SCHOOL OF BUSINESS

A Study on Indian cement industry

Guided By:Prof. Samik shome

Submitted By:AMIT KUMAR YADAV

Acknowledgement
1 | Page

Knowledge is an experience gained in life, it is the choicest

possession, which should not be shelved but should be happily
shared with others. It is the supreme art of the teacher to
awaken joy in creative expression and knowledge.
The feeling of a task well done is incomplete without giving the
acknowledgment where due, so before we proceed further We
wish to spend some time in expressing our gratitude to all
those who have been involved in guiding us and helping us out
during our report.
We would like to give special thanks to Prof. Samik Shome
for his guidance during the report. Despite of his demanding
schedule, he bestowed every possible support to us, so as to
carry on the report work without any hindrance.
We would like to thank valuable works of publishers and
authors whose work helped me during the project.

Table of Contents
2 | Page

Topic

1.
1.1
1.2
2.
3
3.1
3.2
3.3

3.4

3.5
3.6
3.7
3.8

Executive summary
Introduction to Indian cement industry
History of the Indian Cement Industry

Page
No.
1
2
2

Current Scenario

Review of Literature
Analysis
Introduction
Major players in Indian Cement Industry
& Nature of Competition
Market Segmentation
3.3. Geographical Segmentation
1
3.3. Customer Segmentation
2
PESTEL Analysis on Indian Cement
Industry
3.4. Political
1
3.4. Economic
2
3.4. Social
3
3.4. Technological
4
3.4. Environmental
5
3.4. Legal
6
Business diversification Conglomerate or
Standalone
Consolidation Mergers & Acquisitions
International Exposure of Indian Cement
Industry
Technology Intensity
3.8. Cement Production Process

6
14
14
14
22
22
24
26
26
27
28
29
30
31
32
36
39
43
43
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3.9
3.10
3.11
3.12
4

1
3.8. Adoption of Latest Technologies
2
3.8. Research and Development
3
Marketing Initiative
Future Outlook
Comparison with Other Countries
Conclusion
Reference

45
46
48
51
53
54
55

EXECUTIVE SUMMARY
The cement industry is one of the key industries in India.
Cement industry is a rapidly growing sector heavily taxed by
the government. The Indian cement industry is one of the
largest user of power, is the third largest consumer of coal in
the country. As Limestone is found in abundance all over the
country, the cement industry has a huge potential to grow. The
Indian Cement Industry comprises 148 large cement plants with
around 46 member companies. The major players are-Grasim
Industries Ltd, ACC Ltd, Udaipur Cement Works Ltd, Ambuja
Cements Ltd, Century Textiles & Inds. Ltd, India Cements Ltd,
Shree Cement Ltd, Madras Cements Ltd, Birla Corporation Ltd,
Dalmia Cement(Bharat) Ltd. The industry is growing manifold
due to increased industrial activity, real estate business,
growing construction activity, and expansion in the
infrastructure sector. The production and consumption of
cement to a large extent indicate a countrys progress. The
global cement has always been a good indicator of economic
activity, as industry growth patterns consistently point to the
direction in which the economy is likely to move. India is the
second largest cement producer in the world after China and
has got a huge cement industry. With the government of India
giving boost to various infrastructure projects, housing facilities
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and road networks, the cement industry in India is currently

growing at an enviable pace. Cement industry plays a vital role
in the economic development of the country. Domestic cement
manufacturing industry is going through a tumultuous phase. It
is battling profitability woes. This overall growth in cement
industry has a significant impact on the overall level of
anthropogenic greenhouse gas emissions. The production of
each tone of cement leads to emissions of roughly 1.25 tons of
carbon dioxide.

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1. Introduction to Indian Cement

Industry
Cement Industry is one of the most important industries with
respect to national growth and development. Cement is a
mixture of silicates and aluminates of calcium, formed out of
calcium oxide, silica, aluminum oxide and iron oxide. The
demand for cement is correlated with the momentum of
activities in the financial, real estate and infrastructure sectors
of the nation. Due to cost control measures and technology up
gradation, the Indian cement industry is globally competitive.
The Indian Cement Industry is one of the largest users of power
in the country. It is also the third largest consumer of coal in the
country. Since limestone is found in abundance all over the
country, it has huge opportunities for growth and development.

1.1.

History

of

Indian

Cement

Industry
The first manufacturer of cement was by a Calcutta-based
company in 1889. But the first endeavor to manufacture
cement in an organized way commenced in Madras. In the year
1904, South India Industries Limited began manufacturing
Portland cement. However, the company had to stop the
production as it was not successful.
The first licensed cement manufacturing unit was set up by
India Cement Company Ltd at Porbandar, Gujarat in 1914.
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During the First World War, a huge growth was seen in the
cement industry. After the war in the later years the industry
witnessed

high

growth

rate

especially

in

terms

of

manufacturing units, installed capacity and production. This

phase is referred to as the Nascent Stage of Indian Cement
Industry.
During the earlier years, demand of the cement was low and
the supply was much more than the market demand. The
Indian public at first did negative opinion against the cement
manufactured in India until government had to come in
between

and

provided

protection

to

the

producers

by

encouraging cooperation among the manufacturers.

In 1927, the Concrete Association of India was formed with the
objective of making cement more popular among the public in
a positive manner and to increase cement consumption.
Later in 1930, the Cement Marketing Company of India (CMI)
was formulated to promote the sale and distribution of cement
at regulated prices. The Indian cement industry witnessed a
new beginning when 11 cement companies amalgamated to
form

the

Associated

Companies

Limited

ACC.

Post

independence the growth in the cement industry was very low

due to various factors like low prices, slow growth in additional
capacity and rising cost. The government intervened several
times to boost the industry, by increasing prices and providing
financial incentives. But it had little impact on the industry.
In 1956, the price and distribution control system was set up to
ensure fair prices to reduce regional imbalances and reach self
sufficiency. The government severely held back the cement
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industry during 1969-1982 .It intervened directly by exercising

control over production, capacity and distribution of cement
and indirectly by controlling prices. In 1977, the government
set higher prices for cement but still the growth rate was not up
to the mark.
In 1982, the government introduced a quota system. A 66.60%
of quota was created for sales to government and real estate
developers.50% quota was imposed for new and sick units, and
the remaining 33.40% was left to be sold in the open market. In
1989, after liberalization, the cement industry was given full
freedom to meet the challenges in open market which led to an
accelerated growth in the industry.

1.2. Current Scenario

The Indian cement industry is the second largest producer of
quality cement and occupies a strategic place in the national
economy

due

to

its

importance

in

other

sectors

like

construction, transportation, coal and power. It is engaged in

the production of different varieties of cement such as Ordinary
Portland Cement (OPC), Portland Pozzolana Cement (PPC), Oil
Well Cement, Sulphate Resisting Portland Cement, White
Cement, etc.
The Indian Cement industry comprises 148 large cement plants
with around 46 member companies. The installed capacity of
large cement plants was estimated to be 219.17 million tonne
during 2009-10 (as on March 2009).There are 365 mini and
white cement plants with an installed capacity of 11.10 million
tonne .
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Table 1: Cement Production & Despatches

Description
Cement
Production
Cement
Despatches

Sep-

Aug- Sep-

10

09

12.54
12.56

12.8
5
12.8
2

09
11.83
11.74

2010 2009-11

2010

(Apr-Sep)
81.5
4
81.1
0

77.22
76.50

Source: Cement Manufacturers' Association

Cement production during April to January 2009-10 was 130.67

million tonnes as compared to 115.52 million tonnes during the
same period for the year 2008-09. Despatches were estimated
at 129.97 million tonnes during April to January 2009-10
whereas during the same period for the year 2008-09, it stood
at 115.07 million tonnes.

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2. Review of Literature
Cement proves to be an area of interest for many researchers
because of its overall impact on the economic development on
the country. There is a lot of research work done on cement
industry.

Cement

industry

has

been

analyzed

by

many

individuals and researchers. They found many valuable insights

in the industry and made the data available to all. There were
many studies conducted to know the environmental impacts of
cement

production,

the

current

market

trends,

Trade

perspective of Indian cement industry and detecting cartels in

the cement industry. For the purpose of the current study, a lot
of articles, research papers and reports have been studied and
analyzed to gain the knowledge about cement industry as a
whole. The following articles have been taken to get an in
depth knowledge and insight about the cement industry.

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According to L. G. Burange and ShrutiYamini (2008), the

Cement industry is a rapidly growing sector heavily taxed by
the government. The industry is growing manifold due to
increased industrial activity, real estate business, growing
construction activity, and expansion in the infrastructure sector.
The issue here lies in the technology used, fuel efficiency and
power efficiency. Since, cement is a high bulk and low value
commodity, competition is localized because the cost of
transportation of cement to distant markets resulting in the
product being uncompetitive in those markets. In 1989, all price
and distribution controls on sale of cement were withdrawn and
in 1991 the industry was de-licensed in order to accelerate
growth and induce modernization. The industry has also
witnessed a number of mergers and acquisitions and entry of
foreign majors in the cement market.
According to Arindam Chakrabarti, et.al (2008), the domestic
cement manufacturing industry is going through a tumultuous
phase. While it is battling profitability woes on one hand, it also
has to contend with the increasing level of environmental
activism that is keenly scrutinizing its various actions and their
impact on environment and society. Thus cement industry has
to proactively engage itself in three dimensions of profitability,
environmental consciousness and social obligations that will
earn the industry the right to grow and the license to operate.
The cement companies have to embark upon a set of proactive
activities that impacts all three dimensions of balanced growth.
They suggested a set of proactive actions that companies may
adopt according to their suitability such as: Look to consolidate
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where long term players may look to grow their operations

either organically or inorganically, proactively change product
mix with which they suggest the companies to focus upon
Ready Mix Concrete usage and enter RMC business as it helps
in reducing pollution. The other suggestions are to develop a
logistics models to support changing product mix, look for
alternate fuel sources as power and fuel cost is the second
most important element of operations cost after raw material
cost. By optimally utilizing the existing limestone quarries,
companies can save precious resources. Finally, the author
suggests the companies to undertake a continuing dialog with
the affected community so that it creates a community friendly
image across the society. Actions suggested above impact the
three dimensions. This will help companies to gain advantage
over their competitors.
According to C. A. Hendricks, et.al (2004) cement is the most
important

building

material.

Cement

consumption

and

production is closely related to construction. It is also one of the

most produced materials in the world it is the most important
construction material. Cement production is highly energy
consumption process also production of cement produces
greenhouse gases like CO2. It contributes to about 5% total
global carbon dioxide. And about half of it comes from
calcinations and half from combustion process. A wide range of
options

exist

to

reduce

CO2

emission.

Technological

advancements are adding to reduction of carbon dioxide from

cement production.

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According to Paul (2008), Cement Industry has always been a

good indicator of economic activity, as industry growth patterns
consistently point to the direction in which the economy is likely
to move. The article examines present drivers of growth in
cement industry and some special demands placed upon
automation suppliers dealing with emerging markets. Pressure
of

maintaining

the

standards

imported

by

the

cement

multinationals, three main trends are to be observed on the

marketplace:

productivity,

safety

and

environmental

responsibility. Cement plant operators have four primary

productivity goals: the reduction of downtime, the reduction of
energy consumption, improvements in product quality and the
intelligent

use

operators are

of

maintenance

resources.

Cement

plant

investing heavily in systems aimed at improving

plant safety. The main attention has been on improved

monitoring of processes and the installation of modern
technology aimed at lessening the risk of extraordinary events,
such as explosions. By lowering the amount of time needed to
maintain the plant, and ensuring that maintenance cycles
around the plant are optimized, plant operators can reap
significant cost savings.
ICRA Limited(January 2010), in its report Indian Cement
Industry

says that with 153 cement plants and a total

installed capacity of around 209 million tonnes per annum

(MTPA) both as of March 2009, the Indian cement industry is
the second largest in the world, the largest being China.
Demand for cement reported strong growth during the period
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2002-03 to 2007-08 even as capacity addition remained

moderate.

The Indian

cement

industry witnessed strong

growth, with demand reporting a compounded annual growth

rate (CAGR) of 9.3% and capacity addition a CAGR of 5.6%
between 2004-05 and 2008-09. This led to tightening of the
supply-demand

situation

and hardening of prices,

which

remained strong till the first half (H1) of 2009-10. But due to
capacity additions, capacity utilizations have been pushed
down to 83% from around 90% in 2008-09, due to which
cement prices have come under pressure since the 3 rd quarter
of 2009-10. ICRA believes that the extent to which pressures
will be felt will depend on two factors, both of which are to
some extent under control of manufacturers. One, the phasing
out or deferment of the announced capacity additions. And two,
the extent to which the shift towards Ordinary Portland Cement
(OPC) reduces the effective capacity of the industry. While ICRA
expects all cement manufacturers to face pressures on
realisations and margins in the medium term, the impact will
not be the same for all companies. Those with leaner cost
structures, location advantages, strong capital structures, and
geographically dispersed plants would be in a better position to
absorb the impact of the anticipated softening in prices and
declined in capacity utilisation.
According to Ernst Worrell and Christina Galitsky (March 2008),
energy efficiency is an important component of a companys
environmental strategy. As the U.S. manufacturers face an
increasingly competitive global business environment, they
14 | P a g e

seek

opportunities

to

reduce

production

costs

without

negatively affecting product yield or quality. This report reflects

an in-depth analysis of the cement industry, and identifies
energy

savings

and

carbon

dioxide

emissions

reduction

potentials. In their analysis, the cement industry includes

establishments engaged in manufacturing hydraulic cements,
including Portland, natural, masonry, and pozzolana cements.
The historic trends for energy efficiency in the U.S. cement
industry and the cost-effective energy and carbon dioxide
savings that can be achieved in the near future are analyzed in
this report. The cost of energy as part of the total production
costs in the cement industry is significant. Coal and coke are
currently the primary fuels for the sector. Most recently, there is
a slight increase in the use of waste fuels, including tires.
Between 1970 and 1999, primary physical energy intensity for
cement production dropped 1%/year from 7.3 MBtu/short ton to
5.3 MBtu/short ton. Carbon dioxide intensity due to fuel
consumption and raw material calcinations dropped 16%, from
609 lb. C/ton of cement (0.31 tc/tonne) to 510 lb. C/ton cement
(0.26 tc/tonne). Despite the historic progress, there is ample
room for energy efficiency improvement. a relatively large
potential for improved energy management practices exists.
From the impact of trade perspective (2009), Cement is the
industry which beckons the countrys economy and has
resulted in construction of small buildings to that of the multi
storied building. It consists of grinded limestone, clay and silica
which is being dried and mixed into a composite mass. Semi15 | P a g e

finished form of Clinker is being formed when this mixture is

being heated, then this clinker is grounded and cooled in air to
form cement. With liberalization and globalization of the
economy alterations were being made to survive in the global
economy. Manpower costs were reduced, technologies were
being implemented and modernization was also done. Till
January 2007 was the import duty was 12.5% and after which
this reduced to nil and still its into effect. From 2011 there will
be an import duty on cement and cement clinkers called as the
Clean Energy Cess, which will be collected as a duty of excise
from coalmines.
According to Environmental Agency of Bristol (2005), the
objective is to deliver the performance of the industry in such a
way that it results in the environmental benefit. The plan
includes the statutory and non-statutory activities with set of
high level objectives to be fulfilled. The Cement Industry uses
this plan in England and Wales to perform environmental
targets, to compare the performance against the targets and
report to public at large through the British Cement Association
(BCA).The

key

aspects

were

concentrated

on

Key

Environmental Issues, Raw materials, Use and disposal of

manufactured

cement

products,

Use

and

disposal

of

manufactured cement products.

According to Lloyd Timberlake (2007), Cement industry is
responsible for the sustainable development. It clearly has an
impact over the present and the future. Manufacturing process
involves emissions of gases with climate change. Action by
individual companies, the CSI has: Produced and updated a
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protocol for reporting and make an account of CO2 emissions

that has been established all CO2 emissions from the cement
industry, set of guidelines on the use of fuels and materials and
a consistent approach for sustainable development. Monitoring
and reporting the common emissions of protocol that identifies
measurement methods for nitrogen oxides, sulfur compounds,
and particulates and defines to obtain a how to obtain
fingerprint

of

key

micro-pollutant

emissions.

CSI

has

established a Senior Advisory Board to advise the CSI leaders

on critical issues.
According to Rejie George Pallathitta (2008) Can Ultratech Be
The Next Market Leader. Cement industry is a homogenous
industry with 125 large cement plants and more than 300 small
cement plants in India. Large companies are acquiring smaller
ones. Aditya Birla Group (ABG) acquired management control of
L&T Cement on 17th June 2003, and renamed it UltraTech. It
became the second largest cement producer and third in terms
of profitability. Both Ultratech and ACC have increased sales
growth and capacity utilization. Ultratech has an advantage of
its raw materials with leases higher quality of raw materials.
Both ACC and Ultratech enjoy lower fuel cost. Ultratech started
to switch to coal as fuel. So, ACC may lose its advantage in
near future. Ultratech is a part of Aditya Birla Group which has
more

promoters,

highest

quality

human

capital,

higher

operating leverage and better quality limestone than ACC. Acc

enjoys cost advantage over Ultratech in terms of power.
Because Ultratech uses Naphtha and Fuel Oil based Power
Plants which are of higher cost and ACC uses coal based plants.
17 | P a g e

It manages good relationships with importers, exporters,

distributors, warehouse providers, wholesalers, retailers and
dealers.
According to Mr. Sumit Banerjee (2009), mainly there are 3
types of processes to produce cement wet, semi-dry, and dry
processes. The dry and semi-wet processes are more fuelefficient. Different varieties of cements are Ordinary Portland
Cement (gray cement) account for 70% of total consumption,
Portland

Pozzolana

Cement

account

for

18%

of

total

consumption, White Cement, Portland Blast Furnace Slag

Cement and Specialised Cement. Asia accounting for 66% of
the global demand. China was the worlds largest consumer of
cement in 2008 and accounted for 48.7% of total cement
consumption. India has the lowest level of per capita cement
consumption.

The current study on Indian cement industry is different from

the previous studies in the following manner. An in depth
analysis of the Indian cement industry is done. The top 10
companies are analyzed. Also the industry is analyzed in terms
of

political,

environmental,

technological

and

economical

analysis. The impact of the cement industry on the economic

development is analyzed. The impact of how other related
sectors like construction and real estate sectors impact this
sector was analyzed. The main thing about the report is that it
does not concentrate on single topic. This report is giving
information on different aspects related to cement industry.
18 | P a g e

Objective of the Study

The cement industry has been considered as the backbone of a
nations economy, it is because, the almost all other industries
are directly or indirectly inter-related to this industry. As
mentioned above, it is base of all other industries, so it would
be very interesting and important to know the effect of this
industry i.e. cement industry on other industries like power, real
estate, transport, mining etc. At the same time, it is also
important to know the contribution of cement industry in the
National economy by using different parameters like export
related activities, role of technology etc. In addition to this, we
also wanted to know about the no. of players in the concerned
market, and their respective market share in order to know the
intensity and the depth of the industry. Cement is one of the
industry, where lot of research and development can be done
with the advancement in technology, which further makes the
health of the industry more robust. Apart from this, we also
wanted to know about the dominance of Indian cement industry
in the global market, which plays an important role in the
political as well as the economical relation of India with rest of
the world.

3. Analysis of Cement industry

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3.1 Introduction
Cement industry is one of the core industries in any country, so
in depth analysis of cement industry is very important. There
are different aspect for our study, which will cover Market share
and

Nature

of

competition,

Market

segmentation,

Policy

framework (PESTEL analysis), Business diversification, Mergers

& acquisition, International exposure, Technology intensity,
Marketing initiatives, Future outlook and Comparison with other
countries. All these aspects will provide in depth knowledge
about the cement industry.

3.2. Major players in Indian Cement

Industry & Nature of Competition

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Figure 1 :Top 10 Major player in Indian Cement Industry

2008-09

Grasim Industries Ltd.

A C C Ltd.

Udaipur Cement Works Ltd

17%

28%
Ambuja Cements Ltd.

Century Textiles & Inds. Ltd.

3%
3%
4% 4%

11%

India Cements Ltd.

10%
10%

Shree Cement Ltd.

5%
Madras
Cements
Ltd.
6%

Dalmia Cement (Bharat) Ltd.

Rest 32

Birla Corporation Ltd.

(Source: Prowess, CMIE)

3.2.1. ACC LIMITED

ACC is India's leading manufacturer of cement and concrete.
ACCs has 16 modern cement factories and more than 40 ready
mix concrete plants throughout the country. The distribution
channel has 20 sales office, 9000 dealers and several zonal
21 | P a g e

offices.

The human capital involved in ACC is around 9,000

persons throughout the country. ACC manufactures ordinary

Portland cement, composite cement and special cement.
Company has begun offering its marketing expertise to gain the
market share. ACC is largest producer of cement and also the
largest user of limestone, coal industry and railways. The
company is committed towards environment and installing
environment friendly equipment in cement plants to reduce the
pollution.

3.2.2. Grasim Industries Ltd

Grasim Industries Limited is a flagship company of the Aditya
Birla

Group,

ranks among India's

largest

private sector

companies. Grasim started as a textiles manufacturer in 1948,

now it has Grasim's businesses comprise viscose staple fibre
(VSF), cement, chemicals and textiles. Its core businesses are
VSF and cement, which contribute to over 90 per cent of its
revenues and operating profits Grasim is a global leader and a
major player in viscose stable fibre. Aditya Birla Group is the
worlds largest producer of VSF which has 21% global market
share. Grasim has a global market share of 10% and also 2 nd
largest

producer

of

caustic

soda

in

India.

Grasim is a subsidiary UltraTech Cement Limited, which is a

leading player in India. In July 2004, Grasim acquired a majority
stake in Ultratech; this acquisition catapulted the Aditya Birla
Group to the top of the league in India. The amalgamation of
Samruddhi Cement Limited (SCL) with UltraTech on 1 July 2010
restructured the cement industry.
22 | P a g e

3.2.3. Ambuja Cements Ltd.

Ambuja Cements Ltd. (ACL) is one of the top cement
manufacturing companies in India. It was formerly known as
Gujarat ambuja cement. The Company commenced cement
production in 1986. The global cement major Holmic has taken
over management control of ACL in 2006. Holcim holds little
over 46% equity in ACL. Company is growing at faster rate the
current installed capacity is about 25 million tonnes. The
Company has 5 integrated cement manufacturing plants and 8
cement grinding units in the country.

3.2.4. Century Textiles & Industries Ltd

Century Textiles & Industries ltd was incorporated in 1897 but
till 1951, it operated only one Cotton Textile Mill in Mumbai.
97% of the profit comes from cement, textile and paper & pulp
segments. Among these cement contributes 57% of the total
profit. In 1974, the Company diversified into production of
Cement by establishing its first cement plant at Baikunth to
produce 0.60 million Tonnes of Portland Cement. The present
capacity is 2.10 million TPA. The total present cement
manufacturing capacity is 7.80 million TPA (4 plants).

3.2.5 India Cements Ltd

The India Cements Ltd was the largest producer of cement in
south India which was established in 1946 and the first plant
was setup at Sankarnagar in Tamilnadu in 1949. Now there are
seven plants 3 in Tamilnadu and 4 in Andhra Pradesh. It is a
market leader with a market share of 28% in the South which
23 | P a g e

aims to achieve a 35% market share in the near future. The

Company has access to huge limestone resources and plans to
expand its capacity. The Company has a strong distribution
network. Its well established brands are Sankar Super Power,
Coromandel Super Power and Raasi Super Power. Its products
are ready mix concrete, Coromandel King-Sankar Sakthi- Raasi
Gold, Coromandel-Sankar-Raasi, Blended Cement and Sulphate
Resisting Portland Cement (SRC).

3.2.6. Shree Cement Ltd

Shree Cement is the largest cement manufacturer in North
India and among the top five cement manufacturing groups in
the country. It has increased its capacity 4 times in the last 5
years to reach present cement capacity (i.e. 12 million tons
p.a.) with manufacturing plants at Beawar, Ras, Khushkhera
and

Suratgarh

in

Rajasthan and

Laksar

(Roorkee)

in

Uttarakhand. The Company follows a multi-brand strategy. Its

highly recognized brands of Shree Ultra, Bangur and Rockstrong
which

together

enjoy

largest

market

share

in

high

value markets of Rajasthan, Delhi & Haryana. Shree is also into

the power sector and is an energy efficient and environment
friendly company and received many awards. it is an active
participant at Climate change forums and is the first Indian
cement company to join the Cement Sustainability Initiative of
the World

Business

Council

for

Sustainable

Development.

3.2.7. Madras Cements Ltd

Madras Cements Ltd contributes most of the profits to Ramco
Group, and is well recognized of South India which is located at
24 | P a g e

Chennai.

The

first

plant

of

MCL

at

Raja

Nagar,

near

Virudhunagar in Tamil Nadu commenced its production in 1962

with a capacity of 200 tonnes,.

The major product of the

company is Portland cement. The cement capacity is 10.49

million tons per annum. The company is the fifth largest
cement producer in the country. Ramco Supergrade is the most
popular cement brand in South India. It also produces Ready
Mix Concrete and Dry Mortar products. It gives best return to its
investors.

3.2.8. Birla Corporation Ltd

Birla Corporation Limited is the flagship Company of the M.P.
Birla Group.

It is incorporated as Birla Jute Manufacturing

Company Limited in 1919.

It was transferred from a

manufacturer

to

of

jute

goods

leading

multi-product

corporation with widespread activities. After it crossed the Rs.

1300 crore turnover mark and the name was changed to Birla
Corporation

Limited

in

1998.The

Company

showed

an

impressive growth record in 2008-09 and 2009-10. Present

chairman is Mr H V Lodha. It has products ranging from cement
to jute goods, PVC floor covering, as well as auto trims.

3.2.9. Dalmia Cement (Bharat) Ltd

Dalmia Cement (Bharat) Ltd. was founded in 1935 by Jaidayal
Dalmia. DCBL experienced a 7 decades of growth. The cement
division of DCBL was established in 1939. It is headquartered in
New Delhi with cement, sugar, travel agency, magnetite,
refractory and electronic operations spread across the country.
25 | P a g e

The Dalmia Group had established four cement plants. It had

made

strategic

investment

in

Orissa

Cements

Limited

(OCL). DCBL has been and continues to be an industry leader in

the niche market segment.

3.2.10 Nature of competition in cement industry

Competition is a process of rivalry between different market
players to attract customers. In their pursuit to be the best,
market players may adopt unfair means like cartelization. There
are goods which are tradable only in limited markets, Cement
being a good example of this. Due to its bulky nature, it is not
possible to transport it to distant places therefore, geographical
segments of a national market can be easily cartelized.
World over it has adopted illegal ways, India is no exception.
Cartelization in India is an open secret. The weak provisions in
the MRTP Act, along with weak investigation capacity are the
major reasons for cartel formation continuing for years.
Cement doesnt have any substitutes; this makes its demand
inelastic. Also since transportation cost eats up a major chunk
of the total cost, companies serve the regional markets and do
not operate out of their region. This typical nature of cement
industry has allegedly driven the firm to form cartels. Since the
majority of the market share is in the hands of large companies,
they can come together and collude, leading to a decline in

26 | P a g e

competition. The industry has witnessed more than a dozen

take overs in domestic region in the last few years.
The Builders Association of India (BAI) has alleged that Indias
cement industry, the worlds second largest, is operating as a
cartel.
The recent allegation has come on the back of a continuous rise
in cement prices from February by up to Rs 15-20 for a 50 kg
bag. The association said top players like ACC, Ambuja
Cements, Grasim, UltraTech and Jaypee Cement, which control
almost half the domestic cement market, are in a dominant
position to determine and monitor prices, the release issued by
BAI said.

Table 2 : Price Trend for Cement

Region State

Rate

(Rs

per
North
West

Delhi
Punjab
Haryana
Rajasthan
Maharashtra

50 Rate (Rs 50 per

kg kg bag)2004-05

bag)2004-05
150-155
160-165
160-165
145-150
170-175

190-220
200-230

(Mumbai)
Maharashtra (Pune 145-150
East
South

)
West Bengal
Orissa
Bihar
Tamil Nadu
Andhra Pradesh
Kerala

165-170
140-145
140-145
145-150
120-150
155-160

200-230
210-265

27 | P a g e

Karnataka
Centra Uttar Pradesh

155-160
150-155

l
Madhya Pradesh

140-140

or

135-140
(Source-Projectmonitor.com, financial
express)

Factors

Price variation,
Demand, Production,
Expense to sales ratio,
Capacity utilisation,
Capacity enhancement

As the above price table shows that price is drastically

changing from 130 to 250 around 100% increase in 5-6 years,
give the sign of cartelisation in cement industry as large
companies are gaining economics of scale in production, which
is reducing the cost. But the prices are increasing. Factors that
point towards cartelization are the structure of Indian cement
industry with few large firms dominating the industry and the
falling cost/expense to sales ratio in the last years despite
rising prices. The large players are not restricting new players
to enter in the market.
All these things conclude that cartel exists in Indian cement
industry and companies are getting profit out of it without
disclosing anything.

28 | P a g e

3.3. Market segmentation

Market

segmentation

can

be

divided

in

two

parts-

(1)

Geographical segmentation, (2) Customer segmentation.

3.3.1. Geographical Segmentation

Figure 2 : Geographical Segmentation
29 | P a g e

CEMENT
INDUSTRY

EAST

WEST

CENTRAL

NORTH

SOUTH

The cement industry in India can be divided into the five

geographical zones of India North, South, East, West and
central based on localised variations in the consumer profile
and supply-demand scenario.
Figure 3 : Regional share of installed capacity (2009)

23%
33%

North
West
Central
16%

14%

East
South

14%

The South zone is the largest market, with the highest installed
capacity of 67 million tonnes, followed by the North zone with
about 48 million tonnes, in 2009.
Source (CMIE; Ernst & Young analysis)

Table 3 : Cement consumption (in million tonnes)

30 | P a g e

Region
East
West
Centra

2009
28.21
33.97
26.24

2008
25.35
32.23
23.76

2007
23.99
28.27
22.40

2006
22.66
25.91
20.57

2005
20.33
24.56
20.41

2004
17.47
22.52
18.97

l
North
South

35.12
31.96

33.52
31.52

29.88
39.37

27.06
44.45

24.26
49.16

22.86
54.26
(Sources:

CMIE; Ernst & Young analysis.)

Table 4 : Cement production (in million tonnes)

Region
East
West
Centra

2009
25.99
28.46
26.10

2008
23.85
28.75
25.00

2007
22.07
27.30
24.00

2006
20.04
24.93
22.30

2005
18.73
22.76
20.40

2004
16.67
21.00
18.50

l
North
South

41.18
59.47

36.46
54.23

32.10
49.81

29.67
44.88

26.70
36.97

25.22
36.06

(Sources: CMIE; Ernst & Young

analysis.)

Above table describes about the production and consumption.

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 infrastructure,
residential and commercial projects. The state of Maharashtra
and Gujarat are the key markets in East region. The demand for
cement has grown in this region primarily due to an increase in
the number of housing and infrastructure projects. In central
region, Uttar Pradesh is the key market. Over the past few
years, growth in housing and commercial real estate has
augmented the demand for cement in this region. The key
31 | P a g e

markets in the East are the states of West Bengal, Orissa and
Bihar. Growth in housing and industrial activity is primarily
driving demand for cement in this region. In the southern
region Key markets are the states of Tamil Nadu, Andhra
Pradesh and Karnataka. The South zone has vast reserves of
limestone. 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.

3.3.2. CUSTOMER SEGMENTATION

Customer segmentation can be divided in three parts
Figure 4 : Customer Segments

HOUSING

INFRASTRUCT
URE

REAL
ESTATE

3.3.2.1. Housing
A major portion of domestic demand of cement accounts for
housing segment. As the per capita income and standard of
living is increasing, the demand for housing sector is also
32 | P a g e

increasing. In eleventh five year plan (2007-12), the demand

for housing sector is estimated to improve from 24 million units
to over 26 million unit till the end of plan. Urbanisation is taking
place in

India, which

is driving the demand for

more

households.

3.3.2.2. Infrastructure
The govt. has formulated the policy of special economic zone in
India to develop industrial growth in particular area, which will
need good infrastructure to boost ht Indian economy. The Govt.
of India is estimated to spend around US$ 350 billion on
infrastructure

projects

und

eleventh

plan.

Govt.

is

concentrating more for infrastructure, so it is demanding more

cement. The demand for cement is rapidly increasing from past
few years. Infrastructure projects such as the Dedicated Freight
Corridors (DFCs) and upgraded and Greenfield airports and
ports are expected to drive construction activity in India.

3.3.2.3. Real estate

As, the Indian economy is growing with rapid rate, the
commercial real estate sector is also booming with the help of
projects like retail, office, schools, hospitals and multiplexes
.Service sectors such as telecom and financial services, as well
as the IT sector (which accounts for the maximum commercial
office space in the country) are growing. Manufacturing sectors
(pharmaceuticals, biotechnology, and automotives) and fast
moving consumer goods (FMCG), are likely to drive the demand
for office space.
33 | P a g e

3.4. PESTEL Analysis on Indian Cement

Industry
PESTEL

nalysis

is

the

study

of

uncontrollable

external

environment, which affects companies in any industry. PESTEL

stands

for

political,

economic,

social,

technological,

environmental & legal. PESTEL analysis helps company to form

the policies to grow in the industry.

3.4.1. Political
3.4.1.1.

SEZ

Act

to

improve

Infrastructural

Development
SEZ is special economic zone. The govt. has formulated the
policy of special economic zone in India to develop industrial
growth in particular area. SEZs are proposed as duty free area
for the point of trade, operations, duty and tariffs. SEZ units are
independent and incorporated having their own infrastructure
and

support

services.

Infrastructure

development

solely

depends on the cement industry, so political environment of

India is in favour of cement industry.

3.4.1.2. Government participation

Cement price is basically depends on the price of raw material
such as power tariff, freight, cess on limestone and railway
34 | P a g e

tariff. The Government is controlling all these prices, on the

other hand govt. is consuming a huge amount of cement in the
country. Many state govt. is making attractive policies (such as
fiscal incentive in the form of sales tax exemption) to attract
the investment within the state. Haryana is providing freeze on
power tariff for 5 years, on the other side Gujarat provides
release from electric duty.

3.4.1.3. Political stability

Countries with political stability attain a higher growth,
compare to political instable country.

The political stability in

India is good. The political instability came in the picture last 20

years ago, so political stability provides a good platform to
Indian cement companies to develop the policies to come up
with flying colours.

3.4.2. Economic
The Indian economy is the fourth largest economy of the world
on the basis of Purchasing Power Parity (PPP)* 1. The factors like
Huge manpower base, strong macro-economic fundamentals
and diversified resource base are the reasons that many other
countries is attracted towards the investment opportunities and
business.

3.4.2.1.

Growth

in

Construction

Activity

improving GDP Growth

1 Purchasing power parity (PPP) is a theory of long-term equilibrium exchange rates based on relative price
levels of two countries.

35 | P a g e

Currently, Indian cement industry is growing at higher rate with

the help of many infrastructure and housing projects. Indian
cement industry is contributing to Indias GDP to grow with a
faster rate.

3.4.2.2. Increase in Per Capita Income

In India per capita income is increasing with a good pace, which
will

result

in

increase

in

housing

development,

as

the

disposable income will be high and standard of living will be

high

3.4.2.3. Rate hikes unlikely to slow down growth

Cement prices are increasing from past year at rapid pace. In
2004, cement prices were rs.130-150. Cement price in current
scenario is around Rs.230-250, so rate hike will unlikely to slow
down the growth.
3.4.2.4. FDI Liberalization to enhance industry growth
In 1989, deregulation took place in Indian industry, which
helped the industry to grow. In India, there is 100% foreign
direct investment is allowed in cement industry. The first
foreign company to enter in Indian market was Lafarge cement.
As foreign investment is permitted, it will boost the cement
industry in India.

3.4.3. Social

36 | P a g e

3.4.3.1. Shifting consumption pattern to fuel

industry growth
There is a drastic change in the consumption pattern of
cement.
In past, consumer purchases the cement as commodity, now it
is changed from commodity to brands. Due to marketing
initiative of companies, brand came into the picture. Now
Indian consumer goes only for branded cement like, Jaypee
cement, Ultratech etc.

3.4.3.2. Creation of direct and indirect jobs each

year
With a population of more than 100 billion people, the main
problem is to provide job to each and every one. The Indian
cement industry is providing job opportunities to many people.

3.4.3.3. Lifestyle and standard of living

Standard of living in India is increasing, as the per capita
income is increasing. The increase in lifestyle and standard of
living will affect the demand of housing sector in India. This will
lead to grow the cement industry.

3.4.4. Technology
The technology up gradation has helped the cement industry to
increase the capacity of plant, decline in thermal energy
consumption, decline in electrical energy consumption, decline
37 | P a g e

in cost of production of cement, decline in energy cost through

co-processing and reduction in the CO2 emission through
blended cement and energy conservation.
Currently, all the cement plants are using dry process with most
effectual pollution control measure to accomplish the terms
provided by the Pollution Control Authorities.

New technology adopted by industry

Advanced control systems with soft sensors
All fans (including HT) with variable speed drives,

preferably VFDs*
Integrated computerised quality control systems
Mines planning
Bulk analyser
Raw mix design and blending

3.4.5. Environmental
3.4.5.1. Easing environment norms
Entrepreneurs in India are required to acquire environmental
clearance
introduced

from

the

Ministry

Environmental

of

Environment.

Management

Systems

Recently
(EMS)

certification is a mechanism by which cement companies can

acquire the label of environmentally sound enterprises and also
derive the benefits of improved performance.

The EMS does

not lay down specific environmental performance criteria but

requires an organisation to formulate policies and objectives,
38 | P a g e

taking into account information about significant environmental

effects for continual improvement.
ISO 14000 environmental management standards have been
established to help companies :
Minimize those operations which adversely affect
the environment ( air, water or land)
Comply with applicable laws and regulations
Continually improve in the above
The major objective of the ISO 14000 series of norms is "to
promote

more

effective

and

efficient

environmental

management in organizations and to provide useful and usable

tools - ones that are cost effective, system-based, flexible and
reflect the best organizations and the best organizational
practices

available

for

gathering,

interpreting

and

communicating environmentally relevant information"

Acts which concern cement industry from the environmental
viewpoint are:

Air (Prevention & Control of Pollution) Act, 1986

The Environmental (Protection) Act 1986
Forest (Conservation) Act, 1980
Water (Prevention & Control of Pollution) Cess Act, 1974
Water (Prevention & Control of Pollution) Cess Act, 1977
The Public Liability Insurance Act, 1991

3.4.6. Legal
In India, the Department of Industrial Policy and Promotion
(DIPP), under the Ministry of Commerce and Industry, is the
nodal agency for the development of cement industries, that is,
39 | P a g e

it is involved in monitoring their performance at regular

intervals and suggesting suitable policy incentives, as per the
requirement. The Department is responsible for formulation and
implementation of promotional and developmental measures
for growth of entire industrial sector in general and of some
selected industries like cement, light engineering, leather,
rubber, light machine tools, etc. in particular. It is involved in
framing and administering overall industrial policy and foreign
direct investment (FDI) policy as well as promoting FDI inflow
into the country. It plays an active role in investment promotion
through dissemination of information on investment climate
and opportunities in India as well as by advising prospective
investors about various policies and procedures.
Some of the rules and orders, administered by DIPP, relating to
the cement industry are:

3.5.

Cement
Cement
Cement
Cement

Control Order, 1967

Cess Rule, 1993
(Quality Control) Order,1995
(Quality Control) Order, 2003

Business

Diversification:

Conglomerate or Standalone
The following group of industries are conglomerate

3.5.1. Grasim industries

40 | P a g e

Grasim's business started as a textile manufacturer in 1948,

today it encompasses viscose staple fiber (VSF), cement,
chemicals and textiles; VSF and cement, contributing to over 90
per cent of its revenues and operating profits. Through its
subsidiary UltraTech Cement Limited, it has a capacity of 52
million ton Per annum and is a leading player in India. UltraTech
Cement Limited manufactures and markets-Ordinary Portland
cement, Portland Blast Furnace Slag Cement and Portland
Pozzalana Cement, ready mix concrete (RMC).

3.5.2. Century Textiles and Industries Ltd

Century Textiles and Industries Ltd. was incorporated in 1897
and has made rapid progress in expanding and diversifying its
activities. The details of activities presently being carried on by
the Company are as follows:Figure 5 :

Revenue mix of Century Textiles and

Industries Ltd. 2008-09.

(I) Business Segment Textiles

Cotton Textiles, Yarn and Denim
41 | P a g e

Century Rayon - VFY, CSY & Rayon Tyre Yarn

(II) Business Segment - Cement
In 1974, the Company diversified into production of Cement by
setting up its first cement plant at Baikunth, near Raipur
(Chhattisgarh)

to

produce

Portland

cement.

The

current

capacity is 2.10 million TPA.

(III) Business Segment Century Pulp and Paper

3.5.3. Jaypee Group

The Jaypee group is a diversified infrastructure conglomerate
and has a terrific presence in Engineering & construction along
with interests in power, cement and hospitality, real estate &
expressway. The engineering & construction of Jaypee group in
the construction of multi-purpose River Valley and Hydropower
projects. Engineering and Construction of the Group is an
acknowledged leader. The group has the largest share in Indian
Hydropower. Jaypee group has 4 five star hotels. The Group is a
pioneer in the development of Indias first golf centric Real
Estate. Jaypee Greens - a world class fully integrated complex
consists of an 18 hole Greg Norman Golf Course. Stretching
over 452 acres, it also includes residences, commercial spaces,
corporate park, entertainment and nature in abundance.

3.5.4. Dalmia Cement (Bharat) Limited (DCBL)

Dalmia have cement plants in southern states of Tamil Nadu
and Andhra Pradesh and eastern regions of the country, with a
capacity of 9 million tonnes per annum. Since 1939, DCBL is a
major cement player with a double digit market share and a
42 | P a g e

leader in super specialty cements used for Oil wells, Railway

sleepers and Air strips.
Dalmia

started

manufacturing

sugar

in

the

mid-Nineties

Ramgarh Chini Mills (Distt. Sitapur) UP. The sale of sugar forms
a major part of Dalmias revenues and uses state-of-the-art
technology which ensures high productivity.

The following companies are standalone-

3.5.5. ACC Limited

ACC (ACC Limited) is India's primary manufacturer of cement
and concrete. Its operations are spread throughout the country
with 16 modern cement factories, more than 40 ready mix
concrete plants, 20 sales offices, and several zonal offices, a
workforce of around 9,000 persons and the distribution network
comprising over a 9000 dealers.
Since the start in 1936, the company has been a trendsetter
and has set benchmark in many areas of cement and concrete
technology. It has an excellent track record of innovative
research, product development and specialized consultancy
services. The company's different manufacturing units are
backed by a central technology support services centre - the
only one of its kind in the Indian cement industry.
ACC has extensive experience in mining, being the largest user
of limestone. It is one of the biggest customers of the domestic
coal industry, of Indian Railways, and of the countrys road
transport network services for inward and outward movement
of materials and products. The company promotes the use of
43 | P a g e

other alternative fuels and raw materials and offer solutions for
waste

management

recycling

and

like

testing,

co-processing,

suggestions

thereby

is

for

reuse,

environment

consciousness.

3.5.6. Ambuja Cements Ltd

Ambuja Cements Ltd. (ACL) is one of the major cement
manufacturing companies in India. The Company started
cement production in 1986, and was acquired by the global
cement major Holcim in 2006.Today, Holcim holds a little over
46% equity in ACL.
ACL has grown significantly over the past decade, and current
cement capacity is about 25 million tonnes. It is the first
cement manufacturers in India to build a captive port with three
terminals along the countrys western coastline to facilitate
timely, cost effective and environmentally cleaner shipments of
bulk cement to its customers and has its own fleet of ships. It
also initiated the development of the multiple bio-mass co-fired
technology for generating greener power in its captive plants.

3.5.7. India Cements Ltd

The India Cements Ltd was established in 1946 and was setup
at Sankarnagar in Tamilnadu in 1949 and is the largest
producer of cement in South India. The Company has access to
huge limestone reserves and plans to expand volumes by de44 | P a g e

bottlenecking and optimisation of existing plants as well as by

acquisition.

3.5.8. J.K. Cement

J.K. Cement is an affiliate of the J.K. Organization, founded by
Lala Kamlapat Singhania. The J.K. Organization is an association
of industrial and commercial companies which have operations
in

number

of

industries.

J.K Cement commenced commercial production in May 1975 at

Nimbahera in the state of Rajasthan. It is one of the largest
cement manufacturers in Northern India, the second largest
white cement manufacturer in India by production capacity.
While the grey cement is majorly sold in the northern India
market, the white cement is exported to countries like South
Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka,
Kenya, Tanzania, UAE and Nepal.

3.5.9. Lafarge
Lafarge India is a subsidiary of the French Building Materials
major Lafarge and entered the Indian market in 1999, with the
acquisition of the cement business of Tata Steel. This was
followed by the purchase of the Raymond Cement facility in
2001.
Lafarge is the world leader in building materials comprising
cement, aggregates & concrete and gypsum.It has 4 cement
plants

in

India:

two

integrated

plants

in

the

state

of

Chhattisgarh , one grinding station each in Jharkhand & West

45 | P a g e

Bengal. Total cement production capacity currently stands at

about 6.5 million tons.
Lafarge India produces different types cements- Portland Slag
Cement, Portland Pozzolana Cement. Its brands Lafarge Cement
and Lafarge Concreto Cement have a good reputation in India
and are amongst the highest priced brands.

3.6.

Consolidation

Mergers

&

Acquisitions
The globalization of Indian cement industry has encouraged
many foreign cement manufacturers to invest in the rapidly
growing Indian cement market. This has been possible through
various mergers and acquisitions deals. Some of the major M&A
deals between domestic and foreign cement manufacturers in
recent years are as follows:

3.6.1. Holcim buys AP-based Encore Cements

Holcim, the Swiss cement giant, acquired a 100 per cent stake
in Encore Cements & Additives Private Ltd, an Andhra-based
coastal cement plant with a 200,000 tonnes capacity slag
grinding unit in Vishakapatnam, through its Indian arm, ACC in
January 2010.This acquisition led to setting up of ACCs first
plant in Andhra Pradesh which helped the company in
strengthening its presence in coastal Andhra Pradesh. Though
deals size was not officially disclosed, but according to industry
analysts, the deal size was in the range of Rs.40 crore and
Rs.50 crore.
46 | P a g e

3.6.2. Holcim Cement - Gujarat Ambuja Cements

(GACL)
Holcim Cement entered into a crucial partnership with GACL, in
2006, to acquire 14.8% in GACL to enter into in the Indian
Cement Industrys dynamic growth. Both the partners wanted
to expand their operations in South Asia, Middle East and the
adjoining regions in Indian Ocean. They wanted to enrich each
other by exchanging experiences in product development,
Human Resources and Information Technology.

In addition,

Holcim desired to use India as a base for its IT & R&D, to create
a better position in the cement industry.

3.6.3 Lafarge India

Lafarge India is a subsidiary of the Lafarge Cement Company of
France and was established in India with the acquisition of the
Tisco and the Raymond cement plants. Tisco was acquired for a
value of Rs.550 crores in November 1999.Tiscos premium
quality Portland slag cement in the Eastern Indian states of
West Bengal and Bihar, high grade ordinary Portland cement in
Madhya Pradesh strengthened the position of Lafarge in
Eastern India. The contract also required to provide Tiscos high
quality slag.
This acquisition was followed by another acquisition of the
Raymond Cement facility in 2001 for Rs.785 crores in an all
cash deal. This deal was aimed at enhancing Lafarges position
in Eastern India. Huge deposits of limestone with Raymond
47 | P a g e

helped in increasing the production capacity in coming years.

This unit was 100 kms away from the Tisco plant, a strategic
move by Lafarge. Part of the proceeds was used by Raymond in
paying off debts and investment in areas textiles, distribution
and retailing. These acquisitions signaled that Lafarge was all
ready to expand its wings in becoming a leading cement
manufacturer in the world.

3.6.4. Heidelberg Cement - Indorama Cement Ltd

Heidelberg Cement is a leading German company in the fields
of cement, concrete and is one of the worlds largest
manufacturers of building materials. It entered into a 50:50
joint venture with Indorama Cement Ltd in March 2006.This was
a big step for Heidelberg Cement in establishing itself a longterm market position in Mumbai and Pune. In August 2006,
Heidelberg Cement acquired a major share in the cement
manufacturer Mysore Cements, and took over operations in
central and southern India.
This led to greater synergies and managerial efficiencies

3.6.5. Italcementi cement - Zuari Cement Limited

Italcementi

Cement

is

among

the

largest

cement

manufacturing companies in the world. In 2001, Italcementi

Cement Company with the help of the Ciments Franais, a
subsidiary for its global activities, entered into a 50:50
agreement with Zuari Cement Limited in Andhra Pradesh,
48 | P a g e

southern India. This gave the company a strong foothold in

India. The deal was of about 100 million euros. In 2002, Zuari
Cement limited took over Sri Vishnu Cement Limited, a 1.2
Million Tonne capacity plant at Sitapuram. The cement business
then grew from 1.7 to 3 million tonnes per annum.
In 2006, the Italcementi Group acquired full control of Zuari
Cement for Rs 600 crore, to strengthen its presence in India.
The company's net sales in the Indian market were roughly
Euro 116 million in 2006. In 2007, Sri Vishnu Cement Limited
merged into Zuari and the same year a total production
capacity of 3.5 million tonnes was achieved. Present capacity is
almost around 6 million tones.

3.6.6. Mergers and Acquisitions before 2006

Gujarat Ambuja took over 14% stakes in ACC
Gujarat Ambuja took over DLF cements and Modi
Cement
India Cement took control over Raasi Cement and Sri
Vishnu Cement
Grasim's acquired L&T, Sri Digvijay Cement.

3.7. International Exposure of Indian

Cement Industry
Cement is one core industries in India. For the past seven years
there has been an immense growth in the cement industry.
Domestic cement demand growth has surpassed the economic
growth rate of the country for the past couple of years. Over
the past five years the growth rate of cement demanded grew
49 | P a g e

up to 8.37 % which was higher than the rate of growth of

supply at 4.84% and also the rate of growth of capacity
addition during the same period. As it is known that it is the
basic material in all types of construction activities throughout
the globe,

the growth and expansion of a nations economy

depends upon it, as it supports the expansion of other

industries, hence we can say that the export and import
aspects of cement is a quite sensitive issue.
The export and import of cement depends upon various
factors,

like

prices,

government

rules

and

regulation,

availability of raw materials etc. In India, the export of cement

took place basically after the liberalisation of the economy,
which further boosted the industrys performance in the later
years. The major markets of Indian cement industry are Middle
East and South East Asia due to an abundant presence of raw
materials, location advantage & production of quality cement
with latest technology. As per the data released by CMA,
Gujarat Ambuja Cements Ltd. & Jaypee Industries are the top
exporters of cement from India. In addition to this, the western
part of the country accounts for approximately 92% of the total
export of cement from the country, out of which Gujarat alone
holds 75% share. Gujarat based Sanghi Cement realised 33% of
its total sales from exports where as

Saurashtra Cement

realised 24% of its sales.

Although India has been considered as one of the most
preferred location for export of cement, in the last few years,
50 | P a g e

the export of cement has been affected by the various

government policies. For example, mid-April 2008, Government
of India imposed a ban on export of cement and clinker to its
neighbouring countries including Nepal in order to preserve the
countrys foreign exchange reserve. The government imposed
ban on the export of cement in order to boost the supplies and
contain prices of commodities in order to keep inflation under
check. But surprisingly this ban did not have much impact on
the cement industry, because when the recession came to an
end,

huge

investments

were

made

in

construction

and

infrastructure sector. **In the fiscal year 2009-2010, the

cement export of India declined by 29% to 2.27 million tonnes,
even though the cement production was increased about 11%
in the same fiscal year, which again proved that the demand of
cement in domestic market had increased over the last 2 years.
The major importers of the Indian cement are Sri Lanka and
Middle East countries, where real estate sectors have boomed
in

the

last

neighbouring

years.

Cement

is

being

countries

making

cement

imported
duty

free,

from
With

Government of India intervention. However, imports of cement

will remain negligible and will not pose a threat to domestic
industry due to logistics issues and lack of port handling
capabilities. When we talk about the imports of cement in India,
then we cant leave Pakistan. Pakistan has been considered as
one of the traditional importer of cement to India. Cement
import from Pakistan started from 2007, when India lifted
import duty and some of the additional custom duties, since
51 | P a g e

then the Pakistani firms have exported ***1,242,588 tonnes of

cement to India. But in 2009, questions on the quality of
Pakistani cement started to arise. Later on, 24 Pakistani cement
companies got BIS {Indian Bureau of Standard} to export
cement to India. Till 2008, India imported 4.57 million tons of
cement from Pakistan.
India banned the export of cement in order to keep a check on
inflation. India plans to increase its import of cement from
Pakistan, and buy a total of seven million tons this fiscal year.
With effect from May 1(2008), 21 lakhs (2.1 million) tones of
cement from Pakistan are being imported.
In total, increase in imports of about seven million tons of
cement by 2010, is being expected. The abolition of import
duty on coal is being demanded by the cement industry since it
is a very vital raw material in the production of cement. The
current import duty on coal and pet coke is 5%. Major cement
producers depend on imports of this fuel since domestic
availability is limited. Cement can be imported without duty;
however duty has to be paid by cement manufacturers on the
imports of inputs.

According to Cement Manufacturers Association (CMA), due to

the shortage, coal and pet coke has to be imported. Initially,
India did not allow any imports through the Wagah border.
However Pakistan allowed Afghanistan to export to India
through

the

Wagah

border.

Since

August

2007,

16

52 | P a g e

manufacturers have been given license for selling cement in

India. About 50,000 tons of cement has entered the country,
largely through the rail route.

According to the figures announced by Cement Manufacturers

Association of India, cement consumption was at its peak
during 2009-2010. It registered 8.6 % year on year growth.

The major players like Shree Cement, Jaiprakash Associates,

Dalmia Cement and Grasim Cement reported high growth rates
of 28.4 percent, 28 percent, 23.7 percent and 21.3 percent
year-on-year,

respectively.

Madras

Cement

and

Ultratech

Cement also reported good growth that is higher than the

industry average.

In comparisons from that of the 2007 result

Ambuja cement has contracted only half of the exports which

results to 0.6 million tones.
In spite of the recession having a negative impact on many
industries all over the world, the cement industry stood strong
and continued at a steady growth rate. Although both steel and
cement are vital ingredients for infrastructural development,
the VAT on cement was 12.5 per cent but only 4 per cent on
steel.
To make cement available, import duty was reduced to nil from
12.5%. The government introduced a dual exercise duty on
cement wherein Rs.600 per million tonnes of cement with more
53 | P a g e

than Rs.190 per bag and exercise duty of Rs.300 million tonnes
on cement with less than rs.190 per bag.
In response to Pakistans ban on the export of onions, the
government is planning on imposing an import ban of cements
from that country. The export and import of cement is going to
increase as long as there is an increase in the demand for
cement and infrastructural activities.

3.8. Technology Intensity

Technology plays an important role in the growth of any
industry. It is also true in the case of cement industry. From past
few years Indian cement industry is continuously adopting new
technology. The technology up gradation has helped the
cement industry to increase the capacity of plant, decline in
thermal energy consumption, decline in electrical energy
consumption, decline in cost of production of cement, decline in
energy cost through co-processing and reduction in the CO2
emission through blended cement and energy conservation.
Modernization at plant process has also helped to reduce the
human capital need for creation of cement. At present, the
quality of cement in India is meeting with benchmark and
dextrous to compete with the international players.

3.8.1. Cement Production Process

Production of cement is three step process Preparing raw materials: Mixing/homogenising, grinding
and preheating (drying) produces the raw meal.

54 | P a g e

 Burning of raw meal to form cement clinker in the kiln:

The components of the raw meal react at high
temperatures (900-1500 C) in the precalciner and in
the rotary kiln, to give cement clinker.
Finish grinding of clinker and mixing with additives:
After cooling the clinker is ground together with
additives.
The process of production of cement is energy intensive. The
heat is used to combine the raw material, chemically to create
a compound with binding properties. These can be ground as a
dry mixture or combined with water to form slurry. At this
stage, mixture of water plays an important implication in
production

process.

There

are

different

cement

manufacturing practices are: (1) dry process, (2) semi-wet

process (3) semi-dry process and (4) wet process. The dry
process is contemporary and more energy-efficient compared
to other process.
The wet process requires 0.28 tonnes of coal and 110 kWh of
power to manufacture one tonne of cement, whereas the dry
process requires only 0.18 tonnes of coal and 100 kWh of
power. Over last few years, Indian industry is giving preference
to dry process (energy efficient) to gain the cost efficiency in
the market.

Since the commencement of the decontrol

process, in India manufacturers have shifted to dry technology

by modifying the plant.

55 | P a g e

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 semidry process technology. There is tremendous scope for waste
heat recovery in cement plants and thereby reduction in
emission level. One project for co-generation of power utilising
waste heat in an Indian Cement plant is being implemented
with Japanese assistance under the Green Aid Plan. The
induction of advanced technology has helped the industry
immensely to conserve energy and fuel and to save materials
substantially. Some cement plants have set up dedicated jetties
for promoting bulk transportation and export. (Dipp.nic.in)

3.8.2. Adoption of Latest Technologies

The roller mill has replaced the ball mills, which is used for
grinding raw material and coal. The industry is also employing
pre blending stockpile and constant homogenizing silos for
homogenization of raw meal. For energy efficient grinding,
industry

started

using

roller

press

and

high

efficiency

separators. For packing purpose, electronic packing machines is

taking place, which will enhance the weight reliability and
effectiveness. The industry has also adopted the packed bag
loading machine, which will save the time.
Currently, all the cement plants are using dry process with most
effectual pollution control measure to accomplish the terms
56 | P a g e

provided by the Pollution Control Authorities. All the plants are

adopting pollution control instruments, such as ESP 2, fabric bag
dust collectors.
Some of the new technologies are Advanced control systems with soft sensors
All fans (including HT) with variable speed drives,

preferably VFDs*3
Integrated computerised quality control systems
Mines planning
Bulk analyser
Raw mix design and blending

Alternative Fuels
Indian cement industry has started utilising alternative fuels
such as Pet coke, biomass, etc. The industry can also discover
other opportunities, like Utilising worn tyres, paint sludge,
municipal solid waste.

3.8.3. Research and Development

Research & development plays an important role for growth of
any industry. R&D performance helps in the adaption and
absorption of technology. In India, the main organisations
dedicated to research and development activities are-

2 An electrostatic precipitator (ESP), or electrostatic air cleaner is a particulate collection device that removes
particles from a flowing gas (such as air) using the force of an induced electrostatic charge. Electrostatic
precipitators are highly efficient filtration devices that minimally impede the flow of gases through the device, and
can easily remove fine particulate matter such as dust and smoke from the air stream.

3 A variable-frequency drive (VFD) is a system for controlling the rotational speed of an alternating
current (AC) electric motor by controlling the frequency of the electrical power supplied to the
motor.

57 | P a g e

 National Council for Cement and Building Materials

(NCB)
Central Research Station (CRS) of ACC Limited
Dalmia Institute of Scientific and Industrial Research
(DISIR)
The machinery suppliers for the industry also carry out the
work of research and development. The key machinery supplier
with own R&D division are
Larsen & Turbo
Walchandnagar industries Limited
With the cement plants, the centralised R&D Centre is
established by Cement Corporation of India. It helps the
industry to adopt the new imported technology and to develop
new technology to increase the efficiency of industry. The main
area

of

research

is

energy

preservation,

production

optimisation, quality enrichment, creation of new type of

cement, waste heat recovery and computerized methods for
quarry planning.
Current technologies used in industry are not sufficient for
more efficient production of cement in environment friendly
way.
Future R&D Efforts
Maximising consumption of alternate fuels, fly ash, slag
and other raw material that will lead to less energy
consumption.

58 | P a g e

 NANO TECHNOLOGY4

in cement manufacture and use-

nanotechnology can be the key for reducing CO2 emission

in the production of cement may hold the key to reducing
carbon dioxide emissions in the production of cement.
Nano modification of concrete is potentially dextrous of
significantly

improving

its

tensile

power,

toughness,

ductility, and durability properties.

Better combustion efficiency technologies.

Table 5 : Current Investment in R&D activity

Company name

Rs. In crores

(March

Ambuja cement
ACC Limited
J.K. cement
Ultratech cement
Birla cement
J.K. laxshmi
Prism cement
Andrha cement
India cement
Madras cement
Binani cement
Shree cement

2010)
1.29 (December 2009)
3.25
0
0
0
0.31
0.8
0
0
0
0
6.39
(Source-

CAPITALINE.COM)

The current status for research & development shows, that

Indian

companies

are

not

making

use

of

research

&

development to grow in the industry. India can become number

4* The term "nanotechnology" has evolved over the years via terminology drift to mean "anything
smaller than micro technology," such as nano powders, and other things that are nanoscale in size,
but not referring to mechanisms that have been purposefully built from nanoscale components

59 | P a g e

one in the world, if Indian industry will make use of R&D to

produce with more capacity with the help of new technology
without harming the environment.

3.9. Marketing Initiatives

As competition is increasing in the cement industry because
foreign players are entering the domestic market, marketing
becomes an essential task for cement companies to survive. In
the past cement was more of a commodity which required
minimum marketing effort but with changes in buyer behaviour
cement has evolved as a brand which requires extensive
marketing efforts. Cement companies are fallowing the strategy
of

brand

building

to

differentiate

themselves.

Celebrity

endorsement and extensive coverage are the key elements

that cement companies are focusing to have top recall among
users.
Binani Cements Ltd started by signing film personality Amitabh
Bachhan as its brand ambassador it posted 56% growth in
profit before tax at Rs 244.84 crore in 2007-08.According to The
Economic Times the companies extensive advertising campaign
was one of the main reasons behind the growth in sales.
Similarly JK Lakshmi had signed actor Om Puri. CS Sadasivan,
Chief of Marketing, JK Lakshmi Cement, said that cement is no
longer just a commodity and to ensure long term profitability,
all companies have to build its brand.
French multinational Lafarge has signed cricketer Mahendra
Singh Dhoni as the brand ambassador for their brand, Concreto.
60 | P a g e

As per Vinod Juneja, MD of Binani Cement Ltd. because of such

promotional methods there has been a steep rise in the sales of
the companies specially in rural markets where the impact of
brand ambassadors are high.
On the other side we have companies like Ultratech which does
not believe in celebrity endorsement, it promoted its phrase,
Ultratech, the engineers choice emphasizing that its cement is
most preferred by engineers in the country. Ultratech Cement
was also one of the main sponsorers for Rajasthan Royals, the
Jaipur franchise of the Indian Premier League. The companies
deal with Rajasthan Royals was in the range of $2 million.
India Cement Ltd bagged Chennais IPL team with an aim to
improve its brand visibility and recall would help it build itself
as a brand as it expands into new markets. According to India
Cement the companys brands (Coromandel, Sankar and Rasi)
were household names in the South but in Maharashtra, where
it is a new entrant, the Coromandel cement bags sport the tag
line, from the house of Chennai Super Kings. The company
was confident that CSK would support it into the markets where
it is new like Gujarat, Madhya Pradesh and Rajasthan in future.
Cements are no more being sold in markets as commodities but
as brands to which people can relate. Most of the cement
companies relate their product with strength which can be
justified by the following tag lines

Sagar Cement- Solid cement solid home

Ultratech Cement- the engineers choice
Buland Cement- shakti Vishal rakcha ki dhal
JP Cement- Andar se solid

Table 6 : Expenditure on Marketing

61 | P a g e

Company name

Rs.

In

crores

Ambuja Cement

(March 2010)
59.65
(December

ACC
J.K. Cement
Ultratech Cement
Birla Cement
J.K. Laxshmi
Prism Cement
Andrha Cement
India Cement
Madras Cement
Binani Cement
Shree Cement
Dalmia Cement
Century Cement
Lafarge Cement

2009)
53.16
26.31
134.05
7.03
0
33.15
0.71
30.16
8.71
28.64
73.97
7.5
7.56
44.31
(source: capitaline.com)

At current companies are investing a lot in marketing activities.

The above table shows that Ultratech is investing around 134
crore on advertising. After that, there is a huge difference
between the investments of companies. Marketing is playing an
important role for cement companies to expand the sale of
companies.

3.10. Future Outlook

The future of an industry like cement basically depends upon
the

pace

in

sectors

like

infrastructure

&

construction,

manufacturing, transportation. Because when these industry

will grow up the demand of the cement would increase with the
time, and finally the growth of the industry i.e. cement industry
62 | P a g e

will take place. Apart from this, as it is well known that, cement
is such a product which plays a major role in growth and
expansion of almost each and every sector, so the future
demand of the industry will always be on dynamic way, which
further boost the industry also.
As far as the future of the Indian cement
industry is concerned, the industry is expected to grow at a
CAGR of around 10.5% during 2010-11-2013-14. According to
the ACC- the largest cement company of country- governments
continued thrust on infrastructure will help the industry to grow
at the rate of around 9-10% annually in the next two years. The
different governments initiative by both, central as well as
state governments, like NREGA, JNNURM, Indira Aawas Yojna
etc. has acted as the key driver of cement industry in last few
years and they are expected to do so in the forth coming years.
At present, around 55-60% of the total cement is
consumed by housing sector. This is expected to change in the
coming years, because, when the infrastructure developments
like road, railways, power plants, bridges etc. will take place the
significant percentage of cement will be consumed by these
sectors. The demand of cement is also going to increase in the
agriculture sector. For example, construction of new go-downs,
silos, warehouses will boost the demand of cement.
According to the research report named Indian cement
industry forecast 2012 by PR log, almost all major cement
company in the country have decided to expand their
production capacity in the coming 2-3 years { few of them have
63 | P a g e

already expanded}, which clearly indicates that, the demand of

the cement is going to increase in the forthcoming years. The
expansion plan of cement companies will not only help them to
increase their domestic presence, it will also enable them to
look for future export opportunities.
The availability of various types of cement like white cement,
Portland cement, oil well cement etc. is a distinct aspect of
Indian cement industry, which plays an important role in the
business of cement in its respective market. In the coming
years, it is expected that Indian cement industry would lead
due

to

the

different

types

and

varieties

of

product.

According to Mr. Vinod juneja, MD, Braj Binani Group, in the

next 10 years, India will become one of the major exporters of
clinker and grey cement to middle east, Africa & other
developing nations. In addition to this the increasing number of
plants near the ports has also added an advantage to the
export of the cement from country. Actually these data clearly
indicates that, India is going to become one of the major
exporters of cement in the world.
It is also expected that, many foreign companies will invest in
the cement sector in India because of constant demand and
right valuation of the product. Indian companies will also go
global through FCCB or GDR route.

3.11. Comparison with Other Countries

Comparison with the US Cement Industry
64 | P a g e

USA is the third largest manufacturer of cement along with

China and India. It comprises 39 cement companies with 115
cement plants spread in 36 states. CEMEX, SAB being in top
cement companies of the US.
In the US cement trade is patterned as the maximum
consumption is between May and October. Most of the industry
is concentrated in a particular region as cost of transportation
is high than its actual value. The domestic production is always
short of demand, therefore, depended on imports to a large
extent. Whereas, in India, demand has an edge over supply,
and the rate of exports are high.
In terms of employment, the cement industry in the US has
gained efficiency through automation and closure of outdated
units. This has led to a dramatic decrease in the levels of
employment. In India, cement industry being a booming
industry, more and more people are joining this sector. Due to
growing infrastructure projects, working in this industry is
considered a lucrative option for the freshers and youngsters.
The US cement industry is less energy intensive as compared to
Indian cement industry which is extremely industry intensive
and uses coal in large quantities.

Comparison with the Chinese Cement Industry

Since 1985, Chinas cement industry has been ranked as no.1
with a high growth rate. It is roughly double the production
capacity of India i.e. chinas production capacity is 300 million
tonnes, whereas Indias production is 151.2 million tones.

65 | P a g e

China has adopted various ways of eliminating backward

cement capacity. It is focusing on reduction of carbon
emissions. Thats why it has adopted dry manufacturing
process to form cement which is more fuel efficient. The dry
process requires only 0.18 tonnes of coal and 100 kWh of
power. The Chinese government processes wastes produced in
the cement industry. Over 200 projects have been started to
reduce environment pollution.
India is the second largest producer of cement in the world. It
has a huge growth prospects due to various infrastructure
projects, housing facilities and road networks. Though, India
needs to work on mining and environmental issues. Otherwise
industrial growth would be rendered valueless and slow the
pace of the growth.

3.12. Conclusion
It can be concluded that Indian cement industry plays an
important role in the development of country. The prices of
cement is rising from past few year, so its responsibility of
Govt. to take the charge and try to find out that cartel exists in
cement industry or not. The price hike in the cement industry is
affecting the lower class people in India, so it is necessary to
stabilise the price at the benefit of companies as well as
consumers.

India

can

become

number

one

in

cement

production, when there will be no corruption and industry will

concentrate on Research & development. The demand for
66 | P a g e

cement will grow in the future, as population is increasing. The

Indian cement industry is expected to grow rapidly in coming
years

due

to

heavy

demand

from

housing,

retail

and

infrastructure industry.

4. Reference
C.A.Hendricks, et.al (2009);
Greenhouse

Gases

from

Emission
the

Cement

Reduction

of

Industry,

IEA

Greenhouse gas R&D Programme, UK

Senthilkumar S., et.al (2009); Developmental Issues in
Indian

Cement

Industry;

SCMS

Journal

Of

Indian

Management, April-May, 2009

Ritu Raj Arora and Runa Sarkar(2007); Detecting Cartels
in the Indian cement industry: An Analytical Framework;
Industrial and Management Engineering Department, IIT
Kanpur
L. G. Burange and Shruti Yamini (2008); Performance of
Indian Cement Industry The competitive landscape
Arindam Chakrabarti, et.al (2008); Balanced Growth: A
Strategic Imperative for Indian Cement Industry; Tata
Strategic Management Group
Paul limpilaw and Siemens AG (2008); Cement plant
Automation In Emerging markets, Emerging Markets
Report.
Rejie George Pallathitta(2008) Can Ultratech be next
market leader
Improving environmental performance (2005)- Bristlol
Environmental Agency, V-1
67 | P a g e

 Ernst Worrell and Christina Galitsky (2008); Energy

Efficiency Improvement and Cost Saving Opportunities for
Cement Making.
Shivani Anand (2009); Identifying Cartel using Economic
Evidence A case study of Indian Cement IndustryCompetition Commission Of India
Various Websites

Capitaline.com
Indiainbusiness.nic.in
Financialexpress.com
www.ibef.org/industry/cement.aspx
www.economywatch.com Business And Economy
www.business.mapsofindia.com
www.etintelligence.com
http://www.brighthub.com/engineering/civil/articles/47509.
aspx
http://www.marketwire.com/press-release/Probing-the-USCement-Industry-1167662.htm
http://www.articlesbase.com/business-articles/the-indiancement-industry-1042800.html
http://www.thehindubusinessline.com/2009/06/28/stories/2
009062851270200.htm
http://economictimes.indiatimes.com/news/news-byindustry/services/advertising/ultratech-to-sponsor-forrajasthan-royals-in-ipl/articleshow/4370209.cms
http://www.financialexpress.com/news/cement-makersstep-up-brand-building-drive/329127/0
http://www.business-standard.com/india/news/cementfirms-jumpthe-brandwagon/356316/
http://economictimes.indiatimes.com/news/news-byindustry/services/advertising/For-Binani-Cement-AmitabhBachchan-is-a-big-Burden/articleshow/3464554.cms
68 | P a g e

 http://marketingpractice.blogspot.com/2010/01/binanicement-sadiyon-ke-liye.html
http://www.lafarge-cement.co.in/wps/portal/
http://www.saveondish.com/forum/ultratech-tcs-sponsorfor-rajasthan-royals-ipl-t-11839.html
http://www.hinduonnet.com/businessline/2000/04/29/stor
ies/14291201.htm
http://www.financialexpress.com/old/fe/daily/20000429/f
co29031.html
http://www.heidelbergcement.com/global/en/company/gr
oup_areas/asia_pacific/india.htm
http://www.financialexpress.com/news/italcementi-snapsup-zuari-for-rs-600-cr/168663/3
http://www.business-standard.com/india/news/holcimbuys-ap-based-encore-cements/384086/

Telephonic conversation with Mr.G.Y. Narayan (Joint

Secretary, CMA)

69 | P a g e