Sector structure/Market size

India is the world's second largest producer of cement after China, with cement companies adding nearly 11
million tonnes (MT) capacity during April-September 2009, taking the total installed capacity to around 231
MT by September 2009.

With the boost given by the government to various infrastructure projects, road networks and housing
facilities, growth in the cement consumption is anticipated in the coming years. According to Jyotiraditya
Scindia, Minister of State, Ministry of Commerce and Industry, cement production could rise to 236.16 MT in
FY11 and touch 262.61 MT in FY12.

With almost total capacity utilisation levels in the industry, cement despatches have maintained a 10 per
cent growth rate. Total despatches grew to 170 MT during 2007–08 as against 155 MT in 2006–07.

Moreover, cement despatches were 12.22 MT in October 2009, showing a growth of 9 per cent as
compared to 11.21 MT in October 2008. During October 2009, cement production was 12.37 MT, registering
a growth of 6.54 per cent as compared to 11.61 MT in October 2008. Between April to October 2009,
cement production totaled 89.59 MT while cement despatches totaled 88.72 MT.

A few of the leading manufacturers are UltraTech/Grasim combine, Dalmia Cements, India Cements, Holcim
etc.

Technological change

Continuous technological upgrading and assimilation of latest technology has been going on in the cement
industry. Presently, 93 per cent of the total capacity in the industry is based on modern and environment-
friendly dry process technology and only 7 per cent of the capacity is based on old wet and semi-dry process
technology. There is tremendous scope for waste heat recovery in cement plants and thereby reduction in
emission level.

New Investments

• Dalmia Cement, South India’s second largest cement maker, will invest over US$ 652.6 million to
add 10 MT capacity over the next 2-3 years.
• India Cements Ltd will invest US$ 104 billion to set up two thermal power plants in the southern
states of Tamil Nadu and Andhra Pradesh.
• Anil Ambani Group company Reliance Infrastructure will invest US$ 2.1 billion to set up cement
plants with a total capacity of 20 MT per annum over the next five years.
• Reliance Cementation, an Anil Dhirubhai Ambani Group (ADAG) company, plans to set up a 5 MT
integrated cement plant in Yavatmal district of Maharashtra at a cost of US$ 463.2 million.
• Jaiprakash Associates Ltd has inked a MoU with state-owned Assam Mineral Development
Corporation Limited (AMDC) for setting up a 2 MT per annum capacity cement plant at an
estimated cost of US$ 221.36 million.
• Iron ore mining firm Rungta Mines (RML), the flagship company of SR Rungta group, plans to set
up a one million tonne cement plant in Orissa with an investment of around US$ 123 million.

Mergers and Acquistions (M&As)

• Holcim strengthened its position in India by increasing its holding in Ambuja Cement from 22 per
cent to 56 per cent through various open market transactions with an open offer for a total
investment of US$ 1.8 billion. Moreover, it also increased its stake in ACC Cement with US$ 486
million, being the single largest acquirer in the cement sector.
• UltraTech Cement, a unit of conglomerate Aditya Birla Group, is absorbing sister unit Samruddhi
Cement, to form India's biggest cement firm.
• Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and
Emerging Market Fund have together bought around 7.5 per cent in India's third-largest cement
firm, India Cements (ICL), for US$ 124.91 million.
 • Cimpor, the Portugese cement maker, paid US$ 68.10 million for Grasim Industries' 53.63 per cent
stake in Shree Digvijay Cement.
• CRH Plc, the world's second biggest maker and distributor of building materials, acquired a 50 per
cent stake in My Home Industries Ltd for almost US$ 372.64 million.
• Vicat SA, a French cement maker acquired a 6.67 per cent stake in Hyderabad-based Sagar
Cement for US$ 14.35 million.

Government Initiatives

Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban
development, continue being the main drivers of growth for the Indian cement industry.

• Increased infrastructure spending has been a key focus area over the last five years indicating
good times ahead for cement manufacturers.
• The government has increased budgetary allocation for roads under National Highways
Development Project (NHDP).
• Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper
allocation of coal (a key raw material) blocks to the core sectors, cement being one of them.

Keeping in mind the global meltdown which is impacting the cement companies in India, the government re-
imposed the counter-veiling duty (CVD) and special CVD on imported cement in January. This is likely to
provide a level playing field to domestic companies.

Road Ahead

According to a report by the ICRA Industry Monitor, the installed capacity is expected to increase to 241
MTPA by FY 2010-end. India's cement industry is likely to record an annual growth of 10 per cent in the
coming years with higher domestic demand resulting in increased capacity utilisation.

Moreover, according to the Centre for Monitoring Indian Economy (CMIE), cement production is expected to
grow by 8.1 per cent and demand for the same is likely to rise by a healthy 7-7.5 per cent in FY 2009-10.

Exchange rate used:

1 USD = 48.8 INR (as on September 2009)
1 USD = 47.5 INR (as on October 2009