CEMENT For updated information, please visit www.ibef.org December 2017 Table of Content Executive Summary……………….…..……3 Advantage India…………………..….……. 4 Market Overview and Trends………..…….6 Porter’s Five Force Framework Analysis...12 Growth Drivers and Opportunities……… 13 Investment Scenario...…….………......... 15 Policies and Initiatives……….………….. 18 Case Studies……….………..............….. 19 Key Industry Organizations……….…….. 24 Useful information……….……….......….. 26 EXECUTIVE SUMMARY Second largest cement Dominated by private Higher share of large Large concentration in market players plants south and west . With cement . Of the total capacity, . 210 large cement . Of the total 210 production capacity 98 per cent lies with plants account for a large cement of nearly 420 million the private sector & cumulative installed plants in India, 77 tonnes, as of March the rest with public capacity of over are situated in the 2017. sector. 350 million tonnes, states of Andhra while over 350 mini . India’s cement . The top 20 companies Pradesh, production capacity accounting for around cement plants have Rajasthan & Tamil is expected to reach 70 per cent of the total an estimated Nadu. production capacity 550 million tonnes by production 2025. of nearly 11.10 million tonnes, as . India is the second of 2016. largest cement producer in the world. Source: Business Standard, Ministry of External Affairs, 3 Cement For updated information, please visit www.ibef.org Cement ADVANTAGE INDIA ADVANTAGE INDIA Robust demand Long-term potential . Increased allocation to infrastructure . Oligopoly market, where large players projects in Union Budget 2017-18 to have partial pricing control drive demand . Low threat from substitutes . Initiative to build 100 smart cities and boost to affordable housing projects to give a further stimulus ADVANTAGE INDIA Attractive opportunities Increasing investments . Robust investments are being made by the . The North-East, which is witnessing a existing players to expand their capacity construction boom, offers attractive investment opportunities. FDI inflow in industry related to manufacturing of Cement & Gypsum products reached US$ . The State Government of Chhattisgarh 5.25 billion between April 2000 and September has auctioned one block of Limestone 2017 (Kesla II) in Raipur District having estimated reserves of 215 million . Emami Ltd to invest US$ 1.27 billion to scale up tonnes which would earn a revenue of its cement production capacity from 2.4 MT to US$ 1.85 billion over the lease period 15-20 MT in 3-5 years Source: Budget 2017-18, News Articles, Aranca Research, DIPP 5 Cement For updated information, please visit www.ibef.org Cement MARKET OVERVIEW AND TRENDS MARKET OVERVIEW . India - world’s 2nd largest cement market, both in production and consumption. Supported by high level of activity going on in real estate and high government spending on smart cities and urban infrastructure. As of FY17, a total of 575 operational cement plants in the country. Capacity of 420 MTPA as of March 2017. Top Cement Producers in 2016E (in MTPA) 3000.00 2500.00 2410.00 2000.00 1500.00 1000.00 500.00 290.00 85.90 77.00 60.00 56.00 53.00 63.00 55.00 0.00 China India USA Turkey Brazil Russia Iran Indonesia South Korea Note: E - Estimate Source: International Cement Review 7 Cement For updated information, please visit www.ibef.org MARKET OVERVIEW . Industry to grow at 5-6 per cent CAGR between FY17 – FY20. Capacity addition of 133 million tonnes per annum (mtpa) between FY13-17. Cement consumption is expected to grow by 5.0-5.5 per cent in FY18 on the back of increased spends on roads and railways, push towards affordable housing by central government and materialisation of pent-up demand.^ Cement consumption (million tonnes) Cement Production in India (million tonnes) 300.00 300 250.00 250 283.457 279.813 270.00 269.00 270.038 256.00 255.826 248.23 200.00 245.00 200 239.00 230.49 221.00 150.00 150 165.588 100.00 100 50.00 50 0.00 0 FY 12 FY13 FY14 FY15 FY16 FY17 FY 12 FY13 FY14 FY15 FY16 FY17 FY181 Note: 1From April to October 2017, ^As per CRISIL Source: Media sources, Aranca Research, CRISIL 8 Cement For updated information, please visit www.ibef.org INSTALLED CAPACITY AND KEY MARKETS IN EACH OF THE GEOGRAPHIC REGIONS North (Rajasthan, Central Punjab, Haryana) (Uttar Pradesh, 85.6 MTPA Madhya Pradesh) 52.8 MTPA West (Gujarat, East Maharashtra) (West Bengal, 57.6 MTPA Chhattisgarh, Odisha, Jharkhand) 49.4 MTPA South (Tamil Nadu, Andhra Pradesh, Karnataka) 132.7 MTPA Notes: mtpa - Million Tonnes Per Annum, E- Estimates Source: Indian Minerals Year Book by Indian Bureau of Mines, TechSci Research 9 Cement For updated information, please visit www.ibef.org RECENT TRENDS AND STRATEGIES Increasing presence of cement players Tie – up with overseas Housing for All . Presence of small & mid-size . India has joined hands with . Under Union Budget 2017-18, cement players across regions is Switzerland to reduce energy US$ 3.42 billion has been increasing, which helps to diminish consumption & develop newer allocated to achieve government's market concentration of industry methods in the country for more mission of 'Housing for All by leaders efficient cement production, which 2022. would help India meet its rising . A large number of foreign players . Housing sector accounts for demand for cement in the have also entered the market nearly 67 per cent of the total infrastructure sector owing to the profit margins, cement consumption in India. constant demand & right valuation. Adoption of cement instead of Bitumen Mergers & Acquisitions Mergers & Acquisitions and Ready Mix Concrete (RMC) . The Government of India has . Consolidation seen in 2016, with . In January 2017, JSW Cement decided to adopt cement instead two out of top five M&A deals bought 35.6 per cent stake in of bitumen for the construction of taking place in the cement Shiva Cement, for an estimate all new road projects on the industry. amount of US$ 14.42 million. grounds that cement is more . UltraTech Cement acquired . In September 2017, the National durable & cheaper to maintain Jaypee Group’s cement business Company Law Tribunal (NCLT) than bitumen in the long run. for US$ 2.38 billion. approved the amalgamation of . Companies are trying to develop a Trinetra Cement Ltd. and Trishul . Lafarge India sold its business to niche market for RMC (Ready Mix Concrete Products Ltd. with The Nirma for US$ 1.4 billion in 2016. Concrete) India Cements Ltd.. Source: Union Budget 2016 – 17, Union Budget 2017-18, Emkay Global Financial Services, News Articles 10 Cement For updated information, please visit www.ibef.org SUCCESSFUL USE OF ALTERNATE FUELS IN CEMENT PRODUCTION Company/Plant Strategy Benefits Module Use bioenergy through Annual cost savings of US$ 1.7 Madras Cement's Alathiyur plant burning of coffee husk & cashew million nut shells Use Low Sulphur Heavy Stock Annual savings of US$ 6,500 India Cements Ltd's Dalavoi plant (LSHS) sludge as alternate fuel approx Reduction of about 30,000 Use tyre chips & rubber dust as UltraTech's Gujarat Cement tonnes of carbon emissions Works alternate fuel annually Higher energy savings and lower Substitute 10 per cent of coal used Lafarge's Arasmeta plant carbon emissions in kilns with rice husk Source: CMA 11 Cement For updated information, please visit www.ibef.org Porter’s Five Force Framework Analysis Threat of Substitutes Low – Although there are partial substitutes such as asphalt, glass, steel, wood, etc.; practically cement has no direct substitutes Bargaining Power of Suppliers Bargaining Power of Buyers Moderate – Cement players have to Competitive Rivalry Low – Substantial market depend on the railways for carriage Low – The Indian cement market is concentration among large players outward & local coal companies for oligopolistic in nature, characterised ensures low bargaining power of fuel, although diversification of by tacit collusion, where large players buyers freight options & fuel sources is partially control supply for better price diminishing the suppliers’ power discipline Threat of New Entrants High – Huge capital investments required present substantial barriers to entry & achieving economies of Positive Impact scale Neutral Impact Negative Impact Source: Aranca Research 12 Cement For updated information, please visit www.ibef.org Cement GROWTH DRIVERS AND OPPORTUNITIES GROWTH DRIVERS AND OPPORTUNITIES Housing Infrastructure Urbanisation . Forms the major portion of cement . Strong focus of government . Development of 500 cities with demand at around 67 per cent population of more than 100,000 . 100 smart cities planned under new Urban Development . Real estate market to increase at . Projects like Dedicated Freight Mission 11.6 per cent CAGR in 2011-20. Corridors and ports under . Government initiatives like development. Housing for all to push demand in . Metro rail projects already the sector. underway in most major cities. % share of cement demand in FY17 Industrial 9 Commercial 11 Infrastructure 13 Housing 67 0 10 20 30 40 50 60 70 80 Source: Ministry of External Affairs (Investment and Technology Promotion Division), AT Kearney, CARE Ratings 14 Cement For updated information, please visit www.ibef.org Cement INVESTMENT SCENARIO INVESTMENT SCENARIO . Emami Cement, a renowned brand of Emami Group, announced expansion plans with an investment of about US$ 74.7 million in 2016. The company plans to commission a grinding plant in Odisha by March 2018. An investment of Emami Cement US$ 94 million has been made in the plant. The company plans to increase its capacity from existing 2.4 MT to 15-20 MT by 2021, with an investment of US$ 1.27 billion. The company has undertaken two greenfield projects in West Bengal and Odisha to increase its Shree Cement presence in eastern India. These projects will attract an investment of US$ 78 million and will be commissioned by late 2018.