Impact of Recession on Cement Industry

35Impact of Global Recession on the Indian Cement Industry(With Special Reference to ACC Limited)

Impact of Global Recession onthe Indian Cement Industry(With Special Reference toACC Limited)Sandeep Kumar Rai* and Shailesh K Dwivedi**

* Assistant Professor, Aacharya Sitaram Chaturvedi College for Women, Ramnagar, Varanasi 221005.E-mail: [email protected]

** Assistant Professor, Vindhya Institute of Management and Techonology, Allahabad.E-mail: [email protected]

© 2011 IUP. All Rights Reserved.

Cement Industry in India is on a roll at the moment. Driven by a boomingreal estate sector, global demand and increased activity in infrastructuredevelopment such as state and national highways, the cement industryhas witnessed tremendous growth. The realty sector boomed but couldnot sustain for long and it collapsed because of the loan defaults. Thissituation spread like wild fire and put the Indian economy in dangerlike the US economy. The US financial crises have affected manycountries of the world and India is not an exception to it. Because ofthese financial crises, Indian economy has lost more than 2% of GDPgrowth. Almost all sectors of the Indian economy have been affected bythis crisis. In this paper, an attempt has been made to find out the impactsof global financial crisis on the Indian Cement Industry particularly theACC limited.

IntroductionThe origins of Indian cement industry can be traced back to 1914 when the first unit wasset-up at Porbandar with a capacity of 1,000 tons. Today cement industry comprises of125 large cement plants and more than 300 mini-cement plants. The Cement Corporationof India, which is a Central Public Sector Undertaking (PSU), has 10 units. There are10 large cement plants owned by various State Governments. Cement industry in Indiahas also taken tremendous strides in technological upgradation and assimilation of latesttechnology. Presently, 93% of the total capacity in the industry is based on modern andenvironment-friendly dry process technology. The induction of advanced technology hashelped the industry immensely to conserve energy and fuel and to save materialssubstantially. Indian cement industry has also acquired technical capability to produce

The IUP Journal of Managerial Economics, Vol. IX, No. 1, 201136

different types of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement(PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid HardeningPortland Cement, Sulphate Resisting Portland Cement, White Cement, etc. Some of themajor clusters of cement industry in India are: Satna (Madhya Pradesh), Chandrapur(Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (AndhraPradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).

Cement industry in India is currently going through a consolidation phase. Some examplesof consolidation in the Indian cement industry are: Gujarat Ambuja taking a stake of 14% inACC, and taking over DLF Cements and Modi Cement; ACC taking over IDCOL; IndiaCement taking over Raasi Cement and Sri Vishnu Cement; and Grasim’s acquisition of thecement business of L&T, Indian Rayon’s cement division, and Sri Digvijay Cements. Foreigncement companies are also picking up stakes in large Indian cement companies. Swisscement major Holcim has picked up 14.8% of the promoters’ stake in Gujarat Ambuja Cements(GACL). Holcim’s acquisition has led to the emergence of two major groups in the Indiancement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birlagroup through Grasim Industries and Ultratech Cement. Lafarge, the French cement majorhas acquired the cement plants of Raymond and Tisco. Italy-based Italcementi has acquireda stake in the K K Birla promoted Zuari Industries’ cement plant in Andhra Pradesh, andGerman cement company Heidelberg Cement has entered into an equal joint-ventureagreement with S P Lohia Group controlled Indo-Rama Cement.

Growth of the Cement IndustryThe growth of the Indian Cement Industry was very old. Prior to the end of the 19th centuryand beginning of the 20th century the cement industry started to grow in India. The growthof the Indian cement industry during different periods has been detailed below.

Prior to IndependenceThe first endeavor to manufacture cement dates back to 1889 when a Calcutta-basedcompany endeavored to manufacture cement from Argillaceous (kankar).

But the first endeavor to manufacture cement in an organized way commenced inMadras. South India Industries Limited began manufacture of Portland cement in 1904.But the effort did not succeed and the company had to halt production.

Finally it was in 1914 that the first licensed cement manufacturing unit was set up byIndia Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000tons and production of 1,000 installed. The First World War gave the impetus to the cementindustry still in its initial stages. The following decade saw tremendous progress in termsof manufacturing units, installed capacity and production. This phase is also referred toas the Nascent Stage of Indian Cement Industry.

During the early years, production of cement exceeded the demand. Society had abiased opinion against the cement manufactured in India, which further led to reduction


in demand. The government intervened by giving protection to the Industry and byencouraging cooperation among the manufacturers.

In 1927, the Concrete Association of India was formed with the twin goals of creating apositive awareness among the public of the utility of cement and propagate cementconsumption.

After IndependenceThe growth rate of cement was slow around the period after independence due to variousfactors like low prices, slow growth in additional capacity and rising cost. The governmentintervened several times to boost the industry, by increasing prices and providing financialincentives. But it had little impact on the industry.

In 1956, the price and distribution control system was set up to ensure fair prices forboth the manufacturers and consumers across the country and to reduce regionalimbalances and reach self sufficiency.

Period of Restriction (1969-1982)The cement industry in India was severely restrained by the government during this period.The Government hold over the industry was through both direct and indirect means.Government intervened directly by exercising authority over production, capacity anddistribution of cement and it intervened indirectly through price control.

In 1977, the government authorized higher prices for cement manufactured by newunits or through capacity increase in existing units. But still the growth rate was belowpar.

In 1979, the government introduced a three–tier price system. Prices were different forcement produced in low, medium and high cost plants.

However, the price control did not have the desired effect. Rise in input cost, reducedprofit margins meant the manufacturers could not allocate funds for increase in capacity.

Partial Control (1982-1989)To give impetus to the cement industry, the Government of India introduced a quota systemin 1982. A quota of 66.60% was imposed for sales to Government and small real estatedevelopers. For new units and sick units, a lower quota at 50% was affected. The remaining33.40% was allowed to be sold in the open market.

These changes had the desired effect on the industry. Profitability of the manufacturersincreased substantially, but the rising input cost was a cause for concern.

After LiberalizationIn 1989, the cement industry was given complete freedom, to gear up to meet the challengesof free market competition due to the impending policy of liberalization. In 1991, the industrywas delicenced.


This resulted in an accelerated growth for the industry and availability of state of theart technology for modernization. Most of the major players invested heavily for capacityexpansion.

To maximize the opportunity available in the form of global markets, the industry laidgreater focus on exports. The role of the government has been extremely crucial in thegrowth of the industry. Cement Industry in India is on a roll at the moment. Productioncapacity has gone up and top cement companies of the world are vying to enter the Indianmarket, thereby sparking off a spate of mergers and acquisitions. Indian cement industryis currently ranked second in the world.

The Indian cement industry with a total capacity of about 190 mn tons in FY 2008 is thesecond largest market after China, despite the fact that the Indian cement industry hadclocked production of more than 100 mn tons for the last five years, registering an averagegrowth of nearly 9%. This, more than anything underlines the tremendous scope for growthin the Indian cement industry in the long term. Although consolidation has taken place inthe Indian cement industry with the top five players controlling almost 50% of the capacity,the balance capacity still remains pretty fragmented. Cement, being a bulk commodity, is afreight intensive industry and transporting cement over long distances can prove to beuneconomical. This has resulted in cement being largely a regional player with the industrydivided into five main regions, viz., north, south, west, east and the central region.

While the southern region always had excess capacity in the past owing to abundantavailability of limestone, the western and northern regions are the most lucrative marketson account of higher income levels. However, with capacity addition taking place at aslower rate as compared to growth in demand, the demand supply parity has been restoredto some extent in the Southern region for the medium term. Considering the pace at whichinfrastructural activity is taking place in different regions, the players have lined upexpansion plans accordingly (Table 1).

Despite the growth of the Indian cement industry, India’s per capita production of115 kg per year lags behind the world average of over 250 kg and China’s production of

more than 450 kg per person. Clearly there remainsroom for tremendous growth in the industry in India. But if India is to reach its potential, the free hand ofthe market must be left unfettered. For this to happen,the Indian government must make sure that foreigncompanies that have a history of price fixing andmarket collusion receive appropriate regulation. Ifmarket shares get fixed, India will be the loser andthe gap between India and China will only grow inthe race to become the next economic superpower.

Table 1: Region-Wise Growth

Region Growth (%)

India 9.60

South 16.30

West 9.80

Central 14.30

North 3.70

East 2.10


The cement industry is one of the vital industries for economic development in a country.The total utilization of cement in a year is used as an indicator of economic growth.

Cement is a necessary constituent of infrastructure development and a key raw materialfor the construction industry, especially in the government’s infrastructure developmentalplans in the context of the nation’s socio-economic development.

The demand for cement in year 2010-2011 is expected to increase by 60 mn tons despitethe recession and decline in demand of housing sector. Against India’s GDP growth of 7%,the experts have estimated the cement sector to grow by 9 to 10% in the current FY 2010-11.Major Indian cement manufacturers and exporters have all made huge investments in thelast few months to increase their production capability. This heralds an optimistic outlookfor the cement industry. The housing sector in India accounts for 50% of the cement’sdemand. And the demand is expected to continue. With the constant effort made by cementmanufacturers and exporters, India has become the second largest cement producer in theworld. Madras Cement Ltd., Associated Cement Company Ltd. (ACC), Ambuja CementsLtd., Grasim Industries Ltd., and J K Cement Ltd., are among the few renowned names ofthe major Indian cement companies.

Major Players of the IndustryThe prominent players in the Indian cement industry are:

• Associated Cement Company Ltd. (ACC)

• Grasim Industries Ltd.

• Ambuja Cements Ltd.

• UltraTech Cement Ltd.

• J K Cement Limited

• Madras Cements Ltd.

• Jaypee Group.

• Binani Cement Limited

• Prism Cement Limited

Indian Cement Industry Forecast to 2012India is fast emerging on the world map as a strong economy and a global power.The country is going through a phase of rapid development and growth. All the vitalindustries and sectors of the country are registering growth and thus, luring investors.And cement industry is one of them. The forecast model shown in Table 2 throws light onthe Indian cement industry.

The forecast model (Table 2) relates to the growth in the cement sector from 2009 to2012. The contributing factors taken to consideration are:


Table 2: Forecast Cement Demand Supply Model

Forecast Model: Year 2009-2012

(mn tons) 2009 2010E 2011E 2012E

Year-end installed capacity 224 250 287 300

Actual effective capacity 207 231 257 283

(–) Mothballed capacity 4.9 4.9 4.9 4.9

Effective installed capacity 202 226 252 278

Domestic consumption 178 187 205 226

Export (cement + clinker) 6.1 5 8 9

Domestic consumption + export 184 192 213 235

Surplus/(deficit) 18 35 38 43

% surplus (wrt effective capacity) 9% 15% 15% 15%

Actual utilization 91% 85% 85% 85%

Average prices 239 240 240 240

Change in average price 3% 0% 0% 0%

Capacity growth 16% 12% 11% 10%

Domestic demand growth 8% 5% 10% 10%

• Export

• Domestic Consumption

• Average Prices

• Capacity Growth and

• Domestic Demand Growth

All the above mentioned factors are increasing at a considerable rate indicating apositive sign towards the growth of the sector.

SWOT Analysis

Strengths• Second largest in the world in terms of capacity.

• Low cost of production.

Weakness• Effect of global recession on Real Estate and Infrastructure.

• Demand-Supply gap, overcapacity.

• Increasing cost of production.

• High interest rates.


Opportunities• Strong growth of economy in the long run.

• Increase in infrastructure projects.

• Growing middle class.

• Technological change.

• Increase in government spending.

Threats• Imports from Pakistan affecting markets in Northern India.

• Excess over capacity can hurt margins as well as prices.

Challenges• Cement industry currently has one of the highest inventory levels in recent times.

• Growth rates have slowed.

• Capacity additions putting pressure on process.

Due to the above mentioned facts, the cement companies are looking to cut production.

From figure 1 we can see that:

• ACC contributed 11.8% to the sector

• L&T 11.3%

• Grasim 9.6%

Figure 1: Big Players: Cement Sector

Others, 49.50%

ACC, 11.80%Grasim, 9.60%

L&T, 11.30%

India Cement, 6.90%

Madras, 3.30%

Guj. Ambuja, 7.60%


• Gujarat Ambuja 7.6%

• India Cement 6.9%

• Madras 3.3%

• Others 49.5% to the sector.

So, ACC being the sector leader contributed a major part of supplies.

ACC: The Market LeaderACC Limited is India’s foremost manufacturer of cement with a countrywide network offactories and marketing offices. Established in 1936, ACC has been a pioneer and trend-setter in cement and concrete technology. ACC’s brand name is synonymous with cementand enjoys a high level of equity in the Indian market. Among the first companies in Indiato include commitment to environment protection as a corporate objective, ACC has wonseveral prizes and accolades for environment friendly measures taken at its plantsand mines.

The manufacturing cost per tonne of ACC Ltd, India’s largest cement manufacturer bycapacity, is the highest in the Indian cement industry. ACC’s manufacturing cost is

1,529 per ton against the industry average of 1,056 per ton. Birla Corp. Ltd., has thesecond highest manufacturing cost, 1,339 per ton, followed by Ultra Tech Cement Ltd.,at 1,240 per ton.

India, the second largest cement market in the world, has a total installed capacity of170 mn tons per annum (mtpa), according to a report on the sector by domestic brokerageKarvy Stock Broking Ltd. Demand for cement in the country stood at 154.9 mtpa for theyear ended March.

ACC Limited is India’s foremost manufacturer of cement and concrete. ACC’s operationsare spread throughout the country with 14 modern cement factories, more than 30 ReadyMix Concrete (RMX) plants, 20 sales offices and several zonal offices. It has a workforce ofabout 9,600 persons and a countrywide distribution network of over 9,000 dealers.

Vision of the ACC Limited“To be one of the most respected companies in India; recognized for challenging conventionsand delivering on our promises.”

SubsidiariesBulk Cement Corporation (India) Ltd. (BCCI): The Company situated in Mumbai, catersto bulk cement requirements of the city of Mumbai and its environs. It has two cementstorage silos with a capacity of 5,000 tons each. The plant receives cement in bulk fromACC plants at Wadi. The first of its kind in India, BCCI is equipped with all the facilities


required by increasingly sophisticated construction sites in a bustling metropolis,including a laboratory, a fleet of specialized trucks and site silos for the convenience ofcustomers and is capable of offering loose cement in bulk-tanker vehicles as well as packedcement in bags of varying sizes from 1 tonne down to 25 kg bags.

ACC Concrete Ltd.: ACC set up India’s first commercial Ready Mix Concrete (RMX) plantin Mumbai in 1994. The RMX business of ACC was reorganized as a separate whollyowned subsidiary. Today this company is one of the largest manufacturers of RMX inIndia with a countrywide network of over 30 plants, with modern equipment and a largefleet of transit mixers.

ACC Mineral Resource Ltd.: ACC’s wholly-owned subsidiary, The Cement MarketingCompany of India Limited, was renamed as ACC Mineral Resources Limited (AMRL) inMay 2009. ACC Mineral Resources Limited has already entered into Joint Venturearrangements for prospecting, exploration and mining coal from the coal blocks in MadhyaPradesh and West Bengal. The company is also exploring other opportunities for securingadditional coal and gypsum resources in India and abroad.

Lucky Minmat: ACC acquired 100% of the equity of Lucky Minmat Private Limited. Thiscompany holds limestone mines in Sikar district of Rajasthan and helps supplementlimestone supply to the Lakheri Plant.

Products and Services

Ordinary Portland CementOPC 43 Grade: It surpasses BIS Specifications (IS 8112-1989 for 43 grade OPC) oncompressive strength levels.

OPC 53 Grade: This is an Ordinary Portland Cement which surpasses the requirements ofIS: 12269-53 Grade. It is produced from high quality clinker ground with high puritygypsum.

Blended Cement

Fly-Ash Based Portland Pozzolana Cement: This is special blended cement, produced byinter-grinding higher strength Ordinary Portland Cement clinker with high qualityprocessed fly-ash based on norms set by the company’s R&D division.

Portland Slag Cement: This is slag-based blended cement that imparts strength anddurability to all structures. It is manufactured by blending and inter-grinding OPC clinkerand granulated slag in suitable proportions as per our norms of consistent quality.

ACC Bulk Cement

Ready Mix Concrete or RMX as it is popularly called, refers to concrete that is specificallymanufactured for delivery to the customer’s construction site in a freshly mixed and plasticor unhardened state.


Consultancy Services

Engineering Skills and Services: ACC houses a wide range of engineering skills andservices under one roof:

• Raw material evaluation and optimization.

• Feasibility studies.

• Engineering consultancy services for green field/brown field cement plants.

• Upgradation and capacity enhancement of existing cement plants.

• Management and operation of cement plants.

• Technical training and skills development.

ACC Plants

“ACC has the oldest plants,” says Sourav Mallik, Associate Director (investment banking)at Kotak Mahindra Capital Co. Ltd, the investment banking arm of Kotak Mahindra BankLtd. “Some plants are inefficient and it is uneconomical to run them.”

Today each of its cement plants has state-of-the art pollution control equipment anddevices.

ACC has 13 plants at 12 locations nationwide, in which Jharkhand and Karnatakaboth have two plants in Chaibasa, Sindri and new Wadi plant respectively. The company

has a manufacturing capacity of around23 mtpa and hopes to expand it to 27 mtpaby the end of 2009. The plants in differentstates and their capacities are given inTable 3.

Table 4 presents the financial highlightsof ACC Limited from 2003-04 to 2008.Table 4 shows that in all respects, thecompany has done well. During thisperiod, the company has shown a risingtrend in every segment. Gross revenue ofthe company increased from 4,038 cr in2003-04 to 8,548 cr in 2008 (Figure 2). Profitafter tax of the company increased by sixtimes during this six–year period, i.e.,200 cr in 2003-04 to 1,212 cr in 2008

(Figure 3). Dividends paid by companyhave also increased by five times. In the year2003-04, the company paid a total of 80 cr

Units Capacity(MTPA)

Bargarh (Orissa) 0.96

Chaibasa (Jharkhand) 0.87

Chanda (Maharashtra) 1.00

Damodhar (West Bengal) 0.53

Gagal (Himachal Pradesh) 4.40

Jamul (Chhattisgarh) 1.58

Kymore (Madhya Pradesh) 2.20

Lakheri (Rajasthan) 1.50

Madukkarai (Tamil Nadu) 1.18

Sindri (Jharkhand) 0.91

Wadi (Karnataka) 2.59

New Wadi Plant (Karnataka) 3.20

Tikaria (Uttar Pradesh) 2.31

Total 23.23

Table 3: Plant Wise Capacity


as dividend which went upto 439 cr in 2008 (Figure 4). In respect of the net worth, thecompany improved during this six-year period. In the year 2003-04, the company had1,318 cr as net worth which went upto 4,927 cr in 2008 (Figure 5).

Book value per share has also tremendously increased during the period. In 2003-04,it was 74.41 and it reached 262.56 in 2008, an increase by four times (Figure 6).

But the recession period 2007-2008 had a negative impact on some major financialinstruments. The company had a decline in profit after tax, return on capital employed,

Table 4: Financial Highlights (in cr)

Gross Revenue 8,548 7,977 6,586 3,815 4,640 4,038

Profit After Tax 1,212 1,438 1,231 544 378 200

Dividend 439 438 322 168 143 80

Net Worth 4,927 4,152 3,142 2,130 1,577 1,318

Capital-Employed 5,745 4,953 4,378 3,607 3,382 3,010

Borrowings 482 469 916 1,176 1,509 1,327

Debt-equity Ratio 0.10 0.11 0.29 0.55 0.96 1.07

Book Value per Share ( ) 262.56 221.33 167.77 115.00 88.00 74.41

Earning per Share 64.63 76.75 66.02 30.02 21.23 11.68

Dividend per Share 20.00 20.00 15.00 8.00 7.00 4.00

Employees (Number) 9,557 10,032 9,231 9,170 8,995 9,115

Shareholders (Number) 155,813 127,476 110,455 97,219 105,165 120,803

2003-042004-052005(9M)200620072008Items

Note: (9M)-Data related to the year 2005 is only for nine months, i.e., April, 2005 to December, 2005.

Figure 2: Gross Revenue of ACC Limited

Gro

ss R

even

ue

(in

cr

)

Year

2003-040

2,000

4,000

6,000

8,000

10,000

2004-05 2005 (9M) 2006 2007 2008


Figure 3: Profit After Tax of ACC Limited

Profit After Tax

0 200 400 600 800 1,000 1,200 1,400 1,600

2008

2007

2006

2005 (9M)

2004-05

2003-04

Figure 4: Dividends Paid by ACC Limited

Dividends50045040035030025020015010050

02003-04 2004-05 2005 (9M) 2006 2007 2008

Year

Figure 5: Net Worth and Return on Net Worth of ACC Limited

Net Worth Return on Net Worth6,000

5,000

4,000

3,000

2,000

1,000

02003-04 2004-05 2005 (9M) 2006 2007 2008

45

40

35

30

25

20

15

10

5


earnings per share and the number of employees. The number of employees went down in2008 as compared to 2007, i.e., from 10,032 to 9,557.

Table 5 depicts the key ratios of ACC Limited during 2004-05 to 2008. Table 5 shows theliquidity, leverage and profitability ratio. Table shows that in this period, the companywas affected by the global crisis. In the last two years, the company had less profitabilityratios. In 2008, the company had low interest coverage ratio than that of the previousyears. It shows that the company has more borrowings.

Table 6 presents the major achievements by ACC Limited during 2006-09. ACC Limitedwon many awards during this period. In 2009, ACC Limited won the Greentech SafetyGold and Silver Awards 2009—for outstanding performance in Safety management systemsby Greentech Foundation.

Table 5: Key Ratios

Ratio 2008 2007 2006 2005 (9M) 2004-05

Liquidity Ratios

Current Ratio 1.00 1.07 1.31 1.16 1.19

Quick Ratio1.09 1.06 1.35 0.90 0.87

Leverage Ratios

Debt-Equity Ratio 0.10 0.11 0.29 0.55 0.96

Proprietary Ratio 85.75 83.82 71.76 59.13 46.96

Interest Coverage Ratio 41.23 70.72 26.86 5.35 4.04

Figure 6: Book Value per Share of ACC Limited

Book Value per Share

300

2003-04 2004-05 2005 (9M) 2006 2007 2008

250

200

150

100

50

0


Table 5 (Cont.)

Ratio 2008 2007 2006 2005 (9M) 2004-05

Profitability Ratios

Return on Assets 21.10 29.86 28.13 15.06 11.12

Return on Capital 21.09 29.03 28.11 15.08 11.18Employed

Return on Equity 6.45 7.66 6.56 2.93 2.11

EPS ( ) 64.63 76.75 66.02 30.02 21.23

Dividend Payout Ratio 30.95 26.06 22.72 26.65 32.97

Note: (9M)-Data related to the year 2005 is only for nine months, i.e., April, 2005 to December, 2005.

Table 6: Achievements

2006 Subsidiary companies Damodhar Cement and Slag Limited, Bargarh Cement Limitedand Tarmac (India) Limited merged with ACC.

2006 ACC announces new Workplace policy for HIV/AIDS.

2006 Change of name to Associated Cement Companies Limited with effect from September1, 2006 from ACC Limited.

2006 ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber ofCommerce and Industry.

2006 New corporate brand identity and logo adopted from October 15, 2006.

2006 ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at Wadi inKarnataka—the first ever such project by a private sector company in India.

2007 ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu.

2007 Sumant Moolgaokar Technical Institute completes 50 years and reopens with newcurriculum.

2007 ACC commissions Wind energy farm in Tamil Nadu.

2008 Ready mixed concrete business hived off to a new subsidiary called ACC ConcreteLimited.

2008 ACC Cement Technology Institute formally inaugurated at Jamul on July 7.

2008 First Sustainable Development Report released on June 5.

2008 ACC wins CNBC-TV18 India Business Leader Award in the category India CorporateCitizen of the year 2008.

2009 Received the Greentech Safety Gold and Silver Awards 2009—for outstandingperformance in safety management systems by Greentech Foundation.


ConclusionThe cement industry is one of the vital industries for economic development in a country.The total utilization of cement in a year is used as an indicator of economic growth.

The numbers have sparked some hope among analysts that demand for cement has pickedup. The reasons for the higher demand include pre-poll spending and strong rural demand.

A research report by broking firm Sharekhan.com says, “With the revival of infrastructureand private house building activity, the cement industry has given an impressive performancein the last two consecutive months of 2008. But sustaining such growth is uncertain, as thereal estate segment, which consumes about 55% of the total cement produced, has still notrevived due to overall economic slowdown. However, we expect that the overall volumegrowth in FY 2010-11 will be certainly ahead of street expectations. Further, cement companiesare also expected to benefit from softening coal and crude prices.”

ACC Limited contributed 11.8% to the sector, so it is the sector leader contributing a majorpart of supplies. ACC Limited is India’s foremost manufacturer of cement and concrete.

Key Findings• Domestic demand for cement has been increasing at a fast pace in India and it

has surpassed the economic growth rate of the country.

• Cement consumption in India is forecasted to grow by over 24% in 2010-11 from2007-08. Among the states, Maharashtra has the highest share in consumptionat 12.18% in 2009-10, followed by Uttar Pradesh.

• In production terms, Andhra Pradesh is leading with 14.72% in 2009-10 of totalproduction followed by Rajasthan.

• Housing sector is expected to remain the largest cement consumer in the comingyears.

• Gagal, Himachal Pradesh has 4.40 mtpa capacities, highest in ACC Limited.

• Gross revenue, net worth, book value per share and dividends paid by ACCLimited increased during the recession period.

References1. Business Standard, November 26, 2008.

2. Indian Concrete Journal, Cement Marketing Company of India, Vol. 68, 1994.

3. Kumar and Bar Das (1987), Cement Industry of India, APH Publishing.

4. Outlook Business, April 20-May 3, 2008, Vol. 3, No. 9.

Websites1. www.acclimited.com

2. www.business.mapsofindia.com

3. www.researchandmarkets.com

4. www.scribed.com

5. www.tradechakra.com

Reference # 21J-2011-02-03-01

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