States included: Maharashtra, Gujarat and Goa

Capacity utilisation levels remain healthy

The western region contributed ~14% of the total ~118 million tonnes of capacities added in the industry from 2011-12 to 2015-16.The average cement
operating rates in the western region have stood at around 88% during the period. The high operating rates in the region can be attributed to limited
effective capacity additions amid excess cement supply to the West from other regions, especially from the South (which has significant capacity
overhang).

Demand growth led by urban areas

Over the past 5 years from 2011-12 to 2015-16, cement demand in the western region grew at a CAGR of almost 4%, largely driven by a spurt in
housing, especially in semi-urban and urban areas as well as higher spending on infrastructure in the urban areas.

Demand from the western region has been growing on account of demand from commercial construction (complexes and shopping malls) and housing
demand especially in urban areas, and increased investments in infrastructure. Cities like Pune have become a hub for IT/ITeS parks and commercial
complexes. Moreover, investment in urban infrastructure projects and the metro rail project in Mumbai have driven demand for cement in Maharashtra.
In 2015-16, demand in the region grew by ~5% y-o-y owing to moderate growth in demand from housing segment.

West: Cement demand-supply scenario

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Source: Industry, CRISIL Research

Maharashtra is the largest cement consumer in the western region and one of the key cement-consuming states in India. Cement demand in Gujarat is
also high with cement consumption witnessing healthy growth over the past few years on account of high infrastructure spending in the state. Major
players in the region are Ultratech Cement, the Holcim group, Kesoram Industries, Jaiprakash Industries and Orient Cement.

Significant cement comes inbound from other regions

Over the past 3 years (2012-13 to 2015-16), prices in the western region have witnessed an annual decline of ~2%. In 2015-16, prices in the West
further dipped by ~9% y-o-y owing to sluggish demand from industrial and commercial segment.

The region has inbound cement from states in other regions, mainly Karnataka, Andhra Pradesh, Madhya Pradesh and Chhattisgarh. Traditionally,
around 25-30 per cent of the overall cement consumption in the western region is met by cement produced in other regions. Similarly, cement
produced in the western region is also moved outbound to other states outside the region like Karnataka, Andhra Pradesh, Madhya Pradesh,
Rajasthan, etc. However, the amount of cement that is outbound from the western region to other states is limited compared to the amount that moves
inbound from other states.

This document is being provided for the exclusive use of Sourabh Kishanpuria at Indian Institute of Management

No part of this Report may be published/reproduced/distributed in any form without CRISIL's prior written approval
 Prices in the West (Rs per bag)

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Source: Industry, CRISIL Research

This document is being provided for the exclusive use of Sourabh Kishanpuria at Indian Institute of Management

No part of this Report may be published/reproduced/distributed in any form without CRISIL's prior written approval