india cement industry trends

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published: Aug’ 2014 Indian Cement Industry Trends

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India Cement Industry Trends

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Page 1: India Cement Industry Trends

published: Aug’ 2014

Indian Cement Industry Trends

Page 2: India Cement Industry Trends

India Cement Industry

Cement Industry Trends

• Mergers and Acquisition: The Indian cement industry has showcased seven merger and acquisition deals worth a total of INR 20,265 crore since January 2013. Market instability may have bolstered the trend of mergers and acquisitions in Indian cement industry. It has been observed that low utilization rates and weak demand from real estate and infrastructure sectors is escalating consolidation in Indian cement Industry. For example, recently, Vicat Group, a cement conglomerate from France, purchased Sagar Cements’ stake in Vicat Sagar Cement for INR 434.8 crore, subject to customary conditions precedents. After this transaction, Vicat will own 100% of Vicat Sagar Cement. Another giant Chettinad Cement Corpora-tion has raised its stake in Anjani Portland Cement to 66.08% by acquiring a 17.08% stake through an open offer.

• Capacity Expansion by Cement Players: It has been noticed that housing segment accounts for significant portion of total domestic demand for cement in India. The Government of India is effectively focused on infrastructure development to strengthen the economic growth, and plans to increase investment in infrastructure in 12th five year plan (2012-2017). Ce-ment manufacturers in India are anticipated to expand their production capacity in coming few years due to higher demand in infrastructure sector, which is expected in future. For instance, CK Birla Group proposed to expand the operations of its cement and asbestos manufacturing units located in Telangana. Another company TNPL Cement is expected to increase its capacity from 600 tonne per day to 900 tonne per day, with an investment of Rs 30 crore. The project will be completed by December 2015.

• New Infrastructure Developments: Cement industry in India anticipates better growth in the next six to nine months, on the back of new infrastructure projects and improvement in the economy. The division of Andhra Pradesh has also in-creased expectations for renewed economic activity under the new governments in Andhra Pradesh and Telengana. Another company, Reliance Cement, will set up a new cement plant and quarry in the Gulbarga district of Karnataka and a grind-ing unit in Gowribidanur Taluk in the next two years. Reliance Infrastructure, meanwhile, is reported seeking shareholder’s approval to raise funds needed to develop several infrastructure projects in future, including in the cement sector. With the new government announcing plans for dedicated freight corridors and new infrastructure developments, such as construct-ing 100 “smart cities”, cement makers are expecting a significant demand and have planned huge capacity expansion in north India. These companies include Jaypee Cement, JK Cement Ltd, Mangalam Cement Ltd, Birla Corporation Ltd, Ambuja Cements Ltd, Shree Cement Ltd, UltraTech Cement Ltd and India Cements Ltd.

• Southern region to cater higher demand: It has been analyzed that Southern region in India is creating higher demand for cement which is expected to be more in future. The key demand drivers are commercial, residential and retail construction in tier 1 and 2 cities in this region. The main consumption centres are Andhra Pradesh, Karnataka and Tamil Nadu. Thus, the companies are also promoting their products in these regions. For instance, after securing a key position amongst the largest cement manufacturers in the country with 21.8 MT expandable capacity, Dalmia Cement has further strengthened the brand in the southern region of India by launching its latest offering Dalmia Ultra, confirmed Mr. Vipin Agarwal, CEO, Dalmia Cement.

• Price trends: Prices in cement sector has showcased various fluctuations in the last one year. Cement manufacturers continue to be under the pressure of rising input costs. Cement companies have witnessed significant incline in freight costs over the past two years because of an increase in freight rates by railways, consistent expansion in diesel prices and increased dependence on costlier road transport due to lack of railway wagons. Besides this, the prices of key raw materi-als, such as limestone and gypsum have also inclined. The hike in prices from June 1, 2014 has witnessed a 25% increase per bag. With the increase by Rs 70 per bag, to nearly Rs. 320 per bag, the growth in the rate will surely impact the already sluggish construction activity in India.

Page 3: India Cement Industry Trends

India Cement Industry

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