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BySapana Agarwal Shweta Karan Rishal Bhide

Cement Industry

Cement Industry An Overview

India is the worlds second largest producer of cement after China with industry capacity of over 200 million tonnes (MT). Growth by 9 to 10% for the current financial year. Indias cement consumption grew 9.6% yoy. Cement production could rise to 236.16 MT in FY11 and touch 262.61 MT in FY12. There is a total number of 134 large cement plants with an installed capacity of 173.08 MT and more than 350 small cement plants with an estimated capacity of 11.10 MT operating in India presently

Major Players of Cement Industry in India

The Associated Cement Companies Limited (ACC) Ambuja Cements Limited UltraTech CemCo Ltd. Grasim Industries Limited The India Cements Limited Century Textiles and Industries Limited

Jai Prakash Industries

Birla Corp Limited Jaiprakash Industries Limited Lafarge


Ambuja Cements was set up in 1986. In the last decade the company has grown tenfold. The total cement capacity of the company is 18.5 MT. Net Profit Rs. crore 318 for Qtr. Jul Sep. 2009 whereas Qtr. Jul Sep 2008 Net Profit Rs. crore 250. Over 40% of the production cost of cement is power. Cheaper and higher quality coal from South Africa & furnace oil from the Middle East.

Annual Capacity Capacity (MT) 5.00 6.00 2.00

Market Cap. : Rs. 12749.06(Cr)

Plant Gujarat Himachal Pradesh/ Punjab Rajasthan

Chhattisgarh/ West Bengal

Maharashtra Total

2.50 18.50

THREAT OF NEW ENTRANTS * Economies of scale * High Capital requirement * Avg gestation period of 2-3 yrs * Access 2 distribution channels * Oversupplied market BARGAINING POWER OF SUPPLIERS * Large and few sellers * Monopolistic control of external cost element * No substitutes * Sellers product is important input

BARGAINING POWER OF BUYERS * Standard product * Rising share of retail purchase and declining share of bulk purchasers * No substitute

THREAT OF COMPETITORS * Large no. of competitors * Marginal product differentiation * High fixed costs * Lack of switching cost * High exit barriers

THREAT OF SUBSTITUTES * Bitumen (construction of roads) * Engineering plastics (construction of buildings)

Brand name Most profitable cement co. in India Lowest cost producer Sea transportation Captive power plant Fuel efficiency

Cement industry is highly fragmented Demand-supply gap, overcapacity Increasing cost of production High interest rates Packaging

Government infrastructure spending Investment in industrial and commercial projects Commercial construction activity

Imports from Pakistan affecting markets in North India Excess overcapacity can hurt margins as well as prices Consolidation through Mergers & Acquisitions

Value Chain Analysis

Logistics Marketing and Sales

Human Resources Management

Technological Development Procurement

Business Level Strategies

Target niche segment. Lowest cost producer.

Corporate Level Strategies

Related Diversification. Vertical Integration.

Gujarat Ambuja's acquisition of Modi Cement ($44 per tonne) in 1997. Gujarat Ambuja's acquisition of DLF in 1999 ($108)

Gujarat Ambuja acquired a 14.4-per cent stake in ACC from the Tata group in 1999 at Rs 370 per share. Holcim buys a 67-per cent stake in Ambuja Cement India in 2005 for 810million(about 3500crore).

Ambuja Cements Ltd M&As Summary

Year 2009 2008 2007 2006 Acquisitions 0 0 0 0 Stakes 0 0 0 0 Divestitures 0 0 0 2

2005 2004
2003 2002 2001 2000 1999 1998 1997 Total

0 0
0 0 0 0 0 0 1 1

1 0
0 0 0 2 5 0 0 8

0 0
0 0 0 0 0 0 0 2