Cement Summary CRISIL Research expects cement consumption to grow at a CAGR of 7.8 per cent over the

Annual Review

July 2009

next 5 years. However, around 90 million tonnes of expected cement capacity additons will lower the operating rates. Further, large bunching up of capacities in 2009-10 and 201011 will build price pressures over the next couple of years. Consequently, profitability of cement players is expected to decline on account of a fall in prices.

Contents Part A: Price decline to hurt profitability of cement companie Executive Summary Cement demand growth to slow down marginally Significant capacities to be added Decline in prices to hurt profitability

A-1 A-3 A-11 A-17

Part B: State of the industry Industry characteristics Products and technology Cement manufacturing process Region-wise scenario Player profile

B-1 B-11 B-19 B-27 B-35

Part C: Industry statistics

C-1

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Opinion Sections Executive Summary 1.0 Cement demand growth to slow down marginally - North: Independent housing will drive cement demand - South: IT/ITeS slowdown will negatively impact cement demand - East: Housing and Industrial investments to drive growth - West: Demand growth primarily in urban areas - Central: Demand will remain subdued 2.0 Significant capacities to be added - Capacity expansions of 90 million tonnes over next 5 years - South India will have maximum capacity additions - Existing players will have a huge share in new capacities - Blending will remain at current levels - Operating rates will dip over the next 2 years 3.0 Decline in prices to hurt profitability - Cement prices to decline over the next couple of years - Profitability will be negatively impacted

A-1 A-3 A-7 A-7 A-8 A-9 A-9 A-11 A-11 A-11 A-12 A-13 A-14 A-17 A-17 A-18

Box 1.0 Cement demand growth to slow down marginally 01 Cement demand forecasting methodology

A-4

Chart

01

Executive Summary Indian cement industry on a map

A-2

Continued…

CRISIL RESEARCH CEMENT ANNUAL REVIEW

A-i

…continued

Figures 1.0 01 02 03 04 05 06 07 08

Cement demand growth to slow down marginally GDP growth, cement demand growth and multiplier Break-up of cement demand Break-up of cement demand from infrastructure segment Cement production and consumption in North Cement production and consumption in South Cement production and consumption in East Cement production and consumption in West Cement production and consumption in Central

A-3 A-5 A-5 A-7 A-8 A-8 A-9 A-10

2.0 01 02 03 04 05 06 07 08 09 10 11 12

Significant capacities to be added Installed capacity additions Share in installed capacity additions by regions (2009-14) Installed capacity additions by regions Player-wise capacity additions Blending ratio and share of blended cement Cement operating rates Cement incremental demand & effective capacity additions North operating rates South operating rates East operating rates West operating rates Central operating rates

A-11 A-12 A-12 A-13 A-13 A-14 A-14 A-15 A-15 A-15 A-15 A-16

3.0 Decline in prices to hurt profitability 01 Cement Operating rates & Prices

A-17

3.0 Decline in prices to hurt profitability 01 Expected price decline by regions 02 Operational performance of cement companies

A-18 A-19

Tables

A-ii

CRISIL RESEARCH CEMENT ANNUAL REVIEW

State of the industry Sections 1.0

2.0

3.0 4.0

5.0

Industry characteristics - Industry structure - Cost elements - Cement industry – Regional in nature - Demand drivers - Evolution of the cement industry Products and technology - Types of cement - Ready mix concrete (RMC) - White cement Cement manufacturing process Region-wise scenario - North - South - East - West - Central region Player profile - Associated Cement Companies Ltd - Ambuja Cements Ltd - Grasim Industries Ltd - India Cements Ltd - Jaiprakash Associates Ltd - Madras Cements Ltd - Shree Cement Ltd - UltraTech Cement Ltd

B-1 B-1 B-2 B-4 B-7 B-9 B-11 B-11 B-14 B-17 B-19 B-27 B-27 B-28 B-30 B-31 B-32 B-35 B-35 B-38 B-41 B-44 B-47 B-50 B-53 B-56

Charts 1.0 01 02

Industry characteristics Cement - Factors influencing demand Cement - Factors affecting domestic supply

3.0 01 02 03

Cement manufacturing process Dry process Wet process Cement manufacturing process

B-6 B-9

B-21 B-22 B-24

Continued…

CRISIL RESEARCH CEMENT ANNUAL REVIEW

B-i

…continued

Figures 1.0 01 02 03 04

Industry characteristics Industry structure Coal requirement v/s coal allocation Regionwise cement consumption Infrastructure spending in India

2.0 01

Products and technology Varietywise cement production

B-1 B-3 B-4 B-7

B-14

3.0 Cement manufacturing process 01 Production break up of processes

B-21

4.0 01 02 03 04 05 06 07 08 09 10

Region-wise scenario North: Market share break up Prices in north region South - Market share break up Prices in south region East market share break up Prices in east region West - Market share break up Prices in west region Central - Market share break up Prices in Central region

B-27 B-28 B-29 B-29 B-30 B-31 B-32 B-32 B-33 B-34

5.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Player profile ACC Ltd - Break up of sales ACC Ltd - Cement despatches by states ACC Ltd - Market share & rank by states Ambuja Cements Ltd - Break up of sales Ambuja Cements Ltd - Cement despatches by states Ambuja Cements Ltd - Market share & rank by states Grasim Industries Ltd - Break up of sales Grasim Industries Ltd - Cement despatches by states Grasim Industries Ltd - Market share & rank by states India Cements Ltd - Break up of sales India Cements Ltd - Cement despatches by states India Cements Ltd - Market share & rank by states Jaiprakash Associates Ltd - Break up of sales Jaiprakash Associates Ltd - Cement despatches by states Jaiprakash Associates Ltd - Market share & rank by states

B-36 B-37 B-37 B-39 B-40 B-40 B-42 B-43 B-43 B-45 B-46 B-46 B-48 B-49 B-49

continued…

B-ii

CRISIL RESEARCH CEMENT ANNUAL REVIEW

…continued

Figures 5.0 16 17 18 19 20 21 22 23 24

Player profile Madras Cements Ltd - Break up of sales Madras Cements Ltd - Cement despatches by states Madras Cements Ltd - Market share & rank by states Shree Cement Ltd - Break up of sales Shree Cement Ltd - Cement despatches by states Shree Cement Ltd - Market share & rank by states UltraTech Cement Ltd - Break up of sales UltraTech Cement Ltd - Cement despatches by states UltraTech Cement Ltd - Market share & rank by states

B-51 B-52 B-52 B-54 B-55 B-55 B-57 B-58 B-58

1.0 01 02 03 04 05

Industry characteristics Industry status Power & fuel requirement in cement manufacturing process Events during the period of government control Events during the period of partial decontrol Events post decontrol

B-2 B-2 B-10 B-10 B-10

2.0 01

Products and technology White cement - Capacity and production

B-18

4.0 01 02 03 04 05

Region-wise scenario North - Capacity/ Production/ operating rate South - Capacity/ Production/ operating rate East - Capacity/ Production/ operating rate West - Capacity/ Production/ operating rate Central region - Capacity/ Production/ operating rate

B-27 B-28 B-30 B-31 B-33

5.0 01 02 03 04 05 06 07 08

Player profile ACC Ltd Ambuja Cements Ltd Grasim Industries Ltd India Cements Ltd Jaiprakash Associates Ltd Madras Cements Ltd Shree Cement Ltd UltraTech Cement Ltd

B-35 B-38 B-41 B-44 B-47 B-50 B-53 B-56

Tables

CRISIL RESEARCH CEMENT ANNUAL REVIEW

B-iii

Industry statistics Section 1.0 Industry statistics

C-1

Figure 01 01

Industry statistics Coal — International prices and landed cost of imports

C-14

01 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Industry statistics Capacity additions in 2008-09 Cement — Playerwise installed capacity trends Cement — Playerwise production trends Cement — Operating Rates (based on the installed capacity) Cement — Aggregate producer market shares Mini cement plant — Regionwise capacity trends Mini cement plants — Regionwise production trends Mini cement plants — Regionwise operating rates Cement — Statewise trends in per capita consumption Cement — Trend in Net Sales Cement — Operating profit margins of companies Cement — Net profit margins of companies Debt- Equity Ratio Return on Capital Employed Gypsum — Domestic prices Lignite — Domestic prices Company-wise limestone cost (Rs/tonne of limestone) Company-wise coal costs (Rs/tonne of cement) Company-wise coal cost (Rs/tonne of coal) Company-wise coal consumption Company-wise power consumption Cement — Statewise sales tax Cement — Customs duty Cement — Excise duty Royalty charges — From 1971 to 2002 Royalty charges w.e.f. from August 2007

C-1 C-1 C-2 C-3 C-4 C-4 C-5 C-5 C-5 C-6 C-7 C-8 C-9 C-10 C-10 C-11 C-11 C-12 C-13 C-14 C-15 C-15 C-16 C-17 C-17 C-18

Tables

CRISIL RESEARCH CEMENT ANNUAL REVIEW

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