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CEMENT INDUSTRY 10/7/2012 PAWAN 1 Presented By: Pawan Kumar Shrivas

Introduction Indian Cement Industry:

Introduction Indian Cement Industry 10/7/2012 PAWAN 2 2nd largest market after China. T otal capacity of about 300 (MT) 2010-11. Top 5 players alone controlling almost 50% of the capacity. Indian Cement Industry is engaged in the production of several varieties of cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, White Cement, etc. www.ibef.org

Market overview:

Market overview 10/7/2012 PAWAN 3 The installed capacity in the Indian cement market was 236 MT in 2009–2010. Installed capacity has increased at a compound annual growth rate (CAGR) of 8.8 per cent between 2004–05 and 2009–2010. The production of cement in 2009–2010 was 200.7 MT. The turnover of the cement industry US$ 15.7 billion in 2009–2010. The Cement Manufacturers’ Association of India (CMA) estimates the industry manpower at about 140,000 as on 31 March 2009 . www.ibef.org

Market share:

Market share 10/7/2012 PAWAN 4 www.ibef.org

Top 10 Cement Companies in India current:

Top 10 Cement Companies in India current 10/7/2012 PAWAN 5 Rank Company PAT Net Sales 1. UltraTech 1367.35 13,205.64 2. ACC 1013.47 7,647.77 3. Ambuja 1165.19 7,371.52 4. Shree Cement 209.7 3,498.52 5. India Cement 65.3 3,413.29 6. Prism Cement 104.95 3,364.27 7. Madras 210.98 2,620.71 8. JK Cement 64.05 2,361.37 9. Birla Corp 320.21 2,146.37 10. JK Laksmi 502.44 / 5023.64 1,317.26 / 46946.72 Moneycontrol.com


Profitability 10/7/2012 PAWAN 6 Profitability in % =PAT / NET SALES = 5023.64 / 46946.72*100 = 10.7007 %

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10/7/2012 PAWAN 7 Key Consuming Sectors http://www.cfriindia.nic.in/coalsampling/paper3.html

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10/7/2012 PAWAN 8 Industry cost Breakup http://www.cfriindia.nic.in/coalsampling/paper3.html

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10/7/2012 PAWAN 9 Capacity Distribution http://www.cfriindia.nic.in/coalsampling/paper3.html


PEST ANALYSIS 10/7/2012 PAWAN 10 POLITICAL Coal rates, power tariffs, railway tariffs all of these prices controlled by government. Government is also one of the biggest consumers of the cement , in the country . Most state governments, in order to attract investments in their respective states, offer fiscal incentives in the form of sales tax exemptions/deferrals . States like Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption from electric duty. ( India Info line Ltd )

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10/7/2012 PAWAN 11 ECONOMIC Currently, the industry is on the boom, with a lot of government infrastructure and housing projects under construction. In spite of seeing a fall during 2008-09, the export segment of the industry is expected to grow again on account of various infrastructure projects that are being taken up all over the world and numerous outstanding cement plants coming up in near future in the country . ( Mapsofindia.com 2010) 6

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10/7/2012 PAWAN 12 SOCIAL Due to population more demand of cement because people move joint family to nuclear family that’s why they demand more house , then more demand of cement. TECHNOLOGY From mining to production the entire process depends on technology. The Government of India plans to study and possibly acquire new technologies from the cement industry of Japan. At present 93% of the total capacity in the industry is based on modern and environment-friendly dry process technology. (mapsofindia.com 2010)

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10/7/2012 PAWAN 13 Threat of substitutes - limited Bargaining power of suppliers-very High Bargaining power of Buyers Limited Threat of new Entrants – Limited Inter Firm Rivalry Intense Large no of players , high storage costs , High Exit barrier ,marginal product differentiation Porter’s Five Force Model

Porter’s Five Force Model :

Porter’s Five Force Model 10/7/2012 PAWAN 14 Firm Rivalry :- High capital costs, Large no of players , high storage costs , High Exit barrier ,marginal product differentiation. Threat of substitutes :- Threat of substitutes limited only bitumen in road , and engineering plastics in building offer some element of competition , otherwise No close substitutes are popular in India Threat of new Entrants – Limited High capital Investment , broad distribution network and oversupplied market deter new entrants . However Technology and manpower are easily available


Bargaining power of Suppliers – Very High Monopolistic control of external cost element {Coal , Power , Transportations & Taxes } results in high Bargaining power Buyers with the Goi. Bargaining power of Buyers – limited Rising share of retail Buyers , declining share of bulk purchase by Goi. Has taken away the bargaining power of customers. 10/7/2012 PAWAN 15 Con…..

Growth drivers:

Growth drivers 10/7/2012 PAWAN 16 The housing segment accounts for a major portion of the total domestic demand for cement in India. According to the Eleventh Five Year Plan (2007–2012), housing demand is estimated to increase from more than 24 million units in 2007 to more than 26 million units at the end of the Plan period. Growing urbanization, an increasing number of households and higher employment are primarily driving the demand for housing . Housing

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10/7/2012 PAWAN 17 Infrastructure The GoI is strongly focusing on infrastructure development to boost the growth in the economy. It plans to increase investment in infrastructure to US$ 1 trillion in the Twelfth Five Year Plan (2012–2017), as compared with US$ 514 billion under the Eleventh Five Year Plan (2007–2012). The GoI intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and further reduce its transportation costs.

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10/7/2012 PAWAN 18 SWOT ANALYSIS Strength : 1.Second largest in the world in terms of capacity: In India there are approximately 124 large and 300 mini plants with installed capacity of 200 million tones 2. Low cost of production: due to the easy availability of raw materials and cheap labor Weakness: 1.Effect of global recession on real estate. 2.Demand-Supply gap, overcapacity: The capacity additions distort the demand-supply equilibrium in the industry thereby affecting profitability. 3.Increasing cost of production due to increase in coal prices. 4.High Interest rates on housing: Opportunity: 1. With growth in infrastructural activity cement demand expected to rise 2. We expect government to cut cement duties in the long run to boost infrastructure development. 3. Huge government spending on infrastructure. Rs 1,30, 000 cr in the Eleventh Five year plan likely to boost cement demand. Threat: 1. Decline in housing and infrastructure growth to slow down cement demand. 2. Capacity overhang expected by FY10. 3. Rise in input costs like coal and petroleum to add pressure to margin.

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WHAT DO CUSTOMERS WANT? COMPETITION KEY SUCCESS FACTORS Low price Product consistency Reliability of supply Credit Nearest Brand Strong price competition . Thin Differentiation. Availability Customer relationship Advertisement Key Success Factors 18

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10/7/2012 PAWAN 20 Thank You

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