Cement 270111

CEMENT
November 2010
CEMENT November 2010
Contents
 Advantage India
 Market overview
 Investments
 Policy and regulatory framework
 Opportunities
 Industry associations
2
ADVANTAGE INDIA
Cement November 2010
Advantage India
India is the second-largest cement producer in the world, with an installed capacity of
about 236 million tonnes (MT) in 2009–2010.
The sector is expected to add

Between 2005–2006 and 2009- Second-
an additional capacity of 92.3
2010, domestic sales and largest cement
MT by 2013. As a result, the
realisation of cement has been producer in the industry will have a total
estimated to have grown at a world
Industry installed capacity of 383.5 MT
CAGR of 18.4 per cent and Substantial
performance by March 2013.
10.6 per cent, respectively. capacity
indicators on an
expansion
incline
Advantage
India
The industry has witnessed Modern and Employment
continuous modernisation and eco-friendly generation The cement industry
adoption of new technologies. technology employed 140,000 people in
Almost 93 per cent of the total 2009.
capacity is based on eco-
friendly dry process Increasing interest
technology. from foreign players
Total FDI in the cement sector between April 2000 and August
2010 stood at US$ 1.9 billion.
Sources: ―Industry‖, Cement Manufacturers Association of India website, http://www.cmaindia.org/portal/industry/highlights.aspx, accessed 10 November 2010;
IAS, 10 November 2010, Centre for Monitoring Indian Economy
―Fact Sheet on Foreign Direct Investment (FDI)‖, Department of Industrial Policy and Promotion website, www.dipp.nic.in, accessed 10 November 2010
3
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
4
MARKET OVERVIEW
Market overview
• The installed capacity in the Indian cement market All-India cement installed capacity growth
was 236 MT in 2009–2010. (in MT)
250
• Installed capacity has increased at a compound 235.9
annual growth rate (CAGR) of 8.8 per cent 200 211.8
between 2004–05 and 2009–2010. 150 168.0
198.3
154.3 160.2
• The production of cement in 2009–2010 was 200.7 100
MT. 50
• The turnover of the cement industry has been 0

estimated at US$ 15.7 billion in 2009–2010. 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
All India cement capacity growth
• The Cement Manufacturers’ Association of India
(CMA) estimates the industry manpower at about
140,000 as on 31 March 2009. Sources: CMIE, Cement Manufacturers’ Association; Ernst &
Young analysis
• Cement players in India produce different types of
cement, based on different compositions such as
ordinary portland, portland pozzolana, portland
blast furnace slag cement, white cement and
specialised cement.
5
MARKET OVERVIEW
Market segments … (1/2)
Cement industry
East West Central North South
• The cement industry in India can be divided into five geographical zones of India — north, south, east,
west and central — based on localised variations in the consumer profile and supply-demand scenario.
6
MARKET OVERVIEW
Market segments … (2/2)

• The south zone is the largest market, with the Regional share of installed capacity (2009)
highest installed capacity of 67 MT, followed by
the north zone with about 48 MT, in 2009.
23%
North
33%
West
Central
East
16% South
14%
14%
Sources: CMIE; Ernst & Young analysis
7
MARKET OVERVIEW
Market segment — North

• Key markets in northern India include the states of Rajasthan, Punjab, Haryana and the National Capital
Region (NCR).
• Demand in this region is being driven by growth in infrastructure, and residential and commercial
construction. In the past few years, demand has been fuelled further by the metro project in Delhi NCR.
Cement consumption — north zone Cement production — north zone

(in MT) (in MT)
40.00 45.00 41.2

35.1
33.5 40.00 36.5
35.00
29.8 32.1
30.00 27.0 35.00
29.7
22.8 24.2 30.00 26.7
25.00 25.2
25.00
20.00
20.00
15.00
15.00
10.00 10.00
5.00 5.00
0.00 0.00
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
Sources: CMIE; Ernst & Young analysis.
8
MARKET OVERVIEW
Market segment ― West

• The states of Maharashtra and Gujarat are the key markets in this region.
• Over the past few years, growth in housing and commercial real estate has augmented the demand for
cement in this region.
• The western region also exports cement to countries in the Middle East.
Cement consumption — west zone Cement production — west zone

(in MT) (in MT)
40.00 35.00
33.9 28.7
35.00 32.2 30.00 27.3 28.4
30.00 28.3 24.9
24.5 25.9 25.00 22.7
25.00 22.5 21.0
20.00
20.00
15.00 15.00
10.00 10.00
5.00 5.00
0.00
0.00
2004 2005 2006 2007 2008 2009
2004 2005 2006 2007 2008 2009
9
MARKET OVERVIEW
Market segment ― Central

• The state of Uttar Pradesh is the key market in this region.
• The demand for cement in this region has primarily grown due to an increase in the number of housing
and infrastructure projects.
Cement consumption — central zone Cement production — central zone

(in MT) (in MT)
30.00 30.00
26.2 26.1
24.0 25.0
25.00 23.7 25.00 22.3
22.4
20.4 20.5 18.5 20.4
18.9
20.00 20.00
15.00 15.00
10.00 10.00
5.00 5.00
0.00 0.00
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
10
MARKET OVERVIEW
Market segment — East

• The key markets in the east are the states of West Bengal, Orissa and Bihar.
• Growth in housing and industrial activity are primarily driving demand for cement in this region.
Cement consumption — east zone Cement production — east zone

(in MT) (in MT)
30.00 28.2 30.00

25.3 25.9
23.9 23.8
25.00 22.6 25.00 22.0
20.3 20.0
20.00 20.00 18.7
17.4 16.6
15.00 15.00
10.00 10.00
5.00 5.00
0.00 0.00
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
11
MARKET OVERVIEW
Market segment ― South

• Key markets in the southern region are the states of Tamil Nadu, Andhra Pradesh and Karnataka.
• The south zone has witnessed increased capacity in last few years due to its rich limestone reserves.
• Growth in the real estate market in the region, coupled with the development of key infrastructure
projects such as airport and metro rail, has resulted in increased demand for cement in this region.
Cement consumption — south zone Cement production — south zone

(in MT) (in MT)
60.00 54.3 70.00
49.2 59.7
50.00 60.00 54.2
44.4 49.8
39.3 50.00 44.9
40.00
31.9 31.5 36.1 36.9
40.00
30.00
30.00
20.00
20.00
10.00 10.00
0.00 0.00
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
12
MARKET OVERVIEW
Growth drivers
Housing Infrastructure Commercial real estate
• The housing segment accounts for • The GoI is strongly focusing on • The demand for commercial
a major portion of the total infrastructure development to real estate (CRE) segments,
domestic demand for cement in boost the growth in the economy. comprising retail space, office
India. It plans to increase investment in space and hotels, as well as civic
• According to the Eleventh Five Year infrastructure to US$ 1 trillion in facilities including hospitals,
Plan (2007–2012), housing demand the Twelfth Five Year Plan (2012– multiplexes and schools, has
is estimated to increase from more 2017), as compared with US$ 514 been on the rise due to growth
than 24 million units in 2007 to billion under the Eleventh Five in economy.
more than 26 million units at the Year Plan (2007–2012). • The demand for office space in
end of the Plan period. • Infrastructure projects such as the India is being driven by the
• Growing urbanisation, an increasing Dedicated Freight Corridors increasing multinational
number of households and higher (DFCs) as well as new and companies and the growth of
employment are primarily driving upgraded airports and ports are the services sector.
the demand for housing. expected to further drive • Strong growth in tourism,
• The Government of India (GoI) construction activity. including both business and
initiatives are expected to provide • The GoI intends to expand the leisure travel, has increased the
impetus to construction activity in capacity of the railways and the construction of hotels in the
rural and semi-urban areas through facilities for handling and storage country.
large infrastructure and housing to ease the transportation of • With the rise in population and
development projects. cement and further reduce its change in consumer behavior
transportation costs. demand for civic facilitates has
been witnessing a trajectory
growth.
13
MARKET OVERVIEW
Key trends
Changing technological profile
• Technological profile of the cement industry has changed significantly in the last two decades as a result
of the increased adoption of energy efficient technologies and processes. The Indian cement industry has
become a forerunner in energy-efficient cement manufacturing in the world with some of the plants
operating at the lowest energy consumption levels. Notably, about 93 per cent of the total capacity is
based on eco-friendly dry process technology.
Volatile cement prices
• Cement prices have witnessed an upward trend across regions over the past few years due to a
constricted supply scenario and an increase in input costs. However, prices are expected to stabilise or
decline in the near future, as supply rises as a result of capacity expansions and players focus on captive
power generation to reduce input costs.
14
MARKET OVERVIEW
Key players
• The Indian cement industry comprises 148 large Market share (production) of key players
and around 365 mini cement plants, including (2009)
public sector units. Large producers contribute
about 95 per cent to the installed capacity, while 5%
mini plants account for the rest.
Aditya Birla Group
• Industry comprises a few large players with a 38%
India Cement Group
pan-India presence as well as several regional and
stand-alone players. There are primarily two 46%
Holcim (F) Group
groups with pan-India presence ― Holcim
Group (comprising ACC and Ambuja Cements) Jaiprakash Group
and Aditya Birla Group (including Grasim 11%
Industries, UltraTech and Century Textiles).
• Shree Cement, India Cement, Lafarge, Jaypee Sources: CMIE, Ernst & Young analysis; Cement
Group and Binani are regionally focused players. Manufacturers’ Association of India website,
www.cmaindia.org/industry.html, accessed 10 November
2010.
• Holcim Group and Aditya Birla Group have
emerged as the largest players in the Indian
cement industry, with a market share of 46 per
cent and 38 per cent, respectively, in 2009.
15
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
16
INVESTMENTS
Investments
• Between April 2000 and August 2010 total FDI in the cement sector was US$ 1.9 billion.
• Most cement companies have announced expansion plans for 2010–11, which is expected to result in a
fresh capacity of more than 40 MT in 2010–11. Some new cement projects in the pipeline expected to
be completed by March 2013 include:
Investment
Company Project Capacity (MT)
(US$ million)
ABG Cement Ltd Cement plant at Kutch, Gujarat 380.4 3.3

Jaiprakash Clinker and cement plant in
358.7 8.6
Associates Jaggayyapeta, Krishna, Andhra Pradesh
Cement project in Guntur, Andhra
My Homes Inds Ltd 239.1 3.0
Pradesh
Cosmos cement Ltd Jaintia hills green field cement projects 210.2 3.4
J K Cement Ltd Mangrol cement expansion project - 2.2
Sources: CMIE; Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to August 2010, Department of Industrial Policy and Promotion.
17
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
18
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework … (1/2)

• Regulatory scenario
• The Ministry of Mines regulates the mining sector, while the states own the minerals sector in
their respective territories in India
• FDI of up to 100 per cent is allowed in the mining sector under the automatic route for cement
production.
• National Mineral Policy (NMP) 2008
• The NMP aims to achieve the twin goals of large-scale prospecting with optimal mining and
attracting investments with the latest technology.
• To implement comprehensive reforms stated in the NMP, the GoI has proposed a new legislation and
amended the existing Mines and Minerals (Development and Regulation) Act. This legislation is expected
to enhance the country’s regulatory environment by making it simple and transparent.
19
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework … (2/2)

• The impact of the Union Budget 2010–11
• Excise duty has been increased by 2 per cent.
• A budget allocation of US$ 36.16 billion has been made for India’s infrastructure development.
Heightened focus on railways, housing, urban infrastructure and continued easy financing of the
projects is expected to give impetus to the construction sector.
• Further, the additional deduction available for investment in long-term infrastructure bonds for
individuals is expected to speed up the execution of infrastructure projects.
Sources: Ministry of Mines, Government of India, ―Doing Business in India, 2010‖, Ernst & Young report; ―India Budget,‖ 2010, Ernst & Young.
20
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
21
OPPORTUNITIES
Opportunities
The Indian cement industry has been on a high-growth trajectory led by buoyancy in sectors such as real
estate, infrastructure and construction.
• The GoI plans to increase its investment in infrastructure to US$ 1 trillion in the Twelfth Five Year Plan
(2012–17) as compared with US$ 514 billion expected to be spent on infrastructure development
under the Eleventh Five Year Plan (2007–2012) .
Increased • Union budget 2010–11 plans a total outlay of US$ 6.4 billion on rural housing, roads and bridges.
government focus • Formal approval has been granted to 577 SEZ proposals and 363 have already been notified as SEZs, as
on infrastructure of August 2010.
development • Infrastructure projects such as the dedicated freight corridors (DFC), upgraded and new airports and
ports are expected to enhance the scale of economic activity, leading to a substantial increase in
demand.
• According to the Eleventh Five Year Plan (2007–2012), there is an increasing demand for housing in the
country, especially in the economically weaker section (EWS)/low-income group (LIG).
Increased demand
• The housing segment accounts for major proportion of the total domestic demand for cement in India.
for housing segment
Given the intense shortage of housing in the country, this segment has been the primary demand driver
for the industry.
Sources: ―Industry,‖ Cement Manufacturers Association of India website, http://www.cmaindia.org/portal/industry/highlights.aspx, accessed 11

November 2010
―Eleventh Five-year plan (2007–2012),‖ Planning commission, Government of India website, http://planningcommission.nic.in/, accessed 11 November
2010
―Fact sheet,‖ Special economic zones in India website, http://www.sezindia.nic.in/index.asp, accessed 10 November 2010
―Economic Survey 2009–2010‖, Union Budget & Economic Survey Website, http://indiabudget.nic.in, accessed 10 November 2010.
―Industry overview,‖ Confederation of Real Estate Developers’ Associations of India website, http://www.credai.org/,accessed 10 November 2010
22
OPPORTUNITIES
Opportunities
• The demand for office space in India is being driven by the influx of multinational companies and the
growth of the services sector, especially the IT-BPO industry. Progressive liberalisation and easing of
FDI norms in various sectors paved the way for growth in FDI, which led to a burgeoning demand for
office space from MNCs and other foreign investors.
• Growth in organised retailing and the entry of international retailers into India has fuelled the demand
Increase in for good quality mall space.
development activity • Strong growth in tourism, including both business and leisure travel, has increased the construction of
in commercial real hotels in the country.
estate (CRE) and • The real estate sector contributes 5 per cent to India’s GDP and is expected to reach a size of US$
other segments 180 billion by 2020.
• Upcoming industrial clusters and infrastructure development in emerging tier-II and tier-III cities are
also likely to fuel demand in the sector.
• The growing population and increased urbanisation in the country has increased the need for more
civil facilities.
Huge potential for • Though India is the second-largest producer and consumer of cement in the world, there is a
growth to increase significant potential to increase the per capita consumption of cement in the country in comparison to
per capita other countries. The per capita consumption of cement in India is 143 kg, as compared with other
consumption of countries such as China (1,014 kg) and Japan (524 kg), which indicates significant potential for growth.
cement
Sources: ―Industry,‖ Cement Manufacturers Association of India website, www.cmaindia.org/industry.html, accessed 11 November 2010
―Industry overview,‖ Confederation of Real Estate Developers’ Associations of India website, http://www.credai.org/,accessed 12 August 2010
―Fact Sheet on Foreign Direct Investment (FDI)‖, Department of Industrial Policy and Promotion website, www.dipp.nic.in, accessed 10 November
2010
23
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
24
INDUSTRY ASSOCIATIONS
Industry associations … (1/2)

Cement Manufacturers' Association
CMA Tower, A-2E, Sector 24 NOIDA – 201 301
Uttar Pradesh, India
Phone: 91-120-2411955, 2411957, 2411958
Fax: 91-120-2411956
E-mail: cmand@vsnl.com
Website: www.cmaindia.org/index.html
National Council for Cement and Building Materials

34th Milestone, Delhi-Mathura Road, Ballabgarh – 121 004 Haryana, India
Phone: 91-129-2242051/52/53/54/55/56; 4192222
Fax : 91-129-2242100; 2246175
E-mail: nccbm@vsnl.com; info@ncbindia.com
Website: www.ncbindia.com
25
INDUSTRY ASSOCIATIONS
Industry associations … (2/2)

Indian Concrete Institute
Ocean Crest 79, Third Main Road, Gandhi Nagar, Adyar, Chennai – 600 020
Phone: 91-44-24912602
Fax: 91-44-24455148
E-mail: ici3@vsnl.in, ici4@airtelmail.in, vj6314@gmail.com
Website: www.indianconcreteinstitute.org
26
NOTE
Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number.
Conversion rate used: US$ 1= INR 48
27
DISCLAIMER
India Brand Equity Foundation (―IBEF‖) engaged Ernst & presentation to ensure that the information is accurate to
Young Pvt Ltd to prepare this presentation and the same the best of Ernst & Young and IBEF’s knowledge and belief,
has been prepared by Ernst & Young in consultation with the content is not to be construed in any manner
IBEF. whatsoever as a substitute for professional advice.
All rights reserved. All copyright in this presentation and Ernst & Young and IBEF neither recommend nor endorse
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due care has been taken during the compilation of this presentation.
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CEMENT

 Policy and regulatory framework

The sector is expected to add

 Policy and regulatory framework

• The turnover of the cement industry has been 0

Market segments … (1/2)

East West Central North South

Market segments … (2/2)

Sources: CMIE; Ernst & Young analysis

Market segment — North

Cement consumption — north zone Cement production — north zone

40.00 45.00 41.2

Sources: CMIE; Ernst & Young analysis.

Market segment ― West

Cement consumption — west zone Cement production — west zone

Sources: CMIE; Ernst & Young analysis.

Market segment ― Central

Cement consumption — central zone Cement production — central zone

Sources: CMIE; Ernst & Young analysis.

Market segment — East

Cement consumption — east zone Cement production — east zone

30.00 28.2 30.00

Sources: CMIE; Ernst & Young analysis.

Market segment ― South

Cement consumption — south zone Cement production — south zone

Sources: CMIE; Ernst & Young analysis.

Housing Infrastructure Commercial real estate

Volatile cement prices

Sources: CMIE; Ernst & Young analysis.

 Policy and regulatory framework

ABG Cement Ltd Cement plant at Kutch, Gujarat 380.4 3.3

J K Cement Ltd Mangrol cement expansion project - 2.2

 Policy and regulatory framework

Policy and regulatory framework … (1/2)

• National Mineral Policy (NMP) 2008

Policy and regulatory framework … (2/2)

• Excise duty has been increased by 2 per cent.

 Policy and regulatory framework

Sources: ―Industry,‖ Cement Manufacturers Association of India website, http://www.cmaindia.org/portal/industry/highlights.aspx, accessed 11

 Policy and regulatory framework

Industry associations … (1/2)

National Council for Cement and Building Materials

Industry associations … (2/2)

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