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Excerpts
Consolidation in the Industry
During 1997-99, there was an acquisition spree with French
major Lafarge taking over Tisco's cement plant/s, A. V. Birla Group
consolidating its cement business under Grasim, which acquired Shree Digvijay
Cements and Dharani Cements, and the acquisition of Narmada Cements from
Chowgules by Larsen & Toubro (L&T). Acquisition was a quick means to market
domination in 1999-2000 as the cost of setting up a greenfield 1.5 MT plant was
estimated at Rs 4 billion and the break-even period was considered to be three
years assuming a 70-80% capacity utilization...
Industry Performance
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There has been an increase in foreign shareholding in the Indian cement
companies during the last quarter 2004, and this indicated investor confidence
in the cement industry.
Foreign shareholders have made their investments based on the improvement in the
construction activities happening in the country. Foreign shareholding in GACL
increased from 31.17 % at the end of September 30, 2004, to 42.43 % at the end
of December 30, 2004 while in Grasim the foreign shareholding went up from 35.34
% to 38.67 % during the same period. In India Cements, foreign shareholding
increased from 5.4 % to 8.09 % during the same period...
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Industry Problems/ Recommendations
With consolidation in the industry, the top five players control approximately
50% of the capacity (Refer Exhibit IX). The consolidation also helped in
bringing some amount of stability in the price of cement which earlier used to
be volatile (Refer Exhibit X for cement price details at select cities in India
in 2003-04 and 2004-05).
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However, cement is a heavily taxed commodity and the
tax incidence is almost 30% of the sales realization (Refer Exhibit XI). On an
average the mining costs tend to be Rs 100-150 per tonne...
Outlook
In 2003, a Cris Infac study mentioned that the cement industry could see a capacity addition of approximately 50 MT by 2008, of which greenfield expansions would contribute 40 MT while debottlenecking of the plants and increase in blending ratios would add another 10 MT, taking the total capacity of the cement industry to around 180 MT by 2008...
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Exhibits
Exhibit I: Shares of Major Cement Producing Nations for the
Year 2003
Exhibit II: Financial Highlights of Cement Industry
Exhibit III: Highlights of Indian Cement Industry (As on 31 March 2004)
Exhibit IV: Production and Despatch Details of Cement Between 1996-97 and
2003-04
Exhibit V: Statewise Production, Consumption of Cement and Exports of
Cement/Clinker
Exhibit VI: Consumption in States/Union Territories Where there is no Cement
Production
Exhibit VII: Production of Cement Based on Different Varieties
Exhibit VIII: Major Deals
Exhibit IX: Capacity and Marketshare of Major Players in the Cement Market of
India
Exhibit X: Cement Prices in 2003-04 and 2004-05 at Select Cities of India
Exhibit XI: Tax Structure
Exhibit XII: Detail of Cement Plants and Grinding Units (G) as on March 31, 2004
Exhibit XIII: Demand Vs GDP Growth (over the previous years)
Exhibit XIV: Direction and Quantum of Cement Exports from India in 2002-03 and
2003-04
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