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In the race to become the most economic superpower, China has generally outperformed India, and with exception of telecom & IT, India has had trouble slaying the Chinese dragon. But now we can add another sector to the Indian success story, i.e., Cement. In last ten years, this sector has recorded a CAGR of 8%, against the world cement industry average of 3.5% and China‟s cement industry growth rate of 7.2%. Today this industry not only outshines that of developed countries such as US and Japan but also has become the second largest cement producer in the world after China.
The cement industry has continued its growth trajectory over the past ten years. Domestic cement demand growth has surpassed the economic growth rate for the past three years. Cement demand in the country grows at roughly 1.5 times the GDP growth rate. The industry had a turnover of around US$ 7.8 billion in 2003-04 and according to CRISIL is expected to grow at a CAGR of around 7 per cent in the next five years. The key drivers for cement demand are real estate sector, infrastructure and industry expansion projects. Among these real estate sector is the key driver of cement demand. The demand for cement is closely related to the growth in the construction sector. Consequently, cement demand has been posting a healthy growth rate of around 8 per cent since 1997-98, propelled by the increased thrust on infrastructure development, and the higher demand from the housing sector and industrial projects.
Cement is bulky commodity and cannot be easily transported over long distances making it a regional market place, with the nation being divided into five regions. Each region is characterized by its own demand-supply dynamics. Over the past few years the cost of cement production has grown at a CAGR of 8.4%.
With increase in infrastructure development activity with projects such as state and national highways, and global demand has led Indian cement industry to increase their production capacity. This inturn has attracted the top cement companies in the world to enter the Indian market and take the advantage of growth in demand.
The cement sector continues to emphasize on cost cutting through enhanced productivity, reduction in energy costs and logistic expenses.
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The government has considered spending more than US $500 billion on infrastructure in the 11th five year plan. Apart from this railways, urban infrastructure, ports, airports, IT sector, organized retailing, malls and multiplexes will be the main sectors driving the demand of cement in the country. So we can see that cement industry is moving towards both challenges and opportunities poised by the presence of domestic and global players in the Indian market. This trend is likely to continue in the coming years.
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1.1 SECTOR ANALYSIS
Indian Economy grew by 5.4 per cent in 2001-02, which is considered to be one of the highest growth rates in the world for the year. This growth is supported by a growth rate of 5.7 per cent in agriculture and allied sectors, 3.3 percent in industry and 6.5 per cent in services. Overall agricultural output is estimated to increase by nearly 7 per cent in 2001-02. Food grains production is expected to rise to 209 million tons compared with 196 million tons in 2000-01. Prospects of agricultural production in 2001-02 are considered to be bright as a result of normal monsoon and relatively favorable distribution of rainfall over time and regions. While the Indian industry sector grew by 3.3 per cent, with in industry sector segments like construction showed a lower growth in 2000-01, there was marked improvement in the growth rates of manufacturing (from 4.2 per cent in 1999-00 to 6.7 per cent in 2000-01) and mining and quarrying (from 2 per cent to 3.3 per cent during the same period). The growth rate of electricity, gas and water supply remained almost invariant at around 6.2 per cent for both 1999-2000 and 2000-01. During 1993-94 to 1999-2000 the service sector had achieved consistently high growth rates in the range of 7.1 per cent to 10.5 per cent. But for the first time in 2000-01, the growth rate of the service sector declined to 4.8 per cent due to poor performance by financial sector, trade hotels and restaurants, and community and social services. Agriculture The agriculture sector, for so long the mainstay of the Indian Economy, now accounts for only about 20 per cent of GDP, yet employs over 50 per cent of the population. For some years after independence, India depended on foreign aid to meet its food needs, but in the last 35 years, food production has risen steadily, mainly due to the increase in irrigated areas and widespread use of high-yield seeds, fertilizers, and pesticides. The Country has large grain stockpiles (around 45 million tons) and is a net exporter of food grains. Cash crops, especially tea and coffee, are the major export earners. India is the world's largest producer of tea, with annual production of around 470 million tons, of which 200 million tons is exported. India also holds around 30 per cent of the world spice market, with exports around 120,000 tons per year.
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etc. the manufacturing sector has recorded an average annual growth rate of 6. Manufacturing Sector After a decade of reforms. These include foreign and institutional investors. The sector also has a number of national and state level financial institutions. Further. Further. it recorded a growth of 2. processors of food and vegetables are exempt from excise duty.3 per cent and in 200102.000 listed companies. Over the period 1992-93 to 1999-2000.CEMENT INDUSTRY With a view to strengthening the sector. comprising 23 stock exchanges. with over 9. and storage of food grains has been granted "infrastructure status" and will be eligible for a tax holiday.604 billion respectively.8 per cent. at the end of December 2000. and access to foreign markets. the manufacturing sector is now gearing up to meet challenges for the new millennium. ALLIANCE BUSINESS SCHOOL Page 4 . the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).926 billion and Rs. Financial Sector An extensive financial and banking sector supports the rapidly expanding Indian Economy. the Country has a well-established stock market. In an effort to provide a further boost to the industrial manufacturing sector. transportation. Foreign Direct Investment (FDI) has been permitted through the automatic route for almost all the industries with certain restrictions. stood at Rs. Structural reforms have been undertaken in the excise duty regime with a view to introduce a single rate and simplify the procedures and rules. on the two dominant stock exchanges. management expertise. equipment leasing companies. 7. has positioned India as a preferred destination for manufacturing and sourcing for global markets. Investment in Indian companies reached record levels by 1994 and many multinationals decided to set up shop in India to take advantage of the improved financial climate. Companies in the manufacturing sector have consolidated around their area of core competence by tying up with foreign companies to acquire new technologies. building infrastructure for handling. The Indian capital markets are rapidly moving towards a market that is modern in terms of infrastructure as well as international best practices such as derivative trading with stock index futures. India boasts of a wide and sophisticated banking network. etc. investment funds. 6. venture capital funds. Total market capitalization. The cost benefits associated with manufacturing in India. Indian subsidiaries of multinationals have been permitted to pay royalty to the parent company for license of international brands.
3 billion in 2000-01. So as to improve the liquidity in the ADR/GDR market and to give opportunity to Indian shareholders to divest their shareholding in the ADR/GDR market abroad. measures such as two-way fungibility in ADR/GDR issues of Indian companies has been introduced and sponsorship of ADR/ GDR offerings against existing shareholding. and have established shared services and call centers in India to cater to their worldwide needs. showing an upward trend despite depressed stock market indices. Hughes and Computer Associates who have made substantial investments in India are increasingly tapping this potential. software services or accounting services.34 billion (January 2001 to June 2001) compared to USD 1. FII inflows were USD 2. etc. Services Sector The main thrust to industrial growth has come from the services sector. over 185 Fortune 500 companies use Indian software services. the quality and complexity of the type of services being marketed is on the rise to match worldwide standards. The software industry was one of the fastest growing sectors in the last decade with a compound annual growth rate exceeding 50 per cent. Whether it is financial services. thereby registering a growth of 57 per cent. The last year witnessed several Indian companies. this sector is highly professional and provides a major impetus to the Economy .5 billion for 2000. Net cumulative FII inflows crossed USD 14 billion (June 2001). India is fast becoming a major force in the Information Technology sector. commencement of internet based trading. Interestingly. Software service exports increased from US$ 4. The world's software giants such as Microsoft.02 billion in 1999-2000 to US$ 6. 26 per cent foreign equity has been allowed in the insurance sector and investment and divestment by venture capital funds and companies registered with SEBI has been simplified. A number of multi-nationals have leveraged the relative cost advantage and highly skilled manpower base available in India. this sector is populated with a range of players who cater to a niche market. In addition to the above. Services contribute to 41 per cent of the GDP. India's success in the software sector can be largely attributed to the industry's ALLIANCE BUSINESS SCHOOL Page 5 .CEMENT INDUSTRY addition to the list of compulsory Demat trading and rolling settlement in certain specified shares. According to the National Association of Software and Service Companies (NASSCOM). Rapidly. mobilizing resources by tapping the world market through the ADR/GDR route.
ALLIANCE BUSINESS SCHOOL Page 6 . showed the survey. shows the official Economic Census for 2005. said the census released here Thursday.54 million in rural and 16. 1. which compiled the census. followed by 25. “This census gives us a complete picture of India‟s economic situation. Following are some of the key census findings: 100. an agency under the ministry of statistics and programme implementation.K. Manufacturing sector employed 25. director general of the Central Statistical Organisation (CSO).78 percent and 4.83 million Establishments. “It is a significant pointer that India has a great deal of potential for growth in these two sectors.CEMENT INDUSTRY ability to cultivate superior knowledge through intensive R&D efforts and the expertise in applying the knowledge in commercially viable technologies.91 percent.8 million establishments in India. compared to 10.25 percent of the total workforce. There has been a rapid growth in small-scale industries.9 million people were employed in 41.” said Statistics and Programme Implementation Secretary Pranob Sen. The first census of its kind was launched in 1977. respectively for retail trade sector.83 establishments in India.” said S. operated in 2005.69 percent. 41.5 million people or 25. We must interpret the data intelligently.29 million in urban areas. “Retail and manufacturing establishments continue to be the key employment providers in India.90 million People employed in 41. Non-farm sector continued to be the principal source of employment. employing 90 million people.2 Contribution of Manufacturing Sector towards the Indian Economy An estimated 100. This was the fifth in the series of the economic censuses conducted by CSO. Nath. growing at 2.9 million in agriculture sector.1 million or 24. 25. respectively from 1998-2005.” he said.
26.3 million of the workforce. women accounted for 20.51 percent employed 10 or more workers. Employment growth rate at 2.91 million workers. 35.2 million.08 million units had 10.4 million.1 million people). without hired workers.CEMENT INDUSTRY 39. while agriculture sector‟s 6. farming was third (9.78 percent between 1998 and 2005. Males accounted for 78.61 million Establishments under private ownership.99 million workers. Manufacturing sector was the largest employer (25. children 2. ALLIANCE BUSINESS SCHOOL Page 7 .96 million Units were own establishments.5 million people).42 percent had 6-9 workers. only 1. the retail sector came next (25. 95 percent establishments had 1-5 workers.2 million people). 3.75 million Non-agricultural establishments engaged 89.
1 INDUSTRY BACKGROUND Pre Independence The first endeavor to manufacture cement dates back to 1889 when a Calcutta based company endeavored to manufacture cement from Argillaceous (kankar). by increasing prices and providing financial incentives. This phase is also referred to as the Nascent Stage of Indian Cement Industry. But the first endeavor to manufacture cement in an organized way commenced in Madras. The following decade saw tremendous progress in terms of manufacturing units. The government intervened by giving protection to the Industry and by encouraging cooperation among the manufacturers. During the earlier years. the price and distribution control system was set up to ensure fair prices for both the manufacturers and consumers across the country and to reduce regional imbalances and reach self sufficiency. the Concrete Association of India was formed with the twin goals of creating a positive awareness among the public of the utility of cement and to propagate cement consumption. The First World War gave the impetus to the cement industry still in its initial stages. production of cement exceeded the demand. Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India Cement Company Ltd at Porbandar. slow growth in additional capacity and rising cost. In 1927. The government intervened several times to boost the industry.000 tons and production of 1000 installed. But it had little impact on the industry. which further led to reduction in demand. South India Industries Limited began manufacture of Portland cement in 1904. ALLIANCE BUSINESS SCHOOL Page 8 . installed capacity and production.CEMENT INDUSTRY 2. In 1956. Post Independence The growth rate of cement was slow around the period after independence due to various factors like low prices. Gujarat with an available capacity of 10.But the effort did not succeed and the company had to halt production. Society had a biased opinion against the cement manufactured in India.
For new units and sick units a lower quota at 50% was affected. In 1977 the government authorized higher prices for cement manufactured by new units or through capacity increase in existing units. The remaining 33.CEMENT INDUSTRY Period of Restriction (1969-1982) The cement industry in India was severely restrained by the government during this period. to gear it up to meet the challenges of free market competition due to the impending policy of liberalization. capacity and distribution of cement and it intervened indirectly through price control. the industry laid greater focus on exports. Profitability of the manufacturers increased substantially. In 1991 the industry was de licensed. Partial Control (1982-1989) To give impetus to the cement industry. Government hold over the industry was through both direct and indirect means. the Government of India introduced a quota system in 1982.40% was allowed to be sold in the open market. In 1979 the government introduced a three tier price system. These changes had a desired effect on the industry. Post Liberalization In 1989 the cement industry was given complete freedom. Government intervened directly by exercising authority over production. To maximize the opportunity available in the form of global markets. Prices were different for cement produced in low. However the price control did not have the desired effect. Most of the major players invested heavily for capacity expansion. medium and high cost plants.60% was imposed for sales to Government and small real estate developers. This resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. ALLIANCE BUSINESS SCHOOL Page 9 . Rise in input cost. The role of the government has been extremely crucial in the growth of the industry. reduced profit margins meant the manufacturers could not allocate funds for increase in capacity. but the rising input cost was a cause for concern.A quota of 66. But still the growth rate was below par.
Indian Cement Industry is engaged in the production of several varieties of cement such as Ordinary Portland Cement (OPC). Sulphate Resisting Portland Cement. coal and power. 2. roads.CEMENT INDUSTRY Cement is one of the core industries which plays a vital role in the growth and expansion of a nation. with demand reporting a compounded annual growth rate (CAGR) of 9. Over the last few years. financial.3% and capacity addition a CAGR ALLIANCE BUSINESS SCHOOL Page 10 . total cement consumption in India stood at 178 million tonnes while exports of cement and clinker amounted to around 3 million tonnes. Portland Blast Furnace Slag Cement (PBFS). transportation. The industry's capacity at the beginning of the year 200910 was 217.97 million tonnes during April to January 2009-10 whereas during the same period for the year 2008-09. They are produced strictly as per the Bureau of Indian Standards (BIS) specifications and their quality is comparable with the best in the world. silica. The Indian cement industry is the second largest in the world. Indian cement industry is globally competitive because the industry has witnessed healthy trends such as cost control and continuous technology upgradation. The industry occupies an important place in the national economy because of its strong linkages to other sectors such as construction.2 CURRENT SCENARIO The Indian cement industry is the second largest producer of quality cement. The demand for cement depends primarily on the pace of activities in the business. formed out of calcium oxide. It comprises of 140 large and more than 365 mini cement plants. real estate and infrastructure sectors of the economy. as well as for creation of infrastructures like ports. Oil Well Cement. Rapid Hardening Portland Cement.52 million tonnes during the same period for the year 2008-09. Cement is considered preferred building material and is used worldwide for all construction works such as housing and industrial construction.80 million tonnes.07 million tonnes. the Indian cement industry witnessed strong growth. White Cement. The cement industry is also one of the major contributors to the exchequer by way of indirect taxes. Cement production during April to January 2009-10 was 130. aluminium oxide and iron oxide.67 million tonnes as compared to 115. Portland Pozzolana Cement (PPC). It is basically a mixture of compounds. Despatches were estimated at 129. it stood at 115. consisting mainly of silicates and aluminates of calcium. power plants. During 2008-09. etc. etc.
the industry posted capacity utilisation levels of around 93% during the last five years.1 ALLIANCE BUSINESS SCHOOL Page 11 .3 Consumption Growth during 2008-09 Even during the economic slowdown in 2008-09. The trends in allIndia consumption and the growth in consumption in the major cement-consuming States over the last five years are presented in below table: Growth in Cement Demand Figures in Million Tonnes 2008-09 Domestic Consumption Year-on-Year Growth (%) 178 8. The main factors prompting this growth in demand include the real estate boom during 2004-08.5% growth in consumption during the first eight months with the growth being aided by strong infrastructure spending.4%. increased investments in infrastructure by both the private sector and Government. growth in cement demand remained at a healthy 8.CEMENT INDUSTRY of 5.4 Apr-Nov 09 100 12. 2.5 Source: Cement Manufacturers Association (CMA). Improved prices in conjunction with volume growth led to the domestic cement industry reporting robust growth in turnover and profitability during the period 2005-09. ICRA Research TABLE 2. especially from the govt sector. With demand growth being buoyant and capacity addition limited.6% between 2004-05 and 2008-09. and higher Governmental spending under various social programmes. 12. on an average. reporting. In the current fiscal (2009-10) cement consumption has shot up.
With the rapid growth rate of the Indian economy after the 1990s. originally possessed by the Indorama S P Lohia Group.5 Globalization of Indian Cement Industry The Globalization of Indian Cement Industry has helped the industry to restructure itself to cope up with the alterations in the global economic and trading system.CEMENT INDUSTRY 2. It has been catering to India's cement requirements since its emergence during the British Raj in India.Indorama Cement Ltd. The Indian cement industry is one of the oldest industries. like Heidelberg Cement . Being one of the ALLIANCE BUSINESS SCHOOL Page 12 . With the globalization of Indian cement industry many foreign cement manufacturers are engaging themselves in agreements and deals with their India counter parts to have a share of the growth. Globalization of Indian Cement Industry includes several foreign companies engaging in mergers and acquisitions of Indian cement companies. The increase in the construction activities has led to the increase in the demand for updated quality building materials and other allied products.5%. the industry was highly regulated. Cement being one of the major elements in the construction work. Though the majority of the players in the Indian cement industry were private sector organizations. Heidelberg Cement Company is the leading German cement manufacturing company. The consumption of cement has increased in India by nearly 7. Heidelberg Cement Company entered into an agreement for a 50% joint venture with the Indorama Cement Ltd.. the infrastructural developments within the country has been tremendous. there is a growth in the cement industry in India. situated in Mumbai.4 Key Drivers of Cement Industry Buoyant real estate market Increase in infrastructure spending Various governmental programmes like National Rural Employment Guarantee Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana 2. The Heidelberg Cement was set up in 1873 and has a long and prosperous history.
It has plans for increasing the cement production through technological innovations and maximization of the capacity of the plant. It was established in 1999 in India with the acquisition of the Tisco and the Raymond cement plants. The joint venture earned revenues of around 100 million Euros and an operating profit of 4 million Euros. A clinker plant is coming up in the state on Gujarat Holcim Cement . superb management. a subsidiary for its global activities. has acquired shares of the famous Indian cement manufacturer .Zuari Cement Limited Italcementi Cement Company with the help of the Ciments Français.CEMENT INDUSTRY best in the world the Heidelberg Cement Company has its bases in different countries.Gujarat Ambuja Cements (GACL) Holcim Cement signed an agreement of 14. A grinding plant in Mumbai and a cement terminal near Mumbai harbor. skilled personnel. Italcementi cement .The Holcim Cement Company has units in excess of 70 countries all over the world. Italcementi Cement is the 5th largest cement manufacturing company in the world.Zuari Cement Limited. The Lafarge Cement Company was set up in the year 1833 by Leon Pavin. In 2001 the Italcementi cement entered the Indian market scenario.8% take over with the Gujarat Ambuja Cements (GACL). Lafarge India is the subsidiary of the Lafarge Cement Company of France. having a work force of 90. It has a large network of distributors in the ALLIANCE BUSINESS SCHOOL Page 13 . The production capacity of the Italcementi cement company is about 70 million tons in a year. One of them is in Jharkhand which is used for the purpose of grinding and the other two are in Chhattisgarh used for manufacturing. and a outstanding market strategy gives this tie up good edge over the other competitors. It took over the plant of the Zuari Cement Limited in Andhra Pradesh in southern India. Holcim Cement Company is among the leading cement manufacturing and supplying companies in the world. Lafarge Cement presently has three cement manufacturing units in India. It is one of the major employers in the world. With new products. With the construction boom in India the company looks for a stable future.000. The acquisition was of 50% shareholding and the deal was of about 100 million Euros. Lafarge Cement Company situated in France is the leading cement producing company in the world. The Heidelberg Cement Company has two manufacturing units in India.
CEMENT INDUSTRY eastern part of India. One of the other defining features of the Indian cement industry is that the location of limestone reserves in select states has resulted in it‟s evolving in the form of clusters. The cyclical nature of this industry has meant that only large players are able to withstand the downturn in demand due to their economies of scale. Another distinguishing characteristic comes from it being cyclical in nature as the market and consumption is closely linked to the economic and climatic cycles. The Lafarge Cement Company is presently producing nearly 5. There are 56 cement companies in India. In India. operational efficiencies. where majority of the production of cement (94%) in the country is by large plants. ALLIANCE BUSINESS SCHOOL Page 14 . competition is also localized because the cost of transportation of cement to distant markets often results in the product being uncompetitive in those markets. Since cement is a high bulk and low value commodity. centrally controlled distribution systems and geographical diversification.5 million tons of cement for the Indian cement market. cement production is normally at its peak in the month of March while it is at its lowest in the month of August and September. 2. operating 124 large and 300 mini plants.6 STRUCTURE OF THE INDIAN CEMENT INDUSTRY It is a fragmented industry.
CEMENT INDUSTRY 3. To compare the global market with Indian cement industry. • The five companies have been chosen based on market share. • Secondary information is obtained by the medium of internet. • To find out the efficiency and economic size of cement manufacturing firms. 3.3 SOURCES OF DATA Only secondary data was collected from the internet. company websites.1 OBJECTIVES OF THE STUDY • • • To analyze the evolution of cement industry. journals. Capitaline databases have been the main source of information for company analysis. To estimate the level and analyze the trends in market concentration in the cement industry. • To assess the profitability. ALLIANCE BUSINESS SCHOOL Page 15 . articles and magazines. liquidity and other financial ratios of the firms when compared to the industry. magazines and various articles. production capacity and net profits for the previous years. 3.2 METHODOLOGY OF THE STUDY • No field work in collection of primary data for the study and the study is going to be descriptive and analytical.
ALLIANCE BUSINESS SCHOOL Page 16 .4 LIMITATIONS OF THE STUDY: The study is limited to the top five cement companies in India. The financial ratios used for analysis of performance of each company are limited. Only three years‟ data is used for comparing the performance of these companies.CEMENT INDUSTRY 3.
b) Weakness: Effect of global recession on real estate: The real estate prices are stabilizing and facing steady slowdown especially in metros. Growing middle class: There has been increase in the purchasing power of emerging middle-class with rise in salaries and wages. High Interest rates on housing: The re-pricing of the interest rates in the last four years from 7% to 12% has resulted in the slowdown in residential property market. There has been drastic reduction in property prices due to reduced demand and increased supply. c) Opportunities: Strong growth of economy in the long run: Indian economy has been one of the stars of global economics in the recent years. such as roads. growing 9. Increase in infrastructure projects: Infrastructure accounts for 35% of cement consumption in India.6% in 2006. ALLIANCE BUSINESS SCHOOL Page 17 .CEMENT INDUSTRY 4. the cement demand is likely to grow in future. There are approximately one hundred thousand completed flats without occupancy in Bangalore. Low cost of production: due to the easy availability of raw materials and cheap labour. And with increase in government focus on infrastructure spending. India is facing tough economic times in 2008. However. which results in rising demand for better quality of life that further necessitates infrastructure development and hence increases the demand for cement. Demand-Supply gap.2% in 2007 and 9. overcapacity: The capacity additions distort the demand-supply equilibrium in the industry thereby affecting profitability.1 SWOT ANALYSIS a) Strengths: Second largest in the world in terms of capacity: In India there are approximately 124 large and 300 mini plants with installed capacity of 200 million tonnes. highways and airports. Increasing cost of production due to increase in coal prices.
as well as prices. ALLIANCE BUSINESS SCHOOL Page 18 . At present ninety three per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology and only seven per cent of the capacity is based on old wet and semi-dry process technology. This was done to keep the price of cement under check. d) Threats: Imports from Pakistan affecting markets in Northern India: In 2007. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially and hence reduce the cost of production.CEMENT INDUSTRY Technological changes: The Cement industry has made tremendous strides in technological up gradation and assimilation of latest technology. 130000 tonnes in 2008. 173000 Metric tones of cement was exported to India. Excess overcapacity can hurt margins.
CEMENT INDUSTRY 4.2 PORTER’S FIVE FORCES ALLIANCE BUSINESS SCHOOL Page 19 .
antitrust and also technology management.1 (or 1. H = Herfindahl Index. it is an economic concept widely applied in competition law. It is obtained by squaring the market-share of each of the players. and then adding up those squares The formula for this index is: Where.800) indicates moderate concentration. moving from a huge number of very small firms to a single monopolistic producer.1Herfindahl-Hirschman Index (HHI) The H index is a far more precise tool for measuring concentration.1 to 0.3. so that %S1 is the percentage owned by the largest company.3 CONCENTRATION RATIO: 4. Herfindahl and Albert O. A HHI index below 0.000) indicates an unconcentrated index. n stands for the total number of firms you are counting. A HHI index below 0. whereas decreases indicate the opposite.18 (or 1. It can range from 0 to 10.800) indicates high concentration ALLIANCE BUSINESS SCHOOL Page 20 . si = Contribution of each individual firm to Industry sales. A HHI index between 0. and so on.01 (or 100) indicates a highly competitive index. %S2 by the second.18 (above 1.000 to 1.CEMENT INDUSTRY 4. Named after economists Orris C. n = Number of firms Here %S stands for the percentages of the market owned by each of the larger companies. A HHI index above 0.000. Hirschman. Increases in the Herfindahl index generally indicate a decrease in competition and an increase of market power.
14.90 2..64659642 20. 33589..96 Birla Corpn. J K Cements JK Lakshmi Cem.64 J K Cements.66 7.040.65 GRAPH 4. ALLIANCE BUSINESS SCHOOL Page 21 . J K Cements JK Lakshmi Cem.08734521 19.96 Birla Corpn. 4.46 6. UltraTech Cem.942.0106767 Market Share ACC Ambuja Cem.716.223.42 1. Shree Cement UltraTech Cem.385. (2009) 7. Shree Cement.09 JK Lakshmi Cem.149173 HHI indicates moderate concentration that implies the size of the firm in relationship to the overall cement industry in North is medium. 20..955250257 3.50 TABLE 4..01 Ambuja Cem.96131414 5.643750249 8. Shree Cement UltraTech Cem.329688095 4. Birla Corpn. 19. 3. 8.70 1.2 HHI = 0. 23.1 (%) 23. 5.33 others others.02 Cr Name of the Company ACC Ambuja Cem.37 ACC. Net Sales in Percentage Cr.CEMENT INDUSTRY MAJOR PLAYERS IN THE NORTH: TOTAL SALES for the year 2009 = Rs.664.19 1.790.
530.61 Chettinad Cement Dalmia Cement India Cements India Cements.28 Chettinad Cement.86 Andhra Cements.81 Madras Cement Rain Commodities zuari Cements others Madras Cement. 22.137.46 GRAPH 4.01 438.98 3.89 Rain Commodities.111.8094889 22. 3.90 1.CEMENT INDUSTRY MAJOR PLAYERS IN SOUTH: TOTAL SALES for the year 2009 = Rs. 15.09825129 15.(2009) 369.758.72 TABLE 4.09 Andhra Cements Dalmia Cement. others. 29.67 1. ALLIANCE BUSINESS SCHOOL Page 22 .2 HHI = 0.61049564 29.01 Cr Name of the company Andhra Cements Chettinad Cement Dalmia Cement India Cements Madras Cement Rain Commodities zuari Cements Net Sales in Cr. 9.278534281 10.46491881 9. 4. 10.894191466 Market Share zuari Cements.34 2.861610277 3.358.36 1.2 Percentage (%) 3.186167 HHI indicates moderate concentration that implies the size of the firm in relationship to the overall cement industry in South is medium. 11266.68 3.
Capacities increase in excess of demand and a glut in capacity is created. It ALLIANCE BUSINESS SCHOOL Page 23 . we believe the cement industry is showing the boom. Portland Pozolona Cement. characterized by the boom-and bust syndrome. It is a fine powder which when mixed with water sets to a hard mass as a result of hydration of the constituent compounds. It accounts for 70% of the total consumption. It contains a very low proportion of iron oxide. Demand catches up and the cycle is repeated all over again. prices fall and margins come under pressure. COMPOSITION OF CEMENT Cement is a mixture of limestone. popularly known as grey cement. at present. Buoyed by booming economy with amplified demand for enhanced infrastructure housing & commercial space. Portland Pozolona Cement (PPC): PPC has 80% clinker. Competition increases. DIFFERENT TYPES OF CEMENT There are different varieties of cement based on different compositions according to specific end uses namely Ordinary Portland Cement. clay. flooring etc. silica and gypsum. White Cement and Specialized Cement. weaker players shut shop or sell off to larger ones. Capacity addition comes to a halt. The buoyant markets and huge profits raked in by players tempt more players into the market. the Indian cement industry exhibits this boom-and-bust cycle most visibly. A huge potential market and rapid growth in the early stages lead to a surge in interest and a flurry of research. of all the cyclical industries. 15% pozolona and 5% gypsum and accounts for 18% of the total cement consumption. Pozolona has siliceous and aluminous materials that do not possess cementing properties but develop these properties in the presence of water. White cement is a variation of OPC and is used for decorative purposes like rendering of walls. Ordinary Portland Cement (OPC): OPC. Portland Blast Furnace Slag Cement. It is the most commonly used construction material. The basic difference lies in the percentage of clinker used.4 Life Cycle Analysis Cement is a typical cyclical industry. Perhaps. The projected growth rates point to a lucrative market. has 95% clinker and 5% of gypsum and other materials.CEMENT INDUSTRY 4.
Water Proof Cement: OPC. It has a heat of hydration even lower than PPC and is generally used in construction of dams and similar massive constructions. the compressible strength increases rapidly. increased preference is being given to the energy efficient dry process technology so as to obtain a cost advantage in a competitive market.3% of the kilns are dry process. so that on casting. since the initiation of the decontrol process. the wet process is expected to be completely phased out in the near future. It has a lower heat of hydration. Rapid Hardening Portland cement: It is similar to OPC.5 MANUFACTURING PROCESSES There are two general processes for producing clinker and cement in India: a dry process and a wet process.4% to ensure whiteness. The semi-dry process has never played an important role in Indian cement production and accounts for less than 0. many manufactures have switched over from the wet technology to the dry technology by making suitable modifications in their plants. 3% are wet. Dry process kilns are ALLIANCE BUSINESS SCHOOL Page 24 . These kilns have been phased out over the past 46 years and at present. around 94% of the cement plants in India used wet process kilns. in tiles and for flooring. the dry process is much more energy efficient than the wet process. and only 1% are semidry process. Specialized Cement: Oil Well Cement: is made from clinker with special additives to prevent any porosity. In 1960. 96. 4. which helps in preventing cracks where large volumes are being cast. It is used to enhance aesthetic value. Portland Blast Furnace Slag Cement (PBFSC): PBFSC consists of 45% clinker. Moreover. with small portion of calcium stearate or non-saponifibale oil to impart waterproofing properties. even more efficient technologies.CEMENT INDUSTRY is cheaply manufactured because it uses fly ash/burnt clay/coal waste as the main ingredient. except that it is ground much finer. 50% blast furnace slag and 5% gypsum and accounts for 10% of the total cement consumed. In general. and the semiwet somewhat more energy efficient than the semi-dry process. White Cement: Basically. Due to new. Over the last decade.2% of total production. White cement is much more expensive than grey cement. Special cooling technique is used. it is OPC: clinker using fuel oil (instead of coal) and with iron oxide content below 0.
The clinker formed is cooled and conveyed ALLIANCE BUSINESS SCHOOL Page 25 . the raw meal undergoes a process of 25alcinations in a precalcinator (in which the carbonates present are reduced fed to the kiln. An electrostatic precipitator dedusts the raw mill gases and collects the raw meal for a series of further stages of blending. Subsequently. In the preheaters the material is heated to 750°C.000 tonnes per day or tpd (average of 2. limestone is crushed to a uniform and usable size. The homogenized raw meal thus extracted is pumped to the top of a preheater by air lift pumps.3 DRY PROCESS In dry process production.450-1. FIG 4.500°C. blended with certain additives (such as iron ore and bauxite) and discharged on to a vertical roller mill where the raw materials are ground to fine powder. While capacities in semi-dry kilns range from 600-1.200 tpd (average 521tpd).CEMENT INDUSTRY typically larger. capacities in wet process kilns range from 200-750 tpd (average 425 tpd).8.880 tpd). with capacities in India ranging from 300. The remaining 25alcinations and clinkerization reactions are completed in the kiln where the temperature is raised to 1.
The wet process is more energy intensive. clinker. as in the case of other plants. gypsum and fly ash are used. GRAPH 4.4 ALLIANCE BUSINESS SCHOOL Page 26 . calcinations and sintering reaction takes place. The chemical composition is corrected and the slurry is then pumped to the kiln where evaporation of moisture. clinker and gypsum are used and for producing PPC.CEMENT INDUSTRY to the clinker silo from where it is extracted and transported to the cement mills for producing cement. The clinker is cooled and transported. preheating. For producing OPC. with suitable conveyors to cement mills for grinding. WET PROCESS The wet process differs mainly in the preparation of raw meal where water is added to raw materials to produce slurry. and thus becomes expensive when power and energy prices are high.
freight. railway. the industry enjoyed a boom in sales and profits. Total Decontrol (1989) In the year 1989. which can be seen from the increase in the installed capacity to 59MT in 1988-89 in comparison with the figure of a mere 27. government controls all of these prices. In the next two years.9MT in 1980-81. levy cement quota was fixed for the units and the balance could be sold in the open market. By decontrolling the cement industry.CEMENT INDUSTRY 4. The control on cement for a long time and then partial decontrol and then total decontrol has contributed to the gradual opening up of the market for cement producers. an increase of almost 111%. total decontrol of the cement industry was announced.6 GOVERNMENT POLICIES Government policies have affected the growth of cement plants in India in various stages. the industry remained stagnant with no addition to existing capacity. The installed capacity reached only 27. For 1992-93. Interestingly. cement was declared as an essential commodity under the Defence of India Rules and was brought under price and distribution controls which resulted in sluggish growth. GOVERNMENT CONTROLS The prices that primarily control the price of cement are coal. The stages of growth of the cement industry can be best described in the following stages: Price and Distribution Controls (1940-1981) During the Second World War. the government relaxed the forces of demand and supply. Under this scheme. ALLIANCE BUSINESS SCHOOL Page 27 . ironically. the economy slipped into recession taking the cement industry down with it. power tariffs. royalty and cess on limestone. This resulted in extensive modernization and expansion drive. partial decontrol was announced. Partial Decontrol (1982-1988) In February 1982. By 1992. the pace of overall economic liberalization had peaked. however.9 MT by the year 1980-81.
Government. leading to concentration of cement units in these states. Maharashtra and Gujarat. It has now levied an advalorem duty of 12% on cement with. 31st May 2007. however. RSP exceeding Rs. total tax burden.f. CAPACITY CLUSTERS Cement and its raw materials namely coal and limestone. There are eight such clusters in the country and account for 81% of the cement capacity. having realized difficulty of the industry and the consequent burden to the consumer. This has resulted in „clusters‟. Most of limestone deposits in India are located in Madhya Pradesh. for the first time. This dual structure not only enhanced taxation burden further on the industry but also complicated its effective implementation. There is a trade-off ALLIANCE BUSINESS SCHOOL Page 28 . At the price level of Rs. announced a dual excise duty structure for cement industry. The industry is characterized by a high degree of fragmentation that has created intense competitive pressure on price realizations. Large cement plants accounted for 94% of the total installed capacity in India. 600 per MT on cement with Retail Sale Price (RSP) exceeding Rs. Excise duty was increased to Rs. 190 per bag while retaining specific duty of Rs. sources of raw materials and markets. The Central Government in its budget presented on 28th February 2007. there are approximately 130 large cement plants owned by around 52 companies and 365 mini-cement plants with an installed capacity of around 172. Andhra Pradesh. 190 per bag and below. 350 per MT on cement sold Rs. 190. 350 per MT for cement with RSP of Rs. cement plants are located close to both. Spread across the length and breadth of the country. 4. has subsequently revised the structure w. 200 per bag.CEMENT INDUSTRY TAX STRUCTURE The Indian Cement industry is one of the highest taxed one.08mtpa as on June 2007. 400 per MT so far. per bag and Rs. Rajasthan.7 INDUSTRY STRUCTURE AND NATURE OF COMPETITION INSTALLED CAPACITY India is the world‟s second largest cement producing country after China. Given this.e. as a percentage of ex-factory realization works out to 45%. The cement industry has been continuously representing to the Government for more rational tax regime.190 per bag and below as against specific excise duty of Rs. are all bulky items that make transportation difficult and uneconomical.
GRAPH 4.5 GRAPH 4.6 ALLIANCE BUSINESS SCHOOL Page 29 .CEMENT INDUSTRY between proximity to markets and proximity to raw materials due to which some cement plants have been set up near big markets despite lack of raw materials.
accounting for nearly 75% of the energy used in cement production. The proposed decision if implemented could result in cost escalation of almost 30-40%. ALLIANCE BUSINESS SCHOOL Page 30 . However. While. freight cost has experienced a decline in its share of total operating costs. repair and maintenance. The share of costs on account of material. manufacturing overheads.8 COST ANALYSIS The energy costs and cement freight costs are the two most important elements in the cost structure of a cement company. In India. as the prices of coal under auction system are 30-40% higher than the notified prices.7 Power & Fuel The cement industry is one of the most energy-intensive sectors within the Indian economy. The remaining is met by fuel oil and high-speed diesel oil. Despite recent increase in coal prices the industry has been able to control the expenditure on this account by investing in captive power plants – freeing themselves from the tariff hike by SEB and reducing the energy consumption required to produce a tonne of cement. steel and paper industry. and administrative expenses) has declined. GRAPH 4. the share of energy costs has increased marginally. an estimated 90-94% of the thermal energy requirement in cement manufacturing is met by coal. employees and selling expenses have more or less remained stable.CEMENT INDUSTRY 4. The share of other costs (such as stores & spares. Government is planning to phase out supplies of subsidized coal to cement. Clinker production is the most energy intensive step.
POWER Cement is a power intensive industry requiring on an average 90-105 units of power in the wet process.CEMENT INDUSTRY COAL Coal is an important input in cement manufacture and accounts for 15-20% of the total cost. ALLIANCE BUSINESS SCHOOL Page 31 . Cement companies are also resorting to importing coal. In particular. Coal serves a dual role in cement manufacture. which reduce the ash content of the coal at the mine itself. Significantly power accounts for 15-20% of the variable cost of cement manufacturing. there has been deterioration in the quality of coal. This is just around 2% of India's total current power generating capacity. However. Thus. kiln rotation and clinker grinding. A dry process plant typically has an average connected load of 15 MW. Therefore. Consumption of coal for production of cement has not increased proportionately with cement production because of the switch to the dry process. the mineral content in coal (basically.800 MW. the share of cement production using captive power has only increased over the years. During FY2005. Each stage accounts for roughly one third of the total power consumption. In order to reduce these problems. and improper and inefficient burning. silica content) acts as a constituent in clinker. the ash content has increased implying lower calorific values for coal. roughly 43% of the total domestic cement production was undertaken using captive power as against only 21% in FY1995. many cement companies are meeting 60-100% of their power requirement through captive facilities. the cement industry started implementing coal washeries. and 100-110 units of power in the dry process to produce one tonne of cement produced. The captive power generation capacity of cement plants is presently estimated at around 1. Cement manufacturing consumes power mainly for three purposes: raw meal grinding. resulting in higher fuel and transportation costs. coal consumption has started to increase. etc. However. or using alternative fuel such as lignite or petcoke.5% of India's coal demand. with the increase in the frequency of power cuts and rising power tariffs. efficiency improvements in cement kilns and the increased use of fly ash produced in power plants and granulated slag produced in blast furnaces of steel plants in the production of cement. Cement accounts for around 4. Secondly. Based on the present installed capacity of 172 mtpa of cement. the total industry requirement is roughly 2520 MW. over the years. the heat value in coal provides the thermal energy required for the operation of the kiln. Firstly.
A) LIMESTONE Limestone is the main raw material and is the source of calcium carbonate. Portland cement consists of compounds of lime mixed with oxides like silica. Cement companies use both road and rail transport to transport cement and to receive coal. cement companies have started preferring road transportation even for longer distances because of insufficient wagon supply to the cement industry. we do expect that it will gradually increase freight charges. However. like sand and coarse rock. There are three major raw materials for cement. which in turn could push up the freight cost again. For ALLIANCE BUSINESS SCHOOL Page 32 . The balance 1% is accounted by Sea transportation. This has induced many cement companies to shift a portion of their cargo to rail. This was largely because of the Supreme Court ruling that banned overloading of cement trucks. Limestone is the most abundant source of CaO. freight costs are considerably high for cement plants.CEMENT INDUSTRY TRANSPORTATION Outward freight on cement is an important element in the operating cost of a cement plant. RAW MATERIALS Cement is usually used in mortar or concrete. Cement is the biggest limestone user in India accounting for over 75-80% of limestone produced in India. The composition of limestone used by the various sectors varies. Although rail transportation is more economical for distances beyond 250-300 km. The share of road over rail has only gone up over the years. These clusters are distant from the collieries and the markets for cement. Cement has an average lead of around 535 km. It accounts for around one third of the total variable costs. Thus. Both coal and cement are of low value and bulky in nature. Further increasing diesel haven‟t helped the cause. For coal transportation. Presently. cement companies have to rely on extensive transportation for moving coal from the coal pitheads to the cement plants and for dispatching cement from the plant to the markets. the dependence on rail network is still very high and accounts for around 70% of coal movement. It is mixed with inert material (called aggregate). alumina and iron oxide. Most of the cement plants in India are located in and around the limestone clusters. Calcium carbonate is burnt to obtain calcium oxide (CaO). with Indian Railways facing shortage of wagons. Over the past 12-15 months freight cost on cement has jumped more than 20%. Rail dispatches amount for about 33% while roads carry the balance 66%.
Thus. on contact with water. followed by the Northern region with 21. Typically. for a 1 million tone cement plant. 1. over 45% of the inventory of cement grade limestone is in the Southern region. the country's estimated gross reserves of cement grade limestone stand at 97430 mn.t.64% with central region.5 tonnes of limestone are required per tonne of clinker. the Western region with 12.82% and rest 3. Gujarat and Tamilnadu. assured availability of cement grade limestone reserves of the order of 50-60 mt in the close vicinity is important.CEMENT INDUSTRY cement. tends to set instantaneously because of the very fast reaction between tri-calcium alluminate and water.4-1. In the presence of gypsum.8 B) GYPSUM Gypsum is used as a retarding agent. Limestone contains about 52% of lime and about 80% of this lime is ALLIANCE BUSINESS SCHOOL Page 33 . GRAPH 4. Out of total limestone reserves.34% and the Eastern region with 15. the desired setting time can be achieved. the CaO content of limestone should be a minimum of 44%. As on 31 March 2006. C) GRANULATED BLAST FURNACE SLAG (GBFS) The other raw materials that are also used in the manufacture of cement are blast furnace slag (a waste product obtained from iron-smelting furnaces) and flyash (leftover ash from a thermal power station). Gypsum is naturally available in abundance in Rajasthan. Ground clinker.84%. Gypsum is added to the extent of 5% during the clinker grinding stage. Andhra Pradesh has the privilege of possessing about 31% of the country's total proved equilanet reserves of limestone.
In the year 1950. only 33 kilns out of which 32 were based on wet process and only one based on semi-dry process. Cement industry being energy intensive. erratic variations in quality of indigenous coal and inconsistent power supply with unpredicted power cuts. Keeping these challenges in view. Today. Clay contributes about 57% silica of which about 25% is lost during ignition. That is why it is used in the manufacture of Portland blast furnace slag cement. The Indian cement industry today is by and large comparable to the best in the world in respect of quality standards. perennial constraints like higher ash content. Till late 70‟s the Cement Industry had a major share of production through the inefficient wet process technology. The major challenges confronting the industry today are raging insecurity in indigenous fuel availability. 4.CEMENT INDUSTRY lost during ignition of the raw materials.9 TECHNOLOGICAL ANALYSIS Modernization and technology up-gradation is a continuous process for any growing industry and is equally true for the cement industry. It is a complex calcium aluminum silicate and has latent hydraulic properties. there were. 26 on wet process and 8 on semi-dry process. there are 162 kilns in operation out of which 128 are based on dry process. The scenario changed to more efficient large size dry process technology since early eighties. Similarly. environmental norms. the energy conservation and alternate cheaper. ALLIANCE BUSINESS SCHOOL Page 34 . Review of Technological Status Process Profile The Cement Industry today comprises mostly of Dry Suspension Preheater and DryPrecalciner plants and a few old wet process and semi-dry process plants. renewable and environmentally friendly sources of energy have assumed greater importance for improving productivity. like alternate fuels and raw materials have to be found to ensure further improvement in productivity and reduce production costs. The productivity parameters are now nearing the theoretical bests and alternate means. the efforts by the industry towards energy conservation and finding alternate cheaper. renewable and environmentally friendly sources of energy are given utmost importance. fuel & power consumption. use of latest technology and capacity. GBFS is obtained by granulation of slag obtained as a by-product during the manufacture of steel.
1 MTPA in Japan. Already there are nine kilns of 8000 tpd capacity in operation and three kilns of capacity 10000 – 12000 TPD are under installation. the new plants installed were of 1200 TPD capacity. from mid seventies. The advent of precalciner technology in mid eighties provided an opportunity to the industry to modernize and increase the capacity of existing dry process plants. Present Status of Technology A comparison of the status of the modernization in equipment and also the technologies absorbed or implemented by the Indian cement industry along with status of Global Technology is as under: ALLIANCE BUSINESS SCHOOL Page 35 . This led to installation of single line kilns of 3000 TPD (1 MTPA) capacity and more. In mid sixties this was standardized at around 600 TPD for both wet and dry process plants. to convert plants from wet to dry process as well as to set up large capacity plants incorporating the latest technological advancements. This is due to blend of small and large plants coming up at various stages and still operating in India as against smaller plants having been decommissioned in Japan. The present trend indicates the preference of still larger kilns of about 6000 TPD capacity and above. i. Average annual installed capacity per plant in India is about 1.2 MTPA as against more than 2.e. About a decade later.CEMENT INDUSTRY Kiln Capacity and Size The economic unit capacity for cement plants in India till early sixties was about 300 TPD. The greenfield plants being installed now are based on most advanced and the best available technology.
DDC Neurofuzzy expert .3 ALLIANCE BUSINESS SCHOOL Page 36 .DDC .Dome silos Packing & Bag Despatch . 300-1800 TPD 3000-6000 TABLE 4.Multi Channel Burner Channel .Conventional cooler .CEMENT INDUSTRY Low Technology Plants Mining Material Handling Crushing Two stage & Conventional Modern Plants Computer aided Global Technology Computer aided Single stage In-pit crushing & conveying Conveying of Limestone Grinding Ball Mills with / without VRM‟s Roll Presses VRM‟s.Bag .4 stage preheater .Bulk .Continuous Blending silos . Belt conveyors conventional classifier dynamic classifier Dry .Multi-Chamber Silos . Roll Presses.Co-processing of WDF Co-generation of Cooler Multi Burner power Low NOx/SO2 emission technologies Blending & Batch-Blending Silos Storage Continuous Blending .Single channel burner Dry .High Efficiency Cooler .Palletizing & Shrink Wrapping Process Control Relay Logic / Hard Wired / PLC .5/6 stage preheater High dynamic Horo Mills with Dumpers/Ropeway/ Tippers Belt conveyors Pipe conveyors. with classifier Pyro Processing Wet Semi Dry Dry .Bulk .Fuzzy Logic expert system system 6000-12000 Plant Size.6 stage preheater Efficiency .
apart from its ability to give much higher drying capacity. Grinding Vertical Roller Mills (VRM) has given the real breakthrough in the area of grinding. The new classifier designs include two stage separation integrating primary and secondary separation. keeping in view the split location of limestone deposits and long conveying distances. The HPGR is being used as pregrinder for upgrading the existing ball mill systems. Crushing Mobile crushers have come in use in some of the newer plants. Such installations could achieve an increase in capacity upto 200% and savings in power consumption to the extent of 30 to 40% as compared to ball mills. The mobile crushing plant is stationed at the mine itself and raw material is crushed at the recovery site. are envisaged and put to use in number of units. Another breakthrough that has come with the application of high pressure grinding rolls (HPGR) has been widely adopted in Indian cement industry. A new mill system called Horizontal roller mill has been developed which is capable of producing uniform raw meal and have advantages in processing raw materials containing higher percentage of quartz. These mills can accept larger feed size and hence mostly be used with single stage crushing. The VRM draws 20-30 % less electrical energy as compared to the corresponding ball mill system. ALLIANCE BUSINESS SCHOOL Page 37 . High efficiency separators are also used now with VRM‟s for further improvement in their performance. High efficiency separators are now widely used for better classification of product and help in increasing the mill capacity besides reducing the specific power consumption. VRMs are now being used in clinker and slag grinding and also as pre-grinder to existing grinding installations. keeping in view the blending operational requirements. a systematic mine plan is developed by cement plants.CEMENT INDUSTRY The directions in which the modernization activities are proceeding are as illustrated below: Mining For rational exploitation of the raw material source. Computer-aided techniques for raw material deposit assessment to arrive at proper extraction sequence of mining blocks.
Use of Industrial Wastes • Cement plants in India utilized about 19% of flyash generated by power plants and 100% of granulated slag generated by steel plants (year 2005-06). used tyres. • Recycling of Industrial wastes in manufacture of cement is highest in Japan followed by India. thereby substituting main fossil and conventional fuel coal upto 100% in some plants. Rajasthan and MP. but regulations do not yet permit in India. It is also procuring coal through open market and direct imports. ALLIANCE BUSINESS SCHOOL Page 38 . waste derived fuels including hazardous combustible wastes have also been tried due to economic pressures in cement manufacturing process owing to tough competition in domestic and global markets as well as ecological reasons on account of waste disposal and coprocessing in cement rotary kilns being most effective mode of waste treatment. The industry is mainly using coal from various coalfields in the country. In the recent past. EU. Lignite from deposits in Gujarat and Rajasthan is also being used by cement plants. • CPCB is actively engaged in plant level trials in respect of wastes viz.CEMENT INDUSTRY 4. Pet coke has also been successfully utilized by some cement plants. refinery sludge.10 Fuel Requirements and Alternate Sources of Energy Fuel Coal continues to be the main fuel for the Indian cement industry and will remain so in the near future as well. Use of Alternate Fuels • Use of hazardous and refuse derived combustibles and Municipal Solid Waste (MSW) as fuel is common in countries like Canada. mainly in Gujarat. paint sludge. as compared to almost 100% flyash and 84% of granulated slag in the Japanese cement industry. Japan and Korea. Effluent Treatment Plant (ETP) sludge and Toluene DiIsocyanite (TDI) tar waste from petroleum industries and in formulation of guidelines for use of these wastes as fuel by cement industry.
It is expected that the industry‟s average thermal energy consumption by the end of Year 2011-12 will come down to about 710 kcal/kg clinker and the average electrical energy consumption will come down to 78 kWh/t cement.9 DEMAND FROM RESIDENTIAL HOUSING SECTOR Housing demand accounts for 60% of total cement demand and 90% of total real estate demand. infrastructure projects 20% and industrial projects 20%. GRAPH 4.CEMENT INDUSTRY Energy Management The industry‟s average consumption in 2005-06 was 725 kcal/kg clinker thermal energy and 82 kWh/t cement electrical energy. Housing demand has supported the cement industry even in times of low infrastructure or industrial demand. The improvements in energy performance of cement plants in the recent past have been possible largely due to: Retrofitting and adoption of energy efficient equipment Better operational control and Optimization Upgradation of process control and instrumentation facilities Better monitoring and Management Information System 4. Housing Sector accounts for 60% of total cement demand.11 DEMAND AND SUPPLY SCENARIO OF CEMENT INDUSTRY DEMAND SOURCES Cement demand in the country emanates from three major sources viz. ALLIANCE BUSINESS SCHOOL Page 39 .
believes the growth in IT/ITES is likely to translate into construction investments of Rs 148 billion (118 million sq ft) by 2007-08 as compared with investments of Rs 74 billion (61 million sq ft) in the last 3 years. hotels. The reasons for the construction of high rise apartment buildings are the lack of space in cities and proximity to offices and IT parks. The investments are based on the manpower/workspace requirement in the sector. stadiums etc. Within office space construction activity. In India. as well as increased urbanisation and nuclearisation. The industrial and commercial sector comprises of all the major industrial set ups. A large proportion of the demand for houses. The growth in the sector will translate into substantially higher demand for commercial space. Delhi (Gurgaon. CRIS INFAC. especially in urban centres such as Mumbai. of which organised retail accounted for Rs. The organised ALLIANCE BUSINESS SCHOOL Page 40 . commercial offices.5%. 9. adding to the overall investment in construction activities. fiscal incentives on both interest and principal payments for housing loans and heightened customer expectations. despite China and Russia also emerging as strong contenders. estimates that retail spending in India in fiscal 2005 was Rs. The other key demand drivers include banking and financial services. a rapidly growing middle class.CEMENT INDUSTRY The growth in the residential real estate market in India has been largely driven by rising disposable incomes. Bangalore. 349 billion. This dependency on IT/ITES is expected to continue due to India‟s emergence as a preferred outsourcing destination. low interest rates. FMCG and telecom. or approximately 3.9 trillion. hospitals. IT & ITES parks and organized retail formats. almost 70-75 per cent of the demand comes from IT/BPO/call centres. Noida) and Pune. Retail boom to result in construction investments of Rs 112 billion over the next 5 years CRIS INFAC. the growth of the highrise segment will be faster as compared to the growth of the urban housing segment. is likely to come from high-rise residential buildings. Since this is a fairly new segment. Growth Drivers o Favourable demography and higher disposable income o Nuclear families and urbanization DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTOR Commercial construction comprises construction of office space. most of the investment in this segment is driven by office space construction. schools.
the change in the perception of branded products. irrigation. CRIS INFAC. Planning commission projected that the total spending by the central government. PSUs and through the Public-Private partnership (PPP) would be around Rs19. This would translate into construction investment of Rs 112 billion over the next 5 years. a jump of over 150%. 7. Infrastructure has been witnessing extraordinary growth across all sectors such as roads. 13. the entry of international players and the availability of cheap finance will drive the growth in organized retail.11. ports and airports. who spend more. increasing disposable incomes. This would imply a construction opportunity of over Rs. Increased emphasis on infrastructure development made it achievable.CEMENT INDUSTRY retail segment in India is expected to grow at a rate of 25% to 30% over the next five fiscal years. recognizing this fact has planned to spend around Rs. Out of total proposed expenditure. However. changes in shopping habits. water supply urban infrastructure. a construction activity are expected to account for more than 50% of total investment and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. We expect cement consumption from this sector to register a CAGR of 9-10% driven by large-scale construction activities. in order to achieve this kind of growth on a sustainable basis. state government.19.7 trillion spend during Xth Five Year Plan. demographic changes (such as the increasing number of working women. However.2 trillion on infrastructure development for the next five year.2 trillion for the next 5 years. railways. The growth of organised retail is expected to be driven by demographic factors. the entry of international retailers into the market and the growing number of retail malls.2 trillion. DEMAND FROM INFRASTRUCTURE SECTOR The Indian economy is all set to grow at a pace of over 7% in the current fiscal. ALLIANCE BUSINESS SCHOOL Page 41 . The increase in disposable incomes. a further impetus is required to be given to the Infrastructure development in the country. believes the current spark in mall construction activity across India will result in around 105 million sq ft of mall space by 2010. this figure has been revised upwards to Rs. GOI. the demand for cement from infrastructure sector is expected to grow at a CAGR of 24-25%. the rising number of nuclear families and higher income levels within the urban population). power. the growth in retail malls. In light of such huge expenditure on construction activities.3 trillion ($470 billion) for the next 5 years as against Rs.
the cement consumption is expected to witness a CAGR of more than 12% in line with the economic growth because of the strong co-relation with GDP and the increased activity in the construction sector. South to West (5. the cement industry has been in a surplus position since a long time. which is far below the world average of approximately 320 kg. By contrast.35 mt).20 mt). The oversupply is largely in the Southern and Northern regions. it is among the lowest cement consuming countries.45 mt). Hence. There exist regional surplus/shortages in the Indian cement industry. Central to North (2. There is significant inter-regional movement of cement. there is a supply shortage in Eastern and Western regions.CEMENT INDUSTRY Overall Demand Driven by a strong residential housing demand.51 mt). and Central to East (2. Most of the cement movement across regions takes place from North to Central (3. ALLIANCE BUSINESS SCHOOL Page 42 . In India per capita cement consumption is 122 kg. growing industrial and commercial activities and the continued momentum in infrastructure investment. which plays a crucial role in the regional demand-supply dynamics. DEMAND-SUPPLY MISMATCH Though India is the second largest cement manufacturer. We further believe that due to huge expenditure by GOI on infrastructure the proportionate demand from infrastructure sector will move northwards and we expect the total share of cement demand from infrastructure to be close to 25% in 2010. However. proportionate demand from housing sector will move southwards and will come down to around 55% while remaining 20% will be from commercial sector.
ALLIANCE BUSINESS SCHOOL Page 43 . TRANSPORTATION COST Rising fuel cost resulting in higher road and rail transportation cost. Adding to this. 2) Lower than expected growth in demand Any lower than anticipated cement demand growth will result in overcapacity in the industry. thereby prices may head southwards.CEMENT INDUSTRY GRAPH 4. This will significantly affect earnings of cements manufacturers. electricity prices are also witnessing pressure. Further.10 4.12 RISK & CONCERNS 1) RISING INPUT COSTS POWER & FUEL Prices and Quantity are regulated and are revised upwards regularly. given the shortage of energy future de-regulation of coal sector could be a risk factor.
Birla Corporation. India Cement. This will significantly affect India‟s cement exports to gulf countries. rising interest rates have created concern for the industry. Binani Industries.CEMENT INDUSTRY 3) Large scale capacities addition in gulf countries India‟s major cement exporting destination. The companies have time till October 25 2007 to reply to these charges. NCL Industries. 5) Access to Finance Cement is a capital-intensive industry. Cement industry has planned huge capex in the coming years. Grasim and other smaller players like Sanghi Industries. Saurashtra Cement and JK Cement. However. Middle East. 4) MRTPC alleges on 14 cement manufacturers India's trade practices regulator MRTPC had ordered a probe into the business practices of 14 leading cement manufacturers. The companies that are to be investigated include all the big guns like ACC. Ultra tech cement.3500/tonne is required for capacity addition. Ambuja Cement. ALLIANCE BUSINESS SCHOOL Page 44 . for which they will require huge capital. Zuari Cement. The Director General of Investigation and Registration (DGIR) which is MRTPC's investigative wing submitted its preliminary report alleging that these manufacturers colluded to hike cement prices. Rs. is adding huge cement capacities that are estimated to be around 70 mtpa.
ACC‟s brand name is Page 45 ALLIANCE BUSINESS SCHOOL . and a considerable user of the country‟s road transport network services for inward and outward movement of materials and products. being the largest user of limestone. We run two institutes that offer professional technical courses for engineering graduates and diploma holders which are relevant to manufacturing sectors such as cement. the company installed sophisticated pollution control equipment as far back as 1966. its high ethical standards in business dealings and its on-going efforts in community welfare programmes have won it acclaim as a responsible corporate citizen. ACC has made significant contributions to the nation building process by way of quality products. Among the first companies in India to include commitment to environmental protection as one of its corporate objectives. suggestions for reuse. of Indian Railways. The company's various manufacturing units are backed by a central technology support services centre . 20 sales offices. and several zonal offices. It has a workforce of about 10. The company actively promotes the use of alternative fuels and raw materials and offers total solutions for waste management including testing. ACC plants. product development and specialized consultancy services.000 persons and a countrywide distribution network of over 9. mines and townships visibly demonstrate successful endeavours in quarry rehabilitation.000 dealers. ACC has a unique track record of innovative research. services and sharing expertise.CEMENT INDUSTRY ACC LIMITED: ACC Limited is India's foremost manufacturer of cement and concrete. Today each of its cement plants has state-of-the art pollution control equipment and devices. long before pollution control laws came into existence. more than 40 Ready mix concrete plants. Its commitment to sustainable development. the company has been a trendsetter and important benchmark for the cement industry in many areas of cement and concrete technology.the only one of its kind in the Indian cement industry. The main beneficiaries are youth from remote and backward areas of the country. recycling and co-processing. As the largest cement producer in India. ACC has rich experience in mining. water management techniques and „greening‟ activities. Since inception in 1936. it is one of the biggest customers of the domestic coal industry. ACC has taken purposeful steps in knowledge building. ACC's operations are spread throughout the country with 16 modern cement factories.
synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer SuperBrands of India. CORPORATE GOVERNANCE The importance of Corporate Governance has always been recognised in ACC. Much before Corporate Governance guidelines became applicable and mandatory for listed companies; ACC had systems in place for effective strategic planning and processes, risk management, human resources development and succession planning. The Audit Committee in ACC was constituted as far back as in 1986. The Shareholders-Investors Grievance Committee was formed way back in 1962 and the Compensation Committee was convened since 1993. The Company‟s core values are based on integrity, respect for the law and strict compliance thereof, emphasis on product quality and a caring spirit. Corporate Governance therefore in ACC is a way of life. ACC is a professionally managed Company with a majority of its Directors being Independent Directors. The Board of Directors has always consisted of persons who are professionals in their respective fields and with unquestionable integrity and reputation. The role, responsibility and accountability of the Board of Directors is clearly defined. Members of the Board have full freedom to express their views on matters placed before them for deliberation and consideration. It is the continuous endeavour of the Board of Directors to achieve the highest standards of Corporate Governance through the adoption of a strategic planning process, succession planning for attracting, motivating and energizing human resources, identification of major risks and the way and means to manage such risks, an effective communication policy and integrity of Company‟s internal control systems. The Board of Directors are also constantly looking at ways and means to ensure that the most effective use is made of the scarce resources at its disposal and that the management and employees have the freedom to take the Company forward within the framework of effective accountability. The Annual Reports, press releases and other communication have always made full disclosures on various facets of importance to the stakeholders, particularly with regard to information relating to financial matters, company‟s operations/performance, stock movements etc.
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GUJARAT AMBUJA CEMENTS LTD.
Ambuja Cements Limited, formerly known as Gujarat Ambuja Limited is a major Cement producing company in India. The Group's principal activity is to manufacture and market cement and clinker for both domestic and export markets. The Company also operates a hotel through its subsidiary GGL Hotel and Resort Company. It has shown innovation in utilizing measures like sea transport, captive power plants, and imported coal and availing of govt. sops and subsidies to constantly check the costs. The company has entered into a strategic partnership with Holcim, the second largest cement manufacturer in the world. Holcim had, in January, bought a 14.8 per cent promoters` stake in the GACL for INR 21.4 billion. The Joint Venture between the public sector Gujarat Industrial Investment Corporation (GIIC) and Narottam Sekhsaria & Associates was the reason for confinement of the company. The company was incorporated in the year 1981 as Ambuja Cements Pvt Ltd and it was rehabilitated into a public limited company on 19th March 1983 as Gujarat Ambuja Cements Ltd, cement production is the role of the company in nature and a cost efficient cement manufacturer in the country. It is a National Quality ISO 9002 certified company, the only cement company have this so. It's also the first to receive the same and also have ISO 14000 Certification for environmental systems. The total cement capacity of the company is 18.5 million tonnes (MT), having five cement plants at Ambuja Nagar Gujarat (5 MT), Darlaghat Himachal Pradesh (6 MT), Upperwahi Maharashtra (2.5 MT), Rabriyawas Rajasthan (2 MT) and in Chhaattisharh West Bengal (3 MT). It is also having three Bulk Cement Terminals at Surat with a storage capacity of 15,000 tonnes has bulk cement unloading facility, Panvel with a storage capacity of 17,500 tonnes has a bulk cement unloading facility and in Galle 120 kms from Colombo, Sri Lanka. It handles million tonnes of cement annually. The port terminal of the company Muldwarka Gujarat, all weather port, 8 kms from Ambuja Nagar plant, handles ships with 40,000 DWT. Is also equipped to export clinker and cement and import coal and furnace oil. A fleet of seven ships with a capacity of 20500 DWT ferry bulk cement to the packaging units. The company's cement plant was commissioned in 1985, had set up in technical collaboration with Krupp Polysius, Germany, Bakau Wolf and Fuller KCP. The 12.6 MW diesel-generating sets were commissioned during the year, which were imported in the year 1988-89. The
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company got necessary approvals for setting up another cement plant with 1 million tonne capacity per annum at Himachal Pradesh in the year 1991. The Company undertook bulk cement transportation, by sea, to the major markets of Mumbai, Surat and other deficit zones on the West Coast. Transportation was to be carried out by three specially designed ships during the year 1992. During the year 1994, the company's Muller location 1.5 million tonne cement project with clinkeriation facility at site in H.P and grinding facility both at Suli & Ropar in Punjab was bespoken. In 1997, Kodinar plant of the company was originated its commercial production with an enhanced capacity. Ambuja Cements had set up a $20 million clinker Grinding unit in Sri Lanka in the year 1998. In the year of 2000 cement giants Larsen & Tubro (L&T) and Gujarat Ambuja Cements entered a unique agreement to reduce transportation costs in dispatching bulk cement in Gujarat and also in the same year the company has entered into an annual contract with a Soinhalese firm, Mahaveli Marine Cement, to supply around 2.5 lakh tonnes of cement. The company has kick started its operations in Sri Lanka with help of a cement terminal in the port of Galle, in the south of the island country, which was started by the company. The commercial production of Maratha Cement Works plant of the company was started in the year 2002, a new 2-million tonne Greenfield cement plant at Chandrapur, Maharashtra has started its commercial production on June of the year and the merger of Ambuja Cement Rajasthan with the company was happened in the same year. Again in the year 2004, the company merged Ambuja Cement Rajasthan with itself. In the last decade the company has grown tenfold. The first company in India introduced the concept of bulk cement movement by the sea transport. The company's most distinctive attribute, however, is its approach to the business. Ambuja follows a unique homegrown philosophy for successful survival. Ambuja is the most profitable cement company in India, and one of the lowest cost producers of cement in the world. The company's most distinctive attribute, however, is its approach to the business. Ambuja follows a unique homegrown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. This simple vision has created an environment where there are no limits to excellence, no limits to efficiency, and has proved to be a powerful engine of growth for the company. As a result, Ambuja is the most profitable cement company in India, and one of the lowest cost producer of cement in the world.
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K. Cement and Sarvashaktiman for OPC products. Organization. wall application and other specialized applications. Portland Pozzolana Cement ('PPC') under grey and white cement. Super for PPC products and J.e. ALLIANCE BUSINESS SCHOOL Page 49 . Jaykaycem Limited became a wholly owned subsidiary of the company in the year 2006 and acquired land to set up a Greenfield Grey Cement plant at Mudhol.Cement (Fujairah) FZ to undertake the business of cement and investment in the state of UAE. through the subsidiary J K Cement Works (Fujairah) FZC. 20MW Petcoke based Captive Power Plant & Waste Heat Recovery power plant. 43-grade and 33-grade Ordinary Portland Cement (OPC) grey cement. Entered into a Memorandum of Understanding (MoU) with Fujairah Municipality during November of the year 2007 in the United Arab Emirates.K.K.K. The Company had acquired from IDBI the assets of Nihon Nirmaan Ltd at Gotan during the year 2007.Cement Works (Fujairah) FZC under which it is proposed to set up a green field cement plant at Fujairah. Started all the captive power projects i. White and Camel for white cement products. 105 crores from Rs. the company had sanctioned enhancement in working capital Facility (both funded and non-funded) to Rs.K.42 crores and decided to utilize this facility to produce Grey cement. It is an affiliate of the J. the company formed a wholly owned subsidiary under the name and style of J.65 crores. which was founded by Lala Kamlapat Singhania in the year 1994. The 10 MW of the Waste Heat Recovery Power Plant of the company was commissioned at Nimbahera in March of the year 2008. During the year 2007-08.CEMENT INDUSTRY JK CEMENTS J K Cement Limited (JK Cement) is one of the largest cement manufacturers in Northern India and also the second largest white cement manufacturer in India by production capacity. From enhancing the domestic footprint.25 MTPA grey cement plant to service the steadily increasing demand in the GCC region. to set up a 2. The Company produces 53-grade. This Company has formed another subsidiary company under the name and style of J. Karnataka. JK Water proof is another product from JK Cements used for flooring. J. UAE.K. the company had taken steps to go beyond national boundaries. 10MW turbine. In the year of 2006-07. The products are marketed under the brand names J. for Rs.
Cement and Sarvashaktiman for OPC ALLIANCE BUSINESS SCHOOL Page 50 . as essential ingredient for cement manufacturing. With the incorporation of newer technology and modern equipment. it is estimated that the limestone reserves of the company are sufficient to support the planned production capacity for approximately 40 years. J K Cement Production Plants The company has three major production plants located in the states of Rajasthan and Gujarat. The company's distribution network for grey cement consist of more than 40 feeder depots. Madhya Pradesh and Rajasthan. J K cement's white cement distribution network comprises of 20 feeder depots and 13 regional offices. Punjab. ISO-14001:1998 EMS and OHSAS18001:2005 recognition. 53-grade and 33-grade OPC. 22 sales promoters and four handling agents.CEMENT INDUSTRY Company Strengths J K Cement enjoys certain vital advantages that have helped them in becoming one of the leading names in the field of cement manufacturing in India and abroad. serviced by seven regional sales office located at Delhi.3 million ton per annum. First the company has proximity to huge reserves of premium quality limestone. Currently the unit has a capacity utilization of around 75% and an operating profit of 30% consistently. the company also has a total of more than 4000 retail stores. The cement products are marketed and sold under the brand names of J. they consist of 43-grade. The grey cement produced by the company Ordinary Portland cement or OPC and Portland Pozzolana Cement or PCC. J K Cement Products The major products of J K Cement are grey and white cement. Based on certain studies undertaken. The Gotan unit located at Gujarat which manufacturers white cement started production commercially in 1984 with a production capacity of 0. the production capacity was enhanced to 2. Haryana. Gujarat. The first plant of J K Cement was set up in Nimbahera. Second the company has an extensive marketing network for grey and white cement both within and outside India. The OPC range of products has three grades which are differentiated by their compressive strength.8 million ton per annum. Rajasthan in the year 1975 with an initial capacity of 0. The unit has ISO-9001:2000 QMS.K. Besides.05 million ton per annum. Uttar Pradesh.
J. Some other products manufactured by the company consist of: J K Wall Putty Grey Cement J K White Cement J K Water Proof J K Cement's manufacturing unit at Nimbahera was chosen by the World Bank and the Danish International Development Agency as one of the four training centers in India to serve as the Regional Training Center in North India. and technical expertise developed by well known national and international cement producers. The operation of the training center gives the company access to state of art training aids.K. ALLIANCE BUSINESS SCHOOL Page 51 . Super for PPC products and J. live working models. White and Camel for white cement products.K.CEMENT INDUSTRY products.
UltraTech Cement has five integrated plants. Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. Cement is an energy intensive industry with coal and ALLIANCE BUSINESS SCHOOL Page 52 . in Colombo. with the latter acquiring controlling stake in the newly formed company UltraTech. 1997.3 per cent by October 2002.CEMENT INDUSTRY ULTRATECH CEMENT LIMITED UltraTech Cement Limited. five grinding units as well as three terminals of its own (one overseas. the board of Larsen & Toubro Ltd (L&T) decided to demerger of its cement business into a separate cement company (CemCo). The Grasim acquired 10 per cent stake in L&T in the year of 2001. The value of stake increased to 15. Africa. In 2004.5 per cent equity stake from L&T and then made an open offer for 30 per cent of the equity of CemCo. The Company bagged Indo-German Greentech Environment Excellence Award from the Greentech Foundation. During the same year the Durgapur grinding unit was came to existence. Export is a thrust area in the company's strategy for growth. to acquire management control of the company. Grasim decided to acquire an 8. The Company enhanced its capacity utilisation across its plants. and all but one have ISO 14001 certification. New Delhi during the period of 2000-2001. It manufactures and markets Ordinary Portland Cement. L&T completed the implementation process to demerger of the cement business and the Grasim also completed open offer. As part of the eighth biggest cement manufacturer in the world. Europe and the Middle East. a Grasim subsidiary was incorporated in 24th August 2000 as L&T Cement Limited. All the plants have ISO 9001 certification. has an annual capacity of 17 million tonnes. Sri Lanka).15 per cent in 2002 and the Arakkonam grinding unit was started. During the year 2003. while two of the plants have already received OSHAS 18001 certification. The Grasim Board approved an open offer for purchase of up to 20 per cent of the equity shares of Larsen & Toubro Ltd (L&T) during the year 2002. in accordance with the provisions and guidelines issued by the Securities & Exchange Board of India (SEBI) Regulations. The Company received State and Zonal level I prize for overall performance in Mines safety 2003-2004 Energy efficient unit award from CII. The export market comprises of countries around the Indian Ocean. Again the Grasim increased its stake in L&T to 14. Grasim acquired management control in July 2004 and the name of the company was changed to UltraTech Cement Limited with in 14th October 2004.
are on track. Use of alternative fuels auctioned. With an eye on the growing Ready Mix Concrete business. These facilities gradually came up over the years. Sri Lanka). UltraTech‟s subsidiaries are Dakshin Cement Limited and UltraTechCeylinco (P) Limited. As part of the eighth biggest cement manufacturer in the world. the Company has commenced setting up Ready Mix Concrete plants in various places in the country during the year 2007. Chattisgarh and Gujarat. It may be to go on stream between FY08 and FY09.CEMENT INDUSTRY power being the major cost contributors. while over Rs.600 crores has been committed for the installation of captive power plants throughout the year 2004-05. to acquire management control of the company. ALLIANCE BUSINESS SCHOOL Page 53 . with the latter acquiring controlling stake in the newly formed company UltraTech 2003 :: The board of Larsen & Toubro Ltd (L&T) decides to demerge its cement business into a separate cement company (CemCo). in Colombo.5 per cent equity stake from L&T and then make an open offer for 30 per cent of the equity of CemCo. The Captive Power Plants being set up at your Company's Units in Andhra Pradesh. Grasim decides to acquire an 8. as indicated below: 2006 :: Narmada Cement Company Limited amalgamated with UltraTech pursuant to a Scheme of Amalgamation being approved by the Board for Industrial & Financial Reconstruction (BIFR) in terms of the provision of Sick Industrial Companies Act (Special Provisions) 2004 :: Completion of the implementation process to demerge the cement business of L&T and completion of open offer by Grasim. five grinding units as well as three terminals of its own (one overseas. UltraTech Cement has five integrated plants. Narmada Cement Company Limited (NCCL) was amalgamated with the company in May of the year 2006.
Coromandel Super Power and Raasi Super Power. Regional offices in all southern states and Maharasthra offices/representative in every district. The Company has well established brands. Shri Sankaralinga Iyer with his energy and drive gave the cement project a realistic form and content.CEMENT INDUSTRY INDIA CEMENTS The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949. he went ahead boldly with his scheme of building a cement plant in the vicinity of Thalaiyuthu. ALLIANCE BUSINESS SCHOOL Page 54 . It aims to achieve a 35% market share in the near future.Sankar Super Power. Company Highlights The Company is the largest producer of cement in South India. The Founders Shri Sankaralinga Iyer was a pioneer of heavy industry in the South. The capacities as on March 2002 have increased multifold to 9 million tons per annum. The Company is the market leader with a market share of 28% in the South. The Company has access to huge limestone resources and plans to expand capacity by de-bottlenecking and optimisation of existing plants as well as by acquisitions. The Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra. where extensive deposits of limestone were assuredly available. Since then it has grown in stature to seven plants spread over Tamilnadu and Andhra Pradesh. he ventured into the field of industry with a rare devotion and confidence with the prime objective of developing major industries in the state. Primarily a banker.000 stockists of whom 25% are dedicated. The Company has a strong distribution network with over 10. With his banking experience and interest in exploring the mineral potential of South India.
78 0.53 0.96 11.17 24.36 26.58 29.80 0.CEMENT INDUSTRY 6.10 22.20 27. This means that the company was in a better position to satisfy its shareholders compared to the previous financial year 2008.1 ACC LIMITED: RATIOS Year 2009 ROE (%) ROA CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO INVENTORY TURNOVER RATIO FIXED RATIO P/E RATIO ASSETS TURNOVER 1.47 10.68 TABLE 6. Since the ideal ratio is 2:1 so it signifies that the company is in a better position to pay the current debts with a margin of safety in current assets.78 in 2009.88 0. The ratio increased in the financial year 2009.08 35.38 1.81 14. ALLIANCE BUSINESS SCHOOL Page 55 .00 ANALYSIS: RETURN ON EQUITY RATIO The ROE of the company decreased considerably from 2007 to 2008.28 31.12 Year 2008 Year 2007 10.19 11.93 0.10 0.93 33.1 7.46 1.88 in 2008 and 0.09 39. This shows that company is unable to satisfy its shareholders by proper utilization of funds. CURRENT RATIO The current ratio in 2007 was 0.93 and it gradually decreased to 0.
thereby making the company unfavourable in the view of the lenders i. Consequently.53 in 2007 declined to 1.20 in 2008. But again in FY 2009 the company is able to control its inventories. 10.58 in 2007. such as property.10. we can see that this ratio has increased to 0. The inventory turnover ratio measures the velocity of conversion of stock into sales. the company‟s performance declined considerably and the company is not generating enough profit to pay the interest to the debts. As we know that the debtors turnover ratio explains the number of times the debtors turned over a period of a financial year. the debt equity ratio was 0. INTEREST COVERAGE RATIO: In 2007. the better it is for the company. Thus. The above table indicates that the fixed assets turnover ratio of 1. In the FY 2007. the amount of debt used effectively by the company is declining from 2007 to 2008.10 in 2009. the firm was managing its inventories efficiently which was then reduced in the FY 2008. In the FY 2009.e. This shows that the company‟s debt is decreasing. INVENTORY TURNOVER RATIO: The inventory turnover ratio was 11.10.08 and by 2009 it is 0.38 in the FY 2009 which shows the ALLIANCE BUSINESS SCHOOL Page 56 . But in 2009 it got decreased to 22. So the debt equity ratio shows a decrease in the financial year 2008. This means that the company‟s debt burden got decreased to a great extent.CEMENT INDUSTRY DEBT-EQUITY RATIO: In 2007.80 in 2008 and then a slight increase to 11. the financial position of the company is growing weak.46 in the FY 2008 and consequently declined to 1. building and other equipments. DEBTORS TURNOVER RATIO: The debtor‟s turnover ratio was 31.19 in 2007 and it decreased to 27. FIXED ASSETS TURNOVER: This ratio indicates the company‟s ability to generate net sales revenue from fixed assets of the company.96 in the FY 2009.16 and by 2008 it was 0. But in the FY 2009. the interest coverage ratio is 24.28 which increased to 39. The higher the ratio.47 by the financial year 2008 and then it again increased to 33.93. by looking at the ratio in the FY 2009 we can say that the efficiency of management of debtors of the firm is growing high in comparison to the previous years.
since a high P/E ratio signifies high expectation. the company recorded a rise in the ratio i.e. has to utilise its fixed assets in order to maintain efficiency in revenue generation.CEMENT INDUSTRY company‟s inability to generate revenue from fixed assets in the consequent years of its operations. Companies with high P/E ratios are more likely to be considered “risky” investments than those with low P/E ratios.81 to 10.68 meaning that the company was in a better position as compared to the previous year. we know that the ratio has decreased considerably from the FY 2007 to the FY 2008. ALLIANCE BUSINESS SCHOOL Page 57 . PRICE/EARNINGS RATIO: Higher the P/E ratio. But in the FY 2009. The reason for this decline was the economic downturn in the FY 2008. From the above table. from 7. thus. the more the market is willing to pay for each rupee of annual earnings. The company.
33 38.72 0. RETURN ON ASSETS It is always said that higher the ratio the better it is. The reason for this is that the operating profit has been decreasing continuously though there has been increase in the total assets for past three years.21 1.CEMENT INDUSTRY AMBUJA CEMENTS LIMITED: RATIOS Year 2009 Year 2008 Year 2007 ROE ROA CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO INVENTORY TURNOVER PERIOD FIXED ASSETS TURNOVER RATIO P/E RATIO 20.25 1.72 12.16 40.66 TABLE 6.06 37.156784 1.2 22.05 0. ALLIANCE BUSINESS SCHOOL Page 58 .15 0. When looking at the previous three years ROA has been decreasing.34 1.29 7.04 0.14 54.32 ANALYSIS: RETURN ON EQUITY Return on equity is net profits to equity share capital.06 0.29 6.88 29.04 67.98 8.55 9.22 9.91 9.52 38.92 28.316693 1.31 39.02 0.15 26. The ratio is decreasing each year which shows the company is unable to increase profits in accordance to the increase in shareholders‟ funds.19387 1.31 13.29 13.
which is not a healthy sign for company‟s growth. The main reason behind decrease in ratio is. company‟s efficiency declined. which reflects company‟s dependence on the debt finance. This shows the company‟s efficiency was increasing but due to economic downturn in FY‟08. The ratio also below 1 for all the three years. but the ratio increased in FY‟09. is very low. INVENTORY TURNOVER RATIO The ratio shows how many times a company's stock is sold and replaced over a period of time. INTEREST COVERAGE RATIO Interest coverage ratio shows how much revenue is being earned in relation to its finance cost. which shows company is able to pay its liabilities. therefore. AVERAGE COLLECTION PERIOD In 2009. then company may face problems to pay its liabilities. though declining from the year 2008. Ambuja Cements were unable to decrease the coverage period but on the contrary coverage period increased every year. If the ratio slips down below 1. The majority of financing of the company is done by equity. DEBT-EQUITY RATIO The debt equity ratio shows a positive trend for FY‟07. excess inventory. FY‟08 & FY‟09. the ratio has gone down which shows that the collection period has become more powerful and company is able to collect its money from debtors more efficiently when compared to the previous year where it was 9 days. but it is still able to sustain the ratio above 1. The efficiency of the company decreased in FY‟08 & it increased in FY‟09. and at the same time risk factor is also reducing because they don‟t have to pay interest to the debenture holders. The liabilities of the company are increasing every year.CEMENT INDUSTRY CURRENT RATIO The current ratio of company. so company should take measures to reduce liabilities. increase in total shareholders‟ funds. DEBTORS TURNOVER RATIO The debtors‟ turnover ratio indicates the efficiency of the company to collect debts. ALLIANCE BUSINESS SCHOOL Page 59 . A low turnover implies poor sales and. There is a difference in the percentage of ratio for FY‟08 as compared to FY‟07.
building and other equipments. P/E RATIO From the data above.02 but there was no decrease in FY‟09 as compared to FY‟08. FIXED ASSETS TURNOVER RATIO This ratio indicates the company‟s ability to generate net sales revenue from fixed assets of the company. So. ALLIANCE BUSINESS SCHOOL Page 60 . The above table indicates that the change in the fixed assets turnover from FY‟07 to FY‟08 was just . INVENTORY TURNOVER PERIOD The ratio has gone down which shows that demand for the product in the market has increased which is a good sign for the company. A higher fixed asset turnover ratio shows that the company has been more effective in utilizing the revenue invested in fixed assets for generating net sales. we can see that in 2009 the ratio has increased significantly because of the increase in market price and earnings per share which is good for the company. such as property. accordingly there was an increase in the inventory turnover. So the utilization of fixed assets in FY‟09 was same as compared to FY‟08.CEMENT INDUSTRY The net sales of the company increased considerably in the year 2009.
31 6.25 10 15.3 Year 2008 Year 2007 0.77 4.28 34.87 1.80 ANALYSIS RETURN ON EQUITY RATIO The ROE of the company was same for the year 2007 and 2008 and it was at 0. Expected even for a new unit in India is 1.15 2. In short.33:1 therefore we can see that the ratios in all the years are well over 1.01 TABLE 6.15 0. ALLIANCE BUSINESS SCHOOL Page 61 . the higher the net working capital.24 ASSETS TURNOVER 1. Min.77 2. Means current ratio indicates the liquidity of the enterprise.CEMENT INDUSTRY JK CEMENTS RATIOS Year 2009 ROE CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO FIXED RATIO P/E RATIO 2.40 5. CURRENT RATIO Net working capital should always be positive.97 0.34 1.34 1.16 1.16.33 which ensures us that the company is in a good condition and has ample liquidity.02 11 14.15 28. The decline may be due to the economic slowdown which has affected almost all the companies.84 7. the greater is the degree of overall short-term liquidity.36 11 16. But it has declined in the year 2009 and came to 0.64 5.66 0.77 30.34.79 0.
24. DEBTORS TURNOVER RATIO: The debtor‟s turnover ratio is increasing in from the past three years as it can be seen from the table. FIXED ASSETS TURNOVER: In 2007.77 in 2007 which rose to 16. It was at 28. INVENTORY TURNOVER RATIO This should not be less than 9:1 and should if possible be higher and we can see that the ratios are well above 9 which clearly state that the company is doing good and is in a good condition and has converted its inventory into sales in a very efficient manner. but there was an increase of 1 day i. The performance of the company got declined in 2009 and the company‟s debt burden was increasing. which is good for the company. but it decreased to 2. ALLIANCE BUSINESS SCHOOL Page 62 . AVERAGE COLLECTION PERIOD: In 2007 the debtor‟s velocity was only 10 days. The debtor‟s turnover ratio is growing higher which implies that the efficiency of the company is increasing.25 in 2007 and it increased to 30. There is a sharp deterioration in this ratio so. DEBT EQUITY RATIO Debt equity ratio should not exceed 3:1 and it has not in the case of JK Cements.77 in 2009. This means that the company has fewer debts which is good for the company. the fixed assets turnover was 2. it became 11 days in the year 2008 and remained the same in 2009. As the company‟s fixed asset was increasing year on year hence its turnover was decreasing and also sales were not increasing in the same proportion.CEMENT INDUSTRY INTEREST COVERAGE RATIO: The interest coverage ratio was 15.e.36 in 2008 and then it gradually increased to 34.15 in 2008. we have to be on guard.97. as the financial risk for the company increases to that extent.02 in 2009. But in 2009 it decreased to 14.15 in 2008 so this proves that the company‟s debt burden got decreased to some extent. It again declined to 1.
e.80 in 2007 to 4.CEMENT INDUSTRY P/E RATIO The P/E ratio is gradually declining for all the 3 years i. ALLIANCE BUSINESS SCHOOL Page 63 .01 in 2009. from 5. This shows that the performance of the company is declining and the management should look into the causes that have resulted into the fall of this ratio.40 in 2008 and then to 2.
42 9 19.62 11.23 0.55 10 11.1 TABLE 6.61 0.74 19.17 TURNOVER 1.16 7.84 35.31 19 days 1.29 0.43 30.31 31.CEMENT INDUSTRY ULTRATECH CEMENT LIMITED RATIOS Year 2009 Year 2008 Year 2007 ROE ROA CURRENT RATIO DEBT-EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO INVENTORY TURNOVER PERIOD FIXED RATIO P/E RATIO ASSETS 0.08 14.43 25 days 1.37 0. This shows that company is unable to satisfy its shareholders by proper utilization of funds.65 0.37 ANALYSIS RETURN ON EQUITY RATIO The ROE of the company decreased each year from 2007 to 2009.74 12. ALLIANCE BUSINESS SCHOOL Page 64 .4 9.8 9 14.84 31 days 0.27 0.44 0.17 0. The decline in return on equity ratio in FY‟09 was comparatively higher than that of FY‟08 because economic downturn also affected the profits of the company.7 1.23 0.
17. But by 2009 it got declined to 0. The debtors turnover ratio is growing higher which implies that the efficiency of management of debtors of the firm is growing high when compared to the previous years. CURRENT RATIO The current ratio in 2007 is 0. So the company‟s performance got declined by 2009 and the company‟s debt burden is increasing i. the return on assets got declined.e.55 by 2009.74 and by 2009 it is 0.61 in 2009. the interest coverage ratio is 14. the assets and the profit of the company increased showing a consistent return of 0. DEBTORS TURNOVER RATIO: The debtor‟s turnover ratio was 30.8 in 2007 and it slightly increased to 31. Since the ideal ratio is 2:1 so it signifies that the company is in comfort to pay the current debts with a margin of safety for possible in current assets. So the debt equity ratio is decreasing constantly and it shows that the company‟s debt is decreasing.31 in 2008 so this proves that the company‟s debt burden got decreased to some extent and by 2009 it got decreased to 11. Generally debtors turnover ratio explains the number of times the debtors turned over a period of a financial year.62. DEBT-EQUITY RATIO: In 2007. Since there is a tremendous increase in total assets.65 in 2008 and 0.42 by 2008 and then it gradually increased to 35.CEMENT INDUSTRY RETURN ON ASSETS RATIO In 2008. INTEREST COVERAGE RATIO: In 2007.e the company is not generating enough profit to pay the interest to the debts and the financial position of the company is growing weak. and so the company is not in a favourable position in the view point of the lenders i.08 and by 2008 it was 0. the amount of debt used effectively by the company is declining from 2007 to 2009.84.23 as in 2007. ALLIANCE BUSINESS SCHOOL Page 65 .43 which raised to 19. the debt equity ratio was 1.7 and it gradually decreased to 0.
84 in 2009.1 in 2007. INVENTORY TURNOVER RATIO: The inventory turnover ratio was 14.17 in 2007 and it is increased to 1. ALLIANCE BUSINESS SCHOOL Page 66 .31 in 2008 and then a steep decrease to 11.37 in 2009 to 9.54.29 by 2008 and by 2009 it got declined to 1. Here from 2007 to 2008 the firm was managing efficiently the inventories and by 2009 the company is overstocking the finished goods intended for sale. In 2008 there is a decrease in fixed assets and so the turnover gradually increased because the company effectively utilised the fixed assets while 1n 2009 the company had increased the fixed assets to 50% than the previous year but the sales revenue was not in tandem with the increase in fixed assets so the fixed assets turnover got declined to 1.e.74 in 2008 and then to 7. Generally the inventory turnover ratio measures the velocity of conversion of stock into sales.43 in 2007 and it got gradually increased to 19.16. from 12. PRICE/EARNINGS RATIO: The P/E ratio is gradually declining for all the 3 years i. FIXED ASSETS TURNOVER: The fixed assets turnover was 1. This shows that the performance of the company is declining and the management should look into the causes that have resulted into the fall of this ratio.CEMENT INDUSTRY AVERAGE COLLECTION PERIOD: In 2007 and 2009 the debtors velocity was only 9 days and it was favourable to the company and the bargaining power of the company was high when compared to 2009 were the debtors velocity was 10 days.
135 1.CEMENT INDUSTRY INDIA CEMENTS LIMITED RATIOS ROE ROA CURRENT RATIO DEBT EQUITY RATIO INTEREST COVERAGE RATIO DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD (days) INVENTORY TURNOVER RATIO FIXED ASSETS TURNOVER RATIO TAX BURDEN RATIO P/E RATIO Year 2009 0. ALLIANCE BUSINESS SCHOOL Page 67 .49 11.55 34 10.55 4.66 ANALYSIS RETURN ON EQUITY RATIO Return on equity is net profits to equity share capital.69 12. because lesser the income there will be lesser rate of return on assets and also shows company inefficiency in utilization of assets.185 1.5 Year 2008 0.51 Year 2007 0.20 1.14 0.01 0.42 0.89 0.29 1 0 9.28 10.35 0.67 8.75 10.15 2.87 1.34 TABLE 6. The ratio is decreasing each year which shows the company is unable to increase profits in accordance to the increase in shareholders‟ funds.43 36 11.96 8.44 32 11.21 0.68 7.20 0. RETURN ON ASSETS RATIO Though in FY‟08 there is an increase in net income of the company but in FY‟09 there is a decline on the net income so that also affects the ROA.88 0.
The current ratio of company. INTEREST COVERAGE RATIO Interest coverage ratio shows how much revenue is being earned in relation to its finance cost.6 which show a healthy sign for company‟s growth. The average collection period of ALLIANCE BUSINESS SCHOOL Page 68 . The ratio also slips below 1. The increase in shareholders‟ funds in FY‟08 was about 50% while in the FY‟09 it was only 15%. DEBTOR‟S TURNOVER RATIO The debtors‟ turnover ratio indicates the efficiency of the company to collect debts. AVERAGE COLLECTION PERIOD The average collection period of the company reduced from 36 days to 32 days in FY‟08. so company should take measures to reduce liabilities. The liabilities of the company are increasing every year. though declining every year from the year 2007. This shows the company‟s efficiency was increasing but due to economic downturn in FY‟09. which reflects company‟s dependence on the debt finance has decreased. The majority of financing of the company is done by equity.15%. so there is a decline in current ratio.CEMENT INDUSTRY CURRENT RATIO The current assets of the company increased by 25% in the FY‟08 but still there was decline the current ratio because of increase in its liabilities by 127%. FY‟08 & FY‟09. DEBT EQUITY RATIO The debt equity ratio shows a positive trend for FY‟07. and at the same time risk factor is also reducing because they don‟t have to pay interest to the debenture holders. This indicates the improvement in liquidity of the company. If the ratio slips down below 1. In FY‟09 the assets decreased by 1% but the liabilities increased by 17%. India cements were unable to decrease the coverage period but on the contrary coverage period increased in the FY‟08. company‟s efficiency declined. The efficiency of the company increased in FY‟08 by 19. so the decrease in ratio in FY‟09 was comparatively low. but it is still able to sustain the ratio above 1. which shows company is able to pay its liabilities. The main reason behind decrease in ratio is. But in the FY‟09 the coverage period decreased to 7.27% & it decreased in FY‟09 by 7. then company may face problems to pay its liabilities. increase in total shareholders‟ funds.49 from 8.
accordingly there was an increase in the inventory turnover. therefore. building and other equipments. excess inventory.57crores so company paid tax of 14. but the ratio decreased by 14% in FY‟09. So the share prices also increased.87.CEMENT INDUSTRY the company increased in the year 2009 by 5%. P/E RATIO The dividend paid by the company in the year 2007 was 26. INVENTORY TURNOVER RATIO The ratio shows how many times a company's stock is sold and replaced over a period of time.01 but there was a decrease in FY‟09. The net sales of the company increased considerably in the year 2008. The above table indicates that the change in the fixed assets turnover from FY‟07 to FY‟08 was just . ALLIANCE BUSINESS SCHOOL Page 69 .8crores in FY‟08. A low turnover implies poor sales and.04crores. Though in the year 2009 the dividend paid by the company was at par. TAX BURDEN RATIO There is no tax paid by the company in FY‟07 because during the previous year company made a loss of 262.35 from 11. In the FY‟09 there was increase in net sales but the increase in inventory was also considerably higher due to which the ratio decreased to 10.37crores which is 116% higher than the latter year. But the trend has not deviated and the change is nominal. So. A higher fixed asset turnover ratio shows that the company has been more effective in utilizing the revenue invested in fixed assets for generating net sales. such as property. The dividend given by the company in the year 2008 was 56. In FY‟07 company had a profit of 46. There is a slight difference in the percentage of ratio for FY‟08.53crores. FIXED ASSETS TURNOVER RATIO This ratio indicates the company‟s ability to generate net sales revenue from fixed assets of the company. The tax paid by the company substantially increased in the year 2009. the share prices tumbled down because of economic downturn in the country. So the utilization of fixed assets in FY‟09 was lower as compared to FY‟07 & FY‟08. because there was a major rise in the profits of the company in FY‟08.
But in case of Ambuja Cements ltd this decrease is because of the decrease in profit after tax in the year 2009 when compared with the year 2008.25 0.14 ROE 0.15 0.2 0. Similar is the case with both the other companies.1 It is always said that higher the ROE is better for the company and when looked at the investors point of view.CEMENT INDUSTRY 7.1 INTERCOMPANY ANALYSIS: RETURN ON EQUITY Return on shareholder‟s equity is calculated to see the profitability of owner‟s investment. though there was increase in sales in 2009. Industry Aggr.3 0. share premium and reserves and surplus less accumulated losses. When compared with the industry average only ACC ltd and Ultratech Cement ltd is performing well.27 0.188 0. ROE indicates how well the firm has used the resources of owners.24 COMPANY ACC ltd Ambuja Cements ltd J K Cements ltd Ultratech Cement ltd India Cements ltd TABLE 7.157 0. This was because to keep up with the competition in the market the three companies had to reduce their prices by increasig the sales. = 0. ALLIANCE BUSINESS SCHOOL Page 70 .1 0.267 0. The shareholder‟s equity or net worth will include paid – up share capital.1 ROE 0.05 0 ACC Ambuja J K Cements UltraTech India Cements GRAPH 7.
RETURN ON ASSETS It shows how profitable a company‟s assets are in generating revenue. It gives an indication of the capital intensity of the company. Industry Aggr. = 0.178 COMPANY ACC ltd Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd
ROA 0.188 0.16 0.121 0.17 0.135
0.2 0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 ACC Ambuja J K Cements UltraTech India Cements
Here we can see that only ACC ltd could go in par with the industry average. And UltraTech is in close range with the industry average. Whereas in case other three companies though their total assets has been increasin gyear after year there was decrease in operating profit in the year 2009 when compared with 2008. Hence we can say as per investors point of view companies ACC ltd and UltraTech Cement ltd are the best companies to invest right now out of all the five companies.
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CURRENT RATIO Current ratio indicates the extent to which a company can pay back its current and short term liabilities using its current assets. It is merely an index. Industry Aggr. = 0.85 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd
CURRENT RATIO 0.78 1.06 1.79 0.61 1.42
2 1.5 1 0.5 0 ACC Ambuja J K Cements UltraTech India Cements
The current ratio of companies ACC ltd and UltraTech Cement ltd is below the industry average that is because the current assets of the companies has gone down when compared to previous year, i.e., 2008. But for the other companies it is above the industry average. Even having higher current ratio is not good for the company.
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DEBT-EQUITY RATIO Debt – Equity ratio indicates the component of debt to the component of equity of a company. Higher the ratio, higher is the debt for the company and vice versa. It is merely an index. Industry Aggr. = 1.60 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd
D/E RATIO 0.1 0.04 0.64 0.62 0.68
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Category 1 Ambuja J K Cements UltraTech India Cements
Here we can see that the debt – equity ratio is less than the industry average which is good for the company as the percentage of debt component with respect to increase in percentage of equity component is decreasing for all the companies when compared with the previous year. But one point what needs to be taken into consieration is tax component as we know that debt acts as a tax shield to the company.
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CEMENT INDUSTRY INTEREST COVERAGE RATIO Interest Coverage ratio indicates the number of times interest is covered by the profits available to pay interest charges. = 6.93 67. This shows that all the five companies are having enough cash to payoff their interests.84 7. ACC and Ambuja are having almost three and ten times more than the industry avrage respectively.29 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7.5 INTEREST COVERAGE RATIO 22. ALLIANCE BUSINESS SCHOOL Page 74 .28 11. Industry Aggr. This shows that the financial strength of both the companies.5 When comparing with the industry average.49 Interest Coverage Ratio 70 60 50 40 30 20 10 0 Category 1 Ambuja J K Cements UltraTech India Cements GRAPH 7.16 5. all the companies are having a higher interest coverage ratio. That is why both are still the major two players in this sector. It is an index of the financial strength of an enterprise. It is merely an index.
this would be significantly higher. Except India cements the debtors turnover ratio is higher for all the companies when compared with the industry average.96 34.6 DEBTORS TURNOVER RATIO 33. but this depends upon so many factors such as.6 This basically shows the quality of debtors the company holds. When looking at ratios of all the companies the speed with which their debotrs repay back their debt is high. Conditions of the market – monopolistic or competitive – monopolistic. type of industry like capital goods.55 11. Page 75 ALLIANCE BUSINESS SCHOOL . = 29.02 40.98 35.55 Debtors Turnover Ratio 50 40 30 20 10 0 ACC Ambuja J K Cements UltraTech India Cements GRAPH 7. this would be higher and competitive it would be less as you are forced to give credit. this would be less and consumer goods. consumer goods – capital goods. Industry Aggr.57 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7. This indicates the speed with which debtors repay back their debt to the company. Whether new enterprise or established – new enterprise would be required to give higher credit in the initial stages while an existing business would have a more fixed credit policy evolved over the years of business.CEMENT INDUSTRY DEBTORS TURNOVER RATIO This indicates the efficiency of collection of receivables and contributes to the liquidity of the system.
e.t industry. ALLIANCE BUSINESS SCHOOL Page 76 . Formula for average collection period = 360/receivables turnover ratio. = 13 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd AVERAGE COLLECTION PERIOD 11 9 11 10 34 TABLE 7. 13 days.CEMENT INDUSTRY AVERAGE COLLECTION PERIOD Average collection period is inversely related to debtors‟ turnover ratio.7 This basically shows the number of days the debtors takes to pay back their debt.r. i. Out of which Ambuja brouth down their average collectio period to 9 days w.7 Average Collection Period 35 30 25 20 15 10 5 0 ACC Ambuja J K Cements UltraTech India Cements GRAPH 7. Industry aggr. Except India Cements ltd all the other four companies reduced the number of days when compared with the industry average.. This also depends on each company‟s policies.
97 11.35 Inventory Turnover Ratio 15 10 5 0 ACC Ambuja J K Cements UltraTech India cements GRAPH 7.CEMENT INDUSTRY INVENTORY TURNOVER RATIO Inventory Turnover ratio is a measure of how efficiently a company is able to manage its inventory and how it impacts the revenue for the firm.8 This shows how efficiently the company could turnover the inventory into sales. J K cements. ALLIANCE BUSINESS SCHOOL Page 77 .94.1 9.8 INVENTORY TURNOVER RATIO 11.84 10. Industry Aggr. Ambuja and India Cements are having inventory turnover ratio less than the industry average which is 10. and UltraTech Cement ltd are having ratios greater than the industry average which shows that these three companies are able to efficiently manage their inventories. = 10.52 14.94 COMPANY ACC LTD Ambuja Cement ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7. While other three companies ACC. It is merely an index.
Industry Aggr.e.06 COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7.CEMENT INDUSTRY FIXED ASSET TURNOVER RATIO Fixed Asset Turnover ratio indicates how well a company utilizes its fixed assets in generating the revenue.77 which shows how efficiently the company is utilizing their fixed assets. In case of India cements ltd fixed turnover ratio is 0.77 1.5 1 0. ALLIANCE BUSINESS SCHOOL Page 78 . It is merely an index. = 1.9 FIXED ASSET TURNOVER RATIO 1.89.89 Fixed Asset Turnover Ratio 2 1.38 1. Whle comparing beetween the other four companies J K Cements ltd is having higher ratio of 1.29 1.9 All the four cement companies except India Cements ltd fixed turnover ratio is higher comopared to the industry average.16 0. 16% decrease when compared with the industry average. This shows that India Cements is not able to utilize their fixed assets efficiently.5 0 ACC Ambuja J K Cements UltraTech GRAPH 7.. i.
J K Cements and UltraTech Cement ltd. This shows the relationship between market value of the share and the EPS.CEMENT INDUSTRY PRICE – EARNING RATIO This indicates investor‟s judgement or expectations about the firm‟s performance. And hence the P/E ratio will increase in the near future.. is better to sell when the P/E ratio is high and buy when it is less. COMPANY ACC LTD Ambuja Cements ltd J K Cements ltd UltraTech Cement ltd India Cements ltd TABLE 7.10 P/E RATIO 10. It is now the best time to buy the shares of J K Cements and UltraTech Cement ltd as their performance when compared to last year is increasing. The higher the PE the stronger is the recommendation to sell the share and the lower the PE. We can see that ACC. Ambuja and India Cementsltd are having a higher P/E ratio when compared with other two.34 P/E RATIO 15 10 5 0 ACC Ambuja J K Cements UltraTech India Cements GRAPH 7. the stronger is the recommendation to buy the share. i.e.01 7.1 8.68 13.10 For the investors to get a higher return on the shares they have actually invested.66 2. ALLIANCE BUSINESS SCHOOL Page 79 .
00% 20.79 16.00% 2007 2008 2009 GRAPH 7.00% 5.66 1438.00% 15. ACC LTD: 2009 Net Sales PAT Profitability Trend (%) 7942.79 1212.00% 0.90773 PROFITABILITY TREND 25.73 20.CEMENT INDUSTRY 7.92472 2007 6880.22912 TABLE 7.11 2008 7165.59 20. Profitability is calculated as: Profitability (%) = Profit after Tax (PAT) / Net Sales The trend in terms of percentage in profit of the companies are considered and analyzed over the period of study.11 ALLIANCE BUSINESS SCHOOL Page 80 .2 TREND ANALYSIS PROFITABILITY TREND Profitability gives us the earnings available to the investors and owners of the company after taking into account all the expenses incurred during the business operations.66 1606.00% 10.
00% 5.00% 15.62 13.12 J K CEMENTS LTD: 2009 Net Sales PAT Profitability Trend (%) 1664.61924 2007 1343.64 178.13 2008 1595.56 265.91 1769.1 31.73567 2007 5597.00% 2007 2008 2009 GRAPH 7.71 1402.12 2008 6167.34 8.7 1218.60287 Profitability Trend 35.CEMENT INDUSTRY AMBUJA CEMENTS LTD: 2009 Net Sales PAT Profitability Trend (%) 7040.27 22.00% 20.37 17.17 16.551928 TABLE 7.29374 ALLIANCE BUSINESS SCHOOL Page 81 .00% 0.00% 10.30467 TABLE 7.42 142.00% 30.00% 25.
00% 0.00% 6.02 15.14 2008 5511.CEMENT INDUSTRY Profitability Trend 18.74 782.00% 4.28033 2007 4908.93647 Profitability Trend 19 18.3006 TABLE 7.00% 16.99 1007.5 977.00% 8.5 2007 2008 2009 GRAPH 7.5 17 16.5 14 13.5 15 14.00% 14.5 18 17.00% 10.00% 2007 2008 2009 GRAPH 7.00% 2.13 ULTRATECH CEMENT LTD: 2009 Net Sales PAT Profitability Trend (%) 6385.5 16 15.14 ALLIANCE BUSINESS SCHOOL Page 82 .00% 12.61 18.28 15.
23217 Profitability Trend 25 20 15 10 5 0 2007 2008 2009 GRAPH 7.86886 TABLE 7.34 432. There is an increase in profitability trend when compared with the profits in the year 2009 and 2008.25 637. we can see that ACC ltd is performing well in comparison with other four companies.21 478.CEMENT INDUSTRY INDIA CEMENTS LTD: 2009 Net Sales PAT Profitability Trend (%) 3358.54 20.83 21.18 12.15 If we look at all the five companies.94243 2007 2255.15 2008 3044. ALLIANCE BUSINESS SCHOOL Page 83 . Whereas there is a decrease in profitability trend for all the other four companies when compared with the profits in the year 2009 and 2008.
29 7165.16 Ambuja Cement Ltd: 2009 R & D Expenses Net Sales R & D Focus (%) 1.045 0.29 7040.004287 TABLE 7.17 ALLIANCE BUSINESS SCHOOL Page 84 .044 0.044327 R & D Focus 0.71 0.004053 2008 0.66 0.042 0.91 0.038 2007 2008 2009 GRAPH 7.25 6167.7 0. R&D Focus (%) = R&D Expense / Net Sales ACC Ltd: 2009 R & D Expenses Net Sales R & D Focus (%) 3.04 0.24 5597.041 0.045913 TABLE 7.018322 2007 0.046 0.66 0.16 2007 3.047 0.039 0.05 6880.CEMENT INDUSTRY In House R&D: This ratio provides an insight to the company‟s interest in developing new technology.25 7942.79 0.040918 2008 3.043 0.
.015 0.e. r = Compounded Annual Growth Rate. n = Number of years the company is analyzed ALLIANCE BUSINESS SCHOOL Page 85 . 2008.e. S0 = Net Sales during Year 0 or the starting year considered for analysis. i.CEMENT INDUSTRY R & D Focus 0. UltraTech cement ltd. For the last three years Ambuja cements has been constantly spending more money on R&D of the company whereas ACC reduced their R&D expenses in 2009 compared to the last year . When we look at other companies..005 0 2007 2008 2009 GRAPH 7. Sn = S0 (1 + r) n Where.. compounded annual growth rate (CAGR). Sn = Net Sales during Year n or the last year considered for analysis. GROWTH ANALYSIS The growth of the companies in a particular industry is calculated and analyzed on the basis of the industries sales growth rate. J K cements ltd they doesn‟t focus towards the R&D of their company and hence their R&D Expense is zero. i.01 0.17 If we look at the above two graphs we can see that both ACC and Ambuja cements gives importance to R&D.02 0.i.e. India cements ltd..
00% 10.18 Ambuja Cements Ltd: For the year.CEMENT INDUSTRY ACC Ltd: For the year.00% 0.00% 5.00% 30.00% 5.00% 20.00% 25.74% 2007 – 29.00% 2007 2008 2009 GRAPH 7.00% 2007 2008 2009 GRAPH 7.00% 10.19 ALLIANCE BUSINESS SCHOOL Page 86 .06% 2008 – 24. 2009 – 20.13% 2007 – 29.00% 0.00% 25.11% 2008 – 25.00% 20.37% GROWTH ANALYSIS 35. 2009 – 22.00% 30.00% 15.00% 15.16% GROWTH ANALYSIS 35.
00% 19.00% 0.00% 2007 2008 2009 GRAPH 7.00% 18.21 ALLIANCE BUSINESS SCHOOL Page 87 .00% 20.00% 23.00% 50.00% 20. 2009 – 36.00% 2007 2008 2009 GRAPH 7.61% 2007 – 23.53% GROWTH ANALYSIS 24.00% 21.20 UltraTech Cement ltd: For the year.85% GROWTH ANALYSIS 60.21% 2008 – 45. 2009 – 19.65% 2008 – 20.00% 17.00% 30.61% 2007 – 55.00% 40.00% 10.CEMENT INDUSTRY J K Cements Ltd: For the year.00% 22.
00% 24. there is a decline in the percentage in growth. 2009 – 23.00% 27.00% 25.00% 21.CEMENT INDUSTRY India Cements ltd: For the year.00% 23.22 If we look at the growth of each company under the cement industry which is taken into consideration for the analysis. ALLIANCE BUSINESS SCHOOL Page 88 .64% 2008 – 27. Though there is always an increase in sales for each company every year but the change in percentage of sales for a particular year compared to the previous year is always less.22% 2007 – 24.73% GROWTH ANALYSIS 28.00% 2007 2008 2009 GRAPH 7.00% 22.00% 26.
the exports were curtailed in FY09 in order to satisfy the domestic demand and contain inflation. ALLIANCE BUSINESS SCHOOL Page 89 . The industry added nearly 30 MT in FY09 over the previous year taking the total capacity to nearly 212 MTPA. average industry cement realizations (average of price per bag of cement) were higher by about 5% YoY. The industry had lined up huge capex plans with that depreciation costs have moved up. the industry maintained volume growth of around 10% YoY. India owing to its locational advantage has been catering to the cement requirements of the Middle East and the South East Asian nations. So the players either have to purchase it from open market or import it. Considering the financial turmoil witnessed globally. But coal linkages for the industry are poor. stimulus packages announced by the government and agricultural income gave a fillip to the demand for the commodity. On account of general economic slowdown and these issues. While demand growth stood at 10% YoY. To ensure smooth functioning of plants and lower costs. This cautious stance has led to a credit crunch and the same has impacted upcoming projects. financial institutions have tightened their credit norms. Smooth supply of state grid power is another problem. However. the demand for cement has moderated. cost of operation did also witnessed northward movement that exerted pressure on margins. However. Recently the ratio has dropped below 50%. industry has opted to set up captive power plants based on coal.CEMENT INDUSTRY 8. However. The overheated real estate sector has cooled off now. This has resulted in increase in demand for coal. The growth in realizations slowed down as additional capacities coming on stream eased the supply pressures. This has increased cost of operation. The industry volumes and realizations were higher during FY09 that boosted top line growth.1 FINDINGS & RECOMMENDATIONS During FY09. the benefit of which should start flowing in starting quarter ended March 2009 onwards. The cement industry on an average maintains two months inventory of fuel and such costs. The crude prices have only started cooling off November 2008 onwards. All of this dented profitability.
A large number of foreign players are also expected to enter the cement sector in the next 10 years. constant demand. India‟s cement industry is expanding capacity to meet increasing demand. owing to the profit margins. The industry experts project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%. ALLIANCE BUSINESS SCHOOL Page 90 . through suitable adjustments in selling prices through rational economic considerations. are expected to be commissioned over three-year period and may create an imbalance in demand and supply. Cement companies will go for global listings either through the FCCB route or the GDR routes. Buoyed by the strong demand from realty and infrastructure companies in India. The industry plans to invest around Rs 50. Unless the industry is able to recover cost increases. Infrastructure and housing are still moving apace. the cement industry will be under pressure. However what is of concern to the industry are staggering rise in input costs and pressures to cap selling prices at the same time. the sector will grow and will take India‟s economy forward along with it. Consolidation of the cement sector too will take place and cement plants producing less than 1 million tonnes will find it difficult to survive in this market. lower taxation. the outlook for the cement sector remains positive in respect of growth in demand in the foreseeable future. cement companies have embarked on massive expansion plans for the coming years. With help from the government in terms of friendlier laws.CEMENT INDUSTRY 8.2 FUTURE OUTLOOK Despite apprehensions about the impact of inflation and a slowdown in industrial production and overall economic scenario.000 crore in order to increase production from 198 MTPA to about 275 MTPA over next two to three years. and right valuation. according to such announcements. and more infrastructure spending. resulting in impact on realization. These capacities.
The cement industry is expected to grow steadily in 2009-2010 and increase capacity by another 50 million tons in spite of the recession and decrease in demand from the housing sector. ALLIANCE BUSINESS SCHOOL Page 91 . In 2008 all companies underperformed comparatively due to economic downturn. During this period investors have an opportunity to gain by paying lower prices for shares and receiving high dividends in future. The effect of recession in 2008 could be seen in the year 2009 where the growth of the company has been decreased. During Financial year 2007 inflationary conditions enabled all to perform well and generate profits resulting in boom in share prices.CEMENT INDUSTRY 8. But now slowly all the companies are picking up. So recommendations to other companies will include increasing their customer base and decrease their cost of productions and improve their performance with respect to credit sales.3 CONCLUSION In the present scenario of hectic competition it has been seen that the biggest player in the market remains big and does not allow other companies to rise. financial prudence and capacity utilization. In the analysis it has been seen that the ACC LTD is over shadowing all other companies in terms of performance.
gujaratambuja.com/indian-economy/industries/cement-industry.rrfinance.in/Files/PDF/SpecialComments/2010-January-Cement-Industry.ultratechcement.in/ http://www.emt-india.indiainbusiness.jkcement.ibef.co.org/industry/cement.com/cement/ http://www.thaindian.nic.htm http://www.com/ http://www.CEMENT INDUSTRY REFERENCES http://www.com/Research/Fundamental%20Research/Cement%20Industry.com/research-it/sector-info/cement/ http://www.mapsofindia.mapsofindia.com/ http://www.tradechakra.net/cement_code/2007/Chapter_2.aspx http://business.html http://www.in/industry-infrastructure/industrial-sectors/Cement.com/newsportal/business/manufacturing-sector-is-indias-largestemployer-census_10054253.com/ http://www.indiacements.html http://www.com/ http://www.html http://www.pdf http://india.com/ http://www.html ALLIANCE BUSINESS SCHOOL Page 92 .com/indian-economy/major-economic-sectors.equitymaster.acclimited.icra.html http://capitaline.
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