195

Cement
Cement prices soften across the country
While we expect cement demand from the real estate sector to be subdued in
the coming months, cement demand from the infrastructure sector is expected to
largely remain healthy. We expect cement consumption to post a rise of eight per
cent during the year 2008–09. Cement production is expected to be higher by 6.7 CMIE
per cent in 2008–09.
Consequent to the recent excise duty cut announced by the Union Government, the Babita Rana
cement companies have cut the prices by 4–6 per bag in different regions across the brana@cmie.com
country. The cement prices, in the recent months, displayed a softening trend in the December 2008
Eastern and Northern regions. In view of recent slow down in cement demand, the
prices were likely to come under pressure even in the absence of excise duty cut.
We expect sales of the sector to grow by 13 per cent in the December 2008 quarter.
A higher rise in raw material and power costs is expected to exert pressure on the
profitability of the sector. The profit margins of the sector are, therefore, expected
to erode during the December 2008 quarter. However, on a sequential basis, the
profit margins are expected to improve.

F IGURE 40.1: α: 0.18 β: 0.90 Mkt Cap: Rs. 40,274 cr F IGURE 40.2: Financial Performance (%)
Volatility/Returns

pe=4.36 60
Growth in Income
low
volatility r=0.06%
σ=2.03%
50
40
moderate
volatility 30
20
average 10
volatility
0
30 PAT/Income
25
volatile
20
15
10
very volatile
5
0
decline low average high excellent -5
returns returns returns returns
-10
r = Average Daily Returns D02 S03 J04 M05 D05 S06 J07 M08 D08
σ = Standard Deviation (Volatility) of Daily Returns (CMIE Forecast)

Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy December 2008
196 Cement

Cement production up 7 % in October
After recording a robust rise of 9.6 per cent in the pre-
ceding month, cement consumption grew by a modest
4.6 per cent in October 2008. The consumption was
sluggish in the North, Western and Central regions that
either recoded a decline or a modest growth of 1–3 per
cent. The East and South zones reported a healthy con-
sumption growth of 8–12 per cent.
On a cumulative basis also, consumption in the Eastern
and Southern regions during April–October 2008 grew
by a strong 10 per cent and 12 per cent, respectively.
Contrarily, consumption growth slowed down substan-
tially in the North and West zones to one per cent and
seven per cent, respectively, against a strong growth of
12 and 17 per cent achieved in the year ago period. The
slow down in these regions reflected on the overall con-
sumption growth that decelerated to 7.6 per cent against
a strong growth of 11.2 per cent clocked in the corre-
sponding period of the previous year.
Cement production recorded a healthy growth of seven
per cent in the month of October 2008. On a sequen-
tial basis also the production was up by 6.3 per cent
to 14.8 million tonnes. The production in the Western
and Central regions remained flat during the month. On
the other hand, Northern, Central and Southern regions
posted a strong production rise of 8–12 per cent, driving
the overall production growth during the month.
The slow down in cumulative cement consumption
during the period April–October 2008 led to a slow
down in aggregate production growth during the period.
While the North, Central and South zones recorded a
healthy production rise of 8–11 per cent during the pe-
riod, the Western and Central regions reported either a
decline or a modest growth. As a result, the aggregate
production during the period slowed down to 6.7 per
cent against a rise of 8.2 per cent in the year ago period.
The cement production has slowed down despite a sub-
stantial increase in the industry’s installed capacity in
2007–08. Consequently, industry’s average capacity
utilization during the year, so far, has dipped to 85.3
per cent from 94.5 per cent in the year ago period.

TABLE 40.1: Cement consumption grows by a modest 4.6 per cent in October 2008
Prodn Prodn Consump Consump Cap. Util. Closing
tion tion stocks
(Lakh tonnes) (% chg.) (Lakh tonnes) (% chg.) (Per cent) (Lakh tonnes)
Oct 2007 138.1 7.4 133.6 10.9 95.7 13.5
Nov 2007 130.6 4.8 124.9 4.0 90.6 15.0
Dec 2007 140.5 4.4 138.4 5.5 97.4 13.2
Jan 2008 148.0 5.0 145.9 7.6 101.9 12.6
Feb 2008 147.3 13.0 145.5 14.8 101.2 11.6
Mar 2008 163.9 9.3 161.1 10.0 104.1 10.8
Apr 2008 150.2 7.5 145.3 8.6 91.9 13.4
May 2008 148.9 4.5 148.3 7.5 89.1 13.5
Jun 2008 146.7 6.9 146.4 10.1 86.5 11.9
Jul 2008 146.6 9.3 142.8 8.9 86.4 13.2
Aug 2008 131.6 2.4 129.1 4.0 77.3 12.6
Sep 2008 138.9 8.9 135.4 9.6 81.6 12.0
Oct 2008 147.6 6.9 139.7 4.6 86.3 16.4

Apr–Oct Apr–Oct Apr–Oct Apr–Oct Apr–Oct Apr–Oct

2007–08 946.6 8.2 917.5 11.2 94.5 13.5
2008–09 1,010.4 6.7 987.5 7.6 85.3 16.4

Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar

2007–08 1,683.1 8.1 1,640.2 10.1 95.8 10.7

December 2008 Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy
Cement 197

Cement prices decline on excise duty cut
Cement prices across the country, barring Kolkata, dis-
played a firm trend in the month of November 2008.
Prices in Delhi, Chennai and Hyderabad remained sta-
ble at their month ago levels. The prices in Kolkata
softened by as much as Rs.10 per 50 kg bag in the sec-
ond week of the month. As a result, the prices for the
month in the city averaged at Rs.240.
Coal shortage continues for cement companies. As per
the recent media reports, the allocation of coal link-
ages to cement companies by Coal India Limited has
shrinked to below 50 per cent of their requirement.
Consequently, cement companies’ dependences on ex-
pensive open market purchases or coal imports con-
tinue to rise. Coal prices in the global markets have
started easing. However, the Indian Rupee has depreci-
ated about 24 per cent against USD in the past one year
ended November 2008, partly offsetting the benefit of
fall in imported coal prices. Therefore, we expect coal
cost pressure to continue.
The Central Government, on 7 December 2008, an-
nounced the much desired across the board cut in the
excise duty. With this, the packaged cement that was
being charged an excise duty of 12 per cent will attract
eight per cent duty. In response to this, most of the ce-
ment companies (including the industry majors) have
announced a price cut in the range of 4-6 per bag in dif-
ferent regions across the country. The companies have
reportedly cut the prices after factoring into the impact
of recent increase in rail freight rate for cement and
coal. In view of real estate slow down, cement demand
slowed down a tad in recent months. Consequently, the
prices in the Eastern and Northern regions displayed a
softening trend. We expected cement prices to soften
even in the absence of recently announced excise duty
relief.

TABLE 40.2: Cement prices come down in December 2008

Cement Cement Cement Cement Cement
Average Change Average Change Average Change Average Change Average Change
Mumbai (%) Delhi (%) Kolkata (%) Chennai (%) Hyderabad (%)
(Rs./50 (% chg.) (Rs./50 kg (% chg.) (Rs./50 kg (% chg.) (Rs./50 kg (% chg.) (Rs./50 kg (% chg.)
kg) bag) bag) bag) bag)
Nov 2007 239 7.08 227 11.65 230 8.90 253 22.67 217 22.83
Dec 2007 244 9.12 227 8.21 230 9.16 254 23.58 218 24.49
Jan 2008 246 9.67 227 9.38 231 9.86 256 23.60 220 24.61
Feb 2008 248 10.84 227 9.78 230 9.67 259 21.88 216 14.51
Mar 2008 250 9.39 227 5.06 233 2.91 258 13.29 216 1.86
Apr 2008 252 7.56 232 5.94 240 4.45 257 9.80 215 -0.37
May 2008 253 8.12 230 5.02 245 6.67 259 7.73 215 1.10
Jun 2008 253 6.93 228 3.88 245 7.57 260 6.84 215 1.32
Jul 2008 253 4.33 229 3.50 249 8.93 263 6.28 225 1.52
Aug 2008 253 5.20 229 3.15 250 8.76 277 8.77 234 0.65
Sep 2008 254 6.31 229 3.15 246 6.83 278 9.01 232 -0.22
Oct 2008 256 6.97 229 0.88 244 5.77 278 9.92 232 6.85
Nov 2008 255 6.89 229 0.88 240 4.16 278 9.92 232 7.01

Apr–Nov Apr–Nov Apr–Nov Apr–Nov Apr–Nov Apr–Nov Apr–Nov Apr–Nov Apr–Nov Apr–Nov
2007–08 238 12.28 222 8.92 230 12.92 248 24.05 220 24.43
2008–09 254 6.63 229 3.25 245 6.71 269 8.52 225 2.27

Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar Apr–Mar
2007–08 241 11.44 224 8.52 230 10.97 251 22.60 219 21.14
Note: Cement prices are based on CMIE’s independent polling of traders. Mumbai prices are wholesale
prices

Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy December 2008
198 Cement

Margins continue to contract
The aggregate sales of 39 cement companies was higher
by 13.7 per cent in the September 2008 quarter, slowing
down against a rise of 20.6 per cent recorded in the year
ago quarter. However, the growth rate was a tad higher
than that clocked in the preceding quarter.
The sector continued to face cost pressure during the
quarter. Increased prices of coal in the domestic and
global markets saw power & fuel cost rising by a sharp
41 per cent during the quarter. The same is also re-
flected in a rise in the ratio of power cost to sales to 28.4
per cent as compared to 18.9 per cent in the September
2007 quarter. Other key costs namely, raw material and
other expenses were also higher by 25 per cent, each.
cent. A decline in PBDIT coupled with a rise in inter-
est and depreciation expenses resulted in a sharp 27 per
cent fall in profit at the net level. This led to a 680 basis
points contraction in net margin to 12.4 per cent.
A sharp rise in input prices and limited ability of ce-
ment companies to pass on the same in view of some
government intervention and a slight slow down in ce-
ment demand reflected on the profitability of the sector.
The profits of the sector have declined for the second
straight quarter. Yet, the margins are healthy.
F IGURE 40.3: Profit Margins
35
30
25

PBDIT of the sector took a hit of 16.3 per cent. This led 20

to a huge 860 basis points erosion in its PBDIT margin 15

to 24.4 per cent. Similarly, average PBDIT as a propor- 10

tion of net sales that hovered in the range of 28–32 per 5

cent in the earlier quarters has contracted to about 23– 0

-5
27 per cent in the recent quarters. Substantial capacity
-10
additions in 2007–08 coupled with ongoing expansion S02 J03 M04 D04 S05 J06 M07 D07 S08
projects of the companies saw interest and depreciation PBDIT PAT
costs of the sector growing in the range of 20–25 per

TABLE 40.3: Profitability erodes; Yet healthy

Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep
06 06 06 07 07 07 07 08 08 08
Income 37.6 44.9 46.9 37.3 25.4 20.6 17.9 16.3 10.9 13.3
Net sales 38.3 44.9 47.7 36.0 21.7 20.6 17.7 17.0 11.5 13.7
Total expenses 25.8 29.4 29.5 29.2 19.5 19.3 22.0 21.1 19.1 21.7
Raw materials 15.3 19.9 28.3 27.4 23.2 16.8 18.0 20.2 21.3 25.3
Salaries and wages 28.6 19.1 39.9 22.2 12.5 29.9 10.0 22.1 22.1 8.7
Power & fuel 16.8 18.5 16.9 15.1 12.1 14.2 20.0 28.2 37.5 40.7
Selling & marketing 48.9 94.2 16.2 24.8 57.4 33.6 14.3 50.2 24.7 20.4
Other expenses 24.4 31.8 21.6 15.2 8.2 15.3 15.8 25.2 18.9 24.7
Depreciation 14.3 14.9 12.0 52.4 15.6 24.9 49.7 11.2 25.0 20.4
Interest expenses -7.7 -8.3 -15.3 21.5 1.0 15.4 52.2 6.1 16.1 24.6
Tax provisions 144.3 230.1 239.2 182.3 60.0 36.2 50.4 15.3 -17.0 -22.8
PBDIT 93.7 142.9 139.8 86.3 40.8 36.4 25.8 5.7 -5.6 -16.3
PAT 150.6 314.4 257.1 85.2 44.7 42.3 7.9 0.6 -8.7 -27.1
Interest/PBDIT 7.3 7.1 5.5 6.1 5.3 6.1 6.9 6.3 6.5 9.1
PBDIT/Net sales 30.1 27.6 28.4 29.6 32.2 31.6 30.6 26.2 27.0 23.0
PBDIT/Income 31.4 29.1 30.2 32.8 35.4 33.0 32.2 29.8 30.1 24.4
PAT/Income 18.0 16.4 17.6 18.9 20.9 19.2 16.0 16.2 17.2 12.4
All income and profit figures are net of prior period and extraordinary transactions. PBDIT is net of other income
in PBDIT/Net sales ratio. Growth is not calculated when figures are negative.

December 2008 Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy
Cement 199

Cement companies’ profits continue to decline
After a disappointing June 2008 quarter, cement com-
panies faced another difficult quarter as profitability of
majority of the companies declined in the September
2008 quarter. Ten companies reported a 4–45 per cent
fall in sales. All these companies recorded a sharper
decline in profits. Shiva Cement reported the sharpest
fall in sales as well as profits. About 50 per cent of the
companies reported a double digit sales growth. How-
ever, only Kakatiya Cement and Anjani Portland Ce-
ment could translate the same into higher profitability.
The sharp rise in the power cost of majority of the com-
panies took its toll on their profitability as about 90 per
cent of the companies reported an erosion in their profit
margins. Bheema Cements reported the best profit mar-
gins during the quarter. Saurashtra Cement continued to
report the worst financial performance during the quar-
ter. It reported a loss at the PBDIT level itself. Two
companies namely, Sagar Cements and Shree Digvijay
Cement slipped into the red against net profit in the year
ago quarter.
Most of the industry majors continued to report lacklus-
ter sales growth during the quarter. Ambuja Cements
and ACC reported a sales growth of nine per cent, each.
The dispatch volumes of these companies was up by a
muted four per cent. The same was due to weak cement
demand during the quarter and unprecedented floods in
the Eastern parts of the country. On the other hand,
increased input prices saw their profit margins eroding
during the quarter. The cement sales of Grasim and Ul-
tratech grew by a healthy 17–20 per cent. The growth
came largely on the back of higher cement realisations
and higher clinker and RMC sales. PBDIT margin of
the cement segment took a hit of 7–9 per cent points
due to a steep rise in expenses led by higher prices of
coal in the domestic and overseas markets.
North based cement companies namely, Binani Ce-
ments and Shree Cement significantly outperformed in-
dustry sales growth, with over 30 per cent rise in their
sales. The growth was driven by over 19 per cent rise
in their dispatch volumes. However, faced with a steep
rise in their power costs, PBDIT margin of these com-
panies plummeted by a huge 13 per cent points. South
based cement majors - India Cement and Madras Ce-
ments posted a healthy sales growth of 25 per cent and
33 per cent, respectively. However, these companies
could also not sustain their profitability during the quar-
ter.

TABLE 40.4: Profit margins of cement companies continues to remain under pressure
Income Sales PBDIT PAT PBDIT/Income PAT/Income
Sep 07 Sep 08 Sep 07 Sep 08
(Rs.cr.) (G%) (Rs.cr.) (G%) (Rs.cr.) (G%) (Rs.cr.) (G%) (%) (%) (%) (%)
Grasim Industries 2,784.9 9.0 2,700.5 7.7 678.8 -21.4 419.5 -16.1 33.8 24.4 19.6 15.1
ACC 1,870.7 7.7 1,852.5 9.0 504.2 -0.6 283.4 -0.0 29.2 27.0 16.3 15.2
Ambuja Cements 1,443.2 8.7 1,401.9 8.5 442.4 -6.4 250.1 -15.8 35.6 30.7 22.4 17.3
Ultratech Cement 1,424.0 19.3 1,416.9 20.2 324.6 -9.1 164.2 -11.7 29.9 22.8 15.6 11.5
India Cements 954.5 24.4 954.5 25.2 269.6 -13.9 134.3 -39.7 40.8 28.2 29.0 14.1
Madras Cements 669.9 33.8 666.5 33.3 233.8 7.6 113.6 -6.0 43.4 34.9 24.1 17.0
Shree Cement 662.8 31.2 629.3 32.2 216.3 -6.0 117.2 10.3 45.6 32.6 21.0 17.7
Binani Cement 311.1 41.6 310.2 45.2 67.0 -11.0 26.8 -44.0 34.3 21.5 21.8 8.6
Saurashtra Cement 103.8 13.0 103.8 13.0 -7.1 -13.2 7.6 -6.8 -4.0 -12.7
Shree Digvijay Cement Co. 72.7 68.8 72.6 68.6 1.0 -72.3 -3.4 8.5 1.4 3.5 -4.6
Sagar Cements 35.5 -37.4 35.1 -37.3 2.9 -82.8 -2.9 29.3 8.1 16.0 -8.2
Anjani Portland Cement 30.2 45.3 30.2 45.3 9.4 39.6 4.7 73.0 32.3 31.0 13.0 15.5
Bheema Cements 18.7 26.7 18.4 25.9 7.5 23.9 4.6 0.9 40.8 39.9 31.0 24.7
Shiva Cement 3.9 -44.6 3.9 -44.9 -0.5 -1.2 16.3 -12.2 6.1 -31.6
All income and profit figures are net of prior period and extraordinary transactions.
G% = Growth percentage; Growth is not calculated when figures are negative.

Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy December 2008
200 Cement

Cement sector’s margin to expand sequentially
The sales volumes of the industry is expected to be
higher by seven per cent during the December 2008
quarter. The y–o y rise in cement realisations is also
expected to be six per cent. We, therefore, expect the
industry to post a sales growth of 13 per cent during the
quarter. Total income is expected to be higher by 12.3
per cent. The likely slow down in cement consumption
(due to real estate slow down) and consequent soften-
ing of cement prices is expected to reflect on the sale
growth of the sector from the June 2009 quarter. The
sales are likely to grow in the range of 7-9 per cent in
the the March, June and September 2009 quarter.
Despite significant capacity additions made in 2007–08
by cement companies, depreciation cost is expected to
be higher by a mere 2.4 per cent during the quarter. This
is on account of unique depreciation policy followed by
Shree Cement. The recent liquidity crunch faced by the
banking system and subsequent rise in the lending rates
is not likely to result into a substantial rise in sector’s
interest cost. This is because most of the cement com-
panies are placed in a comfortable position to tide over
this problem and also due to a high base effect of the
year ago quarter. The profitability is expected to im-
prove sequentially during the quarter.
F IGURE 40.4: Cement: Profit Margin (%)
35

The industry is expected to continue to face power cost 30

pressure. Power and fuel cost is expected to rise by 25
(CMIE Forecast)
28.1 per cent in the December quarter. The growth rate 20
is likely to moderate further in the subsequent quarters. 15
This expenditure has risen by 37–40 per cent in the pre- 10
ceding two quarters. Growth in the raw material cost is 5
also projected to moderate in the coming quarters. Yet, 0
the y–o–y rise in overall cost is expected to be higher -5
than the growth in income. The sector is expected to S03 J04 M05 D05 S06 J07 M08 D08 S09
report a decline of about 9.4 per cent in PBDIT during PBDIT/Income PAT/Income
the quarter.

TABLE 40.5: Cement sector’s profitability to improve on a sequential basis

Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09
Forecast Forecast Forecast Forecast
Income 17.9 14.9 9.5 13.3 12.8 7.7 5.9 6.2
Net sales 17.7 15.6 10.0 13.7 13.0 9.4 7.9 6.1
Expenses 22.0 19.3 17.5 21.7 14.3 9.9 7.4 5.5
Raw materials 18.0 13.7 15.0 25.3 20.6 7.7 7.4 3.8
Salaries & wages 10.0 21.7 21.7 8.7 10.0 6.0 8.0 6.0
Power & fuel 20.0 28.2 37.5 40.7 31.3 22.5 7.4 3.8
Marketing exp. 14.3 50.2 24.7 20.4 93.7 3.2 10.5 14.7
Freight & Distr. exp. 14.8 15.7 13.0 16.0 9.3 7.3 5.9 9.0
Interest 52.2 5.0 13.0 24.6 10.0 11.8 9.4 4.9
Depreciation 49.7 10.1 23.4 20.4 2.4 1.6 16.4 10.9
Tax provision 50.4 15.3 -17.1 -22.8 -29.0 -4.4 -5.3 11.0
PBDIT 25.8 5.2 -6.2 -16.3 -9.4 -3.4 -3.4 9.1
PAT 7.9 0.1 -9.2 -27.1 -5.4 -6.3 -9.4 8.4
PBDIT/Net Sales (%) 30.6 27.2 27.2 23.2 24.2 25.1 25.8 23.8
PBDIT/Income (%) 32.2 29.8 30.1 24.4 25.9 26.7 27.4 25.1
PAT/Income (%) 16.0 16.2 17.2 12.4 13.4 14.1 14.7 12.6

December 2008 Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy
Cement 201

Cement consumption to grow 8% in 2008–09
There is an evident slow down in the real estate sector.
Also, the real estate companies have reportedly faced
acute cash crunch in the past six months. The demand
outlook in the commercial and retail segments of the
real estate sector is expected to remain weak in view of
recent global slowdown. Similarly, high property prices
in the residential segment and high interest rates have
led to a slump in the sale of residential properties. The
RBI and the Central Government have recently taken
a slew of measures to improve their liquidity problem.
However, the benefits of these measures are expected
to accrue to real estate companies only with a lag. We,
therefore, expect the slow down in the real estate sector
to continue for the coming 2–3 quarters.
Cement consumption grew by 7.6 per cent during the
period April–October 2008. Cement demand from the
real estate sector is likely to be sluggish in the remain-
ing months of the year 2008–09. The recent cut in ce-
ment prices, in view of recent cut in the excise duty on
cement is unlikely to stimulate cement demand from the
real estate sector. On the other hand, we expect demand
from infrastructure projects to remain healthy. We ex-
pect cement consumption to grow by eight per cent dur-
ing 2008–09.
In 2007–08, the industry enhanced its installed capacity
by 30 million tonnes to 198 million tonnes. The aggre-
gate industry capacity stands at 208 million tonnes as of
November 2008. We expect another 14 million tonnes
of new capacity to come on–stream during 2008–09.
The average industry capacity utilisation level dipped to
85 per cent during the year, so far. While this is partly
on account of a substantial increase in the industry’s
installed capacity in 2007–08, this is also attributed to
a slow down in cement production in the months of
May 2008 & August 2008. Consequently, cement pro-
duction growth during the period April–October 2008
slowed down to 6.7 per cent from 8.2 per cent in the
corresponding period of the previous year.
We expect cement production to grow by 6.7 per cent
during 2008–09. The growth is expected to be driven
by the North region that has seen additional capacity of
around 15 million tonnes in 2007–08. Similarly, South-
ern region is also expected to report a healthy produc-
tion growth during the year.
F IGURE 40.5: Cement production to growth (%)
16
14 (CMIE Forecast)
12 11.16
10 9.77
8.63
8.10
8
6.70
6 5.47
4
2
0
Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009

TABLE 40.6: Cement production to grow 6.7 per cent in 2008–09

Units 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09
Forecast
Capacity Lakh tonnes 1,422.0 1,501.3 1,571.5 1,655.5 1,980.3 2,220.3
Production Lakh tonnes 1,174.4 1,275.7 1,418.0 1,556.6 1,683.1 1,796.0
Export Lakh tonnes 69.4 68.6 56.4 48.2 34.2 24.0
Import Lakh tonnes 0.2 0.1 0.2 2.1 6.2 6.0
Export Rs.crore 846.0 1,028.5 1,115.3 1,147.4 822.1 720.0
Import Rs.crore 9.3 8.2 13.9 65.4 218.2 226.8
Realisation Rs./Tonne 2,023.6 2,150.3 2,354.7 3,066.5 3,542.9 3,819.4
Sales Rs.crore 23,765.2 27,431.6 33,390.8 47,733.1 59,630.9 68,595.7
Domestic market value Rs.crore 22,928.5 26,411.3 32,289.4 46,651.1 59,027.0 68,102.5

Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy December 2008
202
Cement companies’ capex plans unaffected by
liquidity crunch
The CMIE CapEx survey identified 29 new projects
(involving capital outlay of Rs.19,488 crore) in the
September 2008 quarter. With this, the total outstand-
ing investment in the sector as of September 2008 stood
at Rs.1,12,509 crore.
During the September 2008 quarter, Sagar Cements
completed expansion of its Nalgonda plant by adding a
capacity of two million tonnes to its existing capacity of
0.5 million tonne. The plant is expected to stabilise by
December 2008. As per the Cement Manufacturers As-
sociation, India Cements commissioned a new grinding
unit at Vallur, Tamil Nadu with an installed capacity of
1.1 million tonnes. J K Cement expanded the capacity
of its plant at Gotan, Rajasthan by 0.37 million tonne
to 0.47 million tonne. Further, as per media reports,
Dalmia Cement commissioned its 2.25 million tonnes
expansion projects at Kadapa Andhra Pradesh on De-
cember 2, 2008. With this, industry’s installed capac-
ity stands enhanced to about 208 million tonnes as of
November 2008.
Fresh cement capacities of a slew of South based ce-
ment companies namely, India Cements, Madras Ce-
ments, Dalmia Cement, Bheema Cements and Chetti-
nad Cement are scheduled to be commissioned within
next one year. All these companies, in their annual re-
ports for the year 2007–08, have informed about the
likely completion of their respective expansion pro-
grammes by the third or fourth quarter of 2008–09. Fur-
ther, in a recent response to CMIE’s query, a company
officials at Dalmia Cement informed that its expansion
projects at Tamil Nadu involving a capacity addition
of 2.25 million tonnes is likely to be commissioned by
March 2009.
Andhra Cements in a press release dated 11 September
2008, informed that its capacity expansion programmes
at both the units in Andhra Pradesh are progressing as
per schedule. With the completion of these projects, the
company expects to enhance its annual capacity by two
million tonnes by June 2009.
December 2008
Cement
In a recent response to CMIE’s query, a company offi-
cial from Murli Industries informed that the three mil-
lion tonne cement plant of the company is expected to
be commissioned in the December 2008 quarter. J K
Lakshmi Cement, in its Annual General Meeting held
on 26 July 2008 informed that its 1.5 million tonne ce-
ment plant is expected to come on-stream by Decem-
ber 2008. The company also expects to add 5–6 ready–
mix–concrete plants during the year.
All the industry majors, in their latest media release,
have informed that their expansion plans continue to
make good progress and are on schedule. The Aditya
Birla group companies completed a major portion of
their capex till September 2008. They expect the bal-
ance of the capex to be commissioned by March 2009.
Ambuja Cements expects its two million tonnes capac-
ity at Solan, Himachal Pradesh to get commissioned in
the first half of the calender year 2009. Similarly, ACC
expects its three million tonnes cement capacity at New
Wadi, Karnataka to come on-stream in 2009. ACC and
Ambuja Cements, with a debt equity ratio of 0.07 times,
were almost debt free as of December 2007. Healthy
cash flows generated in the last two financial years en-
abled these companies to own substantial liquid assets
(cash and marketable securities). This would help them
in ensuring easy availability of external funds, if re-
quired.
While there is a likelihood of expansion projects that
are scheduled for completion within next one year to
get delayed by 3–4 months, the same would be on ac-
count of reasons like delay in delivery or erection of
equipments and machineries. We believe that the re-
cent liquidity crunch faced by the Indian financial mar-
kets is unlikely to affect the commissioning of expan-
sion projects that are currently being carried out by ce-
ment companies and are already in the advanced stages
of completion. In view of RBI’s recent measures to
ease liquidity crunch and the healthy financial position
of most of the cement companies, they are not likely
to face problem in raising external finance to complete
their ongoing projects.
Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy
Cement 203

TABLE 40.7: Cement: Projects expected to be completed in the next 12 months

Company/ Project/ Locations Product Capacity Unit Cost Compl.
(Rs.cr) by
Jaiprakash Associates Ltd. Pozzolana Portland Cement 3.0 Million 2,000.00 Apr 2009
Pozzolana Portland Cement Project tonnes
Solan, HP Captive Power Plant 30.0 Mw
A C C Ltd. Cement 3.0 Million 1,500.00 Jun 2009
New Wadi Cement Project tonnes
Wadi, Gulbarga, KAR
Madras Cements Ltd. Cement 2.0 Million 1,082.00 Dec 2008
Ariyalur Cement Project tonnes
Ariyalur, Tiruchchirappalli, TN Wind turbines (Wind
electricity generator) 56.7 Mw
J K Lakshmi Cement Ltd. Multilocation RMC Project 1,000.00 Mar 2009
Multilocation Rmc Project
Ncr, Delhi, DHL
Jaykaycem Ltd. Cement 3.0 Million 1,000.00 Mar 2009
Cement Project tonnes
Mudgal, Bagalkot, KAR
Dalmia Cement (Bharat) Ltd. Cement 2.2 Million 750.00 Mar 2009
Ariyalur Cement Project tonnes
Ariyalur, TN Electricity energy 27.0 Mw
Ambuja Cements Ltd. Cement 2.0 Million 700.00 Jun 2009
Darlaghat Cement Expansion Project tonnes
Darlaghat, Solan, HP
Chettinad Cement Corpn. Ltd. Cement 2.0 Million 660.00 Mar 2009
Ariyalur Cement Project tonnes
Keelapalur, Ariyalur, TN Captive Power Plant 30.0 Mw
Chettinad Cement Corpn. Ltd. Cement Project 2.5 Million 600.00 Mar 2009
Gulbarga Cement Project tonnes
Gulbarga, Karnataka, KAR Captive Power Project 30.0 Mw
Murli Industries Ltd. Cement 3.0 Million 578.00 Dec 2008
Chandrapur Cement Project tonnes
Chandrapur, MAH Clinker 2.1 Million
tonnes
Andhra Cements Ltd. Cement 2.0 Million 400.00 Jun 2009
Cement Expansion Project tonnes
Guntur, AP
J K Lakshmi Cement Ltd. Cement 1.5 Million 140.00 Mar 2009
Sirohi Cement Expansion Project tonnes
Sirohi, RAJ
Bheema Cements Ltd. Cement 0.7 Million 135.00 Mar 2009
Cement Expansion - Phase-I tonnes
Ramapuram, Nalgonda, AP
Orient Paper & Inds. Ltd. Cement 1.0 Million 66.50 Jan 2009
Cement Expansion Project tonnes
Devapur, Adilabad, AP
Bheema Cements Ltd. Cement 800.0 Tonnes/day Dec 2008
Ramapuram Cement Expansion Project
Ramapuram, Nalgonda, AP
India Cements Ltd. Cement 0.8 Million Dec 2008
Wadapally Cement Expansion Project tonnes
Wadapally, Nalgonda, AP Cement clinker 1,600.0 Tonnes/day

Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy December 2008
204 Cement

Cement index sheds 14 % in November
The benchmark indices - BSE Sensex & NSE Nifty
ended the month of November 2008 with a decline of
5–7 per. The CMIE cement index recorded a sharper
fall of 6.5 per cent, under-performing COSPI by 7.5 per
cent.
Top four companies (by market capitalisation) in the
sector ended the month with a sharp double digit de-
cline. 29 of 35 companies, comprising the index, ended
the month in the red. This dragged the overall index
down. Shiva cement, with a steep fall of 41.6 per cent,
emerged as the highest loser on the bourses. It was fol-
lowed by OCL India that shed 28 per cent during the
month. Eight companies hit their 52 week lows during
the month. Further nine companies hit their one year
low in the first two trading session of December 2008.
The erosion in the market capitalisation of the sector
saw sectoral P/E multiple coming down from five times
in October 2008 to 4.4 times in November 2008.
Contrary to the negative sentiment, Birla Corporation
gained a robust 28 per cent during the month.

TABLE 40.8: Cement index continues its downward trend

Index No. of cos Mkt. cap P/E Volume Returns E.R. over Liquidity
in Index COSPI
Rs.crore Times Rs.crore Mln. nos. % Times
Nov 2007 5,137 35 1,40,744 13.6 5,685 270.5 2.5 2.6 0.91
Dec 2007 5,164 35 1,43,182 14.1 5,518 277.4 0.5 -11.3 0.87
Jan 2008 4,069 36 1,12,952 10.9 6,806 367.1 -21.2 -1.2 1.10
Feb 2008 4,029 35 1,11,666 10.9 3,298 153.9 -1.0 -1.1 1.05
Mar 2008 3,728 35 1,03,354 10.1 2,851 125.0 -7.5 5.3 1.02
Apr 2008 3,627 34 1,00,581 9.8 2,889 123.8 -2.7 -14.1 1.00
May 2008 3,174 34 88,043 8.6 2,763 106.4 -12.5 -6.0 1.09
Jun 2008 2,640 35 74,107 7.2 2,859 165.7 -16.8 2.7 1.26
Jul 2008 2,716 35 75,517 7.5 2,389 123.5 2.9 -5.1 1.10
Aug 2008 2,739 35 75,948 7.5 1,799 92.7 0.9 0.0 0.98
Sep 2008 2,457 36 68,233 6.7 1,807 92.9 -10.3 2.6 0.96
Oct 2008 1,691 35 46,807 5.0 1,536 110.1 -31.2 -3.1 1.17
Nov 2008 1,455 35 40,274 4.4 1,103 84.3 -14.0 -7.5 1.21
ER: Excess Returns COSPI: CMIE Overall Share Price Index

TABLE 40.9: Cement majors drag the cement index down

Mkt. cap Returns (%) No. of shares Trading volume P/E Beta
traded (Lakh nos.) (Rs.crore)
(Rs.crore) Oct 2008 Nov 2008 Oct 2008 Nov 2008 Oct 2008 Nov 2008 (Times)
Grasim Industries 8,124 -39.2 -13.6 29.3 20.2 382.3 198.8 3.9 0.94
Ambuja Cements 7,948 -22.5 -14.4 468.5 295.9 271.6 168.1 6.5 0.66
ACC 7,611 -19.7 -17.9 58.9 74.4 304.8 333.9 6.8 0.85
Ultratech Cement 3,349 -32.9 -24.2 19.7 30.6 76.4 88.0 3.4 0.81
India Cements 2,427 -29.6 -1.3 109.3 104.6 99.9 90.4 4.9 1.30
Madras Cements 1,359 -37.3 -10.6 30.6 25.5 23.7 16.7 3.3 0.92
Shree Cement 1,240 -20.9 -10.7 2.1 0.5 9.9 2.2 4.0 0.93
Century Textiles & Inds. 1,238 -49.7 -20.3 129.7 92.4 284.5 156.1 6.4 1.28
Chettinad Cement Corpn. 1,180 -18.3 0.0 0.4 0.2 1.8 0.8 7.6 0.74
Birla Corporation 790 -36.1 28.1 11.3 11.9 9.9 11.7 2.3 1.36
Cement 40,274 -31.2 -14.0 1,101.2 843.0 1,536.0 1,102.9 4.4 0.90

December 2008 Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy