SUMMER TRAINING REPORT

ON
SALES AND DISTRIBUTION NETWORK OF ULTRA TECH
CEMENT

SUBMITTED IN PARTIAL FULFILLMENT OF

POST GRADUATE DEPLOMA IN BUSINESS AND
MANAGEMENT

SUBMITTED BY:

KAPIL KUMAR
PGDM2007-09
SECTION-A

INSTITUTE FOR INTEGRATED LEARNING IN

MANAGEMENT GRADUATE SCHOOL OF MANAGEMENT
KNOWLEDGE PARK II
GREATER NOIDA

1
 INDEX

ACKNOWLEDGEMENT. . . . . . . . . . . . . . . . . .
PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. CEMENT AND ITS TYPES

2. INDIAN CEMENT INDUSTRY

1.1 OVERVIEW
1.2 STRUCTURE
1.3 MAJOR PLAYERS
1.4 GOVT. POLICIES
1.5 CEMENT EXPORTS
1.6 PORTER’S 5-FORCE MODEL
1.7 SWOT ANALYSIS

3. INTRODUCTION ULTRA TECH CEMENT

3.1 PRODUCTION UNITS
3.2 ULTRA TECH ADVANTAGES
3.3 AWARDS
3.4 EXPORTS

4. PROJECT WORK
4.1 OBJECTIVE OF THE STUDY
4.2 RESEARCH DESIGN
4.3 DATA ANALYSIS & FINDINGS
4.4 LIMITATIONS
4.5 RECOMMENDATIONS

5. CONCLUSION

6. ANNEXURE

7. BIBLIOGRAPHY

2
 ACKNOWLEDGEMENT

PERSEVERANCE, INSPIRATION AND MOTIVATION HAVE

ALWAYS PLAYED A KEY ROLE IN THE SUCCESS OF ANY
VENTURE.SO HEREBY, IT’S MY PLEASURE TO RECORD
THANKS & GRATITUDE TO THE PERSONS INVOLVED.

FIRST, I THANK Mr.SUBODH JAIN, DSM, ULTRA TECH

CEMENT, FOR HIS CONTINUOUS SUPPORT, STIMULATING
SUGGESTIONS AND HELPING ME ALL THE TIME DURING MY
PROJECT.

A SPECIAL THANK GOES TO MR.ROSHAN LAL & MR.VIKAS,

ULTRA TECH CEMENT.BOTH OF THEM WERE ALWAYS READY
TO LISTEN & GIVE ADVICE.MR..VIKAS HAS BEEN A FRIEND
AND A GUIDE.HE WAS ALWAYS THERE TO MEET & TALK
ABOUT MY IDEAS.

I AM ALSO GREATLY INDEBTED TO MY MENTOR MR.GANESH

SINGH.HE WAS THERE TO LISTEN ME & HELP ME OUT IF I
EVER HAD ANY PROBLEM.HE HAS BEEN SO LENIENT ALSO.

AT LAST, THANKS TO MY FAMILY MEMBERS & ALSO TO

FRIEND NAVIN FOR BEING SO SUPPORTIVE.

KAPIL KUMAR

3
 PREFACE

Indian economy is facing a boom in the real estate. This is directly

related with the cement sector. Ultra Tech cement being one of the
top three players in the Indian market and the most exported Indian
cement is an important part of the sector.

During my project, I carried out a research for Ultra Tech cement

and tried to find out its current market position, reasons behind any
shortcomings and also found out some methods of increasing Ultra
Tech cement sales.

The report also gives a detailed idea about the Indian cement
industry and the key players.

4
 WHAT IS CEMENT?

• Cement is a mixture of limestone, Clay, Silica and Gypsum. It is a fine

powder which when mixed with water sets to a hard mass as a result of
hydration of the constituent compounds. It is the most commonly used
construction material. Cement is manufactured by burning a mixture of
limestone and Clay at high temperatures in a kiln, and then finely
grinding the resulting clinker along with Gypsum. The end product thus
obtained is called Ordinary Portland Cement (OPC).

Different Types of Cement

There are different varieties of cement based on different compositions

according to specific end uses, namely Ordinary Portland Cement, Portland
Pozolona Cement, Portland Blast Furnace Slag Cement, White Cement and
Specialized Cement. The basic difference lies in the percentage of clinker
used.

1. Ordinary Portland cement (OPC):

• OPC, popularly known as grey cement, has 95% clinker and 5% of

Gypsum and other materials. It accounts for 70% of the total
consumption. White cement is a variation of OPC and is used for
decorative purposes like rendering of walls, flooring etc. It contains a
very low proportion of iron oxide. Ordinary Portland cement is the most
commonly used cement for a wide range of applications. These
applications cover dry-lean mixes, general-purpose ready-mixes, and
even high strength pre-cast and pre-stressed concrete.

5
2. Portland Pozolona Cement (PPC):

• Portland pozzolana cement is Ordinary Portland Cement blended with

pozzolanic materials (power-station fly ash, burnt clays, ash from burnt
plant material or Siliceous earths), either together or separately. Portland
clinker is ground with Gypsum and Pozzolanic materials which, though
they do not have cementing properties in themselves, combine
chemically with Portland cement in the presence of water to form extra
strong cementing material which resists wet cracking, thermal cracking
and has a high degree of cohesion and workability in concrete. PPC has
80% clinker, 15% pozolona and 5% gypsum and accounts for 18% of the
total cement consumption. It is cheaply manufactured because it uses fly
ash/burnt clay/coal waste as the main ingredient. It has a lower heat of
hydration, which helps in preventing cracks where large volumes are
being cast.

3. Portland Blast Furnace Slag Cement (PBFSC):

• PBFSC consists of 45% clinker, 50% blast furnace slag and 5% Gypsum
and accounts for 10% of the total cement consumed. It has a heat of
hydration even lower than PPC and is generally used in construction of
dams and similar massive constructions. Portland blast-furnace slag
cement contains up to 70 per cent of finely ground, granulated blast-
furnace slag, a nonmetallic product consisting essentially of Silicates and
Aluminum-silicates of Calcium. Slag brings with it the advantage of the
energy invested in the slag making. Grinding slag for cement replacement
takes only 25 per cent of the energy needed to manufacture Portland
cement. Using slag cement to replace a portion of Portland cement in a

6
 concrete mixture is a useful method to make concrete better and more
consistent. Portland blast-furnace slag cement has a lighter colour, better
concrete workability, easier finish ability, higher compressive and
flexural strength, lower permeability, improved resistance to aggressive
chemicals and more consistent plastic and hardened consistency.

4. White Cement:

• White Portland cement has essentially the same properties as gray

cement, except for color, which is a very important quality control issue
in the industry. It is manufactured using fuel oil (instead of coal) and with
iron oxide content below 0.4% to ensure whiteness. Special cooling
technique is used. It is used to enhance aesthetic value, in tiles and for
flooring. White cement is much more expensive than grey cement.

5. Specialized Cement:

• Oil Well Cement: is made from clinker with special additives to prevent
any porosity.
• Rapid Hardening Portland cement: It is similar to OPC, except that it
is ground much finer, so that on casting, the compressible strength
increases rapidly.
• Water Proof Cement: OPC, with small portion of calcium stearate or
non-saponifibale oil to impart waterproofing properties.

7
 INDIAN CEMENT INDUSTRY-AN OVERVIEW

Cement production commenced in India as early as 1914.

The first cement unit was set up at Porbandar in 1914 with a
capacity of 1,000 tones per annum.Cement is the preferred building material
in India. It is used extensively in household and industrial construction.
Earlier, government sector used to consume over 50% of the total cement
sold in India, but in the last decade, its share has come down to 35%. Rural
areas consume less than 23% of the total cement. Availability of cheaper
building materials for non-permanent structures affects the rural demand.

Demand for cement is linked to the economic activity in any country.

Broadly, it can be categorized into demand for housing construction (homes,
offices etc.) and infrastructure creation (ports, roads, power plants etc). The
real driver of cement demand is creation of infrastructure; hence cement
demand in emerging economies is much higher than developed countries
where the demand has reached a plateau. In India too, the demand for
cement will be affected by spending on infrastructure (including housing).

With the boost given by the government to various infrastructure projects,

road network and housing facilities, growth in the cement consumption is
anticipated in the coming year. The favorable housing finance environment
is expected to fulfill the vast housing requirements, both in rural and urban
areas. The increase in infrastructure projects by the government coupled
with the construction of the Golden Quadrilateral and the North-South and
East-West corridor projects have led to an increase in consumption of
cement. This increase is expected to continue in the future. The reduction in
import duties is not likely to affect the industry as the cement produced is at

8
par with the international standards and the prices are lower than those
prevailing in international markets. The graph below show the consumption
of cement in different areas of housing, infrastructure and industries.

9
 Structure of the industry

Domestic players:

Associated Cement Companies Ltd (ACCL)

Associated Cement Companies Ltd manufactures ordinary Portland cement,
composite cement and special cement and has begun offering its marketing
expertise and distribution facilities to other producers in cement and related
areas. It has twelve manufacturing plants located throughout the country
with exports to SAARC nations. The company plans capital expenditure
through expansion of existing units and/or through acquisitions. Non-core
assets are to be divested to release locked up capital. It is also expected to
actively pursue overseas project engineering and consultancy services.

Birla Corp
Birla Corp's product portfolio includes acetylene gas, auto trim parts,
casting, cement, jute goods, yarn, calcium carbide etc. The cement division
has an installed capacity of 4.78 million metric tones and produced 4.77
million metric tones of cement in 2003-04. The company has two plants in
Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar
Pradesh and holds a market share of 4.1 per cent. It manufactures Ordinary
Portland cement (OPC), Portland pozzolana cement, fly ash-based PPC,
Low-alkali Portland cement, Portland slag cement, low heat cement and
sulphate resistant cement. Large quantities of its cement are exported to
Nepal and Bangladesh. Going forward, the company is setting up its captive
power plant to remain cost competitive.

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Century Textiles and Industries Ltd (CTIL)
The product portfolio of CTIL includes textiles, rayon, cement, pulp &
paper, shipping, property & land development, builders and floriculture.
Cement is the largest division of CTIL and contributes to over 40 per cent of
the company's revenues. The company has an installed capacity of 4.7
million tones with a total cement production of 5.43 million tones in 2003-
04. CTIL has four plants that manufacture cement, one in Chattisgarh, two in
Madhya Pradesh and one in Maharashtra. Going forward, the company has
scripted a three-pronged strategy closing down its shipping business,
continuing with its chemicals and adhesive division, and
Focusing on cement, rayon and paper as its long-term business plan.

Grasim-UltraTech Cemco
Grasim's product profile includes viscose staple fiber (VSF), grey cement,
white cement, sponge iron, chemicals and textiles. With the acquisition of
UltraTech, L&T's cement division in early 2004, Grasim has now become
the world's seventh largest cement producer with a combined capacity of 31
million tones. Grasim (with UltraTech) held a market share of around 21 per
cent in 2005-06. It has plants in Madhya Pradesh, Chattisgarh, Punjab,
Rajasthan, Tamil Nadu and Gujarat among others. The company plans to
invest over US$ 9 million in the next two years to augment capacity of its
cement and fiber business. Its also plans to focus on its international
ventures, ramping up the capacity of Alexandra Carbon Black in Egypt to
1,70,000 tone per annum (from 1,20,000 tpa) and raising the capacity of the
carbon black plant in China from 12,000 tpa to 60,000 tpa.

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Gujarat Ambuja Cements Ltd (GACL)
Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of
commercial production at its 2 million tonne plant in Chandrapur,
Maharashtra. The group has clinker manufacturing facilities at Himachal
Pradesh, Gujarat, Maharashtra, Chattisgarh, Punjab and Rajasthan. The
company has a market share of around 10 per cent, with a strong foothold in
the northern and western markets. Its total sales aggregated US$ 526 million
with a capacity of 12.6 million tonne in 2003-04. Gujarat Ambuja is one of
India's largest cement exporter and one of the most cost efficient firms.
GACL has a 14.45 per cent stake in ACC, making it the second largest
cement group in the country, after Grasim-UltraTech Cemco. The company
has free cash flows that it is likely to use to grow inorganically. The
company is scouting for a capacity of around two million tonne in the
northern and western markets. It has also earmarked around US$ 195-220
million for acquisitions

India Cements
India Cements is the largest cement producer in southern India with a total
capacity of 8.81 million tonne and plants in Andhra Pradesh and Tamil
Nadu. The company has a market share of 5.4 per cent with a total cement
production of 6.36 million tonne in 2003-04. Its product portfolio includes
ordinary portland cement and blended cement. The company has limited its
business activity to cement, though it has a marginal exposure to the
shipping business. The company plans to reduce its manpower significantly

12
And exit non-core businesses to turnaround its fortune. It also expects the
export market to open up, with the Gulf emerging as a major importer.

Jaiprakash Associates Limited

Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is
part of the Jaypee Group with businesses in civil engineering, hospitality,
cement, hydropower, design consultancy and IT. It has an annual capacity of
4.6 million tonne with plants located in Rewa & Bela (Madhya Pradesh) and
Sadva Khurd (Uttar Pradesh). The company has a market share of 3.8 per
cent with the cement division contributing US$ 172 million to revenue
in 2003-04. The company is upgrading its capacity to 6.5 million tonne
through the modernizing of the existing units and the commissioning of a
new grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163
million. Jaiprakash Associates has decided to concentrate on its core
business of construction and engineering and leave its cement plant to its
subsidiary Jaypee Rewa Cement Ltd. The company manufactures a wide
range of world class cement of OPC grades 33, 43, 53, IRST-40 and special
Blends of pozzolana cement.

JK Synthetics
JK Synthetics, a Singhania Group company, started manufacturing nylon at
Kota in 1962. Subsequently, it diversified into PSY/PFY, nylon tyre-cord,
cement (in 1975), acrylic and white cement (in 1984). The company has a
market share of 2.7 per cent. JK Synthetics Limited is restructuring its
business divisions into two separate entities- JK Cements and JK Synthetics.
After the restructuring, it will be left with a cement plant at Nimbahera in

13
Rajasthan, with a capacity of 3.26 million metric tonne and manufacturing
white cement.

Madras Cements
Madras Cements Ltd is one of the oldest cement companies in the southern
region and is a part of the Armco group. The company is engaged in cement,
clinker, dolomite, dry mortar mix, limestone; ready mix cements (RMC) and
units generated from windmills. The company has three plants in Tamil
Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It has a
total capacity of 5.47 million tonne annually and holds a market share of 3.1
per cent. Madras Cements plans to expand by putting up RMC plants.
As Karnataka is a promising market, the company is further expanding its
capacity from the present 1.5 million tonne to 3.4 million tonne through an
investment of US$ 9 million.

Foreign players:

Holcim
Holcim, earlier known as Holder bank, has a cement production capacity of
141.9 million tonne. It is a key player in aggregates, concrete and
construction related services. It has a strong market presence in over 70
countries and is a market leader in South America and in a number of
European and overseas markets. Holcim entered India by means of a long-
term strategic alliance with Gujarat Ambuja Cements Ltd (GACL). The
alliance aims to strengthen their clinker and cement trading activities in

14
South Asia, the Middle East and the region adjoining the Indian Ocean.
Holcim also intends to use India as an additional base for its IT operations,
R&D projects as well as a procurement sourcing hub to generate additional
synergies and value for the group.
Italcementi Group
The Italecementi group is one of the largest producers and distributors of
cement with 60 cement plants, 547 concrete batching units and 155 quarries
spread across 19 countries in Europe, Asia, Africa and North America.
Italcementi is present in the Indian markets through a 50:50 joint venture
company with Zuari Cements. All initiatives in southern India are routed
through the joint venture company, while Italcementi is free to buy deals
In its individual capacity in northern India. The joint venture company has a
capacity of 3.4 million tonne and a market share of 2.1 per cent.

Lafarge India
Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement
capacity of 5 million tonne and a clinker capacity of 3 million tonne in the
country. Lafarge commenced operations in 1999 and currently has a market
share of 3.4 per cent. It exports clinker and cement to Bangladesh and Nepal.
It produces Portland slag cement, ordinary portland cement and portland
pozzolana cement. The Indian cement plants are located in Chhattisgarh and
Rajasthan. Lafarge Cement has become the largest cement selling firm in the
Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.

15
Two players call all the shots;
For the first time in India, two companies - Grasim and Gujarat Ambuja,
along with their associate companies, control almost 50% of India’s cement
capacity and supply. In a commodity business, where profits move
disproportionately with even small changes in cement prices, this is a
significant development The emphasis laid by the government on the
development of physical infrastructure mainly roads, airports, seaports and
railroads and the boom in housing driven by easy availability of cheap
housing credit have been the key growth drivers for the sector.
Government is the single largest buyer of cement. Historically, in the last
year, drive to complete pending infrastructure project has driven demand
growth. One of the major cement consuming projects is the Golden
Quadrilateral Project-Besides construction and modernization of four
airports and two seaports. Gujarat Ambuja has always traded at a premium to

16
its peers due to its higher operational efficiency, presence in high growth
markets and fiscal benefits. This edge got further sharpened post ACC
acquisition that added to scale as well as geographical diversity. Grasim and
ultra tech on the other hand are doing so well to capture the more and more
market share.

Major Consolidations

With an installed capacity of around 157 million tonne per annum (mtpa) at
end-March 2007, large cement plants accounted for 93% of the total
installed capacity in India. The installed capacity is distributed over across
approximately 129 large cement plants owned by around 54 companies. The
structure of the industry is fragmented, although, the concentration at the top
is increasing. The fragmented structure is a result of the low entry barriers in
the post decontrol period and the ready availability of technology. However,
cement plants are capital intensive and require a capital investment of over
Rs. 3,500 per tonne of cement, which translates into an investment of Rs.
3,500 million for a 1 mtpa plant. The cement industry has witnessed
substantial reorganization of capacities during the last couple of years.
Some examples of the consolidation witnessed during the recent past
include: Gujarat Ambuja taking a stake of 14% in ACC; Gujarat Ambuja
taking over DLF Cements and Modi Cement; India Cement taking over
Raasi Cement and Sri Vishnu Cement; Grasim's acquisition of the cement
business of L&T; Indian Rayon's cement division merging with Grasim;
Grasim taking over Sri Dig Vijay Cements; L&T taking over Narmada

17
Cements; ACC taking over IDCOL. Multinational cement companies have
also initiated the acquisition process in the Indian cement market. Swiss
cement major Holcim has picked up 14.8% of the promoters stake in Gujarat
Ambuja Cements (GACL). In January 2006, Holderind Investments (Holcim
Mauritius), an indirect, wholly-owned subsidiary of Holcim, acquired 200
million equity shares of GACL at a price of Rs.105 per share from the
promoters. Post-sale, the share of promoters in the company is 9%. Holcim
also made an open offer to acquire an additional 20% stake in GACL at Rs.
90.64 per share. Earlier, Holcim had entered into a strategic alliance with
GACL, and acquired a 67% controlling stake in Ambuja Cement India.
Through this holding company, Holcim acquired a majority in Ambuja
Cement Eastern and a substantial stake in ACC. Ambuja Cement India holds
a 34% share in ACC and a 97% share in Ambuja Cement Eastern. Holcim's
acquisition has led to the emergence of two major groups in the Indian
cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine
(capacity of 33.5 mt) and the
Aditya Birla group through Grasim Industries and Ultratech Cement
(combined capacity of 31.1 mt). Lafarge,
the French cement major, had acquired the cement plants of Raymond and
Tisco in the recent past, and has an installed capacity of 5 mtpa. Italy based
Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries'
cement plant in AP, with a capacity of 3.4 mtpa. Recently, Heidelberg
Cement has entered into an equal joint-venture agreement with S P Lohia
Group controlled Indo-Rama Cement. Heidelberg Cement is expected to
take a 50% controlling stake in Indo-Rama's grinding plant of 0.75 mtpa at
Raigad in Maharashtra. As on March 2006, ACC was the largest player with
a capacity of 18.64 mtpa. UltraTech CemCo Ltd.1 now occupies the second

18
slot with a capacity of 17 mtpa (which includes 1.5 mtpa of subsidiary
Narmada Cement).
The Gujarat Ambuja group has emerged as the third largest player with a
capacity of 14.86 mtpa. Grasim ranks fourth with a capacity of 14.12 mtpa.
Other leading players include India Cements, Jaypee group, Century
Textiles, Madras Cements, Lafarge, and Birla Corp.

Reasons behind these consolidations;

As discussed above, the cement industry is witnessing a number of Mergers

& Acquisitions (M&As). The extent of concentration in the industry has
increased over the years. This concentration is mainly because of the focus
of the larger and the more efficient units to consolidate their operations by
restructuring their business and taking over relatively weaker units. The
relatively smaller and weaker units are finding it difficult to withstand the
cyclical pressure of the cement industry. Some of the key benefits accruing
to the acquiring companies from these acquisition deals include:
❑ Economies of scale resulting from the larger size of operations
❑ Savings in the time and cost required to set up a new unit
❑ Access to new markets
❑ Access to special facilities / features of the acquired company
❑ And, benefits of tax shelter.

19
 State wise Capacity

As cement is a low value commodity, freight costs assume a significant

proportion of the final cost. Transporting costs render the prices of cement in
distant destinations uncompetitive. For instance, it is financially infeasible to
transport cement by road over 250 kms. Railways are mostly used to
transport cement over longer distances. However, its bulky nature and
infrastructure bottlenecks render even rail transport unviable over very long
distances (that is why Madras Cements or India Cements, located in the
south, can hardly make a difference to the fortunes of west-based companies
like Gujarat Ambuja). Therefore, manufacturers tend to sell cement at the
nearest market first and sell in distant markets only if additional realization
is greater than freight costs incurred. This is the reason for showing regional
demand rather than state demand in case of cement.

Region wise Capacity

• The Indian cement industry has to be viewed in terms of five regions:-

• North (Punjab, Delhi, Haryana, Himachal Pradesh, Rajasthan,
Chandigarh, J&K and Uttranchal);
• West (Maharashtra and Gujarat);
• South (Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Pondicherry,
Andaman & Nicobar and Goa);

20
 • East (Bihar, Orissa, West Bengal, Assam, Meghalaya, Jharkhand and
Chhattisgarh); and
• Central (Uttar Pradesh and Madhya Pradesh).

Northern Region
Punjab 2173.34
Delhi 500.00
Haryana 172.00
Himachal Pradesh 4060.00
Rajasthan 16299.34
J&K 200.00
TOTAL 23404.68
West
Maharashtra 8950.00
Gujarat 12937.00
TOTAL 21887.00
South
Tamil Nadu 12913.18
Andra Pradesh 19831.02
Karnataka 9744.00
Kerala 420.00
TOTAL 42908.20
East
Bihar 1000.00
Orissa 2761.00
West Bengal 2291.66
Assam Meghalaya 400.00
Jharkhand 3475.01
Chattisgarh 11287.33
TOTAL 21215.00
Central
U.P. 6297.00
M.P. 16185.00
TOTAL 20482.00

21
South accounts for 33.03% of cement production capacity of the country,
with Andra Pradesh accounting for 15.27% of the total production capacity
of India. It has an installed capacity of around 20mn tons of cement and
ranks first in the country, followed by Tamil Nadu with 9.94% of the total
production capacity. North accounts for 18.02% of the total production
capacity, with Rajasthan at 12.55% of the total production capacity of the
country. West accounts for 16.85% of the total production capacity.
Maharashtra and Gujarat have production capacity of 6.89% and 9.96%
respectively. East and Central Regions account for 16.33% and 15.77% of
the total production capacity of the country respectively.

Trade between these regions is on a very low scale mainly because of the
transportation bottlenecks and uncompetitive cost of transportation. The
Southern region dominated the cement consumption at 44.5 mn tonnes in FY
07, accounting for about 30% of total domestic cement consumption. During
FY 03-07, Southern region has witnessed highest CAGR of cement demand
growth at 10.4% followed by Northern and Eastern regions at 8.9% and 9%,
respectively

Mechanics of Distribution Channels of Sector

Companies invariably hire agents or transport cements to own or
government warehouses either via roadway or railways. Incase of exports,
cement reaches the nearest port via roadways or railways and is then
transferred to the importing country. Domestically, from agents or
warehouses the cement is transported to the dealers/distributors and

22
in turn to sub dealers who finally sell it to the end users. There may or may
not be physical ownership of goods. In the second case, dealers and sub
dealers take order from buyers and place it to the companies, co ordinate and
monitor the timely dispatch of said orders,

ENERGY AND TRANSPORT REQUIREMENTS

The cement industry is dependent on three major infrastructural sectors of

the economy: coal, power and transport. The inputs from these three sectors
account for roughly 50% of the cost of cement. Both the availability and the
cost of these inputs have a vital bearing on the fortunes of the cement
players. All these sectors are largely in the State sector, and, historically
cement companies have had virtually no control on the cost or availability of
these inputs. Hence, the industry response has largely been in the form of
achieving efficiency gains and finding alternatives (captive power, use of
waterways). One additional external influencer of the cement industry
performance is the taxes and levies imposed by the Central and State
Governments. These together account for around 30% of the selling price of
cement in the Indian context.

23
The shortage in domestic coal production coupled with the poor quality has
resulted in cement companies resorting to importing coal, or going in for
open market purchase of coal, or using alternative fuel such as lignite or pet
coke.
Use of imported coal has become an essential feature of the Indian cement
industry and has shown a rising trend during the last few years.

Power and Fuel cost form the largest proportion of the cost structure. This
reflects the effects of the trend in rising global oil and fuel prices. On the
other hand Employee costs form the smallest proportion of over all cost.
This is essentially because cement industry is a very capital intensive
industry. This also accounts for the huge depreciation and interest costs
which accrue on the plant and machinery. Moreover, the labour employed is
essentially semi-skilled excluding the top management which bring down
labour costs.

24
 GOVERNMENT POLICIES

Government policies have affected the growth of cement plants in India in

various stages. The control on cement for a long time and then partial
decontrol and then total decontrol has contributed to the gradual opening up
of the market for cement producers. The stages of growth of the cement
industry can be best described in the following stages:

Price and Distribution Controls (1940-1981):

During the Second World War, cement was declared as an essential
commodity under the Defense of India Rules and was brought under price
and distribution controls which resulted in sluggish growth. The installed
capacity reached only 27.9 MT by the year 1980-81.

25
Partial Decontrol (1982-1988):
In February 1982, partial decontrol was announced. Under this scheme, levy
cement quota was fixed for the units and the balance could be sold in the
open market. This resulted in extensive modernization and expansion drive,
which can be seen from the increase in the installed capacity to 59MT in
1988-89 in comparison with the figure of a mere 27.9MT in 1980-81, an
increase of almost 111%.
Total Decontrol (1989):
In the year 1989, total decontrol of the cement industry was announced. By
decontrolling the cement industry, the government relaxed the forces of

26
demand and supply. In the next two years, the industry enjoyed a boom in
sales and profits. By 1992, the pace of overall economic liberalization had
peaked; ironically, however, the economy slipped into recession taking the
cement industry down with it. For 1992-93, the industry remained stagnant
with no addition to existing capacity

The things that primarily control the price of cement are coal, power tariffs,
railway, freight, royalty and cess on limestone. Interestingly, all of these
prices are controlled by government.
Coal:
The consumption of coal in a typically dry process system ranges from 20-
25% of clinker production. This means for per ton clinker produced 0.20-
0.25 ton of coal is consumed. This contributes 35-40% of the production
cost. The cement industry consumes about 10mn tons of coal annually. Since
coalfields like BCCL supply a poor quality of coal, NCL and CCL the
industry has to blend high-grade coal with it. The Indian coal has a low
calorific value (3,500-4,000 kcal/kg) with ash content as high as 25-30%
compared to imported coal of high calorific value (7,000-8,000 kcal/kg) with
low ash content 6-7%. Lignite is also used as a fuel by blending it with coal.
However this process is not very common.
Electricity:
Cement industry consumes about 5.5bn units of electricity annually while
one ton of cement approximately requires 120-130 units of electricity. Power
tariffs vary according to the location of the plant and on the production
process. The state governments supply this input and hence plants in
different states shall have different power tariffs. Another major hindrance to
the industry is severe power cuts. Most of the cement producing states like

27
AP, MP, experience power cuts to the tune of 25-30% every year causing
substantial production loss.

Limestone:
This constitutes the largest bulk in terms of input to cement. For producing
one ton of cement, approximately 1.6 ton of limestone is required.
Therefore, the cement plant location is determined by the location of
limestone mines. The major cash outflow takes place in way of royalty
payment to the central government and cess on royalties levied by the state
government. The total limestone deposit in the country is estimated to be 90
billion tons. AP has the largest share -- 34%, Karnataka 13%, Gujarat 13%,
M.P 8%, and Rajasthan 6.5%. The plants near the limestone deposit pay less
transportation cost than others.
Transportation:
Cement is mostly packed in paper bags now. It is then transported either by
rail or road. Road transportation beyond 200 kms is not economical
therefore about 55% cement is being moved by the railways. There is also
the problem of inadequate availability of wagons especially on western
railways and southeastern railways. Under this scenario, manufacturers are
looking for sea routes, this being not only cheap but also reducing the losses
in transit. Today, 70% of the cement movement worldwide is by sea
compared to 1% in India. However, the scenario is changing with most of
the big players like L&T, ACC and Grasim having set up their bulk
terminals.
Incentives in States:
Most state governments, in order to attract investments in their respective
states, offer fiscal incentives in the form of sales tax exemptions/deferrals. In

28
some states, this applies only to intrastate sales, like Madhya Pradesh and
Rajasthan. States like Haryana offer a freeze on power tariff for 5 years,
while Gujarat offers exemption from electric duty.
Opening up the FDI channel:
The impact of government policies on cement demand has been
steadily decreasing with the sector being gradually deregulated. At
present, 100 per cent foreign direct investment (FDI) is permitted
in the cement industry. Lafarge was the first foreign company to
enter the Indian market in 1999.
The French
Declining Role of Public Sector:

Historically, cement has been one of the most important areas of operations
for the Indian private sector. Unlike much of heavy industry and utilities,
cement was not deemed to be the exclusive preserve of the State sector in
the post-independence development strategy. Cement was also the industry
of choice of many corporate diversifying away from the troubled traditional
areas of jute and textiles.
Over the years, the share of the public sector in cement production has
declined. While the private sector (large companies) accounts for around
95% of the total installed capacity, the share of public sector companies has
declined from a level of 11% in FY1996 to around 4.4% in FY2006. The
share in production of the public sector companies is even lower at 1.2% in
FY2006 as compared to 6.5% in FY1996.

29
 Export of cement from India
The Indian cement industry exported around 6 mt of cement during FY2006,
accounting for around 4% of the total production. There has been a
significant year on year variation in the export trend, implying that
Companies rely on cement exports to balance out the domestic demand
supply situation. As seen from above there is excess production, so the
difference in supply and demand is met by exporting. The export of Indian
cement has increased over the years, giving a boost to the Indian cement
industry.

The demand for cement in the foreign countries is a derived demand, for it
depends on industrial activity, real estate, and construction activity. Since
growth is taking place all over the world in these sectors, Indian export of
cement is also increasing.

The cement industry in India has around 300 mini cement plants and 130
large cement plants. The total production capacity of these plants is around
167.36 million tons. The India cement industry is technologically very
advanced, as a result of which the quality of Indian cement is now
considered the second best in the world. This has given a major boost to the
Indian export of cement. The production of cement in India is not only able
to meet the domestic demand, but large amounts are also exported. A fair
amount of clinker and cement by-products are also exported by India. As the
quality of Indian cement is very good, its demand in the international market
is always high.

30
The graph shows that the production of cement in India is at 2nd place after
China, this higher production is a good reason for exporting cement .
In 2001-2002, 3.38 million tons of cement was exported from India. That
figure stood at 3.47 million tons in 2002-03, and 3.36 million tons in 2003-
04. In 2001-2002, 1.76 million tons of clinker was exported from India. In

31
2002- 2003 clinker exports amounted to 3.45 million tons, and in 2003-
2004 the figure stood at 5.64 million tons. This shows that the export of
Indian cement has been increasing at a steady pace over the years.

The major companies exporting Indian cement are:

• Gujarat Ambuja
• Ultra Tech Cement
• L&T Limited
Export of Indian cement has registered growth a fair amount of growth,
giving a boost to the Indian economy. India has an immense potential to tap
cement markets of countries in the Middle East and South East Asia due to
its strengths of locational advantage, large-scale limestone and coal deposits,
Adequate cement capacity and world-class cement production with the
latest technology. India has an estimated total of 90 billion tonnes of
limestone deposit in the country.

32
Indian technology advantage
The manufacturing process of cement consists of the mixing, drying
and grinding of limestone, clay and silica into a composite mass.
The mixture is then heated and burnt in a pre-heater and kiln to
be cooled in an air cooling system to form clinker, which is the
Semi-finished form. This clinker is cooled by air and subsequently
ground with gypsum to form cement. The dry and semi-dry processes are
more fuel-efficient. The wet process requires 0.28 tonne of coal and 110
kWh of power to manufacture one tonne of cement, whereas the dry process
requires only 0.18 tonnes of coal and 100 kWh of power. Coal and power
costs account for 35 per cent of the total cement production costs. With 95
per cent of the total capacity based on the modern dry process technology,
the Indian cement industry has become more cost efficient.

33
Top companies in the cement industry match quite well with world standards
in terms of energy (thermal energy Kcal/kg of clinker - India 665 against
690 of Japan)
and pollution norms (SPM of 40 in India against 20 in Japan).

34
 PORTER’S 5-FORCE MODEL FOR CEMENT
INDUSTRY

Threat of New
Entrants: The high capital costs acts as a major entry barrier for the entry
of new players. The high freight costs make it difficult to import cement.
Cement being a high volume low value commodity results in high freight
costs, which makes cement imports economically unfeasible. Domestic
Cement industry is highly insulated from global cement markets. With GoI
intervention, making cement duty free, cement is being imported from
neighboring countries. However, due to logistics issues and lack of port

35
handling capabilities, imports of cement will remain negligible and do not
pose a threat to domestic industry.

Bargaining power of
Suppliers: The major inputs are coal and power. The Prices of both coal
and power are determined by the government. To mitigate the high costs of
power the cement players have set up captive power plants.
Competitive rivalry
between existing players: Previously the rivalry was strong among the
players, as the industry was not consolidated. During the last few years the
industry has become more consolidated with the Top 3 players having a
combined market share of 49 percent in 2005-06 as compared to 32
percent in 1999-2000.
Bargaining power of
Buyers: Retail sales constitute about 80 percent of the total sales and the
rest is institutional sales. The retail buyers don’t have any bargaining power
while the institutional buyers get a discount of 5 to 10 percent as they buy
cement in bulk.
Threat of Substitutes: There are no good substitutes for cement.

36
 SWOT ANALYSIS

Strengths: Double digit growth rate

• Cement demand has grown in tandem with strong economic growth;
derived from:
-Growth in housing sector (over 30%) key demand driver;
-Infrastructure projects like ports, airports, power projects, dam & irrigation
projects
-National Highway Development Programme
-Bharat Nirman Yojana for rural infrastructure
-Rise in industrial projects
-Export potential also demand driver
• Capacity utilization over 90%

Weakness: Low value commodity

• Cement Industry is highly fragmented
• Industry is also highly regionalized
• Low – value commodity makes transportation over long distances un-
economical

Opportunities: Demand–supply gap

• Substantially lower per capita cement consumption as compared to
developing countries (1/3 rd of world average) Per capita cement
consumption in India is 82 kgs against a global average of 255 kgs
and Asian average of 200 kgs.

37
 • Additional capacity of 20 million tons per annum will be required to
match the demand
• Limited green field capacity addition in pipeline for next two years,
leading to favorable demand – supply scenario

Threats: Rising input costs

• Government intervention to adjust cement prices

• Possibility of over bunching of capacities in the long term as some of
the players have already announced new capacities
• Transportation cost is scaling high; bottleneck due to loading
restrictions

38
 • Coal prices climbing up; industry players say current shortage of coal
in the country is estimated to be over 10 million tonnes

PRICES
The regional variation in the Indian market has resulted in the cement prices
across regions witnessing movement within a band, with no appreciable
increase in any region. Differences in regional demand supply situation have
translated into price differences across regions. Prices are lower in Southern
regions where there is normally a supply surplus. However, prices are higher
in Eastern and Western regions where shortages exist. The surplus position
had resulted in significant pressure on price realizations in recent years.
.The cyclical trough in the late-1990s had a severe impact on the industry
financials. However, cement prices have firmed up during the last few years
due to improvement in demand-supply position and increasing consolidation
in the industry. The Wholesale Price Index (WPI) for cement increased 3.9%
during FY2005, as compared with a growth of 1.2% during FY2004. The
WPI for March 2006 was 11% higher than the WPI for March 2005.

39
Margins
Cement prices have firmed up during the last few years due to improvement
in demand-supply position and increasing consolidation in the industry. The
trend in gross sales realization is similar for the cement companies in our
sample (comprising pure cement companies accounting for around two-
thirds of industry production and sales).
The operating profits and margins for cement companies are most sensitive
to cement sales realizations. During FY2004-05, riding on high average
sales realizations, the cement companies posted increased operating profits
and margins. This reversed the decline in operating profits and margins
during FY2002-03. This was mainly because of excess capacity and the
consequent low price realizations. While sales volume of the sample
companies improved 7%, operating income (OI) increased 24.2% to Rs.
183.45 billion

40
RETURNS:
The key driver of profitability is cement prices, which fluctuate depending
on outlook on demand-supply gaps. The fluctuating fortunes of the Indian
cement industry are very typical of a commodity industry. The companies
make bumper returns during the boom years (FY1994-96, and FY2003-06)
while the performance goes down drastically during the lean years (FY1997-
2001). The returns have improved significantly since FY2003 because of
higher capacity utilizations, operational efficiency and cost control measures
supplemented with higher sales realizations.

the Indian cement industry has undergone vital changes through

technological changes in the pursuit of cost efficiency and drive for
consolidations. Most of the companies are making profits.

41
42
 INTRODUCTION

ULTRA TECH CEMENT

43
UltraTech is the second largest cement manufacturer in India. It is the part of
Aditya Birla group and is subsidiary of Grasim. It has a capacity of 17
million tonnes. The company is the largest exporter of cement and clinker
from India. UltraTech has a presence in the west, south, north and east. The
western and southern regions are its major markets. The company exports
both clinker and cement. The company exports are moving towards cement
from clinker owing to the higher realization in the cement. In 2005-06 the
company exported 1.52 million tonnes of cement. With UltraTech Cement,
the Aditya Birla Group has established itself as not only the most respected
domestic player but also among the global leaders in cement. Now a look at

Aditya Birla group’s cement capacity:

Currently, the Aditya Birla Group is the 11th largest cement producer in the
world and the seventh largest in Asia and Ultra Tech and Grasim together,
make it the largest cement producer in India.

The group mainly has two cement units – Grasim and Ultra tech.

UltraTech Cement Limited, a Grasim subsidiary has an annual capacity of

17 million tonnes. It manufactures and markets Ordinary Portland Cement,
Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. It has
five integrated plants. This also includes the integrated plant and two
grinding units of the erstwhile Narmada Cement Company Limited, a
subsidiary, which has been amalgamated with the company in May 2006.

44
Grasim, on the other hand, manufactures grey and white cement. In grey
cement, the company has the capacity to manufacture 14.20 mtpa. This
includes Grasim’s capacity of 2.06 mtpa, Vikram Cement 4.2 mtpa, Aditya
Cement 1.5 mtpa, Rajashree Cement 4.2 mtpa, the acquired and merged
Dharni Cement 1.16 mtpa and the acquired Digvijay Cement 1.08 mtpa.

Grasim and Ultra Tech together have a cement capacity of 31.20 mtpa. And
when the B K Birla cement companies also come into the fold, the Aditya
Birla group would have a cement capacity of 37.86 mtpa, making it clearly
the largest cement maker of India.

The Aditya Birla Group bought over the cement business of L&T for around
Rs. 2,200 crore. L&T allowed its name to be used for about a year. Then
from 19th November 2003,the name was changed to ultra tech cemco.This
name also didn’t last for long and finally the ultra tech cemco was changed
to Ultra Tech cement. These stages of evolution of ultra tech cement are
listed below:

2001
:: Grasim acquires 10 per cent stake in L&T. Subsequently increases stake
to 15.3 per cent by October 2002
:: Durgapur grinding unit

2002

45
 The Grasim Board approves an open offer for purchase of up to 20 per
:: cent of the equity shares of Larsen & Toubro Ltd (L&T), in accordance
with the provisions and guidelines issued by the Securities & Exchange
Board of India (SEBI) Regulations, 1997.
:: Grasim increases its stake in L&T to 14.15 per cent
:: Arakkonam grinding unit

2003
:: The board of Larsen & Toubro Ltd (L&T) decides to demerge its cement
business into a separate cement company (CemCo). Grasim decides to
acquire an 8.5 per cent equity stake from L&T and then make an open
offer for 30 per cent of the equity of CemCo, to acquire management
control of the company.

2004
:: Completion of the implementation process to demerge the cement
business of L&T and completion of open offer by Grasim, with the latter
acquiring controlling stake in the newly formed company UltraTech

2006
Narmada Cement Company Limited amalgamated with UltraTech
pursuant to a Scheme of Amalgamation being approved by the Board for

46
 Industrial & Financial Reconstruction (BIFR) in terms of the provision of
Sick Industrial Companies Act (Special Provisions)

ULTRA TECH PRODUCTION UNITS:

Ultra Tech’s subsidiaries are Dakshin Cement Limited and UltraTech

Ceylinco (P) Ltd.UltraTech has five integrated plants, five grinding units and
three terminals — two in India and one in Sri Lanka. These include an
integrated plant and two grinding units of the erstwhile Narmada Cement
Company Limited, a subsidiary, which has been amalgamated with the
company in May 2006.The details of its different production units is shown
on the next page.

Details of units:

PLANT/UNIT KILN CAPACITY(tpd) CAPACITIES(million tpa)

47
A. Composite integrated
Plants.

1. AndraPradesh Cement 8000 2.3

Works.

2. Awarpur Cement works 9500 3.3

3. Gujrat cement works 15000 5.3

4. Hirmi cement works 8050 1.6

5. Narmada cement works 4350 0.4

B.Grinding Units
6. Arakkonam cements works 1.2

7. Jharsuguda cements works 0.8

8. Narmada cement (Ratnagri) 0.4

Works

9. Narmada cement(Magdala) 0.7

Works

10.West-Bengal cement works 1.0

TOTAL 17.0

THE ULTRA TECH ADVANTAGE

48
UltraTech Cement Ltd is one of the largest premium quality cement
producer in India. UltraTech Cement is manufactured in the state of the art
dry process plant at Tadipatri (Andhra Pradesh) and grinding unit at
Arakkonam (Tamil Nadu). Advanced instrumentation systems, computerized
process control and online quality control through X-ray ensure consistently
high quality product at UltraTech Cement plant. The quality of UltraTech
Cement has been globally accepted and is India's largest exporter of clinker
and cement.
UltraTech Cement due to its consistently superior quality has become the
first choice amongst discerning users and construction professionals.
Raw Material :
Careful selection and scientific proportioning of raw material with the use of
latest technology enables manufacturing of high quality cement. Rigorous
hourly tests are conducted on raw material. Laboratories at all plants are
equipped with sophisticated facilities.
World Class process Technology ensures Quality and Consistency :
Quality Assurance is an integral part of Ultra Tech’s manufacturing
philosophy. The quality attributes are consistently ensured through rigorous
application of advanced technology. Key features include:
• Use of good quality limestone and careful selection of other raw
material
• Computerized mining operation and homogenization of crushed
limestone
• Perfect proportioning of raw materials by QCX ( Quality Control
through X-ray )
• Online process control through CCR ( Computerized Control Room )

49
 • High-quality clinkerisation and close-circuit grinding for optimum
particle size distribution
UltraTech Cement plants have been accredited with ISO 9001, 14001,
18001 Certifications by DNV of Netherlands

Distinct Features:
• Higher Compressive strength
• Optimal fineness
• Balanced physical and chemical properties
• Optimal setting time
• Consistency in quality
• Low-level of Chloride
• High-soundness

Advantages:
• Higher workability
• Lower consumption
• Enhanced durability
• Quicker construction
• Overall economy

Customer Care and Guidance:

UltraTech Cement offers customers a range of "product plus" services. A
full- fledged Technical Services Network has been set up exclusively for

50
technical advice and guidance in usage of cement
UltraTech Cement is marketed nationwide through large network of
stockist's, sales officers and representatives. Cement dumps have also been
established at strategic locations to facilitate faster delivery of cement.

Value Added Services :

• Mobile concrete lab services ( Concrete cube testing facilities )
• Training Programmes for masons, site supervisors on good
construction practices
• Field visits by qualified civil engineers
• Educating individual house builders on various aspects of building
material and construction
• Non-destructive testing of concrete
• Any other customer specific services

Applications :
1. All Kinds of constructions including precast and prestressed concrete,
masonry works
2. Slip form constructions
3. Rehabilitation and retrofitting works
4. Cement based products such as pipes, tiles, blocks, poles,etc.
5. Roads, runways, bridges and flyovers
6. Water retaining structures
AWARDS FOR ULTRA TECH

51
Export awards
Worldwide, clients have consistently endorsed Ultra Tech’s highest
quality standards. The list of export awards it has won is testimony to
Ultra Tech’s uncompromising standards on product quality. Ultra Tech
has been on the roll call of top exporters of the Chemicals & Allied
Products Export Promotion Council (Capexil), year after year.

Ultratech won the Capexil Certificate of Export Recognition - Top

Exporter - Cement, Clinker, Asbestos and Cement Products for the
years 2000, 2002 and 2003.

Other awards that have come its way have included:

Year Award
Capexil Certificate of Export Recognition - Highest Export in Non-mineral
2001 and 1999
Sector
Capexil Certificate of Outstanding Export Performance - Chemicals & Allied
1999
Products (for Portland cement)
Capexil Certificate of Export Recognition - Top Exporter- Cement, Asbestos,
1998
Cement Products
1998 Certificate of Outstanding Export Performance, Gujarat state
Capexil Certificate of Export Recognition - Certificate of Merit for Export
1997
Achievement in Cement and Clinker

National awards won by Awarpur Cement Works

Year Award
Indo-German Greentech Environment Excellence Awards by the Greentech
2000-2001
Foundation, New Delhi
1999-2000 Business / Trade Award Jamanalal Bajaj Uchit Vyavahar Purashkar
1999 ISO 14001 Certification By M/S Det Norske Veritas in November
ISO 9001 Certification By M/S Der Norske Veritas
1996
FIMI National Social Awareness Awards
1995-96 FIMI National Social Awareness Awards
Indira Priyadarshini Vrikshmitra (IPVM) National Award By Ministry of
1995
Environment & Forests, Goverment of India
Special Gold Award By The Council of Industry & Trade Development for
1994-95
Quality
Delhi Commendation Certificate - Rajiv Gandhi National Quality Award By
1994
Bureau of Indian Standards

Awards won by Gujarat Cement Works:

52
 Year Award
Bhartiya Udyog Ratan Award presented to Sh. KYP Kulkarni By Indian
2004
Economic Development & Research Association (IEDRA), New Delhi
2002-2003 Greentech Gold Safety Award By Greentech Foundation, New Delhi
2002 Gujarat State Safety Award By Gujarat Safety Council (GSC), Vadodara
Greentech Environment Excellence Award By Greentech Foundation, New
2001-2002
Delhi
Awards for Excellence in "Industrial Relations" By Federation of Gujarat
2001
Industries (FGI), Vadodara

Awards won by Andhra Pradesh Cement Works:

Year Award
2004-2005 State and Zonal level I prize for overall performance in Mines safety
2003-2004 Energy efficient unit award from CII
Energy Conservation Award from PCRA
Excellence Award in Water Conservation & Pollution Control by APPCB
2002-2003 Gold medal for Six Sigma Project on Optimisation of Compressed air energy
at HIMER National Conference
FIMI environment award for mines
Award for six sigma project on reduction in specific fuel
consumption at NIQR
2001-2002 Energy efficient unit award from CII
Best rural development effort award from FAPCCI
Appreciation award from NSC for achieving OHSAS-18001

Awards won by Hirmi Cement Works:

Year Award
2001-2002 Environment Energy Foundation award for water conservation.
Fuller Energy award for reduction in specific power consumption (KWH/T) per
2001-2002
tonne of cement

ULTRA TECH CEMENT EXPORTS

UltraTech Cement recently bagged an award for being the highest exporter
of the year from CAPEXIL for the eighth time in a row for its sterling
performance. A leading cement exporter, its plants have also received

53
various awards for environment protection, social awareness, safety and
management of better industrial relations.
The company has been credited with boosting its exports of cement and
clinker last year by 25 per cent to 4 million tonnes from 2.8 million tonnes in
2005-2006. stringent quality control and testing in the best laboratories
ensure that cement and clinker produced from its plants conform to and
surpass international standards. The laboratory is equipped to test cement as
per ASTM, British and Euro standards. All the plants are ISO 9001 certified
for the latest production process and 14001 certified for environmental
management. The cement plant in Gujarat has an additional OHSAS 18001
certification as well for occupation hazards and safety parameters.
The company has a captive jetty at the Gujarat plant. The jetty length of 337
meters and width of 23 meters is capable of handling ships of 45,000 DWT
with 11 meters draft. Loading of cement and clinker onto the ship is carried
out by a ship loader, which is fed by a four km long conveyor belt that
connects the plant to the jetty. UltraTech Cement is the first and only Indian
cement company to obtain an EC certification for this plant. The
accreditation, given by Bureau Veritas, is a pre-requisite to supply cement to
EC member countries. UltraTech is one of the few Asian cement companies
to receive this recognition. The export markets span countries around the
Indian Ocean, Africa, Europe and the Middle East.
The Hirmi Cement Works in Chattisgarh and the Jharsuguda Cement Works
in Orissa make them ideal locations for export of cement and clinker to
Nepal and Bangladesh. With captive railway sidings to facilitate loading of
railway rakes and a high-tech production facility for cement and clinker,
UltraTech Cement has found wide acceptance in these neighboring countries

54
 OBJECTIVE OF THE STUDY

Primary objective:
To study the distribution channel of Ultra Tech cement along with other
brands, in Sonepat and Kurukshetra distt. Of Haryana.

Secondary objectives:

55
 1. To find out the market share of Ultra Tech cement.
2. To find out the major competitors of Ultra Tech cement in a particular
area.
3. To find out the problems faced by the Ultra Tech dealers/retailers and
try to minimize these problems.
4. To help the ultra tech dealers/retailers to increase their sales.
5. To find out the possible newer methods for advertisement and
methods for increasing sales of Ultra Tech cement.

RESEARCH DESIGN

(a) General Methodology:

The methodology adopted for this project was completely base on
primary information. The locale of the study was distt. Sonepat and
kurukshetra of Haryana.The first stage included gathering information about
the general cement market of the two cities. That was, to find out which are

56
major players, what is general distribution pattern, what type of incentive
schemes the different brands are using.
The second stage comprised determining
the objective of the study and drafting the questionnaire. The questionnaire
was designed keeping in mind the objective of the study. It was designed
with due guidance of the company guide. It was assured that the
questionnaire didn’t exceed more than 10 questions. Keeping in mind the
education level of the respondents who were mainly dealers/retailers, the
questionnaire was kept simple and precise.

b) Data Sources:
The research called for gathering primary data only. Hence, primary sources
were considered for the collection of data.
*Primary source
The primary data is gathered for specific purpose and is collected by the
researcher himself. It includes direct communication and feedback from the
customers. For the purpose of collecting information from customers a
structured questionnaire was formulated and is contacted directly.
c) Research Approach:
The research conducted was exploratory in nature and the goal was to gather
preliminary data to shed light on the real nature of problems and to suggest
possible solutions. For the purpose of this project, we went for a
questionnaire- based survey of customers. A pilot test of this questionnaire
was done for the preparation of final questionnaire. It involved, applying the
draft questionnaire to a sample of 5 people. This was done to ascertain

57
which questions are ambiguous, wrongly worded or in any way
objectionable.

(d)Research Instrument:
1. Personally administered questionnaire
2. Structured interview
3. Unstructured interview

For the purpose of this project, a questionnaire was designed to collect data
that consisted of close ended questions & open ended questions. A survey
technique is being used to collect the data. During the project a survey of
customers using personal interview was done at random locations in sonepat
and kurukshetra and a predetermined structured questionnaire was
administered to them. The areas covered were as following:
1.Sonepat:
(a) Kundali
(b) Bahalgarh
(c) Kharkhoda
(d) Guhana
(e) Gannaur
2. Kurukshetra:
(a) Pehowa
(b) Ismailabad
(c) Ladwa
(d) Pipli
(e) Shahabad

58
e)Sampling Plan:

* Sampling Unit

The study was restricted to sonepat and kurukshetra only.

Keeping in mind the objective of the study we sampled
dealers and retailers of each and every brand. We try to
explore out as many shops as could be possible.

*Sample Size

The sample size taken for the purpose of study was around
150 respondents from the two distt.All the respondents were
chosen randomly.

*Sampling Procedure

We try to find out almost all of the cement dealers and

retailers in the market.

*Contact Method

I personally visited most of the customers after seeking prior

appointment. Few shopkeepers due to their busy schedule or
loyalty for their brand refused to respond at all.

59
f) Analytical tools:

The data, which was collected, was summarized and tabulated

on MS-excel for further analysis. The analysis performed was
mainly comparative analysis using statistical analytical tools.
The tools that have been used are as follows:

 Bar Chart
 Pie Chart
 Line Graph

DATA ANALYSIS & FINDINGS

• Market share graph 6%

for distt.Sonepat:
9% ultra tech
26% Acc
J.k.
8%
J.P.
BINANI
9% Ambuja
4%
Shree Ultra
Tuff Cemento
12% 15%
60 Bangur
11%
The graph clearly shows that the Ultra Tech Cement has largest market share
in Sonepat, followed by J.K. cement and J.P. Cement.The main reason
behind this excess market share goes to the higher number of dealers of
Ultra Tech cement than other brands.J.K. Cement on the other hand is
having a good market share due to a nicely balanced supply chain of dealers
along with many retailers. All the other brands like Sri Ram and Bangur are
struggling to find market in Sonepat.

• Market Share Graph for kurukshetra:

1%3% 3%
20% ultra tech
12%
Acc
J.k.
J.P.
9%
BINANI
Ambuja
6% 25% Shree Ultra
Tuff Cemento
61 Bangur
21%
The graph shows that the Ultra Tech is lagging behind ACC cement in
kurukshetra.although it has a good 20% share. The credit for ACC success
goes to the no. of dealers it has in kurukshetra.Its no. of dealers is almost
double than the Ultra Tech dealers plus retailers. The possibility behind Ultra
Tech success lies at the chances of getting some more retailers.

• Satisfaction level of Dealers/Retailers:

62
 70 highly satisfied

60

50

40

30
satisfied
20
average
10 not satisfied
highly dissatisfied
0
highly satisfied average not satisfied highly
satisfied dissatisfied

the graph clearly shows that most of the dealers are well satisfied with the
services provided to them by the brand they deal in. The services include
timely supply of cement, regular visits by the company officials, different
type of incentive schemes meant for the dealers etc.The other side of the fact
can be that-being loyal to their respective cement brands, the dealers didn’t
want to give a poor image of the company.i.e.they were not satisfied with the
company but responded positively.

• Want to Shift to Other Brand?

63
 90 NO

80
70
60
50
40
30
20 MAY BE
10 YES

0
NO YES MAY BE

The graph shows that about 84% of the dealers and retailers don’t want to
shift to any cement brand other than the one in which they are currently
dealing. But the last portion of the graph i.e. MAY BE part is of crucial
importance for Ultra Tech.This portion shows the dealers who may shift to a
new brand if it proves beneficial for them. So if Ultra Tech assures them
some better services and mainly the better incentives then these can be the
new suppliers for it

• The major competitor for Ultra Tech in Sonepat is J.K. Cement.The

reason behind this is the presence of more no. of retailers for J.K.
Cement.The two brands under J.K. i.e. J.K. SUPER & J.K. LUXMI
are both well established here.J.K. Provides the benefit of low cost

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 and quality to the customers as compared to higher price of Ultra Tech
cement.
• The competitor for Ultra Tech in Kurukshetra is ACC cement. It
seems that ACC has given more importance to Kurukshetra.It has just
4 dealers in Sonepat but in Kurukshetra it has about 12 dealers.

• The total cement consumption in Sonepat is much higher than that in

Kurukshetra.The reasons behind this are construction of a no. of
malls, presence of major real estate players like ANSAL, DLF etc and
other Govt.projects in Sonepat.So Ultra Tech need to concentrate
more in Sonepat.
• Ultra Tech cement lags behind other brands only at the price point. It
costs nearly 4-5 rupees higher than the other cements. This is the main
reason for some lower sales. On the other hand, customers are very
sure about the thing that Ultra Tech cement provides much better
quality.
• Ultra Tech should try to increase the number of ‘MOBILE
CONCRETE HELP’ vans. These vans are the feature that no other
brand is offering. These are very popular among the local customers.
So Ultra Tech should introduce some more of these vans.

LIMITATIONS OF THE STUDY

1. The major problem of the survey was that most of the respondents

being very loyal to their brands didn’t give exact answers .like they

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 didn’t talk much about what problems they are facing, what are the
different marketing schemes of the brand in which they deal etc.

2. Once we got the questionnaire filled, we need to restart the

conversation in a very generalized way and talk about the local market
conditions. Like who is the main dealer, which cement is mostly sold
in that area etc.so this survey demands a good piece of time while
talking to the respondent. Also Sonepat & Kurukshetra are both big
Distts. With a number of small towns and villages. So to complete the
survey within 2 months time seems to be a bit difficult.

3. Some of the respondents may have told their average monthly sale

more than the actual. Because all of them think that the monthly sale
attached with the market image of their shop.

4. Many of the dealers/retailers refused to answer any question atall.So

the actual figures can be somewhat different from the one that we
have found out
.
5. Being new to the Distts of Sonepat & Kurukshetra, it is quite possible

that I was unable to explore some of the dealers/retailers.

RECOMMENDATIONS

66
Based upon the time spent by me in the market, usefull suggestions of the
dealers & retailers and the findings from the survey, following
recommendations can be suggested for increasing sales and effectiveness of
Ultra Tech Cement:
• What matters for most of the cement buyers is the price of the cement
and then the quality. While visiting market for cement purchase, they
don’t care about which brand they are going to buy. They simply
know that X is ongoing price of the cement, if any brand costs higher
than X, they will not buy that brand. Ultra Tech Cement usually costs
4-5 Rs. Higher than the other counterparts. So the buyers, to much
extant not interested in buying Ultra Tech cement. This extra price is
the main reason behind lower sales.therefore, Ultra Tech need to take
some serious steps to reduce the selling price somehow.
• The second thing is that a good percentage of buyers is still unaware
of the fact that Ultra Tech cement is the changed name of Birla
cement.Birla cement had a very good image and it is still very popular
among the customers. But people are not so much sure about Ultra
Tech cement. so Ultra Tech need to take some steps to make people
familiar with the’ Birla cement and Ultra Tech’ relation. Because this
will bring the old Birla loyal customers to Ultra Tech cement.

• The number of retailers and sub dealers for Ultra Tech cement is very
less as compared to the main competitors ACC, J.K. etc.So Ultra Tech
need to be oriented in this direction. They need to increase the no. of
retailers as much as possible. Although Ultra Tech has taken a right

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 step with the ‘retailer registration scheme’ to increase the no. of
retailers. but this scheme needs some improvements. For ex-margin
for the retailers can be increased, we can assure them some gifts also.
While working, I saw that the main condition for this new scheme was
that the retailer will not sell any other brand of cement. Most of the
retailers refused the scheme due to this particular reason. So Ultra
Tech needs to give them some relaxation in this case.
• Many of the Ultra Tech dealers used to shop other type of building
materials along with cement, in the same shop. This should not be
permitted by Ultra Tech.Because selling of these building materials is
more profitable than cement, so the cement selling becomes less
important for these dealers. They don’t give proper attention to the
company officials and also to the various schemes of increasing sales.
This in turn brings reduced sales to the company
• Ultra Tech Cement has market image of a modern cement with very
good quality. It should try to encash this image. Its mainly the younger
section of people who care about quality first and then the price. So
Ultra Tech needs to give proper attention to the youngsters. May be,
they are not the cement buyers at present but future possibility lies
with them.

• Ultra Tech also should have a check on the upcoming threat of

imported cement from Pakistan. The import of cement from Pakistan
has just started and very quickly it has become successful in the

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 southern markets. The main reason behind this success is the lower
price. The Pak cement brands like Lucky, Mapple Leaf and Elephant
costs 10-15 Rs. Lesser than the local Indian brands. Ultra Tech which
is already facing charges of higher price needs to be prepared for this.
• Some of the Ultra Tech dealers complained that they are losing the
customers loyal to their shops, due to the high price of the cement
provided by them. So at some point, the dealers are not satisfied with
the company. This need to be taken seriously by Ultra Tech.Some
more incentive schemes should be introduced for the dealers and also
the frequency of visits from company officials need to be increased.

POSSIBLE ADVERTISEMENT METHODS

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All of the cement brands use the similar methods of advertising like-
painting walls, use banners, giving free gifts to the dealers and masons
etc.There are still many possible methods of advertisement and creating
brand awareness, which are untouched. Some of these methods are as below:

• Local cable T.V. can be used for advertising as well as to give details
about the major dealer/dealers in the city. Details like address, contact
no. of the dealer, different schemes, current market price etc can be
shown.

• Local F.M. stations of sonepat and Karnal are also reaching a good
part of listeners. So these can also be used for the same purpose.

• Banners, paintings are used mainly on the tractor trolleys, dealer’s

shop and on walls only. We can think about using banners on
rickshaws and autos also.

• Different type of incentive schemes, free gifts are mainly for dealers
and sometimes for the masons. As a change, we can also try to attract
the customers directly. For ex-discount coupons, small free gifts,
scratch cards etc can be made available for the customers.

• A number of meetings are organized by all the cement companies with

the local masons. Most of the masons are very less educated. They
attend many meetings. So it may become difficult for them to
recognize a particular cement brand. What we can do in this case is to

70
 take help of Handvertising i.e. we need to put the Ultra Tech logo on
the hands of these masons. So that next time they saw this logo, they
found themselves a bit familiar with the company.

• The ‘masons meet’ are organized by the company regularly. This

needs some improvements. We need to decrease the frequency of
these meets. What we can do is that organize a big meet with a no. of
people, higher company officials, entertainment, and snacks for all.
The presence of company officials in the meeting is not alone
sufficient. We need to call some big personalities from that city only.
The people like these masons are more impressed by the presence of
Govt.officials.

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• Ultra Tech has two major competitors- J.K. CEMENT and ACC
CEMENT.
• Ultra Tech is well established in the markets as far as quality is
concerned.
• Introduction of new attractive incentive schemes can bring new
dealers & retailers for Ultra Tech cement.
• Price is the major factor that matters for a customer while purchasing
cement
• Market share increases with the increase in no. of dealers.

ANNEXURE 1

QUESTIONNAIRE

72
SOLICITATION

Dear Sir/Madam,
We are conducting a survey on behalf of ultra tech cement
as a part of my ‘summer training project.’ I would be extremely benefited if
you answer the following questions.I assure you that the information
provided by you will be used for my project work only.

NAME: _ _ _ _ _ _ _ _

ADDRESS & CONTACT NO. : _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_________________

WHICH CEMENT YOU DEAL IN: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

YOU ARE A:
>DEALER
>RETAILER
>SUB DEALER

YOUR AVERAGE MONTHLY SALE (IN BAGS): _ _ _ _ _ _ _ _ _ _ _

HOW MUCH ARE YOU SATISFIED WITH THE SERVICES

PROVIDED TO YOU BY THE BRAND YOU DEAL IN:
>HIGHLY SATISFIED
>SATISFIED
>AVERAGE
>DISSATISFIED
>HIGHLY DISSATISFIED

WHAT TYPE OF PROBLEMS ARE YOU FACING WITH YOUR

CURRENT BRAND(IF ANY): _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

73
_ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _

WHAT ARE THE REASONS FOR SELLING THIS PARTICULAR

BRAND: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ ________________________________________
________________________ _________________

DO YOU WANT TO SHIFT TO ANY OTHER BRAND:

>YES
>NO
>MAY BE

USEFUL COMMENTS: _________________________

_________________________________________
_________________________________________

THANKS A LOT

KAPIL KUMAR

ANNEXURE 2

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75
76
BIBLIOGRAPHY

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► www.cemnet.com
► www.pca.com
► www.ceicdata.com
► WWW.ULTRATECH.COM

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