Cement Industry In India

Report on Cement Industry In India

By: Shobhit Chandak

1. INTRODUCTION The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement Industry with total capacity of 165 million tones is the second largest after China. Cement industry is dominated by 20 companies who account for over 70% of the market. Individually no company accounts for over 12% of the market. The major players like L&T and ACC have been quiet successful in narrowing the gap between demand and supply. Private housing sector is the major consumer of cement (53%) followed by the government infrastructure sector. Similarly northern and southern region consume around 20%-30% cement while the central and western region are consuming only 18%-16%. India is the 2nd largest cement producer in world after china .Right from laying concrete bricks of economy to waving fly over’s cement industry has shown and shows a great future. The overall outlook for the industry shows significant growth on the back of robust demand from housing construction, Phase-II of NHDP (National Highway Development Project) and other infrastructure development projects. Domestic demand for cement has been increasing at a fast pace in India. Cement consumption in India is forecasted to grow by over 22% by 2009-10 from 200708.Among the states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement production grew at the rate of 9.1 per cent during 2006-07 over the previous fiscal's total production of 147.8 mt (million tons). Due to rising demand of cement the sales volume of cement companies are also increasing & companies reporting higher production, higher sales and higher profits. The net profit growth rate of cement firms was 85%. Cement industry has contributed around 8% to the economic development of India. Outsiders (foreign players) eyeing India as a major market to invest in the form of either merger or FDI (Foreign Direct Investment). Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. The company continues to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. The cement sector is expected to witness growth in line with the economic growth because of the strong co-relation with GDP. Future drivers of cement demand growth in India would be the road and housing projects. As per the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with capacity utilization of 90 per cent.

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Report on Cement Industry In India

By: Shobhit Chandak

Despite the growth of Indian cement industry India lags behind the per capita production. Supply for cement is expected to remain tight which, in turn, will push up prices of cement by more than 50%. The most important factor for better prices is consolidation of the industry. It has just begun and we will see more consolidation in the coming years. Other budget measures such as cut in import duty from 12.5 per cent to nil etc. are all intended to cut costs and boost availability of cement. Sadly the adverse effects of global slowdown have not speared this industry too. Demand is sluggish, the government is keeping an eagle eye on prizes, domestic coal and pet coke, prizes have increased sharply and utilizations rates are down. The numbers coming out are a reflection of grim times. ACC the country’s largest cement company that’s controlled by Swiss giant HOLCIM, registered 2% fall in august sales. It is the biggest fall since Feb 2007. Production fell by 5%. To stand against the problematic situation, government as well as cement industry has taken some steps. Companies are focusing on cost of transportation. One of the strategy is to decrease dependence on road & opt for sea logistics as that can cut transportation cost by 30- 50 %. Some plants are adopting futuristic plan such as setting up captive power plant, moving closer to the customers by creating clicker, crushing, and capacity in key markets, to be more customer centric to generate better revenue. India should push for stricter regulations of market place as to control the prices of big companies and prevent them from forming cartels and exchanging information. To fight with the high inflation, government wants to import more cement from Pakistan .However cement prizes are not very much high as other items but still they are increasing. And the reason of high prize is surging cost of raw material and transportation cost. Apart from this government also discussed with cement industry not to have increase in prizes and keep consumer interest in mind. Now the question arise in front of the government is whether the demand by the government is possible to increase through expenditure on infrastructure or not according to the current state of economy when so many crises are going on or how the government allocation of US$ 3.23 billion for the National Highway Development, Project will keep the demand for cement alive? And to what extent the prizes of cement should be increase so that consumer can’t affect. Cement industry in India has also made tremendous strides in technological up gradation and assimilation of latest technology. Presently, 93 per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially. Indian cement industry has also acquired technical capability to produce different types of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Page | 2

Report on Cement Industry In India

By: Shobhit Chandak

Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. Some of the major clusters of cement industry in India are: Satna (Madhya Pradesh), Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).

2. CURRENT SCENARIO The Indian cement industry is the second largest producer of quality cement, which meets global standards. The cement industry comprises 130 large cement plants and more than 300 mini cement plants. The industry's capacity at the end of the year reached 188.97 million tons which was 166.73 million tons at the end of the year 2006-07. Cement production during April to March 2007-08 was 168.31 million tons as compared to 155.66 million tons during the same period for the year 200607.Despatches were 167.67 million tons during April to March 2007- 08 whereas 155.26 during the same period. During April-March 2007-08, cement export was 3.65 million tons as compared to 5.89 during the same period. Cement industry in India is currently going through a consolidation phase. Some examples of consolidation in the Indian cement industry are: Gujarat Ambuja taking a stake of 14 per cent in ACC, and taking over DLF Cements and Modi Cement; ACC taking over IDCOL; India Cement taking over Raasi Cement and Sri Vishnu Cement; and Grasim's acquisition of the cement business of L&T, Indian Rayon's cement division, and Sri Digvijay Cements. Foreign cement companies are also picking up stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech Cement. Lafarge, the French cement major has acquired the cement plants of Raymond and Tisco. Italy based Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries' cement plant in Andhra Pradesh, and German cement company Heidelberg Cement has entered into an equal joint-venture agreement with S P Lohia Group controlled IndoRama Cement.

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Report on Cement Industry In India

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3. PROCESS TECHNOLOGY While adding fresh capacities, the cement manufacturers are very conscious of the technology used. In cement production, raw materials preparation involves primary and secondary crushing of the quarried material, drying the material (for use in the dry process) or undertaking a further raw grinding through either wet or dry processes, and blending the materials. Clinker production is the most energyintensive step, accounting for about 80% of the energy used in cement Production. Produced by burning a mixture of materials, mainly limestone, silicon oxides, aluminum, and iron oxides, clinker is made by one of two production processes: wet or dry; these terms refer to the grinding processes although other configurations and mixed forms (semi-wet, semi-dry) exist for both types. In the dry process, the raw materials are ground, mixed, and fed into the kiln in their dry state. In the wet process, the crushed and proportioned materials are ground with water, mixed, and fed into the kiln in the form of slurry. Different types of cement that are produced in India are: • Ordinary Portland cement (OPC): OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent gypsum and other materials. It accounts for 70 per cent of the total consumption. • Portland Pozzolana Cement (PPC): PPC has 80 per cent clinker, 15 per cent pozzolana and 5 per cent gypsum and accounts for 18 per cent of the total cement consumption. It is manufactured because it uses fly ash/burnt clay/coal waste as the main ingredient. • White Cement: White cement is basically OPC - clinker using fuel oil (instead of coal) with iron oxide content below 0.4 per cent to ensure whiteness. A special cooling technique is used in its production. It is used to enhance aesthetic value in tiles and flooring. White cement is much more expensive than grey cement. Page | 4

Report on Cement Industry In India

By: Shobhit Chandak

• Portland Blast Furnace Slag Cement (PBFSC): PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent gypsum and accounts for 10 per cent of the total cement consumed. It has a heat of hydration even lower than PPC and is generally used in the construction of dams and similar massive constructions. • Specialized Cement: Oil Well Cement is made from clinker with special additives to prevent any porosity. • Rapid Hardening Portland cement: Rapid Hardening Portland Cement is similar to OPC, except that it is ground much finer, so that on casting, the compressible strength increases rapidly. • Water Proof Cement: Water Proof Cement is similar to OPC, with a small portion of calcium stearate or non- saponifibale oil to impart waterproofing properties.

4. PROCEDURE The main raw materials used in the cement manufacturing process are limestone, sand, shale, clay, and iron ore. The main material, limestone, is usually mined on site while the other minor materials may be mined either on site or in nearby quarries. Another source of raw materials is industrial by-products. The use of byproduct materials to replace natural raw materials is a key element in achieving sustainable development. Raw Material Preparation Mining of limestone requires the use of drilling and blasting techniques. The blasting techniques use the latest technology to insure vibration, dust, and noise emissions are kept at a minimum. Blasting produces materials in a wide range of sizes from approximately 1.5 meters in diameter to small particles less than a few millimeters in diameter. Material is loaded at the blasting face into trucks for transportation to the crushing plant. Through a series of crushers and screens, the limestone is reduced to a size less than 100 mm and stored until required. Depending on size, the minor materials (sand, shale, clay, and iron ore) may or may not be crushed before being stored in separate areas until required. Raw Grinding Page | 5

Report on Cement Industry In India

By: Shobhit Chandak

In the wet process, each raw material is proportioned to meet a desired chemical composition and fed to a rotating ball mill with water. The raw materials are ground to a size where the majority of the materials are less than 75 microns. Materials exiting the mill are called "slurry" and have flowability characteristics. This slurry is pumped to blending tanks and homogenized to insure the chemical composition of the slurry is correct. Following the homogenization process, the slurry is stored in tanks until required. In the dry process, each raw material is proportioned to meet a desired chemical composition and fed to either a rotating ball mill or vertical roller mill. The raw materials are dried with waste process gases and ground to a size where the majority of the materials are less than 75 microns. The dry materials exiting either type of mill are called "kiln feed". The kiln feed is pneumatically blended to insure the chemical composition of the kiln feed is well homogenized and then stored in silos until required.

Pyroprocessing Whether the process is wet or dry, the same chemical reactions take place. Basic chemical reactions are: evaporating all moisture, calcining the limestone to produce free calcium oxide, and reacting the calcium oxide with the minor materials (sand, shale, clay, and iron). This results in a final black, nodular product known as "clinker" which has the desired hydraulic properties. In the wet process, the slurry is fed to a rotary kiln, which can be from 3.0 m to 5.0 m in diameter and from 120.0 m to 165.0 m in length. The rotary kiln is made of steel and lined with special refractory materials to protect it from the high process temperatures. Process temperatures can reach as high as 1450oC during the clinker making process. In the dry process, kiln feed is fed to a preheater tower, which can be as high as 150.0 meters. Material from the preheater tower is discharged to a rotary kiln with can have the same diameter as a wet process kiln but the length is much shorter at approximately 45.0 m. The preheater tower and rotary kiln are made of steel and lined with special refractory materials to protect it from the high process temperatures. Regardless of the process, the rotary kiln is fired with an intense flame, produced by burning coal, coke, oil, gas or waste fuels. Preheater towers can be equipped with firing as well. Page | 6

Report on Cement Industry In India

By: Shobhit Chandak

The rotary kiln discharges the red-hot clinker under the intense flame into a clinker cooler. The clinker cooler recovers heat from the clinker and returns the heat to the pyroprocessing system thus reducing fuel consumption and improving energy efficiency. Clinker leaving the clinker cooler is at a temperature conducive to being handled on standard conveying equipment. Finish Grinding and Distribution The black, nodular clinker is stored on site in silos or clinker domes until needed for cement production. Clinker, gypsum, and other process additions are ground together in ball mills to form the final cement products. Fineness of the final products, amount of gypsum added, and the amount of process additions added are all varied to develop a desired performance in each of the final cement products. Each cement product is stored in an individual bulk silo until needed by the customer. Bulk cement can be distributed in bulk by truck, rail, or water depending on the customer's needs. Cement can also be packaged with or without color addition and distributed by truck or rail.

5. DEMAND & SUPPLY The demand drivers for the cement sector continue to be housing, infrastructure and commercial construction, etc. We expect the proportion of infrastructure in total demand to improve further in future, as the thrust on infrastructure development is on the rise. During April-November 2007, cement demand grew by 10 per cent yearon-year (y-o-y) propelled by the growth witnessed in end user segments such as housing, infrastructure etc. CRISIL Research expects demand to remain strong and grow by over 12 per cent in the next 2 years. Cement demand is expected to outstrip supply for the next year and a half as no major capacities are coming onstream, thus providing enough flexibility to cement manufacturers to further hike the prices. Today, cement from Andhra is going all over India, including Assam, Meghalaya, Jharkhand, Orissa, West Bengal, Chattisgarh, Gujarat and Maharashtra. More cement is likely to flow into Tamil Nadu from the state in view of cut in sales tax. Any further increase in demand in the South India will benefit the cement industry here. Cement movement from Gujarat to Mumbai is also coming down due to exports while Page | 7

Report on Cement Industry In India

By: Shobhit Chandak

cement movement from Orissa into Andhra has stopped and, in fact, cement is flowing into Orissa as well. Earlier in 2006-07, the housing sector alone consumed 65 per cent of the total domestic consumption. With the launch of several infrastructure projects, the housing consumption may come down to 55 per cent as the infrastructure and other sectors are expected to move up to 45 per cent from the present 35 per cent. Still, the main sector of consumption continues to be housing, including commercial space, occupying more than 60 per cent. The current demand in the state for 200506 is expected to cross 15 million tons (11.5 million tons). We expect the demand here to go past the 17.5-million mark in 2006-07 in view of irrigation and infrastructure projects being taken up in the state. Weaker sections’ housing, construction of public toilets, schools in rural areas apart from several private and public infrastructure projects will also give tremendous boost to the cement consumption in the state. Most importantly, irrigation projects, worth nearly Rs 1 lakh crore, will trigger unprecedented demand for the next 5-7 years. Cement consumptions are as follows:

6. DEMAND DRIVERS Indian cement demand skewed towards housing The demand from the housing sector is ~53% of the total Indian cement demand.

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Report on Cement Industry In India

By: Shobhit Chandak

There are fears of a slowdown in the demand from the housing sector due to a drop in real estate prices in the country. The worry is that builders may postpone construction of new buildings if the property prices were to correct. Infrastructure to give demand a big boost Our analysis shows that Infrastructure should be the biggest growth driver for cement demand in the country. If we were to look only at order books of the top eight construction and manufacturing equipment companies in India, we find that their combined order book has virtually doubled over the last two years from INR1,000bn (USD25bn) to INR1,950bn (USD48.75bn) for completion over the next 24-30 months.

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Report on Cement Industry In India

By: Shobhit Chandak

Over the past five years, cost of cement production has grown at a CAGR of 8.4%. Also, the producers have been able to pass on the hike in cost to consumers on the back of increased demand. Average realizations have increased from Rs. 1,880 per tonne in FY 03 to Rs. 3,133 per tons in FY 07, at a CAGR of 13.6%, which has been reflected in higher profit margins of the industry. To reduce the cost of production, the industry has focused on captive power generation. Proportion of cement production through captive power route has increased over the years. Also, cement movement by rail has increased over the years. Freight and energy costs are also increasing; however, in the current market scenario, manufacturers have the flexibility to pass on the increase in costs to endconsumers. Let us have a look at the cost factors affecting the cement industry Capacity Utilization: Since the industry operates on fixed cost, higher the capacity sold, the wider the cost distributed on the same base. But one should also keep in mind, that there have been instances wherein despite a healthy capacity utilization, margins have fallen due to lower realizations. Power: The cement industry is energy intensive in nature and thus power costs form the most critical cost component in cement manufacturing (about 30% to total expenses). Most of the companies resort to captive power plants in order to reduce power costs, as this source is cheaper and results in uninterrupted supply of power. Therefore, higher the captive power consumption of the company, the better it is for the company. Freight: Since cement is a bulk commodity, transporting is a costly affair (over 15%). Companies, which have plants located closer to the markets as well as to the source of raw materials have an advantage over their peers, as this leads to lower freight costs. Also, plants located in coastal belts find it much cheaper to transport cement by the sea route in order to cater to the coastal markets such as Mumbai and the states of Gujarat and Tamil Nadu. On account of sufficient reserves of raw materials such as limestone and gypsum, the raw material costs are generally lower than freight and power costs in the cement industry. Excise duties imposed by the government and labor wages are among the other important cost components involved in the manufacturing of cement. Operating margins: The company should have a consistent record of outperforming its peers on the operational performance front i.e. it should have higher operating margins than its competitors in the industry. Factors such as captive power plants, effective capacity utilization results in higher operating margins and therefore these factors should be looked into. Since cement is a regional play on account of its high freight costs, the company should not have all its plants concentrated in one region. It should have a geographical spread so that Page | 10

Report on Cement Industry In India

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adverse market conditions in one region can be mitigated by high growth in the other region 8.

Government Policies

Government policies have affected the growth of cement plants in India in various stages. 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. 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, cement was declared as an essential commodity under the Defense of India Rules and was brought under price and distribution controls which resulted in sluggish growth. The installed capacity reached only 27.9 MT by the year 1980-81. Partial Decontrol (1982-1988) In February 1982, partial decontrol was announced. Under this scheme, levy cement quota was fixed for the units and the balance could be sold in the open market. This resulted in extensive modernization and expansion drive, which can be seen from the increase in the installed capacity to 59MT in 1988-89 in comparison with the figure of a mere 27.9MT in 1980-81, an increase of almost 111%. Total Decontrol (1989) In the year 1989, total decontrol of the cement industry was announced. By decontrolling the cement industry, the government relaxed the forces of demand and supply. In the next two years, the industry enjoyed a boom in sales and profits. By 1992, the pace of overall economic liberalization had peaked; ironically, however, the economy slipped into recession taking the cement industry down with it. For 1992-93, the industry remained stagnant with no addition to existing capacity. Government Controls The prices that primarily control the price of cement are coal, power tariffs, railway, freight, royalty and cess on limestone. Interestingly, all of these prices are controlled by government

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Report on Cement Industry In India

By: Shobhit Chandak

9. REQUIREMENTS Coal The consumption of coal in a typically dry process system ranges from 20-25% of clinker production. This means for per ton clinker produced 0.20-0.25 ton of coal is consumed. This contributes 35-40% of the production cost. The cement industry consumes about 10mn tons of coal annually. Since coalfields like BCCL supply a poor quality of coal, NCL and CCL the industry has to blend high-grade coal with it. The Indian coal has a low calorific value (3,500-4,000 kcal/kg) with ash content as high as 25-30% compared to imported coal of high calorific value (7,000-8,000 kcal/kg) with low ash content 6-7%. Lignite is also used as a fuel by blending it with coal. However this process is not very common. Electricity Cement industry consumes about 5.5bn units of electricity annually while one ton of cement approximately requires 120-130 units of electricity. Power tariffs vary according to the location of the plant and on the production process. The state governments supply this input and hence plants in different states shall have different power tariffs. Another major hindrance to the industry is severe power cuts. Most of the cement producing states like AP, MP experience power cuts to the tune of 25-30% every year causing substantial production loss. Infrastructure To reduce uncertainty relating to power, most of the leading companies like ACC, Indian Rayon, and Grasim rely on captive power plants. A few companies are also considering power-generating windmills. Limestone This constitutes the largest bulk in terms of input to cement. For producing one ton of cement, approximately 1.6 ton of limestone is required. Therefore, the cement plant location is determined by the location of limestone mines. The major cash outflow takes place in way of royalty payment to the central government and cess on royalties levied by the state government. The total limestone deposit in the country is estimated to be 90 billion tons. AP has the largest share -- 34%, Karnataka 13%, Gujarat 13%, M.P 8%, and Rajasthan 6.5%. The plants near the limestone deposit pay less transportation cost than others. Page | 12

Report on Cement Industry In India

By: Shobhit Chandak

Transportation Cement is mostly packed in paper bags now. It is then transported either by rail or road. Road transportation beyond 200 kms is not economical therefore about 55% cement is being moved by the railways. There is also the problem of inadequate availability of wagons especially on western railways and southeastern railways. Under this scenario, manufacturers are looking for sea routes, this being not only cheap but also reducing the losses in transit. Today, 70% of the cement movement worldwide is by sea compared to 1% in India. However, the scenario is changing with most of the big players like L&T, ACC and Grasim having set up their bulk terminals.

Infrastructure for Future The consumption of cement is determined by factors influencing the level of housing and industrial construction, irrigation projects, and roads and laying of water supply and drainage pipes etc. The level and growth of GDP and its sectoral composition, capital formation, development expenditure, growth in population, level of urbanization, etc, in turn, determine these factors. But the domestic demand for cement is mainly from the housing activities and infrastructure development. The government paved the way for the entry of the private sector in road projects. It has amended the National Highway Act to allow private toll collection and identified projects, bridges, expressways and big passes for private construction. The budget gave substantial incentives to private sector construction companies. Ongoing liberalization will lead to an increase in industrial activities and infrastructure development. So it is hoped that Indian cement industry shall boom again in near future. Incentives in States Most state governments, in order to attract investments in their respective states, offer fiscal incentives in the form of sales tax exemptions/deferrals. In some states, this applies only to intrastate sales, like Madhya Pradesh and Rajasthan. States like Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption from electric duty. Installed Capacity India is the world’s second largest cement producing country after China. The industry is characterized by a high degree of fragmentation that has created intense competitive pressure on price realizations. Spread across the length and breadth of the country, there are 120 large plants belonging to 56 companies with an installed capacity of around 135mn tons as on March 2002.

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Report on Cement Industry In India

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10.OPPORTUNITIES, THREATS, RISKS AND CONCERNS The cement industry is going through its boom period with full capacity utilization. Powered by the GDP growth of 8-9%, the annual demand for cement in the country continues to grow at 8- 10%. As per NCAER study, under high growth scenario, the demand for cement (including exports) is expected to increase to 244.82 million tonnes by 2010-11. As per the study, the demand is expected to be much higher at 311.37 million tonnes, if the optimistic projections of the road and the housing sectors are met. The industry has responded to this with substantial new capacity announcements. The materialization of these capacities, however, is likely to be delayed due to a number of factors including timely delivery of equipment and construction of the plant due to the heavy order book position of the suppliers. It is expected that demand growth will outstrip supply till the materialization of such new capacities. However, the current high level of international crude prices and its impact on the domestic prices of petroleum products is likely to make a dent in the profitability but its impact will have to be seen depending upon the ability of the economy to pass on such cost increase to the consumer. While the freight cost could be optimized on the imported coal through usage of company’s own ships for part of the quantity, the international prices of imported coal and its volatility together with the strengthening of the dollar against rupee could derail this. This could impact the delivery prices of imported coal and also the cost of production. The Government has taken steps to increase the availability of indigenous coal for its expanded capacity across various plants which can mitigate the impact of such high cost of imported coal for the plants located near the coal fields in India. Page | 14

Report on Cement Industry In India

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The Government’s continuing efforts to rein in cement prices by freeing imports and banning exports could artificially disable the normal market price mechanisms for determining the price. The rise in the price of cement is because of the gap of demand & supply in the market. The demand for cement is much higher than its actual supply. But with the production maximization, which can be encountered in next few year, this gap may narrow down, that may ensure the market to be in equilibrium. Decreasing per capita consumption doesn’t affect the total consumption for the cement. It means the infrastructure; contacted housing is using the bulk of the production. In spite of High price of the product, the hick of demand because of the increasing rate of infrastructural development. Domestic price of cement is rising as well as the imported cement price is lowering. So altogether the supply of the cement, which is affordable, will increase. This may in decrease the gap between supply and demand. Major Demand was from the housing sector, which may shift to infrastructure as lots of infrastructural development processes has already being taken up & due to the increased price, housing segment started showing a slowdown.

11.Main Companies In India

Associated Cement Companies Ltd (ACCL) Page | 15

Report on Cement Industry In India

By: Shobhit Chandak

Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cement and special cement and has begun offering its marketing expertise and distribution facilities to other producers in cement and related areas. It has twelve manufacturing plants located throughout the country with exports to SAARC nations. The company plans capital expenditure through expansion of existing units and/or through acquisitions. Non-core assets are to be divested to release locked up capital. It is also expected to actively pursue overseas project engineering and consultancy services. Birla Corporation Ltd. Birla Corp's product portfolio includes acetylene gas, auto trim parts, casting, cement, jute goods, yarn, calcium carbide etc. The cement division has an installed capacity of 4.78 million metric tonnes and produced 4.77 million metric tonnes of cement in 200304. The company has two plants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent. It manufactures Ordinary Portland cement (OPC), Portland pozzolana cement, fly ashbased PPC, Low-alkali Portland cement, Portland slag cement, low heat cement and sulphate resistant cement. Large quantities of its cement are exported to Nepal and Bangladesh. Going forward, the company is setting up its captive power plant to remain cost competitive.

Century Textiles and Industries Ltd (CTIL) The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper, shipping, property & land development, builders and floriculture. Cement is the largest division of CTIL and contributes to over 40 per cent of the company's revenues. The company has an installed capacity of 4.7 million tonnes with a total cement production of 5.43 million tonnes in 2003-04. CTIL has four plants that manufacture cement, one in Chhattisgarh, two in Madhya Pradesh and one in Maharashtra. Going forward, the company has scripted a three-pronged strategy closing down its shipping business, continuing with its chemicals and adhesive division, and focusing on cement, rayon and paper as its longterm business plan.

Grasim-UltraTech Cemco Grasim's product profile includes viscose staple fibre (VSF), grey cement, white cement, sponge iron, chemicals and textiles. With the acquisition of UltraTech, L&T's cement division in early 2004,

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Report on Cement Industry In India

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Grasim has now become the world's seventh largest cement producer with a combined capacity of 31 million tonnes. Grasim (with UltraTech) held a market share of around 21 per cent in 2003-04. It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and Gujarat among others. The company plans to invest over US$ 9 million in the next two years to augment capacity of its cement and fibre business. It’s also plans to focus on its international ventures, ramping up the capacity of Alexandra Carbon Black in Egypt to 1,70,000 tonne per annum (from 1, 20,000 tpa) and raising the capacity of the carbon black plant in China from 12,000 tpa to 60,000 tpa.

Gujarat Ambuja Cements Ltd (GACL) Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of commercial production at its 2 million tonne plant in Chandrapur, Maharashtra. The group has clinker manufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra, Chhattisgarh, Punjab and Rajasthan. The company has a market share of around 10 per cent, with a strong foothold in the northern and western markets. Its total sales aggregated US$ 526 million with a capacity of 12.6 million tonnes in 2003-04. Gujarat Ambuja is India's largest cement exporter and one of the most cost efficient firms. GACL has a 14.45 per cent stake in ACC, making it the second largest cement group in the country, after Grasim-UltraTech Cemco. The company has free cash flows that it is likely to use to grow inorganically. The company is scouting for a capacity of around two million tonne in the northern and western markets. It has also earmarked around US$ 195-220 million for acquisitions

India Cements India Cements is the largest cement producer in southern India with a total capacity of 8.81 million tonnes and plants in Andhra Pradesh and Tamil Nadu. The company has a market share of 5.4 per cent with a total cement production of 6.36 million tonnes in 2003-04. Its product portfolio includes ordinary Portland cement and blended cement. The company has limited its business activity to cement, though it has a marginal exposure to the shipping business. The company plans to reduce its manpower significantly and exit non-core businesses to turnaround its fortune. It also expects the export market to open up, with the Gulf emerging as a major importer.

Jaiprakash Associates Limited Page | 17

Report on Cement Industry In India

By: Shobhit Chandak

Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the Jaypee group with businesses in civil engineering, hospitality, cement, hydropower, design consultancy and IT. It has an annual capacity of 4.6 million tonnes with plants located in Rewa & Bela (Madhya Pradesh) and Sadva Khurd (Uttar Pradesh). The company has a market share of 3.8 per cent with the cement division contributing US$ 172 million to revenue in 2003-04. The company is upgrading its capacity to 6.5 million tonnes through the modernizing of the existing units and the commissioning of a new grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163 million. Jaiprakash Associates has decided to concentrate on its core business of construction and engineering and leave its cement plant to its subsidiary Jaypee Rewa Cement Ltd. The company manufactures a wide range of world class cement of OPC grades 33, 43, 53, IRST-40 and special blends of pozzolana cement.

JK Synthetics JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in 1962. Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in 1975), acrylic and white cement (in 1984). The company has a market share of 2.7 per cent. JK Synthetics Limited is restructuring its business divisions into two separate entities- JK Cements and JK Synthetics. After the restructuring, it will be left with a cement plant at Nimbahera in Rajasthan, with a capacity of 3.26 million metric tonnes and manufacturing white cement.

Madras Cements Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part of the Ramco group. The company is engaged in cement, clinker, dolomite, dry mortar mix, limestone, ready mix cement (RMC) and units generated from windmills. The company has three plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It has a total capacity of 5.47 million tonnes annually and holds a market share of 3.1 per cent. Madras Cements plans to expand by putting up RMC plants. As Karnataka is a promising market, the company is further expanding its capacity from the present 1.5 million tonnes to 3.4 million tonnes through an investment of US$ 9 million.

Holcim Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million tonnes. It is a key player in aggregates, concrete and construction related services. It has a strong market presence in over 70 countries and is a market leader in South America and in a number of European and overseas markets. Holcim entered India by means of a long-term strategic alliance with Gujarat Ambuja Cements Ltd (GACL). The alliance aims to strengthen their clinker and cement trading activities in South Asia, the

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Report on Cement Industry In India

By: Shobhit Chandak

Middle East and the region adjoining the Indian Ocean. Holcim also intends to use India as an additional base for its IT operations, R&D projects as well as a procurement sourcing hub to generate additional synergies and value for the group.

Italcementi Group The Italecementi group is one of the largest producers and distributors of cement with 60 cement plants, 547 concrete batching units and 155 quarries spread across 19 countries in Europe, Asia, Africa and North America. Italcementi is present in the Indian markets through a 50:50 joint venture company with Zuari Cements. All initiatives in southern India are routed through the joint venture company, while Italcementi is free to buy deals in its individual capacity in northern India. The joint venture company has a capacity of 3.4 million tonnes and a market share of 2.1 per cent.

Lafarge India Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million tonnes and a clinker capacity of 3 million tonnes in the country. Lafarge commenced operations in 1999 and currently has a market share of 3.4 per cent. It exports clinker and cement to Bangladesh and Nepal. It produces Portland slag cement, ordinary Portland cement and Portland pozzolana cement. The Indian cement plants are located in Chhattisgarh and Rajasthan. Lafarge Cement has become the largest cement selling firm in the Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.

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