CEMENT - IBEF ... (sort format); Aranca Analysis; Aranca Estimates ADVANTAGE INDIA ADVANTAGE INDIA ....

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Transcript of CEMENT - IBEF ... (sort format); Aranca Analysis; Aranca Estimates ADVANTAGE INDIA ADVANTAGE INDIA ....

  • For updated information, please visit www.ibef.org November 2017

    CEMENT

  • Table of Content

    Executive Summary...3

    Advantage India.... 4

    Market Overview and Trends...6

    Porters Five Force Framework Analysis...12

    Growth Drivers and Opportunities 13

    Investment Scenario............. 15

    Policies and Initiatives... 18

    Case Studies................. 19

    Key Industry Organizations... 24

    Useful information.......... 26

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    EXECUTIVE SUMMARY

    With cement

    production capacity

    of nearly 420 million

    tonnes, as of March

    2017.

    Indias cement

    production capacity

    is expected to reach

    550 million tonnes by

    2025.

    India is the second

    largest cement

    producer in the

    world.

    Second largest cement

    market

    Of the total capacity,

    98 per cent lies with

    the private sector &

    the rest with public

    sector.

    The top 20 companies

    accounting for around

    70 per cent of the total

    production

    Dominated by private

    players

    210 large cement

    plants account for a

    cumulative installed

    capacity of over

    350 million tonnes,

    while over 350 mini

    cement plants have

    an estimated

    production capacity

    of nearly 11.10

    million tonnes, as

    of 2016.

    Higher share of large

    plants

    Of the total 210

    large cement

    plants in India, 77

    are situated in the

    states of Andhra

    Pradesh,

    Rajasthan & Tamil

    Nadu.

    Large concentration in

    south and west

    Source: Business Standard, Ministry of External Affairs,

    Ministry of External Affairs (Investment and Technology Promotion Division)

  • Cement

    ADVANTAGE INDIA

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    Increasing investments

    Long-term potential

    Attractive opportunities

    Robust demand

    Increased allocation to infrastructure

    projects in Union Budget 2017-18 to

    drive demand

    Initiative to build 100 smart cities and

    boost to affordable housing projects to

    give a further stimulus

    Robust investments are being made

    by the existing players to expand their

    capacity

    FDI inflow in industry related to

    manufacturing of Cement & Gypsum

    products reached US$ 5.24 billion

    between April 2000 and June 2017

    Emami Ltd to invest US$ 1.27 billion to

    scale up its cement production

    capacity from 2.4 MT to 15-20 MT in 3-

    5 years

    Oligopoly market, where large players

    have partial pricing control

    Low threat from substitutes

    The North-East, which is witnessing a

    construction boom, offers attractive

    investment opportunities.

    The State Government of Chattisgarh

    has auctioned one block of Limestone

    (Kesla II) in Raipur District having

    estimated reserves of 215 million

    tonnes which would earn a revenue of

    US$ 1.85 billion over the lease period

    Source: Publication. Report/Press Release Title (as published). Date (sort format); Aranca Analysis; Aranca Estimates

    ADVANTAGE INDIA

    ADVANTAGE

    INDIA

  • Cement

    MARKET

    OVERVIEW AND

    TRENDS

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    Source: International Cement Review

    Top Cement Producers in 2016E (in MTPA)

    2410.00

    290.00

    85.90 77.00 60.00 56.00 53.00 63.00 55.00

    0.00

    500.00

    1000.00

    1500.00

    2000.00

    2500.00

    3000.00

    China India USA Turkey Brazil Russia Iran Indonesia South Korea

    India - worlds 2nd largest cement market, both in production and consumption.

    Supported by high level of activity going on in real estate and high government spending on smart cities and urban

    infrastructure.

    As of FY17, a total of 575 operational cement plants in the country.

    Capacity of 420 MTPA as of March 2017.

    MARKET OVERVIEW

    Note: E - Estimate

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    MARKET OVERVIEW

    Source: Media sources, Aranca Research, Crisil

    Cement consumption (million tonnes)

    22

    1.0

    0

    23

    9.0

    0

    24

    5.0

    0

    25

    6.0

    0

    26

    9.0

    0

    27

    0.0

    0

    0.00

    50.00

    100.00

    150.00

    200.00

    250.00

    300.00

    FY 12 FY13 FY14 FY15 FY16 FY17

    Industry to grow at 5-6 per cent CAGR between FY17 FY20.

    Capacity addition of 133 million tonnes per annum (mtpa) between FY13-17.

    Domestic consumption may outpace supply in next three fiscals.

    Cement Production in India (million tonnes)

    23

    0.4

    9

    24

    8.2

    3

    25

    5.8

    26

    27

    0.0

    38

    28

    3.4

    57

    27

    9.8

    13

    14

    1.2

    65

    0

    50

    100

    150

    200

    250

    300

    FY 12 FY13 FY14 FY15 FY16 FY17 FY181

    Note: 1From April to September 2017

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    INSTALLED CAPACITY AND KEY MARKETS IN EACH

    OF THE GEOGRAPHIC REGIONS

    Source: Indian Minerals Year Book by Indian Bureau of Mines, TechSci Research

    Notes: mtpa - Million Tonnes Per Annum, E- Estimates

    South

    (Tamil Nadu,

    Andhra Pradesh,

    Karnataka)

    132.7 MTPA

    East

    (West Bengal,

    Chhattisgarh,

    Odisha, Jharkhand)

    49.4 MTPA

    North

    (Rajasthan,

    Punjab, Haryana)

    85.6 MTPA

    West

    (Gujarat,

    Maharashtra)

    57.6 MTPA

    Central

    (Uttar Pradesh,

    Madhya Pradesh)

    52.8 MTPA

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    RECENT TRENDS AND STRATEGIES

    Presence of small & mid-size

    cement players across regions is

    increasing, which helps to diminish

    market concentration of industry

    leaders

    A large number of foreign players

    have also entered the market

    owing to the profit margins,

    constant demand & right valuation.

    Increasing presence of cement players

    India has joined hands with

    Switzerland to reduce energy

    consumption & develop newer

    methods in the country for more

    efficient cement production, which

    would help India meet its rising

    demand for cement in the

    infrastructure sector

    Tie up with overseas

    Under Union Budget 2017-18,

    US$ 3.42 billion has been

    allocated to achieve government's

    mission of 'Housing for All by

    2022.

    Housing sector accounts for

    nearly 67 per cent of the total

    cement consumption in India.

    Housing for All

    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 & cheaper to maintain

    than bitumen in the long run.

    Companies are trying to develop a

    niche market for RMC (Ready Mix

    Concrete)

    Adoption of cement instead of Bitumen

    and Ready Mix Concrete (RMC)

    Consolidation seen in 2016, with

    two out of top five M&A deals

    taking place in the cement

    industry.

    UltraTech Cement acquired

    Jaypee Groups cement business

    for US$ 2.38 billion.

    Lafarge India sold its business to

    Nirma for US$ 1.4 billion in 2016.

    Mergers & Acquisitions

    In January 2017, JSW Cement

    bought 35.6 per cent stake in

    Shiva Cement, for an estimate

    amount of US$ 14.42 million.

    In September 2017, the National

    Company Law Tribunal (NCLT)

    approved the amalgamation of

    Trinetra Cement Ltd. and Trishul

    Concrete Products Ltd. with The

    India Cements Ltd..

    Mergers & Acquisitions

    Source: Union Budget 2016 17, Emkay Global Financial Services

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    SUCCESSFUL USE OF ALTERNATE FUELS IN CEMENT

    PRODUCTION

    Madras Cement's Alathiyur plant

    Module Use bioenergy through

    burning of coffee husk & cashew

    nut shells

    Annual cost savings of US$ 1.7

    million

    India Cements Ltd's Dalavoi plant Use Low Sulphur Heavy Stock

    (LSHS) sludge as alternate fuel

    Annual savings of US$ 6,500

    approx

    UltraTech's Gujarat Cement

    Works

    Use tyre chips & rubber dust as

    alternate fuel

    Reduction of about 30,000

    tonnes of carbon emissions

    annually

    Lafarge's Arasmeta plant Substitute 10 per cent of coal used

    in kilns with rice husk

    Higher energy savings and lower

    carbon emissions

    Company/Plant Strategy Benefits

    Source: CMA

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    Porters Five Force Framework Analysis

    Positive Impact

    Neutral Impact

    Negative Impact

    Bargaining Power of Suppliers

    Moderate Cement players have to

    depend on the railways for carriage

    outward & local coal companies for

    fuel, although diversification of

    freight options & fuel s