SCHOOL OF BUSINESS
A Study on Indian cement industry Guided By:Prof. Samik shome
Submitted By:AMIT KUMAR YADAV
1|Page
Acknowledgement “Knowledge is an experience gained in life, it is the choicest possession, which should not be shelved but should be happily shared with others. It is the supreme art of the teacher to awaken joy in creative expression and knowledge.” The feeling of a task well done is incomplete without giving the acknowledgment where due, so before we proceed further We wish wish to spen spend d some some time time in expr expres essi sing ng our our grat gratit itud ude e to all all those who have been involved in guiding us and helping us out during our report. We would like to give special thanks’ to Prof. Samik Shome for his guidance during the report. Despite of his demanding schedule, he bestowed every possible support to us, so as to carry on the report work without any hindrance. We woul would d like like to than thank k valu valuab able le work works s of publ publis ishe hers rs and and authors whose work helped me during the project.
2|Page
Table of Contents
3|Page
Topic
Page No.
Executive summary
1
Introduction to Indian cement industry
2
History of the Indian Cement Industry
2
Current Scenario
4
2.
Review of Literature
6
3
Analysis
14
3.1
Introduction
14
3.2
Major players in Indian Cement Industry & Nature of Competition
14
3.3
Market Segmentation
22
3.3. Geographical Segmentation 1
22
3.3. Customer Segmentation 2
24
1. 1.1 1.2
3.4
PESTEL Analysis on Indian Cement Industry
26
3.4. Political 1
26
3.4. Economic 2
27
3.4. Social 3
28
3.4. Technological 4
29
3.4. Environmental
30 4|Page
EXECUTIVE SUMMARY T The he ceme cement nt indu indust stry ry is one one of the the ke key y indu indust stri ries es in Indi India. a. Cement industry is a rapidly growing sector heavily taxed by the the gove govern rnme ment nt.. The The Indi Indian an ceme cement nt indu indust stry ry is one one of the the largest user of power, is the third largest consumer of coal in the country. As Limestone is found in abundance all over the country, the cement industry has a huge potential to grow. The Indian Indian Cemen Cementt Indust Industry ry compri comprise ses s 148 large large cemen cementt plant plants s with around 46 member companies. The major players areGrasim Grasim Indust Industrie ries s Ltd, Ltd, ACC ACC Ltd, Ltd, Udaipu Udaipurr Cemen Cementt Works Works Ltd, Ltd, Ambu Ambuja ja Cements ents Ltd, td, Centu ntury Text Textil iles es & Ind Inds. Ltd, td, Indi India a Cements Ltd, Shree Cement Ltd, Madras Cements Ltd, Birla Corporati Corporation on Ltd, Ltd, Dalmia Dalmia Cement(B Cement(Bhara harat) t) Ltd. The industry industry is grow growin ing g mani manifo fold ld due due to incr increa ease sed d indu indust stri rial al acti activi vity ty,, re real al estate business, growing construction activity, and expansion in the infrastructure infrastructure sector. The production and consumption of cement to a large extent indicate a country’s progress. The global cement has always been a good indicator of economic activity, as industry growth patterns consistently point to the direction in which the economy is likely to move. India is the second largest cement producer in the world after China and has got a huge cement industry. With the government of India giving boost to various infrastructure infrastructure projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace. Cement industry plays a vital role in the economic development of the country. Domestic cement manufacturing industry is going through a tumultuous phase. It is batt battli ling ng prof profit itab abil ilit ity y woes. woes. This This overa overall ll grow growth th in ceme cement nt indu indus stry try has a sign ignific ficant ant impac pact on the ove overall level vel of anthropog anthropogenic enic greenhou greenhouse se gas emission emissions. s. The producti production on of each tone of cement leads to emissions of roughly 1.25 tons of carbon dioxide. 5|Page
6|Page
1.
Introduction to Indian Cement Industry
Cement Cement Industry Industry is one of the most importan importantt industri industries es with resp re spec ectt to nati nation onal al grow growth th and and deve develo lopm pmen ent. t. Ceme Cement nt is a mixture of silicates and aluminates of calcium, formed out of calc calciu ium m oxid oxide, e, sili silica ca,, alum alumin inum um oxid oxide e and and iron iron oxid oxide. e. The The dema demand nd for for ceme cement nt is corr correl elat ated ed with with the the mome moment ntum um of activities in the financial, real estate and infrastructure sectors of the nation. Due to cost control measures and technology up gradation, the Indian cement industry is globally competitive. The Indian Cement Industry is one of the largest users of power in the country. It is also the third largest consumer of coal in the country. Since limestone is found in abundance all over the country, it has huge opportunities opportunities for growth and development.
1.1.
History of Indian Cement Industry
The The firs firstt manu manufa fact ctur urer er of ceme cement nt was was by a Calc Calcut utta ta-b -bas ased ed comp compan any y in 1889 1889.. But But the the firs firstt ende endeav avor or to manu manufa fact ctur ure e cement in an organized way commenced in Madras. In the year 1904 1904,, Sout South h Indi India a Indu Indust stri ries es Limi Limite ted d bega began n manu manufa fact ctur urin ing g Port Portla land nd ceme cement nt.. Howe Howeve ver, r, the the comp compan any y had had to stop stop the the production as it was not successful. 7|Page
The first licensed cement manufacturing unit was set up by Indi India a Ceme Cement nt Comp Compan any y Ltd Ltd at Porb Porban anda dar, r, Guja Gujara ratt in 1914 1914.. During the First World War, a huge growth was seen in the cement industry. After the war in the later years the industry witnessed
high
growth
rate
especially
in
terms
of
manufact manufacturin uring g units, units, installe installed d capacity capacity and producti production. on. This phase is referred to as the Nascent Stage of Indian Cement Industry. During the earlier years, demand of the cement was low and the the supp supply ly was was much much more more than than the the mark market et dema demand nd.. The The Indian public at first did negative opinion against the cement manufa nufac cture tured d in Indi India a unti ntil gover overn nment had had to com come in between
and
provi ovided
protection
to
the
producers
by
encouraging cooperation among the manufacturers. In 1927, the Concrete Association of India was formed with the objective of making cement more popular among the public in a positive manner and to increase cement consumption. Later in 1930, the Cement Marketing Company of India (CMI) was formulated to promote the sale and distribution of cement at regulated prices. The Indian cement industry witnessed a new beginning when 11 cement companies amalgamated to form
the
Associated
Companies
Limited
ACC.
Post
independence the growth in the cement industry was very low 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. 8|Page
In 1956, the price and distribution control system was set up to ensure fair prices to reduce regional imbalances and reach self sufficie sufficiency. ncy. The governme government nt severely severely held back the cement cement industry during 1969-1982 .It intervened directly by exercising control control over producti production, on, capacity capacity and distribu distribution tion of cement cement and indirectly by controlling prices. In 1977, the government set higher prices for cement but still the growth rate was not up to the mark. In 1982, the government introduced a quota system. A 66.60% of quota was created for sales to government and real estate developers.50% developers.50% quota was imposed for new and sick units, and the remaining 33.40% was left to be sold in the open market. In 1989, after liberalization, the cement industry was given full freedom to meet the challenges in open market which led to an accelerated growth in the industry.
1.2. Current Scenario The Indian cement industry is the second largest producer of quality cement and occupies a strategic place in the national economy
due
to
its
importance
in
other
sectors
like
construction, transportation, coal and power. It is engaged in the production of different varieties of cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Oil Well Well Ceme Cement nt,, Sulp Sulpha hate te Resi Resist stin ing g Port Portla land nd Ceme Cement nt,, Whit White e Cement, etc.
9|Page
The Indian Cement industry comprises 148 large cement plants with around 46 member companies. The installed capacity of large cement plants was estimated to be 219.17 million tonne during 2009-10 (as on March 2009).There are 365 mini and white cement plants with an installed capacity of 11.10 million tonne . Table 1: Cement Production & Despatches
Description Cement Production Cement Despatches
Sep-
Aug- Sep-
10
09
12.54 12.56
12.8 5 12.8 2
09 11.83 11.74
2010 2009-11
2010
(Apr-Sep) 81.5 4 81.1 0
77.22 76.50
Source: Cement Manufacturers' Association
Cement production during April to January 2009-10 was 130.67 million tonnes as compared to 115.52 million tonnes during the same period for the year 2008-09. Despatches were estimated at 129. 129.97 97 mill millio ion n tonn tonnes es duri during ng Apri Aprill to Janu Januar ary y 2009 2009-1 -10 0 whereas during the same period for the year 2008-09, it stood at 115.07 million tonnes.
10 | P a g e
2. Review of Literature Cement proves to be an area of interest for many researchers because of its overall impact on the economic development on the country. There is a lot of research work done on cement indu indus stry try. Ceme ement indus ndusttry has has bee been analyz alyzed ed by many individuals and researchers. They found many valuable insights in the industry and made the data available to all. There were many studies conducted to know the environmental impacts of 11 | P a g e
cement
production,
the
current
market
trends,
Trade
perspective of Indian cement industry and detecting cartels in the cement industry. For the purpose of the current study, a lot of articles, research papers and reports have been studied and analyzed to gain the knowledge about cement industry as a whole. The following articles have been taken to get an in depth knowledge and insight about the cement industry. Acco Accord rdin ing g to L. G. Bura Burang nge e and and Shru Shruti tiYa Yami mini ni (200 (2008) 8),, the the Cement industry is a rapidly growing sector heavily taxed by the the gove govern rnme ment nt.. The The indu indust stry ry is grow growin ing g mani manifo fold ld due due to increa increased sed indus industri trial al activ activity ity,, real real estate estate busine business ss,, growi growing ng cons constr truc ucti tion on acti activi vity ty,, and and expa expans nsio ion n in the the infr infras astr truc uctu ture re sec sector tor. The The issue ssue here here lie lies in the the tec technol hnolog ogy y used, fuel uel efficiency and power efficiency. Since, cement is a high bulk and low value commodity, competition is localized because the cost of transportation of cement to distant markets resulting in the product being uncompetitive in those markets. In 1989, all pri price and dist istrib ributi ution contr ontrol ols s on sale of cement ent were were withdrawn and in 1991 the industry was de-licensed in order to accelerate growth and induce modernization. The industry has also witnessed a number of mergers and acquisitions and entry of foreign majors in the cement market. Accord According ing to Arind Arindam am Chakr Chakraba abarti rti,, et.al (2008), the domestic cement manufacturing industry is going through a tumultuous phase. While it is battling profitability woes on one hand, it also has has to cont conten end d with with the the incr increa easi sing ng leve levell of envi enviro ronm nmen enta tall activism that is keenly scrutinizing its various actions and their 12 | P a g e
impact on environment and society. Thus cement industry has to proactively engage itself in three dimensions of profitability, environm environmenta entall consciou consciousnes sness s and social social obligati obligations ons that that will earn the industry the right to grow and the license to operate. The cement companies have to embark upon a set of proactive activities that impacts all three dimensions of balanced growth. They suggested a set of proactive actions that companies may adopt according to their suitability such as: Look to consolidate where long term players may look to grow their operations either organically or inorganically, proactively change product mix mix with with whic which h they they sugg sugges estt the the comp compan anie ies s to focu focus s upon upon Ready Mix Concrete usage and enter RMC business as it helps in reducing pollution. The other suggestions are to develop a logi logist stic ics s mode models ls to supp suppor ortt chan changi ging ng prod produc uctt mix, mix, look look for for alternate fuel sources as power and fuel cost is the second most important element of operations cost after raw material cost. cost. By optim optimall ally y utiliz utilizing ing the exist existing ing limes limeston tone e quar quarrie ries, s, compa companie nies s can can save save preci precious ous resour resource ces. s. Finall Finally, y, the author author suggests the companies to undertake a continuing dialog with the affected community so that it creates a community friendly image across the society. Actions suggested above impact the three dimensions. This will help companies to gain advantage over their competitors. competitors. According According to C. A. Hendrick Hendricks, s, et.al (2004) cement is the most imp impor orttant ant
buil buildi ding ng
mater eriial.
Cem Cement
con consump umption tion
and
production is closely related to construction. It is also one of the the most ost produ oduced ced materi teria als in the the wor orlld it is the most ost 13 | P a g e
important construction material. Cement production is highly energ nergy y
cons onsump umption tion proc proces ess s
also
pro rod ducti ction of cem cement
produces greenhouse gases like CO 2. It contributes to about 5% total total globa globall carbo carbon n dioxi dioxide de.. And about half of it comes comes from from calcinations and half from combustion process. A wide range of options
exist
to
reduce
CO2
emission.
Technological
advancements are adding to reduction of carbon dioxide from cement production. According to Paul (2008), Cement Industry has always been a good indicator of economic activity, as industry growth patterns cons consis iste tent ntly ly poin pointt to the the dire direct ctio ion n in whic which h the the econ econom omy y is likely to move. The article examines present drivers of growth in
cement cement industry industry and some special special demands demands placed placed upon
automation suppliers dealing with emerging markets. Pressure of
maintaining
the
standards
imported
by
the
cement
multinationals, three main trends are to be observed on the marketplace:
productivity,
safety
and
environmental
resp re spon onsi sibi bili lity ty.. Ceme Cement nt plan plantt oper operat ator ors s have have four four prim primar ary y productivity goals: the reduction of downtime, the reduction of energy consumption, improvements in product quality and the inte intell llig igen entt
use use
of main mainte tena nanc nce e
reso re sour urce ces. s. Ceme Cement nt plan plantt
operators are investing heavily in systems aimed at improving plan plantt safe afety. ty. The main atte ttenti ntion has has bee been on imp improve oved monit onitor oriing of pro roc cesse sses and the the insta stalla llation tion of mode odern technology aimed at lessening the risk of extraordinary events, such as explosions. By lowering the amount of time needed to main mainta tain in the the plan plant, t, and and ensu ensuri ring ng that that main mainte tena nanc nce e cycl cycles es 14 | P a g e
arou ar ound nd the the plan plantt ar are e opti optimi mize zed, d, plan plantt oper operat ator ors s can can re reap ap significant cost savings. ICRA ICRA Limi Limite ted( d(Ja Janu nuar ary y 2010 2010)), in its its re rep por ortt “Ind “India ian n Ceme Cement nt Indu Indust stry ry” ”
says ays that that with with 153 153 ceme cement nt plant plants s and and a tota totall
inst instal alle led d capa capaci city ty of ar arou ound nd 209 209 mill millio ion n tonn tonnes es per per annu annum m (MTPA) both as of March 2009, the Indian cement industry is the the seco second nd larg larges estt in the the worl world d, the the larg larges estt bein being g Chin China. a. Demand for cement reported strong growth during the period 2002 2002-0 -03 3 to 2007 2007-0 -08 8 even even as capac apacit ity y addit dditio ion n re rema main ined ed mode modera rate te.. The The Indi Indian an ceme cement nt indu indust stry ry witn witnes esse sed d stro strong ng growth, with demand reporting a compounded annual growth rate (CAGR) of 9.3% and capacity addition a CAGR of 5.6% between 2004-05 and 2008-09. This led to tightening of the supp supply ly-d -dem eman and d situ situa ation tion and and hard harden enin ing g of pric prices es,, whic which h remained strong till the first half (H1) of 2009-10. But due to capaci capacity ty additi additions ons,, capa capacit city y utili utilizat zation ions s have have been been pushed pushed down down to 83% 83% from from aro roun und d 90% 90% in 2008 2008-0 -09, 9, due due to whic which h cement prices have come under pressure since the 3 rd quarter of 2009-10. ICRA believes that the extent to which pressures will be felt will depend on two factors, both of which are to some extent under control of manufacturers. One, the phasing out or deferment of the announced capacity additions. And two, the extent to which the shift towards Ordinary Portland Cement (OPC) reduces the effective capacity of the industry. While ICRA expe xpects all cemen ment manuf anufa acture turers rs to face ace pre res ssure ures on realisations and margins in the medium term, the impact will 15 | P a g e
not not be the the same same for for all all comp compan anie ies. s. Thos Those e with with lean leaner er cost cost structures, location advantages, strong capital structures, and geographically geographically dispersed plants would be in a better position to absorb the impact of the anticipated softening in prices and declined in capacity utilisation. According to Ernst Worrell and Christina Galitsky (March 2008), energy energy efficie efficiency ncy is an important important component component of a company company’s ’s enviro environm nment ental al strate strategy. gy. As the U.S. U.S. manuf manufact acture urers rs face face an increa increasin singly gly compet competiti itive ve globa globall busine business ss envir environ onmen ment, t, they they see seek
opport portun uniities ies
to
red re duce uce
pro rod ducti uctio on
costs osts
with witho out
negatively affecting affecting product yield or quality. This report reflects an in-de in-depth pth analy analysi sis s of the cemen cementt indus industry try,, and and identi identifie fies s ener energy gy savi saving ngs s
and carb carbon on diox dioxid ide e
emis emissi sion ons s
redu re duct ctio ion n
pote potent ntia ials ls.. In thei theirr anal analys ysis is,, the the ceme cement nt indu indust stry ry incl includ udes es establishments engaged in manufacturing hydraulic cements, includin including g Portland, Portland, natural, natural, masonry masonry,, and pozzolana pozzolana cements. cements. The The histo historic ric trends trends for for energ energy y effic efficien iency cy in the U.S. U.S. cemen cementt indu indust stry ry and and the the cost cost-e -eff ffec ecti tive ve ener energy gy and and carb carbon on diox dioxid ide e savings that can be achieved in the near future are analyzed in this report. The cost of energy as part of the total production costs in the cement industry is significant. Coal and coke are currently the primary fuels for the sector. Most recently, there is a slight increase in the use of waste fuels, including tires. Between 1970 and 1999, primary physical energy intensity for cement production dropped 1%/year from 7.3 MBtu/short ton to 5.3 5.3 MBtu Btu/sho /short rt ton ton. Carbon rbon dioxid oxide e intens tensit ity y due to fuel uel 16 | P a g e
consumption and raw material calcinations dropped 16%, from 609 lb. C/ton of cement (0.31 tc/tonne) to 510 lb. C/ton cement (0.26 (0.26 tc/tonne) tc/tonne).. Despite Despite the historic historic progress, progress, there there is ample ample room room for energ energy y effic efficien iency cy improv improvem emen ent. t. a re relat lative ively ly large large potential for improved energy management practices exists. From the impact of trade perspective (2009), Cement is the indu indus stry try whic which h bec beckons ons the cou countr ntry’s y’s econom onomy y and has resulted in construction of small buildings to that of the multi storied building. It consists of grinded limestone, clay and silica which is being dried and mixed into a composite mass. Semifinished form of Clinker is being formed when this mixture is being heated, then this clinker is grounded and cooled in air to form form ceme cement nt.. With With libe libera rali liza zati tion on and and globa lobali liza zati tion on of the the economy alterations were being made to survive in the global econom economy. y. Manpo Manpowe werr costs costs were were reduce reduced, d, techn technolo ologie gies s were were bein being g impl implem emen ente ted d and and mode modern rniz izat atio ion n was was also also done done.. Till Till January 2007 was the import duty was 12.5% and after which this reduced to nil and still it’s into effect. From 2011 there will be an import duty on cement and cement clinkers called as the Clean Energy Cess, which will be collected as a duty of excise from coalmines. Acco Accord rdin ing g to Envi Enviro ronm nmen enta tall Agen Agency cy of Bris Bristo toll (200 (2005) 5),, the the objective is to deliver the performance performance of the industry in such a way way that that it re resu sult lts s in the the envi enviro ronm nmen enta tall bene benefi fit. t. The The plan plan includes the statutory and non-statutory activities with set of high level objectives to be fulfilled. The Cement Industry uses 17 | P a g e
this this plan plan in Engl Englan and d and and Wale Wales s to perf perfor orm m envi enviro ronm nmen enta tall targets, to compare the performance against the targets and report to public at large through the British Cement Association (BCA).The
key
aspects
were
concentrated
on
Key
Envi Enviro ronm nmen enta tall Issu Issues es,, Raw Raw mate materi rial als, s, Use Use and and disp dispos osal al of manufactured
cement
products,
Use
and
disposal
of
manufactured cement products. Accord According ing to Lloyd Lloyd Timber Timberlak lake e (2007) (2007),, Cemen Cementt indust industry ry is responsible for the sustainable development. It clearly has an impact over the present and the future. Manufacturing process involv involves es emissi emissions ons of gases gases with with clima climate te chan change. ge. Actio Action n by indivi individua duall compan companies ies,, the the CSI CSI has: has: Produ Produced ced and and updat updated ed a protocol for reporting and make an account of CO2 emissions that has been established all CO2 emissions from the cement industry, set of guidelines on the use of fuels and materials and a consistent approach for sustainable development. Monitoring and reporting the common emissions of protocol that identifies measurement measurement methods for nitrogen oxides, sulfur compounds, and part partiicula culate tes s and define ines to obta obtain in a how to obt obtain ain fingerprint
of
key
micro-pollutant
emissions.
CSI
has
established a Senior Advisory Board to advise the CSI leaders on critical issues. According to Rejie George Pallathitta (2008) Can Ultratech Be The Next Market Leader. Ceme Cement nt indus industry try is a homoge homogenou nous s industry with 125 large cement plants and more than 300 small cement plants in India. Large companies are acquiring smaller ones. ones. Aditya Aditya Birla Group (ABG) (ABG) acquire acquired d managem management ent control control 18 | P a g e
of L&T Cement on 17th June 2003, and renamed it UltraTech. It became the second largest cement producer and third in terms of profitability. Both Ultratech and ACC have increased sales growth and capacity utilization. Ultratech has an advantage of its raw materials with leases higher quality of raw materials. Both ACC and Ultratech enjoy lower fuel cost. Ultratech started to switch to coal as fuel. So, ACC may lose its advantage in near future. Ultratech is a part of Aditya Birla Group which has mor ore e
pro rom mote oters, rs,
highe ighes st
quali ualitty
human
capita pitall,
highe gher
operating leverage and better quality limestone than ACC. Acc enjo enjoys ys cost ost adva advant ntag age e over over Ultr Ultrat atec ech h in term terms s of powe power. r. Beca Becaus use e Ultr Ultrat atec ech h uses uses Na Naph phth tha a and and Fuel Fuel Oi Oill base based d Powe Powerr Plants which are of higher cost and ACC uses coal based plants. It mana manage ges s good good re rela lati tion onsh ship ips s with with impo import rte ers, rs, expo export rter ers, s, distribu distributors tors,, warehouse warehouse providers providers,, wholesa wholesalers lers,, retailer retailers s and dealers. Accord According ing to Mr Mr.. Sumit Sumit Banerj Banerjee ee (2009 (2009), ), mainl mainly y there there are 3 types of processes to produce cement – wet, semi-dry, and dry proc proces esse ses. s. The The dry dry and and semi semi-w -wet et proc proces esse ses s ar are e more more fuel fuel-efficient. Different varieties of cements are Ordinary Portland Cement (gray cement) account for 70% of total consumption, Portland
Pozzolana
Cement
account
for
18%
of
total
cons consum umpt ptio ion, n, Whit White e Ceme Cement nt,, Port Portla land nd Blas Blastt Furn Furnac ace e Slag Slag Cement Cement and Specialise Specialised d Cement. Cement. Asia accounting accounting for 66% of the global demand. China was the world’s largest consumer of ceme cement nt in 2008 2008 and and acco accoun unte ted d for for 48.7 48.7% % of tota totall ceme cement nt
19 | P a g e
consumption. India has the lowest level of per capita cement consumption. The current study on Indian cement industry is different from the the prev previo ious us stud studie ies s in the the foll follow owin ing g mann manner er.. An in dept depth h analysis of the Indian cement industry is done. The top 10 companies are analyzed. Also the industry is analyzed in terms of poli politi tica cal, l, envi enviro ronm nmen enta tal, l, tech techno nolo logi gica call
and and
econ econom omic ical al
analysis. The impact of the cement industry on the economic deve develo lopm pmen entt is anal analyz yzed ed.. The The impa impact ct of how how othe otherr re rela late ted d sectors like construction and real estate sectors impact this sector was analyzed. The main thing about the report is that it does does not not conc concen entr trat ate e on sing single le topi topic. c. This This re repo port rt is givi giving ng information on different aspects related to cement industry.
Objective of the Study The cement industry has been considered as the backbone of a nation’s economy, it is because, the almost all other industries are directly or indirectly inter-related to this industry. As mentioned above, it is base of all other industries, so it would be very interesting and important to know the effect of this industry i.e. cement industry on other industries like power, real estate, transport, mining etc. At the same time, it is also important to know the contribution of cement industry in the National economy by using different parameters like export related activities, role of technology etc. In addition to this, we 20 | P a g e
also wanted to know about the no. of players in the concerned market, and their respective market share in order to know the intensity and the depth of the industry. Cement is one of the industry, where lot of research and development can be done with the advancement in technology, which further makes the health of the industry more robust. Apart from this, we also wanted to know about the dominance of Indian cement industry in the global market, which plays an important role in the political as well as the economical relation of India with rest of the world.
3. Analysis of Cement industry 3.1 Introduction Cement industry is one of the core industries in any country, so in depth analysis of cement industry is very important. There are different aspect for our study, which will cover Market share and and Na Natu ture re of comp compet etit itio ion, n, Mark Market et segm segmen enta tati tion on,, Poli Policy cy framework (PESTEL analysis), Business diversification, Mergers & acqui acquisit sition ion,, Intern Internat ation ional al exposu exposure, re, Techno Technolog logy y intens intensity ity,, Marketing initiatives, initiatives, Future outlook and Comparison with other countries. All these aspects will provide in depth knowledge about the cement industry.
21 | P a g e
3.2. Major players in Indian Cement Industry & Nature of Competition Figure 1 :Top 10 Major player in Indian Cement Industry 2008-09 (Source: Prowess, CMIE)
3.2.1. ACC LIMITED ACC is India's leading manufacturer of cement and concrete. ACC’s has 16 modern cement factories and more than 40 ready mix concr concrete ete plant plants s throug throughou houtt the count country. ry. The distr distribu ibutio tion n channe channell has 20 sales sales office office,, 9000 9000 deale dealers rs and seve several ral zonal zonal office offices. s.
The The human capit capital al involve involved d in ACC ACC is aroun around d 9,000
person persons s throu through ghout out the the count country. ry. ACC manuf manufac actur tures es ordin ordinary ary Port Portla land nd ceme cement nt,, comp compos osit ite e ceme cement nt and and spec specia iall ceme cement nt.. Company has begun offering its marketing expertise to gain the market share. ACC is largest producer of cement and also the largest user of limestone, coal industry and railways. The compa company ny is commit committe ted d toward towards s enviro environme nment nt and and insta installi lling ng environment friendly equipment equipment in cement plants to reduce the pollution.
3.2.2. Grasim Industries Ltd Grasim Industries Limited is a flagship company of the Aditya Birl Birla a Group oup, ra ran nks among ong Ind India's ia's larg large est pri private ate sector ctor companies. Grasim started as a textiles manufacturer in 1948, 22 | P a g e
now it has Grasim's businesses comprise viscose staple fibre (VSF), cement, chemicals and textiles. Its core businesses are VSF and cement, which contribute to over 90 per cent of its revenues and operating profits Grasim is a global leader and a major major player player in viscose viscose stable fibre. fibre. Aditya Aditya Birla Group Group is the world’s largest producer of VSF which has 21% global market share. Grasim has a global market share of 10% and also 2 nd largest
producer
of
caustic
soda
in
India.
Grasim is a subsidiary UltraTech Cement Limited, which is a leading player in India. In July 2004, Grasim acquired a majority stake stake in Ultratech Ultratech;; this acquisition acquisition catapulted catapulted the Aditya Aditya Birla Birla Group to the top of the league in India. The amalgamation of Samruddhi Cement Limited (SCL) with UltraTech on 1 July 2010 restructured the cement industry.
3.2.3. Ambuja Cements Ltd. Ambuja Cements Ltd. (ACL) is one of the top cement manufacturing companies in India. It was formerly known as Gujara Guj aratt am ambuj buja a cem cement ent.. The Com Compan pany y com comme mence nced d cem cemen entt production in 1986. The global cement major Holmic has taken over management control of ACL in 2006. Holcim holds little over 46% equity in ACL. Company is growing at faster rate the curr cu rren entt in inst stal alle led d ca capa paci city ty is ab abou outt 25 mi mill llio ion n to tonn nnes es.. Th The e Company has 5 integrated cement manufacturing plants and 8 cement grinding units in the country.
3.2.4. Century Textiles & Industries Ltd
23 | P a g e
Century Textiles & Industries ltd was incorporated in 1897 but till 1951, it operated only one Cotton Textile Mill in Mumbai. 97% of the profit comes from cement, textile and paper & pulp segments segments.. Among Among these these cement cement contribu contributes tes 57% of the total prof profit it.. In 1974 1974,, the the Comp Compan any y dive divers rsif ifie ied d into into prod produc ucti tion on of Cemen Cementt by estab establis lishin hing g its first first cement cement plant plant at Baiku Baikunth nth to produce produce 0.60 million Tonnes of Portland Portland Cement. Cement. The present cap capacit city is 2.10 .10 milli llion TPA. PA. The The tot total pre res sent ent cem cement manufacturing capacity is 7.80 million TPA (4 plants).
3.2.5 India Cements Ltd The India Cements Ltd was the largest producer of cement in south India which was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949. Now there are seven plants 3 in Tamilnadu and 4 in Andhra Pradesh. It is a market leader with a market share of 28% in the South which aims to achieve a 35% market share in the near future. The Company has access to huge limestone resources and plans to expand its capacity. The Company has a strong distribution network. Its well established brands are Sankar Super Power, Coromandel Super Power and Raasi Super Power. Its products are ready mix concrete, Coromandel King-Sankar Sakthi- Raasi Gold, Coromandel-Sankar-Raasi, Blended Cement and Sulphate Resisting Portland Cement (SRC).
3.2.6. Shree Cement Ltd
24 | P a g e
Shree Shree Cemen Cementt is the large largest st cement cement manufa manufactu cturer rer in North North India and among the top five cement manufacturing groups in the country. It has increased its capacity 4 times in the last 5 years to reach present cement capacity (i.e. 12 million tons p.a.) p.a.) with manufacturi manufacturing ng plants plants at Beawar, Beawar, Ras, Ras, Khushkhe Khushkhera ra and
Suratgarh
in
Rajasthan and
Laksar
(Roorkee)
in
Uttarakhand. The Company follows a multi-brand strategy. Its highly
recognized
brands
of
Shree
Ultra,
Bangur
and
Rockstrong which together enjoy largest market share in high value markets of Rajasthan, Delhi & Haryana. Shree is also into the power sector and is an energy efficient and environment friend friendly ly compan company y and and receiv received ed many many awar awards. ds. it is an activ active e partic participa ipant nt at Climat Climate e change change forum forums s and and is the first first India Indian n cement company to join the Cement Sustainability Initiative of the World Business Council for Sustainable Development.
3.2.7. Madras Cements Ltd Madras Cements Ltd contributes most of the profits to Ramco Group, and is well recognized of South India which is located at Chennai.
The
first
plant
of
MCL
at
Raja
Nagar,
near
Virudhunagar in Tamil Nadu commenced its production in 1962 with with a capa capaci city ty of 200 tonne tonnes, s,..
The The major major produ product ct of the
compa company ny is Portla Portland nd cemen cement. t. The cemen cementt capac capacity ity is 10.49 10.49 mill millio ion n tons tons per per annum nnum.. The The comp compan any y is the the fift fifth h larg larges estt cement producer in the country. Ramco Supergrade is the most popular cement brand in South India. It also produces Ready
25 | P a g e
Mix Concrete and Dry Mortar products. It gives best return to its investors.
3.2.8. Birla Corporation Ltd Birla Corporation Limited is the flagship Company of the M.P. Birl Birla a Grou Group. p.
It is inco incorp rpor orat ated ed as Birl Birla a Jute Jute Manu Manufa fact ctur urin ing g
Com Company Limi imited ted in 1919 1919..
It was was tra ran nsferr ferre ed fro rom m a
manufa nufac cture turerr
to
of jute ute
good goods s
a
lea leadin ding
multi lti-pro -prod duct uct
corporation with widespread activities. After it crossed the Rs. 1300 crore turnover mark and the name was changed to Birla Corporation
Limited
in
1998.Th .The
Company
showed
an
impres impressiv sive e growth growth record record in 2008-0 2008-09 9 and and 2009-1 2009-10. 0. Prese Present nt chairman is Mr H V Lodha. It has products ranging from cement to jute goods, PVC floor covering, as well as auto trims.
3.2.9. Dalmia Cement (Bharat) Ltd Dalmia Cement (Bharat) Ltd. was founded in 1935 by Jaidayal Dalmia. DCBL experienced a 7 decades of growth. The cement division of DCBL was established established in 1939. It is headquartered headquartered in New Ne w Delh Delhii with with ceme cement nt,, suga sugar, r, trav travel el agen agency cy,, magn magnet etit ite, e, refractory and electronic operations spread across the country. The Dalmia Group had established four cement plants. It had made
strategic
investment
in
Orissa
Cements
Limited
(OCL). DCBL has been and continues to be an industry leader in the niche market segment.
26 | P a g e
3.2.10 Nature of competition in cement industry Competition is a process of rivalry between different market players to attract customers. In their pursuit to be the best, mark market et play player ers s may may adop adoptt unfa unfair ir mean means s like like cart cartel eliz izat atio ion. n. There are goods which are tradable only in limited markets, Cement being a good example of this. Due to its bulky nature, it is not not poss possib ible le to tran transp spor ortt it to dist distan antt plac places es ther theref efor ore, e, geog geogra raph phic ical al segm segmen ents ts of a nati nation onal al mark market et can can be easi easily ly cartelized. World over it has adopted illegal ways, India is no exception. Cartelization in India is an open secret. The weak provisions in the MRTP Act, along with weak investigation capacity are the major reasons for cartel formation continuing for years. Cement doesn’t have any substitutes; this makes its demand inelastic. Also since transportation cost eats up a major chunk of the total cost, companies companies serve the regional markets markets and and do not operate operate out of their their region. region. This typica typicall nature nature of cement cement industry has allegedly driven the firm to form cartels. Since the majority of the market share is in the hands of large companies, they can come together and collude, leading to a decline in competition. The industry has witnessed more than a dozen take over’s in domestic region in the last few years.
27 | P a g e
The Builders Association of India (BAI) has alleged that India’s cement industry, the world’s second largest, is operating as a cartel. The recent allegation has come on the back of a continuous rise in cement prices from February by up to Rs 15-20 for a 50 kg bag. bag. The The asso associ ciat atio ion n said said top top play player ers s like like ACC, ACC, Ambu Ambuja ja Cements, Grasim, UltraTech and Jaypee Cement, which control almost half the domestic cement market, are in a dominant position to determine and monitor prices, the release issued by BAI said.
Table 2 : Price Trend for Cement Region State
Rate
(Rs
per North
West
Delhi Punjab Haryana Rajasthan Maharashtra
50 Rate (Rs 50 per kg kg bag)2004-05
bag)2004-05 150-155 160-165 160-165 145-150 170-175
190-220
200-230
(Mumbai) Maharashtra (Pune 145-150 ) East West Bengal Orissa Bihar South Tamil Nadu Andhra Pradesh Kerala Karnataka Centra Uttar Pradesh
165-170 140-145 140-145 145-150 120-150 155-160 155-160 150-155
200-230
210-265
l 28 | P a g e
Madhya Pradesh
140-140
or
135-140
(Source-Projectmonitor.com, financial express)
Factors•
Price variation,
•
Demand, Production,
•
Expense to sales ratio,
•
•
Capacity utilisation, Capacity enhancement
As the above ove price ice table show shows s tha that pric rice is drasti astica callly changing from 130 to 250 around 100% increase in 5-6 years, give give the the sign sign of cart cartel elis isat atio ion n in ceme cement nt indu indust stry ry as larg large e companies are gaining economics of scale in production, which is reducing the cost. But the prices are increasing. Factors that point towards cartelization are the structure of Indian cement industry with few large firms dominating the industry and the fall fallin ing g cost cost/e /exp xpen ense se to sale sales s ra rati tio o in the the last last year years s desp despit ite e rising prices. The large players are not restricting new players to enter in the market. All these things conclude that cartel exists in Indian cement indu indust stry ry and and comp compan anie ies s ar are e gett gettin ing g prof profit it out out of it with withou outt disclosing anything.
29 | P a g e
3.3. Market segmentation Market segmentation can be divided in two parts- (1) Geographical segmentation, (2) Customer segmentation.
3.3.1. Geographical Segmentation Figure 2 : Geographical Segmentation
CEMENT
EAST
WEST
INDUSTRY
CENTRAL
NORTH
SOUTH 30 | P a g e
T The he ceme cement nt indu indust stry ry in Indi India a can can be divi divide ded d into into the five five geogra geographi phica call zones zones of India India —N —Nort orth, h, South, South, East, East, West West and and central —based on localised variations in the consumer profile and supply-demand scenario. Figure 3 : Regional share of installed capacity (2009)
The South zone is the largest market, with the highest installed capacity of 67 million tonnes, followed by the North zone with about 48 million tonnes, in 2009. Source – (CMIE; Ernst & Young analysis)
Table 3 : Cement consumption (in million tonnes) Region 2009
2008
2007
2006
2005
2004
East
28.21
25.35
23.99
22.66
20.33
17.47
West
33.97
32.23
28.27
25.91
24.56
22.52
Centra 26.24
23.76
22.40
20.57
20.41
18.97
l North
35.12
33.52
29.88
27.06
24.26
22.86
South
31.96
31.52
39.37
44.45
49.16
54.26 (Sources:
CMIE; Ernst & Young analysis. )
Table 4 : Cement production (in million tonnes) 31 | P a g e
Region 2009
2008
2007
2006
2005
2004
East
25.99
23.85
22.07
20.04
18.73
16.67
West
28.46
28.75
27.30
24.93
22.76
21.00
Centra 26.10
25.00
24.00
22.30
20.40
18.50
l North
41.18
36.46
32.10
29.67
26.70
25.22
South
59.47
54.23
49.81
44.88
36.97
36.06
Sources: CMIE; Ernst & Young (Sources: analysis.)
Above table describes about the production and consumption. Key markets in northern India include the states of Rajasthan, Punj Punjab ab,, Hary Haryan ana a and and the the Na Nati tion onal al Capi Capita tall Regi Region on (NCR (NCR). ). Dema Demand nd in this this re regi gion on is bein being g driv driven en by infr infras astr truc uctu ture re,, residential and commercial projects. The state of Maharashtra and Gujarat are the key markets in East region. The demand for cement has grown in this region primarily due to an increase in the number of housing and infrastructure projects. In central regi re gion on,, Utta Uttarr Prad Prades esh h is the the ke key y mark market et.. Over Over the the past past few few year years, s, grow growth th in hous housin ing g and and comm commer erci cial al re real al esta estate te has has augmen augmented ted the demand demand for for cemen cementt in this this re regio gion. n. The ke key y markets in the East are the states of West Bengal, Orissa and Bihar. Bihar. Growt Growth h in housin housing g and and indus industri trial al activ activity ity is prima primaril rily y driv drivin ing g dema demand nd for for ceme cement nt in this this re regi gion on.. In the the sout southe hern rn regi re gion on Key Key mark market ets s ar are e the the stat states es of Tami Tamill Na Nadu du,, Andh Andhra ra Pradesh and Karnataka. The South zone has vast reserves of lime limest ston one. e. Grow Growth th in the the re real al esta estate te mark market et in the the re regi gion on,, 32 | P a g e
couple coupled d with with the the devel developm opment ent of ke key y infra infrastr struc uctur ture e proje projects cts such such as airp airpor ortt and and metr metro o ra rail il,, has re resu sult lted ed in incr increa ease sed d demand for cement in this region.
3.3.2. CUSTOMER SEGMENTATION Customer segmentation can be divided in three parts – Figure 4 : Customer Segments
HOUSING
INFRASTRUCTURE
REAL ESTATE
3.3.2.1. Housing A major portion of domestic demand of cement accounts for housing segment. As the per capita income and standard of livi living ng is incr increa easi sing ng,, the the dema demand nd for for hous housin ing g sect sector or is also also increasi increasing. ng. In eleventh eleventh five year plan (2007-12) (2007-12),, the demand for housing sector is estimated to improve from 24 million units to over 26 million unit till the end of plan. Urbanisation is taking place in India, which is driving the demand for more households. 33 | P a g e
3.3.2.2. Infrastructure The govt. has formulated the policy of special economic zone in India to develop industrial growth in particular area, which will need good infrastructure to boost ht Indian economy. The Govt. of Ind India is esti estima mate ted d to spe spend ar arou ound nd US$ US$ 350 350 bill billio ion n on infrastructure
projects
und
eleventh
plan.
Govt.
is
concentrating more for infrastructure, so it is demanding more cement. The demand for cement is rapidly increasing from past few years. Infrastructure Infrastructure projects such as the Dedicated Freight Corr Corrid idor ors s (DFC (DFCs) s) and and upgr upgrad aded ed and and Gree Greenf nfie ield ld airp airpor orts ts and and ports are expected to drive construction activity in India.
3.3.2.3. Real estate As, As, the the Ind Indian ian econ conomy omy is gro rowi wing ng with ith rapid pid ra rate te,, the the commercial real estate sector is also booming with the help of projects
like
retail,
office,
schools,
hospitals
and
multip multiplex lexes es .Serv .Service ice secto sectors rs such such as teleco telecom m and and fina financi ncial al serv servic ices es,, as well well as the the IT sect sector or (whi (which ch accou ccount nts s for for the the maximum commercial office space in the country) are growing. Manufact Manufacturin uring g sectors sectors (pharmac (pharmaceuti euticals cals,, biotechn biotechnology ology,, and automo automotiv tives) es) and fast fast moving moving consu consumer mer goods goods (FMCG (FMCG), ), are likely to drive the demand for office space.
34 | P a g e
3.4. PESTEL Analysis on Indian Cement Industry PESTEL
nalysis
is
the
study
of
uncontroll ollable
external
environment, which affects companies in any industry. PESTEL stands
for
political,
economic,
social,
technological,
environmental & legal. PESTEL analysis helps company to form the policies to grow in the industry.
3.4.1. Political 3.4.1.1.
SEZ
Act
to
improve
Infrastructural
Development SEZ is special economic zone. The govt. has formulated the policy of special economic zone in India to develop industrial growth in particular area. SEZs are proposed as duty free area for the point of trade, operations, operations, duty and tariffs. SEZ units are independent and incorporated having their own infrastructure and and
supp suppor ortt
serv servic ices es..
Infr Infras astr truc uctu ture re
deve develo lopm pmen entt
sole solely ly
depends on the cement industry, so political environment of India is in favour of cement industry.
3.4.1.2. Government participation Cement price is basically depends on the price of raw material such as power tariff, freight, cess on limestone and railway tariff tariff.. The Gover Governme nment nt is contr controll ollin ing g all these these price prices, s, on the 35 | P a g e
other hand govt. is consuming a huge amount of cement in the country. Many state govt. is making making attractive attractive policies (such as fiscal incentive in the form of sales tax exemption) to attract the investment within the state. Haryana is providing freeze on powe powerr tari tariff ff for for 5 year years, s, on the the othe otherr side side Guja Gujara ratt provi provide des s release from electric duty.
3.4.1.3. Political stability Coun Countr trie ies s wit with poli politi tica call stab stabil ilit ity y atta attain in a highe igherr grow growth th,, compare to political instable country.
The political stability in
India is good. The political instability came in the picture last 20 years years ago, ago, so polit politica icall stabil stability ity provid provides es a good good platf platform orm to Indian cement companies to develop the policies to come up with flying colours.
3.4.2. Economic The Indian economy is the fourth largest economy of the world on the basis of Purchasing Power Parity (PPP)* 1. The factors like Huge manpower manpower base, base, strong strong macro-e macro-econom conomic ic fundame fundamental ntals s and diversified resource base are the reasons that many other countries is attracted towards the investment investment opportunities and business.
1
Purchasing power parity (PPP) is a theory of long-term equilibrium exchange rates based on relative price levels of two countries.
36 | P a g e
3.4.2.1.
Growth
in
Construction
Activity
improving GDP Growth Currently, Indian cement industry is growing at higher rate with the help of many infrastructure and housing projects. Indian cement industry is contributing to India’s GDP to grow with a faster rate.
3.4.2.2. Increase in Per Capita Income In India per capita income is increasing with a good pace, which will result in increase in housing development, as the disposable income will be high and standard of living will be high
3.4.2.3. Rate hikes unlikely to slow down growth Cement prices are increasing from past year at rapid pace. In 2004, cement prices were rs.130-150. Cement price in current scenario is around Rs.230-250, so rate hike will unlikely to slow down the growth. 3.4.2.4. FDI Liberalization to enhance industry growth
In 1989 1989,, dere deregu gula lati tion on took took plac place e in Indi Indian an indu indust stry ry,, whic which h helped the industry to grow. In India, there is 100% foreign dire direct ct inve invest stme ment nt is allo allowe wed d in ceme cement nt indu indust stry ry.. The The firs firstt foreign company to enter in Indian market was Lafarge cement. As foreign investment is permitted, it will boost the cement industry in India. 37 | P a g e
3.4.3. Social 3.4.3 .4.3.1 .1.. Shift hiftiing cons consu umpti ption patt attern ern to fuel fuel industry growth The There re is a dras drasti tic c chan change ge in the the cons consum umpt ptio ion n patte attern rn of cement. In past, consumer purchases the cement as commodity, now it is cha changed nged from from comm commod odit ity y to bra brands. nds. Due Due to mark market etin ing g init initia iati tive ve of comp compan anie ies, s, bran brand d came came into into the the pict pictur ure. e. No Now w Indian Indian consum consumer er goes goes only only for brand branded ed cemen cementt like, like, Jaype Jaypee e cement, Ultratech etc.
3.4.3.2. Creation of direct and indirect jobs each year With a population of more than 100 billion people, the main problem is to provide job to each and every one. The Indian cement industry is providing job opportunities to many people.
3.4.3.3. Lifestyle and standard of living Stan Standa dard rd of livi living ng in Indi India a is incr increa easi sing ng,, as the the per per capi capita ta income is increasing. The increase in lifestyle and standard of living will affect the demand of housing sector in India. This will lead to grow the cement industry.
38 | P a g e
3.4.4. Technology The technology up gradation has helped the cement industry to incr increa ease se the the capa capaci city ty of plan plant, t, decl declin ine e in ther therma mall ener energy gy consumption, decline in electrical energy consumption, decline in cost of production of cement, decline in energy cost through co-p co-pro roce cess ssin ing g and and re redu duct ctio ion n in the the CO CO2 2 emis emissi sion on thro throug ugh h blended cement and energy conservation. Curre Currentl ntly, y, all all the the cement cement plants plants ar are e using using dry proce process ss with with most most effec effectua tuall pollut pollution ion contro controll measu measure re to accomp accomplis lish h the terms provided by the Pollution Control Authorities.
New technology adopted by industry •
Advanced control systems with soft sensors
•
All All fans fans (inc (inclu ludi ding ng HT) HT) with with vari variab able le spee speed d driv drives es,, preferably VFD’s*
•
Integrated computerised computerised quality control systems
•
Mines planning
•
Bulk analyser
•
Raw mix design and blending
3.4.5. Environmental 3.4.5.1. Easing environment norms
39 | P a g e
Entrepre Entrepreneu neurs rs in India India are required required to acquire acquire environme environmental ntal cle clear ara ance fro rom m int intro rodu duce ced d
the the
Min Ministr istry y
Enviro viron nmenta entall
of Envir nviron onm ment. ent.
Manage agement
Recen cently tly
Syst System ems s
(EMS (EMS))
certific certificatio ation n is a mechanis mechanism m by which which cement cement companie companies s can acquire the label of environmentally environmentally sound enterprises and also derive derive the benefit benefits s of improved improved performa performance. nce. The EMS does does not lay down specific specific environme environmental ntal performa performance nce criteria criteria but requires an organisation to formulate policies and objectives, taking into account information about significant significant environmental effects for continual improvement. ISO 14000 environmental environmental managemen managementt standards standards have been established to help companies : •
Minimize those operations which adversely affect the environment ( air, water or land)
•
Comply with applicable laws and regulations
•
Continually Continually improve in the the above above
The major objective of the ISO 14000 series of norms is "to promote
more
effective
and
efficient
environmental
management in organizations and to provide useful and usable tools - ones that are cost effective, system-based, flexible and refl re flec ectt the the best best or orga gani niza zati tion ons s and and the the best best or orga gani niza zati tion onal al practices
available
for
gathering,
interpreting
and
communicating environmentally relevant information" Acts Acts which which concer concern n cemen cementt indus industry try from from the enviro environm nment ental al viewpoint are: •
•
Air (Prevention & Control of Pollution) Act, 1986 The Environmental (Protection) Act 1986 40 | P a g e
•
Forest (Conservation) Act, 1980
•
Water (Prevention & Control of Pollution) Cess Act, 1974
•
Water (Prevention & Control of Pollution) Cess Act, 1977
•
The Public Liability Insurance Act, 1991
3.4.6. Legal In Indi India a, the the Depart Departmen mentt of Indust Industria riall Policy Policy and and Promot Promotion ion (DIPP), (DIPP), under the Ministry of Commerce and Industry, Industry , is the nodal agency for the development of cement industries, industries, that is, it is invo involv lved ed in moni monito tori ring ng thei theirr perf perfor orma manc nce e at re regu gullar intervals and suggesting suitable policy incentives, as per the requi requirem rement ent.. The Depart Departme ment nt is respon responsi sible ble for formu formulat lation ion and
implem pleme entati tation on
of
prom promot otio ion nal
and
devel evelop opm mental ntal
measures for growth of entire industrial sector in general and of some some selec selected ted indust industrie ries s like like cemen cement, t, light light engin enginee eerin ring, g, leat leathe her, r, rubb rubber er,, ligh lightt mach machin ine e tool tools, s, etc. etc. in part partic icul ular ar.. It is involved in framing and administering overall industrial policy and foreign direct investment (FDI) policy as well as promoting FDI inflow into the country. It plays an active role in investment promotion through dissemination of information on investment clim climat ate e and and oppo opport rtun unit itie ies s in Indi India a as well well as by advi advisi sing ng prospective investors about various policies and procedures. Some of the rules and orders, administered by DIPP, relating to the cement industry are:•
Cement Control Order, 1967 41 | P a g e
•
Cement Cess Rule, 1993
•
Cement (Quality Control) Order,1995
•
Cement (Quality Control) Order, 2003
3.5.
Business
Diversification:
Conglomerate or Standalone The following group of industries industries are conglomerate –
3.5.1. Grasim industries Grasim's business started as a textile manufacturer in 1948, toda today y it enco encomp mpas asse ses s visc viscos ose e stap staple le fibe fiberr (VSF (VSF), ), ceme cement nt,, chemicals and textiles; VSF and cement, contributing to over 90 per cent of its revenues and operating profits. Through its subsidiary UltraTech Cement Limited, it has a capacity of 52 million ton Per annum and is a leading player in India. UltraTech Cement Limited manufactures and markets-Ordinary Port Portla land nd ceme cement nt,, Port Portla land nd Blas Blastt Furn Furnac ace e Slag Slag Ceme Cement nt and and Portland Pozzalana Cement, ready mix concrete (RMC).
3.5.2. Century Textiles and Industries Ltd Century Textiles and Industries Ltd. was incorporated in 1897 and has made rapid progress in expanding and diversifying its activities. The details of activities presently being carried on by the Company are as follows:-
42 | P a g e
Figu igure 5 :
Revenue mix of Century Textiles les and
Industries Ltd. 2008-09.
(I) Business Segment – Textiles Cotton Textiles, Yarn and Denim Century Rayon - VFY, CSY & Rayon Tyre Yarn (II) Business Segment - Cement In 1974, the Company diversified into production of Cement by sett settin ing g up its its firs firstt ceme cement nt plan plantt at Baik Baikun unth th,, near near Raip Raipur ur (Chh (Chhat atti tisg sgar arh h)
to prod produc uce e Port Portla land nd ceme cement nt.. The The curr curren entt
capacity is 2.10 million TPA. (III) Business Segment – Century Pulp and Paper
3.5.3. Jaypee Group The Jaypee group is a diversified infrastructure conglomerate and has a terrific presence in Engineering & construction along with interests in power, cement and hospitality, real estate & expressway. The engineering & construction of Jaypee group in the construction of multi-purpose River Valley and Hydropower proj projec ects ts.. Engi Engine neer erin ing g and and Cons Constr truc ucti tion on of the the Grou Group p is an 43 | P a g e
acknowledged acknowledged leader. The group has the largest share in Indian Hydropower. Jaypee group has 4 five star hotels. The Group is a pione pioneer er in the devel developm opment ent of India India’s ’s first first golf golf centr centric ic Real Real Estate. Jaypee Greens - a world class fully integrated complex consi consists sts of an 18 hole hole Greg Greg Norma Norman n Golf Golf Course Course.. Stretc Stretchi hing ng over 452 acres, it also includes residences, residences, commercial spaces, corporate park, entertainment and nature in abundance.
3.5.4. Dalmia Cement (Bharat) Limited (DCBL) Dalmia have cement plants in southern states of Tamil Nadu and Andhra Pradesh and eastern regions of the country, with a capacity of 9 million tonnes per annum. Since 1939, DCBL is a major major ceme cement nt player player with a double double digit marke markett share share and a leader in super specialty cements used for Oil wells, Railway sleepers and Air strips. Dalm Dalmia ia start tarted ed manu manufa fact ctur urin ing g suga sugarr in the the midmid-Ni Nine neti ties es Ramgarh Chini Mills (Distt. Sitapur) UP. The sale of sugar forms a major major part part of Dalmi Dalmia’s a’s reven revenues ues and and uses uses state state-of -of-th -the-a e-art rt technology which ensures high productivity. productivity. The following companies are standalone-
3.5.5. ACC Limited ACC (ACC Limited) is India's primary manufacturer of cement and concrete. Its operations are spread throughout the country with 16 modern cement factories, more than 40 ready mix concrete plants, 20 sales offices, and several zonal offices, a
44 | P a g e
workforce of around 9,000 persons and the distribution network comprising over a 9000 dealers. Since the start in 1936, the company has been a trendsetter and has set benchmark in many areas of cement and concrete tech techno nolo logy gy.. It has has an exce excell llen entt trac track k re reco cord rd of inno innova vati tive ve research research,, product product developm development ent and speciali specialized zed consulta consultancy ncy servic services es.. The compan company's y's diffe differen rentt manufa manufactu cturin ring g units units are backed by a central technology support services centre - the only one of its kind in the Indian cement industry. ACC has extensive experience in mining, being the largest user of limestone. It is one of the biggest customers of the domestic coal coal indus industry try,, of India Indian n Railwa Railways ys,, and of the count country’ ry’s s road road transport network services for inward and outward movement of materials materials and products. products. The company company promotes promotes the use of other alternative fuels and raw materials and offer solutions for was waste
managem gement
recycling
and
like like
tes testin ting,
co-processing,
sugge ggestio tions
thereby
is
for
reus re use e,
environment
consciousness.
3.5.6. Ambuja Cements Ltd Ambu Ambuja ja Cem Cements Ltd Ltd. (ACL ACL) is one one of the major jor cem cement manu manufa fact ctur urin ing g comp compa anies nies in Indi India a. The The Compa ompany ny star starte ted d cement production in 1986, and was acquired by the global cement major Holcim in 2006.Today, Holcim holds a little over 46% equity in ACL. ACL has grown significantly over the past decade, and current ceme cement nt capa capaci city ty is abou aboutt 25 mill millio ion n tonn tonnes es.. It is the the firs firstt 45 | P a g e
ceme cement nt manu manufa fact ctur urer ers s in Indi India a to buil build d a capt captiv ive e port port with with thre three e term termin inal als s alon along g the the coun countr try’ y’s s west wester ern n coas coastl tlin ine e to facili facilitat tate e timely timely,, cost cost effec effectiv tive e and and envir environm onment entall ally y clean cleaner er shipments of bulk cement to its customers and has its own fleet of ships. It also initiated the development of the multiple biomass co-fired technology for generating greener power in its captive plants. 3.5.7. India Cements Ltd
The India Cements Ltd was established in 1946 and was setup at Sanka nkarnaga nagarr in Tam Tamilna ilnad du in 1949 949 and is the the larg large est producer of cement in South India. The Company has access to huge limestone reserves and plans to expand volumes by debottlenecking and optimisation of existing plants as well as by acquisition.
3.5.8. J.K. Cement J.K. Cement is an affiliate of the J.K. Organization, founded by Lala Kamlapat Singhania. The J.K. Organization is an association of industrial and commercial companies which have operations in a number of industries. J.K Cement commenced commercial production in May 1975 at Nimbahera in the state of Rajasthan. It is one of the largest cemen cementt manuf manufac actur turers ers in Northe Northern rn India India,, the secon second d large largest st white white ceme cement nt manuf manufac actur turer er in India India by produ producti ction on capac capacity ity.. Whil While e the the grey grey ceme cement nt is majo majorl rly y sold sold in the the nort northe hern rn Indi India a market, the white cement is exported to countries like South 46 | P a g e
Africa Africa,, Ni Niger geria ia,, Singa Singapor pore, e, Bahrai Bahrain, n, Bangla Banglades desh, h, Sri Lanka Lanka,, Kenya, Tanzania, UAE and Nepal.
3.5.9. Lafarge Lafarge India is a subsidiary of the French Building Materials major Lafarge and entered the Indian market in 1999, with the acqu acquis isit itio ion n of the the ceme cement nt busi busine ness ss of Tata Tata Stee Steel. l. This This was was followed by the purchase of the Raymond Cement facility in 2001. Lafarg Lafarge e is the the world world leade leaderr in build building ing mater material ials s compri comprisi sing ng cement, cement, aggregate aggregates s & concrete concrete and gypsum.I gypsum.Itt has 4 cement plants
in
India:
two
integrated
plants
in
the
state
of
Chhattisgarh , one grinding station each in Jharkhand & West Bengal. Total cement cement production production capacity capacity currently stands at about 6.5 million tons. Lafarge India produces different types cements- Portland Slag Ceme Cement nt,, Port Portla land nd Pozz Pozzol olan ana a Ceme Cement nt.. Its Its bran brands ds Lafa Lafarg rge e Cement and Lafarge Concreto Cement have a good reputation in India and are amongst the highest priced brands.
3.6.
Consolidation
-
Mergers
&
Acquisitions The The globa globaliz lizati ation on of India Indian n ceme cement nt indust industry ry has encour encourag aged ed many foreign cement cement manufac manufacture turers rs to invest invest in the rapidly growing Indian cement market. This has been possible through various mergers and acquisitions deals. Some of the major M&A 47 | P a g e
deals between domestic and foreign cement manufacturers in recent years are as follows:
3.6.1. Holcim buys AP-based Encore Cements Holcim, the Swiss cement giant, acquired a 100 per cent stake in Encore Cements & Additives Private Ltd, an Andhra-based coas coasta tall ceme cement nt plan plantt with with a 200, 200,00 000 0 tonn tonnes es capa capaci city ty slag slag grinding unit in Vishakapatnam, through its Indian arm, ACC in January 2010.This acquisition led to setting up of ACC’s first plant in Andhra Pradesh whi which helped the company in strengthening its presence in coastal Andhra Pradesh. Though deal’s size was not officially disclosed, but according to industry anal analys ysts ts,, the the deal deal size size was was in the the ra rang nge e of Rs.4 Rs.40 0 cror crore e and and Rs.50 crore.
3.6.2. 3.6.2. Holcim Holcim Cement Cement - Gujarat Gujarat Ambuja Ambuja Cements Cements (GACL) Holcim Cement entered into a crucial partnership with GACL, in 2006, to acquire 14.8% in GACL to enter into in the Indian Cement Industry’s dynamic growth. Both the partners wanted to expand their operations in South Asia, Middle East and the adjoining regions in Indian Ocean. They wanted to enrich each other other by excha exchangi nging ng experi experienc ences es in produ product ct devel developm opment ent,, Human Human Resource Resources s and Informa Information tion Techn Technology ology..
In addition addition,,
Holcim desired to use India as a base for its IT & R&D, to create a better position in the cement industry. 48 | P a g e
3.6.3 Lafarge India Lafarge India is a subsidiary of the Lafarge Cement Company of France and was established in India with the acquisition of the Tisco and the Raymond cement plants. Tisco was acquired for a valu value e of Rs.5 Rs.550 50 cror crores es in No Nove vemb mber er 1999 1999.T .Tis isco co’s ’s prem premiu ium m quality Portland slag cement in the Eastern Indian states of West Bengal and Bihar, high grade ordinary Portland cement in Madh Madhya ya Prad Prades esh h stre streng ngth the ened ned the the posi positi tion on of Lafa Lafarg rge e in Eastern India. The contract also required to provide Tisco’s high quality slag. This This acquis acquisiti ition on was was follow followed ed by anoth another er acqui acquisi sitio tion n of the Raymond Cement facility in 2001 for Rs.785 crores in an all cash deal. This deal was aimed at enhancing Lafarge’s position in Easte Eastern rn India. India. Huge Huge depos deposits its of limes limeston tone e with with Raymo Raymond nd helped in increasing the production capacity in coming years. This unit was 100 kms away from the Tisco Tisco plant, plant, a strategi strategic c move by Lafarge. Part of the proceeds was used by Raymond in paying off debts and investment in areas textiles, distribution and retailin retailing. g. These These acquisi acquisition tions s signale signaled d that Lafarge Lafarge was all read re ady y to expa expand nd its its wing wings s in bec becomin oming g a lead leadin ing g ceme cement nt manufacturer in the world.
3.6.4. Heidelberg Cement - Indorama Cement Ltd Heidelberg Cement is a leading German company in the fields of cement, concrete and is one of the world’s largest manuf manufac actur turers ers of buildi building ng materi materials als.. It entere entered d into into a 50:50 50:50 49 | P a g e
join jointt ventur venture e with with Indora Indorama ma Cemen Cementt Ltd Ltd in March March 2006.T 2006.Thi his s was a big step for Heidelberg Cement in establishing itself a long long-t -ter erm m mark market et posi positi tion on in Mumb Mumbai ai and and Pune Pune.. In August August 2006, Heidelberg Cement acquired a major share in the cement manuf manufac actur turer er Mysore Mysore Cemen Cements, ts, and took took over over operat operation ions s in central and southern India. This led to greater synergies and managerial efficiencies
3.6.5. Italcementi cement - Zuari Cement Limited Italcementi
Cement
is
among
the
largest
cement
manuf manufac actur turing ing compa companie nies s in the world world.. In 2001, 2001, Italce Italceme menti nti Ceme Cement nt Comp Compan any y with with the the help help of the the Cime Ciment nts s Fr Fran ança çais is,, a subs subsid idia iary ry for for its its glob global al acti activi viti ties es,, ente ntere red d into a 50:5 50:50 0 agre agreem emen entt with with Zuar Zuarii Ceme Cement nt Limi Limite ted d in Andh Andhra ra Prad Prades esh, h, southern India. This gave the company a strong foothold in India. The deal was of about 100 million euros. In 2002, Zuari Ceme Ce ment nt li limi mite ted d to took ok ov over er Sr Srii Vi Vish shnu nu Ce Ceme ment nt Li Limi mite ted, d, a 1. 1.2 2 Million Tonne capacity plant at Sitapuram. Sitapuram . The cement business then grew from 1.7 to 3 million tonnes per annum. In 2006, 2006, the Italce Italceme menti nti Group Group acqui acquired red full full contr control ol of Zuari Zuari Cement Cement for Rs 600 crore, crore, to strength strengthen en its presence presence in India. India. The company's net sales in the Indian market were roughly Euro 116 million in 2006. In 2007, Sri Vishnu Cement Limited merg merged ed into into Zuar Zuarii and the the same same year year a tota totall pro rodu duc ction tion capacity of 3.5 million tonnes was achieved. Present capacity is almost around 6 million tones.
50 | P a g e
3.6.6. Mergers and Acquisitions before 2006 •
Gujarat Ambuja took over 14% stakes in ACC
•
Guja ujara ratt Ambu Ambuja ja took ook over ver DLF DLF cements ents and Modi odi Cement
•
India India Cement Cement took control control over Raasi Raasi Cement Cement and Sri Vishnu Cement
•
Grasim's acquired L&T, Sri Digvijay Cement.
3.7. 3.7. Inte Intern rnat atio iona nall Expo xposure sure of Ind Indian ian Cement Industry Cement is one core industries in India. For the past seven years there has been an immense growth in the cement industry. Domestic cement demand growth has surpassed the economic growth rate of the country for the past couple of years. Over the past five years the growth rate of cement demanded grew up to 8.37 % which was higher than the rate of growth of supp supplly at 4.8 4.84% and also lso the the ra ratte of gro rowt wth h of capac pacity ity addition during the same period. As it is known that it is the basic material in all types of construction activities throughout the globe, globe, the growth growth and and expansi expansion on of a nation’s nation’s econo economy my dep depends ends upon pon it, it, as it supp suppor orts ts the the expa expans nsiion of oth other indu indust stri ries es,, henc hence e we can can say that that the the expo export rt and and impo import rt aspects of cement is a quite sensitive issue. The The expo export rt and and impo import rt of ceme cement nt depe depend nds s upon upon vari variou ous s factors,
like
prices,
government
rules
and
regulation, on, 51 | P a g e
availability of raw materials etc. In India, the export of cement took took place place basic basicall ally y after after the liber liberali alisat sation ion of the econom economy, y, which further boosted the industry’s performance in the later years. The major markets of Indian cement industry are Middle East and South East Asia due to an abundant presence of raw materials, location advantage & production of quality cement with with late latest st tech techn nolog ology. y. As per per the the data data re rele leas ased ed by CMA, CMA, Gujarat Ambuja Cements Ltd. & Jaypee Industries are the top exporters of cement from India. In addition to this, the western part of the country accounts for approximately 92% of the total export of cement from the country, out of which Gujarat alone holds 75% share. Gujarat based Sanghi Cement realised 33% of its its tota totall sale sales s from from expor exports ts where where as
Saur Sauras asht htra ra Cemen Cementt
realised 24% of its sales. Alt Althoug ough Ind India has has been consi onside dere red d as one one of the most ost preferred location for export of cement, in the last few years, the the export port of cement has bee been affecte cted by the the var various ious government policies. For example, mid-April 2008, Government of India imposed a ban on export of cement and clinker to its neighbouring neighbouring countries including Nepal in order to preserve the country’s foreign exchange reserve. The government imposed ban on the export of cement in order to boost the supplies and contain prices of commodities in order to keep inflation under check. But surprisingly this ban did not have much impact on the cement industry, because when the recession came to an end, nd, huge inve nvestme tments nts were were made in con constru struc ction ion and 52 | P a g e
infr infras astr truc uctu ture re sect sector or.. ** **In In the the fisc fiscal al year year 2009 2009-2 -201 010, 0, the the cement export of India declined by 29% to 2.27 million tonnes, even though the cement production was increased about 11% in the same fiscal year, which again proved that the demand of cement in domestic market had increased over the last 2 years. The major importers of the Indian cement are Sri Lanka and Middle East countries, where real estate sectors have boomed in
the
last
neig neighb hbou ourring ing
2
years.
Cement
is
being
countr untrie ies s
making king
ceme ement
imported duty duty
fre ree e,
from With ith
Government of India intervention. However, imports of cement will remain negligible and will not pose a threat to domestic indu indust stry ry due due to logi logist stic ics s issu issues es and and lack lack of port port hand handli ling ng capabilities. When we talk about the imports of cement in India, then we can’t leave Pakistan. Pakistan has been considered as one one of the the trad tradit itio iona nall impo import rter er of ceme cement nt to Indi India. a. Ceme Cement nt impo import rt from from Paki Pakist stan an star starte ted d from from 2007 2007,, when when Indi India a lift lifted ed import duty and some of the additional custom duties, since then the Pakistani firms have exported ***1,242,588 tonnes of ceme cement nt to Indi India a. But But in 2009 2009,, ques questi tion ons s on the the qual qualit ity y of Paki Pakist stan anii ceme cement nt star starte ted d to ar aris ise. e. Late Laterr on, on, 24 Paki Pakist stan anii ceme cement nt comp compan anie ies s got got BIS BIS {Ind {India ian n Bure Bureau au of Stan Standa dard rd} } to export export cement cement to India. India. Till 2008, India imported imported 4.57 million million tons of cement from Pakistan. India banned the export of cement in order to keep a check on infl inflat atio ion. n. Indi India a plan plans s to incr increa ease se its its impo import rt of ceme cement nt from from 53 | P a g e
Pakistan, and buy a total of seven million tons this fiscal year. With effect effect from May 1(2008), 1(2008), 21 lakhs lakhs (2.1 million) million) tones of cement from Pakistan are being imported. In tota total, l, incr increa ease se in impo import rts s of abou aboutt seve seven n mill millio ion n tons tons of cement by 2010, is being expected. The abolition of import duty on coal is being demanded by the cement industry since it is a very vital raw material in the production of cement. The current import duty on coal and pet coke is 5%. Major cement prod produc ucer ers s depe depend nd on impo import rts s of this this fuel fuel sinc since e dome domest stic ic availability is limited. Cement can be imported without duty; however duty has to be paid by cement manufacturers on the imports of inputs. According to Cement Manufacturer’s Association (CMA), due to the shortage, coal and pet coke has to be imported. Initially, Indi India a did did not not allo allow w any any impo import rts s thro throug ugh h the the Waga Wagah h bord border er.. Howe Howeve verr Paki Pakist stan an allo allowe wed d Afgh Afghan aniistan stan to expo export rt to Indi India a through
the
Wagah
border.
Since
August
2007,
16
manufacturers have been given license for selling cement in India. About 50,000 tons of cement has entered the country, largely through the rail route. According to the figures announced by Cement Manufacturers Asso Associ ciat atio ion n of Indi India, a, ceme cement nt cons consum umpt ptio ion n was was at its its peak peak during 2009-2010. It registered 8.6 % year on year growth.
54 | P a g e
The major major players players like Shree Shree Cement, Cement, Jaipraka Jaiprakash sh Associat Associates, es, Dalmia Cement and Grasim Cement reported high growth rates of 28.4 percent, 28 percent, 23.7 percent and 21.3 percent year year-o -onn-ye year ar,, re resp spec ecti tive vely ly.. Madr Madras as Ceme Cement nt and and Ultr Ultrat atec ech h Ceme Cement nt also also re repo port rted ed good good grow growth th that that is high higher er than than the the industry average.
In comparisons comparisons from that of the 2007 result
Ambuja cement has contracted only half of the exports which results to 0.6 million tones. In spite of the recession having a negative impact on many industries all over the world, the cement industry stood strong and continued at a steady growth rate. Although both steel and cement cement are vital ingredie ingredients nts for infrastr infrastructu uctural ral developme development, nt, the VAT on cement was 12.5 per cent but only 4 per cent on steel. To make cement available, import duty was reduced to nil from 12.5%. The government introduced a dual exercise duty on cement wherein Rs.600 per million tonnes of cement with more than Rs.190 per bag and exercise duty of Rs.300 million tonnes on cement with less than rs.190 per bag. In response to Pakistan’s ban on the export of onions, the government is planning on imposing an import ban of cements from that country. The export and import of cement is going to increase as long as there is an increase in the demand for cement and infrastructural activities.
55 | P a g e
3.8. Technology Intensity Tec Techn hnol olog ogy y play plays s an impo import rtan antt ro role le in the the grow growth th of any any industry. It is also true in the case of cement industry. From past few years Indian cement industry is continuously adopting new technology. The technology up gradation has helped the cement industry to increase the capacity of plant, decline in ther therma mall ener energy gy cons consum umpt ptio ion, n, decl declin ine e in elec electr tric ical al ener energy gy consumption, decline in cost of production of cement, decline in energy cost through co-processing and reduction in the CO2 emission emission through through blended blended cement cement and energy energy conserva conservation tion.. Modernization at plant process has also helped to reduce the human human capit capital al need need for creat creation ion of cement cement.. At prese present, nt, the qual qualit ity y of ceme cement nt in Indi India a is meet meetin ing g with with benc benchm hmar ark k and and dextrous to compete with the international players.
3.8.1. Cement Production Process Production of cement is three step process•
Preparing raw materials: Mixing/homogenising, Mixing/homogenising, grinding and preheating (drying) produces the raw meal.
•
Burning of raw meal to form cement clinker in the kiln: The components of the raw meal react at high temperatures (900-1500 °C) in the precalciner and in the rotary kiln, to give cement clinker.
•
Finish Finish grind grinding ing of clinke clinkerr and and mixin mixing g with with additi additives ves:: Afte fter cool ooling ing the clink linke er is gro rou und toge ogether wit with additives. 56 | P a g e
The process of production of cement is energy intensive. The heat is used to combine the raw material, chemically to create a compound with binding properties. These can be ground as a dry dry mixt mixtur ure e or comb combin ined ed with with wate waterr to form form slur slurry ry.. At this this stag stage, e, mixt mixtur ure e of wate waterr play plays s an impo import rtan antt impl implic icat atio ion n in production
process.
There
are
4
different
cement
manuf manufac actur turing ing pract practic ices es are: are: (1) (1) dry dry proce process, ss, (2) semisemi-wet wet proces process s (3) semi-d semi-dry ry proces process s and and (4) wet wet proce process. ss. The dry process process is contempo contemporary rary and more energy-e energy-effic fficient ient compared compared to other process. The wet process requires 0.28 tonnes of coal and 110 kWh of power to manufacture one tonne of cement, whereas the dry proc proces ess s re requ quir ires es only only 0.18 0.18 tonn tonnes es of coal coal and and 100 100 kW kWh h of power. Over last few years, Indian industry is giving preference to dry process (energy efficient) to gain the cost efficiency in the the mark rke et.
Since nce the the comm ommencem cement of the dec decontr ontrol ol
process, in India manufacturers have shifted to dry technology by modifying the plant. Continuous technological upgrading and assimilation of latest technology has been going on in the cement industry. Presently 93 per cent of the total capacity in the industry is based on modern modern and environme environment-f nt-frien riendly dly dry process process technolog technology y and only 7 per cent of the capacity is based on old wet and semidry process technology. There is tremendous scope for waste heat heat re reco cove very ry in ceme cement nt plan plants ts and ther thereb eby y re redu duc ction tion in 57 | P a g e
emission level. One project for co-generation of power utilising waste heat in an Indian Cement plant is being implemented with with Japa Japane nese se assi assist stan ance ce unde underr the the Gree Green n Aid Aid Plan Plan.. The The indu induct ctio ion n of adva advanc nced ed tech techno nolo logy gy has has help helped ed the the indu indust stry ry immensely to conserve energy and fuel and to save materials subs substa tant ntia iall lly. y. Some Some ceme cement nt plan plants ts have have set set up dedi dedica cate ted d jetties
for
promoting
bulk
transportation
and
export.
(Dipp.nic.in)
3.8.2. Adoption of Latest Technologies The roller mill has replaced the ball mills, which is used for grinding raw material and coal. The industry is also employing pre blend blending ing stock stockpil pile e and and consta constant nt homoge homogeniz nizing ing silos silos for homoge homogeni nizat zation ion of raw meal. meal. For energ energy y effic efficie ient nt grind grinding ing,, indu indus stry try
star tarted ted
usi using
roll oller
pre ress ss
and
high igh
eff effici icienc ency
separator separators. s. For packing packing purpose, purpose, electroni electronic c packing packing machines machines is taking place, which will enhance the weight reliability and effectiveness. The industry has also adopted the packed bag loading machine, which will save the time. Curre Currentl ntly, y, all all the the cement cement plants plants ar are e using using dry proce process ss with with most most effec effectua tuall pollut pollution ion contro controll measu measure re to accomp accomplis lish h the terms terms provi provided ded by the Pollut Pollution ion Contro Controll Autho Authorit rities ies.. All the
58 | P a g e
plants are adopting pollution control instruments, such as ESP 2, fabric bag dust collectors. Some of the new technologies are•
Advanced control systems with soft sensors
•
All All fans fans (inc (inclu ludi ding ng HT) HT) with with vari variab able le spee speed d driv drives es,, preferably VFD’s*3
•
Integrated computerised computerised quality control systems
•
Mines planning
•
Bulk analyser
•
Raw mix design and blending
Alternative Fuels
Indian cement industry has started utilising alternative fuels such as Pet coke, biomass, etc. The industry can also discover othe otherr oppo opport rtun unit itie ies, s, like like Util Utilis isin ing g worn worn tyre tyres, s, pain paintt slud sludge ge,, municipal solid waste.
3.8.3. Research and Development Research & development plays an important role for growth of any any indu indust stry ry.. R&D R&D perf perfor orma manc nce e help helps s in the the adap adapti tion on and and
2
An electrostatic precipitator (ESP), or electrostatic air cleaner is a particulate collection device that removes particles from a flowing gas (such as air) using the force of an induced electrostatic charge. charge. Electrostatic precipitators are highly efficient filtration devices that minimally impede the flow of gases through the device, and can easily remove fine particulate matter such as dust and smoke from the air stream.
3 A variable-frequency drive (VFD) is a system for controlling the rotational speed of an alternating current (AC) electric motor by controlling the frequency of the electrical power supplied to the motor.
59 | P a g e
abso absorp rpti tion on of tech techno nolo logy gy.. In Indi India, a, the the main main or orga gani nisa sati tion ons s dedicated to research and development activities are•
Nati Na tion onal al Coun Counci cill for for Ceme Cement nt and and Buil Buildi ding ng Mate Materi rial als s (NCB)
•
Central Research Station (CRS) of ACC Limited
•
Dalmia Dalmia Instit Institute ute of Scient Scientif ific ic and Indus Industri trial al Resea Research rch (DISIR)
The The machin machiner ery y suppl supplie iers rs for the indus industry try also also carry carry out the work of research and development. development. The key machinery supplier supplier with own R&D division are – •
Larsen & Turbo
•
Walchandnagar industries Limited
With the cement plants, the the centralised R&D Centre is estab stabli lis shed by Cement ent Cor orp por ora ation tion of Indi India. a. It help helps s the industry to adopt the new imported technology and to develop new technology to increase the efficiency efficiency of industry. The main area
of
research
is
energy
preservation,
production
opti optimi misa sati tion on,, qual qualit ity y enri enrich chme ment nt,, crea creati tion on of new new type type of cement, waste heat recovery and computerized methods for quarry planning. Current technologies used in industry are not sufficient for more more effic efficien ientt produc productio tion n of ceme cement nt in enviro environm nment ent frien friendly dly way. Future R&D Efforts
60 | P a g e
•
Maximising consumption of alternate fuels, fly ash, slag and and othe otherr ra raw w mate materi rial al that that will will lead lead to less less ener energy gy consumption.
•
NANO TECHNOLOGY4
in ceme cement nt manuf manufact actur ure e and and useuse-
nanotechnology nanotechnology can be the key for reducing CO2 emission in the production of cement may hold the key to reducing carbon carbon dioxi dioxide de emiss emission ions s in the produc productio tion n of cemen cement. t. Nano modification of concrete is potentially dextrous of sign signif ific ican antl tly y
impr improv ovin ing g
its its tens tensil ile e powe power, r, toug toughn hnes ess, s,
ductility, and durability properties. •
Better combustion efficiency technologies.
Table 5 : Current Investment in R&D activity Company name
Rs. In crores
(March
2010)
Ambuja cement
1.29 (December 2009)
ACC Limited
3.25
J.K. cement
0
Ultratech cement
0
Birla cement
0
J.K. laxshmi
0.31
Prism cement
0.8
Andrha cement
0
4* The term "nanotechnology" has evolved over the years via terminology drift to mean "anything smaller than micro technology," such as nano powders, and other things that are nanoscale in size, but not referring to mechanisms that have been purposefully built from nanoscale components
61 | P a g e
India cement
0
Madras cement
0
Binani cement
0
Shree cement
6.39 (Source-
CAPITALINE.COM)
The The curre current nt status status for resea research rch & develo developm pment ent shows shows,, that that Indian
companies
are
not
making
use
of
research
&
development to grow in the industry. India can become number one in the world, if Indian industry will make use of R&D to produce with more capacity with the help of new technology without harming the environment.
3.9. Marketing Initiatives As competition is increasing in the cement industry because foreign players are entering the domestic market, marketing becomes an essential task for cement companies to survive. In the the past past ceme cement nt was was more more of a comm commod odit ity y whic which h re requ quir ired ed minimum marketing effort but with changes in buyer behaviour ceme cement nt has has evol evolve ved d as a bran brand d whic which h re requ quiire res s exte extens nsiv ive e mark rke eting ting eff effor orts ts..
Cement compa ompan nies ies
are fal fallowi lowing ng the the
strategy of brand building to differentiate themselves. Celebrity endors endorsem ement ent and exten extensiv sive e covera coverage ge ar are e the ke key y eleme elements nts that cement companies are focusing to have top recall among users. 62 | P a g e
Binani Cements Ltd started by signing film personality Amitabh Bachha Bachhan n as its brand brand amba ambass ssado adorr it poste posted d 56% growth growth in profit before tax at Rs 244.84 crore in 2007-08.According to The The Econ Econom omic ic Time Times s the the comp compan anie ies s exte extens nsiv ive e adve advert rtis isin ing g campaign was one of the main reasons behind the growth in sales. Similarl Similarly y JK Lakshmi Lakshmi had signed signed actor actor Om Puri. Puri. CS Sadasiva Sadasivan, n, Chief of Marketing, JK Lakshmi Cement, said that cement is no longer just a commodity and to ensure long term profitability, all companies have to build its brand. French French multinat multinationa ionall Lafarge Lafarge has signed signed crickete cricketerr Mahendra Mahendra Singh Dhoni as the brand ambassador for their brand, Concreto. As per Vinod Juneja, MD of Binani Cement Ltd. because of such promotional methods there has been a steep rise in the sales of the companies specially in rural markets where the impact of brand ambassadors are high. On the other side we have companies like Ultratech which does not believe in celebrity endorsement, it promoted its phrase, ‘Ultratech, the engineers choice’ emphasizing that its cement is most preferred by engineers in the country. Ultratech Cement was also one of the main sponsorers for Rajasthan Royals, the Jaipur franchise of the Indian Premier League. The companies deal with Rajasthan Royals was in the range of $2 million. India Cement Ltd bagged Chennai’s IPL team with an aim to improve its brand visibility and recall would help it build itself 63 | P a g e
as a brand as it expands into new markets. According to India Cement the company’s brands (Coromandel, Sankar and Rasi) were household names in the South but in Maharashtra, where it is a new entrant, the Coromandel cement bags sport the tag line, ‘from the house of Chennai Super Kings.’ The company was confident that CSK would support it into the markets where it is new like Gujarat, Madhya Pradesh and Rajasthan in future. Cements are no more being sold in markets as commodities but as brands to which people can relate. Most of the cement compa companie nies s re relat late e their their produ product ct with with stren strength gth which which can can be justified by the following tag lines •
Sagar Cement- Solid cement solid home
•
Ultratech Cement- the engineers choice
•
Buland Cement- shakti Vishal rakcha ki dhal
•
JP Cement- Andar se solid
Table 6 : Expenditure on Marketing Company name
Rs.
In
crores
(March 2010)
Ambuja Cement
59.65
(December
2009) ACC J.K. Cement
53.16 26.31
Ultratech Cement
134.05
Birla Cement
7.03
J.K. Laxshmi Prism Cement
0 33.15 64 | P a g e
Andrha Cement
0.71
India Cement
30.16
Madras Cement
8.71
Binani Cement
28.64
Shree Cement
73.97
Dalmia Cement
7.5
Century Cement
7.56
Lafarge Cement
44.31 (source: capitaline.com)
At current companies are investing a lot in marketing marketing activities. The above table shows that Ultratech is investing around 134 cror crore e on adve advert rtis isin ing. g. Afte Afterr that that,, ther there e is a huge huge diff differ eren ence ce between the investments of companies. Marketing is playing an important role for cement companies to expand the sale of companies.
3.10. Future Outlook The future of an industry like cement basically depends upon the
pace
in
sectors
like
infrastructure
&
construction,
manufact manufacturin uring, g, transpor transportati tation. on. Because Because when these these industry industry will grow up the demand of the cement would increase with the time, and finally the growth of the industry i.e. cement industry will take place. Apart from this, as it is well known that, cement is such such a prod produc uctt whic which h play plays s a majo majorr ro role le in grow growth th and and expa expans nsio ion n of almo almost st each each and and ever every y sect sector or,, so the the futu future re 65 | P a g e
demand of the industry will always be on dynamic way, which further boost the industry also. As far as the future of the Indian cement industry is concerned, the industry is expected to grow at a CAGR of around 10.5% during 2010-11-2013-14. According to the
ACC-
the
largest
cement
company
of
country-
government’s continued thrust on infrastructure will help the industry to grow at the rate of around 9-10% annually in the next two years. The different government’s initiative by both, centra centrall as well well as state state govern governme ments nts,, like like NREGA NREGA,, JNNURM JNNURM,, Indira Aawas Yojna etc. has acted as the key driver of cement industry in last few years and they are expected to do so in the forth coming years. At present, around 55-60% of the total cement is consumed by housing sector. This is expected to change in the coming years, because, when the infrastructure developments like like road, road, railwa railways, ys, power power plants plants,, bridge bridges s etc. etc. will will take take place place the the sign signif ific ican antt perc percen enta tage ge of ceme cement nt will will be cons consum umed ed by these sectors. The demand of cement is also going to increase in the agriculture sector. For example, construction of new godowns, silos, warehouses will boost the demand of cement. Acco Accord rdin ing g to the the re rese sear arch ch re repo port rt name named d “Ind “India ian n ceme cement nt industry forecast 2012’’ by PR log, almost all major cement company in the country have decided to expand their production capacity in the coming 2-3 years { few of them have already expanded}, which clearly indicates that, the demand of 66 | P a g e
the cement is going to increase in the forthcoming years. The expansion plan of cement companies will not only help them to increase their domestic presence, it will also enable them to look for future export opportunities. opportunities. The availability of various types of cement like white cement, Portland cement, oil well cement etc. is a distinct aspect of Indian cement industry, which plays an important role in the busin busines ess s of ceme cement nt in its respec respectiv tive e marke market. t. In the coming coming years, it is expected that Indian cement industry would lead due
to
the
different
types
and
varieties
of
product.
According to Mr. Vinod juneja, MD, Braj Binani Group, in the next 10 years, India will become one of the major exporters of clinker and grey cement to middle east, Africa & other developing nations. In addition to this the increasing number of plan plants ts near near the the port ports s has has also also adde added d an adva advant ntag age e to the the export of the cement from country. Actually these data clearly indi indica cate tes s that that,, Indi India a is goin going g to beco become me one one of the the majo majorr exporters of cement in the world. It is also expected that, many foreign companies will invest in the cement sector in India because of constant demand and right valuation of the product. Indian companies will also go global through FCCB or GDR route.
3.11. Comparison with Other Countries
67 | P a g e
Comparison with the US Cement Industry USA is the third largest manufacturer of cement along with China and India. It comprises 39 cement companies with 115 cement plants spread in 36 states. CEMEX, SAB being in top cement companies of the US. In the US cement trade is patterned as the maximum consumption is between May and October. Most of the industry is concentrated in a particular region as cost of transportation is high than its actual value. The domestic production is always short of demand, therefore, depended on imports to a large extent. Whereas, in India, demand has an edge over supply, and the rate of exports are high. In terms of employment, the cement industry in the US has gained efficiency through automation and closure of outdated unit units. s. This This has has led led to a dram dramat atic ic decr decrea ease se in the the leve levels ls of empl employ oyme ment nt.. In Indi India, a, ceme cement nt indu indust stry ry bein being g a boom boomin ing g industry, more and more people are joining this sector. Due to grow growin ing g infr infras astr truc uctu ture re proj projec ects ts,, work workin ing g in this this indu indust stry ry is considered a lucrative option for the fresher’s and youngsters. The US cement industry is less energy intensive as compared to Indian cement industry which is extremely industry intensive and uses coal in large quantities.
Comparison with the Chinese Cement Industry Since 1985, China’s cement industry has been ranked as no.1 with a high growth rate. It is roughly double the production
68 | P a g e
capacity of India i.e. china’s production capacity is 300 million tonnes, whereas India’s production is 151.2 million tones. Chin China a has has adop adopte ted d vari variou ous s ways ways of elim elimin inat atin ing g back backwa ward rd cem cement cap capacit city. It is focu ocusing ing on re redu duct ctiion of carbon rbon emis emissi sion ons. s. That That’s ’s why why it has has adop adopte ted d dry dry manu manufa fact ctur urin ing g process to form cement which is more fuel efficient. The dry proc proces ess s re requ quir ires es only only 0.18 0.18 tonn tonnes es of coal coal and and 100 100 kW kWh h of power. The Chinese government processes wastes produced in the cement industry. Over 200 projects have been started to reduce environment pollution. India is the second largest producer of cement in the world. It has has a huge huge growt growth h pros prospe pect cts s due due to vari variou ous s infr infras astr truc uctu ture re projects, projects, housing housing faciliti facilities es and road networks networks.. Though, Though, India India needs to work on mining and environmental issues. Otherwise industrial growth would be rendered valueless and slow the pace of the growth.
3.12. Conclusion It can can be conc conclu lude ded d that that Indi Indian an ceme cement nt indu indust stry ry play plays s an important role in the development of country. The prices of cement is rising from past few year, so it’s responsibility of Govt. to take the charge and try to find out that cartel exists in cement industry or not. The price hike in the cement industry is affecting the lower class people in India, so it is necessary to stab stabil ilis ise e the the pric price e at the the bene benefi fitt of comp compa anies nies as well well as 69 | P a g e
consumers.
India
can
become
number
one
in
cement
production, when there will be no corruption and industry will conc concen entr trat ate e on Rese Resear arch ch & deve develo lopm pmen ent. t. The The dema demand nd for for cement will grow in the future, as population is increasing. The Indian cement industry is expected to grow rapidly in coming years
due
to
heavy
demand
from
housing,
retail
and
infrastructure industry .
4. Reference •
C.A.Hendricks, et.al (2009);
“Emission
Reduction
of
Gree Greenh nhou ouse se Gase Gases s from from the the Ceme Cement nt Indu Indust stry ry”, ”, IEA IEA Greenhouse gas R&D Programme, UK •
Senthilk Senthilkumar umar S., et.al (2009 (2009); ); “Devel “Developm opment ental al Issue Issues s in Indian
Cement
Industry”;
SCMS
Journal
Of
Indian
Management, April-May, 2009 •
Ritu Raj Arora and Runa Sarkar(2007); “Detecting Cartels in the Indian cement industry: An Analytical Framework”; Industria Industriall and Manageme Management nt Enginee Engineering ring Departme Department, nt, IIT Kanpur
•
L. G. Burange and Shruti Yamini (2008); “Performance of Indian Cement Industry – The competitive landscape”
•
Arindam Arindam Chakraba Chakrabarti, rti, et.al (2008 (2008); ); “Balan “Balanced ced Growth Growth:: A Strat Strategi egic c Impera Imperativ tive e for Indian Indian Ceme Cement nt Indus Industry try”; ”; Tata Tata Strategic Management Group 70 | P a g e
•
Paul Paul limp limpil ilaw aw and and Siem Siemen ens s AG (200 (2008) 8);; “Cem “Cemen entt plan plantt Auto Automa mati tion on In Emer Emergi ging ng mark market ets” s”,, Emer Emergi ging ng Mark Market ets s Report.
•
Rejie Rejie Georg George e Pallat Pallathit hitta ta(20 (2008) 08) “Can “Can Ultrat Ultratec ech h be next next market leader”
•
Improv Improvin ing g envir environm onment ental al perfor performa mance nce (2005 (2005))- Bristl Bristlol ol Environmental Environmental Agency, V-1
•
Erns Ernstt Worr Worrel elll and and Chri Christ stin ina a Gali Galits tsky ky (200 (2008) 8);; “Ene “Energ rgy y Efficiency Improvement and Cost Saving Opportunities for Cement Making”.
•
Shivani Anand (2009); “Identifying Cartel using Economic Evid Eviden ence ce –A case case stud study y of Indi Indian an Cemen ementt Indu Indust stry ry””Competition Commission Commission Of India
Various Websites •
Capitaline.com
•
Indiainbusiness.nic.in
•
Financialexpress.com
•
www.ibef.org/industry/cem www.ibef.org/industry/cement.aspx ent.aspx
•
www.economywatch.com www.economywatch.com › Business And Economy
•
www.business.mapsofindia.com
•
www.etintelligence.com
•
http://www.brighthub.com/e http://www.brighthub.com/engineering ngineering/civil/articl /civil/articles/47509. es/47509. aspx
•
http://www.marketwire.com/p http://www.marketwire.com/press-relea ress-release/Probing se/Probing-the-US-the-USCement-Industry-1167662.htm
71 | P a g e
•
http://www.articlesbase.com/business-articles/the-indiancement-industry-1042800.html
•
http://www.thehindubusi http://www.thehindubusinessline.c nessline.com/2009/06/28 om/2009/06/28/stories/ /stories/ 2009062851270200.htm
•
http://economictimes.indiatimes.com/news/news-byindustry/services/advertising/ultratech-to-sponsor-forrajasthan-royals-in-ipl/articleshow/4370209.cms
•
http://www.financialexpress.com/news/cement-makersstep-up-brand-building-drive/329127/0
•
http://www.business-standard.com/india/news/cementfirms-jumpthe-brandwagon/356316/
•
http://economictimes.indiatimes.com/news/news-byindustry/services/advertising/For-Binani-Cement-AmitabhBachchan-is-a-big-Burden/articleshow/3464554.cms
•
http://marketingpractic http://marketingpractice.blogspot.c e.blogspot.com/2010/01/bi om/2010/01/binaninanicement-sadiyon-ke-liye.html
•
http://www.lafarge-cem http://www.lafarge-cement.co.in/wps ent.co.in/wps/portal/ /portal/
•
http://www.saveondish.com/forum/ultratech-tcs-sponsorfor-rajasthan-royals-ipl-t-11839.html
•
http://www.hinduonnet.com/b http://www.hinduonnet.com/businessl usinessline/2000/04/2 ine/2000/04/29/sto 9/sto ries/14291201.htm
•
http://www.financialexpr http://www.financialexpress.com/old/f ess.com/old/fe/daily/2000 e/daily/20000429/f 0429/f co29031.html
•
http://www.heidelbergcem http://www.heidelbergcement.com/globa ent.com/global/en/compa l/en/company/gr ny/gr oup_areas/asia_pacific/india.htm
•
http://www.financialexpress.com/news/italcementisnaps-up-zuari-for-rs-600-cr/168663/3 72 | P a g e
•
http://www.business-standard.com/india/news/holcimbuys-ap-based-encore-cements/384086/
Telep Telepho honi nic c conv conver ersa sati tion on with with Mr.G Mr.G.Y .Y.. Nara Naraya yan n (Joi (Joint nt Secretary, CMA)
73 | P a g e
