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Acronym AAI APH ARR AT&C AVR BFP BMCR BOP BTG BU CAGR CERC COD CPP CRPS CW DCS DE DPR EA EBDIT Airport Authority of India Air Pre Heater Annual Revenue Requirement Aggregate Technical and Commercial Losses Automatic Voltage Regulator Boiler Feed Water Pump Boiler Maximum Continuous Rating Balance Of Plant Boiler and Turbine Generator Billion Units Compounded Annual Growth Rate Central Electricity Regulatory Commission Commercial Date of Operation Captive Power Plant Cumulative Redeemable Preference Shares Cooling Water Distributed Control System Debt Equity Detailed Project Report Electricity Act Earning Before Depreciation, Interest and Taxes Abbreviation
Acronym EHV FOB FPA FSA GCV GDP GoI ICT ID IDC IEC KVKEIPL KW KWh L/c LD MoA MOEF MT MTPA MW NOC NTP Extra High Voltage Free On Board Fuel Procurement Agreement Fuel Supply Agreement Gross Calorific Value Gross Domestic Product Government of India Interconnecting Transformer Induced draft Interest During Construction International Electro-technical Commission KVK Energy & Infrastructure Private Limited Kilo Watts Kilo Watt Hour Letter of Credit Liquidated Damages Memorandum of Agreement Ministry Of Environment and Forest Million Tonne Million Tonnes Per Annum Mega Watt No Objection Certificate Notice to Proceed Abbreviation
Acronym O&M PG PPA ppm RCC SEB SERC SG TNEB TNERC TPA TPD TPH TWAD Operations & Maintenance Performance Guarantee Power Purchase Agreement Parts Per Million Reinforced Cement Concrete State Electricity Board State Electricity Regulatory Commission Steam Generator Tamil Nadu Electricity Board Tamil Nadu Electricity Regulatory Commission Tonnes Per Annum Tonnes Per Day Tonnes Per Hour Tamil Nadu Water and Drainage Board Abbreviation
9. 2. 5. Index SL. 10. 7. 11. 13. 15. 8. 6.NO PARTICULARS 1. 12. 4. 3. 14. INTRO Of SBI CAPS INTRODUCTION THE COMPNY PROJECT DETAILS PLANT & MACHINERY COST OF PROJECT MENS OF FINANCE STATUS & IMPLEMENTATION PRODUCT PROFILE INDUSTRY STRUCTURE MARKET ANALYSIS FINANCIAL PROJECTIONS SENSITIVITY ANALYSIS RISK & SCOT ANALYSIS CONCLUSION & RECOMMENDATIONS ANNEXURE 5|Page PAGENO MA1RKET ANLYSSI . 16.
Product types d. Implementation status 9. Product application 6|Page . Project cost b. Details of the associate companies 4. Categories of Portland cement f. Mining approvals c. Plant approvals b. Company’s profile a. Means of finance 8. Manufacturing process c. Cost of project a. cost comparison 7. Qualities of cement c. Project details a. Management and organization c. Product profile a. Status of approvals and implementation a. Utilities e. Location and site b. Introduction 3. Product mix g. Product profile b. Plant and machinery 6. FINNACIAL PROJECTIONS Table of illustration 1. Portland cement (PC) e. Environment aspects g. Promoter’s profile b. Technical arrangements 5. Manpower f. Raw materials d. Executive summary 2.
Prognosis for the industry h. Demand drives continue to be strong b. Structural Characteristics of the Industry 11. Marketing and selling arrangements i. SCOT analysis 16. 10. Industry structure a. Financials of the project 13. Players c. Market analysis a. Supply c. Financial performance of comparable players 12. Region wise demand supply scenario f. Conclusion and Recommendation 17. Risk analysis 15. Industry scenario b. Overall demand supply scenario in the country d. Annexure ANNEXURE I: Project balance sheet statement ANNEXURE II: Project Cash Flow Statement ANNEXURE III: Assumptions of financial projections ANNEXURE IV: Working Capital & Margin Money Calculations ANNEXURE V: Capex & Debt Draw‐Down Schedule ANNEXURE VI: Project Profitability Statement ANNEXURE VII: Rev & Cost ANNEXURE VIII: Depreciation ANNEXURE IX: P&L Acc Annexure:X Process flow of the cement plant Annexure XI : specification of plant and machinery 7|Page . Southern region demand supply scenario g. Cement pricing as a function of demand e. Financial projections a. Sensitivity analysis 14.
marketing strategy of the company. The areas that have been dealt in the report include the project at a glance. particulars of the project. The report covers all the aspects that go in the making of a project report. funds flow statement. Note 8|Page . market analysis. Abstract The report covers the complete details of the project that was to be submitted by me for the completion of my internship program. The project proposal is regarding the implementation of the new cement plant. assumptions to the working and finally the analysis of the important financial parameters. the projected balance sheet. company details. cash flow statement and the company has been attached as an appendix. details about the promoters and the management. cost of the project. Finally.
forecasts. nor state bank of India nor any of its associates. employees or advisors make nay expressed or implied representation or warranty and no responsibility or liability is accepted by any of them with respect to the accuracy. This FAR is furnished on strictly confidential basis. it is clarified that SBICAPS has no role or obligation to monitor the end use / deployment of the funds for the project. By accepting a copy of this FAR the receipt accepts the terms of this notice. Financial projections require ex4ercise of the judgment and are subject to uncertainties concerning the effects that change in legislation or economic or other circumstances may have on future events. or other information set forth in this FAR or the underlying assumption on which they are based or the accuracy of any computer model used and nothing contained herein is. There will usually be differences projected and actual results because events and circumstances do not occur as expected. Neither SBICAP. which forms an integral part of this report. and those differences may be material. A financial projection presents to the best management’s knowledge and belief. Financial appraisal of the project by SBICAP in no way shall cast any responsibility on it s regards compliance with various SEBI and other statuary rules. projections. and different people. its consultants and other publicly available information. regulations. opinions. a company’s expected financial position. nor any of their respective directors. estimates. guidelines with respect to the envisaged public issue. This FRA has been prepared by SBI capital markets limited (SBICAPS) on the basis of the project report /information provided by the company/ its officials/ promoters. any have a different view in future. Under the circumstances. or any future events or performance of the company. if any. may be reproduced or passed to any person or used for any purpose other than stated above. completeness or reasonableness of the facts. Further. Neither this FAR. This financial appraisal report (FAR) contains proprietary and confidential information regarding M/S CSTAWAY cement limited. The FAR has been prepared for raising funds from financial institutions /banks. There are financial projects present in this FAR based on the information made available by the CASTAWAY. results of operations and cash flow for the projected period. even the temporary use of funds pending deployment. Executive summary 9|Page . nor the information contained herein. or shall be relied upon as a promise or representation regarding the historic or current position or performance of the company. no assurance can be provided that the assumptions or data upon which these projections have been based are accurate or whether these business plan projections will actually materialized. by the company.
it do not have any past cash accruals. fixed assets Contingency IDC Preliminary & preoperative expenses Working capital margin Total project cost Rs. 378. 378. and associates is engaged in the business of manufacturing cement. The project site is at Bhvanipuram in Nalgonda dist. a company promoted by Mr.51crores is proposed to be financed through equity of Rs.00 180.00 15.00 5. Ram Agarwal. The capital cost estimated prepared by the company have been vetted by Matt Mac Donald and are summarized below: Project cost land & site development Civil works Plant &machinery Power plant Misc.93 378.00 70. 240.85 19.00 50. Castaway proposes to set up a 1.87crores The company has appointed Mott Mac Donald (IMM) for carrying out a techno‐economic feasibility of the proposed project. Castaway has approached SBI Caps to appraise the project based on this techno –economic feasibility report. Of Andhra Pradesh (adjacent to its existing plant) and in close proximity to its existing limestone mines. data provided by the company and other market information and to syndicate the debt component. Thus.73 17 8. The cost of the project estimated at Rs.25 million TPA cement plant for the manufacture of the ordinary Portland cement/ Portland Pozzolana cement with a clinker capacity of 1062500 million TPA along with setting up of a captive coal based power plant 15 MW.51 10 | P a g e .51crores.64crores and term loan s of Rs. The company Castaway cement. 137. the company is new. To take advantage of the increasing demand for Portland and blended cement in India . The marketing establishment of the company is also expensive but due to the increase in the demand of the cement sector the company will not have any future problem in selling. crore 12. Rs. Main crust of the project Cost of the project The cost of project is estimated at Rs.
administrative building. mandatory green belt. Godowns. Building and other civil structures The total cost of buildings is estimated at about Rs. parks etc. the company is in the process of acquiring an additional 261 acres of land (govt. railway siding. However. The cost of the project includes both the soft and the hard cost. This cost includes 1. fixed assets The soft cost is calculated once the hard cost is calculated and this includes the following components: Contingency Preliminary and Preoperative Expenses Working Capital Margin IDC (Interest during Construction) Brief detail is given below on each component Land and site development: The company already has 78. non plant structure Administrative Building Security & Time Office Work Shop Stores Canteen 3.80 acres at its disposal on which new plant will be constructed. This land will be for power plant. plant structure Limestone Crusher Limestone Stacker & Reclaimer Raw Material Feed Hopper Raw Material Grinding Section Raw Heat Bag House Pre‐Heater Tower 2.00crores. 70. Colony structure Colony roads and drainage 11 | P a g e . the components of the hard cost are: Land and site development Civil works Plant and machinery Power plant Misc. land‐118 acres and patta land 143 acres).
International benchmarks available based on evaluation of similar plants setup globally.73crore. The cost of the project is part financed by the term loan. The components under soft cost are IDC (interest during construction) : This is the interest which is calculated from the star of the project till the commencement of it. This head further includes Core Equipments used to form the Cement.33/‐ crore per MW is considered reasonable for such kind of projects. salaries. The cost of plant & machinery has been validated by IMM based on‐ Quotations received by the client from the suppliers.87crores. Preliminary & preoperative expenses: Preoperative expenditure of Rs. The supplier identified by the company for the captive power plant is M/s Greensol power systems Misc. Discussion with the equipment suppliers. Working capital margin: The margin money for working capital requirement of the project is estimated at Rs. the ODC for is project is around Rs. fixed assets The cost of this overhead is estimated 5crores.therefore. Research papers published by various reputed universities. 240. 12 | P a g e . which was collected for carrying out asset valuation assignments or TEFR studies for similar assignments. On this term loan the interest rate is estimated around 12%. Electrical Auxillary Equipments Power plant The 15 MW coal fired captive power plant is to come up at a cost of Rs. 8. 19. traveling. The term loan is of amount Rs.00crores has been estimated taking into account the cost of up‐ front fees. 180crores. 17.93 crores. 50crores. Type of quarters Plant and machinery The total cost of plant & machinery is estimated at about Rs. communications and consultancy costs.3. The cost of rs. Information available with them. based on the calculations for the first full year of operations for the project.
if any. HERE.87crores with the interest rate of 12 % and the repayment period of 31 quarters.75:1. 240.87 378. The company needs to increase the authorized share capital to an appropriate level if they are to bring in additional equity. to account for any unforeseen escalation in prices. Debt The debt is taken in the form of the term loan of amount Rs. a contingency of Rs. Hence. Rs. In crores 137.thus the company is having huge amount of equity. 68. Out of this the company has 50% as the up‐front equity that accounts to around 68. we have calculated the IRR and the DSCR ratios for the final evaluations The sensitivity analysis is also done to evaluate the project. Unsecured loans.82 is proposed to be brought in by way of unsecured loans/additional promoter’s equity. Contingency Contingency cost at 5% of the total hard cost has been assumed since the company has not placed orders for the entire set of plant and machinery.82crore. The rest of the amount i.64crores.85crores is estimated at 5% of all hard cost components Means of finance Project is partially financed by equity and partially by term loan. will be subordinate to the term loans from banks/institutions and will not carry any interest.64 240.75 Introduction to SBI CAPS 13 | P a g e .51 1. The debt to equity ratio is 1.e.the break up is as follows: Sources of funds Equity Debt Total Debt to equity ratio Equity The total equity requirement of the project is 137. 1. 15.
1 SBICAPS year book 14 | P a g e . advisory and financial services under one umbrella. both dynamically and internationally in debt. equity and hybrids.the distinguished parentage (with a 86. We are known for professionalism and business ethics and provide a full range of investment.84% stake in the equity of SBICAPS . It also enables us to make a structured entry and exit mechanism for cross border transactions. SBI1 CAPITAL MARKETS LIMITED (SBICAPS) is India’s investment bank and project advisor. amongst the entries received under the category ‘financial sector’. Foreseeing the changing needs of clients in a rapidly opening economy over the year. We tower above others as the thought leaders in analysis and interpreting industry trend.16% stake) together with the long standing association of an internationally renowned financial institution like the Asian development bank further enhances our image as truly ‘world class investment ban’. we have established ourselves as leader in providing financial and advisory services in the core and infrastructure industries. Our knowledge and understanding enables us to offer complete. both at the micro and macro levels. professional and customer focused world class investment banking services THE SBI CAPS Edge We are an edge above others when it comes to understanding the needs of the client . We provide seamless investment banking advice and execution in capital market deals. which is the largest commercial bank I India. ICAI has awarded SBICAPS the second best presented financials. apart from offering innovative fund raising solutions. We began operations in august 1986 as a wholly owned subsidiary of the state bank of India. Our expertise in structuring investments enhances expertise value leading to long term mutually beneficial partnerships. assisting domestic companies fund mobilization efforts for the last many years. end‐to‐end corporate finance solutions to clients at all levels. In January 1997. A pioneer in privatization in India.fresh equity shares were issued to Asian development bank (ADB) and ADB now holds 13. we have evolved an array of advisory services in almost all sectors of the economy. Our mission is to provide credible.A comprehensive analysis of the dynamics of the markets and an extensive knowledge about the regulatory environment gives us a wider view of all the aspects of this highly competitive market. Recognizing our efforts of setting up a truly professional organization.
PSUs. 1 five times. Fulfilling the needs of sponsors. in terms of private placement. Our product portfolio includes: Project structuring & due diligence Structured finance & syndication Infrastructure project advisory Securitization Debt & equity syndication The breadth & depth of domain expertise combined with strong product capability enables us to function as a financial cum business advisor and offer integrated “concept‐to‐ commissioning” solutions across product streams. We don’t just advise our clients. having been involved in most major book building and fixed price offerings over the as decade we manage fund raising for corporate. New product development is essentially based on assimilation of such expertise and implementing the same to suit local conditions. Our experience in managing a vast array of capital market products has enabled us to develop and accumulate expertise in this field. regulators. In the last 10 years. debt and hybrid capital raising. both from the domestic as well as from international capital markets. and rights issue of debt and equity. we were ranked no. and securities research. Acquisitions & Advisory 15 | P a g e . We provide complete platform to our clients. Project advisory & structured finance SBICAPS has built a formidable presence in the area of project finance advisory and funds syndication with several prestigious mandates in almost every sector of the industry. we have a dedicated team of professionals with vast experience in a range of investment banking services. banks. vendors and investors. Capital markets We have a formidable presence in the areas of capital markets advisory. We partner with them. corporate strategy and structure. including advising on project advisory and structured finance. The SIBCAPS Services At SBICAPS. etc. financial institutions. equity. state government undertakings. Mergers.
with over 500 professional advisors in 41 member firms in 39 countries. In case of organic growth. divestitures. the world’s leading alliance of mid‐market mergers & acquisitions specialists.. The M&A product portfolio includes : Mergers and acquisitions Private equity Foreign currency convertible bonds (FCCB) Corporate advisory Timely expertise with an Enduring perspective Introduction 16 | P a g e . M&A International Inc. brings to bear the unparalleled expertise in acquisitions. SBICAPS is the leading domestic investment bank offering advisory and fund solutions to corporate for organic as well as inorganic growth. In case of inorganic growth. financing and joint ventures through this network to facilitate cross border M&A.M & A international Inc. we provide services to raise private equity. rights issue etc. foreign currency convertible bonds (FCCBS). we advise and assist companies in domestic and cross borders mergers & acquisitions as well as in raising financing for acquisition. SBICAPS is the exclusive Indian member of M& A international Inc. closed 380 deal worth US $ 21 billion in 2007.
378. 137. a company promoted by Mr. Ram Agarwal. The cost of the project estimated at Rs. 2 2 Hypothetical company name but financial data given by SBICAPS 17 | P a g e .51crores is proposed to be financed through equity of Rs. and associates is engaged in the business of manufacturing cement. 240.64crores and term loan s of Rs. Castaway proposes to set up a 1. in Nalgonda dist.06255 million TPA along with setting up of a captive coal based power plant 15 MW. To take advantage of the increasing demand for Portland and blended cement in India. Castaway has approached SBI Caps to appraise the project based on this techno –economic feasibility report. data provided by the company and other market information and to syndicate the debt component. Castaway cement.25 million TPA cement plant for the manufacture of the ordinary Portland cement/ Portland Pozzolana cement with a clinker capacity of 1. Of Andhra Pradesh (adjacent to its existing plant) and in close proximity to its existing limestone mines. The project site is at Bhavanipuram.87crores The company has appointed Mott Mac Donald (IMM) for carrying out a techno‐economic feasibility of the proposed project.
aged about 52 years. He is the Managing Director of Castaway cement Pvt. Castaway chambers.No 1 2 4 5 Name Sri DEEN DAYAL AGARWAL Sri ASHOK KUMAR AGARWAL Smt SUNITHA KUMARI AGARWAL Sri NAWAL KISHORE AGARWAL Smt GINNIBAI AGARWAL Designation MANAGING DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR PROMOTERS AND MANAGEMENT: CASTAWAY CEMENT (P) Ltd has four promoters namely Sri Deen Dayal Agarwal. The top management of the company works as a cohesive team to make the business grow higher and faster than the competition. Having 35 years 3 Hypothetical company name but financial data is original 18 | P a g e . Following is the brief profile of the promoters of the company: Sri Deen Dayal Agarwal. As a founder member and Managing Director of the company. is the main promoter of the company. he has taken keen interest in the business process of the company and can be credited with the phenomenal success of the company.2008 Public Limited Company Private Cement Bhavanipuram.Hyderabad None Cement manufacturing and power generation Registered Office Existing Activities Proposed Activities Promoter’s profile : : : Following is the list of the promoter‐directors of the company: S. Mahankaligudam Nalgonda district‐ 508218 Andhra Pradesh. 7‐5‐999/A. Sri Naval Kishore Agarwal and Smt. Sri Ashok Kumar Agarwal. Ginni Bai Agarwal. The company3 Name Date of Incorporation Constitution Sector Industry Location of the project : : : : : : Castaway Cement Limited 16th April .Begumpet. Ltd. He is a graduate in commerce.
The company has one sister concern. The wide and varied experiences of other promoter‐directors when coupled with the youthful energy of Sri Naval Kishore Agarwal results in a formidable combination. He also takes active interest in the managerial issues of the business. aged about 42yrs is a commerce graduate. As a director. As a young professional he has successfully led the company to be one of the growing companies in the Industry. of business experience as partner in Mancherial Company. He has a rich experience of 25 years in this industry as partner in Mancherial Company and Director of castaway cement Pvt. Sri Ashok Kumar Agarwal. She is actively involved in all the business decisions and processes there by playing a major part in the growth of the company. his contribution to the management and decision making process is very vital for the success of the company. Sri Naval Kishore Agarwal. He has been able to clinch many a vital business deals in favor of the company applying his gifted negotiating skills. He takes care of management and the day‐to‐day affairs of business. which augurs well for the future of castaway (P) Ltd. 19 | P a g e . aged about 25yrs is a graduate in commerce. Smt Ginni Bai Agarwal. He is actively involved in all the business decisions and processes thereby playing a major part in the growth of the company. aged about 69yrs is having 40 years of business experience as partner in Mancherial Company. namely AGARWAL CEMENT PRIVATE LIMITED. he manages the affairs of the company through his sharp business acumen and professional approach of management. Human Resource Management and inter‐personnel relations are his strong points. It is due to his sheer dedication that the above concern grew to the present heights. Ltd. w/o Late Mukhram Agarwal.
Gypsum Presently gypsum is being procured from Coromandal fertilizers. Karnataka and also in Andhra Pradesh.93 hectares of land for its future operations. The plant site has the following location advantages: Locational advantages Proximity to raw material sources Limestone Limestone is the main raw material for the clinkerisation process in the proposed plant. railway siding. parks etc. Vishakhapatnam which is located 300 kms from Castaway’s plant. A.97crores. of Andhra Pradesh adjoining the company’s existing plant. of Andhra Pradesh along with a captive coal based power plant of 15 MW.06225 million TPA at Bhavanipuram.P. administrative building. Mahakaligudam Nalgonda dist. Limestone is being transported by means of dumpers to the plant. This land will be for the captive power plant.P. 4. Data provided by the company through Matt Mac Donald report 4 20 | P a g e . It proposes to obtain mining leasehold rights for an additional 73. Iron ore There are huge deposits of iron ore in Bellary. The company has reported calcium carbonate content of 75%‐87% in the limestone deposits.80 acres at its disposal on which the new plant will be constructed. Kavali and other places in Andhra Pradesh which can be procured conveniently. Mahakaligudam Nalgonda dist. However. iron ore is being procured from Bellary area and various sponge iron plant in A. land 118 acres and patta land 143 acres) costing Rs. Laterite Laterite is to be procured from Mallampalli near Warangal and Rajamundry/ Yelemanchii in Andhra Pradesh. Castaway is in the process of acquiring an additional 261 acres of land (govt. The plant areas are adjacent to the limestone mines of which 183.11 hectares of mines are currently on lease with castaway. godowns.25 million TPA with a clinker capacity of 1. mandatory green belt. The company already has 78. Location and site4 The proposed project will be located at Bhavanipuram. Project details Castaway proposes to set up a cement plant with an installed cement capacity of 1. Laterite is available at Zaheerabad.
Meanwhile. Fly ash Castaway proposes to purchase the same Vijayawada thermal station. which is 100 kms away from the plant. Indents are issued on yearly basis and SCCL allots the quantity for the whole year .castaway makes advance payment and procures the material on a fortnightly basis from the allotted quantity. fly ash The production of cement includes the following steps: Isolation and preparation of raw materials Drying Fusion of raw materials to give cement linker Preparation of other component of cement 5 Data provided by company through Matt Mac Donald report 21 | P a g e . Coal The company buys coal from Singareni collieries company Ltd (SCCL). alumina and ferric oxide) Other supplementary materials such as sand. Manufacturing process5 In this section the manufacturing processes followed in a cement plant and also that in a captive power plant are discussed: Cement plant manufacturing process For its raw material cement uses minerals containing the four essential elements for its creation‐ Calcium Silicon Aluminum Iron Most common raw material used in cement production is: Limestone (supplies the bulk of the lime) Clay. castaway is also exploring the possibilities of importing coal. Proximity to the market The project site is at a distance of about 15 kms from the state highway connecting Hyderabad and Guntur. On account of the well developed road and rail linkages.While the railway linkage is established through Vishnupuram railway station which is around 6 kms from the plant site and falls on the main line connecting Hyderabad and Guntur. the cement produced in the plant has easy access to the market. marl or shale (supplies the bulk of eh silica.
Grinding of cement components with calcium sulphate for settings. The raw material preparation includes variety of blending and sizing that are designed to feed the raw material with the physical and chemical properties. The grinding provides an increased surface area to enhance the heat exchange in the downstream heating process. The process flow chart of a cement plant is as illustrated Limestone Clay Heating of Raw materilas Blending of Raw materials Pre‐Heating of Raw materials Quality check Grinding of material Cooling of molten material Storage of packing Raw material preparation6 The initial production step is raw material acquisition. This moisture content can be limited to 1 percent before or during grinding. Cement raw materials received may contain initial moisture content with 1 to 50 percent. The raw material is crushed and ground as necessary to roved a fine material for blending. while secondary crushing reduces it to the size of gravel. The quarry material is fed through the chutes in crusher where it is reduced by crushing into the required size. Calcium is the most important raw material and is obtained from limestone.The dosed raw materials are dried and finely ground in the raw mill to form an intermediate product called raw meal. 6 Data provided by company through Matt Mac Donald report 22 | P a g e . Nowadays. Primary crusher reduces the material to about the size of baseball. These raw materials are obtained from open face quarries or underground mines. chalk and seashells. some plants crush materials in a single stage. Most of the material is usually ground finer than 90 um (the fineness is often expressed in terms of the percentage retained on a 90 um sieve). So the preparation of raw materials is needed.raw materials are extracted from the quarry may have different composition.
the raw meal undergoes a series of concurrent heat exchanges with the hot exhaust gas from the kiln system. The raw materials are analyzed in the plant laboratories to make certain the chemical composition is correct. turning from about one to three revolutions per minute. The gas and material stream are separated by cyclones after each heat exchange process. lined with firebrick. This homogenizing process is important to stabilize the downstream sintering process as well as to provide a uniform quality product. Rising more than 200 feet. The first chemical reaction also takes place in the Pre‐Calciner of the pre heater. hot exit gases from the kiln het the raw materials as they swirl through the cyclones. Once raw materials are ground fine enough. modern cement plants preheat the materials before they enter the kiln. 23 | P a g e . The raw material is then stored in a homogenizing silo in which the chemical variation is reduced. The raw meal temperature increases from 80 C to 1000 C within 40 seconds. they are blended in the proportions required to produce clinker of the desired composition. PRE‐HEATER TOWER To save energy most modern plants pre heater the materials before they enter in the kiln. Kiln Raw material is then fed in to huge rotating furnace known as kiln. The pre‐heater tower supports a series of vertical cyclone chambers through which the raw materials pas on their way to the kiln. It’s the heat of the cement making process –a horizontally sloped steel cylinder. To save energy. the material is now ready for the Pre heater. blended in the proper proposition. These activities are as carried out in the vertical roller mill. After grinding. In the Pre‐Heater. where limestone CaCO3 is decomposed into lime. and then ground even finer.
they are inclined at an angel of 3‐4 and rotate at 1. process flow from quarry product shipment is enclosed at annexure II 7 Data provided by company through Matt Mac Donald report 24 | P a g e . setting retarders. Cooler The clinker is discharged from the rotating kiln into the air quenching coolers that reduce the temperature to approximately 100 to 200 degree centigrade while simultaneously preheating the combustion air. The transportation of cement can be done by rail.. which is necessary for the formation of clinker. the raw materials emerge as a new substance. Another illustration of the cement plant process i. as a result of inclination and rotation of the tube. or calcium lingosulfonate. At the lower end of the kiln.. cement’s primary constitute. fuels such as powdered coal and natural gas feed a flame that reaches 1870 degree centigrade. From the pre heater the raw materials enter the kiln at the upper end. the temperature of the material being burnt reaches 1350‐1500 C. Rotary kilns are refractory lined tubes with a diameter up to about 6m. It slides and tumbles down the kiln through progressively hotter zones towards the flame. During the fine grinding. such as gypsum. and air entraining. Near the flame in sintering or clinkering zone of a rotary kiln with a gas temperature of 1800‐2000 C. the material to be fused into the top of the kiln moves down towards the coal dust oil or gas flame burning at the bottom of the tube. plaster. dispersing. road or ship. Storage and packaging The cement is then housed in storage silos from where it is mechanically or hydraulically extracted and transported to the facilities where it is packaged in sacks or supplied in bulk. Grinding Pulverizing followed by fine grinding in the tube ball mills and an automatic packaging completes the process. Because of the intense heat the series of chemical reactions converts the calcium and silicon oxides into calcium silicates. Quality check7 Cement quality check typically involves x ray tests and compress strength tests. and waterproofing agents are added. red‐hot particle known as clinker. Here the raw material becomes partially molten.e. The clinker is ground by various hook ups and by different sizes of steel ball while it works its way through the mills two chambers. At the lower end of the kiln.2‐2 times/min.
Captive power plant manufacturing process
Coal fired boiler
A power station (also referred to as generating station or power plant) is a facility for the generation of electrical power. In thermal power stations, mechanical power is produced by a heat engine, which transforms thermal energy, often from combustion of a fuel, into rotational energy. Most thermal power stations produce steam, and these are sometimes called steam power stations. A thermal power plant consists of all the equipments and the system that makes a complete thermal power station using coal fired system generator or boiler. A convectional coal fired thermal power plant consists of a coal handling system, boiler, turbine, generator, transformer, and water handling and emission control system.
The detailed process is described as follows:‐
Coal is fed into a boiler where it is burned in order to heat after to produce high‐pressure steam. Depending on many factors including the size of the boiler and the type of coal burned energy content, ash content etc), the amount of coal used will vary. Coal is delivered by mass transport systems such as truck and rail. Generating stations adjacent to a mine may receive coal by conveyor belt or massive diesel electric drive trucks. The coal is prepared for use by crushing the rough coal to about ¾ inch (6 m) in size. Then the coal is transported from the storage yard to in‐plant storage silos by rubberized conveyor belts and stored in the boilers hoppers above the boilers. the coal then passes through pipes to the coal feeders for regulating and measuring coal quantity, then to coal pulverizers for pulverizing coal, and then to a pulverized coal bin. The pulvenizers may be a rotary drum type or ball or roller grinder tyre. From the pulverized coal bin coal is conveyed by hot air injectors through coal pipes to boiler coal burner of one tier or level at a horizontal angle into the furnace to give a swirling action for powered coal for proper mixing of coal powder and also the incoming hot air from FD fans, to give the best combustion. If the system does not have pulverized coal bin then coal powder is conveyed directly to coal burners from pulverizers. To provide sufficient combustion temperature in the furnace before spraying powdered coal to catch
25 | P a g e
fire or ignite, the furnace temperature is brought up by spraying and burning light oil by means of igniter oil guns. Pulverized coal is air‐blown into the furnace from fuel nozzles at the four corners and it rapidly burns, forming a large fireball at the center. The steam generator unit has to produce steam at highest purity, and at high pressure and temperature required for the turbine. This is made up of Economizer, the steam drum with all internal and external fittings and chemical dosing arrangements, generating tubes (with necessary headers for uniform distribution of water flow) forming the Furnace chamber and super heater coils. Necessary safety valves are located at suitable points to avoid excessive boiler pressure. Air and gas path equipment are: forced draught fan (FD fan), air pre heater (APH), boiler furnace, induced draft fan (ID fan), mechanical and electrical dust precipitators and the Stack or chimney. This heats the water that circulates through the boiler tubes. The water circulation rate in the boiler is three to four times the throughput and is typically driven by pumps. As the water in the boiler circulates it absorbs heat and changes into steam at 700 degree F (370 degree C) and 3200 psi. It is separated from the water inside a drum at the top of the furnace. Here the steam is superheated to 1000 degree F (540 degree C) to prepare it for the turbine. The turbine generator consists of a series of steam turbines interconnected to each other and a generator on a common shaft. There is a high pressure turbine at one end, followed by an intermediate pressure turbine, two low pressure turbines, and the generator. superheated steam from the boiler is delivered through 14‐16 inch (350‐400nm) diameter piping to the high pressure turbine where it falls in pressure to 600 psi (4 MPa ) ant to 600 F (315 C) through the stage. it exists via 24‐26 inch (600‐650nm) diameter cold reheat lines and passes back into the boiler where the steam is reheated in special reheat lines passes back into the boiler where the steam is reheated in special reheat pendant tubes back to 1000 F (540 C). The hot reheat steam is conducted to the intermediate pressure turbine where it falls n both temperature and pressure and exists directly to the long‐ bladed low pressure turbines and finally exists to the condenser. The rotation of the generator induces alternating current in the coils to produce electricity. To ensure that the alternating current is kept constant at the standard frequency, the turbine and generator must rotate at a constant speed. Once generated, the electricity passes through a transformer, which steps up the voltage to ensure efficient transmission over long distances. A critical part of the power generation system is water handling. After the steam passes through the turbine, it enters a condenser. The condenser converts the low‐ pressure steam to liquid water. Cooling water from rivers or large lakes is generally used. If the rivers or lakes are distant, cooling towers are constructed. Raw materials Availability of raw materials is a very critical factor in the operations of cement plants. The same is as brought out in this section. The following table illustrates the consumption rate of the various inputs, their price of procurement and their respective freight costs
26 | P a g e
Inputs for clinker Consumption per Input price (Rs/T of Freight cost (Rs./T Value of input production ton of clinker or input) of input) (Rs./T of cement) cement in tones Limestone 1.4500 100.00 0.00 145.00 Laterite 0.0150 500.00 320.00 12.30 Iron ore 0.0150 500.00 610.00 16.65 Coal 0.1800 2300.00 300.00 468.00 Power 50.00 1.74 87.25 (units*Rs./unit) Stores consumed 1.0000 60.00 60.00 Total cost of 1.0000 789.20 789.20 clinker per tone For OPC Total cost of 0.9500 749.74 clinker per tone Gypsum 0.0500 621.00 480.00 55.05 Input cost/‐tonne 804.05 of OPC cement For PPC Total cost of 0.7000 552.44 clinker per tone Gypsum 0.0500 621.00 480.00 55.05 Fly ash 0.2500 40.00 390.00 107.50 Input cost /‐tonne 714.99 of PPC cement OPC’s composition is 95% clinker and 5 % gypsum while that of PPC is 70% clinker, 5% gypsum and 25 % fly ash. The cost of clinker, OPC and PPC are Rs. 789.20/‐ per tone, Rs. 804.05/‐ per tone and Rs. 714.99/‐ per tone respectively. From the above table it can be inferred that coal, limestone, power, gypsum and fly‐ash are the most critical inputs for this plant. The table below illustrated the cost incurred w.r.t procuring the raw materials that going for inputs for clinker: Inputs for clinker Pure raw production material cost per ton of clinker production (Rs./T of cement ) Limestone 145.00 Laterite 7.5 Iron ore 7.5 Coal 414 Total cost of 574.00 clinker per tone Freight cost per Total cost per ton % age of raw ton of clinker of clinker (Rs./T material cost production (Rs./T of clinker) of clinker)
0.00 4.8 9.15 54.00 67.915
145.00 12.30 16.65 468.00 641.95
22% 2% 3% 73% 100%
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As illustrated in the above table, the transportation cost of the raw materials alone account for around 20% of the total raw material cost of clinkers. The availability of the main raw materials is as discussed below: Limestone Limestone is the main raw material for the clinkerisation process in the proposed plant. The plant area is adjacent to the limestone mine of which 183.11 hectares of mines is currently on lease with castaway. The company has reported calcium carbonate content of 75%‐87% in the limestone deposits. It proposes to obtain mining leasehold rights for an additional 73.93 hectares of land for its future operations. Limestone is being transported by means of dumpers to the plant. The table below illustrates details of mining leases of CASTAWAY as cited in the rapid environmental impact assessment report prepared for castaway by M/s B.S. Envi‐tech Pvt. Ltd area in hectares mineable reserves (million tones) existing mining lease 183.11 74.99 proposed mining lease 73.93 17.50 257.04 92.49 It is indicated in their report that the combined mineable lime stone reserves of existing and proposed plants @ 92.49 mts is sufficient for 40 years of production. Laterite The annual requirement of the new plant will be procured from Malllampalli near Warangal and Rajamundry / Yelemanchii in Andhra Pradesh which can be procured conveniently Iron ore There are huge deposits of iron ore in Bellary, Karnataka and also in Andhra Pradesh, A.P. iron ore is being procured from Bellary area and various sponge iron plant in A.P. Gypsum Gypsum requirement for the proposed cement production is being procured from Coromandal fertilizers, Vishakhapatnam which has a surplus quantity being generated and which is located 300 kms from castaway’s plant. Fly‐ash The total requirement of fly‐ash is proposed to be purchased from Vijayawada thermal station, which is 100 kms way from the plant. Coal The company buys coal from M/s Singareni collieries company ltd (SCCL).indents are issued in yearly basis an SCCL allots the quantity for the whole year. Castaway makes advances payment and 28 | P a g e
castaway is also exploring the possibilities of importing coal. The same has been considered while making projections. The consumption norms and cost for power at capacity utilization of 95% to manufacture clinker. a treatment plant will be installed for the captive power plant. 3.meanwhile. OPC and PPC are given in the table blow. Utilities8 Power supply The power requirement for the project will be met from the 15 MW proposed captive coal power plant to be set up adjacent to the plant. Bigger and bulk supplies will be made through railway wagons depending upon the destination. The finished product viz. Limestone will be transported from the mines by dumpers. Treatment is normally not required. 8 9 UNIT KWH/MT KWH/MT KWH/MT POWER 50 40 40 circulating cooling boiler feed Drinking total requirement 300 cubic meters/day 300 cubic meters/day 100 cubic meters/day 700 cubic meters/day Data provided by company through Matt Mac Donald report Data provided by the company through the Matt Mac Donald report 29 | P a g e . These sets will supplement cement packing and dispatch during grid interruption. cement will be transported through regular authorized private truck operators to be finalized by the company on rate contract basis. The water required for the plant as well as colony would be met from the Krishna where near the site or from existing bore walls. Regular transport vehicles will transport the other raw materials. installation of 1250 KV DG is also planned. The water is mainly used for circulating cooling water for bearings and gearboxes and sprays in crushers and transfer points to control dust and domestic purposes in the factory and colony. Since. 2. To maintain uninterrupted operation of clinkerisation. The main raw material viz. procures the material on a fortnightly basis from the allotted quantity . 4. Consumption norms of power category Clinker ordinary Portland cement (OPC) Portland Pozzolana cement (PPC) Water supply9 The requirement of water is as indicated in the following table: 1. However. the quality of water is clear.
3.no Category Number persons 15 30 70 20 135 of Average annual salary per head (in rs. Manager Supervisor Skilled Semi‐skilled Total The company does not envisage any problem in arranging manpower as they have been in this business for the last two decades.00 450. Lakhs) 68.40 48.000 240.000 Total annual cost (in rs. The captive power plant will generate steam.00 1.20 218. The table also indicates the grade wise manpower requirement for operating the cement and captive power plant. Manpower cost Sr. Manpower It is estimated that 135 employees will be required to operate cement and captive power plant. It is also required for cleaning the bag filters and certain pneumatically operated equipments. Compressed air Compressed air is required for pneumatic conveying and feeding of raw meal coal and cement besides for bleeding and fluidizing operations.40 115.000 384. The details of the manpower cost are indicated in the table below.000 312. Environmental aspects10 The potential pollution types for the project can be broadly categorized into‐‐‐‐ Air pollution The various sources of pollutants include— dust particulates from fly ash coal dust particles during storage/handling of coal ash dust particles during ash handling and disposal Castaway plans to take the following steps to reduce the overall impact on local air quality— electro static precipitators tall chimney use of low sulphur and nitrogen coal 10 Data through the research done by the company 30 | P a g e . Steam The plant does not require any steam for the purposes. 2.) 456. 4.
The emissions as per APPB norms should conform to the following norms. The project envisages reduction of 60000 MT of CO2 per annum resulting in carbon credits valued at Rs 150 lakhs per annum 31 | P a g e . blowers and compressors combustion chamber steam traps and leaking points Castaway plans to take the following steps to reduce the overall impact on local air quality— use of better acoustic systems to minimize noise generated by the equipments regular maintenance of equipments to minimize noise pollution The environmental management plan for the project has been prepared by castaway. covered storage for coal. total suspended particles (TSPM) 200 ppm RESUDIAL SUSPENDED PARTICLES (TSPM) 100 ppm Sulphur dioxide 80 ppm Nitrate oxide 80 ppm Cement manufacture yields around 1 MT of carbon dioxide for every MT of cement produced. On the basis of the plan. The various sources of pollutants include— polluted water from ash handling system sewerage generated blow downs from boilers and cooling towers run‐off water from coal piles sewerage Castaway plans to take the following steps to reduce the overall impact on local water quality— reverse osmosis system to recycle waste water sealing of ash pits to minimize seepage of water biological treatment facility for sewerage Noise pollution The project will generate noise from various locations like— steam generator rotary equipments like fans. castaway has approached the AP pollution control board (APPCB) for obtaining a no objection certificate (NOC) from the state government. wherever necessary use of wet system for ash handling Water pollution The project will generate significant quantum of pollutants that can damage water quality in the region.
electrical/instrumentation system design consultants and mechanical design consultants for project implementation. where it considers reduction of clinker content of Portland Pozzolana cement (PPC) and slag cement which are proposed to be manufactured. infrastructure and social development. Some cement sector credentials of IMM are as follows: 11 Data provided by the Matt Mac Donald to the company 32 | P a g e . limestone reserve conservation. The new 1. Thus would also reduce environmental problems like land destruction and erosion arising out lime stone quarry mining and its associated dust e missions. It would rely on it’s in – house technical expertise given the considerable experience of its chairman and key executives in setting up and running cement plants. The CDM activity therefore will reduce direct onsite missions from the clinkerization. Castaway proposes to install pollution control equipment to have a least possible dust emission levels from both the primary and secondary dust generating sources and will adhere to other norms prescribed by APPCB Clean Development Mechanism The company plans to adopt the clean development mechanism (CDM) in the plant. The techno‐economic feasibility study has been carried out by Mott Mac Donald (IMM) Techno‐economic feasibility study11 Castaway has appointed Mott Mac Donald India (IMM) for techno‐economic feasibility study IMM is a part of the Mott Mac Donald group head quarter in the UK and provided business planning and advisory services for a wide spectrum of clients in industry. by increasing the additive percentage to be maximum possible extent by using fly ash in the production of slag cement The above proposed reduction in the clinker percentage in the cement would conserve natural resources like lime stone and coal. The CDM project which has been conceived as an integral part of this cement project has excellent environmental benefits in terms of reduction of carbon emissions.25 million TPA cement plant project envisaged by CASTAWAY incorporates clean development mechanism (CDM) project activity. It would also help in reducing electrical energy consumption in the manufacture of cement. Further fly ash disposal by thermal power plant is a continuous environmental issue in India. It also helps in mitigating air and water pollution problems arising out of land‐fill dumps of fly ash. coal conservation. which is the main source of Co2 emission in the cement production. decreased environmental destruction etc Technical arrangements The company proposes to engage civil design consultants. The project activities facility fly‐ash utilization and reduce the coal of waste handling and disposal on the part of coal fired thermal power plants.
plant and machinery cost. Preliminary project profile on Vidhya cement Market survey on asbestos cement sheets for Shree Digvijay cement co. preliminary and preoperative expenses. Appraise the project cost including details such as land and civil works. manpower cost. manpower required along with requisite skill sets Validate project profitability 33 | P a g e . cost of term loan and working capital and other fixed and variable costs Validate cost of manpower. product mix. Ltd Energy conservation study for Gujarat Ambuja cement ltd Pre‐feasibility study for a cement project for the Arvind mills ltd Scope of the techno economic study The scope of work for the techno economic study encompassed the following Appraise the project configuration. Validate cost of production including cost of raw material and utilities. cost of miscellaneous fixed assets. pricing strategy and target markets.
grey colored mineral powder. Cement is capable of hardening in dry and humid conditions. and even under water. calcium aluminates. Burning a mixture of lime and clay to form clinker and then pulverizing the clinker into powder can obtain cement. and flexibility among others make it the world’s most popular building material. and can bind other materials like sand and coarse rock. The key requirement for this is that the hydrates formed on immediate reaction with water are essentially insoluble in water. Product profile Product description12 Cement is a finely ground. when mixed with water. once it sets. durability. cement is capable of taking on any three‐dimensional shape. Cement is such an effective adhesive that. a substance which sets and hardens independently. retain strength and stability even under water. Cement is composed of calcium silicates. after hardening. Most construction cements today are hydraulic. Cement is a blinder. and rock. cement holds the shape and volume. as a result of chemical reactions with the mixing water and. it is virtually impossible to break its bond to materials such as brik. gravel. Cement and the concrete made from it is as durable as rock. steel. which is the most widely used construction material. The project focuses on the Portland Cement (PC) and hence Portland cement is detailed in the subsequent section. Cement is remarkable shapeable: when it comes into contact with water and aggregates. 12 Data provided by the company through the Matt Mac Donald report 34 | P a g e . Product types Cement can be classified into two categories based on their composition as indicated below Hydraulic cement Hydraulic cements are materials which set and harden after combining with water. and its durability increases with the passage of time. such as sand and gravel. and most of these are based upon Portland cement. Despite climate conditions. Cement is hydraulic because. Cement can provide excellent noise insulation. Buildings made with cement products are more waterproof then the proportion of cement is greater than that of aggregate materials. it chemically reacts until it hardens. Qualities of cement Cement’s qualities strength. and calcium ferrites.
early strength can also be maintained. mortar and most non‐specialty grout. expansive clinkers (usually sulphoaluminate clinkers). Portland cement (PC) Portland cement is the most common type of cement in general usage. ”set” only by drying out. with the rest Portland clinker and a little gypsum. Mexico. hydrated lime. Subtle variations of masonry cement in the US are plastic cements and stucco cements. Chile. but also includes cements made from other natural or artificial Pozzolan. in addition to Portland clinker. cement and water. the Philippines) these cements are often the most common form in use. Where good quality cheap fly ash is available. Concrete is a composite material consisting of aggregate (gravel and sand). They are usually complex proprietary formulations containing Portland clinker and a number of other ingredients that may include limestone. as it is a basic ingredient of concrete. Masonry cements are used for preparing bricklaying mortars and stuccos. Categories of Portland cement Based upon the chemical composition Portland cement can be classified as below:‐ Portland blast furnace cement contains up to 70% ground granulated blast furnace slag. air entries. early strength is reduced. for example. Italy. This allows large floor slabs (up to 60 m square) to be prepared without contraction joints. In countries where volcanic ash are available (ex. Portland Pozzolan cement includes fly ash cement. water proofers and coloring agents. lime mortars. while sulfate resistance increases and heat evolution diminishes . and designed to offset the effects of drying shrinkage that is normally encountered with hydraulic cements. which must be kept dry in order to gain strength. this can be an economic alternative to ordinary Portland cement. so that ultimate strength is maintained. and must not e used in concrete. and oxychloride cements which have liquid components. As a construction material. Addition of silica fume can yield exceptionally high strengths. They are formulated to yield workable mortars that allow rapid and consistent masonry work. Portland cement may be gray or white. The most common use for Portland cements in the production of concrete. All compositions produce high ultimate strength. Non hydraulic cement Non hydraulic cements include materials such as (non hydraulic) lime and gypsum plasters. retarders. concrete can be cast in almost any shape desired and once hardened can become a structural (load bearing) element. The fly ash is Pozzolanic. and gain strength only very slowly by absorption of carbon dioxide from the atmosphere to re‐form calcium carbonate. However. Because fly ash addition allows lower concrete water content. Portland silica fumes cement. silica fume is more usually added to Portland cement at the concrete mixer. but as slag content is increased. Since fly ash is a pozzolan.used as an economic alternative to Portland sulfate‐resisting and low‐heat cements. and cements containing 5‐20% silica fume are occasionally produced. These are designed to produce controlled bond with masonry blocks. Portland fly ash cement contains up to 30% fly ash. 35 | P a g e . Expansive cements contain.
and once hardened. and colored cements are sold as “blended hydraulic cements”. or may make cast‐in‐situ concrete such as building superstructures. and water. In other standards. such as panels. These may be supplied with concrete mixed on site. Dams. Product mix Castaway proposes to produce OPC with 40% of the clinkers produced while the balance 60% would be used towards manufacturing PPC. As a construction material. 36 | P a g e . beams. cement. road‐beds. Portland cement is also used in mortars (with sand and water only) for plasters and screeds. the addition of pigments to produce “colored Portland cement” is allowed. can become a structural (load bearing) element. Colored cements are used for decorative purposes and some standards. etc). pigments are not allowed constitute of Portland cement. Product applications The most common use for PC is in the production of concrete. White blended cements may be made using white clinker and white supplementary materials such as high‐ purity Metakaolin. roads. concrete can be cast in almost any shape desired. Users may be involved in the factory production of pre‐cast units. Concrete is a composite material consisting of aggregate (gravel and sand). and in grouts (cement/water mixes squeezed into gaps to consolidate foundations. road furniture. or may be provided with “ready‐mixed” concrete made at permanent mixing sites.
Stacker or limestone s storage capac city is 30000M MT Fo Sta acking rate is s 650 TPH Bo oom length is 20 meter Re claime er apacity is 30000 MT Ca Ra ate is 450 TPH H Ra ail center is 33 3 M Re ecommended d motor is 75 KW 13 Data pro ovided by the c company 37 | P a g e . The insta alled capacity y of the plant is 1.74 to 7. a as validated b by Mott Mac c Donald in th heir report is a as under: A) (A Cement plant Main crus sher apacity of the main crusher is about 900 0 TPH Ca It w will be an imp pactor type o of crusher Medium to har rd lime stone can be crushed with the c crusher Inl let opening o of the crusher r is about 180 00 mm‐2200m mm 10 000 KW motor will be requ uired It is to be noted that the capacity is suitable for the proposed productio e r on program of castaway Apron fee eder apacity of the apron feeder is about 900 0 TPH Ca Width of the ap pron is 2400 m mm Ce enter distance e is 1100 mm Inc clination is ab bout 23 degre ee Co onveying spee ed is about 0. 3 Plant t and Machinery13 The produ uction proces ss is the dry process kiln h having a 6‐stage pre‐heat ter and pre‐ca alciner.the kiln and Pre‐C Calciner will be fired with c coal.4 m/m min 90 0 KW/1500 RP PM motor wil ll be required d It is to be noted that the specifications a are as per the e requiremen nt to match th he proposed production progra am of castawa ay.25 millio on TPA. A brief sy ynopsis of the e key compon nents of the c cement and t the captive power plant.
5 degree Kiln speed is 4.5 maximum Single drive motor 340 KW Pyrostep clinker cooler Cooler type‐Pyrostep Grate surface 63 sq meter Specific loading 47.6 dia M * 14. max. Vertical mill for coal grinding Capacity is 30 TPH Classifier rotor size is 2500 mm – 900mm Pre heater Pre calciner Inlet chamber with brick retaining shell Connecting pipes for the gad stream with seals Raw material pipes with pendulum locks and compensators Kiln Rotary kiln three tyre 3.5 RPM normal and 5.8 M * 56 M Kiln inclination is 3. 80mm Capacity ‐260 TPH Grinding fines‐15% R on 90 microns Grinding table ‐3750 MM Clinker grinder with ball mill Double chamber ball mill 4.6t/sq meter Number of air fans‐8 Raw mill blending silo and kiln feed system Silo capacity 8000 T Feeding capacity 250‐315 TPH Discharge capacity 300 TPH Kiln feeding system Feeding capacity is 300 TPH Discharge capacity is 300 TPH Bin diameter * height is 5*7 meter Vertical roller mill for raw material Feed material – cement raw material Feed size ‐95% <75 mm.5 M length 38 | P a g e .
Detail specifications of some of the plant and machinery items are as shown in annexure XI Captive power plant Captive power plant using is a proven technology and is extensively adopted by players in the cement industry. There will be two steam turbines with each having a gross capacity of 7.6 kV level and later stepped down to 433 V for usage Extraction type condensers will be used to improve power generation Condensate energy will be used to heat feed water .5 MW to improve operating flexibility. Power will be generated at 6. The features of the technology being procured by the company include— The steam turbines will have a gross capacity of 15 MW.which will improve plant performance Reverse osmosis system will be installed to use wastewater generated in the plant operation to be recycled as make‐up feed water Automation to improve controls Adequate environmental safety measures 39 | P a g e .
It was observed that the limestone deposit is right next to this proposed plant.02. Implementation status Our executive visited the plant site in MAY 07. of Andhra Pradesh for an area of 183. Status Under process Obtained Obtained Under process Under process Under process Under process Under process Cleared on 28/04/07 14 Company applied for such approvals 40 | P a g e .copy of the order dated 09.02. Status of approvals and implementation status14 Approvals are required from various statutory and governmental agencies for setting up cement plant and mining activities.e. the company has obtained acknowledgement for the IEM filed with secretariat for industrial assistance. Ancillary equipments required are under finalization.f 09. During the visit. Plant approvals Approval Content of establishment of industry from APPCB IEM acknowledgement from SIA Grampanchayat approval Director of town and country planning approval Permission under factories act Confirmation of power availability from APTRANSCO NOC from APPCB MOEF clearance Public hearing held during Mining approvals Castaway cement has obtained mining lease sanctions from govt. The existing plants were found to be operational. government of India.11 hectares for a period of 20 years w.2000 is as placed in annexure IV The company proposes to apply for similar sanctions for the balance 73.2000. ministry of commerce and industry. Further.93 hectares proposed in this project and which is required for its future mining operations. Preliminary geological survey has been conducted at the limestone deposits to assess the reserves and quality of the deposits. the land demarcated for the propose cement plant and also that for the captive power plant were seen. Necessary applications for the approvals from different authorities as cited above have been made. Core machinery requirement have been finalized and orders are being released. Given below are the various approvals required for setting up the project along with their present status.
51crores.11 hectares of mine is currently on lease with DCL.01 Rs. land‐118 acres and Patta land 143 acres) costing Rs.00 180.in crs 3.93 hectares of land for its future mining operations.51 The details of the various project cost components are as under : a) Land and site development This head has three components: 1. parks etc.00 5.43 4.93 378. godowns.00 70. Land for mining purposes The plant area is adjacent to the limestone mine of which 183. castaway is in the process of acquiring an additional 261 acres of land (govt. mandatory green belt. Cost of project15 Project cost The cost of project is estimated at Rs. 4.97 2.03 0.00 8. It proposes to obtain lease for an additional 73.73 17. fixed assets Contingency IDC Preliminary & preoperative expenses Working capital margin Total project cost Rs.crs) 0.80 acres at its disposal on which new plant will be constructed.crore 12. Factory land Govt land Patta land Total Acres 118 143 Rate(rs.85 19. Crorers. administrative building. The capital cost estimated prepared by the company have been vetted by Matt Mac Donald and are summarized below: Project cost land & site development Civil works Plant &machinery Power plant Misc.0 50. Land for the cement plant and the captive power plant The company already has 78. This land will be for power plant. 378.00 15. 15 Done by us as the financial aspects of the company 41 | P a g e . railway siding. However.97 crores.54 1.
00crores.raw heat bag house 6.000.000 44.000 42 | P a g e .000 1 1 1 1 1 1 1 1 1 1 1 1 1 3 2 2 5 2 3 2 6 SHED 2 5 CUM CUM CUM MT CUM CUM CUM CUM MT CUM MT CUM CUM MT CUM 1000 4000 1800 12000 5000 1200 2600 2000 35000 500 4000 600 5000 6000 300 9000 11000 10500 3300 12000 9000 9000 9000 1500 9000 4000 9000 11000 4000 9000 9. Details of civil costs are given below Department S.000 23.gypsum stock pile 13.rotary kiln & TA duct 9.000.600.cement mill building 16.93 Rate(rs.000.000 18. of floors Units CUM CUM Quantities 2000 2500 Rate 9500 9500 Amount (rs) 19.46 ACRES Mining land Compensatory land Aforrestation cost Total Hectares 73.000.dump hopper No.cement mill hoppers 15. Per acre) 40000 50000 Rs. Therefore.000.727 0.000 5. 5.raw material grinding section 5. on the basis of the NPV for the acquired land.000 72.000 23.31lakhs per hectare needs to be remitted to the govt.83 hectares works out to Rs.000 16.000 10.750.Lime stone stacker & reclaimer 3.clinker tank 12.000 18. lime stone crusher 2 . Building and other civil structures The total cost of buildings is estimated at about Rs.000.93 73. 70. the total NPV for 73.500.400. 3.900.of units 1 1 No.000 55.000.fly ash silo 14.grate cooler & ESP 10. ONE HECTARE =2.cement storage silo’s 17.909 1.N Name A)plant structures 1.636 An additional amount of Rs.Raw material feed hopper 4.000 5. Thus. the total land and site development cost is estimated at Rs.raw heat blending silo 7.000.coal mill 11.in crs 0.40crores.preheater tower 8. 7. 12crores.400.000 60.000 4.400.000 39.000 52.500.800.
000 28.000 54.000 700.000 24.work shop 26.packaging plant including truck loaders 19.000 300.”A” type quarters 32.000 10.000.020.000 800.administrative building 24.000 4.CCR building 20.000.000 6.canteen 28.stores 27.000.480.000.000.000.load centres (3 no’s) 21.000 60.cable tunnels Total plant structures B)Non plant structures 23.”C” type quarters 34.”B” type quarters 33.000 3.000 18.000 9.000 SQM SQM SQM SQM SQM Gallons LS LS 2000 50 2000 2000 400 60000 9000 6000 5000 5000 7000 60 120 500 7500 7000 8000 6000 2.000 14.320. for additives 18.000 1 3 1 1 1 1 1 1 1 1 2 3 4 6 8 2 2 2 2 1 2 3 3 SQM CUM CUM CUM 1600 2000 600 500 8000 10000 8000 8000 12.800.600.security & time office 25.000 24.Weigh bridge 30.80.000 71.colony roads drainage Total colony structures Grand total 1 6 CUM 1900 10500 19.00.”D” type quarters 35.000 574.000 500 500 43 | P a g e .500.conveyor foundations 22.000.underground water tank 29.000.000.000.700.Roads & drainage Total non plant structures C) COLONY STRUCTURES 31.950.000 4.000 10.
00 44 | P a g e . 5. 6. HT and LT power and control cables IV. gearboxes.00 7. Mill internals.00 5. PLC automation system/instrumentation VII. Discussion with the equipment suppliers.6 KW switch boards III. The detailed break‐up of the plant & machinery is as follows: Plant & machinery A.00 7. weigh Feeders.20 14. Crusher. kiln feed system) IV.28 2. conveyors. ESP etc Bag house.00 2. roto packer model with wagon loading machines Total B.00 3.00 10.00 7. raw meal blending silo. apron feeder II. silo internals. refractories and castables. Vertical mill for coal grinding phroprocessing (including pre heater.00 2.85 51. International benchmarks available based on evaluation of similar plants setup globally. reclaimer III. VFD drives VI.00 7. Electrical & instrumentation of cement plant I. 4. staker.00 37. The cost of plant & machinery has been validated by IMM based on— Quotations received by the client from the suppliers.00 9.35 8. elevators. Packing plant. Plant lighting VIII. Information available with them.00crores respectively. II. Plant and machinery The total cost of plant & machinery & miscellaneous fixed asset is estimated at about Rs. Cement plant‐core equipments I. Clinker grinding with ball mill VI.00 47. power and distribution transformers etc.00 14. HT and LT motors V. etc Total 1. circuit breakers. kiln. 180crores & Rs. gear boxes Aux.92 3.00 4.00 8. Vertical roller mill for raw material V. Miscellaneous Total C. Research papers published by various reputed universities. clinker cooler. Auxillary equipments Process fans.40 18. which was collected for carrying out asset valuation assignments or TEFR studies for similar assignments. 132 KVA switch yard.00 1.
00 The proposed technology suppliers for the project are as listed below while the credentials of a few of them are as in annexure XI: Sr. 5. Mining equipments Mining equipments worth Rs. Railway siding Total 25. India M/s. Ltd.00 10. 4.20 0.30 0.60 0.00 45 | P a g e . Pfeirffer India P. India Humboldt Wedag India P. Ltd. Pfeirffer India P.7 Cu meter‐2 no Dumper‐35 ton ‐5 no’s Bull dozer‐2 no’s Pay loader‐2 no’s Crawler mounted drill‐100 mm Wheel mounted drill‐100 mm‐ 2no Diesel compressor‐1 no Total cost Supplier Hind Marion L&T BEML BEML BEML Ingersol rand Ingresol rand Consolidated pneumatic Rs. India M/s Alston India Ltd.60 0. 3.00 170. 8. Gebr. Ltd. Mining equipments Shovel 1. Crusher & apron feeder 2. D. Stacker & reclaimer Vertical mill for coal grinding Pyroprocessing equipments Vertical roller mill Clinker grinding with ball mill Packaging plant Electrical Auxiliary equipments Miscellaneous equipments Fabrication Railway sidings Suppliers M/s Gebr. 9. India Supplier being identified Supplier being identified Supplier being identified Supplier being identified Supplier being identified Supplier being identified 5. 11.in crores 1. The same would be employed for mining the limestone which is one of the critical raw materials. 6.no Description 1. India Humboldt Wedag India P. 10.46 1.20 4. 12crores is proposed to be procured. India Tecpro systems limited.14 10. Ltd. 12. Erection & fabrication E.50 1.91 Cu meter‐1 no Excavator 3. 7.
85crores is estimated at 5% of all hard cost components.50 4. Contingency Contingency cost at 5% of the total hard cost has been assumed since the company has not placed orders for the entire set of plant and machinery. Preliminary & preoperative expenses Preoperative expenditure of Rs. The construction period has been considered as 21 months starting from JULY 2008 and the production is expected to start from 1st April 2010. Interest during construction (IDC) The project cost is proposed to be part financed through a term loan of Rs. Apart from these fees. the IDC has been estimated at Rs. other pre‐operative expenses like salaries. travel. to account for any unforeseen escalation in prices.73crores for the project.50 3. salaries. Captive power plant The 15 MW coal fired captive power plant is to come up at a cost of Rs. The supplier identified by the company for the captive power plant is M/s Greensol power systems 7. 6.33 0.10 2. traveling. based on the calculations for the first full year of operations for the project.87crore.93crores. 15. 19. The particulars for the same for the year 2009‐10 are as follows: Particulars Lime stone Gypsum+iron+laterite+coal Fly ash Coal for power plant Stores & consumables Packing material WIP‐clinker Cement (FG) Sundry debtors Basis(months) 0.17 1.50 2.10 1.00 0.092crores has been estimated taking into account the cost of up‐ front fees. 9. These costs have been capitalized over the fixed assets in proportion of their hard costs. Accordingly. 10.00 Amount(rs. financial and legal expenses too have been accounted for.crs) 0.50 1. a contingency of Rs. 240. Hence.3. communications and consultancy costs.00 1.00 0.00 0. The cost of rs.10 46 | P a g e . 8.the interest up‐to the commencement of the production has been considered as IDC. 10.23 0.90 25. 50crores. 8.17 1. Working capital margin The margin money for working capital requirement of the project is estimated at Rs.33crore per MW is considered reasonable for such kind of projects. The total pre‐operative expenses amount to 2% of the total project cost and these primarily comprise of fees payable to various consultants engaged for the project.50 0.
00 17.98 350.81% 1.Similarly.90 14.89% 14. the same works out to Rs.85 2036.96% ‐4.90 The detailed computation of working capital is given in annexure IV Cost comparison16 As the cement industry is in consolidation stage.76 3895.71% 0.84 3719.) Acc ltd 16 source: ISI emerging markets/ CRIS INFAC/ SBICAP Analysis 47 | P a g e . In this project’s case.31 4.77% 15.38 1219.61 2388.60 Current liabilities 5.68 2376.45 machinery P& M cost 2176.00 Tons) Plant & 4048. this project is a new project to be put up right from scratch.35 3461.24% 31.47% 14.61 1975. common equipment and other facilities enjoyed in expansion projects.95 2187.14 Rs.29 445. Unlike an expansion project.57 1002. Based on the foregoing.39% 25.58 229.85 277.80 17.31 PAT 231. an attempt for cost comparison has been made vis‐à‐ vis analysis of some key performers in the cement industry are as follows: Gujarat India Ultratech ambuja cements cement cements Ltd.65 3454.17 468.40% 12.88 1561.46 2318.28% 19.00 5. Per ton The performance of ACC.39% 6.50 margin(NWC) Margin money for working cap 25% of NWC 7.2700‐3000/ tone.97% Capacity (mn. GACL & Ultratech cements can be classified as strong while that of India cements is just fair thus demonstrating the benefit of economies of scale in this industry.21% 16.08 2714.31% PAT/Sales 16.15 803.76 2.60 18. In the absence of a detailed break up.40 2700.85 PBDIT/Sales 27. Current assets 37. the total cost may not be comparable due to the underlying advantages of the existing land.85 596. most of the plants that have come up in the recent past are capacity additions.67% 10. (GACL) CY06 CY05 CY06 CY05 CY06 CY05 CY06 CY05 PBDIT 1930.74 2883.80 8. 18.20 14. 2700 per ton of the capacity (approx. Ltd.10 Sundry creditors 1.75 2140.84 725.60 8. the cost of plant & machinery for most of the key performers falls in the range of Rs.60 Net working capital 31.77 216.56% 5.
if any.87 378. The left over equity is brought up according to the needs. The schedule is given below: Schedule Quarter sep‐09 Quarter dec‐09 Quarter mar‐10 Unsecured loans. The company needs to increase the authorized share capital to an appropriate level if they are to bring in additional equity.51 1.64 240.75:1.75 Crores 34.the funding pattern for the project would thus be as under: Sources of funds Equity Debt Total Debt to equity ratio Equity The total equity requirement for the project is estimated at Rs.71 Done by us as the financial aspect of the company 48 | P a g e . Means of finance17 The funding of the cement project is proposed at a debt to equity ratio of 1.64crores which is brought in the following manner: 2. Rs.29 19. 68. will be subordinate to the term loans from banks/institutions and will not carry any interest.82crores is the up‐front equity which is brought up from the beginning by the promoters 3. 137. In crores 137.82 14. 17 Rs.
e.93crores.25% Bank PLR 12. 8. The company would be approaching the working capital bankers separately for the grant of working capital limits.87crores for the project.00% NEXT 24 qrts‐qtrly repayment of 3. 49 | P a g e .. The proposed terms and conditions of the term loans are given below— Particulars Facility Tenure of loan Terms Rupee term loan /foreign currency loans 40 quarters i.(10 years door‐to‐door) (7 qurly drawals from jul‐08 to apr‐10 ) 2 qtrs moratorium. Terms loans The company proposes to raise term loans aggregating Rs. This has been assumed from the first year of full operations.33% Next 4 qtrs‐qtrly repayment of 3.31 qtrs repayment) 6 months from the date of commencement of operations 31 quarterly installments commencing from QE jun 11 1st 3 qtrs‐qtrly repayments of 3. 240.00% (BPLR MINUS 25 BASIS POINTS) 50% of the loan amount payable up‐front ‐First pari passu charge on all movable and immovable fixed assets of the company ‐Second pari passu charge on the current assets of the company Moratorium Repayment Interest rate Up‐front fee Security Working capital arrangements The project would necessitate working capital loan of Rs.
31% 191.47 respectively.45 405.84 70.94 287.65 67.54 137.58 45.46 261.27 37.64 88.42 17.72 137. clinker & power Other income PBDIT Depreciation Interest PBT PAT Cash accruals Share capital Reserves & surplus(incl shares premium) Tangible net worth DSCR Min.00 91.82 0.79 42.64 200.22 3.00 29.55 44. which reflect that the projected cash flows are adequately robust to meet the debt service obligations.69 52.63 203.16 Mar‐ 12 90% Mar‐ 13 100% Mar‐ 14 100% Mar‐ 15 100% Mar‐ 16 100% Mar‐ 17 100% Mar‐ 18 100% Mar‐ 19 100% Mar‐ 20 100% 258.76 137.22 31.75 287.54 1.80 17.94 0.22 10.57 17.38 1.00 91.00 91.43 35.22 25.22 17.03 137.58 137.94 287.36 0.37 338.77 132.00 96.67 34.22 298.95 70.94 287. profitability statement.11 424.59 286.03 137. DSCR IRR Mar‐11 80% 227.58 35.37 46.64 123.89 7.05 0.45 0.42 0.52 1.22 14.22 6.81 1.74 25.37 97.64 23.94 287.62 17. Financial projections Financials of the project The projected financial performance of the project on a “stand‐alone” basis is detailed under: Project financials Capacity utilization Net sales: cement.70 471.25 46.71 61. VI.74 0.54 287. DSCR Avg.87 161.76 1.03 39.97 23.91 The average and minimum DSCRs are comfortable at 1.00 380.64 160.64 379.42 17.41 63.73 0.22 3.40 53.00 84.42 17.47 0.00 91.00 91.11 242. 50 | P a g e .00 91.22 21.07 517.20 17.51 1.47 1.15 167.00 90.64 333.77 21.54 137.00 91. balance sheet and cash flow statement for the project on a stand‐alone basis have been placed at annexure V.64 53.93 56.64 242.64 287.17 60.92 137.47 1. Projected Capex & debt raw schedule.09 223.58 1.42 17.37 346.77 and 1.II statement.42 17.09 137.58 0.42 17.I.94 287.62 137.94 287.66 1.22 28.
77 1.47 1.96 1.41 1. DSCR 1. even in these scenarios.53 1.76 1.85% 21.95 1. However.50% The summary of the sensitivity analysis is provided hereunder: scenario Base case Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Project IRR 21. The debt service obligations are comfortably met.11% Min.21% 23. Sensitivity analysis A sensitivity analysis has been carried out to ascertain the effect of the following scenarios on the major financial parameters of the project: Scenario Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Description Increase in project cost by Increase in operating cost Decrease in selling price Reduction in capacity utilization Increase in interest cost 5% 5% 5% 5% 0.56 Avg.55% 23.02 It can be seen that the DSCR is more sensitive to variation in decrease in the selling price as well as the increase in the operating cost and the reduction in the capacity utilization.53 1.73% 25.31% 24. DSCR 1. 51 | P a g e .54 1.96 2.
The transportation of coal is by road and other raw materials are to be procured from distances ranging from 100‐300 kms. Firm contracts are yet to be placed for supply of equipments. The risks have been classified as pre and post completion risks. is marketing knowledge in the southern region Andhra Pradesh has a large resources of skilled as well as unskilled manpower. However. lenders may stipulate for suitable clearances from the project based on the progress made. Risk factor Management risk Operating risk Proposed mitigation mechanism Castaway proposes to operate the cement plant by itself. Risk analysis18 The risk associated with the project and the proposed mechanism for mitigation of these risks is mentioned below. Limestone mines‐a critical raw material are located adjacent to the plant site. This is the factor which is risky and has to be taken care of. especially for commanding higher realizations. approvals for the same are under process. Lenders may stipulate for 50% upfront equity from the promoters. Through castaway does not envisaged any problem in obtaining the clearance. The lenders may have cost over‐run support from promoters towards the project in the form of equity or debt subordinated in principal and interest to the senior lenders. Marketing knowledge risk Employee risk Transportation raw material Withdrawal promoters Pre –completion risk Construction period risk/time overrun Cost overrun Funding risk Post completion/operation risk Environment risk Power availability risk 18 Done by us for calculating the risk factors 52 | P a g e . The company may submit firm purchase orders to the lenders as and when placed. Adequate contingency provisions have made in the project cost. Not envisaged Reputed equipment suppliers have been identified and orders are being placed. A critical success factor in this business. The company plans to set up a captive power plant of 15 MW and also plans to take up balance load from the state grid.
Castaway proposes to operate the plant in‐ house. Tamil Nadu and Karnataka. the company does not envisaged any payment risk in this regard. Also dry process for cement manufacturing is proven internationally and plants with similar technology are performing satisfactorily in India. The view of the long standing experience of promoter in this area. castaway currently sells around 90% of its entire production in Andhra Pradesh (AP) itself and the rest 10% in the border areas of Maharashtra. Further. no risk is foreseen Payment risk Technology risk Plant performance Plant maintenance 53 | P a g e . As castaway would be selling through stockiest/retailers on advance payment basis and /or at the credit norms prevalent in the industry. The company’s brand “castaway cement” has a good quality perception and it caters to the state of AP through a network of 600 dealers. Castaway is well equipped with the necessary expertise. Market risk Off‐take risk Castaway never been in the cement business.in order to have the strong business network they have to do the marketing with great care.
the company will have to make aggressive efforts to sell the production. This has raised expectation of an increase in margins and realizations from the cement in future. given the scale of operations of its competitors as also their relative financial muscle. although. 19 Done by us to known the parameters affecting the company 54 | P a g e . Scot analysis19 Strengths Low debt level and a strong credit track record The promoters have demonstrated expertise in setting up cement plants and operations thereafter CASTAWAY has a team of professionals who have a rich experience in the cement industry Proposed captive power plant will improve operating efficiencies Location of the project near its captive mines ensures availability. Cost Pressures ‐ The profitability of the industry has high correlation with the prices of key raw materials such as limestone.00 million TPA. they have not been able to pass on the entire increase to the customer ‐ Highly capital intensive ‐ It requires about Rs 400crore to set up a cement plant with a capacity of 1. Opportunities The positive trend in the cement industry is expected to continue due to increased housing demand and implementations of major road projects in the coming years. ‐ Pricing Pressures – The huge raw material costs have resulted in pressure on the realizations and hence. due to competitive pressures. it is considered necessary that Castaway associates itself with companies having experience in the industry through equity participation or alternatively through marketing/branding agreements. Cement industry faces tough competition. the players have been vouching to increase the prices. So. Notwithstanding the promoter’s expertise in the field. coal etc as they account for more than 70% of the total costs. any hurdle in getting approval on time is not perceived. reliability of supplies and lower transportation costs Proximity to railways and roadways Concerns key approvals required for project implementation are pending: The company has started the process of applying for various approvals. Since they are new players and also since the project is to come up adjoining to their limestone mines. Price of cement has firmed up in the current financial year.
It acquired companies like Tisco cement and Raymond Wollen in 1999‐2000.1 MT capacities of Mysore cements. Holcim and Heidelberg. Availability of cement grade limestone in the area is abundant leading to enough opportunity for the plant to increase the capacity. Repeal of urban land ceiling regulation act will give further impetus to the housing sector thus increasing the demand for cement. ACC and ACEL. followed by Italcementi. Lafarge was the first MNC to enter the Indian market. Threats Consolidation in the industry The cement sector has been witnessing a lot of consolidation and foreign entrants over the past few years. 55 | P a g e . This would help large players cut competition from small regional players. Its aggressive acquisition strategy has made Holcim the largest MNC player in the cement sector currently Holcim has a total of 34 mn tones of capacity through GACL. Heidelberg entered India by acquiring indo Rama’s capacity of 1 MT and has now acquired 2.
4% in FY2006. was taken over by India Cements in FY1998.85mtpa at end‐ FY2006.16mtpa). the Yerraguntla unit in Andhra Pradesh. The main attraction of the mini‐cement plant concept is the lower capital costs per tonne of capacity as compared to large plants. 3500+ per tonne of capacity of large plants. Among cement public sector undertakings (PSUs).9mtpa). 1. 20 http://icra.400‐1. The share in production of the public sector companies is even lower at 1.5% in FY1996. Also. the share of public sector companies has declined from a level of 11% in FY1996 to around 4. cement has been one of the most important areas of operations for the Indian private sector.600 per tonne.icra. Other PSU companies manufacturing cement include State entities such as UP State Cement Corporation (3 units with total capacity of 2. Against the requirement of Rs. This reduces to a large extent the fixed cost per tonne of cement produced. which belonged to CCI. the share of the public sector in cement production has declined. the cement industry is witnessing a number of Mergers & Acquisitions (M&A).2% in FY2006 as compared to 6.in/recentrel/Cement‐200607. The extent of concentration in the industry has increased over the years. Cement was also the industry of choice of many corporate diversifying away from the troubled traditional areas of jute and textiles. The three units of UP State Cement Corporation have been closed since early 1998. While the private sector (large companies) accounts for around 95% of the total installed capacity. cement was not deemed to be the exclusive preserve of the State sector in the post‐independence development strategy. to increase regional development and to make use of smaller limestone deposits. Construction of such plants began in the early‐1980s and their capacity (including capacities of white cement plants) aggregates about 11. These units were taken over by Jaypee Group in FY2006. Unlike much of heavy industry and utilities.1mtpa. Accordingly. Given the extent of losses being incurred by most of these plants. The Mini‐Cement Industry21 In order to reduce transportation as well as capital costs. a central PSU. Cement Corporation of India (CCI). capital costs for mini‐cement plants come to about Rs. Over the years. and Tamil Nadu Cement (2 plants with a total capacity of 0.com 56 | P a g e . Declining Role of Public Sector20 Historically. many mini‐cement plants have been set up in dispersed locations across India. is the leading player. restructuring and revival through privatization appears imminent. as the main market is in the vicinity of a mini‐cement plant. This concentration is mainly because of the focus of the larger and the more efficient units to consolidate their operations by restructuring their business and taking over relatively weaker units. It has 10 cement plants with a total installed capacity of 3. The relatively smaller and weaker units are finding it difficult to withstand the cyclical pressure of the cement industry.pdf 21 www. savings are large on transportation costs. Industry outlook As discussed above.
semi‐dry) exist for both types.3% of total excise revenue collected by the government. Clinker production is the most energy‐intensive step. these terms refer to the grinding processes although other configurations and mixed forms (semi‐wet. India is the second largest producer of cement in the world. silicon oxides. A backup DG set for meeting 25% of the power is however usually provided FOR. India produced 142mt of cement. with an installed capacity of 144 million tonnes. It is a significant contributor to the revenue collected by both the central and state governments through excise and sales taxes. Cement has consistently figured among the top 5‐7 commodities. Indian cement industry The Indian Cement industry is the second largest cement producer in the world. Majority of the production of cement in the http://icra. accounting for about 80% of the energy used in cement production. The Indian cement industry is a mixture of mini and large capacity cement plants. The industry is highly energy intensive and the energy bill in some of the plants is as high as 60% of cement manufacturing cost. The industry has undergone rapid technological up‐gradation and vibrant growth during the last two decades.1% per year between 1981 and 2004‐05. In cement production.14 million people. India's cement industry‐both installed capacity and actual production‐has grown significantly over the past three decades. central excise collections from cement industry aggregated Rs.pdf 22 57 | P a g e . and blending the materials. raw materials preparation involves primary and secondary crushing of the quarried material. drying the material (for use in the dry process) or undertaking a further raw grinding through either wet or dry processes. the cement manufacturers are very conscious of the technology used. Although the newer plants are equipped with the latest state‐of‐the‐art equipment. The mini‐cement plants rely almost entirely on the State Electricity Boards (SEBs) for power supply. Produced by burning a mixture of materials. clinker is made by one of two production processes: wet or dry. For example. significant competition from large‐scale units and rising cost of production. All these benefits however are negated by other factors like diseconomies associated with small‐ scale operation. It is a heavily taxed commodity and the duties amount to around 30% of the selling price of cement. 45.23 billion in FY2005 and accounted for 4. Process Technology While adding fresh capacities. accounting for 6.in/recentrel/Cement‐200607. with production increasing at an average rate of 8. and some of the plants can be compared in every respect with the best operating plants in the world. and iron oxides.3% of GDP and employs over 0. mainly limestone.22 billion tonnes.4% of global production of 2. but ahead of the US (99mt) and Japan (66mt). Importance to Economy22 The cement industry accounts for approximately 1.000mt). India is the second largest producer‐behind China (1. ranging in unit capacity per kiln as low as 10tpd to as high as 7500tpd. there exists substantial scope for reduction in energy consumption in many of the older plants adopting various energy conservation measures. aluminum. since captive generation is uneconomical for small size. In 2005.
At present there are 124 large rotary kiln plants in the country. Major cement producing states24 Madhya Pradesh Maharashtra Karnataka Andhra Pradesh Chhattisgarh Rajasthan Production growth Momentum continues25 India's cement production increased 9. The cement industry has achieved significant progress in terms of reducing the overall energy intensity. The southern region is the most cement rich region while other regions have almost same cement production capacity. 23 www. The industry presents a mixed picture with many new plants that employ state‐of‐the‐art dry process technology and a few old wet process plants having wet process kilns. and top cement companies of the world are vying to enter the Indian market. Production from large plants (with capacity above 1 MTPA) account for 85% of the total production.reportbuyer. Despite the fact that Indian cement industry has clocked a production of more than 100m tonnes for the last five consecutive years. Salient features of Indian cement industry23 Indian cement industry is the second largest in the world with an installed capacity of 135 MTPA. the per capita consumption of around 130kgs compares poorly with the world average of over 260kgs and more than 450kgs in China. There is regional imbalance in cement production in India due to the limitations posed by raw material and fuel sources. and weighted average electrical energy consumption was 89 kWh/tone of cement. Dry process plants that the weighted average thermal energy consumption was 734kCal/kg clinker. There are 124 large plants and around 365 mini plants. country (94%) is by large plants.com/industry_manufacturing/construction/opportunities_trends_indian_ cement_industry. which are defined as plants having capacity of more than 600tpd.icra. The best energy consumption is 692kCal/ kg. The Ordinary Portland Cement (OPC) enjoys the major share (56%) of the total cement production in India followed by Portland Pozzolana Cement (PPC) and Portland Slag Cement (PSC). exploiting the natural resources to the full extent. Most of the cements plants in India are located in proximity to the raw material sources.com 24 Source: Cygnus Research 25 http://www.5% during FY07 to 155. This. It accounts for nearly 6% of the world production.31m tonnes from 141. A positive trend towards the increased use of blended cement can be seen with the share of blended cement increasing to 43%.html 58 | P a g e .81m tonnes in the FY06. Clinker and 66 kWh/ton of cement. Production capacity has gone up.
59 | P a g e . more than anything underlines the tremendous scope for growth in the Indian cement industry in the long term.
we still remain positive on Grasim (diversified nature of business) and India Cements (deficit in South till FY09E). However.a. 27 http://www. With the regional analysis of the demand supply mismatch. versus our assumption of 10% p. regional players in South (India Cement and Madras Cements) would not have a sharp correction as compared to the northern players.com/content/rep/Sector_Updates/2006/4/2442006/Cement_Sector_Update_1512 05. assuming demand growth of 10% p.indiainfoline. continues. resulting in the de‐ rating.9 mn tonnes (45% of total surplus) in FY09E. We will be shortly introducing FY09E earnings estimates and we expect cement realizations to decline by 5‐ 8% YoY in FY09E depending on the region due to oversupply.a. Considering this reversal in the cement cycle. as the region would have surplus of 4. seeing both sides of the coin for pan India players. due to the demand supply mismatch. the companies will not command the premium valuations that they did during the uptrend.a. However. though the surplus may come down to 2 mn tonnes from 11 mn tonnes in FY09E. We expect a mixed bag.6 mn tonnes of cement capacities between FY07‐ FY10E. Profits for the companies would fall by 15% to 20% YoY in FY09E for pan India players like Grasim. which would have a negative impact on the earnings. This surplus situation is driven by addition of 96. The surplus would lead to price correction impacting the profits of the companies. as surplus situation is not seen till FY10E.pdf 27 Exhibit 1‐‐Source : CMA ASK Raymond james 26 60 | P a g e . considering the time element and lower utilization levels. growth over the next two years. The surplus situation would not change even if we presume higher growth rate of 12% p. companies having huge market share in the northern region would face maximum impact. ACC and Ambuja Cements. Both sides of the coin26 We expect a total surplus of 11 mn tonnes by 1Q FY09E. UltraTech. will not last long. We feel that the current party enjoyed by the cement manufacturers.
We expect demand to continue to grow at 10% YoY in FY08E.5 mn tonnes new kiln capacities. we see a huge gap in demand‐supply 28 29 Exhibit 2‐‐ Source : CMA.asp?id=40496 61 | P a g e . we expect a total of 96. 28 Highlights Adding approximately 96.6 mn tonnes by FY10E: After meeting the machinery suppliers and collating the data of the announced capacities by the cement producing companies.ASK Raymond James Exhibit 3‐‐Source : CMA. At present the total capacity excluding the dead capacity is around 160.bharatbook. which would translate in a deficit of 0.ASK Raymond James 30 http://www. Currently KHD Humboltd Wedag (cement machinery supplier) is working on 14.6 mn tonnes of new capacities to be added by FY10E (see Exhibit 3). This would also include the additional capacities through debottlenecking and exclude the dead capacities.80 mn tone which would drive the prices.com/detail. They mentioned that currently their order book is completely full till FY09E 29 Higher30 demand may not change the surplus situation in FY09E: Demand has remained quite strong and grown by 10% YoY for the period April‐January 2007. Being optimistic with the increasing thrust on infrastructure development and assuming demand grows at 12% for FY08E.2 mn tonnes in FY06.
even a stronger growth in demand would not help beat the surplus as huge as 12 mn tonnes. however this is likely only till FY08E. This deficit of 1. than the surplus is 2.92 mn tonnes. We expect demand to grow by 11% YoY in FY08E and by 11% YoY in FY09E. 32 Southern region in deficit till FY09E: Considering all the capacities coming in various regions and the strong demand growth. depending on the demand growth. 31 Region wise demand‐supply outlook: The analysis shows that the southern and eastern region are likely to be in deficit till FY09E. Whereas northern.ASK Raymond James Exhibit 5‐‐source CMA. 31 32 Exhibit 4‐‐Source: CMA. the outlook for prices is expected to change. This is considering when additional capacities come on stream in phases in various regions and also considering state wise demand growth. From April 2006‐January 2007. with a deficit of 3 mn tonnes in FY08E. the southern region is likely to be in deficit till FY09E.2 mn tonnes is due to strong growth in demand as compared to supply addition (Refer Exhibit 6). if the growth is lowered to 8%. ACC and UltraTech with 10% market share and regional companies like India Cements and Madras Cements will benefit. But. with huge capacity addition. central and western regions would be surplus from FY09E.ASK Raymond James 62 | P a g e . Thus. demand in the southern market grew by 16% YoY. In FY09E.
We expect demand to grow at 12% YoY in FY08E and 11% in YoY FY09E. going forward. we expect demand to remain strong in the northern region due to upcoming Commonwealth Games to be held in Delhi in 2010.9 mn tonnes in FY09E: With major capacities coming in the northern region there is huge surplus of 5 mn tonnes likely from FY09E. Going forward. But. Gujarat Ambuja would be impacted. Such high utilizations and increase in blending ratio shows tight supply scenario. Demand in the northern region has grown by 11.ASK Raymond James Exhibit 7—Source : CMA. But the incremental supply of 22. In FY06 the utilization jumped to around 90% and April to January (YTD) utilization has remained at around 92%. 33 Northern region to witness surplus of 4.6 mn tonnes in North in two years will cause a substantial surplus in the region.ASK Raymond James 63 | P a g e . when all the capacities are onstream and considering the time element and lower utilizations of the new capacities there is huge surplus creating a glut in the sector.8% YoY for April 2006‐January 2007. Regional players like Shree Cements. JK Lakshmi. 34 High capacity utilization levels: The average capacity utilizations for the industry have been in the ra nge of 79‐81%. 35 33 34 Exhibit 6‐‐Source: CMA.
Its aggressive acquisition strategy has made Holcim the largest MNC player in the cement sector. Also cement being a very bulky and perishable commodity requires proper warehousing facility. followed by Ital cement. But for imports to be feasible. which is much higher than the average domestic prices of Rs211 per bag. Currently Holcim has a total of 34 mn tonnes of capacity through GACL. exports contributed around 4.5% there are threats from imports.aspx?cat_id=525&art_id=9722 64 | P a g e . 36 No threat from exports flowing back: According to machinery suppliers. as the quantity exported is huge. as the shelf life is not more than 45 days. Moreover.ASK Raymond James Exhibit 10—source : CMA. ACC and ACEL. Lafarge was the first MNC to enter the Indian market. This would help large players to cut competition from small regional players.ibef. Threat of imports minuscule: Post the announcement of the import duty cut of 12.2% of the overall production in FY06. the suppliers added that even after huge capacities coming on stream in the Middle East by December 2007. Holcim and Heidelberg. Heidelberg entered India by acquiring Indo Rama's capacity of 1 MT and has now acquired 2.ASK Raymond James 37 http://www. 37Consolidation to help the industry: The cement sector has been witnessing a lot of consolidation and foreign entrants over the past few years (see Exhibit 11). Thus there will be no major threat of exports flowing back in the domestic market. It acquired companies like Tisco Cement and Raymond Woollen in 1999‐2000. the rising demand in the Middle East markets would surpass the incremental supply. Moreover the landed cost of cement even at zero import duty works out to be Rs250 per 50 kg bag (see exhibit 10).1 MT capacities of Mysore Cements.org/artdisplay. And with the demand growing in double digit of around 10% CAGR for FY06‐10E these would be easily consumed in the domestic market. 35 36 Source : CMA. proper logistics (ports facility) is needed. The Chinese producers prefer to dump in other markets like the Middle East where demand is much higher. which India lacks.
Prices remained firm during monsoons and currently prices are stable in all regions due to concerns from the government with respect to rising cement prices.in/industry‐infrastructure/industrial‐sectors/Cement. This also considers a dip in the monsoons and price correction in the last quarter due to increase in supply. due to strong demand and lag in supply. Although the debate still continues on how these will be tracked as the prices vary from plant to plant depending on the distance travelled and also accounting for the dealer margins. Thus the average realizations of the companies are likely to be stable in FY08E.indiainbusiness.htm 40 Exhibit 12. which would have a positive impact on FY07E earnings by 5%. Considering stable price scenario in FY08E and our quick number crunching it will impact our earnings estimates for FY08E in the range of 3‐7%. The valuations table below is taking into account the impact of stable price scenario in FY08E. after the pass on of the excise duty and the government's interference. has already come through in 4Q FY07E. Currently national average prices are at Rs211 per 50 kg bag. along with Rs3 per bag in 4Q FY07E.nic. 38 Cement prices frozen at current levels post budget: Cement prices have risen by 27% from January 2006 till January 2007. Further.13—source : CMA. Further to this. the manufacturers have agreed on to raise prices further. we believe companies will be able to maintain the prices at current levels in FY08E. 39 Marginal impact to our earnings estimates in FY08E: We had assumed a marginal increase in average realizations of 2.ASK Raymond James http://www. 40 38 39 Exhibit 11—Source: CMA.5%‐3% YoY in FY08E which translates to around Rs4‐5 per 50 kg bag. This Rs4‐ 5 per bag. In the Union Budget 2007‐2008. differential excise duty on cement has been introduced due to which a cap of Rs190 per 50 kg bag is imposed on the prices.ASK Raymond James 65 | P a g e .
This would lead to price correction impacting the profits of the companies. India is a developing country and so there are good growth opportunities with respect to infrastructure initiatives by the government. Cement sector. is expected to grow at more than 9% (See exhibit 15). will create oversupply scenario. UltraTech. Glut from 1Q FY09E41: The Indian economy is growing at 9. which would have a negative impact on the earnings. 42 41 42 www.ASK Raymond James 66 | P a g e . Considering this reversal in the cement cycle. Profits for the companies would fall by 15% to 20% in FY09E for pan India players like Grasim.com Exhibit 14. However we still remain positive on Grasim (diversified nature of business) & India Cements (deficit in south till FY09E). ACC and Ambuja Cements. boom in the construction and real estate industry and Commonwealth Games to be held in India in 2010. which would drive the demand for cement.2% (FY07) and has been projected to grow at 9‐10% in the 11th Plan period (2007‐2012). We will be shortly introducing FY09E earnings estimates and we expect cement realizations to decline by 5‐8% YoY in FY09E depending on the region due to oversupply.cma. being a core infrastructure sector.15 –source : CMA. But the concern remains that the substantial addition of supply. which is expected to come from early FY09E. resulting in the rerating. the companies will not command the premium valuations that they did during the uptrend.
43 43 Exhibit 16—source : CMA.ASK Raymond James 67 | P a g e .
1% to 136 million tons and is estimated to grow at the rate of 10. Hence. As of FY 06. in the country. The strong demand growth in the. Prices remained firm during monsoons and currently prices are stable in all regions due to concerns from the government with respect to rising cement prices. Thereafter on account of the capacity additions going on line. the total installed cement capacity in the country was 160 MTPA as compared to 141 in FY03.asp?id=40496 45 http://www.5% to 150 million tons by 2006‐ 2007.com/detail. This is expected to last till the further demand catches up with the surplus. differential excise duty on cement has been introduced due to which a cap of Rs 190 per 50 kg bag is imposed on the prices although the debate still continues on how these will be tracked as the price vary from plant to plant depending on the distance travelled and also for the dealer margins The pricing of cement varies from region to region primarily on account of the freight cost incurred in reaching the market. given the strong regional characteristics of the cement it is more meaningful to look at demand‐supply balance in a region separately.thereafter. Supply India is the world’s largest producer of cement.demand is to continue growing at 10% would translate in the deficit of 0. beginning from the FY 09 a surplus scenario is created. growth in cement consumption.com 68 | P a g e . 44 http://www. Market analysis Demand44 drives continues to be strong Cement industry depends on the growth in various sectors of the economy. in the union budget of 2007‐2008. Overall demand supply scenario Against the above backdrop. cement demand in the year 2005‐2006 grew at 10. Cement pricing as a function of demand45 Cement prices have risen by 27% from January 2006 till January 2007.crisil. infrastructure development and industrial investment.80mn tonne. demand. And hence. medium term will be driven by continued: Strong housing demand Higher level of commercial construction activity Increased government focus on infrastructure spending and Higher investment in industrial projects. has exhibited a strong correlation to the GDP growth. such as construction.bharatbook. housing.currently national average prices are at Rs 211 per 50 kg bag.
as compared with 6.2% during FY1996‐2006. central and western regions would be in surplus in FY09E. It is expected that the cement utilizations would decline in FY09E depending on the region due to the oversupply.9% during FY1986‐ 96. We have sought to assess the impact of supply overhang on the project by examining the sensitivities of the project to fall in capacity utilization.com/biznews/categoryNewsDesc.2% during FY2006 to 141.5% during FY2004.indiabiznews. Prognosis for the industry46 It is likely that the substantial addition of supply. By comparison.this is considering when additional capacities come on the stream in various phases in various regions and also considering state wise demand growth of the other hand. DEMAND-SUPPLY POSITION Robust Production Growth47 India's cement production increased 11. http://www. Region wise demand –supply scenario The Southern and the eastern region are likely to be in the deficit till FY09.com 46 47 69 | P a g e . This may lead to price correction impacting the profits of the companies. increase in operating costs and also increase in project cost.4%.6% during FY2005. decrease in selling price. northern. and 5.icra.jsp?catId=11740 http://www. On a decadal basis. which may have a negative impact on the earnings.81mt. production increased 8. will create oversupply scenario even in the southern region. India's cement production increased at an annual average of 8. which is expected to come from FY09E. Production has increased at a 3‐year compound annual growth rate (CAGR) of 8.
so that its fineness and chemical composition can be assured. after the slack of the monsoon season. Some of the likely ways in which this can be done are as follows: • Improving the quality of the additive. For example. • 48 Compiled by ICRA 70 | P a g e . the industry can initiate corrective action for enhancing its consumption. cement production registered high growth since October 2005. During FY2006. Capacity utilization increased from 76% in FY2002 to around 90% in FY2006. Increasing customer awareness by organizing training programmers. the quality of a Pozzolonic material like flash can be improved by processing it. 48 Given the strong benefits associated with the use of blended cement. High growth in the cement sector reflected robust demand from the construction sector and high exports. The increased growth in cement consumption since 2004 has had a positive impact of the capacity utilization of cement producers.
Key benefits accruing to the country from this move would include greater pollution control (because of the effective use of waste material like slag) and preservation of the valuable limestone reserve of the country. or providing sales tax exemption benefits to producers of blended cement. cement exports increased from 4.01mt during FY2006.asp 50 http://www.cement. avoidance of transit loss. However. 49 http://www.18mt. high bulk commodity. pilferage. increased domestic demand resulted in clinker exports declining from 5. accounting for around 4% of the total production.org/basics/cementindustry.icra. by opting for bulk transportation.99mt to 3. it would also help in improving the construction quality in the country. With the export point of view two kinds of strategies50 are highly advantageous for a country: • Countries with high export thrust opt for bulk transportation for exporting cement. • The Government can also play a role by taking strategic initiatives like increasing the concession on excise duty on blended cements.com 71 | P a g e . For example. World cement trade has averaged just around 6‐7% of the total production. Bulk transportation leads to significant advantages such as savings in freight costs and packing costs. Greece is in a position to export over 50% of its cement production. bursting of bags and damage to cement. This has resulted in a very low volume of international trade in cement. implying that Companies rely on cement exports to balance out the domestic demand supply situation. As cement is a low value. EXPORTS49 The Indian cement industry exported around 6mt of cement during FY2006. adulteration. Besides. Because of increased overseas demand. There has been a significant year on year variation in the export trend. freight cost becomes a significant factor in determining the landed cost of cement.07mt in FY2005 to 6.
grew at Exports sa aw huge decline to 0. 1 Cement51 Summary y The overa all dispatches have grown by 14 per cen nt in February y 2008. An additional route for ex xports to Bang gladesh is the e Inland Waterway ys on the rive er Brahmaput tra. India can expor rt to the neigh hboring and land‐locked countries such h as Pakistan.com 72 | P a g e . .crisilserac ch. as compared to the pre evious year to o reach 14.52 2 million tonn nes. countries o on the East co oast of Africa an continent including South Africa. South East Asi ia. Madagascar. on a y year‐on‐year basis (y‐o‐y). Middle Eas st.73 t 13 per cent on the year‐o on‐year (y‐o‐y y) basis. Because o of freight cost ts. seen at 14. The production. India is in a a position to export cement through se ea routes to c countries in Indian sub bcontinent. million tonnes. MA Source CM mand indexed to demand in April 2001 1 Note: Dem Source CM MA 51 http://w www. and also Ma auritius and o other islands o of the Indian Ocean.21 m million tonnes witnessing a fall of over 3 30 per cent (y‐o‐y) due to huge dem mand and attr ractive prices in the domes stic market. Nepal and Bangladesh through rail as well as road routes.
0 Exports 0.0 0.0 0.0 1.2 0. State of the market Feb‐07 Jan‐08 Feb‐08 Domestic c prices Western r region 136 147 Surat 147 136 146 Ahmedab 146 bad 150 162 Pune 162 134 146 Nagpur 146 134 148 Mumbai 148 Northern region Delhi 155 168 168 Eastern re egion Kolkata 133 142 141 Southern region Hyderaba ad 130 161 161 134 156 158 Bangalore e 125 149 147 Calicut 122 150 150 Chennai Note: Cement p prices are inde exed to 100: B Base year April 2001. Source: CMA Change (pe er cent) Month Year 0.0 14.7 0.3 22.2 ‐1. Source: CRISIL Researc ch State of the market In million tonnes Fe Jan‐08 Feb eb‐ b‐08 chan nge 07 (percent) month Year Capacity * * 14 4.0 14.0 10.0 0.0 0.6 14.7 0.6 14.0 9.7 14.7 ‐0.9 73 | P a g e .2 y figures are f for January 2007.6 13.0 8.0 ‐0.6 5.1 7.4 8.0 0.9 0.9 17.4 Productio on 13 3.4 8.0 ‐30.8 14.6 14.0 ‐0.3 0 0.7 17.0 Despatche es 12 2.0 23.5 0.2 6. Decemb ber * Capacity 2007 and January 2008 8.
1 12.3 Electricity Rs billion 19.0 38.508.541.7 Note: 1 The figures reflect the change in total investments in March 2007.318.1 1.0 1.203.6 290.3 Mining Rs billion 3.3 1.1 29.1 1.2 ‐ Road transport Rs billion 1.0 9.8 7.416.9 1.879. as compared with those in December 2006.4 8.9 9.370.4 1.131.4 7.893.8 ‐ Ports and shipping Rs billion 856.5 4.968.185.694.6 ‐ Hotels and Tourism Rs billion 207.1 1.2 14.7 11.3 311.6 Services Rs billion 4.3 74.3 53.5 1.9 ‐ Commercial complexes 1.5 Irrigation Rs billion 0.3 1.3 51.359. Region‐wise proportion (April ‐ September 2007) Capacit Despatche in percent Demand y s East 15 14 15 North 25 25 30 South 32 33 30 West 28 29 24 Total 100 100 100 Source: CMA Source CMA Projects under implementation Mar 2006 Dec 2006 Mar 2007 Change (per cent) Month1 Year Manufacturing Rs billion 8.756.375.8 1.8 11.2 25.690.8 203.088.637.4 7.1 8.098.710. Source: CRISIL Research West Region profile Western region Unit Jan‐07 Dec‐07 Jan‐08 Change (per cent) Month Year 74 | P a g e Unit .282.411.7 9.5 1.6 3.730.5 Rs billion 11.4 50.
7 3.0 1. CRISIL Research expects prices to remain stable in the month of April in most parts of the western region. CRISIL Research Prices to remain stable Prices in the western region saw some volatility in February 2008.3 2.4 4. 2.6 1.3 14.3 per cent.1 per cent and 7 per cent.0 130 4. Cement prices are indexed to 100: Base year April 2001.7 75 | P a g e 4.5 0.6 2. Both. On month‐on‐month basis.7 4. Source: CMA.7 1.9 8.1 161 4.4 6. South Region profile Southern region Capacity Production Despatches Andhra Pradesh Total despatches Price (Hyderabad) Unit million tonnes million tonnes million tonnes million tonnes Jan‐07 4. Indexed prices are for February 2007.0 4. In January 2008.1 per cent (y‐o‐y) basis.0 6.1 Despatches million tonnes 4.1 7.5 2. January 2008 and February 2008. respectively over the previous month due to an increase in demand.6 2.7 9. cities like Bhopal saw prices grown up by 2. Capacity million tonnes 4.0 23.1 Gujarat Total despatches million tonnes 1.1 161 Dec‐07 Jan‐08 Change (per cent) Month Year 0.5 4.0 Production million tonnes 4.4 1.2 0.3 4.1 10.4 4.1 Price (Mumbai) 134 148 Notes: 1.1 ‐9.4 4.5 0. respectively.1 4.4 4.6 2.5 4. whereas prices in Mumbai and Ahmedabad remained stable.4 146 1.3 148 1. both production and dispatches grew by 9.7 .7 0.2 9.7 144 1.2 per cent and 0.4 0.0 5.3 16.0 2.9 7.1 1.4 2.6 Price (Bhopal) 133 141 Maharashtra Total despatches million tonnes 1. production and dispatches have seen a growth of 3.7 4.6 4.4 Price (Ahmedabad) 136 146 Madhya Pradesh Total despatches million tonnes 1.1 ‐0.
2 ‐3.6 0.6 ‐3. Karnataka Total despatches million tonnes 0.8 3.9 3. CRISIL Research Prices to increase marginally In February 2008.0 6.3 3. In January 2008.4 7.4 4. 2. on the back of increasing construction activities.2 ‐1. CRISIL Research expects increase in prices in major parts of the region.4 3.4 145 0.4 144 0.2 per cent on month‐on‐month basis whereas. whereas Kerala and Karnataka saw some fluctuations.0 ‐0.6 17. January 2008 and February 2008.5 1.1 0.5 0.3 17.5 22.7 ‐1.5 140 Jan‐08 Change (per cent) Month Year 0. Prices in Karnataka increased by 1.1 Price (Calicut) 125 149 147 Tamil Nadu Total despatches million tonnes 1.8 7.6 1.4 3.4 137 0.9 0. North Region profile Northern region Capacity Production Despatches Punjab Total despatches Price (Bhatinda) Uttar Pradesh Total despatches Price (Lucknow) Rajasthan Unit million tonnes million tonnes million tonnes million tonnes million tonnes Jan‐07 3.1 0.5 7.7 ‐6.8 1.5 1.9 ‐5.9 14. production and dispatches increased by 2.2 1. prices in Kerala saw decline of 1. during April.6 3. Indexed prices are for February 2007.5 3.9 per cent over previous month.5 137 .4 1.0 Price (Bangalore) 134 156 158 Kerala Total despatches million tonnes 0.7 76 | P a g e 23. prices in major part of Andhra Pradesh and Tamil Nadu region remained stable. The cement demand is picking up in the region that is expected to firm up prices in coming days.3 3. Source: CMA.4 138 Dec‐07 3.0 6.0 0.6 3.5 Price (Chennai) 122 150 150 Notes: 1.6 3.4 0. Cement prices are indexed to 100 : Base year April 2001.4 per cent each over previous month.
prices in places like Bhatinda decreased by 0.1 Price (Patna) 134 139 Notes: 1.0 ‐4.9 1.0 2. January 2008 and February 2008.4 per cent.0 6.9 1.0 2. In January. Source: CMA. Indexed prices are for February 2007. East Unit Jan‐07 Dec‐07 Jan‐08 Change (per cent) Month Year 1. respectively over the previous month.2 Production million tonnes 1.9 Despatches million tonnes 1. prices in the region have shown a mixed trend.1 ‐1.2 ‐0.3 0. witnessed increase of 3.3 0. both production and dispatches.1 139 77 | P a g e . 2.0 14.5 6.1 ‐8.1 0. CRISIL Research Prices to be stable 2. CRISIL Research expects prices to increase marginally in the most part of northern region during April.3 141 0.2 2.7 5.9 West Bengal Total despatches million tonnes 0.8 6.1 5.1 7.0 5.2 42.6 6. Indexed prices are for February 2007.2 Price (Jaipur) 148 157 Notes: 1.5 per cent and 3.7 7.0 0. Cement prices are indexed to 100 : Base year April 2001.3 0.4 per cent per bag whereas prices in Uttar Pradesh witnessed an increase of 1. January 2008 and February 2008. On month‐on‐month basis. 2. CRISIL Research Prices to increase marginally In February 2008.0 0.3 Price (Kolkata) 133 142 Orissa Total despatches million tonnes 0.1 2.4 9.1 2.5 per cent per bag.3 4.3 Region profile Eastern region Capacity million tonnes 2. Cement prices are indexed to 100 : Base year April 2001.4 139 0.5 5.3 157 6. Total despatches million tonnes 2. Source: CMA.3 Price (Bhubaneshwar) 131 142 Bihar Total despatches million tonnes 0.
S Small and medium p players like M Mangalam Cem ment. resul lting in utilisation n rates hoveri ing at over 90 0 per cent.5 per c cent and 5 pe er cent.5 million tonne to 2 milli ion tonnes pe er annum in the near futur re. price es in the regio on have show wn a volatile t trend. Bihar price es remained s stable over th he previous declined b month. Bo oom in housin ng. infrastruct ture and com mmercial construction segments s has led to he ealthy growth h in the ceme ent demand. Prices i in West Beng gal and Orissa by 0. CRISIL L Research expects the ope erating rates to start softe ening from the e fourth quarter of 2008 8‐09. Am mbuja Cemen nt. Penna C Cement are a adding capacities in the ran nge of 0. no orth and south India are ex xpected to ha ave expansion n in excess of 20 million n tonnes per a annum each.crisilsearc ch. Grasim Industries are e expected to a augment cem ment capacitie es in the range of 5‐8 mill lion tonnes per annum acr ross the coun ntry in the me edium term. Birla Corpo oration are expected to co ome up with c capacities in excess of 3 million tonnes per annu um. CRISIL Re esearch expec cts the prices in the region n to remain st table for the m month of Apr ril. W With large ce ement capacities s likely to bun nch up. respective ely compared d to previous month.5 percen nt and 1.6 per rcent. Big player rs like ACC.com 78 | P a g e . snapshots52 Industry s Capacity e expansion in cement indus stry The dema and‐supply scenario was observed to be e tight for las st couple of quarters. wherea as. pro oduction and dispatches sa aw an increas se by 7. In February 2008. mestic prices West: Dom N North: Domes stic prices Note :Pric ces are weekly Source: In ndustry mestic prices East: Dom N Note :Prices are weekly Source: Indust S try South: D Domestic pric ces 52 http://w www. Both. In n January.
4 12 2.5% Operating g rate % % 89.29 Blending r ratio 22 Demand mn tonnes 121 13 149 95 104 m 36 10. cement t demand incr reased by 9.9 9% 93. fo ollowed by sou uthern and northern regio on.0% Clinker ca apacity mn tonnes 120 12 128 85 89 m 22 Clinker pr roduction mn tonnes 107 11 121 78 83 m 15 92.1% 95.8 8 per cent (yea ar‐on‐year) during Ap pril‐November 2007.7 million tonnes in the same period last financial year.4% 94. CRISIL R Research ontinue to de ecline Exports co In the first 8 months of f 2007‐08.8 8% 94.5 5 million tonn nes. This grow wth is led by h healthy invest tments in its e end‐user segm ments. which rose e by 16.crisilsearc ch. G Going forward d. cement exports s stood at 2. which is a a decline of 32 per cent (year‐on‐year r basis) when compared to o 3.2 1.0% 93.6 9.8 Demand g growth y‐ ‐o‐y % chg 6. 12 an nd 11 per cen nt. namely housing. Note :Pric ces are weekly Source: In ndustry Cement d demand continues to rema ain healthy53 Note :Pr rices are weekly Source: Industry In line wit th CRISIL Rese earch's estimates. Table 2: A All India dema and‐supply sc cenario Category Units 20 004‐05 2005‐0 2006‐07 2006‐07 2 06 2007‐08 8 month hs Cement capacity mn tonnes 152 15 167 111 116 m 58 Cement p production mn tonnes 125 14 155 100 108 m 41 90. coup pled with hea althy demand in the domestic market.28 1. respective ely.com 79 | P a g e .1% Operating g rate % % 82.0 9.2% 88. infrastruc cture and com mmercial cons struction segm ments. The fall in export ts is due to fre esh capacities s that have st tarted to com me on stream in the Middle e East.9 Source: CMA.29 1. exports are e expected to o 53 http://w www. Dema and growth fo or cement wa as once again highest in the western region.17 1.2% 1.
C CRISIL Researc ch expects th he demand in n the region t to remain stro ong and cont tinue enjoying g healthy ope erating rates in short to m medium term. du uring the sam me period las st year.4 3 3. Delhi. In addition. Himachal Pradesh.crisilsearc ch. have been over 90 0 per cent.com 80 | P a g e . as s more capaci ities are likely y to commence operation in the Middle e East.7 2 2.5 Source: CMA Note: Sta ates & Union Territories c considered in Northern region are Utta arakhand. demand‐supp ply situation is possible to or the next 12 2‐ remain tight in the domestic market fo hs. indicating str rong demand d in the region n. Chandigarh. The operat ting rates in t the region. 15 month Table 3: T Trend in expo orts (mn tonnes) 2003‐04 2004‐05 2005‐06 2006‐07 2006‐07(A April ‐ Novem mber) 2007‐08(A April ‐November) Source: CMA Regional scenario54 North Cement c consumption in the northe ern region ha as grown at a CAGR of 9 p per cent in las st 3 years. come dow wn further.4 4 4.1 6 6. Th his trend has accelerated during April‐November 20 007‐08. Figure 2: C Consumption n growth & Op perating rates of Cement ( (North) Cement exports 3 3. Jammu and Kashmir 54 http://w www. Ha aryana. Punjab. Rajasthan n. it is currently o operating at 9 98 per cent.0 5 5. where cement con nsumption ha as grown by 1 11 per cent.
West Bengal. Chhattisg garh. cement co onsumption increased by marginal 2 pe er cent (y‐o‐y y). Orissa.8 per cen nt CAGR durin ng Southern region is one the last 3 years. During g April ‐ Nove ember 2007. and oth her North East t states South e of fastest g growing regio on witnessing a growth of 11. CRISIL Research expec cts the region n to continue enjoying hea althy growth of over 10 per cent during the medium m term due to o booming co onstruction de emand in the region. This is pr redominantly a base effe as this re y ect egion's opera ating rates ar at healthy 83 per cen re y nt. Jharkhand. CRISIL Research exp pects the east tern region to o grow by ove er 6 per cent in medium t term and ope erating rates t to remain high due to limit ted capacity a additions in m medium term. it has witnessed a grown of 12 per cen nt (y‐o‐y) basi is. East During the first 8 months of 2007‐0 08. B Bihar. indicating g a stable dem mand. The region continues t to enjoy oper rating margins of above 90 0 per cent. Consumption n growth & Op perating rates of Cement ( (South) Figure 4: C 81 | P a g e . Figure 3: C Consumption n growth & Op perating rates of Cement ( (East) Source: CMA Note: Stat tes & Union T Territories considered in Eastern region n are Assam. it is currently o operating at 9 94 per cent u utilisation rat tes.
Diu u West Cement consumption i in the wester rn region has risen by over r 8 per cent C CAGR during la ast 3 years an nd witnessed growth of d a f 16 per cent (y‐o‐y) in fir t rst 8 months of 2007‐08. The operatin s ng rates in th he region are e well above 9 90 per cent a and are curren ntly operating g at 93 per ce ent. Daman. Figure 5: C Consumption n growth & Op perating rates of Cement ( (West) Source: CMA Note: Sta ates & Union T Territories co onsidered in w western regio on are Gujarat t & Maharash htra Central55 Cement consumption in the centra al region grew w at a CAGR o of 5. Goa a.7 per cen nt during the last 3 years. Source: CMA Note: Sta ates & Union Territories c n considered in southern re n egion are Andhra Pradesh Tamil Nadu. Andaman and Nicobar. It has witne essed an incr rease of 5 pe cent (y‐o‐y in the first 8 months. The regi ion is expecte ed to remain n forefront in construction n related acti ivities and wi ill continue to o grow healthily during th he medium t term. h. Kerala. Po ondicherry.crisilsearc ch. The operatin rates in th er y) t ng he 55 http://w www.com 82 | P a g e .
region are over 90 pe cent and are expected to remain so in the med e er a o dium term. unless the go overnment int tervenes to c control prices. Figure 6: C Consumption n growth & Op perating rates of Cement ( (Central) Source: CMA Note: Stat tes & Union T Territories considered in ce entral region are Uttar Pra adesh & Madhya Pradesh Operating g rates to soft ten starting fr rom end of 20 008‐09 Tight dem mand supply s situation has resulted in healthy operating rates in t the cement industry. re espectively. w er ng we expect op perating rates s to start sof ftening. as s large cement capacities s are expected to bunch up p. re egistering a rise of 13 per cent y‐o‐y. operating rates hav gone up fr y ve rom 90 per c cent to 93 pe cent. Cement prices have increased by over 14 pe cent (y‐o‐ during Ap p y er ‐y) pril‐Decembe period wit er th southern region (17 pe er cent y‐o‐y) ) witnessing the highest increase follow wed by easter rn and wester rn region. Goin forward. whic ch is operating at over 90 0 per cent ut tilisation rate es. G Going forward d. Pricing flexibility in s short term Cement manufactures will continu to enjoy pricing flexib m s ue bility as dema is expec and cted to excee ed supply for r next 3‐4 quarters. N ACC LOCATION C CCI LOCATION N 83 | P a g e . starti ing from four rth quarter o of 2008‐09. allowi ing manufactures to pass on an increas se in cost to e end consume er. we expect cement price es to firm up p further after monsoons. CRISIL Researc ch expects th he cement co onsumption in n the region t to grow by ov ver 7 per cent t in medium term. In the first t 8 months (A April‐Novemb ber) of curren nt financial year.
64crores and term loan of Rs.51crores is proposed to be financed through equity of Rs. It can be observed that at Rs. will be subordinated to the term loans from banks/ institutions and will not carry any interest. The cost of the project estimated at Rs. 240. The overall financial. the company has an advantage in terms of low project cost per ton when compared to the industry’s average of Rs. Mumbai APRIL 2008 84 | P a g e . Based on the detailed financial appraisal. However.87crores. Unsecured loans. Subject to the concerns and threats enumerated and the impact of the various scenarios as envisaged under the sensitivity analysis study.e. if any. 378. it may be concluded that: Considering castaway’s projected performance. the capital expenditure program of castaway for the project is viewed as financial viable. Take various steps for mitigating the various risks identified for the project. on an assessment of the project parameters. which are at variance with the base case scenario assumed. liquidity and profitability parameters of te project are considered reasonable and satisfactory. The company needs to increase the authorized share capital to an appropriate level if they are to bring in additional equity. Conclusion and recommendations Castaway proposes to set up a 1. limestone. Added to this is the advantages of being located close to the major raw material source i. the company is expected to meet its debt serving obligations towards the project.25 million TPA cement plant for the manufacture of ordinary Portland cement/ Portland Puzzolona cement with a clinker capacity of 1. SBICAP has assessed the financial viability of the project based on the Techno Economic Feasibility Report prepared by IMM. 2770per ton of installed cement capacity. The company has appointed Mott Mac Donald (IMM) for carrying out a techno‐economic feasibility of the proposed project. 2700‐ Rs 3000/ tone. data provided by the company and other market information through sensitivity analysis under the various scenarios. it is recommended that castaway should‐‐‐‐ Get the required approvals from the appropriate authorities for setting up of the project. 137. SBI Capital Markets Limited.06225 million TPA along with setting up of a captive coal based power plant of 15 MW.
Annexure ANNEXURE I: Project balance sheet statement ANNEXURE II: Project Cash Flow Statement ANNEXURE III: Assumptions of financial projections ANNEXURE IV: Working Capital & Margin Money Calculations ANNEXURE V: Capex & Debt Draw‐Down Schedule ANNEXURE VI: Project Profitability Statement ANNEXURE VII: Rev & Cost ANNEXURE VIII: Depreciation ANNEXURE IX: P&L Acc ANNEXURE X: Process flow of the cement plant ANNEXURE XI: specification of plant and machinery 85 | P a g e .
M. The technical analysis course I.com www.htm players http://www.com/biznews/categoryNewsDesc. Thomas A.deadpresident.pdf http://www. Jordan.asp http://www.in/industry‐infrastructure/industrial‐sectors/Cement.indiabiznews.bharatbook.reportbuyer.com http://icra.com www.com/sect/ceme/ch05.blogspot.guruji.com www.com/detail.icra.myiris.indiainbusiness. Fisher and Ronald J.com www.html http://www.aspx?cat_id=525&art_id=9722 present scenario http://www.com www.crisil.bseindia. Security analysis on investment and corporate finance.com www. Security Analysis and Portfolio management.com www.jsp?catId=11740 Books: Aswath Damodaran.com/industry_manufacturing/construction/opportunities_trends_i ndian_cement_industry.ibef.com www.org/artdisplay.pdf http://www.money.html http://www. Damodaran on valuation.indiainfoline.rediff.bloomberg.nseindia. Pandey 86 | P a g e .com www.com/content/rep/Sector_Updates/2006/4/2442006/Cement_Sect or_Update_151205. References Online references: www. Meyers.indiainfoline.indiainfoline.com www.com www. Donald E.asp?id=40496 http://www.karvy.nic.google.com www.cement.in/recentrel/Cement‐200607.buzzingstocks.org/basics/cementindustry.
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