement are coal. ALLIANCE BUSINESS SCHOOL Page 1 . 350 per MT for cement with RSP of Rs.7 INDUSTRY STRUCTURE AND NATURE OF COMPETITION INSTALLED CAPACITY India is the world’s second largest cement producing country after China. per bag and Rs. Spread across the length and breadth of the country. having realized difficulty of the industry and the consequent burden to the consumer. as a percentage of ex-factory realization works out to 45%.e. RSP exceeding Rs. The Central Government in its budget presented on 28th February 2007. for the first time. freight. The cement industry has been continuously representing to the Government for more rational tax regime. Interestingly. Excise duty was increased to Rs. 4. royalty and cess on limestone. railway. 200 per bag. announced a dual excise duty structure for cement industry. 400 per MT so far. This dual structure not only enhanced taxation burden further on the industry but also complicated its effective implementation. 190 per bag while retaining specific duty of Rs. government controls all of these prices. there are approximately 130 large cement plants owned by around 52 companies and 365 mini-cement plants with an installed capacity of around 172. total tax burden. 350 per MT on cement sold Rs.190 per bag and below as against specific excise duty of Rs. TAX STRUCTURE The Indian Cement industry is one of the highest taxed one. Government. 190 per bag and below. It has now levied an advalorem duty of 12% on cement with. Large cement plants accounted for 94% of the total installed capacity in India. 600 per MT on cement with Retail Sale Price (RSP) exceeding Rs. At the price level of Rs. 31st May 2007. The industry is characterized by a high degree of fragmentation that has created intense competitive pressure on price realizations. however.08mtpa as on June 2007. has subsequently revised the structure w. power tariffs. 190.f.
CEMENT INDUSTRY CAPACITY CLUSTERS Cement and its raw materials namely coal and limestone. This has resulted in ‘clusters’. Maharashtra and Gujarat. cement plants are located close to both. sources of raw materials and markets. GRAPH 4. are all bulky items that make transportation difficult and uneconomical. 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. There are eight such clusters in the country and account for 81% of the cement capacity. Most of limestone deposits in India are located in Madhya Pradesh. Given this. leading to concentration of cement units in these states. Andhra Pradesh.5 ALLIANCE BUSINESS SCHOOL Page 1 . Rajasthan.
and administrative expenses) has declined. The share of costs on account of material. the share of energy costs has increased marginally. While.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.CEMENT INDUSTRY GRAPH 4. ALLIANCE BUSINESS SCHOOL Page 1 . repair and maintenance. employees and selling expenses have more or less remained stable. freight cost has experienced a decline in its share of total operating costs. manufacturing overheads. The share of other costs (such as stores & spares.
an estimated 90-94% of the thermal energy requirement in cement manufacturing is met by coal. The proposed decision if implemented could result in cost escalation of almost 30-40%.7 Power & Fuel The cement industry is one of the most energy-intensive sectors within the Indian economy. Secondly. the heat value in coal provides the thermal energy required for the operation of the kiln. Clinker production is the most energy intensive step. accounting for nearly 75% of the energy used in cement production. steel and paper industry. However. Firstly. 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. The remaining is met by fuel oil and high-speed diesel oil. as the prices of coal under auction system are 30-40% higher than the notified prices. Coal serves a dual role in cement manufacture. Government is planning to phase out supplies of subsidized coal to cement.CEMENT INDUSTRY GRAPH 4. In India. the mineral content in coal ALLIANCE BUSINESS SCHOOL Page 1 . COAL Coal is an important input in cement manufacture and accounts for 15-20% of the total cost.
During FY2005. the cement industry started implementing coal washeries. the ash content has increased implying lower calorific values for coal. Each stage accounts for roughly one third of the total power consumption.CEMENT INDUSTRY (basically. and 100-110 units of power in the dry process to produce one tonne of cement produced. etc. The captive power generation capacity of cement plants is presently estimated at around 1. Consumption of coal for production of cement has not increased proportionately with cement production because of the switch to the dry process. This is just around 2% of India's total current power generating capacity. However. kiln rotation and clinker grinding. Cement accounts for around 4. over the years. TRANSPORTATION ALLIANCE BUSINESS SCHOOL Page 2 . Thus. many cement companies are meeting 60-100% of their power requirement through captive facilities. Therefore. the share of cement production using captive power has only increased over the years. In order to reduce these problems. A dry process plant typically has an average connected load of 15 MW. there has been deterioration in the quality of coal. coal consumption has started to increase. POWER Cement is a power intensive industry requiring on an average 90-105 units of power in the wet process. or using alternative fuel such as lignite or petcoke. Based on the present installed capacity of 172 mtpa of cement. However.5% of India's coal demand. Cement companies are also resorting to importing coal. and improper and inefficient burning. with the increase in the frequency of power cuts and rising power tariffs. the total industry requirement is roughly 2520 MW. silica content) acts as a constituent in clinker.800 MW. Cement manufacturing consumes power mainly for three purposes: raw meal grinding. Significantly power accounts for 15-20% of the variable cost of cement manufacturing. roughly 43% of the total domestic cement production was undertaken using captive power as against only 21% in FY1995. resulting in higher fuel and transportation costs. 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. In particular. which reduce the ash content of the coal at the mine itself.
with Indian Railways facing shortage of wagons.CEMENT INDUSTRY Outward freight on cement is an important element in the operating cost of a cement plant. Presently. the dependence on rail network is still very high and accounts for around 70% of coal movement. Calcium carbonate is burnt to obtain calcium oxide (CaO). cement companies have started preferring road transportation even for longer distances because of insufficient wagon supply to the cement industry. For coal transportation. like sand and coarse rock. Cement companies use both road and rail transport to transport cement and to receive coal. The balance 1% is accounted by Sea transportation. It accounts for around one third of the total variable costs. freight costs are considerably high for cement plants. Most of the cement plants in India are located in and around the limestone clusters. Thus. This has induced many cement companies to shift a portion of their cargo to rail. These clusters are distant from the collieries and the markets for cement. RAW MATERIALS Cement is usually used in mortar or concrete. The share of road over rail has only gone up over the years. Although rail transportation is more economical for distances beyond 250-300 km. There are three major raw materials for cement. Rail dispatches amount for about 33% while roads carry the balance 66%. Over the past 12-15 months freight cost on cement has jumped more than 20%. Further increasing diesel haven’t helped the cause. However. we do expect that it will gradually increase freight charges. Portland cement consists of compounds of lime mixed with oxides like silica. Both coal and cement are of low value and bulky in nature. This was largely because of the Supreme Court ruling that banned overloading of cement trucks. Cement has an average lead of around 535 km. Limestone is the most abundant source of ALLIANCE BUSINESS SCHOOL Page 2 . which in turn could push up the freight cost again. 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. A) LIMESTONE Limestone is the main raw material and is the source of calcium carbonate. It is mixed with inert material (called aggregate). alumina and iron oxide.
on contact with water. the CaO content of limestone should be a minimum of 44%. As on 31 March 2006. the Western region with 12. tends to set instantaneously because of the very fast reaction between tri-calcium alluminate and water.84%. Typically. For cement. Ground clinker. for a 1 million tone cement plant. The composition of limestone used by the various sectors varies. Cement is the biggest limestone user in India accounting for over 75-80% of limestone produced in India. the country's estimated gross reserves of cement grade limestone stand at 97430 mn. assured availability of cement grade limestone reserves of the order of 50-60 mt in the close vicinity is important. Gypsum is added to the ALLIANCE BUSINESS SCHOOL Page 2 .4-1.5 tonnes of limestone are required per tonne of clinker.8 B) GYPSUM Gypsum is used as a retarding agent.34% and the Eastern region with 15. GRAPH 4. Out of total limestone reserves. followed by the Northern region with 21.t. the desired setting time can be achieved. 1.82% and rest 3. over 45% of the inventory of cement grade limestone is in the Southern region.CEMENT INDUSTRY CaO.64% with central region. In the presence of gypsum. Thus. Andhra Pradesh has the privilege of possessing about 31% of the country's total proved equilanet reserves of limestone.
Clay contributes about 57% silica of which about 25% is lost during ignition. renewable and environmentally friendly sources of energy have assumed greater importance for improving productivity. Cement industry being energy intensive. The productivity parameters are now nearing the theoretical bests and alternate means. environmental norms. Gujarat and Tamilnadu.CEMENT INDUSTRY extent of 5% during the clinker grinding stage. perennial constraints like higher ash content. It is a complex calcium aluminum silicate and has latent hydraulic properties. ALLIANCE BUSINESS SCHOOL Page 2 . GBFS is obtained by granulation of slag obtained as a by-product during the manufacture of steel. The major challenges confronting the industry today are raging insecurity in indigenous fuel availability. The Indian cement industry today is by and large comparable to the best in the world in respect of quality standards. Similarly. Limestone contains about 52% of lime and about 80% of this lime is lost during ignition of the raw materials. the energy conservation and alternate cheaper. use of latest technology and capacity. 4. Keeping these challenges in view. That is why it is used in the manufacture of Portland blast furnace slag cement. renewable and environmentally friendly sources of energy are given utmost importance. erratic variations in quality of indigenous coal and inconsistent power supply with unpredicted power cuts.9 TECHNOLOGICAL ANALYSIS Modernization and technology up-gradation is a continuous process for any growing industry and is equally true for the cement industry. Gypsum is naturally available in abundance in Rajasthan. C) GRANULATED BLAST FURNACE SLAG (GBFS) The other raw materials that are also used in the manufacture of cement are blast furnace slag (a waste product obtained from iron-smelting furnaces) and flyash (leftover ash from a thermal power station). the efforts by the industry towards energy conservation and finding alternate cheaper. like alternate fuels and raw materials have to be found to ensure further improvement in productivity and reduce production costs. fuel & power consumption.
1 MTPA in Japan. from mid seventies. Today. only 33 kilns out of which 32 were based on wet process and only one based on semi-dry process. to convert plants from wet to dry process as well as to set up large capacity plants incorporating the latest technological advancements. The greenfield plants being installed now are based on most advanced and the best available technology. In mid sixties this was standardized at around 600 TPD for both wet and dry process plants. Kiln Capacity and Size The economic unit capacity for cement plants in India till early sixties was about 300 TPD. 26 on wet process and 8 on semi-dry process. there were. 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. The scenario changed to more efficient large size dry process technology since early eighties. This led to installation of single line kilns of 3000 TPD (1 MTPA) capacity and more. In the year 1950. Average annual installed capacity per plant in India is about 1.e.CEMENT INDUSTRY Review of Technological Status Process Profile The Cement Industry today comprises mostly of Dry Suspension Preheater and DryPrecalciner plants and a few old wet process and semi-dry process plants. Till late 70’s the Cement Industry had a major share of production through the inefficient wet process technology. About a decade later. Present Status of Technology ALLIANCE BUSINESS SCHOOL Page 1 . 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. 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. there are 162 kilns in operation out of which 128 are based on dry process. the new plants installed were of 1200 TPD capacity.2 MTPA as against more than 2. i.
Multi Channel Burner Channel .High Efficiency Cooler ALLIANCE BUSINESS SCHOOL . conveyors Ball Mills with / without VRM’s Roll Presses VRM’s. with classifier Dry .6 stage preheater .Single channel burner Efficiency . Roll Presses.Conventional cooler .CEMENT INDUSTRY 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: Mining Material Handling Crushing Low Technology Plants & Conventional Modern Plants Computer aided Global Technology Computer aided Two stage Dumpers/Ropeway/ Tippers Single stage Belt conveyors In-pit crushing & Belt Conveying of Limestone Grinding conveying Pipe conveyors.Co-processing of WDF Co-generation Low of power NOx/SO2 Page 1 conventional classifier Pyro Processing Wet Semi Dry Dry .4 stage preheater .5/6 stage preheater High Multi Cooler Burner dynamic Horo Mills with dynamic classifier Dry .
These mills can accept larger feed size and hence mostly be used with single stage crushing. The mobile crushing plant is stationed at the mine itself and raw material is crushed at the recovery site.Bulk . ALLIANCE BUSINESS SCHOOL Page 1 . Computer-aided techniques for raw material deposit assessment to arrive at proper extraction sequence of mining blocks. keeping in view the blending operational requirements. Grinding Vertical Roller Mills (VRM) has given the real breakthrough in the area of grinding. VRMs are now being used in clinker and slag grinding and also as pre-grinder to existing grinding installations.3 .Palletizing & Shrink Wrapping . 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.CEMENT INDUSTRY Blending & Batch-Blending Silos Storage Packing & Bag Despatch Process Control Plant Size. The VRM draws 20-30 % less electrical energy as compared to the corresponding ball mill system. a systematic mine plan is developed by cement plants. are envisaged and put to use in number of units.Bulk .Multi-Chamber Silos . 300-1800 TPD Relay Logic / Hard Wired / PLC emission technologies Continuous Blending .DDC system 3000-6000 TABLE 4.DDC Neurofuzzy expert system 6000-12000 .Bag . apart from its ability to give much higher drying capacity.Fuzzy Logic expert - The directions in which the modernization activities are proceeding are as illustrated below: Mining For rational exploitation of the raw material source.Dome silos .Continuous Blending silos .
Use of Industrial Wastes ALLIANCE BUSINESS SCHOOL Page 1 .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. 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. 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. The HPGR is being used as pregrinder 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.CEMENT INDUSTRY Another breakthrough that has come with the application of high pressure grinding rolls (HPGR) has been widely adopted in Indian cement industry. In the recent past. mainly in Gujarat. The new classifier designs include two stage separation integrating primary and secondary separation. Rajasthan and MP. Pet coke has also been successfully utilized by some cement plants. 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. 4. High efficiency separators are also used now with VRM’s for further improvement in their performance. A new mill system called Horizontal roller mill has been developed which is capable of producing uniform raw meal and have advantages in processing raw materials containing higher percentage of quartz. thereby substituting main fossil and conventional fuel coal upto 100% in some plants.
used tyres. EU. Effluent Treatment Plant (ETP) sludge and Toluene DiIsocyanite (TDI) tar waste from petroleum industries and in formulation of guidelines for use of these wastes as fuel by cement industry. • CPCB is actively engaged in plant level trials in respect of wastes viz. refinery sludge. paint sludge.CEMENT INDUSTRY • 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). Use of Alternate Fuels • Use of hazardous and refuse derived combustibles and Municipal Solid Waste (MSW) as fuel is common in countries like Canada. 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 ALLIANCE BUSINESS SCHOOL Page 1 . • Recycling of Industrial wastes in manufacture of cement is highest in Japan followed by India. as compared to almost 100% flyash and 84% of granulated slag in the Japanese cement industry. It is expected that the industry’s average thermal energy consumption by the end of Year 2011-12 will come down to about 710 kcal/kg clinker and the average electrical energy consumption will come down to 78 kWh/t cement. Japan and Korea. but regulations do not yet permit in India. Energy Management The industry’s average consumption in 2005-06 was 725 kcal/kg clinker thermal energy and 82 kWh/t cement electrical energy.
Bangalore. A large proportion of the demand for houses. infrastructure projects 20% and industrial projects 20%.CEMENT INDUSTRY 4. especially in urban centres such as Mumbai. fiscal incentives on both interest and principal payments for housing loans and heightened customer expectations. The growth in the residential real estate market in India has been largely driven by rising disposable incomes. Since this is a fairly new segment. Housing demand has supported the cement industry even in times of low infrastructure or industrial demand. low interest rates. GRAPH 4. the growth of the highrise segment will be faster as compared to the growth of the urban housing segment. Housing Sector accounts for 60% of total cement demand.9 DEMAND FROM RESIDENTIAL HOUSING SECTOR Housing demand accounts for 60% of total cement demand and 90% of total real estate demand. a rapidly growing middle class. is likely to come from high-rise residential buildings. Noida) and Pune. Delhi (Gurgaon. as well as increased urbanisation and nuclearisation.11 DEMAND AND SUPPLY SCENARIO OF CEMENT INDUSTRY DEMAND SOURCES Cement demand in the country emanates from three major sources viz. ALLIANCE BUSINESS SCHOOL Page 2 . The reasons for the construction of high rise apartment buildings are the lack of space in cities and proximity to offices and IT parks.
ALLIANCE BUSINESS SCHOOL Page 2 . most of the investment in this segment is driven by office space construction. FMCG and telecom.CEMENT INDUSTRY • Growth Drivers ○ Favourable demography and higher disposable income ○ Nuclear families and urbanization DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTOR Commercial construction comprises construction of office space. stadiums etc. adding to the overall investment in construction activities. despite China and Russia also emerging as strong contenders. The industrial and commercial sector comprises of all the major industrial set ups. changes in shopping habits. This dependency on IT/ITES is expected to continue due to India’s emergence as a preferred outsourcing destination. The growth of organised retail is expected to be driven by demographic factors. 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. This would translate into construction investment of Rs 112 billion over the next 5 years. hotels. IT & ITES parks and organized retail formats. The growth in the sector will translate into substantially higher demand for commercial space. CRIS INFAC. the entry of international retailers into the market and the growing number of retail malls. almost 70-75 per cent of the demand comes from IT/BPO/call centres. 9.5%. CRIS INFAC. of which organised retail accounted for Rs. increasing disposable incomes. estimates that retail spending in India in fiscal 2005 was Rs. believes the current spark in mall construction activity across India will result in around 105 million sq ft of mall space by 2010. The other key demand drivers include banking and financial services. or approximately 3. hospitals. Retail boom to result in construction investments of Rs 112 billion over the next 5 years CRIS INFAC. 349 billion. The investments are based on the manpower/workspace requirement in the sector. The organised retail segment in India is expected to grow at a rate of 25% to 30% over the next five fiscal years. commercial offices.9 trillion. schools. Within office space construction activity. In India.
The increase in disposable incomes, demographic changes (such as the increasing number of working women, who spend more, the rising number of nuclear families and higher income levels within the urban population), the change in the perception of branded products, the growth in retail malls, the entry of international players and the availability of cheap finance will drive the growth in organized retail. We expect cement consumption from this sector to register a CAGR of 9-10% driven by large-scale construction activities. DEMAND FROM INFRASTRUCTURE SECTOR The Indian economy is all set to grow at a pace of over 7% in the current fiscal. Increased emphasis on infrastructure development made it achievable. Infrastructure has been witnessing extraordinary growth across all sectors such as roads, railways, irrigation, power, water supply urban infrastructure, ports and airports. However, in order to achieve this kind of growth on a sustainable basis, a further impetus is required to be given to the Infrastructure development in the country. GOI, recognizing this fact has planned to spend around Rs. 13.2 trillion on infrastructure development for the next five year. However, this figure has been revised upwards to Rs.19.2 trillion. Out of total proposed expenditure, a construction activity are expected to account for more than 50% of total investment and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. Planning commission projected that the total spending by the central government, state government, PSUs and through the Public-Private partnership (PPP) would be around Rs19.3 trillion ($470 billion) for the next 5 years as against Rs. 7.7 trillion spend during Xth Five Year Plan, a jump of over 150%. This would imply a construction opportunity of over Rs.11.2 trillion for the next 5 years. In light of such huge expenditure on construction activities, the demand for cement from infrastructure sector is expected to grow at a CAGR of 24-25%. 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
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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).
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4.12 RISK & CONCERNS
1) RISING INPUT COSTS • POWER & FUEL Prices and Quantity are regulated and are revised upwards regularly. Further, given the shortage of energy future de-regulation of coal sector could be a risk factor. Adding to this, electricity prices are also witnessing pressure. • TRANSPORTATION COST Rising fuel cost resulting in higher road and rail transportation cost.
1) Lower than expected growth in demand
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India Cement.CEMENT INDUSTRY Any lower than anticipated cement demand growth will result in overcapacity in the industry. However. thereby prices may head southwards. This will significantly affect India’s cement exports to gulf countries. 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. This will significantly affect earnings of cements manufacturers. The companies have time till October 25 2007 to reply to these charges. Grasim and other smaller players like Sanghi Industries.3500/tonne is required for capacity addition. 2) Large scale capacities addition in gulf countries India’s major cement exporting destination. Cement industry has planned huge capex in the coming years. Rs. NCL Industries. Birla Corporation. Ambuja Cement. Zuari Cement. for which they will require huge capital. 4) Access to Finance Cement is a capital-intensive industry. Binani Industries. ALLIANCE BUSINESS SCHOOL Page 1 . Ultra tech cement. Middle East. 3) MRTPC alleges on 14 cement manufacturers India's trade practices regulator MRTPC had ordered a probe into the business practices of 14 leading cement manufacturers. The companies that are to be investigated include all the big guns like ACC. is adding huge cement capacities that are estimated to be around 70 mtpa. Saurashtra Cement and JK Cement. rising interest rates have created concern for the industry.
ACC has rich experience in mining.the only one of its kind in the Indian cement industry. ALLIANCE BUSINESS SCHOOL Page 2 . suggestions for reuse. ACC plants. being the largest user of limestone. The company actively promotes the use of alternative fuels and raw materials and offers total solutions for waste management including testing.000 dealers. ACC has a unique track record of innovative research. It has a workforce of about 10. recycling and co-processing. more than 40 Ready mix concrete plants. the company has been a trendsetter and important benchmark for the cement industry in many areas of cement and concrete technology. and a considerable user of the country’s road transport network services for inward and outward movement of materials and products. 20 sales offices. and several zonal offices. it is one of the biggest customers of the domestic coal industry. Since inception in 1936. mines and townships visibly demonstrate successful endeavours in quarry rehabilitation. of Indian Railways. long before pollution control laws came into existence. Among the first companies in India to include commitment to environmental protection as one of its corporate objectives.CEMENT INDUSTRY ACC LIMITED: ACC Limited is India's foremost manufacturer of cement and concrete. As the largest cement producer in India. the company installed sophisticated pollution control equipment as far back as 1966. water management techniques and ‘greening’ activities.000 persons and a countrywide distribution network of over 9. The company's various manufacturing units are backed by a central technology support services centre . product development and specialized consultancy services. ACC's operations are spread throughout the country with 16 modern cement factories. Today each of its cement plants has state-of-the art pollution control equipment and devices.
The Company’s core values are based on integrity.CEMENT INDUSTRY ACC has taken purposeful steps in knowledge building. respect for the law and strict compliance thereof. The Audit Committee in ACC was constituted as far back as in 1986. Members of the Board have full freedom to express their views on matters placed before them for deliberation and consideration. emphasis on product quality and a caring spirit. 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. The role. ACC has made significant contributions to the nation building process by way of quality products. The main beneficiaries are youth from remote and backward areas of the country. ACC is a professionally managed Company with a majority of its Directors being Independent Directors. succession planning for attracting. risk management. 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 Board of Directors has always consisted of persons who are professionals in their respective fields and with unquestionable integrity and reputation. responsibility and accountability of the Board of Directors is clearly defined. services and sharing expertise. identification of major ALLIANCE BUSINESS SCHOOL Page 1 . motivating and energizing human resources. The Shareholders-Investors Grievance Committee was formed way back in 1962 and the Compensation Committee was convened since 1993. human resources development and succession planning. Much before Corporate Governance guidelines became applicable and mandatory for listed companies. ACC had systems in place for effective strategic planning and processes. ACC’s 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. Its commitment to sustainable development. CORPORATE GOVERNANCE The importance of Corporate Governance has always been recognised in ACC. 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. Corporate Governance therefore in ACC is a way of life.
particularly with regard to information relating to financial matters. formerly known as Gujarat Ambuja Limited is a major Cement producing company in India. company’s operations/performance. an effective communication policy and integrity of Company’s internal control systems. cement production is the role of the company in nature and a cost efficient cement manufacturer in the country. the only cement company have this so. The company has entered into a strategic partnership with Holcim. 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. press releases and other communication have always made full disclosures on various facets of importance to the stakeholders. It has shown innovation in utilizing measures like sea transport. the second largest cement manufacturer in the world. The Annual Reports.4 billion. The Group's principal activity is to manufacture and market cement and clinker for both domestic and export markets.CEMENT INDUSTRY risks and the way and means to manage such risks. sops and subsidies to constantly check the costs. and imported coal and availing of govt. captive power plants. Ambuja Cements Limited. The Company also operates a hotel through its subsidiary GGL Hotel and Resort Company. It's also the first to receive the same and also have ISO ALLIANCE BUSINESS SCHOOL Page 2 . 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. GUJARAT AMBUJA CEMENTS LTD. in January. It is a National Quality ISO 9002 certified company. Holcim had. stock movements etc. The Joint Venture between the public sector Gujarat Industrial Investment Corporation (GIIC) and Narottam Sekhsaria & Associates was the reason for confinement of the company.8 per cent promoters` stake in the GACL for INR 21. bought a 14.
handles ships with 40. Is also equipped to export clinker and cement and import coal and furnace oil. In 1997. Sri Lanka.CEMENT INDUSTRY 14000 Certification for environmental systems. to supply around 2. The Company undertook bulk cement transportation. It is also having three Bulk Cement Terminals at Surat with a storage capacity of 15. Mahaveli Marine Cement. Surat and other deficit zones on the West Coast. Ambuja Cements had set up a $20 million clinker Grinding unit in Sri Lanka in the year 1998. Rabriyawas Rajasthan (2 MT) and in Chhaattisharh West Bengal (3 MT). by sea. During the year 1994. which was started by the company.6 MW diesel-generating sets were commissioned during the year. Upperwahi Maharashtra (2. The company's cement plant was commissioned in 1985. the company's Muller location 1. The commercial production of Maratha Cement Works plant of the company was ALLIANCE BUSINESS SCHOOL Page 2 . Kodinar plant of the company was originated its commercial production with an enhanced capacity. The 12. to the major markets of Mumbai. The total cement capacity of the company is 18.P and grinding facility both at Suli & Ropar in Punjab was bespoken.5 lakh tonnes of cement. It handles million tonnes of cement annually. Bakau Wolf and Fuller KCP.500 tonnes has a bulk cement unloading facility and in Galle 120 kms from Colombo. which were imported in the year 1988-89.000 DWT. in the south of the island country. had set up in technical collaboration with Krupp Polysius. A fleet of seven ships with a capacity of 20500 DWT ferry bulk cement to the packaging units. The port terminal of the company Muldwarka Gujarat.000 tonnes has bulk cement unloading facility. Darlaghat Himachal Pradesh (6 MT).5 million tonne cement project with clinkeriation facility at site in H. The company got necessary approvals for setting up another cement plant with 1 million tonne capacity per annum at Himachal Pradesh in the year 1991.5 MT). The company has kick started its operations in Sri Lanka with help of a cement terminal in the port of Galle. Germany. Panvel with a storage capacity of 17. 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. all weather port.5 million tonnes (MT). Transportation was to be carried out by three specially designed ships during the year 1992. 8 kms from Ambuja Nagar plant. having five cement plants at Ambuja Nagar Gujarat (5 MT).
This simple vision has created an environment where there are no limits to excellence. which was founded by Lala Kamlapat Singhania in the year 1994. however. The first company in India introduced the concept of bulk cement movement by the sea transport. Karnataka. and the freedom to achieve their goals. The products are marketed under the brand names J. is its approach to the business.K. Ambuja follows a unique homegrown philosophy for successful survival. It is an affiliate of the J. Super for PPC products and J. The Company produces 53-grade. a new 2-million tonne Greenfield cement plant at Chandrapur. however.CEMENT INDUSTRY started in the year 2002. 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. JK Water proof is another product from JK Cements used for flooring.K. 43-grade and 33-grade Ordinary Portland Cement (OPC) grey cement. White and Camel for white cement products. and one of the lowest cost producers of cement in the world. Again in the year 2004. As a result. 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. Portland Pozzolana Cement ('PPC') under grey and white cement. J. and has proved to be a powerful engine of growth for the company. 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. is its approach to the business. wall application and other specialized applications. the company merged Ambuja Cement Rajasthan with itself. Cement and Sarvashaktiman for OPC products. The company's most distinctive attribute.K. In the last decade the company has grown tenfold. Ambuja is the most profitable cement company in India. Ambuja is the most profitable cement company in India. In the year of ALLIANCE BUSINESS SCHOOL Page 3 . Organization. Ambuja follows a unique homegrown philosophy of giving people the authority to set their own targets. and one of the lowest cost producer of cement in the world. no limits to efficiency. The company's most distinctive attribute.K.
through the subsidiary J K Cement Works (Fujairah) FZC.Cement Works (Fujairah) FZC under which it is proposed to set up a green field cement plant at Fujairah. 20MW Petcoke based Captive Power Plant & Waste Heat Recovery power plant. Started all the captive power projects i. 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. UAE. The Company had acquired from IDBI the assets of Nihon Nirmaan Ltd at Gotan during the year 2007. During the year 2007-08.CEMENT INDUSTRY 2006-07. The 10 MW of the Waste Heat Recovery Power Plant of the company was commissioned at Nimbahera in March of the year 2008. The company's distribution network for grey cement consist of ALLIANCE BUSINESS SCHOOL Page 2 .65 crores.K. the company had taken steps to go beyond national boundaries. 10MW turbine.K. From enhancing the domestic footprint.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. First the company has proximity to huge reserves of premium quality limestone.25 MTPA grey cement plant to service the steadily increasing demand in the GCC region. Entered into a Memorandum of Understanding (MoU) with Fujairah Municipality during November of the year 2007 in the United Arab Emirates. to set up a 2. the company had sanctioned enhancement in working capital Facility (both funded and non-funded) to Rs. Second the company has an extensive marketing network for grey and white cement both within and outside India.42 crores and decided to utilize this facility to produce Grey cement. 105 crores from Rs. it is estimated that the limestone reserves of the company are sufficient to support the planned production capacity for approximately 40 years.e. the company formed a wholly owned subsidiary under the name and style of J. as essential ingredient for cement manufacturing. for Rs. Based on certain studies undertaken.
J K cement's white cement distribution network comprises of 20 feeder depots and 13 regional offices. White and Camel for white cement products. J K Cement Products The major products of J K Cement are grey and white cement. 53-grade and 33-grade OPC. Cement and Sarvashaktiman for OPC products.K. Currently the unit has a capacity utilization of around 75% and an operating profit of 30% consistently.K.CEMENT INDUSTRY more than 40 feeder depots. the company also has a total of more than 4000 retail stores. the production capacity was enhanced to 2. they consist of 43-grade.K. Some other products manufactured by the company consist of: • • • • J K Wall Putty Grey Cement J K White Cement J K Water Proof Page 2 ALLIANCE BUSINESS SCHOOL . The OPC range of products has three grades which are differentiated by their compressive strength.8 million ton per annum. Super for PPC products and J. Punjab. Rajasthan in the year 1975 with an initial capacity of 0. ISO-14001:1998 EMS and OHSAS18001:2005 recognition. J. J K Cement Production Plants The company has three major production plants located in the states of Rajasthan and Gujarat. The grey cement produced by the company Ordinary Portland cement or OPC and Portland Pozzolana Cement or PCC. With the incorporation of newer technology and modern equipment. The unit has ISO-9001:2000 QMS. Gujarat. The cement products are marketed and sold under the brand names of J. Haryana.05 million ton per annum.3 million ton per annum. serviced by seven regional sales office located at Delhi. Madhya Pradesh and Rajasthan. The Gotan unit located at Gujarat which manufacturers white cement started production commercially in 1984 with a production capacity of 0. Uttar Pradesh. 22 sales promoters and four handling agents. The first plant of J K Cement was set up in Nimbahera. Besides.
ALLIANCE BUSINESS SCHOOL Page 1 . has an annual capacity of 17 million tonnes. As part of the eighth biggest cement manufacturer in the world. and technical expertise developed by well known national and international cement producers. live working models. ULTRATECH CEMENT LIMITED UltraTech Cement Limited. The operation of the training center gives the company access to state of art training aids. Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. It manufactures and markets Ordinary Portland Cement.CEMENT INDUSTRY 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. a Grasim subsidiary was incorporated in 24th August 2000 as L&T Cement Limited.
All the plants have ISO 9001 certification.5 per cent equity stake from L&T and then made an open offer for 30 per cent of the equity of CemCo. in accordance with the provisions and guidelines issued by the Securities & Exchange Board of India (SEBI) Regulations. Sri Lanka). while over Rs. 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. New Delhi during the period of 2000-2001.600 crores has been committed for the installation of captive power plants throughout the year 2004-05. The Grasim acquired 10 per cent stake in L&T in the year of 2001. In 2004. 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. to acquire management control of the company. Use of alternative fuels auctioned.15 per cent in 2002 and the Arakkonam grinding unit was started. The export market comprises of countries around the Indian Ocean. 1997. Africa. in Colombo. The Company received State and Zonal level I prize for overall performance in Mines safety 2003-2004 Energy efficient unit award from CII. ALLIANCE BUSINESS SCHOOL Page 2 . five grinding units as well as three terminals of its own (one overseas. with the latter acquiring controlling stake in the newly formed company UltraTech. The value of stake increased to 15. Grasim acquired management control in July 2004 and the name of the company was changed to UltraTech Cement Limited with in 14th October 2004. Export is a thrust area in the company's strategy for growth. L&T completed the implementation process to demerger of the cement business and the Grasim also completed open offer. The Company bagged Indo-German Greentech Environment Excellence Award from the Greentech Foundation.3 per cent by October 2002. Again the Grasim increased its stake in L&T to 14. Narmada Cement Company Limited (NCCL) was amalgamated with the company in May of the year 2006. Cement is an energy intensive industry with coal and power being the major cost contributors. while two of the plants have already received OSHAS 18001 certification.CEMENT INDUSTRY UltraTech Cement has five integrated plants. During the year 2003. Europe and the Middle East. The Company enhanced its capacity utilisation across its plants. and all but one have ISO 14001 certification. During the same year the Durgapur grinding unit was came to existence.
Sri Lanka). the Company has commenced setting up Ready Mix Concrete plants in various places in the country during the year 2007. Grasim decides to acquire an 8. 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). are on track. to acquire management control of the company.5 per cent equity stake from L&T and then make an open offer for 30 per cent of the equity of CemCo. five grinding units as well as three terminals of its own (one overseas. UltraTech Cement has five integrated plants. Chattisgarh and Gujarat. in Colombo. As part of the eighth biggest cement manufacturer in the world. These facilities gradually came up over the years. INDIA CEMENTS ALLIANCE BUSINESS SCHOOL Page 1 .CEMENT INDUSTRY With an eye on the growing Ready Mix Concrete business. UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTechCeylinco (P) Limited. The Captive Power Plants being set up at your Company's Units in Andhra Pradesh. It may be to go on stream between FY08 and FY09.
Primarily a banker. • The Company has well established brands. 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. where extensive deposits of limestone were assuredly available. • The Company has a strong distribution network with over 10. • The Company is the market leader with a market share of 28% in the South. Company Highlights • • The Company is the largest producer of cement in South India. Shri Sankaralinga Iyer with his energy and drive gave the cement project a realistic form and content. he ventured into the field of industry with a rare devotion and confidence with the prime objective of developing major industries in the state. It aims to achieve a 35% market share in the near future. • Regional offices in all southern states and Maharasthra offices/representative in every district.CEMENT INDUSTRY The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949. Coromandel Super Power and Raasi Super Power. The Founders Shri Sankaralinga Iyer was a pioneer of heavy industry in the South. With his banking experience and interest in exploring the mineral potential of South India. 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. he went ahead boldly with his scheme of building a cement plant in the vicinity of Thalaiyuthu.000 stockists of whom 25% are dedicated.Sankar Super Power. ALLIANCE BUSINESS SCHOOL Page 2 . 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.
47 10.93 33.53 14.68 TABLE 6.46 7.17 24.20 27.36 26.1 ACC LIMITED: RATIOS Year 2009 ROE (%) ROA CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO INVENTORY TURNOVER RATIO FIXED RATIO P/E RATIO ASSETS TURNOVER 1.09 39.1 Year 2008 Year 2007 29.08 35.28 31.19 11. This means that the company was in a better position to satisfy its shareholders compared to the previous financial year 2008. CURRENT RATIO ALLIANCE BUSINESS SCHOOL Page 1 .93 0. This shows that company is unable to satisfy its shareholders by proper utilization of funds.88 0. The ratio increased in the financial year 2009.96 11.78 0.81 0.12 0.00 ANALYSIS: RETURN ON EQUITY RATIO The ROE of the company decreased considerably from 2007 to 2008.38 10.80 1.10 0.CEMENT INDUSTRY 6.10 22.58 1.
Consequently. As we know that the debtors turnover ratio explains the number of times the debtors turned over a period of a financial year.19 in 2007 and it decreased to 27. So the debt equity ratio shows a decrease in the financial year 2008.93.28 which increased to 39. The inventory turnover ratio measures the velocity of conversion of stock into sales. DEBT-EQUITY RATIO: In 2007. the interest coverage ratio is 24.10. INVENTORY TURNOVER RATIO: The inventory turnover ratio was 11. 10.CEMENT INDUSTRY The current ratio in 2007 was 0. This means that the company’s debt burden got decreased to a great extent.47 by the financial year 2008 and then it again increased to 33. the debt equity ratio was 0.78 in 2009. In the FY 2009.10. But in the FY 2009. thereby making the company unfavourable in the view of the lenders i. we can see that this ratio has increased to 0. INTEREST COVERAGE RATIO: In 2007.93 and it gradually decreased to 0.58 in 2007. the amount of debt used effectively by the company is declining from 2007 to 2008. But again in FY 2009 the company is able to control its inventories. Thus. the company’s performance declined considerably and the company is not generating enough profit to pay the interest to the debts. 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.96 in the FY 2009.08 and by 2009 it is 0. the financial position of the company is growing weak. ALLIANCE BUSINESS SCHOOL Page 2 . This shows that the company’s debt is decreasing.80 in 2008 and then a slight increase to 11. DEBTORS TURNOVER RATIO: The debtor’s turnover ratio was 31. In the FY 2007. 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.20 in 2008.10 in 2009. But in 2009 it got decreased to 22.88 in 2008 and 0. the firm was managing its inventories efficiently which was then reduced in the FY 2008.e.16 and by 2008 it was 0.
68 meaning that the company was in a better position as compared to the previous year. has to utilise its fixed assets in order to maintain efficiency in revenue generation. The above table indicates that the fixed assets turnover ratio of 1. the company recorded a rise in the ratio i.e. 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.46 in the FY 2008 and consequently declined to 1. thus.38 in the FY 2009 which shows the company’s inability to generate revenue from fixed assets in the consequent years of its operations. The higher the ratio. But in the FY 2009.53 in 2007 declined to 1. we know that the ratio has decreased considerably from the FY 2007 to the FY 2008. The company. from 7.81 to 10.CEMENT INDUSTRY FIXED ASSETS TURNOVER: This ratio indicates the company’s ability to generate net sales revenue from fixed assets of the company. such as property. the better it is for the company. building and other equipments. From the above table. The reason for this decline was the economic downturn in the FY 2008. the more the market is willing to pay for each rupee of annual earnings. ALLIANCE BUSINESS SCHOOL Page 1 . PRICE/EARNINGS RATIO: Higher the P/E ratio.
72 12.25 1.88 29.34 1.92 28.316693 1.05 0.04 0.19387 1.15 0.15 26.29 13.02 0.22 9.21 1.16 40.CEMENT INDUSTRY AMBUJA CEMENTS LIMITED: RATIOS Year 2009 Year 2008 Year 2007 ROE ROA CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO INVENTORY TURNOVER PERIOD FIXED ASSETS TURNOVER RATIO P/E RATIO TABLE 6.55 9.14 54.156784 1.32 Page 1 .06 0.04 67.91 9.52 38.31 13.66 22.29 6.72 0.29 7.31 39.2 ALLIANCE BUSINESS SCHOOL 20.98 8.06 37.33 38.
Ambuja Cements were unable to decrease the coverage period but on the contrary coverage period increased every year. which is not a healthy sign for company’s growth. then company may face problems to pay its liabilities. FY’08 & FY’09. INTEREST COVERAGE RATIO Interest coverage ratio shows how much revenue is being earned in relation to its finance cost. but it is still able to sustain the ratio above 1. and at the same time risk factor is also reducing because they don’t have to pay interest to the debenture holders. which shows company is able to pay its liabilities. so company should take measures to reduce liabilities. DEBTORS TURNOVER RATIO ALLIANCE BUSINESS SCHOOL Page 1 . though declining from the year 2008. 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. If the ratio slips down below 1. is very low. The majority of financing of the company is done by equity. which reflects company’s dependence on the debt finance.CEMENT INDUSTRY ANALYSIS: RETURN ON EQUITY Return on equity is net profits to equity share capital. The ratio also below 1 for all the three years. CURRENT RATIO The current ratio of company. When looking at the previous three years ROA has been decreasing. The ratio is decreasing each year which shows the company is unable to increase profits in accordance to the increase in shareholders’ funds. DEBT-EQUITY RATIO The debt equity ratio shows a positive trend for FY’07. increase in total shareholders’ funds. The liabilities of the company are increasing every year. RETURN ON ASSETS It is always said that higher the ratio the better it is. The main reason behind decrease in ratio is.
P/E RATIO ALLIANCE BUSINESS SCHOOL Page 1 . but the ratio increased in FY’09. therefore. building and other equipments.02 but there was no decrease in FY’09 as compared to FY’08. the ratio has gone down which shows that the collection period has become more powerful and company is able to collect its money from debtors more efficiently when compared to the previous year where it was 9 days. The above table indicates that the change in the fixed assets turnover from FY’07 to FY’08 was just . accordingly there was an increase in the inventory turnover. So the utilization of fixed assets in FY’09 was same as compared to FY’08. FIXED ASSETS TURNOVER RATIO This ratio indicates the company’s ability to generate net sales revenue from fixed assets of the company. INVENTORY TURNOVER RATIO The ratio shows how many times a company's stock is sold and replaced over a period of time. So. The net sales of the company increased considerably in the year 2009. There is a difference in the percentage of ratio for FY’08 as compared to FY’07. excess inventory. The efficiency of the company decreased in FY’08 & it increased in FY’09. company’s efficiency declined. such as property. 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.CEMENT INDUSTRY The debtors’ turnover ratio indicates the efficiency of the company to collect debts. AVERAGE COLLECTION PERIOD In 2009. This shows the company’s efficiency was increasing but due to economic downturn in FY’08. 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. A low turnover implies poor sales and.
15 28.97 0.84 7.77 30.28 34.31 6.77 Year 2008 Year 2007 ALLIANCE BUSINESS SCHOOL Page 1 .79 0. 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.02 11 14.64 5.16 1.66 0.CEMENT INDUSTRY From the data above.87 1.36 11 16.34 1.34 1.15 0.25 10 15. JK CEMENTS RATIOS Year 2009 ROE CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO 0.
There is a sharp deterioration in this ratio so.33:1 therefore we can see that the ratios in all the years are well over 1. But it has declined in the year 2009 and came to 0. In short. DEBT EQUITY RATIO Debt equity ratio should not exceed 3:1 and it has not in the case of JK Cements. as the financial risk for the company increases to that extent. INTEREST COVERAGE RATIO: The interest coverage ratio was 15.15 2. CURRENT RATIO Net working capital should always be positive. ALLIANCE BUSINESS SCHOOL Page 1 .24 P/E RATIO 2.CEMENT INDUSTRY FIXED RATIO ASSETS TURNOVER 1.16. The performance of the company got declined in 2009 and the company’s debt burden was increasing. Min. But in 2009 it decreased to 14.33 which ensures us that the company is in a good condition and has ample liquidity.15 in 2008 so this proves that the company’s debt burden got decreased to some extent. the higher the net working capital. Expected even for a new unit in India is 1. the greater is the degree of overall short-term liquidity.77 2. The decline may be due to the economic slowdown which has affected almost all the companies. This means that the company has fewer debts which is good for the company.80 ANALYSIS RETURN ON EQUITY RATIO The ROE of the company was same for the year 2007 and 2008 and it was at 0.40 5.34. we have to be on guard.97.3 4. Means current ratio indicates the liquidity of the enterprise.77 in 2007 which rose to 16.01 TABLE 6.
As the company’s fixed asset was increasing year on year hence its turnover was decreasing and also sales were not increasing in the same proportion.e.40 in 2008 and then to 2.02 in 2009. FIXED ASSETS TURNOVER: In 2007. AVERAGE COLLECTION PERIOD: In 2007 the debtor’s velocity was only 10 days. but there was an increase of 1 day i.e. which is good for the company. It again declined to 1.CEMENT INDUSTRY DEBTORS TURNOVER RATIO: The debtor’s turnover ratio is increasing in from the past three years as it can be seen from the table.01 in 2009.77 in 2009. It was at 28.25 in 2007 and it increased to 30. P/E RATIO The P/E ratio is gradually declining for all the 3 years i. the fixed assets turnover was 2. from 5. but it decreased to 2. ALLIANCE BUSINESS SCHOOL Page 1 .15 in 2008. it became 11 days in the year 2008 and remained the same 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. The debtor’s turnover ratio is growing higher which implies that the efficiency of the company is increasing.36 in 2008 and then it gradually increased to 34. 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.80 in 2007 to 4.24.
CEMENT INDUSTRY ULTRATECH CEMENT LIMITED RATIOS Year 2009 Year 2008 Year 2007 ALLIANCE BUSINESS SCHOOL Page 1 .
CEMENT INDUSTRY ROE ROA CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO INVENTORY TURNOVER PERIOD FIXED RATIO P/E RATIO ASSETS 0.84 35.31 31. This shows that company is unable to satisfy its shareholders by proper utilization of funds.27 0.37 0.43 25 days 1.7 1.74 12.44 0.42 9 19.55 10 11.61 0. The decline in return on equity ratio in FY’09 was comparatively higher than that of FY’08 because economic downturn also affected the profits of the company.4 9.43 30.17 0.65 0.8 9 14.62 11.1 TABLE 6.16 7.37 ANALYSIS RETURN ON EQUITY RATIO The ROE of the company decreased each year from 2007 to 2009.23 0.84 31 days 0.23 0.29 0. RETURN ON ASSETS RATIO ALLIANCE BUSINESS SCHOOL Page 1 .17 TURNOVER 1.74 19.08 14.31 19 days 1.
7 and it gradually decreased to 0.31 in 2008 so this proves that the company’s debt burden got decreased to some extent and by 2009 it got decreased to 11.CEMENT INDUSTRY In 2008. 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.42 by 2008 and then it gradually increased to 35. But by 2009 it got declined to 0. the interest coverage ratio is 14. DEBTORS TURNOVER RATIO: The debtor’s turnover ratio was 30. the assets and the profit of the company increased showing a consistent return of 0. the amount of debt used effectively by the company is declining from 2007 to 2009.08 and by 2008 it was 0. Since there is a tremendous increase in total assets.61 in 2009. DEBT-EQUITY RATIO: In 2007.17. the debt equity ratio was 1.23 as in 2007.65 in 2008 and 0. ALLIANCE BUSINESS SCHOOL Page 1 . So the debt equity ratio is decreasing constantly and it shows that the company’s debt is decreasing.43 which raised to 19.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. CURRENT RATIO The current ratio in 2007 is 0.8 in 2007 and it slightly increased to 31.e.84. and so the company is not in a favourable position in the view point of the lenders i. INTEREST COVERAGE RATIO: In 2007.62. 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. the return on assets got declined. So the company’s performance got declined by 2009 and the company’s debt burden is increasing i.55 by 2009. Generally debtors turnover ratio explains the number of times the debtors turned over a period of a financial year.74 and by 2009 it is 0.
ALLIANCE BUSINESS SCHOOL Page 3 .84 in 2009.CEMENT INDUSTRY 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.54. PRICE/EARNINGS RATIO: The P/E ratio is gradually declining for all the 3 years i. INVENTORY TURNOVER RATIO: The inventory turnover ratio was 14. FIXED ASSETS TURNOVER: The fixed assets turnover was 1.31 in 2008 and then a steep decrease to 11.1 in 2007.16. 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.17 in 2007 and it is increased to 1. Generally the inventory turnover ratio measures the velocity of conversion of stock into sales. from 12. 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. 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.43 in 2007 and it got gradually increased to 19.37 in 2009 to 9.e.29 by 2008 and by 2009 it got declined to 1.74 in 2008 and then to 7.
42 0.34 TABLE 6.14 0. RETURN ON ASSETS RATIO ALLIANCE BUSINESS SCHOOL Page 1 .87 1.96 8.69 12.67 8.49 11.51 Year 2007 0.68 7.55 34 10.5 Year 2008 0.44 32 11.88 0. The ratio is decreasing each year which shows the company is unable to increase profits in accordance to the increase in shareholders’ funds.28 10.185 1.135 1.21 0.43 36 11.66 ANALYSIS RETURN ON EQUITY RATIO Return on equity is net profits to equity share capital.20 0.CEMENT INDUSTRY INDIA CEMENTS LIMITED RATIOS ROE ROA CURRENT RATIO DEBT EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD (days) INVENTORY TURNOVER RATIO FIXED ASSETS TURNOVER RATIO TAX BURDEN RATIO P/E RATIO Year 2009 0.15 2.55 4.75 10.89 0.20 1.29 1 0 9.01 0.35 0.
so there is a decline in current ratio. The ratio also slips below 1.27% & it decreased in FY’09 by 7. then company may face problems to pay its liabilities. DEBT EQUITY RATIO The debt equity ratio shows a positive trend for FY’07. so company should take measures to reduce liabilities. The majority of financing of the company is done by equity. If the ratio slips down below 1. CURRENT RATIO The current assets of the company increased by 25% in the FY’08 but still there was decline the current ratio because of increase in its liabilities by 127%.49 from 8. but it is still able to sustain the ratio above 1. which shows company is able to pay its liabilities. INTEREST COVERAGE RATIO Interest coverage ratio shows how much revenue is being earned in relation to its finance cost. The current ratio of company. ALLIANCE BUSINESS SCHOOL Page 1 . and at the same time risk factor is also reducing because they don’t have to pay interest to the debenture holders.6 which show a healthy sign for company’s growth. DEBTOR’S TURNOVER RATIO The debtors’ turnover ratio indicates the efficiency of the company to collect debts. But in the FY’09 the coverage period decreased to 7. The increase in shareholders’ funds in FY’08 was about 50% while in the FY’09 it was only 15%. though declining every year from the year 2007. which reflects company’s dependence on the debt finance has decreased. because lesser the income there will be lesser rate of return on assets and also shows company inefficiency in utilization of assets. The efficiency of the company increased in FY’08 by 19. so the decrease in ratio in FY’09 was comparatively low. In FY’09 the assets decreased by 1% but the liabilities increased by 17%. The liabilities of the company are increasing every year.15%. FY’08 & FY’09. The main reason behind decrease in ratio is. increase in total shareholders’ funds. India cements were unable to decrease the coverage period but on the contrary coverage period increased in the FY’08.CEMENT INDUSTRY Though in FY’08 there is an increase in net income of the company but in FY’09 there is a decline on the net income so that also affects the ROA.
There is a slight difference in the percentage of ratio for FY’08. INVENTORY TURNOVER RATIO The ratio shows how many times a company's stock is sold and replaced over a period of time. So the utilization of fixed assets in FY’09 was lower as compared to FY’07 & FY’08. because there was a major rise in the profits of the company in FY’08. So. But the trend has not deviated and the change is nominal. ALLIANCE BUSINESS SCHOOL Page 2 . This indicates the improvement in liquidity of the company. excess inventory.57crores so company paid tax of 14. The average collection period of the company increased in the year 2009 by 5%. accordingly there was an increase in the inventory turnover. A low turnover implies poor sales and. AVERAGE COLLECTION PERIOD The average collection period of the company reduced from 36 days to 32 days in FY’08.35 from 11. TAX BURDEN RATIO There is no tax paid by the company in FY’07 because during the previous year company made a loss of 262. The above table indicates that the change in the fixed assets turnover from FY’07 to FY’08 was just . building and other equipments.53crores. but the ratio decreased by 14% in FY’09.01 but there was a decrease in FY’09.CEMENT INDUSTRY This shows the company’s efficiency was increasing but due to economic downturn in FY’09. therefore. In the FY’09 there was increase in net sales but the increase in inventory was also considerably higher due to which the ratio decreased to 10.8crores in FY’08. company’s efficiency declined. In FY’07 company had a profit of 46. The tax paid by the company substantially increased in the year 2009. The net sales of the company increased considerably in the year 2008. such as property. 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. FIXED ASSETS TURNOVER RATIO This ratio indicates the company’s ability to generate net sales revenue from fixed assets of the company.87.
157 0.37crores which is 116% higher than the latter year. The dividend given by the company in the year 2008 was 56. ROE indicates how well the firm has used the resources of owners.1 ROE 0.1 INTERCOMPANY ANALYSIS: RETURN ON EQUITY Return on shareholder’s equity is calculated to see the profitability of owner’s investment.27 0.267 0. Industry Aggr.188 0. the share prices tumbled down because of economic downturn in the country.CEMENT INDUSTRY P/E RATIO The dividend paid by the company in the year 2007 was 26. = 0.04crores. The shareholder’s equity or net worth will include paid – up share capital. So the share prices also increased. When compared with the industry average only ACC ltd and Ultratech Cement ltd is performing well.1 It is always said that higher the ROE is better for the company and when looked at the investors point of view. Though in the year 2009 the dividend paid by the company was at par.14 GRAPH 7. share premium and reserves and surplus less accumulated losses.24 COMPANY ACC ltd Ambuja Cements ltd J K Cements ltd Ultratech Cement ltd India Cements ltd TABLE 7. 7. But in case of Ambuja Cements ltd this decrease is ALLIANCE BUSINESS SCHOOL Page 1 .
188 0. Industry Aggr. It gives an indication of the capital intensity of the company. though there was increase in sales in 2009.2 Here we can see that only ACC ltd could go in par 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 2008.178 COMPANY ACC ltd Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7.17 0. This was because to keep up with the competition in the market the three companies had to reduce their prices by increasig the sales.2 ROA 0. 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 ALLIANCE BUSINESS SCHOOL Page 1 . = 0. Similar is the case with both the other companies.CEMENT INDUSTRY because of the decrease in profit after tax in the year 2009 when compared with the year 2008.135 GRAPH 7.16 0. And UltraTech is in close range with the industry average.121 0. RETURN ON ASSETS It shows how profitable a company’s assets are in generating revenue.
85 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7.06 1. Industry Aggr.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.3 CURRENT RATIO 0.60 COMPANY ACC LTD ALLIANCE BUSINESS SCHOOL D/E RATIO 0.CEMENT INDUSTRY Current ratio indicates the extent to which a company can pay back its current and short term liabilities using its current assets. Higher the ratio.78 1.1 Page 1 . = 1.. It is merely an index.42 GRAPH 7. higher is the debt for the company and vice versa.61 1. 2008. It is merely an index. DEBT-EQUITY RATIO Debt – Equity ratio indicates the component of debt to the component of equity of a company.79 0.e. But for the other companies it is above the industry average. i. Even having higher current ratio is not good for the company. Industry Aggr. = 0.
84 Page 1 . 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.CEMENT INDUSTRY Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7. Industry Aggr. It is an index of the financial strength of an enterprise.64 0.29 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd ALLIANCE BUSINESS SCHOOL INTEREST COVERAGE RATIO 22.68 GRAPH 7. INTEREST COVERAGE RATIO Interest Coverage ratio indicates the number of times interest is covered by the profits available to pay interest charges.16 5.4 0.28 11. It is merely an index.62 0.04 0.4 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. = 6.93 67.
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. Conditions of the market – monopolistic or competitive – monopolistic.96 34. DEBTORS TURNOVER RATIO This indicates the efficiency of collection of receivables and contributes to the liquidity of the system.5 7. all the companies are having a higher interest coverage ratio. That is why both are still the major two players in this sector. this would be less and consumer goods. This shows that the financial strength of both the companies.CEMENT INDUSTRY India Cements ltd TABLE 7. consumer goods – capital goods.49 GRAPH 7.02 40. type of industry like capital goods. this would be higher and competitive it would be less as you are forced to give credit.55 Page 1 . = 29.57 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd ALLIANCE BUSINESS SCHOOL DEBTORS TURNOVER RATIO 33.98 35.5 When comparing with the industry average. ACC and Ambuja are having almost three and ten times more than the industry avrage respectively. this would be significantly higher. Industry Aggr. but this depends upon so many factors such as. This shows that all the five companies are having enough cash to payoff their interests.
i.7 This basically shows the number of days the debtors takes to pay back their debt. = 13 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd AVERAGE COLLECTION PERIOD 11 9 11 10 34 TABLE 7. This also depends on each company’s policies. AVERAGE COLLECTION PERIOD Average collection period is inversely related to debtors’ turnover ratio. Out of which Ambuja brouth down their average collectio period to 9 days w.CEMENT INDUSTRY India Cements ltd TABLE 7.7 GRAPH 7.r. Formula for average collection period = 360/receivables turnover ratio.t industry. Except India cements the debtors turnover ratio is higher for all the companies when compared with the industry average. Except India Cements ltd all the other four companies reduced the number of days when compared with the industry average. When looking at ratios of all the companies the speed with which their debotrs repay back their debt is high. Industry aggr.6 11. This indicates the speed with which debtors repay back their debt to the company. ALLIANCE BUSINESS SCHOOL Page 1 .e.55 GRAPH 7..6 This basically shows the quality of debtors the company holds. 13 days.
97 11.35 GRAPH 7.8 This shows how efficiently the company could turnover the inventory into sales. ALLIANCE BUSINESS SCHOOL Page 1 . While other three companies ACC.8 INVENTORY TURNOVER RATIO 11. It is merely an index. = 10.52 14.94. Industry Aggr.CEMENT INDUSTRY 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.1 9. J K cements.84 10.94 COMPANY ACC LTD Ambuja Cement ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7. 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. Ambuja and India Cements are having inventory turnover ratio less than the industry average which is 10.
9 FIXED ASSET TURNOVER RATIO 1.CEMENT INDUSTRY FIXED ASSET TURNOVER RATIO Fixed Asset Turnover ratio indicates how well a company utilizes its fixed assets in generating the revenue. = 1. Industry Aggr.77 1.29 1.89 GRAPH 7.38 1.77 which shows how efficiently the company is utilizing their fixed assets. 16% decrease when compared with the industry average. Whle comparing beetween the other four companies J K Cements ltd is having higher ratio of 1.e.16 0. PRICE – EARNING RATIO This indicates investor’s judgement or expectations about the firm’s performance.06 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7. It is merely an index. This shows that India Cements is not able to utilize their fixed assets efficiently.89. i. This shows the relationship between market value of the share and the EPS. The higher the PE the ALLIANCE BUSINESS SCHOOL Page 3 .. In case of India cements ltd fixed turnover ratio is 0.9 All the four cement companies except India Cements ltd fixed turnover ratio is higher comopared to the industry average.
COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7.10 For the investors to get a higher return on the shares they have actually invested.CEMENT INDUSTRY stronger is the recommendation to sell the share and the lower the PE.. Ambuja and India Cementsltd are having a higher P/E ratio when compared with other two. is better to sell when the P/E ratio is high and buy when it is less. And hence the P/E ratio will increase in the near future. 7.1 8. 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.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.e.68 13. J K Cements and UltraTech Cement ltd. i. Profitability is calculated as: Profitability (%) = Profit after Tax (PAT) / Net Sales ALLIANCE BUSINESS SCHOOL Page 1 .01 7.66 2. the stronger is the recommendation to buy the share.10 P/E RATIO 10.34 GRAPH 7. We can see that ACC.
37 17.59 20.71 1402.66 1438.27 22.79 1212.CEMENT INDUSTRY The trend in terms of percentage in profit of the companies are considered and analyzed over the period of study.12 J K CEMENTS LTD: ALLIANCE BUSINESS SCHOOL Page 1 .1 31.12 2008 6167. ACC LTD: 2009 Net Sales PAT Profitability Trend (%) 7942.92472 2007 6880.79 16.91 1769.90773 GRAPH 7.11 2008 7165.60287 GRAPH 7.66 1606.73567 2007 5597.7 1218.22912 TABLE 7.73 20.11 AMBUJA CEMENTS LTD: 2009 Net Sales PAT Profitability Trend (%) 7040.30467 TABLE 7.
3006 TABLE 7.61924 2007 1343.13 2008 1595.14 2008 5511.18 12.29374 GRAPH 7.42 142.94243 2007 2255.5 977.02 15.64 178.CEMENT INDUSTRY 2009 Net Sales PAT Profitability Trend (%) 1664.21 478.28033 2007 4908.99 1007.15 2008 3044.83 21.23217 ALLIANCE BUSINESS SCHOOL Page 1 .28 15.34 8.56 265.34 432.14 INDIA CEMENTS LTD: 2009 Net Sales PAT Profitability Trend (%) 3358.25 637.86886 TABLE 7.61 18.54 20.93647 GRAPH 7.62 13.551928 TABLE 7.74 782.13 ULTRATECH CEMENT LTD: 2009 Net Sales PAT Profitability Trend (%) 6385.17 16.
There is an increase in profitability trend when compared with the profits in the year 2009 and 2008. In House R&D: This ratio provides an insight to the company’s interest in developing new technology.66 0.05 6880. R&D Focus (%) = R&D Expense / Net Sales ACC Ltd: 2009 R & D Expenses Net Sales R & D Focus (%) 3.29 7165.16 2007 3.79 0.66 0.040918 2008 3. Whereas there is a decrease in profitability trend for all the other four companies when compared with the profits in the year 2009 and 2008.15 If we look at all the five companies.045913 TABLE 7.16 ALLIANCE BUSINESS SCHOOL Page 1 .044327 GRAPH 7. we can see that ACC ltd is performing well in comparison with other four companies.25 7942.CEMENT INDUSTRY 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.i.24 5597.004053 2008 0. India cements ltd.25 6167..29 7040.e. 2008. i.71 0.17 GRAPH 7. When we look at other companies.004287 TABLE 7. Sn = Net Sales during Year n or the last year considered for analysis. Sn = S0 (1 + r) n Where. 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.018322 2007 0..7 0. n = Number of years the company is analyzed ALLIANCE BUSINESS SCHOOL Page 1 .CEMENT INDUSTRY Ambuja Cement Ltd: 2009 R & D Expenses Net Sales R & D Focus (%) 1.91 0.e. r = Compounded Annual Growth Rate. GROWTH ANALYSIS The growth of the companies in a particular industry is calculated and analyzed on the basis of the industries sales growth rate. S0 = Net Sales during Year 0 or the starting year considered for analysis. J K cements ltd they doesn’t focus towards the R&D of their company and hence their R&D Expense is zero. UltraTech cement ltd.e.. compounded annual growth rate (CAGR)..
74% 2007 – 29. 2009 – 36. 2009 – 20.13% 2007 – 29.06% 2008 – 24.CEMENT INDUSTRY ACC Ltd: For the year.18 Ambuja Cements Ltd: For the year.11% 2008 – 25.61% 2007 – 55.16% GRAPH 7.20 ALLIANCE BUSINESS SCHOOL Page 2 .37% GRAPH 7.85% GRAPH 7. 2009 – 22.21% 2008 – 45.19 J K Cements Ltd: For the year.
there is a decline in the percentage in growth. 2009 – 23.CEMENT INDUSTRY UltraTech Cement ltd: For the year.22 If we look at the growth of each company under the cement industry which is taken into consideration for the analysis.21 India Cements ltd: For the year.22% 2007 – 24.64% 2008 – 27.73% GRAPH 7.53% GRAPH 7. 2009 – 19.65% 2008 – 20.61% 2007 – 23. 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. ALLIANCE BUSINESS SCHOOL Page 1 .
industry has opted to set up captive power plants based on coal. India owing to its locational advantage has been catering to the cement requirements of the Middle East and the South East Asian nations. the industry maintained volume growth of around 10% YoY. The crude prices have only started cooling off November 2008 onwards. So the players either have to purchase it from open market ALLIANCE BUSINESS SCHOOL Page 3 .1 FINDINGS & RECOMMENDATIONS During FY09. This has resulted in increase in demand for coal. the exports were curtailed in FY09 in order to satisfy the domestic demand and contain inflation. average industry cement realizations (average of price per bag of cement) were higher by about 5% YoY. On account of general economic slowdown and these issues. cost of operation did also witnessed northward movement that exerted pressure on margins. The industry volumes and realizations were higher during FY09 that boosted top line growth.CEMENT INDUSTRY 8. However. stimulus packages announced by the government and agricultural income gave a fillip to the demand for the commodity. This cautious stance has led to a credit crunch and the same has impacted upcoming projects. However. the benefit of which should start flowing in starting quarter ended March 2009 onwards. To ensure smooth functioning of plants and lower costs. financial institutions have tightened their credit norms. While demand growth stood at 10% YoY. The overheated real estate sector has cooled off now. But coal linkages for the industry are poor. the demand for cement has moderated. The growth in realizations slowed down as additional capacities coming on stream eased the supply pressures. The cement industry on an average maintains two months inventory of fuel and such costs. However. Smooth supply of state grid power is another problem. Considering the financial turmoil witnessed globally. Recently the ratio has dropped below 50%. The industry added nearly 30 MT in FY09 over the previous year taking the total capacity to nearly 212 MTPA.
and right valuation. are expected to be commissioned over three-year period and may create an imbalance in demand and supply. All of this dented profitability.2 FUTURE OUTLOOK Despite apprehensions about the impact of inflation and a slowdown in industrial production and overall economic scenario. The industry plans to invest around Rs 50. resulting in impact on realization. The industry had lined up huge capex plans with that depreciation costs have moved up. according to such announcements. through suitable adjustments in selling prices through rational economic considerations. This has increased cost of operation. A large number of foreign players are also expected to enter the cement sector in the next 10 years. the outlook for the cement sector remains positive in respect of growth in demand in the foreseeable future. Consolidation of the cement sector too will take place and cement plants producing less than 1 million tonnes ALLIANCE BUSINESS SCHOOL Page 2 . cement companies have embarked on massive expansion plans for the coming years.000 crore in order to increase production from 198 MTPA to about 275 MTPA over next two to three years. However what is of concern to the industry are staggering rise in input costs and pressures to cap selling prices at the same time. Infrastructure and housing are still moving apace. constant demand. Unless the industry is able to recover cost increases. owing to the profit margins.CEMENT INDUSTRY or import it. Buoyed by the strong demand from realty and infrastructure companies in India. India’s cement industry is expanding capacity to meet increasing demand. the cement industry will be under pressure. 8. These capacities.
In 2008 all companies underperformed comparatively due to economic downturn. and more infrastructure spending. the sector will grow and will take India’s economy forward along with it. 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. financial prudence and capacity utilization. But now slowly all the companies are picking up. During this period investors have an opportunity to gain by paying lower prices for shares and receiving high dividends in future. lower taxation. During Financial year 2007 inflationary conditions enabled all to perform well and generate profits resulting in boom in share prices. The industry experts project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%. ALLIANCE BUSINESS SCHOOL Page 3 . The effect of recession in 2008 could be seen in the year 2009 where the growth of the company has been decreased. Cement companies will go for global listings either through the FCCB route or the GDR routes.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. With help from the government in terms of friendlier laws.CEMENT INDUSTRY will find it difficult to survive in this market. 8. 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.
mapsofindia.mapsofindia.com/ http://www.in/ http://www.CEMENT INDUSTRY REFERENCES http://www.ibef.aspx http://business.jkcement.gujaratambuja.ultratechcement.in/Files/PDF/SpecialComments/2010-January-Cement-Industry.icra.in/industry-infrastructure/industrial-sectors/Cement.com/indian-economy/major-economic-sectors.indiainbusiness.com/ ALLIANCE BUSINESS SCHOOL Page 5 .org/industry/cement.htm http://www.com/cement/ http://www.html http://capitaline.nic.com/ http://www.co.pdf http://india.indiacements.com/ http://www.
html ALLIANCE BUSINESS SCHOOL Page 1 .rrfinance.thaindian.com/indian-economy/industries/cement-industry.net/cement_code/2007/Chapter_2.tradechakra.CEMENT INDUSTRY http://www.emt-india.com/newsportal/business/manufacturing-sector-is-indias-largestemployer-census_10054253.acclimited.com/ http://www.html http://www.equitymaster.html http://www.com/research-it/sector-info/cement/ http://www.com/Research/Fundamental%20Research/Cement%20Industry.html http://www.
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