Cement Sector
Overview
Cement Industry in India is the second largest in the world in terms of both production and consumption, with an
installed capacity of 545 mn tons (~9.8% of Global Capacity) and 61% capacity utilization
Share of Major Cement Market Players (Net Sales)
Trends/Growth Drivers
Cement Production
Government initiatives for infrastructure projects
A budget of INR 1.7 Tn is allocated in the budget plan
of FY 2021 for the development of transport
infrastructure. Government is also working on
fulfilment of the 100 Smart Cities Mission initiative
Abundance of minerals used for cement manufacturing
The essential minerals used for manufacturing
cement, such as limestone (calcium), bauxite
(aluminum), iron ore, and coal, are available in
abundance across the country. As a result, cement
manufacturing has increased steadily in the country
This study source was downloaded by 100000874443453 from CourseHero.com on 11-04-2023 11:20:51 GMT -05:00
Source: EMIS Database, netscribes, CMIE
Domestic cement production was recorded at
~335 mn tons (FY20), compared to ~337 mn
1 tons (FY19), due to economic slowdown in
the country
Government enforced lockdown and
monsoon season hampered the industry as
2 cement capacity utilization reduced to 61%
from 70% a year earlier
Housing sector contributes to a significant
3 share (~63%) in driving the demand of the
industry
Private Domestic players dominate the industry
(90%) and 32 manufacturing entities accounts
4 for 96% of the country's annual cement
production
Installed capacity vs capacity utilization
Affordable housing and growth of the real estate sector
Government has undertaken several initiatives such as
the PMAY, and Housing for All by 2022 and the real
estate market in India is expected to reach a value INR
~64.47 Tn by 2030. This will push the demand for
cement throughout the country
Covid Impact
The demand for cement in the country is expected to
tumble by ~11%-15% in FY 2021. The weakened
demand from the consuming industries has resulted in
reduced capacity utilization. However, the industry is
expected to recover in the third quarter of FY 2021
 Cost structures and operating leverage

Prices hike in FY20 expected to be partially reversed The muted crude oil prices in FY20 eased down
to rekindle demand, however no price war expected margin pressures due to reduction in P&F expense

Financial Leverage distribution in the Industry

ISCR Distribution Debt to EBITDA distribution
• Leverage has been
a concern in the
capital intensive
* * Cement Sector
• Rationalization by
most players has
led to improved
credit metrics,
financial health and
capacity to borrow
• Weak metrics are
mainly displayed by
• *ISCR 2-5 : 22% of cos have 68% of total debt and 43% of the capacity regional players
• *Debt to EBITDA 2-3 : 30% of cos have 72% of total debt and 46% of the capacity
Key Risks in the sector Overall outlook

1
High cyclicality and demand disruptions
lead to under-utilization and thus distort
the cost structures (due to high
operating leverage)
Covid-19 induced slowdown in housing
sector & infrastructure may last longer
2 than expected leading to low revenue
growth
Manufacturers are highly dependent on
continued supply of limestone. Change in
3 regulations/ state government policies
can lead to disruption in supply chain
This study source was downloaded by 100000874443453 from CourseHero.com on 11-04-2023
Source: EMIS Database, netscribes, CMIE
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Neutral
30-40% of the cement demand is derived
from the govt. led projects, govt's
infrastructure initiatives and housing
schemes is expected to drive the growth
Debt rationalization to lead to reduced risks
and consolidation to lead to better capacity
utilization and thus, better cost structures
Despite the recovery post lockdown, the
cement consumption will still be lower YoY
by ~18-20%, moreover utilization is expected
to be lower
tooGMT
11:20:51 at ~40-45%
-05:00 in FY21