CEMENT

SURVEY
ANALYSIS
INTRODUCTION
The Indian cement industry with a total capacity of about190 m tonnes in financial year-2008 is the
second largest market after China. Despite the fact that the Indian cement industry has clocked
production of more than 100 m tonnes for the last five years, registering an average growth of
nearly 9%, the per capita consumption of around 150 kgs compares poorly with the world average
of over 260 kgs and more than 450 kgs in China. .

Although consolidation has taken place in the Indian cement industry with the top five players controlling
almost 50% of the capacity, the balance capacity still remains pretty fragmented. This has resulted in
cement being largely a regional play with the industry divided into five main regions viz. north, south, west,
east and the central region. While the southern region always had excess capacity in the past owing to
abundant availability of limestone, the western and northern region are the most lucrative markets on
account of higher income levels. However, with capacity addition taking place at a slower rate as
compared to growth in demand, the demand supply parity has been restored to some extent in the
Southern region for the medium term. Considering the pace at which infrastructural activity is taking place
in different regions, the players have lined up expansion plans accordingly.

The cement industry in India is estimated at rs. 24-25 billion in value terms and 114 million tonnes by
volume. the domestic cement industry is highly fragmented, with over 50 cement players and more than
120 manufacturing plants.
• Cement sector is characterized by the following:

1. Units concentrated near raw material sources or markets

2. High freight costs

3. Small value chain

4. Regional variation and volatility in prices and margins

5. High debt levels

6. Regional distribution of demand

7. Seasonality of demand and cyclicality of the industry

8. High entry barriers

 Historical cement demand supply model

Year-end installed capacity FY04 FY05 FY06 FY07 FY08 FY09

Actual effective capacity 144 152 158 166 199 222
(-) Mothballed capacity 142 152 158 166 180 207
Effective installed capacity 8.5 8.2 8.5 8.3 5.7 4.9
Domestic consumption 136 143 150 158 174 202
Export (cement + clinker) 114 121 136 149 164 178
Domestic consumption 9 10.1 9.2 8.9 6 6.1
Export Surplus / deficit) 123 131 145 158 170 184
% surplus (wrt effective capacity) 13 12 5 0 4 18
Actual utilisation 10% 9% 3% 0% 2% 9%
Average prices 86% 88% 95% 99% 97% 91%
Change in average price 141 153 163 206 231 239
Capacity growth 3% 8% 6% 27% 12% 4%
Domestic demand growth 5% 6% 4% 6% 10% 16%
5.80% 6.40% 12.00% 9.90% 10.10% 8.00%

Historically, the sustainable capacity utilisation in the cement industry has been
80-85%. This implies FY09 and FY10 are unlikely to be years of overcapacity in
the traditional sense
• CEMENT BRANDS :
• ACC CEMENT
• BIRLA WHITE CEMENT
• BIRLA SUPER CEMENT
• BIRLA SUPREME
• BIRLA COASTAL
• JK LAXSHMI CEMENT
• GUJRAT AMBUJA CEMENT
• MANIKGADH CEMENT
• KAMDHENU CEMENT
• COROMANDEL CEMENT
• BIRLA STAR
• ULTRATECH CEMENT
• BIRLA GOLD
• BIRLA EVEREST CEMENT
• VIKRAM CEMENT
• VASODATTA CEMENT
• BINANI CEMENT
• SPAN CEMENT
• ORIENT CEMENT
• DALMIA CEMENT
• CHETTINAD CEMENT
• DHANDAPANI CEMENT
 Current Price Trend for Grade A Cement

Region State Rate (Rs 50 per kg bag)

North Delhi 250-255
Punjab 260-265
Haryana 260-265
West Rajasthan 245-250
Maharashtra (Mumbai) 270-275
Maharashtra (Pune) 265-270
East West Bengal 265-270
Orissa 240-245
Bihar 240-245
South Tamil Nadu 245-250
Andhra Pradesh 220-250
Kerala 255-260
Karnataka 255-260
Central Uttar Pradesh 250-255
Madhya Pradesh 235-240
• (Prices for Grade B is Rs 10 to Rs 12 less than the Grade A and Prices for
Grade C is Rs 20 less than the Grade A)
• Grades for cement vary from market to market
• Mechanics of Distribution Channels of Sector

• Companies invariably hire C&F agents or transport cements to own or government warehouses
either via roadway or railways.

• Incase of exports, cement reaches the nearest port via roadways or railways and is then
transferred to the importing country.
• Domestically, from C&F agents or warehouses the cement is transported to the
dealers/distributors and in turn to sub dealers who finally sell it to the end users. There may or
may not be physical ownership of goods.
• In the second case, dealers and sub dealers take order from buyers and place it to the
companies, co ordinate and monitor the timely dispatch of said orders, transportation of goods
and final delivery.

• Distributor network in cement industry is highly dominating and companies are compelled to
hire as they do not really have that rapport and touch with the end consumer of their product.
Apart, from this, the distributors have storage facilities as well which help control well in the
entire supply chain as they are the ones who bring orders and therefore are directly responsible

for the business that a manufacturer would do.

 DISTRIBUTION MODEL OFCEMENT :

Primary REGIONAL Secondary

distributio DISTRIBUTIO
distribution
n N CENTRE

MAIN
DISTRIBUT WARE HOUSE-
PUNE
ION DHAKKA,KHADKI
DHAKKA,LONI
CENTRE DHAKKA.

Tertiary
DISTRIBUTORS distribution

End users

DEALERS
End users
 OBSERVATIONS
• SHOP ANALYSIS
Weight of one bag: 50 kgs.
cost of one bag: 265 rs
Margin earned by dealers: 3- 4%
• OPERATING COST STRUCTURE OF LTV
CEMENT GODOWNS
 KEY FINDINGS :
• There are three types of players in market: large seller, medium scale seller, small
scale seller.
• There are two types of cement category available in the market OPC (ordinary
Portland cement ) and PPC (pozzalana Portland cement ) which is graded as-
GRADE A and GRADE B.The main difference is between the concreting hours -
CEMENT GRADED CONCRETING CAPACITY COMPOSITION
CATEGORY

Grade A 53 graded 8 hours Coal + clinker

Grade B 43 graded 24 hours Made from fly ash

• Opc category includes - Birla super

Binani
ACC
Vasodatta,etc.

• Ppc category includes - Birla shakti,

Birla gold etc
OWNERS EXPENSE : It includes various shop expenses

 (Electricity, Refreshments, tax),

 (Drivers salary, Insurance, Vehicles Maintenance cost, Fuel cost, Tyre cost, Emi),
 Promotional/advertising cost of shop(optional),Payment to sales manager, Employee.

• EXPENSES
Distributor Margin earned per bag is 3 – 4%.
Electricity Rs.500
& incase of shortage 7-10 %.
Telephone expense Rs. 1000

• Peak season is from –November to June Refreshment Rs.1000

VAT 12.50%

• Off season is from-July to October. Supervisor salary Rs.5000

Helper Rs.1000
• Loading/unloading charges is Rs.1 per bag. Total 8500
Note: promotional activity are optional
• CHARGING PATTERN:

Charging patterns km 1.5 to 2 ton

truck
3w Category

Maximum carried 20 bags 36 BAGS

Free home delivery 5-10 km radius ----

Note : free deliver is given to those who are regular customers or to those who buy in
large bulks.

Charged delivery as 3-7 km Rs.100 Rs.160

per km

7-10 km Rs.150 Rs.250

Above 15 km Rs.200 Rs.400

Charge as per bag For 3 -7 km Rs.4-5 per bag Rs.5 per bag

For 7-10 km Rs.7 per bag Rs.7-8 per bag

15 km and above Rs.10 per bag Rs.12 per bag

• Average inventory :
retailers Standards no. of Sales per day Liquidator Reorder
bags kept purchase
pattern
(In terms of no. of
days taken to
finish the stock)
Micro retailer Below 75 50 1 Purchase order is
given to the
company when the
Small retailer 200 100 1 stock is at 70 % of
finishing edge
Medium retailer 400 250 1-2

Large retailer 600 above 300-350 1-2

THANK YOU