PEER RATING

Roll Number Name of Students Rating(Out of 10)

05 Rupesh Srivastava 9.5

15 Prawesh Lohia 10

23 Satya Aneja 9.5

24 Akarshit Sardalia 7

Annexure:1 For Students

LOVELY PROFESSIONAL UNIVERSITY

Mittal School Of Business Faculty of Management

Name of the faculty member: Dr. Napinder Kaur

Course Code: ECO113 Course Title: Business Economics

Academic Task No:02 Academic Task Title: Cement Industry
Date of Allotment: 23-03-2023 Date of Submission: 31-03-2023
Student Roll No: Student Registration no-
Term: 02 Section: Q2207
Max. Marks: 30 Marks. Obtained:
Evaluation Parameters

Learning Outcomes: (Student to write briefly about learnings obtained from the
academic tasks)

Declaration: I declare that this Assignment is my individual work. I have not copied
it from any other students’ work or from any other source except where due
acknowledgement is made explicitly in the text, nor has any part been written for me
by any other person.

Evaluation Criterion: Rubrics on different parameters

Student’ Signature:
Evaluator’s Comments (For Instructor’s use only)

General Observations Suggestions for Best part of assignment

Improvement
 Cement Industry In India

Discovery of Cement
John Smeaton, who is also known as “father of civil engineering” and credited for
design of many bridges, canals, harbors etc. was the first proclaimed civil
engineer and pioneered the use of ‘hydraulic lime’, which led to discovery of modern
cement.
The common cement or Portland cement was prepared and Patented by Joseph
Aspdin in 1824.
In the later part of 19th century, cement production was taken up by many countries
many decades after the first patent was taken by Aspdin in England.

First Cement Factory of India

India entered into the Cement Era in 1914, when the Indian Cement Company Ltd.
started manufacturing Cement in Porbundar in Gujarat.
However, even before that a small cement factory was established in Madras in
1904 by a company named South India Industrial Ltd.
Indian Cement Company Ltd produced only one type of cement which was designed
by the British standard committee as “Artificial Portland Cement”. This company
marketed its product in Mumbai, Karachi, Madras and other parts and became a
financial success.
At that time India had to import cement from England. The price of the imported
cement was higher. Some other factors such as increase in domestic demand,
reduction in supply from abroad (due to war), availability of Indian Capital, ample raw
material, Cheap labour, support of the government etc. made it a leading industry in
India in a short period of time.

 In January 1915, a cement unit was started at Katni in Madhya Pradesh

 In December 1916, another unit at Lakheri in Rajasthan was started.
During the First World War period, cement production in these three important
factories was taken under control of the government and later the control was lifted
once the war was over. After the war, 6 more units were launched in India.
In 1924, India’s cement production was 267000 tons. However, initially this
increased production could not reduce the imports and the industry suffered a rate
war. This led to closure of many indigenous units. The Indian companies which were
away from ports or commercial centres faced the locational disadvantage.
The above incidents led to the industry stakeholder approach to the government for
some kind of protection. The British government constituted a Tariff board , which
recommended protection of the indigenous industry against the dumping of the
imported cement. It recommended raising of the customs duty to 41% which was
around 15% at that time, but this recommendation was not accepted by the
government.

Key Other Landmarks in History of Cement

 In 1925, first association of the cement manufacturers was formed as
“Cement Manufacturers Association“.
 It was followed by “Concrete Association of India” in 1927.
  In 1930 “Cement Marketing Company of India” was started and this was
followed by a quota system on the basis of installed capacity of the factories.
 In 1936, all the cement companies except one i.e. Sone valley Portland
Cement Company agreed and formed Associated Cement Companies Ltd.
(ACC). This was the most important even in the history of cement industry in
India. Many more companies were established in the following years.
 Before partition India had 24 factories, out of which India retained 19 factories,
which annual production of 2.1 million tons. Pakistan faced a problem at the
supply side as it had problem of disposal of the cement produced and India
faced a problem in demand side as production fell to 2.1 million tons from 2.7
million tons.
 After Independence, the partition of the country had a bad impact on the
cement industry.

Cement Expansion Scheme

In 1948, the government adopted the Cement Expansion Scheme which envisaged
new factories to increase the production. New factories were established at
Bagalkot, Jaipur, Orissa, Travancore etc. In 1950-51, there were 22 operating units
with an installed capacity of 3.3 million tons. Cement industry was given a great
importance in all the initial five year plans. The target of the first five year plan was to
raise the installed capacity to 5.4 million tons which was achieved. The industry has
grown to manifold since then.

Largest Producer States

 Maximum number of large cement plants are located in Andhra Pradesh,
followed by Tamil Nadu & Rajasthan. Andhra Pradesh and Rajasthan are
largest cement producing states while Maharashtra is largest consumer state
of Cement.

Cement Clusters
There are 7 cement clusters in India, which account for around half of production.
1. Satna (Madhya Pradesh),
2. Chandrapur (North Andhra Pradesh and Maharashtra),
3. Gulbarga (North Karnataka and East AP),
4. Chanderia (South Rajasthan + Jawad & Neemuch in MP),
5. Bilaspur (Chhattisgarh),
6. Yerraguntla (South AP),
7. Nalgonda (Central AP).

Did you know?

The cement industry in India is expected to grow by 116% by 2030.

 MARKET INSIGHTS

India is the second-largest producer of cement in the world, accounting for more than
7% of the global installed capacity. In FY 2022, domestic production of cement stood
at 356 million tons, up from 296 million tons in FY 2021. In terms of volume, cement
consumption reached 355.46 million tons in FY 2022 and is expected to reach
450.78 million tons by the end of FY 2027. The spurt in demand from sectors such
as housing, commercial construction, and industrial construction will lead to an
increase in consumption.

In September 2022, The Adani Group, acquired Ambuja Cements and its subsidiary
ACC Ltd. from Switzerland's Holcim Group for USD 6.5 Bn. With this acquisition,
Adani Group became the second-largest cement maker in the country.

India's cement production is expected increased at a CAGR of 5.65% between

FY16-22, driven by demands in roads, urban infrastructure and commercial real
estate. The consumption of cement in India is expected grow to at a CAGR of 5.68%
from FY16 to FY22.

At present, the Installed capacity of cement in India is 500 MTPA with production of
298 MTPA

The Cement sector has received good investments and support from the
Government in the recent past.

FDI inflows in the industry, related to the manufacturing of cement and gypsum
products, reached US$ 5.48 billion between April 2000-June 2022.

In June 2022, UltraTech Cement approved Rs. 12,886 crore (US$ 1.65 billion)
capital expenditure to increase capacity by 22.6 million tonnes per annum (MTPA)
through brownfield and greenfield projects.

PE/VC investments in real estate and infrastructure stood at US$ 338 million and
US$ 795 million respectively in September 2022.

Cement production in India increased by 12.1% in September 2022 compared to

September 2021.

In October 2022, UltraTech announced that it has been granted Environmental

Product Declaration (EPD) certificates for four of its cement products, which are
Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Slag
Cement (PSC) and PCC (Portland Composite Cement).

As per the Union Budget 2022-23, there was a higher allocation for infrastructure to
the tune of US$ 26.74 billion in roads and US$ 18.84 billion in railways is likely to
boost demand for cement.
Talk on how big the market is,

The cement demand in India is estimated to touch 419.92 MT by FY 2027. As India

has a high quantity and quality of limestone deposits through-out the country, the
cement industry promises huge potential for growth. India has a total of 210 large
cement plants out of which 77 are in the states of Andhra Pradesh, Rajasthan, and
Tamil Nadu. Nearly 33% of India's cement production capacity is based in South
India, 22% in North India, 13% in Central and West India, and the remaining 19% is
based in East India. India's cement production is expected increased at a CAGR of
5.65% between FY16-22, driven by demands in roads, urban infrastructure and
commercial real estate. The consumption of cement in India is expected grow to at a
CAGR of 5.68% from FY16 to FY22. As per Crisil Ratings, the Indian cement
industry is likely to add ~80 million tonnes (MT) capacity by FY24, the highest since
the last 10 years, driven by increasing spending on housing and infrastructure
activities.

MARKET SIZE(in terms of valuation): US$ 1.65 billion(12,886 crores)

Importance of the cement industry

In India, the cement industry is booming right now. The cement industry has
experienced great expansion because of a rising real estate sector, increased global
demand, and increased activity in infrastructure projects like state and national
highways. Production capacity has increased, and the world's leading cement
corporations are vying for a piece of the Indian market, resulting in a flurry of
mergers and acquisitions. India is now rated second in the world for cement
production.

By 2025, the cement industry in India is estimated to have a demand of roughly 550
to 600 million tonnes per year. This is because various industries, including housing,
industrial building, and commercial construction, are expanding. Furthermore,
infrastructure in India is rapidly increasing, ensuring that demand for cement will be
high in the next few years. In the future years, the country is expected to see the
establishment of 98 smart cities.

The Indian cement industry will play a unique role in building a new India,

Here is a list of the top 9 cement companies in India,

1.) UltraTech Cement

2.) Shree Cement

3.) Ambuja Cement

4.) ACC

5.) Dalmia Bharat

6.) JK Cement

7.) Ramco Cement

8.) Birla Corp

9.) Heidelberg Cement(Mysore Cements previously)

 Markets for products are characterised by fundamental supply and demand
factors, which in turn decide the behaviour of competing firms, including their
ability to pass costs through to prices.

Cement is a relatively homogeneous product due to which it falls in the

category of Oligopoly Market. With not many competitors for the settled
companies, their market share is highly characterised by what quality they
have been able to serve in the past few years.

ADVANTAGE INDIA?

In 2021, 64% of China's population and 37% of India's population lived in urban

areas, according to the census. With such huge difference between India and China,
India has done remarkably well to stand on 2 nd position as the biggest cement
producer.

Housing sector is the biggest demand driver of cement, accounting for about 67% of
total cement consumption. Other major consumers include infrastructure at 13%,
commercial construction at 11%, and industrial construction at 9%.

Questions from the case study are discussed here ,

1. What are the types of costs discussed in the case? Categorise them under
various heads.

Ans. The types of cost are discussed below with their heads,
 a. Cost of raw materials: Variable Costs

Raw materials are categorized as direct expenses on a company's income statement

because they contribute directly to the making of a product or delivery of a service.
As raw material costs change along with production volumes, they are considered to
be variable costs.

b. Transportation Cost: Fixed/Variable Costs

Transport costs are the costs internally assumed by the providers of transport
services. They come as fixed (infrastructure) and variable (operating) costs,
depending on conditions related to geography, infrastructure, administrative barriers,
energy, and how passengers and freight are carried.

c. Employee costs: Direct/Indirect Cost

Direct costs include wages for the employees that produce a product, including
workers on an assembly line, while indirect costs are associated with support labor,
such as employees who maintain factory equipment.

d. Administration expenses: General and administrative expenses are also

typically fixed costs in nature, as they would stay the same regardless of the
level of sales that occur.

e. Repair and Maintenance Costs: Indirect cost includes the cost of resources

common to various repairs and maintenance activities such as manpower,
equipment usage and other costs allocable to such activities.

2. Since price of the product(cement) is given, how can companies increase

their profit margin? Discuss.

Ans. Cement companies can increase their profit margin by implementing the
following strategies:

a. Streamline operations: Cement companies can streamline their operations to

reduce costs and increase efficiency. This includes improving logistics,
optimizing production processes, and reducing waste.
b. Increase sales volume: Cement companies can increase their sales volume
by expanding into new markets or increasing their market share in existing
 markets. This can be achieved through strategic marketing and distribution
efforts.
c. Focus on high-margin products : Cement companies can focus on high-margin
products such as premium cement, which can command higher prices and
generate higher profits.
d. Reduce input costs: Cement companies can reduce input costs by improving
procurement processes, negotiating better prices with suppliers, and investing
in energy-efficient technologies.
e. Innovate and differentiate: Cement companies can differentiate themselves
from competitors by offering innovative products or services. For example,
they could develop new cement blends that offer superior performance, or
provide value-added services such as technical support or training.
f. Invest in sustainability: Cement companies can invest in sustainable practices
to reduce their environmental impact and improve their reputation. This can
include using alternative fuels, reducing greenhouse gas emissions, and
implementing water conservation measures.

Overall, cement companies can increase their profit margin by focusing on efficiency,
innovation, and sustainability, while also optimizing their sales and marketing efforts.

Below are briefly discussed factors of improved cement market advocating the
growth of cement industry in India,

1. Mega Infrastructural Projects Driving Market Growth

The economy of India relies heavily on the infrastructure industry. This sector is
essential to India's overall growth, and the government has placed a high priority
on enacting regulations that would assure the country's building of world-class
infrastructure promptly. Power, bridges, dams, highways, and urban infrastructure
development are part of the infrastructure industry. The government of India has
turned its attention to the infrastructure sector. India intends to invest USD1.4
trillion in infrastructure between 2019 and 2023 to ensure the country's long-term
prosperity. From 2018 to 2030, the government proposes investing USD 750
billion in railway infrastructure.

2. Rapid Urbanization Driving India Cement Market

An estimated 270 million people will be added to India's urban population between
now and 2040. Even with such rapid urbanization on a massive scale, the
proportion of India's population living in cities is anticipated to be less than 50% by
2040. Most of the structures that will exist in India in 2040 have yet to be
constructed. Urbanization is driving a tremendous rise in total residential floor
area, from less than 20 billion square meters today to more than 50 billion square
meters in the next two decades. As a result, demand for energy-intensive building
materials is expected to skyrocket. Steel demand doubles to 2040 in the STEPS,
while cement consumption roughly triples.

3. Affordable Housing Schemes (Pradhan Mantri Awas Yojana) Driving Market

The Pradhan Mantri Awas Yojana (PMAY), launched in 2015, is a massive

scheme promoting affordable housing in India. The principal goal of this program
is to offer 20 million affordable housing units to people from low-income families by
2022. This program covers urban (PMAY-Urban) and rural (PMAY-Gramin) India,
aiming to build dwellings with adequate sanitation, water, and power. While the
former covers nearly 4000 cities and towns across India, the latter focuses on
slums, villages, and other rural areas.

4. The Growing Population

After China, India is the world's second most populated country. India's population
has recently surpassed one billion. According to the 2001 Indian Census, India
has a population of 4 billion. On March 1, 2001, India had a population of 1027
million. The population-housing relationship is a two-way street. Moreover,
population shifts result in shifting housing demand. Housing demand rises with
population increase, particularly as the number of households rises. In the long
run, population loss may lead to a fall in housing demand.

5. Market Segmentation

The India cement market is segmented based on type, application, region, and
company. Based on type, the market is further fragmented into Ordinary Portland
Cement (OPC), Portland Pozzolana Cement (PPC), Others. Also, segmentation of
the market on grounds of the application is done into residential, commercial,
infrastructure, industrial and institutional.

Some reasons why Indian cement industry has not yet peaked,

Recommendations

India have a lot of bases to cover if they are to make the most out of the cement
industry, so, the recommendations would carry the following points,

1. Switch to alternative fuels

Switching to alternative fuels can help reduce the cement industry’s CO2
emissions. At the same time, it can address India’s current challenge of
managing municipal waste and reducing the burning of crop residue.

2.  Invest in Waste Heat Recovery

Indian cement companies need to take bigger steps to address the huge
unrealised potential in Waste Heat Recovery (WHR). The technology can
reduce energy consumption and improve EBITDA margins by between
10% and 15%.

3. Increase clinker substitution

Substituting limestone clinker with waste products like fly ash and slag
preserves scarce limestone reserves and reduces the emissions from the
clinker production process. However, to prevent clinker substitution
plateauing at current levels, the industry needs to ramp up efforts on
composite cement and explore new options like calcined clay cements.

4. Explore carbon capture & storage and novel cements

Even with a higher substitution of clinker, CO2 emissions cannot be

entirely eliminated. Therefore the Indian cement industry needs to actively
explore and test carbon capture and storage (CCS) solutions that can be
scaled up and rolled out at an affordable cost. In the same vein, Indian
cement manufacturers need to get abreast of novel cements that emit
lower emissions than Portland cement.
5. Promote Green buildings

Green buildings are a rapidly growing market in India as customers

demand more energy efficient and environmentally friendly spaces.
Concrete buildings are well placed to meet these increasingly stringent
environmental standards due to their energy efficiency and durability. The
cement industry should help popularise green building standards and raise
awareness of concrete’s advantages.

6. Advocate concrete recycling

The cement industry can help improve the supply of aggregates and
reduce the amount of construction waste going to landfill or being dumped
illegally by encouraging concrete recycling. The industry can also use it in
co-processing of new cement.

Conclusion
Any country's cement company plays a critical part in the country's development. In
India, the cement industry is government-regulated since 1965. Despite being the
world's second-largest cement output, India has the lowest per capita cement usage,
125 kg. However, India's cement consumption and supply have accelerated. There is
always the possibility of increasing the cement business in a fast-developing
economy like India.

The Indian cement industry is large, growing and, with consumption of just
185kg/capita/year in 2011 (compared to global average of ~300kg/capita/year) the
country itself has the capacity to demand significantly more cement as it develops.

However, the industry is at a tricky point in its development. Capacity is way ahead
of actual consumption. However, cement producers are keen to maintain their
market share and so expand to secure future demand. Producers in this situation
should bear in mind the Indian cement industry of the early 20th Century, when
companies expanded, lowered prices and, in many cases, went out of business.
Some have cautioned against rapid capacity addition in the coming years. 16

It is foreseeable that the Indian cement industry will see consolidation over the
coming years. Producers that can differentiate their cement from others or can make
savings on production costs by, for example, using alternative fuels, will be able to
take advantage of increasing demand while remaining ahead of their competitors.