introduction

Pre Independence

The first endeavor to manufacture cement dates back to 1889 when a Calcutta based company endeavored to manufacture cement from Argillaceous (kankar).But the first endeavor to manufacture cement in an organized way commenced in Madras. South India Industries Limited began manufacture of Portland cement in1904.But the effort did not succeed and the company had to halt production. Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000tons and production of 1000 installed. The First World War gave the impetus to the cement industry still in its initial stages. The following decade saw tremendous progress in terms of manufacturing units, installed capacity and production. This phase is also referred to as the Nascent Stage of Indian Cement Industry.

During the earlier years, production of cement exceeded the demand. Society had a biased opinion against the cement manufactured in India, which further led to reduction demand. The government intervened by giving protection to the Industry and by encouraging cooperation among the manufacturers. In 1927, the Concrete Association of India was

formed with the twin goals of creating a positive awareness among the public of the utility of cement and to propagate cement consumption.

Post Independence

The growth rate of cement was slow around the period after independence due to various factors like low prices, slow growth in additional capacity and rising cost. The government intervened several times to boost the industry, by increasing prices and providing financial incentives. But it had little impact on the industry In 1956, the price and distribution control system was set up to ensure fair prices for both the manufacturers and consumers across the country and to reduce regional in balance sand reach self sufficiency.

Period of Restriction (1969-1982)

The cement industry in India was severely restrained by the government during this period. Government hold over the industry was through both direct and indirect means .Government intervened directly by exercising authority over production, capacity and distribution of cement and it intervened indirectly through price control .In 1977 the government authorized higher prices for cement manufactured by new units or through capacity increase in existing units. But still the growth rate was below par. In 1979 the government introduced a three tier price system. Prices were different for cement produced in low, medium and high cost plants. However the price control did not have the

desired effect. Rise in input cost, reduced profit margins meant the manufacturers could not allocate funds for increase in capacity.

Partial Control (1982-1989

To give impetus to the cement industry, the Government of India introduced a quota system in 1982.A quota of 66.60% was imposed for sales to Government and small real estate developers. For new units and sick units a lower quota at 50% was affected. The remaining 33.40% was allowed to be sold in the open market. These changes had a desired effect on the industry. Profitability of the manufacturers increased substantially, but the rising input cost was a cause for concern.

Post Liberalization

In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges of free market competition due to the impending policy of liberalization. In1991 the industry was de licensed .This resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. Most of the major players invested heavily for capacity expansion. To maximize the opportunity available in the form of global markets, the industry laid greater focus on exports. The role of the government has been extremely crucial in the growth of the industry. Cement is one of the core industries which plays a vital role in the growth and expansion of a nation. It is basically a

mixture of compounds, consisting mainly of silicates and aluminates of calcium, formed out of calcium oxide, silica, alumunium oxide and iron oxide. The demand for cement depends primarily on the pace of activities in the business, financial, real estate and infrastructure sectors of the economy. Cement is considered preferred building material and is used worldwide for all construction works such as housing and industrial construction, as well as for creation of infrastructures like ports ,roads, power plants, etc. Indian cement industry is globally competitive because the industry has witnessed healthy trends such as cost control and continuous technology upgradation.

Current Scenario

The Indian cement industry is the 2nd largest market after China. The cement industry in India has received a great impetus from a number of infrastructure projects taken up by the Government of India like road networks and housing facilities. While the Indian cement industry enjoys a phenomenal phase of growth, experts reveal that it is poised towards a highly prosperous future over the very recent years. The country’s cement production is projected to grow at a compound annual growth rate (CAGR) of around 12 per cent during 2011-12 - 2013-14 to reach 303 million metric tones (MMT), as per the RNCOS research report. India’s cement industry has suffered two major setbacks recently. The largest domestic supplier of coal to cement plants, Coal India Ltd, recently increased their prices by 30%. In addition to this, the government’s 2011 Budget outlined a 2% hike in excise duty for the already suffering cement sector. The two setbacks are likely to reduce profits

in the upcoming year. Despite a bad performance during the last four quarters, the cement sector had started to turn around since December when the industry saw a gradual

increase of demand, in particular from the realty sector. Indian cement industry comprises of 137 large and 365 mini cement plants. The large plants employ 120,000 people, according to a recent report on the Indian cement industry published by Cement Manufacturers Association (CMA).

Cement production during April to January 2010-11 was 136.51 million tones as compared to 130.85 million tones during the same period for the year 2009-10. Despatches were estimated at 135.56 million tones during April to January 2010-11 whereas during the same period for the year 2009-10, it stood at 130.09 million tones.

Key Drivers of Cement Industry

• Buoyant real estate market

• Increase in infrastructure spending

• Various governmental programmes like National Rural Employment Guarantee

• Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana.

Globalisation of Indian Cement Industry

Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. While the southern region always had excess capacity in the past owing to abundant availability of limestone, the western and northern regions are the most lucrative markets on account higher demand and production shortfall. However, with capacity addition taking place at a faster rate as compared to demand, prices have remained southbound, especially in the recent past. Nevertheless, considering the government's thrust on infrastructure long term demand remains intact. Given the high potential for growth, quite a few foreign transnationals have been eyeing the Indian markets and are planning to acquire domestic companies. Thus globalization of Indian Cement Industry has led to many foreign companies engaging in mergers and acquisitions of Indian cement companies. For example,

Heidelberg Cement- Indorama Cement Ltd.

Heidelberg Cement Company entered into an agreement for a 50% joint venture with then Indorama Cement Ltd., situated in Mumbai, originally possessed by the Indorama S P Lohia Group. Heidelberg Cement company is the leading German cement manufacturing company. The Heidelberg Cement was set up in 1873 and has a long and prosperous

history. Being one of the best in the world the Heidelberg Cement Company has its bases in different countries. The Heidelberg Cement Company has two manufacturing units in India. A grinding plant in Mumbai and a cement terminal near Mumbai harbor. A clinker plant is coming up in the state on Gujarat.

Holcim Cement - Gujarat Ambuja Cements(GACL)

Holcim Cement Company is among the leading cement manufacturing and supplying companies in the world. It has increased its stake from 46.44 per cent to 50 per cent stake in Ambuja Cement through the creeping acquisition route. It has also increased its stake in ACC to reach 50.1 per cent.

Italcementi cement - Zuari Cement Limited

Italcementi Cement Company with the help of the Ciments Français, a subsidiary for its global activities, has acquired shares of the famous Indian cement manufacturer – Zuari Cement Limited. The acquisition was of 50% shareholding and the deal was of about 100 million Euros. Italcementi Cement is the 5th largest cement manufacturing company in the world. The production capacity of the Italcementi cement company is about 70 million tons in a year. With the construction boom in India the company looks for a stable future. In

2001 the Italcementi cement entered the Indian market scenario. It took over the plant of the Zuari Cement Limited in Andhra Pradesh in southern India. The joint venture earned revenues of around 100 million Euros and an operating profit of 4 million Euros. Lafarge India is the subsidiary of the Lafarge Cement Company of France. It was established in 1999 in India with the acquisition of the Tisco and the Raymond cement plants. Lafarge Cement presently has three cement manufacturing units in India. One of them is in Jharkhand which is used for the purpose of grinding and the other two are in Chhattisgarh used for manufacturing. The Lafarge Cement Company was set up in the year 1833 by Leon Pavin. Lafarge Cement Company situated in France is the leading cement producing company in the world. It has plans for increasing the cement production through technological innovations and maximization of the capacity of the history. Being one of the best in the world the Heidelberg Cement Company has its bases in different countries. The Heidelberg Cement Company has two manufacturing units in India. A grinding plant in Mumbai and a cement terminal near Mumbai harbor. A clinker plant is coming up in the state on Gujarat.

Lafarge India is the subsidiary of the Lafarge Cement Company of France. It was established in 1999 in India with the acquisition of the Tisco and the Raymond cement plants. Lafarge Cement presently has three cement manufacturing units in India. One of them is in Jharkhand which is used for the purpose of grinding and the other two are in Chhattisgarh used for manufacturing. The Lafarge Cement Company was set up in the year 1833 by Leon Pavin. Lafarge Cement Company situated in France is the leading cement

producing company in the world. It has plans for increasing the cement production through technological innovations and maximization of the capacity of the plant. It has a large network of distributors in the eastern part of India. The Lafarge Cement Company is presently producing nearly 5.5 million tons of cement for the Indian cement market. During the first half of FY11, UltraTech Cement merged itself with Samruddhi Cement to become the largest cement company in the country. Considering the long term growth story, fair valuations, fragmented structure of the industry and low gearing, another wave of consolidation would not come as a surprise.