With nearly 350 million tonnes (MT) of cement production capacity, India is the

second largest cement producer in the world. The cement production capacity was
366 MT in FY15 (December 2014), and is estimated to touch 550 MT by FY 20. Of
the total capacity, 98 per cent lies with the private sector and the rest with the
public sector.
A total of 188 large cement plants together account for 97 per cent of the total
installed capacity in the country, while 365 small plants make up the rest. Of the
total 188 large cement plants in India, 77 are located in the states of Andhra
Pradesh, Rajasthan and Tamil Nadu.
The Government of India is strongly focused on infrastructure development to boost
economic growth and is aiming for 100 smart cities. It plans to increase investment
in infrastructure to US$ 1 trillion in the 12th Five Year Plan (201217). The
government also intends to expand the capacity of the railways and the facilities for
handling and storage to ease the transportation of cement and reduce
transportation costs.
The cement sector has potential to grow in the North Eastern region, which has
been in cement deficit for several years; the present demand in the region is around
5.2 metric tonnes per annum (MTPA). Also, major policy and fiscal initiatives are
expected to catalyse infrastructure and industrial development in the region, driving
the demand for cement.
Introduction
India's cement industry is a vital part of its economy, providing employment to
more than a million people, directly or indirectly. Ever since it was deregulated in
1982, the Indian cement industry has attracted huge investments, from both Indian
and foreign investors, making it the second largest in the world. The industry is
currently in a turnaround phase, trying to achieve global standards in production,
safety, and energy-efficiency.
India has a lot of potential for development in the infrastructure and construction
sector and the cement sector is expected to largely benefit from it. Some of the
recent major government initiatives such as development of 100 smart cities are
expected to provide a major boost to the sector.
Expecting such developments in the country and aided by suitable government
foreign policies, several foreign players such as Lafarge, Holcim and Vicat have
invested in the country in the recent past. A significant factor which aids the growth
of this sector is the ready availability of the raw materials for making cement, such
as limestone and coal.
Market Size
The cement market in India is expected to grow at a compound annual growth rate
(CAGR) of 8.96 percent during the period 2014-2019.
In India, the housing sector is the biggest demand driver of cement, accounting for
about 67 per cent of the total consumption. The other major consumers of cement
include infrastructure at 13 per cent, commercial construction at 11 per cent and
industrial construction at nine per cent.

To meet the rise in demand, cement companies are expected to add 56 million
tonnes (MT) capacity over the next three years. The cement capacity in India may
register a growth of eight per cent by next year end to 395 MT from the current
level of 366 MT. It may increase further to 421 MT by the end of 2017. The country's
per capita consumption stands at around 190 kg.
A total of 188 large cement plants together account for 97 per cent of the total
installed capacity in the country, while 365 small plants account for the rest. Of
these large cement plants, 77 are located in the states of Andhra Pradesh,
Rajasthan and Tamil Nadu. The Indian cement industry is dominated by a few
companies. The top 20 cement companies account for almost 70 per cent of the
total cement production of the country.
Investments
On the back of growing demands, due to increased construction and infrastructural
activities, the cement sector in India has seen many investments and developments
in recent times.
According to data released by the Department of Industrial Policy and Promotion
(DIPP), cement and gypsum products attracted foreign direct investment (FDI) worth
US$ 3,084.89 million between April 2000 and December 2014.
Some of the major investments in Indian cement industry are as follows:
Dalmia Cement (Bharat) Ltd has invested around Rs 2,000 crore (US$ 321.12
million) in expanding its business in North East over the past two years. The
company currently has three manufacturing plants in the region one in
Meghalaya and two in Assam.
JSW Group plans to expand its cement production capacity to 30 million
tonnes per annum (MTPA) from 5 MTPA now by setting up grinding units
closer to its steel plants.
UltraTech Cement Ltd has charted out its next phase of greenfield expansion
after a period of aggressive acquisitions over the last two years. Following its
takeover of two cement plants owned by the Jaypee group, UltraTech has
plans to set up two greenfield grinding units in Bihar and West Bengal,
according to Mr O P Puranmalka, MD, UltraTech.
UltraTech Cement Ltd has agreed to buy two cement plants and related
power assets of Jaiprakash Associates Ltd in Madhya Pradesh for Rs 5,400
crore (US$ 867.28 million).
JSW Cement Ltd has planned to set up a 3 MTPA clinkerisation plant at
Chittapur in Karnataka at an estimated cost of Rs 2,500 crore (US$ 401.55
million).
Andhra Cements Ltd has commenced the commercial production in the
company's cement plants Durga Cement Works at Dachepalli, Guntur and
Visakha Cement Works at Visakhapatnam.
Government Initiatives
In the 12th FiveYear Plan, the government plans to increase investment in
infrastructure to the tune of US$ 1 trillion and increase the industry's capacity to
150 MT.
The Cement Corporation of India (CCI) was incorporated by the Government of India
in 1965 to achieve self-sufficiency in cement production in the country. Currently,
CCI has 10 units spread over eight states in India.
In order to help the private sector companies thrive in the industry, the government
has been approving their investment schemes. Some such initiatives by the
government in the recent past are as follows:

The Government of Tamil Nadu has launched low priced cement branded
'Amma' Cement. The sale of the cement started in Tiruchi at Rs 190 (US$
3.05) a bag through the Tamil Nadu Civil Supplies Corporation (TNCSC). Sales
commenced in five godowns of the TNCSC and will be rolled out in stages
with the low priced cement available across the state from 470 outlets.
The Government of Kerala has accorded sanction to Malabar Cements Ltd to
set up a bulk cement handling unit at Kochi Port at an investment of Rs 160
crore (US$ 25.68 million).
The Andhra Pradesh State Investment Promotion Board (SIPB) has approved
proposals worth Rs 9,200 crore (US$ 1.47 billion) including three cement
plants and concessions to Hero MotoCorp project. The total capacity of these
three cement plants is likely to be about 12 MTPA and the plants are
expected to generate employment for nearly 4,000 people directly and a few
thousands more indirectly.
India has joined hands with Switzerland to reduce energy consumption and
develop newer methods in the country for more efficient cement production,
which will help India meet its rising demand for cement in the infrastructure
sector.
The Government of India has decided to adopt cement instead of bitumen for
the construction of all new road projects on the grounds that cement is more
durable and cheaper to maintain than bitumen in the long run.
Road Ahead
The eastern states of India along with the border states will be the newer and virgin
markets for cement companies and will contribute to their bottom line in future. In
the next 10 years, India will become the main exporter of clinker and gray cement
to the Middle East, Africa, and other developing nations of the world. Cement plants
near the ports, for instance the plants in Gujarat and Visakhapatnam, will have an
added advantage for exports and will logistically be well armed to face stif
competition from cement plants in the interior of the country.
A large number of foreign players are also expected to enter the cement sector in
the next 10 years, owing to the profit margins, constant demand, and right
valuation. Cement companies will go for global listings either through the FCCB
route or the GDR route.
With help from the government in terms of friendlier laws, lower taxation, and more
infrastructure spending, the sector will grow and will take Indias economy forward
along with it.

Although the Indian cement industry has some multinational cement giants, like
Holcim and Lafarge, which have interests such as ACC, Ambuja Cement and Lafarge
Birla Cement, the Indian cement industry is broadly home-grown. 5 Ultratech
Cement, the country's largest firm in terms of cement capacity, holds around 22%
of the domestic market, with ACC (50%-owned by Holcim) and Ambuja (50%-owned
by Holcim) having 15% and 13% shares respectively.
Many of the remaining dozen top players are Indian and are (in order of diminishing
market share); Jaiprakash Associates (10%), The India Cements Ltd (7%), Shree
Cements (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 domestic
market.6 Around 100 smaller players produce and grind cement on a wide range of
scales but are often confined to small areas.
The Indian cement industry is in globalisation mode.
Even as the commodities business, true to its inherent character, remains a local
player, global majors are beginning to call the shots like never before.

It all started in the late nineties, when Lafarge, the world's largest cement producer,
made its debut here by acquiring the cement facilities of Tata Steel, which was
followed up with the buyout of the cement business of the Singhania-controlled
Raymond, taking its total capacity here to 5mt.
But the real big one came last month, when Holcim, the world's second-largest
player, sewed up a strategic alliance with Gujarat Ambuja Cements to take control
of ACC, the country's second-largest cement producer, with a capacity of around
18mt.
In fact, with this mega deal, Holcim has emerged as the world's largest cement
producer, with a capacity of 165mt, overtaking Lafarge's world-wide capacity of
around 160mt.
In between, another European major Italcementi has also set up base here, by
forming a joint venture Zuari Cement with the KK Birla group, while Mexican
major Cemex has been waiting in the wings to make its debut here.
The opportunities are obvious. Cement demand in India, today the world's secondlargest cement market, has been growing fast.
Over the last 15 years, the compounded annual growth rate of cement is pegged at
7.5%, while cement dispatches grew by 7.4%, which is higher than most other
emerging countries.
With housing and infrastructure construction activities picking up and the average
per capita consumption (around 115kg a year) still trailing other Asian countries,
the industry is poised to grow at a consistent pace of 8-10% over the coming years.
Indian cement companies are also gearing up to be a part of the action.
The Aditya Birla group flagship, Grasim Industries, has taken control of UltraTech
Cement, the erstwhile cement division of Larsen & Toubro, thereby becoming the
undisputed market leader, with a combined capacity of 32mt.

Besides, the wild fluctuations in cement prices are also becoming a thing of the
past, as many industry players expect demand-supply parity to be achieved in the
current fiscal itself.
Many reckon that the industry consolidation, which picked up in the last few years,
may be just the beginning and is set to continue as a large part of the industry
capacity is still fragmented.
Almost half the cement capacity is still untouched by the consolidation drive, which
is accounted for by over four dozen manufacturers. The consolidation drive,
analysts feel, will bring in greater price discipline.
Retail cement prices in Mumbai, the largest market, is currently pegged at around
Rs 172 per bag, as against Rs 150 per bag in 1995-96. Five years ago, average
cement prices in the city stood at around Rs 185 per bag.
Similarly in Delhi, retail prices are currently ruling at Rs 158 per bag, as against Rs
143 per bag in 1995-96, and Rs 133 per bag in '00.
In Chennai, retail cement prices moved from Rs 142 per bag in 1995-96, to Rs 185
per bag at the end of '00, to the current level of Rs 160 per bag, while in Kolkata,
prices have risen from Rs 133 per bag to Rs 177 per bag during the past 10 years.
Manufacturers say that post-liberalisation, cement prices have not moved in
tandem, with prices of other commodities. "On the contrary, current realisations are
lower. If inflation is factored in, prices today are lower than they were 10-15 years
ago," says an official.
For the local industry, it's been a long journey. There has been a marked
transformation, since pre-liberalisation days, when capacities sprung up
haphazardly, with many coming by way of unrelated diversifications.
With supply consistently outpacing demand after an acute shortage that the
industry saw in the mid-80s industry realisations have stayed under pressure.
Industry output, which stood at 45.8mt in 1990-91, is today pegged at around
120mt. Current cement capacity at 147mt, is the world's second-largest, just behind
China, while mini cement plants have an additional capacity of 11mt.
Manufacturers argue that the industry has turned "more mature" and unrelated
expansions are a thing of the past. "It's been a remarkable shift.
The industry has learnt its lessons from the past, when cement prices used to
fluctuate almost daily. This maturity on the part of manufacturers enables the
sector, as a whole, to focus more on crucial issues like quality and logistics," says an
industry official.

Cultural Distance. Culture happens to be the first facet of CAGE, in terms of the acronym,
but it also can be the most practically perplexing facet for managers. Culture is sometimes
referred to as the software of the mind, in that it has a sometimes invisible but indelible in fluence on people`s values and behaviors.Cultural distance, then, has to do with the possible
differences existing in relation to the way individuals from different countries observe certain
values and behaviors.
Administrative Distance. Administrative distance reflects the historical and present political and legal associations between trading partners; for example, colonial ties between trading partners, or participation in common trading blocs. This facet of CAGE asks you to examine whether there are historical or current political factors that might favor or impede a
business relationship between a company and a new country market. NAFTA, for instance,
decreased the administrative distance between U.S. firms and Mexico and Canada. Similarly,
historical political hostilities between the United States and Cuba make it virtually impossible
(and illegal) for most U.S. firms to do business there. Trade practices between countries can be
significantly affected by laws and regulations enacted at the national or international level.
Because they affect fundamental business practices, they often affect the competitive position
of firms as well.
Geographic Distance. How far apart are trading partners in physical terms: the size of the
country, differences in climates, and nature of transportation and information networks? You
can think of geographic distance as absolute, in terms of the miles or kilometers that separate a
firm from another market or supplier. Technology and the Internet, however, has shrunk
distance in terms of transportation time, and now with digital products and services, almost
entirely eliminated geographic distance as a constraint of trade between some markets.
Economic Distance. Finally, economic distance captures fundamental differences relating
to income, the distribution of wealth, and the relative purchasing power of segments of a
geographic market. This has been one of the biggest barriers, for instance, in the way of U.S.
firms` success selling products in emerging markets. In global terms, this is the four billion
people who live on less than $2 per day. The phrase bottom of the pyramid is used in particular by people developing new models of doing business that deliberately target that market, typically using new technology. An example of a product that is designed with the needs of
the very poor in mind is that of a shampoo that works best with cold water. Such a product is
marketed by Hindustan Lever (part of the Unilever family of firms).

3. MARKET CHARACTERISTICS
A process, capital intensive industry

The cost of cement plants is usually above 150M per million tonnes of annual capacity, with correspondingly high
costs for modifications. The cost of a new cement plant is equivalent to around 3 years of turnover, which ranks the
cement industry among the most capital intensive industries. Long time periods are therefore needed before
investments can be recovered and plant modifications have to be carefully planned and must take account of the longterm nature of the industry.
An energy intensive industry
Each tonne of cement produced requires 60 to 130 kilograms of fuel oil or its equivalent, depending on the cement
variety and the process used, and about 110 KWh of electricity.
An industry with low labour intensity
With the development of modern automated machinery and continuous material handling devices, the cement
industry has become a process industry using a limited amount of skilled labour. A modern plant is usually manned
by less than 150 people. In the EU the cement industry represents 45 000 direct jobs. In CEMBUREAU countries, it
represents approximately 56 000 direct jobs
An industry with a homogeneous product
Although produced from natural raw materials which vary from plant to plant, cement can be considered a standard
product there are only a few classes of cement and in each class, products from different producers can generally be
interchanged. Therefore, price is the most important sales parameter next to customer service; quality premiums exist
but are rather limited.
A heavy product
Land transportation costs are significant and it used to be said that cement could not be economically hauled beyond
200 or at most 300 km. The price of long road transportation may even be higher than the cost price. Bulk shipping
has changed that, however, and it is now cheaper to cross the Atlantic Ocean with 35,000 tonnes of cargo than to
truck it 300 km. However, in large countries transportation costs normally cluster the markets into regional areas,
with the exception of a few long-distance transfers (where, for example, sea terminal facilities exist).
A mature product
Demand for cement (which was first produced in the early 1800s) increased considerably in the 20th century,
reflecting the development of industry and growing urbanisation. Consumption in the industrialised countries
multiplied 6 to 8 times following World War II. Other than a few ups and downs in both the United States and Europe
in the intervening years, growth continued until the 1975 oil crisis with a subsequent decline of 20 to 40 percent in
mature markets.However, over the last 25 years, some European countries have doubled or even tripled their
consumption (Greece, Portugal, Spain and Turkey), since these countries have experienced significant growth over
the last 10 years.
3.1 MARKET PARAMETERS
Consumption of cement is closely linked to both the state of economic development in any given country or region
and to the economic cycle. In mature markets, such as in Europe, where cement consumption per capita still varies
considerably from one country to another, cement sales are dependent on evolution and habits in the construction
sector, a sector that is itself following very closely (usually after a brief delay) the evolution of the economy in general.
3.2 MARKET SIZE
The cement industry of India is expected to add 30-40 million tonnes per annum (MTPA) of capacity in 2013. The
industry has a current capacity of 324 MTPA and operates at 75-80 per cent utilisation. It is anticipated that the

cement industry players will continue to increase their annual cement output in coming years and the countrys
cement production will grow at a compound annual growth rate (CAGR) of around 12 per cent during 2011-12 201314 to reach 303 million metric tonne (MMT), according to a report titled Indian Cement Industry Forecast to 2012,
by research firm RNCOS.