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Cement Production

India

February 2014



Table of Contents

I. Cement Sector Overview

1. Sector Highlights

2. Key Indicators

3. Economic Links

4. Forecasts

5. Porter’s Five Forces Model

6. Production

7. Production (cont’d)

8. Capacity

9. Consumption

10.Cement Prices

11.Production Costs

12.Trade

13.Trade (cont’d)

14.Energy Efficiency

15.Foreign Direct Investment

16.Government Policy

II. Cement - Regional Performance

1. Northern Region

2. Eastern Region

3. Southern Region

4. Western Region

5. Central Region

III.Clinker

1. Clinker

2. Clinker (cont’d)

IV. Main Players

1. M&A Activity

2. UltraTech

3. UltraTech (cont’d)

4. Ambuja Cements Ltd.

5. Ambuja Cements Ltd. (cont’d)

6. ACC Limited

7. ACC Limited (cont’d)

8. Shree Cement

9. Shree Cement (cont’d)

10.Ramco Cement

11.Ramco Cement (cont’d)



I. Cement Sector Overview

India’s fiscal year runs from Apr 1 to March 31. Thus, FY 2014 (also called fiscal 2014) means Apr 1, 2013 – Mar 31, 2014. In Indian documents, FY (fiscal) 2014 is also labeled FY13-14.

The remaining nine months of calendar 2014, i.e. Apr-Dec, belong to fiscal year 2015.

In order to better align with calendar years and make international comparisons more meaningful, in the Major Players section of this report, Emerging Markets Insight has chosen to label data by

the year in which most of the result occurred. Unless otherwise stated, in the Major Players section of this report, 2012, for example, means the 12 months between Apr 1, 2012 - Mar 31, 2013, or

what in India is referred to as FY 2013. This applies to Indian companies only and may not apply to companies with global operations, which may be presented in this report.

When sources have not provided details on their year labeling policy, year labels in graphs and tables featured in this report appear as provided by the source.



Sector Highlights

India is the world's second-largest cement manufacturer after China, accounting for about 7% of the global production. The country is also among the leading

exporters worldwide. Since cement is a cyclical commodity, the dynamics of production are highly dependent on the overall economic activity in India. Thus, the

recent slow-down in GDP growth and especially the unstable situation in the construction sector have resulted in decreasing demand and excess capacities.

Sector Dynamics

Demand

Market Segmentation

Regional Presence

The housing sector is the main driver of demand for cement manufacturing, as over 67% of the production is directed to housing construction. Another 13% are

used in the commercial construction and 11% in infrastructure projects, with approximately 9% of the cement used in industrial construction.

The demand for cement was affected by the economic slowdown in recent years, subdued construction activity and delays in execution of infrastructure projects.

Prolonged monsoon periods also had a negative effect on the sector. The capacity has reached around 240mn tonnes in FY 2012, while utilisation fell to 75%,

reflecting the still existing mismatch in supply-demand.

Cement production in India is a fragmented industry with more than 160 players. However, the sector is rather oligopolistic in nature as the top 10 producers

control about 70% of the domestic market. The recent slowdown in demand has affected negatively the sector but small producers experienced the biggest

reduction in capacity utilisation, suggesting there is a scope for consolidation in the industry.

The sector is dominated by private entities, as less than 5% of the manufacturers are state-owned. A number of foreign companies have entered the market -

French cement maker Lafarge, Germany's HeidelbergCement, Italy's Italcementi and Swiss cement maker Holcim.

With cement being a bulk, transport-expensive commodity, the production has been concentrated on regional basis. India is divided into five main regions –

northern, eastern, western, southern and central. The southern has the highest installed capacity and production there exceeds consumption.

The main cement production states in India are Andhra Pradesh, Tamil Nadu (both in the southern region) and Rajasthan(northern region).



Source:

Key Indicators

Main Indicators

CEIC, Oxford Economics

Product 2007 2008 2009 2010 2011

Cement Production (mn tonnes) 168.3 181.6 160.8 168.3 179.9

Cement Despatches (mn tonnes) 167.7 181.2 159.8 167.2 179.0

Cement Installed Capacity (mn tonnes) 178.8 206.6 199.2 224.4 241.9

Cement Capacity Utilisation, % 94 88 83 76 75

Cement Consumption (mn tonnes) 164.0 178.0 158.3 165.6 177.4

Cement Export (mn tonnes) 3.7 3.2 1.6 1.5 1.6

Cement Closing Stock (mn tonnes) 1.1 1.1 1.3 1.6 1.3

Clinker Production 129.7 138.8 128.3 131.7 137.1

Clinker Ground (mn tonnes) 124.2 133.7 121.2 126.2 134.0

Clinker Export (mn tonnes) 2.4 2.9 3.1 2.6 1.9

Clinker Closing Stock (mn tonnes) 5.5 5.5 6.3 6.5 5.6

Cement, plaster, concrete etc.( % of manufacturing

output) 3.6 3.2 3.3 2.9 2.8

Cement,plaster,concrete etc. (% of world output) 2.6 2.6 3.1 2.9 2.8

Cement,plaster,concrete etc., real output (USD bn) 0.6 0.5 0.5 0.5 0.4



Source:

Economic Links

GDP at factor costs (INR tn, constant prices)

Construction and GDP development (real yoy growth %)

Cement, plaster and concrete VA output, % of manufacturing

Comments

MOSPI, Oxford Economics

Construction (incl. real estate, infrastructure etc.), which determines

the overall cement production dynamics, outpaced GDP growth in the

pre-crisis period, but has slowed down in recent years.

As demand for cement declined in the past few years, cement

production also lost share in the total country output.

39.0 41.6 45.2 49.4 52.4 55.1

9.3%

6.7%

8.6% 9.3%

6.2%

5.0%

2007 2008 2009 2010 2011 2012

GDP yoy change

3.59

3.16 3.26

2.90 2.83 2.80

2007 2008 2009 2010 2011 2012

9.3% 6.7%

8.6% 9.3%

6.2%

5.0%

10.8%

5.3%

6.7%

10.2%

5.6%

4.3%

2007 2008 2009 2010 2011 2012

GDP Construction



Source:

Forecasts

Key macroeconomic indicators forecast

In the medium term, the increase in GDP, rising

population and high interdependence between economic

growth and infrastructure development suggest stable

expansion of the cement demand. Moreover forecasts

are for reduction in the inflationary pressure, which will

increase households’ disposable income. The economic

growth and urbanisation will push the demand for

commercial and retail real estate, again having positive

effect on cement sector.

In the short-run however, the dynamics are not so clear.

Although forthcoming state and national elections could

result in increased spending and, along with Government

attempts to spur infrastructure, could lead to pick up in

construction activity, the problems with oversupply of

cement and high production costs persist. The slight

increase in consumption will be probably offset by new

capacity additions.

Cement demand will grow by a compound rate of 8% in

2013-2015, according to trust foundation India Brand

Equity Foundation (IBEF).

Cement forecast

IMF, Oxford Economics, IBEF

2014 2015 2016 2017 2018 2020 2025 2030 2035

Cement, plaster,

concrete etc.,

% of manufacturing

2.77 2.75 2.76 2.77 2.79 2.83 2.96 3.05 3.01

Cement, plaster,

concrete etc.,

% of world output

2.76 2.84 2.94 3.04 3.14 3.35 3.90 4.31 4.54

Cement, plaster,

concrete etc.,

real output, USD bn

0.42 0.42 0.42 0.43 0.43 0.43 0.45 0.44 0.42

Indicator 2013 2014 2015 2016 2017 2018

GDP real growth, % 3.8 5.1 6.3 6.5 6.7 6.7

Investment,% GDP 35.0 35.1 35.2 35.4 35.6 35.8

CPI, average % 10.9 8.9 7.5 7.0 6.8 6.7

Population

(mn persons) 1,243 1,260 1,276 1,293 1,310 1,327



Porter's Five Forces Model for India's Cement Industry

Entry Barriers

High initial capital investment, long gestation period and required economies of scale form high barriers for entry. Moreover the

scarce free resources and experienced domestic companies make the entry of new players more difficult.

Problems with land acquisition are reported by producers as major obstacle for expansion. As a result, many of the investments

are made in brownfield manner.

Supplier Power

Coal and freight are among the main ingredients of the cement industry mix. The government is the body that controls licensing

of coal and limestone reserves. Some of the leading companies reported inordinate delays in conversion of allotted linkages

and deteriorating quality. The use of imported coal has increased, making production more dependent on international coal

price movements and forex fluctuations.

Buyer Power Cement producers are highly concentrated in the different regional markets, thus reducing the power of the consumer.

Inter-firm

Rivalry In spite of the big number of players, the Indian cement industry is rather oligopolistic in nature with regional segmentation.

Treats of

Substitutes

There are no materials that can substitute cement. There are shifts between cement varieties as a result of differences in

energy and cost efficiency of production.



Source:

Production

Comments

Cement production in India

Top cement producers 2012, mn tonnes (estimated)

Cement production regional structure, 2011

CEIC, US Geological Survey (Jan 2013), The Economic Times

India cement manufacturing expanded at a compound rate of 5.4% in

the period between 2003 and 2011. Fuelled by the construction boom

in 2004-2008 the sector growth averaged 9.1%. A drop of 11.5%

followed in 2009, but production rose again in 2010 and accelerated

in 2011.

Domestic production grew by a modest 3.9% during H1 FY 14

primarily due to weak demand from end-user industries, according to

credit ratings and research provider ICRA Ltd.

155.7 168.3

181.6

160.8 169.2

179.9 9.8%

8.1% 7.9%

-11.5%

5.3% 6.3%

2006 2007 2008 2009 2010 2011

Production, mn tonnes Change, yoy %

Southern 33.8%

Northern 23.5%

Central 15.3%

Western 13.7%

Eastern 13.7%

2,150

250 74 70 65 65 60 60 52

China India US Brazil Iran Vietnam Russia Turkey Japan



Comments

Source:

Production (cont'd)

The Ordinary Portland Cement (OPC) was the main variety produced in India in the early 2000s, but the industry went through a shift in the production mix.

With the reduction in OPC output in 2005-2007 and the expansion of Portland Pozzolana Cement (PPC) at a CAGR of 10.1% in 2004-2010, the latter

variety took the leading role. The share of OPCs dropped to about 25% in 2007 from over 60% in 2000. At present, more than 60% of the cement produced

in India is PPC.

Sector companies also manufacture Sulphate Resistance Cement and IRST 40, but their share represents less than 0.3% of the total production.

Cement production by variety, mn tonnes Cement production by variety, %, 2011

CEIC

42.8 45.1 48.2 54.4 56.9

111.2 120.8

100.2 102.4

110.1

13.6

15.2

11.8 11.8

12.4 0.7

0.6

0.7 0.6

0.6

0

20

40

60

80

100

120

140

160

180

200

2007 2008 2009 2010 2011

Others

PortlandBlastFurnaceSlagPortlandPozzolanaCement

OrdinaryPortlandCement

Portland Pozzolana

Cement 61.2%

Ordinary Portland

Cement 31.6%

Portland Blast Furnace Slag

6.9%

Others 0.3%



Source:

Capacity

Comments

Installed capacity by region, mn tonnes

Installed capacity, mn tonnes

Capacity utilisation, %

CEIC

Due to the long-period needed for set-up of new capacities, they are

usually created ahead of demand. Thus, new capacities continued to

be installed after the market started to contract.

The pace of capacity additions has slowed down in 2011, though

overcapacity still poses problems for the industry. The over-supply

led to shrinking capacity utilisation and in 2011 it fell to 79%.

The level dropped the most in the southern region, which registered

the highest levels of consumption in the pre-crisis period. At the same

time, utilisation in the western region where the production-

consumption gap is the largest continued to rise.

151.7 157.6 165.9 178.8

206.6 199.2

225.8 241.9

2004 2005 2006 2007 2008 2009 2010 2011

38.3 48.4 38.9 49.5 51.7

27.6 29.9

26.3 28.2 31.7

57.4

68.3 83.6

92.3 96.6 29.3

32.3 26.5

28.7 30.5

26.0

27.6 24.0

27.2 31.4

0

50

100

150

200

250

2007 2008 2009 2010 2011

CentralRegion

WesternRegion

SouthernRegion

EasternRegion

NorthernRegion

Product 2007 2008 2009 2010 2011

Northern Region 95 86 92 78 83

Eastern Region 86 87 85 85 80

Southern Region 94 88 72 66 63

Western Region 98 89 79 76 81

Central Region 96 94 106 98 89

India average 94 89 87 81 79



Source:

Consumption

Consumption and production, mn tonnes

Consumption by region, mn tonnes

Per capita consumption 2012, kg

Comments

CEIC, International Cement Review (Sep 2013)

India's cement production fully meets domestic demand.

The per capita consumption in the country is substantially below the

world average and far lower than the consumption in India's main

competitor – China, suggesting good potential for expansion.

168

182

161

168

180

164

178

158

167

177

2007

2008

2009

2010

2011

Consuption Production

33.5 35.1 26.7 27.5 30.8

25.3 28.2 25.9 29.2 30.0

49.2 54.4

52.7 51.0 50.9

32.2 34.0

28.1 31.5 35.8

23.8

26.2

25.0 27.4

29.9

0

20

40

60

80

100

120

140

160

180

2007 2008 2009 2010 2011

CentralRegion

WesternRegion

SouthernRegion

EasternRegion

NorthernRegion

1,581

744

402 330

202 191 129

China Turkey Russia Brazil Indonesia India Pakistan



Source:

Comments

Cement Prices

Cement prices showed a steady upward trend from 2003 to H1 2008 due to expansion of the construction sector and supply gap. Although installed

capacity has outstripped demand by 2009, much of those capacities were in stabilisation phase i.e. the effective capacity was lower than the capacity

utilisation level suggested. In the following years, however, with most of the capacities being fully operational, pricing pressures started to build. The

unstable local construction sector and lower demand also affected cement prices.

The price of cement rose in end-2011- mid 2012 period, following a slight recovery in demand. The increase decelerated again in end 2012 and was on a

downward path in the last months of 2013.

Cement and Lime Wholesale Prices, annual change %

CEIC, Emerging Markets Insight calculations

-5

0

5

10

15

20

25

1.20

07

4.20

07

7.20

07

10.2

007

1.20

08

4.20

08

7.20

08

10.2

008

1.20

09

4.20

09

7.20

09

10.2

009

1.20

10

4.20

10

7.20

10

10.2

010

12.2

01

4.20

11

7.20

11

10.2

011

1.20

12

4.20

12

7.20

12

10.2

012

1.20

13

4.20

13

7.20

13

10.2

013



Source:

Production Costs

Fuel, Freight and Electricity Prices (WPI, yoy change %)

CEIC, X-Rates.com, ICRA

Inflation and Exchange Rate Movements

Comments

The development of the sector and especially its profitability is dependent on the investment costs (land costs, inflation, environmental regulations) and operating costs (coal, electricity, oil). The latter have been quite volatile recently, rising more often than not, reflecting high inflation and tax hikes.

International coal prices declined substantially in 2013, leading to higher imports of the raw material and relatively lower prices for the import dependent companies. The price decline was however partially offset by the weak rupee.

In May 2013, Coal India Ltd reduced the prices of premium varieties of coal by 10% in line with decline in international coal prices. To offset this, CIL increased the prices of low grade coal -varieties that are commonly used by Indian cement companies - by an average 10% . The increase in coal prices affected the power and fuel cost for cement companies and was more pronounced on companies which depend more heavily on domestic coal.

The costs pressure is expected to continue in the short-to-medium term and will carry a downside risk for the sector development.

-10

0

10

20

30

4.2012 6.2012 8.2012 10.2012 12.2012 2.2013 4.2013 6.2013 8.2013 10.2013 12.2013

Coal Electricity Mineral Oils

-36

-24

-12

0

12

4.2012 6.2012 8.2012 10.2012 12.2012 2.2013 4.2013 6.2013 8.2013 10.2013 12.2013

WPI, yoy % USD/INR



Comments

Source:

Trade

India is among the world's top ten exporters of cement both in value and volume terms. However, it lost market share in 2012 when the country's exports

accounted for 1.5% of the global trade, down by 1% compared to 2011.

The country has a positive trade balance with traditionally high cement exports and relative product imports.

Main exporters in value terms, calendar 2012 India cement trade balance, USD mn

Emerging Markets Insight calculations, Department of Commerce of India

149.2

111.6

21.4

124.8

134.0

83.5

70.6

2007

2008

2009

2010

2011

2012

Apr-Sep'137.4%

6.3%

5.3%

3.4% 3.4%

2.5%

1.5%

Tur

key

Chi

na

Pak

ista

n

Vie

tnam

Japa

n

US

A

Indi

a



Source:

Trade (cont'd)

India - Export of cement

India - Import of cement

Main export markets in value terms, Apr-Sep 2013

Main import markets in value terms, Apr-Sep 2013

Department of Commerce, Emerging Markets Insight calculations, Data for HS 2523

43.6%

26.2%

9.7%

4.6%

3.9%

2.7%

1.1%

1.0%

7.1%

Sri Lanka

Nepal

Bhutan

Saudi Arabia

Myanmar

Tanzania

Comoros

South Africa

Others

38.9%

26.8%

11.3%

9.6%

3.7%

3.1%

2.2%

1.8%

1.3%

1.2%

Pakistan

Bangladesh

China

Vietnam

Netherlands

Egypt

UAE

Germany

Malaysia

Others

54.5

76.7

118.9

77.3 79.5 94.7

26.0

0.022%

0.025%

0.041%

0.021% 0.016%

0.019% 0.011%

2007

2008

2009

2010

2011

2012

Apr

-Sep

'13

Import, USD mn Share in total, %

203.7 188.3

140.3

202.1 213.5

178.2

96.6

0.125%

0.102%

0.079% 0.081% 0.070%

0.059% 0.064%

2007

2008

2009

2010

2011

2012

Apr

-Sep

'13

Export, USD mn Share in total, %



Comments

Source:

Energy Efficiency

According to data from the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development, India performs well in terms

of energy efficiency.

Despite the fact that fast capacity accumulation has led to lower utilisation, the recent expansion of the industry provides efficiency as modern plants are

more efficient than older ones.

Weighted average electric energy consumption, kWh/tonne Weighted average clinker to cement ratio, %

Cement Sustainability Initiative, GNR Project

91.2

90.8

92.3

94.5

87.3

105

103

103

102

102

109

111

113

116

114

112

111

110

110

107

2007 2008 2009 2010 2011

India China EU-27 World

74.3

73

72.7

72

72.6

74.1

72.9

71.9

72.8

73.2

74.1

73.7

73.7

73.7

72

77.1

76.4

76.2

75.9

75.6

2007 2008 2009 2010 2011

India China EU-27 World



Source:

Foreign Direct Investment

FDI Inflows Cement and Gypsum Products (calendar years) Sector-wise distribution of equity FDI (2000-Nov2013)

CEIC, Ministry of Commerce and Industry of India, Department of Industry Policy and Promotion

Services 18.6%

Construction 11.0%

Telecommunications 6.2%

Camputer software 5.9%

Pharmaceuticals 5.5%

Cement and Gypsum

products 1.4%

674.9

80.7

617.5

214.0

96.6

252.6

2.0%

0.3%

2.9%

0.8%

0.4%

1.4%

2008 2009 2010 2011 2012 Oct'13

FDI in cement and gypsum products, USD mn

Cement and gypsum products in total FDI



Source:

Government Policy

Cartels and

competition

In June 2012, the Competition Commission of India (CCI) imposed fines worth a total of USD 1.1 billion on eleven local cement

manufacturers for price fixing.

The watchdog said the companies colluded to underuse their plants and create an artificial shortage of cement. The companies were

fined the equivalent of 50% of their net profit for the fiscal years ending in March 2010 and March 2011.

Budget

India's 2013-2014 national budget features several projects designed to boost construction sector development and, consequently, cement demand. Among them are projects for building of roads in North-eastern states and connecting them with Myanmar; 3,000km of road projects in Gujarat, Madha Pradesh, Maharashtra, Rajastan and Uttar Pradesh, two new major ports in the states of West Bengal and Andhra Pradesh and a new harbour in Tamil Nadu. About INR 200bn were to be allocated to the Rural Infrastructure Development Fund.

The budget also levied 2% custom duty on steam and bituminous coal. Coal is among the main raw material in cement production, as the annual requirement exceeds 50mn tonnes. Administrative, environmental and legal delays in adding new mines and expanding existing ones has increased India's dependence on coal imports and the country is currently the third largest importer of the raw material.

12th Five-Year

Plan

The growth of the Indian cement sector is closely related to the development of the local construction sector. The 12th Five Year Plan suggests doubling the funds allocated for infrastructure in 2013-2017 to INR 56tn (USD 1tn). It includes projects for freight corridors, upgraded and new airports and ports, large number of highway, which are expected to enhance economic activity and lead to increase in cement demand. According to official estimates, there will be a shortage of 40mn dwelling units in rural areas and 29mn units in urban area, which will drive housing demand.

The construction sector is expected to grow by accumulated 10% in the period. To cater for the rising demand the government projects that cement capacity has to increase to about 480mn tonnes per annum i.e. approximately additional 150mn tonnes are to be installed and operationalized in the coming years.

But considering the average annual consumption, the current low utilisation levels and history of underachievement and delays of the government construction projects, the achievement of these ambitious targets is doubtful.

Planning Commission for 12th Plan estimates



II. Cement - Regional Performance


Indian fiscal year 2013 ends in March 2013 and the remaining nine months of calendar 2013 belong to fiscal year 2014.

In order to better align with calendar years and make international comparisons more meaningful, Emerging Markets Insight has chosen to label data by the year in which most of the result

occurred. Unless otherwise stated, in charts throughout this report, 2011, for example, means the 12 months between Apr 1, 2011 - Mar 31, 2012, or what in India is referred to as fiscal 2012.



Source:

Northern Region

Production and consumption, mn tonnes

Installed capacity (mn tonnes) and capacity utilisation (%)

Top cement producers, 2011

Comments

CEIC, Competition Commission of India - Assessment of Competition in Cement Industry

About 80% of the production in the Northern region is concentrated in

Rajasthan. The state is the production hub for white cement in India.

The share of this cement variety in consumption is still relatively low.

This could be explained with the higher price compared with grey

cement and the price conscious demand in the country.

About 77% of the cement produced in the Northern Region in 2011

was manufactured by 5 companies.

36.5 41.2

34.1 37.9

42.2

33.5 35.1

26.7 27.5 30.8

2007 2008 2009 2010 2011

Production Consumption

26.4%

15.3% 14.9%

10.7% 9.6%

Shr

eeC

emen

t

Bin

ani

Cem

ent

Ultr

atec

hC

emen

t

Jaip

raka

shA

ssoc

iat

es JKLa

kshm

iC

emen

t

0.4 2.5 2.5 2.6 3.0 4.2 4.8 1.8 1.8 1.8

26.2

33.0 32.8

39.2 40.9

6.2

6.2

0.3

2.0 2.1

0.7

1.0

1.0

1.0 1.0

95.0

86.0

92.0

78.0 83.0

0

10

20

30

40

50

60

2007 2008 2009 2010 2011

Other

HimachalPradeshRajasthan

Punjab

Haryana

CapacityUtilization



Source:

Eastern Region




Comments


The Eastern region is the only region in India, where cement

consumption outstrips production. Despite the capacity addition in the

past years, the supply-demand gap has been increasing.

Nonetheless, the levels of utilisation seam relatively low in

comparison with other regions as well as in light of the uncovered

demand.

23.8 26.0

21.4 23.2 24.6 25.3

28.2 25.9

29.2 30.0

2007 2008 2009 2010 2011


30.3%

26.7%

15.2%

8.9%

Lafa

rge

Indi

a

Ultr

aT

ech

Cem

ent

OC

LIn

dia

Ltd.

Cen

tury

Tex

tiles

and

Indu

strie

s

5.1 5.2 3.8 3.6 5.7

3.6 4.6 6.4 6.4 6.4

5.1 5.4 4.0 4.8

4.8

11.1 12.0

9.4 10.5

11.6

2.7 2.8

2.8 2.9

3.2 86.0

87.0

85.0 85.0

80.0

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011

Others

Chhattisgarh

West Bengal

Orissa

Jharkhand

CapacityUtilization



Source:

Southern Region




Comments


Being the region with the highest consumption in the pre-crisis period,

the Southern region also had the highest capacity installed. In recent

years, however, there was practically no demand growth due to lack

of infrastructure and housing projects .The demand contraction

resulted in substantial decline in utilisation level.

With excess capacities, the producers in the region are faced with

downward price pressures.

54.2 59.9 59.3 60.2 60.8

49.2 54.4 52.7 51.0 50.9

2007 2008 2009 2010 2011


15.9% 14.4%

11.8% 9.2%

7.9% 7.8% 6.8%

Indi

a C

emen

t

Ultr

a T

ech

cem

ent

Mad

ras

Cee

nts

Kes

oram

Cem

ent

Dal

mia

Bha

rat

Sug

ar &

Inds

.

Che

ttina

d ce

men

t

Pen

na C

emen

t

26.4 32.6 41.2 44.9 47.2

17.4 20.2

28.7 32.3

34.4

13.1

14.8

13.0 14.5

14.3

0.6

0.6

0.6

0.6 0.6

94.0 88.0

72.0

66.0 63.0

0

20

40

60

80

100

120

2007 2008 2009 2010 2011

Kerala

Karnataka

Tamil Nadu

AndhraPradesh

CapacityUtilization



Source:

Western Region




Comments


According to the country's competition watchdog, in 2011 four

companies accounted for 77% of the total cement output in the

Western region. The production is almost equally spread between the

two main states Gujarat and Maharashtra.

In 2011, the Western region registered growth in demand of 13.7%,

reflected in higher utilisation levels despite the capacity additions.

28.8 28.5

20.8 21.7 24.7

32.2 34.0

28.1 31.5

35.8

2007 2008 2009 2010 2011


47.7%

9.0% 8.8% 7.0%

Ultr

a T

ech-

Guj

arat

San

ghi I

ndus

trie

s

Cen

tury

Tex

tiles

and

Indu

strie

s

Jaip

raka

shA

ssoc

iate

s

17.4 19.2 15.2 16.9 18.7

11.9 13.1

11.3 11.8

11.8

98.0

89.0

79.0 76.0 81.0

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011

Maharashtra

Gujarat

CapacityUtilization



Source:

Central Region




Comments


Production in the Central region almost entirely covers consumption,

underpinning the high capacity utilisation level.

The market is highly oligopolistic, with 3 companies accounting for

70% of the cement output.

25.0

26.0

25.1

26.2

27.6

23.8

26.2

25.0

27.4

29.9

2007 2008 2009 2010 2011


41.5%

15.6% 13.0%

Jaip

raka

shA

ssoc

iate

s

Cen

tury

Tex

tiles

Ultr

atec

h C

emen

t

7.7 8.3 6.3 8.0 9.1

18.4 19.4

17.8

19.2

22.3

94.0 94.0

106.0

98.0

89.0

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011

MadhyaPradesh

UttarPradesh

CapacityUtilization



III. Clinker







Comments

Source:

Clinker

India is the second-largest producer of clinker in the world behind China. As the country uses almost all of the manufactured quantity in the production of

cement, it exports just about 2% of its total clinker output.

The main export markets in volume terms are Nepal, followed by Sri Lanka and Mozambique.

Clinker capacity in 2012, mn tonnes (estimated) Clinker export, thou tonnes

US Geological Survey, CEIC

1,750

250 105 80 75 68 66 57 55 55

2,375

2,899 3,121

2,673

1,879

557 510

880 1,042 997

2007 2008 2009 2010 2011

Total clinker export Clinker export to Nepal



Source:

Clinker (cont'd)

Comments

Region-wise production, 2011

Clinker production

Region-wise clinker grinding (mn tonnes)

CEIC

Clinker production rose at an average rate of 6% in the period 2003-

2007 but slowed down to 1.4% in 2007-2011.

Most of the clinker is ground in the Southern region.

129.7 138.8 128.3 131.7 137.1

6.5% 7.0%

-7.6%

2.7% 4.1%

2007 2008 2009 2010 2011

Production, mn tonnes Change, yoy %

Southern 38.2%

Northern 23.3%

Central 16.2%

Western 12.9%

Eastern 9.3%

26.5 30.5 26.4 28.2 31.1

14.4 15.3

13.0 13.8 15.0

42.1 46.6

46.9 47.6 47.8

23.5

22.9

17.1 17.9

20.4

17.8

18.4

17.9 18.7

19.7

0

20

40

60

80

100

120

140

2007 2008 2009 2010 2011

CentralRegion

WesternRegion

SouthernRegion

EasternRegion

NorthernRegion



IV. Main Players







Source:

M&A Activity

Recent Mergers and Acquisitions

DealWatch

Date Target Company Deal Type Buyer Country of

Buyer Deal Value USD (mn) Stake %

11.09.2013 Gujarat plants of Jaypee Cement

Corp Ltd Acquisition Ultratech Cement Ltd India 23.4 100.0

29.08.2013 Century Textiles & Industries Ltd Open market

purchase Private Investors - 2.3 0.8

12.08.2013 Sree Jayajothi Cements Ltd Acquisition CRH Plc Ireland 230.0 68.0

24.07.2013 ACC Ltd Acquisition Ambuja Cements India Ltd India 2,467.6 50.0

27.06.2013 Sree Jayajothi Cements Ltd Acquisition Vicat Group France - 50.0

21.05.2013 Cement grinding facility of

Heidelberg Cement Acquisition JSW ISPAT Steel Ltd India - 100.0

15.05.2013 Lafarge India Pvt Ltd Minority stake

purchase Baring Private Equity Asia Ltd Hong Kong 260.0 14.0

19.01.2013 India Cements Ltd. Block trade Undisclosed investors - 3.3 9.8



Highlights

Source:

UltraTech

Income and profit (INR bn)

Key Performance Indicators

UltraTech is the largest cement producer and clinker exporter in India and is among the leading cement producers globally. Along with the Indian market, the company operates also in Bahrain, Bangladesh, Sri Lanka and the UAE.

UltraTech is active in the cement and concrete production, building products and building solutions.

In the cement segment, the company’s assortment includes Ordinary Portland Cement, Portland blast furnace slag cement and Portland Pozzolona Cement.

As at March 2013, the company had production capacity of 53.9mn tonnes of cement per annum (51mn tonnes in India and 3mn tonnes in subsidiaries abroad). In the financial 2013, UltraTech commissioned a 3.3mn tonne clinkerisation plant at Rawan, Chhattisgarh, a 1.55mn tonne grinding unit at Hotgi, Maharashtra and additional 0.6mn tonne cement grinding capacity at Gujarat. The company invested also in a wall-care putty plant of 0.4mn tonnes at Katni, Madhya Pradesh and port based bulk terminal of 0.5mn tonnes per annum at Cochin. UltraTech plans to expand its cement production to 64.45mn tonnes by 2015.

In September 2013, Ultra Tech acquired the Gujarat Cement Unit of JCCL with 3.6mn tonnes clinker and 2.4mn tonnes cement capacity, as well as, a grinding cement unit with 2.4mn tonnes capacity. After the acquisition the company’s debt-to-equity ratio was 0.54.

In December 2013, UltraTech announced plans for an INR 50bn investment in two cement plants in Uttarakhand. The new units will have capacity of 3.5mn and 2mn tonnes per annum.

As at end of fiscal 2013, the company had a work force of 12,660 employees.

UltraTech is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Company data; The Economic Times

63.8 70.5

132.1

181.7 200.2

18.1

20.9

28.2

45.2

49.8

9.8

10.9

14.0

24.5

26.6

2008 2009 2010 2011 2012

Net Sales EBITDA Net Profit

Product 2008 2009 2010 2011 2012

Equity Share Capital (INR bn) 1.2 1.2 2.7 2.7 2.7

Capital Employed (INR bn) 64.7 70.4 165.4 187.5 225.5

Net worth (INR bn) 36.0 46.1 106.7 128.6 152.3

EPS 78.5 87.8 62.7 89.3 96.9

EBITDA margin, % 15.0 16.0 11.0 13.0 25.0

Debt Equity Ratio 0.6 0.4 0.4 0.3 0.4



Source:

UltraTech (cont’d)

Cement production and sales, mn tonnes

Capacity and Production

Clinker production and sales, mn tonnes

Sales, mn tonnes

Company data; * Effective capacity

Indicator 2011 2012 yoy change,

%

Installed

Capacity (mn

tonnes/annu

m)

Clinker 36.2 39.5 9.0

Grey Cement 48.8 50.9 4.0

Production

(mn tonnes)

Clinker 31.3 31.8 1.0


White Cement 5.5 5.7 3.0

Capacity Clinker 0.9 0.9 1.0


15.1

15.6

26.8

31.3

31.8

2.4

2.5

1.6

1.0

0.5

2008 2009 2010 2011 2012

Production Sales

15.9

17.6

32.9

39.4

40.1

15.8

17.8

33.2

39.8

40.2

2008 2009 2010 2011 2012

Production Sales

Indicator 2011 2012 yoy change,

%

Domestic

sales

Grey cement 39.1 39.4 0.9

Clinker 0.2 0.2 -15.8

Total 39.3 39.6 0.8

Export sales

Clinker 0.7 0.7 4.2

Grey cement 0.8 0.3 -57.7

Total 1.5 1.1 -28.2

Sales Others White Cement (LMT) 0.56 0.57 2.0



Highlights

Source:

Ambuja Cements



Ambuja Cements was founded in 1983 as Gujarat Ambuja Cements Ltd and entered the cement production segment in 1986.

In 2006, global cement producer Holcim acquired management control over Ambuja Cements Ltd (ACL) and currently holds a majority stake in the Indian manufacturer.

ACL has five integrated cement manufacturing plants and eight grinding units across India. The firm has also built a port with three terminals on the western coastline and owns its own fleet of ships.

In 2012, ACL put into operation a pre-grinder at its Bhatpara unit worth approximately INR 400mn, thus increasing the total cement grinding capacity of the company to 27.95mn tonnes.

In January 2014, ACL completed a bulk packing terminal of 1mn tonne capacity at Mangalore, Karnataka.

In July 2013, Ambuja Cements announced plans to acquire a 50.01% stake in local peer ACC Ltd for an estimated total consideration of INR 147bn (USD 2.5bn). In November 2013, The Economic Times reported that state-owned reinsurer General Insurance Corporation of India and four other general insurers would vote against the deal, calling it unfavourable to the minority shareholders. The main institutional shareholder Life Insurance Corporation is still undecided. A statement on the restructuring is expected by the Gujarat High Court by April 2014.

ACL is listed on both leading bourses in India – BSE and NSE.

Company data for year ending 31.12.

Product 2008 2009 2010 2011 2012

Net worth (INR bn) 56.7 64.7 73.3 80.7 88.1

Capital employed

(INR bn) 63.4 71.2 79.3 87.8 94.1

Debt Equity Ratio 0.05 0.03 0.01 0.01 0.00

EPS 9.21 8.00 8.28 8.02 8.43

Dividend per share 2.2 2.4 2.6 3.2 3.6

62.2 70.8 73.9

85.5 96.8

90.9

14.0 12.2 12.6 12.3 13.0

12.9

2008 2009 2010 2011 2012 2013

Net Sales Net Profit



Source:

Ambuja Cements (cont’d)

Cement production and capacity, mn tonnes

Cement sales by region, mn tonnes

Cement sales, mn tonnes

Investments projects and planned capacities installation


Ambuja Cements plans to complete 13 projects worth about

INR 2.72bn in early 2014. The projects are for efficiency

optimisation and are expected to pay back in 2.5 to 4 years.

The firm plans grinding capacity expansion of Rabriyawas unit,

Rajasthan by 0.3mn tonnes to a total of 0.8mn tonnes. The

project is worth INR 700mn and its completion is expected in

2014, although it was initially planned for 2013.

Expansion of Sankrail Grinding unit capacity by 0.8mn tonnes

is expected to be finalized in 2015.

22.0

22.0

25.0

27.4

28.0

17.8

18.8

20.1

21.0

21.6

2008 2009 2010 2011 2012

Capacity Production

19.5

20.5

21.3

0.5

0.4

0.1

2010

2011

2012

Domestic Export

7.7

3.7

8.1

0.5

8.1

3.9

8.5

0.4

8.8

4.2

8.3

0.1

North East West Export2010 2011 2012



Highlights

Source:

ACC Limited



Associated Cement Companies Ltd is among the top

cement producers in India. The company was

established in 1936 and operates in the cement and

ready-mix concrete manufacturing segments.

In 2005, after the acquisition of Ambuja Cement India

Ltd by the Swiss-based Holcim, the later made an

open offer to the shareholders of Associated Cement

Companies and through ACIL increases its holdings to

34.69% from 13.8%.

As of 2005, the financial accounting year of the

company was changed to match the calendar year.

In 2006, the company was renamed to ACC Limited.

In 2011, ACC installed the world’s largest kiln at its

cement plant in Wadi, Karnataka with a capacity of

12,500 tonnes per day.

Cement sales account for almost 95% of the

company’s revenue. In 2013, cement sales amounted

to INR 106.2bn, while ready-mix concrete added INR

6.7bn in revenue.

ACC Limited share are traded on the Bombay Stock

Exchange and the National Stock Exchange of India.


71.3

79.7

77.1

94.3

111.

3

109.

1

12.1

16.1

11.2

13.3

10.6

11.0

-15.7%

32.5%

-30.3%

18.3%

-19.9%

3.3%

2008 2009 2010 2011 2012 2013

Net Sales Net profit Profit, yoy change

Product 2008 2009 2010 2011 2012 2013

Operating EBITDA

margin, % 26.6 33.2 23.5 20.4 19.7

Return on Capital

employed,% 29 34 20 18 21 16

Debt equity ratio 0.10 0.09 0.08 0.07 0.02 0.004

EPS 65.0 86.0 60.0 71.0 56.5 58.4

Dividend per share 20.0 23.0 30.5 28.0 30.0



Source:

ACC Limited (cont’d)

Sales volume and growth

Assets

Cement production and capacity utilisation

Number of employees at year-end


20.8

21.4

21.1

23.5

24.1

93.0% 91.0%

77.0% 81.0% 79.0%

2008 2009 2010 2011 2012

Production, mn tonnes Utilization

21.0

21.5

21.3

23.7

24.1

5.2%

2.3%

-1.0%

11.5%

1.6%

2008 2009 2010 2011 2012

Sales, mn tonnes yoy change, %

47.2

61.1

65.5

65.7

61.8

1.5

1.3 1.2

1.4

1.8

2008 2009 2010 2011 2012

Net Fixed Assets, INR bn Asset Turnover Ratio

9,557

8,916

8,971

9,031

9,769

2008

2009

2010

2011

2012

Utilisation



Highlights

Source:

Shree Cement

Sales and profit (INR bn)

Key Indicators

• Shree Cement is an Indian cement producer, whose

activities are concentrated in the northern region of the

country.

• The company's cement plants are located in Beawar,

Ras, Khushkhera, Jobner (Jaipur) and Suratgarh in

Rajasthan and Laksar (Roorkee) in Uttarakhand.

• As at June 2013, the cement production capacity of

Shree Cement was 13.5mn tonnes per annum. Among

the finalised projects in 2013 are clinker manufacturing

units with capacity of 2mn tonnes per annum in Ras.

• Shree Cement also has a power generation capacity

of 570 MW with plants located in Beawar and Ras in

Rajasthan.

• The company work force reached 4,200 employees as

at June 2013.

• Shree Cement is listed on the Bombay Stock

Exchange and the National Stock Exchange.

Company data

30.9

40.1 38.8

64.8 61.5

9.9 15

.8

10.1

18.1

17.5

5.8

6.8

2.1 6.

2 10.0

2008 2009 2010 Apr'11-Jun'12 Jul'12-Jun'13

Gross Sales Operating profit Net profit

Product Apr'08-

Mar'09 Apr'09-Mar'10

Apr'10-

Mar'11

Apr'11-

Jun'12

Jun'12-

Jun'13

EBITDA margin,

% 36.6 43.5 29.2 31.2 31.3

Return on Capital

employed,% 32.1 28.4 5.1 14.5 24.1

Debt equity ratio 0.88 0.89 0.84 0.56 0.2

Net fixed assets 11.1 17.2 22.0 17.9 22.5

EPS 165.9 194.1 60.2 177.5 288.2



Comments

Source:

Shree Cement

Shree Cement plans to commission two cement mills with total capacity of 4mn tonnes per annum, as a part of its Ras unit in 2014.

Another clinker manufacturing unit at Ras plant is also scheduled to be completed by June 2014.

The company has also planned to add split clinker grinding capacity at other locations in northern India and has initiated steps for acquiring land and obtaining necessary clearances.

Shree Cement has started the work on setting up an integrated unit (clinkerisation with grinding) of 2mn tonnes in Baloda Bazar, Chhattisgarh, expected to be completed by March 2015. A split grinding facility with 2mn tonnes per annum capacity at Bihar unit is also under construction and planned to be launched by the end of the financial year.

Production (mn tonnes) Sales

Company data

7.8

9.4

9.4

14.2

12.3

6.4

8.1

7.5

10.3

8.7

2008 2009 2010 Apr'11-Jun'12 Jul'12-Jun'13

Cement Clinker

8.5

10.2 10.3

14.9

12.5

117.1

263.6

524

132.23

261.03

0

100

200

300

400

500

600

0

2

4

6

8

10

12

14

16

2008 2009 2010 Apr-11-Jun-12 Jul'12-Jun'13

Clinker and cement, mn tonnes Power, MWh (rhs)



Highlights

Source:

Ramco Cement Limited

Sales and profit (INR bn)

Key Indicators

Ramco Cement is the fifth largest cement producer in India. The company is the flagship firm of Ramco Group and is headquartered in Chennai. The main product of Ramco Cement is Portland cement, manufactured in eight state-of-the-art production facilities that includes integrated cement plants (three in Tamil Nadu and one in Andhra Pradesh and Karnataka) and grinding units (two in Tamil Nadu and one in West Bengal) with a total production capacity of 16mn tonnes per annum. The firm also operates two packing terminals and a research centre.

Ramco Cement also produces ready-mix concrete and dry mortar products and operates one of the largest wind farms in India.

In 2012, the company completed the projects for installing a roll press mill at Ramasamy Raja Nagar cement plant and for increasing the cement grinding capacity at Salem grinding unit.

Ramco Cement plans to install its fourth grinding unit at Vizag with a capacity to grind 1mn tonnes per annum, at an investment cost of INR 3.60bn. The project is expected to be commissioned in the second quarter of the financial 2015.

Ramco Cement is listed on the Bombay Stock Exchange and the National Stock Exchange of India.

Company data

Product 2008 2009 2010 2011 2012

Operating profit

margin,% 32.1 31.1 24.9 29.8 27.0

Net worth per share 52 65 73 86 100

EPS 15 15 9 16 17

Divident per share 2 2 1.25 1.25 3

Equity share

(INR bn) 0.03 0.03 0.03 0.2 0.2

Net Fixed Assets

(INR bn) 36.4 40.1 44.9 40.6 45.1

24.7 28.2 26.4

32.6

38.7

3.6 3.5 2.1 3.9 4.0

2008 2009 2010 2011 2012

Income Net profit



Source:

Ramco Cement Limited (cont’d)

Capacity (mn tonnes)

Employees

Cement production and sales (mn tonnes)

Comments

Company data

In 2012, Ramco increased its cement sales by 10.7% year-on-

year to 8.36mn tonnes. Out of the total sales for the year,

84,000 tonnes were exported compared to 46,000 tonnes

exported during the previous year. The export turnover of the

company for the year was INR 287mn compared with INR

142.6mn for the previous year.

The sale value of cement for 2012, net of excise duty and VAT

amounted to INR 36.27bn compared to INR 30.94bn for the

previous year.

10.0 10.5 10.5 10.5

12.5

2008 2009 2010 2011 2012

6.53

8.03

7.31

7.52

8.48

7.95

7.26

7.55

8.36

2008 2009 2010 2011 2012

2,447

2,583

2,593

2,626

2,787

2008

2009

2010

2011

2012



Contact:

Corporate Headquarters

Nestor House

Playhouse Yard

London EC4V 5EX

UK

Voice: +44 207 779 8471

Fax: +44 207 779 8224

Americas Headquarters

225 Park Avenue South

New York, New York 10003

US

Voice: +1 212 610 2900

Fax: +1 212 610 2950

Asia Headquarters

Eucharistic Congress Bldg. No.

III

4th Floor, 5 Convent Street

Mumbai 400 001

India

Voice: +91 22 22881123

Fax: +91 22 22881137

Disclaimer:

The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness

of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional

Investor PLC take no responsibility for decisions made on the basis of these opinions.

Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. A Euromoney Institutional Investor company.

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