India : Cement Sector Report_August 2013

Second largest Cement

market

• With nearly 300 million tonne of cement production capacity, India is the second largest

cement producer in the world

Dominated by private

players • Of the total capacity, 98 per cent lies with the private sector and the rest with public sector

Higher share of large

plants

• 185 large cement plants together account for 97 per cent of the total installed capacity,

while 365 small plants account for the rest

Large concentration in

South and West

• Of the total 185 large cement plants in India, 77 are located in the states of Andhra

Pradesh, Rajasthan and Tamil Nadu

Source: Planning Commission, Aranca Research

• The engineering sector is delicensed; 100 per cent FDI is allowed in the sector

• Due to policy support, there was cumulative FDI of USD14.0 billion into the sector over April 2000 – February 2012, making up 8.6 per cent of total FDI into the country in that period

Growing demand

Source: Edelweiss

Notes: FY20E – Estimated market size for 2020

Robust demand

• Robust infrastructure growth during 12th Five Year Plan to drive growth

• Demand is expected to be boosted by growth in real estate sector

Long-term potential

• Oligopoly market, where large players have partial pricing control

• Low threat from substitutes

Attractive opportunities

• The North-East, which is witnessing a construction boom, offers attractive investment opportunities

• Large planned investments in infrastructure and housing is likely to boost demand for cement in the coming years as well

Increasing investments

• Robust investments are being made by the existing players to expand their capacity

• Increasing presence of Tier II cement players

• Use of alternate fuels to lower production costs and emissions

FY12

Production

capacity:

247 million

tonnes

FY20E

Production

capacity:

407 million

tonnes

Advantage

India

Source: Cement Manufacturers’ Association (CMA),Planning Commission, Aranca Research

Note: mtpa - Million Tonnes Per Annum, * FY12 data

Cement Industry

(FY13)

Mini And White Cement Plants Large Cement Plants

• Cement plants: 185

• Installed capacity: 339.5 mtpa

• Cement production: 168.3 mtpa*

• Cement plants: 365

• Installed capacity: 11.1 mtpa

• Cement production: 6.0 mtpa*

Top Cement Consumers in 2011 (million

tonnes)

Source: International Cement Review, Aranca Research

India is the 2nd largest cement producer as well as consumer in the world led by the enormous growth in the infrastructure

and construction sector for the last two decades

Top Cement Producer in 2011 (million

tonnes)

2,048

229 72 65 58 56 56 50 49 48

Ch

ina

India

US

A

Bra

zil

Russia

Ira

n

Tu

rke

y

Eg

yp

t

Vie

tna

m

Indo

nesia

2,058

222 66 66 64 63 56 56 52 49

Chin

a

India

Ira

n

US

A

Bra

zil

Tu

rke

y

Jap

an

Russia

Vie

tna

m

Indo

nesia

Production of Cement (million tonnes)

Source: Department of Industrial Policy and Promotion,

Working group for 12th Five Year Plan, Aranca Research

Notes: E - Estimate, CAGR - Compound Annual Growth Rate

Cement production increased at a CAGR of 9.7 per cent to

272 million tonnes over FY06–13

As per the 12th Five Year Plan, production is expected to

reach 407 million tonnes by FY17

142 156 168

182 207

229 247

272 300

332 368

407

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13E

FY

14E

FY

15E

FY

16E

FY

17E

CAGR:10.0%

Domestic Cement Consumption (million tonnes)

Source: Working group for 12th Five Year Plan, Aranca Research

Notes: E – Estimate, CAGR - Compound Annual Growth Rate

Domestic cement consumption is expected to reach 265

million tonnes in FY13 from 222 million tonnes in FY11

The consumption is further expected to increase at a CAGR

of 10.2 per cent during FY11-17 and reach 398 million

tonnes 222 242

265 293

324 359

398

FY11 FY12 FY13E FY14E FY15E FY16E FY17E

CAGR:10.2%

323

336

350

373

405

441

479


Cement Production Capacity (million tonnes)



Cement production capacity reached 350 million tonnes in

FY13 from 323 million tonnes in FY11

Production capacity is expected to increase at a CAGR of

6.8 per cent during FY11-17 and reach 479 million tonnes

CAGR:6.8%

Cement capacity (million tonnes) and utilisation

rate (%)



Cement capacity utilisation rate is expected to touch around

78 per cent in FY13 from 71 per cent in FY11

The utilisation rate is expected to further reach 85 per cent

by FY17

60%

65%

70%

75%

80%

85%

90%

150

200

250

300

350

400

450

500


Capacity -LHS Production-LHS Utilisation rate (%)


Currently, India has 185 large cement plants spread across

all states

Andhra Pradesh is the leading state with 37 large cement

plants, followed by Rajasthan and Tamil Nadu having 21

and 19 plants, respectively

37

19

21

11 12

11

10

10

11

5

5

4 8

3 3

5

3

2

2

1

1 1

Source: Department of Industrial Policy and Promotion, Aranca Research

Note: mtpa - Million Tonnes Per Annum

Cement Industry

South

North

East

West

Central

126.9 mtpa

66.4 mtpa

43.5 mtpa

44.1 mtpa

37.3 mtpa

Tamil Nadu, Andhra Pradesh and Karnataka

Rajasthan, Punjab, Haryana and the NCR

West Bengal, Chhattisgarh, Orissa and

Jharkhand

West Bengal, Chhattisgarh, Orissa and

Jharkhand

Uttar Pradesh, Madhya Pradesh

Installed capacity (2011) Key markets

Shares in Total Capacity in Northern

Region (2011)


Rajasthan has the highest installed capacity in North India, accounting for a 66.5 per cent share in capacity in the region in

2011

Chhattisgarh leads the Eastern region with a share of 32.6 per cent of total installed capacity in the region in 2011

Shares in Total Capacity in Eastern Region

(2011)

66.5%

14.2%

7.2%

6.0%

4.5%

0.8% 0.8%

Rajasthan

Himachal Pradesh

Punjab

Uttarakhand

Haryana

Jammu & Kashmir

Delhi

0.5%

7.5%

2.3%

19.5%

20.8% 16.8%

32.6%

Assam

Meghalaya

Bihar

Jharkhand

Orissa

West Bengal

Chhattisgard

Shares in total capacity

in Southern region (2011)


Andhra Pradesh has the highest installed capacity in South India (53.5 per cent share of total installed capacity)

Madhya Pradesh leads the Central region in installed capacity, while Gujarat leads the West

53.5%

28.0%

18.0%

0.5%

Andhra Pradesh Tamil Nadu

Karnataka Kerala

34.4%

65.6%

Uttar Pradesh Madhya Pradesh

55.0%

45.0%

Gujarat Maharashtra


in Central region (2011)


in Western region (2011)

All India (million tonnes)


Total demand for cement is expected to grow at a CAGR of 10.2 per cent to 265.9 million tonnes during FY08-13

Cement demand from the Eastern and Central regions during FY08-13 is expected to grow at a CAGR of 13.5 per cent

and 12.1 per cent, respectively.

Central (million tonnes) East (million tonnes)

163.4 177.5

196.4

210.2

236.3

265.9

FY08 FY09 FY10 FY11F FY12F FY13F

23.8

26.2

30.8

34.3

38.2

42.0


24.7

28.0

33.0

37.3

41.7

46.6


CAGR: 10.2% CAGR: 12.1% CAGR: 13.5%

32.7

34.5

38.8

41.4

45.4

49.8


33.6

35.1

38.3 40.8

48.6

51.0


48.6

53.8 55.5

56.4

62.1

63.9


South (million tonnes)


Cement demand from Western, Northern and Southern regions is expected to grow at a CAGR of 8.8, 8.7 and 5.6 per

cent, respectively, during FY08-13

North (million tonnes) West (million tonnes)

CAGR: 5.6% CAGR: 8.7% CAGR: 8.8%

All India


UltraTech Cement, a major player in India, accounted for 15.0 per cent of the total market share in terms of installed

capacity in 2011

It is a leading player in the Southern and Eastern regions, accounting for 50.6 and 52.1 per cent of total market share,

respectively, in terms of installed capacity in 2011

South East

10.2%

5.9%

9.9%

8.3%

7.1%

8.0%

50.6%

India Cement Madras Cement

Ultratech Cement Chettinad Cement

Dalmia Cement ACC

Others

14.2%

6.2%

12.1%

9.8%

5.5%

52.1%

Lafarge India ACC

Ultratech OCL India Ltd

Ambuja Cement Others

10.0%

7.5%

15.0%

1.4% 66.1%

Ambuja Cement ACC

Ultratech Cement Jaypee Cement

Others

North


Jaypee Cement led the Central region in terms of installed capacity, with 33.5 per cent of the market share; the Western

region was dominated by UltraTech cement with 29.0 per cent of market share in 2011

Ambuja Cements accounted for 28.9 per cent of the total market share in terms of installed capacity in the Northern region

in 2011

Central West

28.9%

16.6%

14.2%

13.8%

11.1%

7.3%

5.5% 2.5%

Ambuja Cement Shree Cement

Others Ultratech Cement

J K Cement ACC

Jaypee Cement Birla Cement

33.5%

12.3%

12.1%

42.1%

Jaypee Cement Ultratech Cement

ACC Others

29.0%

10.9%

12.5%

47.6%

Ultratech Cement Jaypee Cement

Ambuja Cement Others

Increasing presence of

small and mid-size

cement players

• Presence of small and mid-size cement players across regions is increasing, which helps

to diminish market concentration of industry leaders

• Small and mid-size players have been constantly increasing their installed capacity to

cater to increasing cement demand

Cost reduction through

the use of alternate

fuels **

• Major cement manufacturers in India are increasingly using alternate fuels, especially

bioenergy, to fire their kilns

• This is not only helping to reduce production costs of cement companies, but is also

proving effective in reducing emissions

Increasing sale of

blended cement

• The proportionate sales of blended varieties of cement—Portland Pozzolana Cement

(PPC) and Portland Blast Furnace Slag Cement (PBFC)—has risen over the years

• During 2011, blended cement accounted for 75 per cent of total cement production in the

country

Notes: ** The Success Stories section includes cases of successful employment

of alternate fuels in cement production to reduce production costs

ACC

• Holcim, a Switzerland-based major cement company has plans for capacity expansion in

India through its subsidiary ACC cement

• The construction of the company’s new plant at Jamul, Chhattisgarh is under process.

This plant will increase ACC’s capacity to 35 million tonnes per annum (mtpa) from 30

mtpa in a phased manner by 2015

Ambuja Cements

• Ambuja Cements is targeting an investment of USD370.4 million for capacity expansion in

Rajasthan and Northern India

• The proposed project in Rajasthan is expected to add 5 million tonnes (MT) to Ambuja

Cements’ existing production capacity

Dalmia Cement

• Dalmia Cement is planning an investment of USD333.3 million to ramp up its

manufacturing capacity to 21 mtpa from the existing 17 mtpa over the next two years.

• Dalmia has plans to set up a 2.5 million tonne (MT) greenfield unit at Belgaum in

Karnataka. It also plans to scale up its two plants in North-East India for a total value of

USD239 million and USD9.2 million, respectively

Source: Aranca Research

Heidelberg Cement

• Heidelberg Cement, a Germany-based cement manufacturer has commissioned Phase-I

of its Jhansi grinding unit

• The company has undertaken an investment worth USD 259.4 million for expanding its

capacity to 2.7 million tonnes (MT)

• Heidelberg aims to ramp up the operational capacity to 6 MT at its Damoh plant in Madhya

Pradesh

Vicat Group

• Vicat Group, a France-based company plans to sell 4.5 MT of cement in India in FY 2013

• The company has recently commissioned a joint venture cement plant Vicat Sagar

Cement at Chattrasal, Karnataka, for a total value of USD333.3 million

• Vicat Sagar will have a 2.8 MT of capacity in the first phase

Amrit Cement

• Amrit Cement India Ltd (ACIL) has announced the launch of Amrit Cement in the North-

Eastern market.

• The company plans to achieve a production level of 5 million tonnes per annum by 2015–

16 through capacity expansion in North-Eastern Bihar and Nepal


Source : Aranca Research

• High – Huge capital investments required

present substantial barriers to entry and

achieving economies of scale

• Moderate – Cement players have

to depend on the railways for

carriage outward and local coal

companies for fuel, although

diversification of freight options

and fuel sources is diminishing

the suppliers’ power

• Low – Substantial market

concentration among large

players ensures low bargaining

power of buyers

• Low – Cement, practically,

has no substitutes

• Low – The Indian cement market

is oligopolistic in nature,

characterised by tacit collusion,

where large players partially

control supply for better price

discipline

Positive

Neutral

Positive Positive

Positive

Market

Attractiveness

Source : McKinsey Quarterly Report, Aranca Research

Housing Growth Infrastructure Growth Commercial Real Estate

Growth

• The Housing segment accounts for

a major portion of the total domestic

demand for cement in India

• Real estate market is expected to

grow at a CAGR of 17.2 per cent

over 2011–15 to USD126 billion

• Growing urbanisation, an increasing

number of households and higher

employment are primarily driving the

demand for housing

• Initiatives by the government are

expected to provide an impetus to

construction activity in rural and

semi-urban areas through large

infrastructure and housing

development projects respectively

• The government is strongly focused

on infrastructure development to

boost economic growth

• It plans to increase investment in

infrastructure to USD1 trillion in the

12th Five Year Plan (2012–17),

compared with USD514 billion

under the 11th Five Year Plan

(2007–12)

• Infrastructure projects such as

Dedicated Freight Corridors as well

as new and upgraded airports and

ports are expected to further drive

construction activity

• The government 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 government is strongly focused

on infrastructure development to

boost economic growth

• It plans to increase investment in

infrastructure to USD1 trillion in the

12th Five Year Plan (2012–17),

compared with USD514 billion

under the 11th Five Year Plan

(2007–12)

• Infrastructure projects such as

Dedicated Freight Corridors as well

as new and upgraded airports and

ports are expected to further drive

construction activity

• The government 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

Major cement demand drivers (FY12)


Demand for cement is highly correlated with cyclical

activities like construction and development

Housing sector accounts for 64 per cent of the total cement

demand

Real estate market is expected to grow at a CAGR of 17.2

per cent during 2011–15 to USD126 billion

The rapidly increasing real estate industry in India is

expected to push the demand for cement

Residential real estate demand is driven by rising

population and growing urbanisation

Rising income levels are leading to higher demand

for luxury projects

Demand for affordable housing is growing in order to

meet the demand from lower income groups

Commercial real estate demand will be driven by growth in

IT/ITeS sector and organised retail

64% 17%

13%

6% Housing sector

Infrastructure

Commercial &Institutional

Industrial

Infrastructure Spending As % Of GDP

Source: Working group for 12th Five Year Plan

Notes: Additional capacity creation estimates are based on increase in base lines, roads, housing and fiscal support

Investment in infrastructure is the main growth driver for the cement industry

The Planning Commission estimates total infrastructure spending to be about of 10 per cent of the GDP during the 12th

Five-Year Plan (2012–17), up from 7.6 per cent during the previous five-year plan (2007–12)

India’s investment in infrastructure is estimated to double to about USD1 trillion during the 12th plan (2012–17) compared

to the previous plan

Infrastructure Spending in % during 11th

And 12th Five-year Plan

75.7

69.4 89.5

101.6 101.9

157.4 181.2

206.0

233.5

264.4

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13E

FY

14E

FY

15E

FY

16E

FY

17E

5.2%

6.4%

7.2%

7.5%

7.9%

8.4%

7.6%

10.0%

10th Five year plan

FY08

FY09

FY10

FY11

FY12

11th Five year plan

12th Five year plan12th Plan

11th Plan

North

Source: CMA, Kotak Institutional Equities, Aranca Research

Note: F- Forecast

South

82% 84% 88%

FY11F FY12F FY13F

67% 68%

73%

FY11F FY12F FY13F

81%

87%

91%

FY11F FY12F FY13F

East

West Central All India

79% 77% 80%

FY11F FY12F FY13F

90%

85% 87%

FY11F FY12F FY13F

78% 77%

82%

FY11F FY12F FY13F

12.8 13.5

23.6

31.9

35.5

38.7

FY12 FY13E FY14E FY15E FY16E FY17E

Capacity creation as per the 12th Five Year Plan

(million tonnes)

Source: Working group for 12th Five Year Plan

Notes: Additional capacity creation estimates are based on

increase in base lines, roads, housing and fiscal support,

E - Estimates

Total capacity of 336 million tonnes is estimated to have

been generated in FY12

The strong momentum in capacity addition is not surprising

given the sharp growth in construction, infrastructure and

real estate in Indian economy

Hence, the 12th Five Year Plan is estimated to have an

additional capacity requirement of 156.0 million tonnes by

FY17

Strategy Benefits Company/Plant

Madras Cement's

Alathiyur plant

India Cements Ltd's

Dalavoi plant

UltraTech's Gujarat

Cement Works

Lafarge's Arasmeta plant

Use bioenergy through

burning of coffee husk

and cashew nut shells

Use Low Sulphur Heavy

Stock (LSHS) sludge as

alternate fuel

Use tyre chips and

rubber dust as alternate

fuel

Substitute 10% of coal

used in kilns with rice

husk

Annual cost savings of USD1.7 million

Annual savings of USD6500 approx

Reduction of about 30,000 tonnes of

carbon emissions annually

Higher energy savings and lower

carbon emissions

Source: CMA, Aranca Research

Revenue and Profit after Tax (PAT) in USD billion

Source: Company Website (www.grasim.com, Aranca Research

Notes: RMC – Ready-Mix Concrete

UltraTech is India's largest exporter of cement clinker

spanning export markets in countries across the Indian

Ocean, Africa, Europe and the Middle East

UltraTech and its subsidiaries have a presence in five

countries through 11 integrated plants, one white cement

plant, one clinkerisation plant, 15 grinding units, two rail and

three coastal terminals, and 101 RMC plants

It has an annual capacity of 52 MT

Projects: Mumbai Metro, Bangalore Metro Rail, Kolkata

Metro Rail, Monorail, Coastal Gujarat Power

MILESTONES

• 2004 – Acquisition of L&T’s Cement Business: UltraTech

Cement Ltd

• 2006 – Narmada Cement Company Limited amalgamated

with UltraTech

• 2010 – Samruddhi Cement Limited amalgamated with

UltraTech Cement Limited

• 2012 – Acquisition of Adhunik Cement’s Meghalaya plant

1.1

1.4 1.4 1.5

3.0

4.0 3.9

0.2 0.3 0.2 0.2 0.3 0.5 0.5

FY07 FY08 FY09 FY10 FY11 FY12 FY13

CAGR: 23.5%

1.4 1.4 1.5

1.6

1.8 1.8

FY07 FY08 FY09 FY10 FY11 FY12

Revenue (USD billion)

Source: Company Website, Aranca Research

Note: mtpa – Million Tonnes Per Annum

Ambuja Cements Ltd (ACL) is one of the leading cement

manufacturing companies in India.

The company, initially called Gujarat Ambuja Cements Ltd,

was founded by Narotam Sekhsaria in 1983

Ambuja Cements is the second largest cement

manufacturer in India, with nearly 10 per cent of the market

share of total installed capacity

It is the market leader in Northern India with 29 per cent of

the total installed capacity

MILESTONES

• 2010 – Started cement plant at Nalagarh, Himachal

Pradesh and Dadri, Uttar Pradesh with a capacity

of 1.5 million tonnes

• 2011 – Acquired 85 per cent stake in Nepal-based Dang

Cement

• 2012 – Expansion of Sankrail Grinding Unit, thereby

increasing the capacity from 1.5 mtpa to 2.4 mtpa

CAGR: 5.2%

Source: Industry Sources, Aranca Research

Note: mtpa - Million Tonnes Per Annum

5.2

3.0

Estimated Demand Available Supply

NE India: Cement demand NE India: Cement supply

NE India: Cement demand-supply gap

Deficit of 2.2 mtpa

• The North Eastern (NE) region has

consistently been in cement deficit for

several years

• At present, cement demand in the NE is

about 5.2 mtpa

• Cement manufactured locally is inadequate

to meet the local demand for cement

• The deficit is met through cement

purchased from other parts of India

• High transportation costs cause the landed

costs of cement to increase considerably

NE States Projected GDP Growth at

Constant Prices

The Government has approved a package of fiscal incentives and other concessions for the North Eastern Region, namely

the North East Industrial and Investment Policy, 2007, effective from 1 April, 2007

The major policy and fiscal initiatives are expected to catalyse infrastructure and industrial development in the region,

spurring the demand for cement

NE States Projected Per Capita Income

Growth

10.0%

13.7%

16.4%

XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan

8.6%

12.4%

15.2%

XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan

Cement Manufacturers' Association

CMA Tower, A-2E, Sector 24 NOIDA – 201 301

Uttar Pradesh, India

Phone: 91-120-2411955, 2411957, 2411958

Fax: 91-120-2411956

E-mail: [email protected]

Website: www.cmaindia.org/index.html

Indian Concrete Institute

Ocean Crest 79, Third Main Road, Gandhi Nagar, Adyar, Chennai – 600 020

Phone: 91-44-24912602

Fax: 91-44-24455148

E-mail: [email protected], [email protected], [email protected]

Website: www.indianconcreteinstitute.org

National Council for Cement and Building Materials

34th Milestone, Delhi-Mathura Road, Ballabgarh – 121 004 Haryana, India

Phone: 91-129-2242051/52/53/54/55/56; 4192222

Fax : 91-129-2242100; 2246175

E-mail: [email protected]; [email protected]

CMA: Cement Manufacturers' Association

GDP: Gross Domestic Product

GoI: Government of India

INR: Indian Rupee

MTPA: Million tonnes per annum

NE India: North-East India

FY: Indian financial year (April to March)

So FY10 implies April 2009 to March 2010

USD: US Dollar

Wherever applicable, numbers have been rounded off to the nearest whole number

Year INR equivalent of one USD

2004-05 44.95

2005-06 44.28

2006-07 45.28

2007-08 40.24

2008-09 45.91

2009-10 47.41

2010-11 45.57

2011-12 47.94

2012-13 54.31

Exchange Rates (Fiscal Year)

Year INR equivalent of one USD

2005 45.55

2006 44.34

2007 39.45

2008 49.21

2009 46.76

2010 45.32

2011 45.64

2012 54.69

2013 54.45

Exchange Rates (Calendar Year)

Average for the year

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Transcript of India : Cement Sector Report_August 2013