TableofContentsHistory ..................................................................................................................................... 4

Overview ................................................................................................................................. 5

Major Organisations affecting the Cement Industry ........................................................ 7

Product Profile of Industry .................................................................................................. 8

Major Players in the Cement Industry in India ................................................................ 10

PESTLE Analysis of Cement Industry............................................................................... 12

Porter’s Five Forces Model for Cement Industry............................................................ 13

Cement industry - Future forecasts ................................................................................. 14

Cement industry - Conclusion ............................................................................................ 15

Bibliography.......................................................................................................................... 16

History

The indigenous Indian cement industry traces its history back to 1914, at a time whenthe market was dominated by imports. In that first year the industry produced just1000 T of cement, but over just 10 years this figure increased to 0.26 MT in 1924. Inthe same 10-year bracket, India consumed a total of 2 MT of cement, with around halfimported.

From a modern perspective, the need to expand the industry is clear. However, theindustry was fighting against poor public perception surrounding not only domesticIndian cement, but cements itself. Many producers went out of business as a result ofprice-wars between Indian producers who were aiming at a bigger slice of the futuremarket.

To end the uncertainty surrounding the industry and to campaign for tariffs on importedcement, the Indian Cement Manufacturers' Association (ICMA) was set up in 1925. Thissubsequently transformed into two connected groups. The modern CementManufacturers' Association (CMA) was reformed in 1961.

Between 1925 and the early 1940s, the capacity of the Indian cement industrygradually increased to 1.8 MT in 1942, with imports dwindling to just 1000 T/yr overthe same period. However, all was not well with the industry, which, like manyindustries across the world, suffered due to the Great Depression in the United Statesand the run-up to the Second World War in Europe. To combat continued price wars,Associated Cement Companies (ACC) was formed from 11 competing firms in 1936.

In 1942 all of India's cement capacity came under the control of Defence for India rulesas part of the war effort. With up to 90% of cement heading directly to defencepurposes, the apparent private market shrank by a factor of 10. After the conclusion ofthe Second World War, during which capacity reached 3.2 MT/year, controls stayed inplace. From 1945 to 1956 the government regulated prices directly.

However, it became increasingly obvious that regulated prices from central governmentcould not provide the cement that the country was demanding. The controls wererelaxed in steps, with a free market from 1989 onwards. The result of de-regulation wasa massive expansion of cement capacity, which has since only accelerated as thecountry has developed and opened up its economy.

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Overview

Today, the Indian cement industry is very large, second only to China in terms ofinstalled capacity, and has grown at a very fast pace in recent years. The rate of growthover the past 20 years has been phenomenal, as shown by Figure 1.3 Since 1992 India'scement production has more than quadrupled from around 50 MT/ Year to 220 MT/year in 2011.

Although the Indian cement industry has some multinational cement giants, like Holcimand Lafarge, which have interests such as ACC, Ambuja Cement and Lafarge BirlaCement, the Indian cement industry is broadly home-grown. Ultratech Cement, thecountry's largest firm in terms of cement capacity, holds around 22% of the domesticmarket, with ACC (50%-owned by Holcim) and Ambuja (50%-owned by Holcim) having15% and 13% shares respectively.

Many of the remaining dozen top players are Indian and are (in order of diminishingmarket share); Jaiprakash Associates (10%), The India Cements Ltd (7%), ShreeCements (6%), Century Textiles and Industries (5%), Madras Cements (5%), Lafarge (5%),Birla Cement (4%) and Binani Cement (4%).

Between them the top 12 cement firms have around 70% of the domesticmarket. Around 100 smaller players produce and grind cement on a wide range ofscales but are often confined to small areas. Following Table will give a brief about theStatistics of Cement production capacity Industry in India:

Large cement plants

1 Installed Capacity (MT) 244.052 Turnover in 2011 (Million US$) around 19,5003 Manpower Employed (Nos.) Approx. 1,20,000

4Plants with Capacity of Million tonnes andabove (Nos.) 102

5 Cement Production (MT) 2011-2012 179.876 Cement Plants (Nos.) 1447 Companies (Members) (Nos.) 42

Mini & White Cement Plants

1 Cement Production (MT) 2011-126.00(P)

2 Cement Plants (Nos.) Approx. 3653 Installed Capacity (MT) 11.1

(Source: www.cmaindia.org)

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Facts of Indian Cement Industry (1982 – 2013)

· The Industry recorded an exponential growth with the introduction of partialdecontrol in 1982 culminating in total decontrol in 1989.

· The capacity, which was 29 MT in 1981-82, rose to 219 MT at the end of FY 09,while it took 8 decades to reach the 1st 100 MT capacity, the 2nd 100 MT wasadded in just 10 years.

· The Industry has been facing a chronic problem of insufficient availability of themain fuel coal, driving the manufacturers to resort to use of alternatives atsteep cost.

· Taxes and Government levies on cement are high compared to countries in Asiapacific region.

· Cement Industry, which was branded as the highest polluter of environment, nowmeets the pollution standards, and no longer a polluter today.

· Contributes to environmental cleanliness by consuming hazardous wastes likeFly Ash (around 30 MT) from Thermal Power Plants and the entire 8 Mn.t ofgranulated Slag produced by Steel manufacturing units.

· As a part of Corporate Social Responsibility (CSR), the Cement Industry employsaround one lakh people and takes care of the social needs not only of theemployees but also adopts several villages around the factories providing freedrinking water, electricity, medical and educational facilities.

· The Cement Industry produces a variety of cement to suit a host of applicationsmatching the world’s best in quality.

· Exports Cement/Clinker to around 30 countries across the globe and earnsprecious foreign exchange.

· The core sector Cement Industry deserves due support from the Government byavoiding imposition of high levies and duties, making available various inputs likefuel, power, transport etc. at reasonable prices and in required quantities andhelp its growth and improve competitivity both in domestic and internationalmarkets.

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Major Organisations affecting the CementIndustry

o National Council for Cement and Building Materials (NCB)o Construction Industry Development Council (CIDC)

1. National Council for Cement and Building Materials (NCB): Established in 1962,as Cement Research Institute of India and redesignated as National Council forCement and Building Materials in April 1985, NCB is an apex body dedicated tocontinuous research, technology development and transfer, education andindustrial services for the cement and building material industries. The entire rangeof services of NCB is delivered by eight Corporate Centres through its units inBallabhgarh and Hyderabad. The main laboratories of the Council are located atBallabhgarh, about 35 kms south of New Delhi.

National Council for Cement and Building Materials (NCB) is the largest IndustrialSupport Organisation of its kind in India, with units in the various regions of thecountry and in the field of Cement, Building Materials and Allied Areas.

2. Construction Industry Development Council (CIDC):

The Planning Commission, Government of India, jointly with the Indian constructionindustry has set up CIDC to take up activities for the development of the Indianconstruction industry. The Council, for the first time in the country, provides theimpetus and the organisational infrastructure to raise quality levels across theindustry. This helps to secure wider appreciation of the interests of constructionbusiness by the government, industry and peer groups in society.

CIDC is a change agent to accelerate a process of self-reform that should enablethe industry to answer the challenges of the future.

3. Cement Manufacturers’ Association:

Cement Manufacturers’ Association (CMA), the apex representative body of largecement manufacturers in India was established in 1961. It is a unique body in asmuch as it has both the private and public sector cement companies as itsmembers. It is a registered body under the Societies Registration Act XXI of 1860.Its registered office is in New Delhi, while the Corporate Office in Noida with Branchoffices in Mumbai and Hyderabad.

Main Objectives:

· To promote Indian cement industry’s growth.· To protect consumer interest.· To identify newer usage of cement.· To establish contacts with similar bodies abroad for exchange of information,

data, publications etc.

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Product Profile of Industry

Cement is a mixture of limestone, clay, silica and gypsum. It is a fine powder whichwhen mixed with water sets to a hard mass as a result of hydration of the constituentcompounds. It is the most commonly used construction material.

Different types of CementThere are different varieties of cement based on different compositions according tospecific end uses namely Ordinary Portland Cement, Portland Pozolona Cement,Portland Blast Furnace Slag Cement, White Cement and Specialized Cement. Thebasic difference lies in the percentage of clinker used.

· Ordinary Portland Cement (OPC)OPC, popularly known as grey cement, has 95% clinker and 5% of gypsum andother materials. It accounts for 70% of the total consumption. White cement is avariation of OPC and is used for decorative purposes like rendering of walls,flooring etc. It contains a very low proportion of iron oxide.

· Portland Pozolona Cement (PPC)PPC has 80% clinker, 15% Pozolona and 5% gypsum and accounts for 18% of thetotal cement consumption. Pozolona has siliceous and aluminous materials thatdo not possess cementing properties but develop these properties in thepresence of water. It is cheaply manufactured because it uses fly ash/burntclay/coal waste as the main ingredient. It has a lower heat of hydration, whichhelps in preventing cracks where large volumes are being cast.

· Portland Blast Furnace Slag Cement (PBFSC)PBFSC consists of 45% clinker, 50% blast furnace slag and 5% gypsum andaccounts for 10% of the total cement consumed. It has a heat of hydration evenlower than PPC and is generally used in construction of dams and similarmassive constructions.

· White CementOPC: clinker using fuel oil (instead of coal) and with iron oxide content below0.4% to ensure whiteness. Special cooling technique is used. It is used toenhance aesthetic value, in tiles and for flooring. White cement is much moreexpensive than grey cement.

· Specialized CementOil Well Cement: is made from clinker with special additives to prevent anyporosity. Rapid Hardening Portland cement: It is similar to OPC, except that it isground much finer, so that on casting, the compressible strength increasesrapidly. Water Proof Cement, OPC with small portion of calcium stearate or non-saponifibale oil to impart waterproofing properties.

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Manufacturing Process in brief:

There are two general processes for producing clinker and cement in India: a dry processand a wet process. In general, the dry process is much more energy efficient than the wetprocess, and the semi wet somewhat more energy efficient than the semi-dry process. Thesemi-dry process has never played an important role in Indian cement production andaccounts for less than 0.2% of total production.Over the last decade, increased preference is being given to the energy efficient dryprocess technology so as to obtain a cost advantage in a competitive market. In 1960around 94% of the cement plants in India used wet process kilns. These kilns have beenphased out over the past 46 years and at present 96.3% of the kilns are dry process, 3%are wet and only 1% are semidry process. Dry process kilns are typically larger withcapacities in India ranging from 300- 8,000 tons per day or tpd (average of 2,880 tpd).While capacities in semi-dry kilns range from 600-1,200 tpd and capacities in wet processkilns range from 200-750 tpd (average 425 tpd).

The following Diagram shows a brief manufacturing process of the cements:

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Major Players in the Cement Industry in India

Here is a list of Top 10 cement companies in India; these are the best companies incement manufacturing field.

1. ACC LimitedCorporate office - Mumbai, MaharashtraEstablishment – 1936

ACC cement limited is one of the top cement company in India established in 1936which is also a leading player in ready mix concrete. It is part of the world’s leaderHolcim Group.

2. UltraTech CementCorporate office - Mumbai, MaharashtraEstablishment – 1987

UltraTech cement is largest clinker producer and exporter which has an annual capacityof more than 50 million tonnes. It is a flagship company of Aditya Birla group andleading cement company which acquired all ISO and OHSAS certifications.

3. Ambuja CementCorporate office - Mumbai, MaharashtraEstablishment – 1983

Ambuja Cement is among of the top 5 cement companies in India. It was founded in year1983 and formerly known as Gujrat Ambuja cement Ltd. Company has an annualcapacity to produce more than 27 million tonnes.

4. Jaypee CementCorporate office - Noida, Uttar PradeshEstablishment – 2001

Jaypee is a well-known corporate group in the business of power, infrastructure,construction and highway. Company started cement business in the year 2001 and hasannual capacity to manufacturer almost 35 MTPA.

5. India CementCorporate office - Chennai, Tamil NaduEstablishment – 1946

India cement is leading cement manufacturer in southern region of India which wasestablished a cement plant in Sankarnagar in year 1946 and since then setup total 7plants in various part of Andhra Pradesh and Tamil Nadu. Company has an annualcapacity to produce 15 MTPA cement.

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6. Ramco CementCorporate office – Chennai, TamilnaduEstablishment – 1957

Ramco cement is a group company of Madras cement which is also a front leader inReady mix concrete. It has total 5 cement units spread across the southern states ofIndia. It has an annual capacity to manufacture 13 MTPA cement.

7. JK CementCorporate office – New Delhi, IndiaEstablishment – 1975

JK Cement Ltd was founded in year 1975 and established first cement manufacturing inRajasthan. It is second largest white cement manufacturer in India having a capacity ofalmost 3 lakhs tonnes per annum.

8. Prism CementCorporate office – Mumbai, MaharashtraEstablishment – 1997

Prism cement is managed by Raheja group a largest integrated building materialcompany established in the year 1997. Company has significant market share in UP,Bihar and Madhya Pradesh. It has an annual capacity to produce more than 5.5 MTPA.

9. Rain CementCorporate office – Hyderabad, Andhra PradeshEstablishment – 1986

Priya Cement formerly known as Rain cement is a subsidiary of Rain commodities. Itproduces 3.12 MT cement per annum and leading cement company in south India whichwas established in the year 1986.

10. Shree CementCorporate office – Kolkata, IndiaEstablishment – 1970

A Bangar group company Shree cement is a leading cement manufacturer in northernIndia. It has three major brands in market named Shree ultra, Bangar cement andRockstrong cement.

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PESTLE Analysis of Cement Industry

PESTLE analysis is a useful tool for understanding the big picture of operating andtakes advantage of opportunities. Pest analysis includes political, environmental, socialand technological factors which affects both the companies as well as industry.

Ø Political

The price of cement is primarily controlled by the coal rates, power tariffs, railwaytariffs, freight, royalty and cess on limestone. Interestingly, government controlsall of these prices. Government is also one of the biggest consumers of the cementin the country. Most state governments, in order to attract investments in theirrespective states, offer fiscal incentives in the form of sales taxexemptions/deferrals. States like Haryana offer a freeze on power tariff for 5years, while Gujarat offers exemption from electric duty.

Ø Economic

The industry is on the boom, with a lot of government infrastructure and housingprojects under construction. The export segment of the industry is expected togrow again on account of various infrastructure projects that are being taken up allover the world and numerous outstanding cement plants coming up in near future inthe country.

Ø Social

The cement industry in India consists of both the organized sector and theunorganized sector. Organized sector comprises of the well-known cementmanufacturing companies while the main players of the unorganized sector are theregional and local cement-producing units in various states across the country.Indian consumers prefer buying branded cement like Ultratech, Jaypee Cement,Lafarge Cement etc. A population of more than 100 billion people, it is expectedthat cement industry will create another 25 lakhs jobs in the next 4-5 years.

Ø Technology

The Government of India plans to study and possibly acquire new technologies fromthe cement industry of world. The government is discussing technology transfer inthe field of energy conservation and environment protection to help improveefficiency of the Indian cement industry. Cement industry has made tremendousstrides in technological up-gradation and assimilation of latest technology. Atpresent 93% of the total capacity in the industry is based on modern andenvironment-friendly dry process technology.

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Porter’s Five Forces Model for CementIndustry

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Bargaining Power ofSuppliers - High: GOIexercises excessivecontrol on Coal andPower Prices & Supply.Govt. authorities alsocontrol thetransportation sector.

Threat of Substitute –Low: Use of Bitumin inRoad construction andEngineering plastic inBuilding creates someconcern for the industry.

Barriers to entry –Medium to High: HighCapital Investment (Rs.3500 per Tonne),Distribution Networkand Oversuppliedmarket deters newentrants. However,Technology andManpower are easilyavailable.

Bargaining Power ofBuyers – Low: In recentpast the cement industryis witnessing majorchange in purchaseQuantity. Now the shareof Retail Purchase hasbeen rising as comparedto bulk. Now with theindustry operating at 90%level increases thebargaining power ofmanufacturers.

Rivalry among the Firms -High: Large number ofplayers, overcapacity,High degree of producthomogeneity, Highstorage cost and highexist barriers, createsintensive rivalry amongthe firms.

Cement industry - Future forecasts

Given the rampant growth of the Indian cement industry, few are betting againstcontinued capacity additions in the short- to medium-term. The extent of capacityaddition, however, and whether or not demand will rise to match it more closely than atpresent, is up for debate.

In November 2012 the India Brand Equity Foundation (IBEF) said that it expecteddouble-digit growth in the cement industry for the 2013 and 2014 fiscal years, whichend on 31 March 2013 and 31 March 2014 respectively. It reported that the cementindustry would increase production by around 71 MT/year over the same time-frame toreach over 300 MT/year in 2014.

Meanwhile, the Indian Government's 12th Five-Year Plan, which runs for 2013 to 2017,states that India will require a cement capacity in the region of 480 MT/year by the endof 2017.12 It states that a further 150 MT/year of capacity will be required toaccomplish this. Separately, ACC expects India to have a capacity of 500 MT/year by2020.

This represents more than twice the cement that India currently consumes in a year andso it is worth asking, if this capacity is reached, what will the capacity utilisation ratebe? The government promises significant investment in infrastructure, althoughbureaucracy has hampered such investments in the past.

"Land acquisition is a big issue," said H M Bangur, chairman and managing director ofnorth-based Shree Cement, in August 2012. "No state government is providing land toset up units. Greenfield expansion is tough."

Sunil Singhania, equity head at Reliance Mutual Fund, said, "Capacity creation in India isvery difficult because there is no land (in some places) and no limestone deposits atothers. Several cement companies have written down assets. I believe capacityadditions going forward will not be as aggressive as in the past. Expansion will be slowerthan demand growth."

With prices remaining low due to overcapacity and low demand, the potential for futurecollusion between producers and the difficulty of setting up new capacity, it is possiblethat producers, under pressure to meet the expectations placed on them by the Five-Year Plan, will see increased pressure on margins in the next few years, especially iffuel prices continue to rise.

In the midst of this, smaller companies are likely to suffer more than most, possiblymaking them acquisition targets for better-equipped multinationals. Indeed, in January2013 Prism Cement, one of India's smaller cement producers, actually reported a netloss for the quarter to 31 December 2012. It cited low demand, high fuel costs andincreased electricity prices.

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An academic report carried out for the Competition Commission of India in 2012 hintsat this possibility of future consolidation in the industry. The study found that, despitecapacity utilisation falling across all cement producers in India from 2006 to 2011, itwas those with the smallest market share that experienced by far the worst reduction.Binani Cement, for example, recorded utilisation rates of only around 55-60%.Conversely mega-players like Ultratech have been more stable, with rates of 80-95%. InJanuary 2013 India Ratings reported that smaller businesses were less likely to benefitfrom the expected improvement in the industry.

A major reason behind this phenomenon is rising fuel costs, which have hit producersfrom two directions in the past year. Firstly, demand for power in India is high anddomestic fuels are dedicated predominantly to electrical generation. Industrialcompanies are forced, in many cases, to import costly foreign fuel, which must beshipped inland to be used. A second effect of increased fuel prices is that cement ismore costly to transport once it has left the factory.

Due to their size allowing greater economies of scale, larger cement companies arebetter positioned to import fuel on a large scale and are more likely to have flexiblevehicle fleets to respond as demand fluctuates in different areas. Another crucialdifference between the larger and smaller companies is that larger players are morelikely to have a pan-Indian presence. This enables them to ride-out periods of difficultyin one area while maximising margins elsewhere. Local producers do not have thisluxury.

Smaller local producers are less well equipped to deal with expansion and their relativesize will gradually diminish compared to the top 12 producers. As this happens, it islikely that they will become the acquisition targets of the larger firms.

Cement industry – Conclusion

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

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

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

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Bibliography

http://www.cmaindia.org/facts.php

http://www.globalcement.com/magazine/articles/752-the-incredible-indian-cement-industry

https://www.cia.gov/library/publications/the-world-factbook/geos/in.html

http://data.worldbank.org/indicator/NY.GDP.PCAP.CD

http://www.cmaindia.org/portal/static/DynamicHistory.aspx

http://www.indiainfoline.com/Markets/News/Fragile-recovery-unlikely-to-benefit-smaller-cement-players-India-Ratings/5582688342

Books:

Global Cement Magazine: January 2012 - January 2013.