EMIS Insight - India Cement Production Report PDF

Cement
Production
India
February 2014
Produced by:
Any redistribution of this information is strictly prohibited.

Copyright 2014 EMIS, all rights reserved. -1-
Table of Contents
I. Cement Sector Overview II. Cement - Regional Performance

1. Sector Highlights 1. Northern Region
2. Key Indicators 2. Eastern Region
3. Economic Links 3. Southern Region
4. Forecasts 4. Western Region
5. Porters Five Forces Model 5. Central Region
6. Production III.Clinker
7. Production (contd) 1. Clinker
8. Capacity 2. Clinker (contd)
9. Consumption IV. Main Players
10.Cement Prices 1. M&A Activity
11.Production Costs 2. UltraTech
12.Trade 3. UltraTech (contd)
13.Trade (contd) 4. Ambuja Cements Ltd.
14.Energy Efficiency 5. Ambuja Cements Ltd. (contd)
15.Foreign Direct Investment 6. ACC Limited
16.Government Policy 7. ACC Limited (contd)
8. Shree Cement
9. Shree Cement (contd)
10.Ramco Cement
11.Ramco Cement (contd)

I. Cement Sector Overview
Indias fiscal year runs from Apr 1 to March 31. Thus, FY 2014 (also called fiscal 2014) means Apr 1, 2013 Mar 31, 2014. In Indian documents, FY (fiscal) 2014 is also labeled FY13-14.
The remaining nine months of calendar 2014, i.e. Apr-Dec, belong to fiscal year 2015.
In order to better align with calendar years and make international comparisons more meaningful, in the Major Players section of this report, Emerging Markets Insight has chosen to label data by
the year in which most of the result occurred. Unless otherwise stated, in the Major Players section of this report, 2012, for example, means the 12 months between Apr 1, 2012 - Mar 31, 2013, or
what in India is referred to as FY 2013. This applies to Indian companies only and may not apply to companies with global operations, which may be presented in this report.
When sources have not provided details on their year labeling policy, year labels in graphs and tables featured in this report appear as provided by the source.

Sector Highlights
Sector Dynamics
India is the world's second-largest cement manufacturer after China, accounting for about 7% of the global production. The country is also among the leading
exporters worldwide. Since cement is a cyclical commodity, the dynamics of production are highly dependent on the overall economic activity in India. Thus, the
recent slow-down in GDP growth and especially the unstable situation in the construction sector have resulted in decreasing demand and excess capacities.
Demand
The housing sector is the main driver of demand for cement manufacturing, as over 67% of the production is directed to housing construction. Another 13% are
used in the commercial construction and 11% in infrastructure projects, with approximately 9% of the cement used in industrial construction.
The demand for cement was affected by the economic slowdown in recent years, subdued construction activity and delays in execution of infrastructure projects.
Prolonged monsoon periods also had a negative effect on the sector. The capacity has reached around 240mn tonnes in FY 2012, while utilisation fell to 75%,
reflecting the still existing mismatch in supply-demand.
Market Segmentation
Cement production in India is a fragmented industry with more than 160 players. However, the sector is rather oligopolistic in nature as the top 10 producers
control about 70% of the domestic market. The recent slowdown in demand has affected negatively the sector but small producers experienced the biggest
reduction in capacity utilisation, suggesting there is a scope for consolidation in the industry.
The sector is dominated by private entities, as less than 5% of the manufacturers are state-owned. A number of foreign companies have entered the market -
French cement maker Lafarge, Germany's HeidelbergCement, Italy's Italcementi and Swiss cement maker Holcim.
Regional Presence
With cement being a bulk, transport-expensive commodity, the production has been concentrated on regional basis. India is divided into five main regions
northern, eastern, western, southern and central. The southern has the highest installed capacity and production there exceeds consumption.
The main cement production states in India are Andhra Pradesh, Tamil Nadu (both in the southern region) and Rajasthan(northern region).

Key Indicators
Main Indicators
Product 2007 2008 2009 2010 2011
Cement Production (mn tonnes) 168.3 181.6 160.8 168.3 179.9
Cement Despatches (mn tonnes) 167.7 181.2 159.8 167.2 179.0
Cement Installed Capacity (mn tonnes) 178.8 206.6 199.2 224.4 241.9
Cement Capacity Utilisation, % 94 88 83 76 75
Cement Consumption (mn tonnes) 164.0 178.0 158.3 165.6 177.4
Cement Export (mn tonnes) 3.7 3.2 1.6 1.5 1.6
Cement Closing Stock (mn tonnes) 1.1 1.1 1.3 1.6 1.3
Clinker Production 129.7 138.8 128.3 131.7 137.1
Clinker Ground (mn tonnes) 124.2 133.7 121.2 126.2 134.0
Clinker Export (mn tonnes) 2.4 2.9 3.1 2.6 1.9
Clinker Closing Stock (mn tonnes) 5.5 5.5 6.3 6.5 5.6
Cement, plaster, concrete etc.( % of manufacturing

3.6 3.2 3.3 2.9 2.8
output)
Cement,plaster,concrete etc. (% of world output) 2.6 2.6 3.1 2.9 2.8
Cement,plaster,concrete etc., real output (USD bn) 0.6 0.5 0.5 0.5 0.4
Source: CEIC, Oxford Economics

Economic Links
GDP at factor costs (INR tn, constant prices) Cement, plaster and concrete VA output, % of manufacturing
9.3% 9.3% 3.59

8.6%
3.16 3.26
6.7% 2.90 2.83 2.80
6.2%
5.0%
49.4 52.4 55.1

39.0 41.6 45.2
2007 2008 2009 2010 2011 2012

2007 2008 2009 2010 2011 2012
GDP yoy change
Construction and GDP development (real yoy growth %) Comments
10.8% 10.2%
9.3%
8.6%
9.3% 6.7%
6.2% Construction (incl. real estate, infrastructure etc.), which determines
6.7% 5.0% the overall cement production dynamics, outpaced GDP growth in the
5.3% 5.6% pre-crisis period, but has slowed down in recent years.
4.3%
As demand for cement declined in the past few years, cement

production also lost share in the total country output.
2007 2008 2009 2010 2011 2012
GDP Construction
Source: MOSPI, Oxford Economics

Forecasts
Key macroeconomic indicators forecast
Indicator 2013 2014 2015 2016 2017 2018
In the medium term, the increase in GDP, rising

GDP real growth, % 3.8 5.1 6.3 6.5 6.7 6.7 population and high interdependence between economic
growth and infrastructure development suggest stable
Investment,% GDP 35.0 35.1 35.2 35.4 35.6 35.8 expansion of the cement demand. Moreover forecasts
are for reduction in the inflationary pressure, which will
increase households disposable income. The economic
CPI, average % 10.9 8.9 7.5 7.0 6.8 6.7 growth and urbanisation will push the demand for
commercial and retail real estate, again having positive
Population effect on cement sector.
1,243 1,260 1,276 1,293 1,310 1,327
(mn persons)
In the short-run however, the dynamics are not so clear.
Cement forecast Although forthcoming state and national elections could
result in increased spending and, along with Government
2014 2015 2016 2017 2018 2020 2025 2030 2035 attempts to spur infrastructure, could lead to pick up in
construction activity, the problems with oversupply of
Cement, plaster, cement and high production costs persist. The slight
concrete etc., 2.77 2.75 2.76 2.77 2.79 2.83 2.96 3.05 3.01 increase in consumption will be probably offset by new
% of manufacturing
capacity additions.
Cement, plaster,
concrete etc., 2.76 2.84 2.94 3.04 3.14 3.35 3.90 4.31 4.54 Cement demand will grow by a compound rate of 8% in
% of world output 2013-2015, according to trust foundation India Brand
Cement, plaster, Equity Foundation (IBEF).
concrete etc., 0.42 0.42 0.42 0.43 0.43 0.43 0.45 0.44 0.42
real output, USD bn
Source: IMF, Oxford Economics, IBEF

Porter's Five Forces Model for India's Cement Industry
High initial capital investment, long gestation period and required economies of scale form high barriers for entry. Moreover the
Entry Barriers scarce free resources and experienced domestic companies make the entry of new players more difficult.
Problems with land acquisition are reported by producers as major obstacle for expansion. As a result, many of the investments
are made in brownfield manner.
Coal and freight are among the main ingredients of the cement industry mix. The government is the body that controls licensing
of coal and limestone reserves. Some of the leading companies reported inordinate delays in conversion of allotted linkages
Supplier Power
and deteriorating quality. The use of imported coal has increased, making production more dependent on international coal
price movements and forex fluctuations.
Buyer Power Cement producers are highly concentrated in the different regional markets, thus reducing the power of the consumer.
Inter-firm
In spite of the big number of players, the Indian cement industry is rather oligopolistic in nature with regional segmentation.
Rivalry
Treats of There are no materials that can substitute cement. There are shifts between cement varieties as a result of differences in
Substitutes energy and cost efficiency of production.

Production
Comments Top cement producers 2012, mn tonnes (estimated)
2,150
India cement manufacturing expanded at a compound rate of 5.4% in
the period between 2003 and 2011. Fuelled by the construction boom
in 2004-2008 the sector growth averaged 9.1%. A drop of 11.5%
followed in 2009, but production rose again in 2010 and accelerated
in 2011.
250
Domestic production grew by a modest 3.9% during H1 FY 14 74 70 65 65 60 60 52
primarily due to weak demand from end-user industries, according to
credit ratings and research provider ICRA Ltd. China India US Brazil Iran Vietnam Russia Turkey Japan
Cement production in India Cement production regional structure, 2011
181.6 179.9 Central 15.3%

168.3 169.2
155.7 9.8% 8.1% 7.9%
160.8
Western
6.3%
5.3% Northern 13.7%
23.5%
-11.5% Eastern 13.7%
2006 2007 2008 2009 2010 2011

Southern
Production, mn tonnes Change, yoy % 33.8%
Source: CEIC, US Geological Survey (Jan 2013), The Economic Times

Production (cont'd)
Cement production by variety, mn tonnes Cement production by variety, %, 2011
200 Ordinary
0.6 0.6 Others Portland
180 Cement 31.6%
0.7 15.2 0.6 12.4
0.7 11.8
160 13.6
11.8
140 Portland
120 Blast
120.8 102.4
110.1 Furnace
100 111.2 100.2 Slag
Portland
80
Pozzolana
60 Cement Portland Blast
Portland Furnace Slag
40 Ordinary Pozzolana 6.9%
45.1 48.2 54.4 56.9
Portland Cement 61.2%
20 42.8
Cement
0 Others 0.3%
2007 2008 2009 2010 2011
Comments
The Ordinary Portland Cement (OPC) was the main variety produced in India in the early 2000s, but the industry went through a shift in the production mix.
With the reduction in OPC output in 2005-2007 and the expansion of Portland Pozzolana Cement (PPC) at a CAGR of 10.1% in 2004-2010, the latter
variety took the leading role. The share of OPCs dropped to about 25% in 2007 from over 60% in 2000. At present, more than 60% of the cement produced
in India is PPC.
Sector companies also manufacture Sulphate Resistance Cement and IRST 40, but their share represents less than 0.3% of the total production.
Source: CEIC
Copyright 2014 EMIS, all rights reserved. - 10 -
Capacity
Comments Installed capacity, mn tonnes
Due to the long-period needed for set-up of new capacities, they are 241.9
usually created ahead of demand. Thus, new capacities continued to 225.8
206.6 199.2
be installed after the market started to contract. 178.8
The pace of capacity additions has slowed down in 2011, though 157.6 165.9
151.7
overcapacity still poses problems for the industry. The over-supply
led to shrinking capacity utilisation and in 2011 it fell to 79%.
The level dropped the most in the southern region, which registered
the highest levels of consumption in the pre-crisis period. At the same
time, utilisation in the western region where the production-
consumption gap is the largest continued to rise.
2004 2005 2006 2007 2008 2009 2010 2011
Installed capacity by region, mn tonnes Capacity utilisation, %

250
Central Product 2007 2008 2009 2010 2011
31.4
27.2 Region
200 27.6 30.5 Northern Region 95 86 92 78 83
24.0 28.7 Western
26.0 32.3 26.5 Region
150 Eastern Region 86 87 85 85 80
29.3 96.6
92.3 Southern
68.3 83.6 Region Southern Region 94 88 72 66 63
100 57.4
31.7 Eastern Western Region 98 89 79 76 81
29.9 28.2
50 27.6 26.3 Region
38.3 48.4 38.9 49.5 51.7 Northern Central Region 96 94 106 98 89
0 Region
2007 2008 2009 2010 2011 India average 94 89 87 81 79
Source: CEIC
Consumption
Consumption and production, mn tonnes Per capita consumption 2012, kg
177 1,581
2011 180
167
2010 168
158
2009 161 744
178
2008 402
182 330
202 191
164 129
2007 168
Consuption Production China Turkey Russia Brazil Indonesia India Pakistan
Consumption by region, mn tonnes Comments

180
26.2
Central
160 29.9
23.8 27.4 Region
25.0
140 34.0 35.8 Western
120 32.2 31.5 India's cement production fully meets domestic demand.
28.1 Region
100 Southern
54.4 50.9
80 49.2 52.7 51.0 Region The per capita consumption in the country is substantially below the
60 Eastern
world average and far lower than the consumption in India's main
40
25.3 28.2
25.9 29.2 30.0 Region competitor China, suggesting good potential for expansion.
20 33.5 35.1 26.7 27.5 30.8 Northern
0 Region
2007 2008 2009 2010 2011
Source: CEIC, International Cement Review (Sep 2013)

Cement Prices
Cement and Lime Wholesale Prices, annual change %

25
20
15
10
-5
1.2007
4.2007
7.2007
10.2007
1.2008
4.2008
7.2008
10.2008
1.2009
4.2009
7.2009
10.2009
1.2010
4.2010
7.2010
10.2010
12.201
4.2011
7.2011
10.2011
1.2012
4.2012
7.2012
10.2012
1.2013
4.2013
7.2013
10.2013
Comments
Cement prices showed a steady upward trend from 2003 to H1 2008 due to expansion of the construction sector and supply gap. Although installed
capacity has outstripped demand by 2009, much of those capacities were in stabilisation phase i.e. the effective capacity was lower than the capacity
utilisation level suggested. In the following years, however, with most of the capacities being fully operational, pricing pressures started to build. The
unstable local construction sector and lower demand also affected cement prices.
The price of cement rose in end-2011- mid 2012 period, following a slight recovery in demand. The increase decelerated again in end 2012 and was on a
downward path in the last months of 2013.
Source: CEIC, Emerging Markets Insight calculations

Production Costs
Fuel, Freight and Electricity Prices (WPI, yoy change %)

30
Coal Electricity Mineral Oils
20
10
0
-10
4.2012 6.2012 8.2012 10.2012 12.2012 2.2013 4.2013 6.2013 8.2013 10.2013 12.2013
Inflation and Exchange Rate Movements

12
0
-12
-24
WPI, yoy % USD/INR
-36
4.2012 6.2012 8.2012 10.2012 12.2012 2.2013 4.2013 6.2013 8.2013 10.2013 12.2013
Comments
The development of the sector and especially its profitability is dependent on the investment costs (land costs, inflation, environmental regulations) and operating costs
(coal, electricity, oil). The latter have been quite volatile recently, rising more often than not, reflecting high inflation and tax hikes.
International coal prices declined substantially in 2013, leading to higher imports of the raw material and relatively lower prices for the import dependent companies. The
price decline was however partially offset by the weak rupee.
In May 2013, Coal India Ltd reduced the prices of premium varieties of coal by 10% in line with decline in international coal prices. To offset this, CIL increased the prices of
low grade coal -varieties that are commonly used by Indian cement companies - by an average 10% . The increase in coal prices affected the power and fuel cost for
cement companies and was more pronounced on companies which depend more heavily on domestic coal.
The costs pressure is expected to continue in the short-to-medium term and will carry a downside risk for the sector development.
Source: CEIC, X-Rates.com, ICRA

Trade
Main exporters in value terms, calendar 2012 India cement trade balance, USD mn
7.4%
Apr-Sep'13 70.6
6.3%
5.3% 2012 83.5
2011 134.0
3.4% 3.4%
2.5% 2010 124.8
1.5%
2009 21.4
2008 111.6
Turkey
China
USA
India
Vietnam
Pakistan
Japan
2007 149.2
Comments
India is among the world's top ten exporters of cement both in value and volume terms. However, it lost market share in 2012 when the country's exports
accounted for 1.5% of the global trade, down by 1% compared to 2011.
The country has a positive trade balance with traditionally high cement exports and relative product imports.
Source: Emerging Markets Insight calculations, Department of Commerce of India

Trade (cont'd)
India - Export of cement Main export markets in value terms, Apr-Sep 2013
203.7 202.1 213.5
188.3 Others 7.1%
0.125% 178.2
0.102% 140.3 South Africa 1.0%
0.079% 0.081% 96.6 Comoros 1.1%

0.070%
0.059% Tanzania 2.7%
0.064%
Myanmar 3.9%
Saudi Arabia 4.6%
Bhutan 9.7%
2007
2008
2009
2010
2011
2012
Apr-Sep'13
Nepal 26.2%
Export, USD mn Share in total, % Sri Lanka 43.6%
India - Import of cement Main import markets in value terms, Apr-Sep 2013
0.041%
Others 1.2%
Malaysia 1.3%
118.9
0.025% 94.7 Germany 1.8%
0.022% 76.7 77.3 79.5
0.019% 0.011% UAE 2.2%
54.5 0.016%
0.021%
26.0 Egypt 3.1%
Netherlands 3.7%
Vietnam 9.6%
2007
2008
2009
2010
2011
2012
Apr-Sep'13
China 11.3%
Bangladesh 26.8%
Import, USD mn Share in total, % Pakistan 38.9%
Source: Department of Commerce, Emerging Markets Insight calculations, Data for HS 2523
Energy Efficiency
Weighted average electric energy consumption, kWh/tonne Weighted average clinker to cement ratio, %
77.1
116
114
113
76.4
112
111
111
110
110
76.2
109
107
75.9
105
103
103
102
102
75.6
94.5
92.3
91.2
90.8
87.3
74.3
74.1
74.1
73.7
73.7
73.7
73.2
72.9
72.8
72.7
73
72.6
71.9
72
72
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
India China EU-27 World India China EU-27 World
Comments
According to data from the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development, India performs well in terms
of energy efficiency.
Despite the fact that fast capacity accumulation has led to lower utilisation, the recent expansion of the industry provides efficiency as modern plants are
more efficient than older ones.
Source: Cement Sustainability Initiative, GNR Project

Foreign Direct Investment
FDI Inflows Cement and Gypsum Products (calendar years) Sector-wise distribution of equity FDI (2000-Nov2013)
674.9
2.9%
617.5
Telecommunic
ations 6.2%
Camputer
2.0% Construction software 5.9%
11.0%
Cement and
1.4% Gypsum
252.6 products 1.4%
214.0
0.8%
96.6
80.7 0.4%
0.3%
Services Pharmaceutica
2008 2009 2010 2011 2012 Oct'13 ls 5.5%
18.6%
FDI in cement and gypsum products, USD mn
Cement and gypsum products in total FDI
Source: CEIC, Ministry of Commerce and Industry of India, Department of Industry Policy and Promotion
Government Policy
Cartels and In June 2012, the Competition Commission of India (CCI) imposed fines worth a total of USD 1.1 billion on eleven local cement
manufacturers for price fixing.
competition
The watchdog said the companies colluded to underuse their plants and create an artificial shortage of cement. The companies were
fined the equivalent of 50% of their net profit for the fiscal years ending in March 2010 and March 2011.
India's 2013-2014 national budget features several projects designed to boost construction sector development and, consequently,
cement demand. Among them are projects for building of roads in North-eastern states and connecting them with Myanmar; 3,000km
of road projects in Gujarat, Madha Pradesh, Maharashtra, Rajastan and Uttar Pradesh, two new major ports in the states of West
Bengal and Andhra Pradesh and a new harbour in Tamil Nadu. About INR 200bn were to be allocated to the Rural Infrastructure
Budget Development Fund.
The budget also levied 2% custom duty on steam and bituminous coal. Coal is among the main raw material in cement production, as
the annual requirement exceeds 50mn tonnes. Administrative, environmental and legal delays in adding new mines and expanding
existing ones has increased India's dependence on coal imports and the country is currently the third largest importer of the raw
material.
The growth of the Indian cement sector is closely related to the development of the local construction sector. The 12th Five Year Plan
suggests doubling the funds allocated for infrastructure in 2013-2017 to INR 56tn (USD 1tn). It includes projects for freight corridors,
upgraded and new airports and ports, large number of highway, which are expected to enhance economic activity and lead to increase
in cement demand. According to official estimates, there will be a shortage of 40mn dwelling units in rural areas and 29mn units in
12th Five-Year urban area, which will drive housing demand.
Plan The construction sector is expected to grow by accumulated 10% in the period. To cater for the rising demand the government projects
that cement capacity has to increase to about 480mn tonnes per annum i.e. approximately additional 150mn tonnes are to be installed
and operationalized in the coming years.
But considering the average annual consumption, the current low utilisation levels and history of underachievement and delays of the
government construction projects, the achievement of these ambitious targets is doubtful.
Source: Planning Commission for 12th Plan estimates

II. Cement - Regional Performance
Indian fiscal year 2013 ends in March 2013 and the remaining nine months of calendar 2013 belong to fiscal year 2014.
In order to better align with calendar years and make international comparisons more meaningful, Emerging Markets Insight has chosen to label data by the year in which most of the result
occurred. Unless otherwise stated, in charts throughout this report, 2011, for example, means the 12 months between Apr 1, 2011 - Mar 31, 2012, or what in India is referred to as fiscal 2012.

Northern Region
Production and consumption, mn tonnes Top cement producers, 2011
42.2 26.4%
41.2
36.5 37.9
33.5 35.1 34.1
30.8
26.7 27.5 15.3% 14.9%
10.7% 9.6%
2007 2008 2009 2010 2011
Cement
Cement
Lakshmi
Jaipraka
Associat
Ultratech
Cement
Cement
Binani
Shree
JK
es
sh
Production Consumption
Installed capacity (mn tonnes) and capacity utilisation (%) Comments

60
95.0 92.0
86.0 78.0 83.0
1.0 Other
50 1.0 1.0 About 80% of the production in the Northern region is concentrated in
2.1
6.2 2.0 Himachal Rajasthan. The state is the production hub for white cement in India.
40 0.7 1.0
0.3 Pradesh The share of this cement variety in consumption is still relatively low.
6.2 Rajasthan
30 This could be explained with the higher price compared with grey
33.0 39.2 40.9 cement and the price conscious demand in the country.
32.8
Punjab
20 26.2
Haryana About 77% of the cement produced in the Northern Region in 2011
10
4.8 1.8 1.8 1.8 was manufactured by 5 companies.
4.2 2.5 2.5 2.6 3.0 Capacity
0 0.4
Utilization
2007 2008 2009 2010 2011
Source: CEIC, Competition Commission of India - Assessment of Competition in Cement Industry

Eastern Region
29.2 30.0 30.3%

28.2 26.7%
26.0 25.9
23.825.3 23.2 24.6
21.4
15.2%
8.9%
2007 2008 2009 2010 2011
Lafarge
Cement
Industries
India Ltd.
Century
Textiles
India
Tech
Ultra
OCL
and
35
87.0 Others
30 86.0 85.0 3.2
2.8 85.0
2.7 2.9 The Eastern region is the only region in India, where cement
25 2.8 Chhattisgarh
11.6 consumption outstrips production. Despite the capacity addition in the
12.0
20 11.1 9.4
10.5 West Bengal past years, the supply-demand gap has been increasing.
15 4.8
Orissa
5.1
5.4 4.0 4.8 80.0 Nonetheless, the levels of utilisation seam relatively low in
10
4.6
6.4
Jharkhand comparison with other regions as well as in light of the uncovered
3.6 6.4 6.4
5 demand.
5.1 5.2 3.8 5.7
3.6 Capacity
0
Utilization
2007 2008 2009 2010 2011

Southern Region

15.9%
59.9 59.3 60.2 60.8 14.4%
54.2 54.4 52.7 11.8%
49.2 51.0 50.9
9.2%
7.9% 7.8% 6.8%
Chettinad cement
Penna Cement
Kesoram Cement
Dalmia Bharat
India Cement
Ultra Tech cement
Madras Ceents
Sugar & Inds.

2007 2008 2009 2010 2011

120
94.0
88.0 0.6 Kerala
100 0.6 Being the region with the highest consumption in the pre-crisis period,
0.6
72.0 14.3
14.5
Karnataka
the Southern region also had the highest capacity installed. In recent
80 0.6 13.0 66.0 63.0 years, however, there was practically no demand growth due to lack
0.6 34.4 of infrastructure and housing projects .The demand contraction
60 14.8
28.7
32.3
Tamil Nadu
13.1 resulted in substantial decline in utilisation level.
40 20.2
17.4
Andhra
20 41.2 44.9 47.2 Pradesh With excess capacities, the producers in the region are faced with
26.4 32.6
Capacity
downward price pressures.
0 Utilization
2007 2008 2009 2010 2011

Western Region
35.8 47.7%
32.2 34.0
31.5
28.8 28.5 28.1
24.7
20.8 21.7
9.0% 8.8% 7.0%
Century Textiles
Ultra Tech- Gujarat
Sanghi Industries
Associates
Jaiprakash
and Industries
2007 2008 2009 2010 2011

35
30
98.0 Maharashtra
89.0 According to the country's competition watchdog, in 2011 four
25
79.0 76.0
81.0 companies accounted for 77% of the total cement output in the
13.1 11.8
20 11.9 11.8 Western region. The production is almost equally spread between the
11.3
15
Gujarat two main states Gujarat and Maharashtra.
10 19.2 18.7
17.4
15.2 16.9 In 2011, the Western region registered growth in demand of 13.7%,
5 Capacity reflected in higher utilisation levels despite the capacity additions.
Utilization
0
2007 2008 2009 2010 2011

Central Region

41.5%
29.9
27.6
27.4
26.2
26.2
26.0
25.1
25.0
25.0
23.8
15.6% 13.0%
Century Textiles
Ultratech Cement
Associates
Jaiprakash
2007 2008 2009 2010 2011

35
30 106.0
Madhya
25 Pradesh
Production in the Central region almost entirely covers consumption,
98.0
20 18.4 19.4 22.3 underpinning the high capacity utilisation level.
19.2
94.0 94.0 Uttar
15 17.8
Pradesh
89.0
The market is highly oligopolistic, with 3 companies accounting for
10
70% of the cement output.
5 7.7 8.3 8.0 9.1 Capacity
6.3
Utilization
0
2007 2008 2009 2010 2011

III. Clinker

Clinker
Clinker capacity in 2012, mn tonnes (estimated) Clinker export, thou tonnes
1,750 3,121
2,899
2,673
2,375
1,879
1,042 997
880
250
105 557 510
80 75 68 66 57 55 55
2007 2008 2009 2010 2011
Total clinker export Clinker export to Nepal
Comments
India is the second-largest producer of clinker in the world behind China. As the country uses almost all of the manufactured quantity in the production of
cement, it exports just about 2% of its total clinker output.
The main export markets in volume terms are Nepal, followed by Sri Lanka and Mozambique.
Source: US Geological Survey, CEIC

Clinker (cont'd)
Comments Clinker production
6.5% 7.0%
4.1%
Clinker production rose at an average rate of 6% in the period 2003- 2.7%
2007 but slowed down to 1.4% in 2007-2011.
129.7 138.8 128.3 131.7 137.1

Most of the clinker is ground in the Southern region.
-7.6%
2007 2008 2009 2010 2011

Production, mn tonnes Change, yoy %
Region-wise production, 2011 Region-wise clinker grinding (mn tonnes)

140
Central 16.2% Central
18.4 19.7
120 17.8 18.7 Region
Northern 17.9
Western 100 22.9 20.4 Western
23.3% 17.9
12.9% 23.5 17.1
Region
80
46.6 47.8 Southern
46.9 47.6 Region
60 42.1
Eastern
40 15.3 13.8 15.0 Region
Eastern 9.3% 14.4 13.0
20 30.5 31.1 Northern
Southern 26.5 26.4 28.2
Region
38.2% 0
2007 2008 2009 2010 2011
Source: CEIC
IV. Main Players

M&A Activity
Recent Mergers and Acquisitions
Country of
Date Target Company Deal Type Buyer Deal Value USD (mn) Stake %
Buyer
Gujarat plants of Jaypee Cement

11.09.2013 Acquisition Ultratech Cement Ltd India 23.4 100.0
Corp Ltd
Open market
29.08.2013 Century Textiles & Industries Ltd Private Investors - 2.3 0.8
purchase
12.08.2013 Sree Jayajothi Cements Ltd Acquisition CRH Plc Ireland 230.0 68.0
24.07.2013 ACC Ltd Acquisition Ambuja Cements India Ltd India 2,467.6 50.0
27.06.2013 Sree Jayajothi Cements Ltd Acquisition Vicat Group France - 50.0
Cement grinding facility of

21.05.2013 Acquisition JSW ISPAT Steel Ltd India - 100.0
Heidelberg Cement
Minority stake
15.05.2013 Lafarge India Pvt Ltd Baring Private Equity Asia Ltd Hong Kong 260.0 14.0
purchase
19.01.2013 India Cements Ltd. Block trade Undisclosed investors - 3.3 9.8
Source: DealWatch
UltraTech
Income and profit (INR bn) Highlights
200.2 UltraTech is the largest cement producer and clinker exporter in

181.7 India and is among the leading cement producers globally. Along
with the Indian market, the company operates also in Bahrain,
132.1 Bangladesh, Sri Lanka and the UAE.
UltraTech is active in the cement and concrete production,
70.5 building products and building solutions.
63.8
49.8
45.2
In the cement segment, the companys assortment includes
28.2
26.6
24.5
20.9
Ordinary Portland Cement, Portland blast furnace slag cement

18.1
14.0
10.9
9.8
and Portland Pozzolona Cement.

As at March 2013, the company had production capacity of
53.9mn tonnes of cement per annum (51mn tonnes in India and
2008 2009 2010 2011 2012 3mn tonnes in subsidiaries abroad). In the financial 2013,
UltraTech commissioned a 3.3mn tonne clinkerisation plant at
Net Sales EBITDA Net Profit Rawan, Chhattisgarh, a 1.55mn tonne grinding unit at Hotgi,
Maharashtra and additional 0.6mn tonne cement grinding
capacity at Gujarat. The company invested also in a wall-care
Key Performance Indicators putty plant of 0.4mn tonnes at Katni, Madhya Pradesh and port
based bulk terminal of 0.5mn tonnes per annum at Cochin.
UltraTech plans to expand its cement production to 64.45mn
Product 2008 2009 2010 2011 2012 tonnes by 2015.
In September 2013, Ultra Tech acquired the Gujarat Cement Unit
Equity Share Capital (INR bn) 1.2 1.2 2.7 2.7 2.7 of JCCL with 3.6mn tonnes clinker and 2.4mn tonnes cement
capacity, as well as, a grinding cement unit with 2.4mn tonnes
capacity. After the acquisition the companys debt-to-equity ratio
Capital Employed (INR bn) 64.7 70.4 165.4 187.5 225.5 was 0.54.
In December 2013, UltraTech announced plans for an INR 50bn
Net worth (INR bn) 36.0 46.1 106.7 128.6 152.3 investment in two cement plants in Uttarakhand. The new units
will have capacity of 3.5mn and 2mn tonnes per annum.
EPS 78.5 87.8 62.7 89.3 96.9 As at end of fiscal 2013, the company had a work force of 12,660
employees.
EBITDA margin, % 15.0 16.0 11.0 13.0 25.0 UltraTech is listed on the Bombay Stock Exchange (BSE) and the
National Stock Exchange (NSE).
Debt Equity Ratio 0.6 0.4 0.4 0.3 0.4
Source: Company data; The Economic Times

UltraTech (contd)
Cement production and sales, mn tonnes Clinker production and sales, mn tonnes
31.8
31.3
40.2
40.1
39.8
39.4
26.8
33.2
32.9
15.6
15.1
17.8
17.6
15.9
15.8
2.5
2.4
1.6
1.0
0.5
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
Production Sales Production Sales
Capacity and Production Sales, mn tonnes

yoy change, yoy change,
Indicator 2011 2012 Indicator 2011 2012
% %
Installed Clinker 36.2 39.5 9.0 Grey cement 39.1 39.4 0.9
Capacity (mn Domestic
tonnes/annu Grey Cement Clinker 0.2 0.2 -15.8
48.8 50.9 4.0 sales
m) Total 39.3 39.6 0.8
Clinker 31.3 31.8 1.0
Clinker 0.7 0.7 4.2
Production
Grey Cement 39.4 40.1 2.0
(mn tonnes) Export sales Grey cement 0.8 0.3 -57.7
White Cement 5.5 5.7 3.0
Total 1.5 1.1 -28.2
Capacity Clinker 0.9 0.9 1.0
Sales Others White Cement (LMT) 0.56 0.57 2.0
Grey Cement 0.8 0.8 1.0
Source: Company data; * Effective capacity

Ambuja Cements
Ambuja Cements was founded in 1983 as Gujarat Ambuja

96.8
85.5 90.9 Cements Ltd and entered the cement production segment
73.9 in 1986.
70.8
62.2 In 2006, global cement producer Holcim acquired
management control over Ambuja Cements Ltd (ACL) and
currently holds a majority stake in the Indian manufacturer.
ACL has five integrated cement manufacturing plants and
14.0 12.2 12.6 12.3 12.9
13.0 eight grinding units across India. The firm has also built a
port with three terminals on the western coastline and owns
its own fleet of ships.
2008 2009 2010 2011 2012 2013
In 2012, ACL put into operation a pre-grinder at its
Net Sales Net Profit Bhatpara unit worth approximately INR 400mn, thus
increasing the total cement grinding capacity of the
company to 27.95mn tonnes.
Key Performance Indicators
In January 2014, ACL completed a bulk packing terminal of
Product 2008 2009 2010 2011 2012 1mn tonne capacity at Mangalore, Karnataka.
In July 2013, Ambuja Cements announced plans to acquire
Net worth (INR bn) 56.7 64.7 73.3 80.7 88.1 a 50.01% stake in local peer ACC Ltd for an estimated total
consideration of INR 147bn (USD 2.5bn). In November
Capital employed 2013, The Economic Times reported that state-owned
63.4 71.2 79.3 87.8 94.1 reinsurer General Insurance Corporation of India and four
(INR bn)
other general insurers would vote against the deal, calling it
unfavourable to the minority shareholders. The main
Debt Equity Ratio 0.05 0.03 0.01 0.01 0.00 institutional shareholder Life Insurance Corporation is still
undecided. A statement on the restructuring is expected by
EPS 9.21 8.00 8.28 8.02 8.43 the Gujarat High Court by April 2014.
ACL is listed on both leading bourses in India BSE and
Dividend per share 2.2 2.4 2.6 3.2 3.6 NSE.
Source: Company data for year ending 31.12.

Ambuja Cements (contd)
Cement production and capacity, mn tonnes Cement sales, mn tonnes
28.0
27.4
25.0
22.0
22.0
21.6
2012
21.0
21.3 0.1
20.1
18.8
17.8
2011 20.5 0.4
2010 19.5 0.5

2008 2009 2010 2011 2012
Capacity Production
Domestic Export
Cement sales by region, mn tonnes Investments projects and planned capacities installation
8.8 8.5 8.3

7.7 8.1 8.1 Ambuja Cements plans to complete 13 projects worth about
INR 2.72bn in early 2014. The projects are for efficiency
optimisation and are expected to pay back in 2.5 to 4 years.
4.2 The firm plans grinding capacity expansion of Rabriyawas unit,
3.7 3.9
Rajasthan by 0.3mn tonnes to a total of 0.8mn tonnes. The
project is worth INR 700mn and its completion is expected in
0.5 0.4 0.1 2014, although it was initially planned for 2013.
Expansion of Sankrail Grinding unit capacity by 0.8mn tonnes
North East West Export is expected to be finalized in 2015.
2010 2011 2012

ACC Limited
32.5%
Associated Cement Companies Ltd is among the top
111.3
109.1
18.3% cement producers in India. The company was
94.3
established in 1936 and operates in the cement and
79.7
77.1
3.3%
ready-mix concrete manufacturing segments.
71.3
-15.7% -19.9% In 2005, after the acquisition of Ambuja Cement India

16.1
13.3
Ltd by the Swiss-based Holcim, the later made an
12.1
11.2
11.0
10.6
-30.3%
open offer to the shareholders of Associated Cement
Companies and through ACIL increases its holdings to
2008 2009 2010 2011 2012 2013
Net Sales Net profit Profit, yoy change 34.69% from 13.8%.
As of 2005, the financial accounting year of the
Key Performance Indicators company was changed to match the calendar year.
In 2006, the company was renamed to ACC Limited.
Product 2008 2009 2010 2011 2012 2013
In 2011, ACC installed the worlds largest kiln at its
Operating EBITDA cement plant in Wadi, Karnataka with a capacity of
26.6 33.2 23.5 20.4 19.7 12,500 tonnes per day.
margin, %
Cement sales account for almost 95% of the
Return on Capital
29 34 20 18 21 16 companys revenue. In 2013, cement sales amounted
employed,%
to INR 106.2bn, while ready-mix concrete added INR
Debt equity ratio 0.10 0.09 0.08 0.07 0.02 0.004 6.7bn in revenue.
ACC Limited share are traded on the Bombay Stock
EPS 65.0 86.0 60.0 71.0 56.5 58.4
Exchange and the National Stock Exchange of India.
Dividend per share 20.0 23.0 30.5 28.0 30.0

ACC Limited (contd)
Sales volume and growth Cement production and capacity utilisation
93.0% 91.0%
11.5% 81.0%
77.0% 79.0%
5.2% 21.3
2.3%
1.6%
21.1
21.0
21.5
23.7
24.1
20.8
21.4
23.5
24.1
-1.0%
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
Sales, mn tonnes yoy change, % Production, mn tonnes Utilisation

Utilization
Assets Number of employees at year-end
1.8 2012 9,769

1.5
1.4
1.3 2011
1.2 9,031
2010 8,971
47.2
61.1
65.5
65.7
61.8
2009 8,916
2008 2009 2010 2011 2012 2008 9,557

Net Fixed Assets, INR bn Asset Turnover Ratio

Shree Cement
Sales and profit (INR bn) Highlights

64.8
61.5
Shree Cement is an Indian cement producer, whose
40.1 38.8 activities are concentrated in the northern region of the
30.9 country.
18.1
17.5
15.8
The company's cement plants are located in Beawar,

10.1
10.0
9.9
6.8
6.2
5.8
Ras, Khushkhera, Jobner (Jaipur) and Suratgarh in

2.1
Rajasthan and Laksar (Roorkee) in Uttarakhand.

2008 2009 2010 Apr'11-Jun'12 Jul'12-Jun'13
Gross Sales Operating profit Net profit

As at June 2013, the cement production capacity of
Shree Cement was 13.5mn tonnes per annum. Among
the finalised projects in 2013 are clinker manufacturing
Key Indicators units with capacity of 2mn tonnes per annum in Ras.
Apr'08- Apr'10- Apr'11- Jun'12-
Product Apr'09-Mar'10 Shree Cement also has a power generation capacity
Mar'09 Mar'11 Jun'12 Jun'13
of 570 MW with plants located in Beawar and Ras in
EBITDA margin,
36.6 43.5 29.2 31.2 31.3 Rajasthan.
%
Return on Capital
employed,%
32.1 28.4 5.1 14.5 24.1 The company work force reached 4,200 employees as
at June 2013.
Debt equity ratio 0.88 0.89 0.84 0.56 0.2
Shree Cement is listed on the Bombay Stock
Net fixed assets 11.1 17.2 22.0 17.9 22.5 Exchange and the National Stock Exchange.
EPS 165.9 194.1 60.2 177.5 288.2
Source: Company data

Shree Cement
Production (mn tonnes) Sales
16 600
14.2
14.9
14 524
12.3
500
12 12.5
10.3
9.4 10.2 10.3 400
9.4
10
8.7
8.1
8.5
7.8
7.5
8 300
263.6 261.03
6.4
6
200
4 132.23
117.1 100
2
0 0
2008 2009 2010 Apr-11-Jun-12 Jul'12-Jun'13
2008 2009 2010 Apr'11-Jun'12 Jul'12-Jun'13
Cement Clinker Clinker and cement, mn tonnes Power, MWh (rhs)
Comments
Shree Cement plans to commission two cement mills with total capacity of 4mn tonnes per annum, as a part of its Ras unit in 2014.
Another clinker manufacturing unit at Ras plant is also scheduled to be completed by June 2014.
The company has also planned to add split clinker grinding capacity at other locations in northern India and has initiated steps for acquiring land and
obtaining necessary clearances.
Shree Cement has started the work on setting up an integrated unit (clinkerisation with grinding) of 2mn tonnes in Baloda Bazar, Chhattisgarh, expected to
be completed by March 2015. A split grinding facility with 2mn tonnes per annum capacity at Bihar unit is also under construction and planned to be
launched by the end of the financial year.

Ramco Cement Limited
Sales and profit (INR bn) Highlights
38.7 Ramco Cement is the fifth largest cement producer in

32.6 India. The company is the flagship firm of Ramco
28.2 26.4 Group and is headquartered in Chennai. The main
24.7 product of Ramco Cement is Portland cement,
manufactured in eight state-of-the-art production
facilities that includes integrated cement plants (three
3.6 3.5 3.9 4.0 in Tamil Nadu and one in Andhra Pradesh and
2.1
Karnataka) and grinding units (two in Tamil Nadu and
one in West Bengal) with a total production capacity of
2008 2009 2010 2011 2012
16mn tonnes per annum. The firm also operates two
Income Net profit packing terminals and a research centre.
Ramco Cement also produces ready-mix concrete
Key Indicators and dry mortar products and operates one of the
largest wind farms in India.
Product 2008 2009 2010 2011 2012 In 2012, the company completed the projects for
Operating profit installing a roll press mill at Ramasamy Raja Nagar
32.1 31.1 24.9 29.8 27.0 cement plant and for increasing the cement grinding
margin,%
capacity at Salem grinding unit.
Net worth per share 52 65 73 86 100
Ramco Cement plans to install its fourth grinding unit
EPS 15 15 9 16 17 at Vizag with a capacity to grind 1mn tonnes per
annum, at an investment cost of INR 3.60bn. The
Divident per share 2 2 1.25 1.25 3
project is expected to be commissioned in the second
Equity share quarter of the financial 2015.
0.03 0.03 0.03 0.2 0.2
(INR bn) Ramco Cement is listed on the Bombay Stock
Net Fixed Assets Exchange and the National Stock Exchange of India.
36.4 40.1 44.9 40.6 45.1
(INR bn)

Ramco Cement Limited (contd)
Capacity (mn tonnes) Cement production and sales (mn tonnes)
12.5
8.03
8.48
8.36
7.95
7.55
7.52
7.31
7.26
10.0 10.5 10.5 10.5
6.53
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
Employees Comments
In 2012, Ramco increased its cement sales by 10.7% year-on-

2012 2,787
year to 8.36mn tonnes. Out of the total sales for the year,
84,000 tonnes were exported compared to 46,000 tonnes
2011 2,626
exported during the previous year. The export turnover of the
company for the year was INR 287mn compared with INR
2010 2,593
142.6mn for the previous year.
2009 2,583
The sale value of cement for 2012, net of excise duty and VAT
amounted to INR 36.27bn compared to INR 30.94bn for the
2008 2,447
previous year.

Contact:
Asia Headquarters
Corporate Headquarters
Americas Headquarters Eucharistic Congress Bldg. No.
Nestor House
225 Park Avenue South III
Playhouse Yard
New York, New York 10003 4th Floor, 5 Convent Street
London EC4V 5EX
US Mumbai 400 001
UK
Voice: +1 212 610 2900 India
Voice: +44 207 779 8471
Fax: +1 212 610 2950 Voice: +91 22 22881123
Fax: +44 207 779 8224
Fax: +91 22 22881137
Disclaimer:
The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness
of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional
Investor PLC take no responsibility for decisions made on the basis of these opinions.
Any redistribution of this information is strictly prohibited. Copyright 2014 EMIS, all rights reserved. A Euromoney Institutional Investor company.
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Cement

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I. Cement Sector Overview II. Cement - Regional Performance

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Product 2007 2008 2009 2010 2011

Cement Production (mn tonnes) 168.3 181.6 160.8 168.3 179.9

Cement Despatches (mn tonnes) 167.7 181.2 159.8 167.2 179.0

Cement Capacity Utilisation, % 94 88 83 76 75

Cement Consumption (mn tonnes) 164.0 178.0 158.3 165.6 177.4

Cement Export (mn tonnes) 3.7 3.2 1.6 1.5 1.6

Clinker Production 129.7 138.8 128.3 131.7 137.1

Clinker Ground (mn tonnes) 124.2 133.7 121.2 126.2 134.0

Clinker Export (mn tonnes) 2.4 2.9 3.1 2.6 1.9

Cement, plaster, concrete etc.( % of manufacturing

Cement,plaster,concrete etc. (% of world output) 2.6 2.6 3.1 2.9 2.8

Source: CEIC, Oxford Economics

9.3% 9.3% 3.59

49.4 52.4 55.1

2007 2008 2009 2010 2011 2012

Construction and GDP development (real yoy growth %) Comments

As demand for cement declined in the past few years, cement

Source: MOSPI, Oxford Economics

Key macroeconomic indicators forecast

Indicator 2013 2014 2015 2016 2017 2018

In the medium term, the increase in GDP, rising

Source: IMF, Oxford Economics, IBEF

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Comments Top cement producers 2012, mn tonnes (estimated)

Cement production in India Cement production regional structure, 2011

181.6 179.9 Central 15.3%

-11.5% Eastern 13.7%

2006 2007 2008 2009 2010 2011

Source: CEIC, US Geological Survey (Jan 2013), The Economic Times

Cement production by variety, mn tonnes Cement production by variety, %, 2011

Comments Installed capacity, mn tonnes

Installed capacity by region, mn tonnes Capacity utilisation, %

Consumption and production, mn tonnes Per capita consumption 2012, kg

Consuption Production China Turkey Russia Brazil Indonesia India Pakistan

Consumption by region, mn tonnes Comments

Source: CEIC, International Cement Review (Sep 2013)

Cement and Lime Wholesale Prices, annual change %

Source: CEIC, Emerging Markets Insight calculations

Fuel, Freight and Electricity Prices (WPI, yoy change %)

Inflation and Exchange Rate Movements

Source: CEIC, X-Rates.com, ICRA

Source: Emerging Markets Insight calculations, Department of Commerce of India

0.102% 140.3 South Africa 1.0%

0.079% 0.081% 96.6 Comoros 1.1%

Saudi Arabia 4.6%

Export, USD mn Share in total, % Sri Lanka 43.6%

Import, USD mn Share in total, % Pakistan 38.9%

India China EU-27 World India China EU-27 World

Source: Cement Sustainability Initiative, GNR Project

Source: Planning Commission for 12th Plan estimates

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Production and consumption, mn tonnes Top cement producers, 2011

2007 2008 2009 2010 2011

Installed capacity (mn tonnes) and capacity utilisation (%) Comments

Source: CEIC, Competition Commission of India - Assessment of Competition in Cement Industry

Production and consumption, mn tonnes Top cement producers, 2011

29.2 30.0 30.3%