Cement Sector 2007

The cement sector is one of the booming sectors in the country. Huge demand for cement arises from housing sector's growth, infrastructure development and also global demand. Most cement companies are actively considering their expansion plans to meet future requirements. The present scenario is very good in terms of the surging demand and the rise in prices. Few years ago, housing sector was the biggest consumer of cement with 65 per cent, but this year an unexpected growth in infrastructure and several other projects made the housing sectors consumption to come down to 50-55 per cent. Infrastructure sector's consumption of domestic cement has grown to 45 per cent.

Production:

Globally, India stands second in cement manufacturing. The cement industry comprises of 128 large cement plants with an installed capacity of 165 million tonnes and more than 365 mini cement plants with an estimated capacity of 11.10 million tonnes per annum.

The cement industry faces a number of constraints in terms of high cost of power, high railway tariff, high incidence of state and central levies and duties, lack of private and public investment in infrastructure projects, poor quality coal and inadequate growth of related infrastructure such as sea and rail transport, ports and bulk terminals.

FDI inflows:

The cumulative FDI inflows into the cement industry have been $995 million from August 1991 to November 2007. The FDI inflows for cement industry are 2.26 per cent of the whole country's FDI into the country.

Financial performance:

The Top 5 companies in the cement sector are Grasim Industries, Ultra Tech, Gujarat Ambuja, ACC and India Cements. All these 5 companies have registered more than 50% growth when compared to last 5 years.

Operating profit (in Rs crore)

Companies	2007	2006	2005	2004	2003
Grasim Industries	2409.35	1421.79	1615.31	1294.97	1019.91
Gujarat Ambuja	103.74	76.09	60.49	51.46	33.58
ACC	1877.20	1623.22	623.38	383.09	292.51
India Cements	22.82	18.51	2.91	1.37	(0.34)
Ultra Tech	1417.81	554.26	272.81	199	133

Exports:

Cement exports have increased over the years, giving a boost to the industry. Among the cement majors, Gujarat Ambuja Cements and UltraTech Cement are the largest exporters; their production centres being close to the Western Coast. UltraTech exports over 3 million tonnes of clinker and cement per annum. Cement and clinker are exported to countries around the Indian Ocean, Africa, Europe and the Middle East. Europe and the UAE are the major markets for UltraTech Cement. Export realisations saw a rise during the last fiscal, due to the construction boom in West Asia. The surplus position that was long enjoyed by the Indian cement industry is steadily on the decline on account of increased demand.

Future:

Cement industry projects an annual growth at 10 per cent in the coming years as more money is poured into infrastructure projects like roads, bridges, ports and houses. Cement companies are running plants at full capacity to catch a fast expanding economy and producers have pledged to add another 110 million tonnes of capacity by 2009/10 to the existing 177 million tonnes a year.

It is an impressive growth but in terms of per capita consumption, India is well behind average. As a result of huge investments in infrastructure, the Indian cement industry is likely to grow rapidly. Indian cement companies are considered as the most efficient globally because of its low cost technology. There is a huge potential for Indian cement companies in the export market. The rules and regulations for FDI are also investor-friendly. It is a favorable factor for India to attract investments from global majors. Despite some consolidation, the industry remains somewhat fragmented and merger and acquisition possibilities are strong.