Somaiya Institute of Management Studies & Research,

Mumbai.

2012-14

Study of four major Indian

brands in the CEMENT

Sector. A comparative analysis.

PARNAMOY DUTTA

Roll No. : 13

PGDM (IB)

Contents

1. Introduction 1

2. Major Players in India

ACC Limited

o History

o Slogan and Vision

o Major milestones

Ambuja Cements Limited

o History

o Slogan and Vision

o Major milestones

UltraTech Cement Limited

o History

o Slogan and Vision

o Major milestones

JK Cement Limited

o History

o Slogan and Vision

o Major milestones

2

2

2

4

4

6

6

7

7

8

8

9

9

11

11

12

12

3. Comparison

Market Share of Major Companies

Pricing in the last few months

Distribution

Promotions

13

13

13

14

16

4. Observations on: Comparing

Production in MnT (million tonnes)

Profit after TAX in ` Crores

Sales Volume in MnT

Net Worth in ` Crores

18

18

18

19

19

5. Cement Industry: Overview 20

6. Bibliography 24

2

Introduction

India is one of the emerging markets in the global economy. As a result there is a positive

growth rate in the infrastructure and housing markets. Regular government spending on the

rural sector and infrastructure spend accomplished by rise in the number of infrastructure

projects implemented by the private sector will also drive forward the growth in domestic

cement demand. According to forecast it is expected that due to this positive vibe in the

market India’s cement production will grow at a compound annual growth rate of 12% during

2012-14 to reach 303 million metric ton. Cement Manufacturing Association is targeting to

achieve 550 Million metric ton capacities by the year 2020. It can be also assumed that with

relaxing of FDI norms a number of foreign players can also enter the industry thereby

increasing the competitiveness and quality of the product delivered. Also with the increase of

number of production units the advantages of industrialization will also enrich our

economical situation.

India is the 2nd

largest producer of cement in world after China. There are almost 137 large

and 365 mini cement plants. Leading players in the industry include ACC limited, UltraTech

Cement Limited, Ambuja Cements Limited, JK Cement Limited, etc. Cement acts as an

adhesive that holds concrete together and is hence vital for meeting the economy’s needs of

housing & accommodation and necessary infrastructure for roads, bridges, schools, hospitals,

offices and other utilities.

The demand for cement depends on the rate of growth and level of development of the

economy. Considering the present scenario of raw materials needed for construction it is well

understood that there is no substitute for cement hence the demand for cement is price

inelastic.

In this report we will look at the major players in the Indian market today. Then we will do a

comparative analysis between them. And finally we will decipher the major observation on

the major players and the industry as a whole.

Let us now look at the major players in India.

3

Major Players

ACC Limited:

History:

ACC Limited was formed in the 1936 when ten existing

companies came together to merge to form a single entity.

Hence the name Associated Cement Companies Limited. These companies belong to four

prominent business groups Tatas, Khataus, Killick Nixon and F E Dinshaw groups. F E

Dinshaw is recognized as the founder of ACC. This merger was the first of its kind even

before the term mergers and acquisitions were coined.

The Tata group was with the group till 1999. By the end of 2000 the Tata group sold all 14.45

per cent of its shareholding in ACC to subsidiary companies of Gujarat Ambuja Cements Ltd

(later called Ambuja Cement Ltd), who then became the largest single shareholder in ACC.

In a significant turn of events in 2005 a new association of Holcim group of Switzerland and

ACC was formed with the help of Ambuja Cements India Limited (ACIL) after which

shareholdings of ACIL increased to 34.69 percent.

This is an important event in the history of ACC as Holcim was a world leader in cement

production with worldwide operations in 70 countries.

ACC's First Board Meeting in 1936 at The Esplanade, Mumbai.

4

Slogan:

“Build with Confidence” a very catchy and apt tagline which caters well to its clients.

Vision:

“To be one of the most respected companies in India; recognized for challenging conventions

and delivering on our promises.”

Major Milestones:

Year Actions

1936 ACC Limited formed. First board meeting.

1947 India’s first entirely indigenous cement plant

set up at Chaibasa, Bihar.

1956 Bulk Cement Depot established at Delhi.

1961 Manufacture of Portland Slag Cement (from

Chaibasa plant) and Accocid Cement

(resistant to corrosion of acid and chemicals)

for the first time in India.

1968 Advent of computers in ACC for data

processing and designing management

information and control systems.

1973 Take-over of The Cement Marketing

Company of India.

1977 ASSOCHAM national award for contribution

in rural and agricultural development

activities.

1978 Introduction of the energy efficient

precalcinator technology for the first time in

India. Full scale commercial production

based on MFC technology at Wadi in 1979.

1979 ACC wins international contract for

operation and management of a cement plant

at Yanbu-Ras Biridi in Saudi Arabia.

5

1982 Commissioning of the first 1 MTPA plant in

the country at Wadi, Karnataka.

1987 New binder for sub-zero temperatures

developed to be used for Indian expedition to

Antarctica.

1992 Incorporation of Bulk Cement Corporation of

India, a joint venture with the Government of

India.

1995 Selected as the most respected company by

Business India

1999-2000 Tata Group sells their stake in ACC to the

GACL group, who with 14.45% now emerge

as the single largest shareholder of ACC.

2004 Listed in London Stock Exchange

2005 Strategic alliance with Holcim group.

2008 CNBC-TV18 India Business Leader Award.

2010 FICCI Award for Outstanding Corporate

Vision

2011 World’s largest kiln installed at Wadi Plant,

in Karnataka.

Major Manufacturing Units:

ACC Limited has its major manufacturing sites at the following places:

Bargarh Cement Works

Chaibasa Cement Works

Chanda Cement Works

Damodhar Cement Works

Kudithini Cement Works

Kymore Cement Works

Sindri Cement Works

Wadi Cement Works

Thondebhavi Cement Works

Tikaria Cement Works

6

Ambuja Cements Limited:

History:

Ambuja Cements Limited is one of the leading cement

manufacturing companies in India. It was founded by Narotam

Sekhsaria and Suresh Neotia in 1983. It was previously known as

Gujarat Ambuja Cements Ltd. Under Narotam Sekhsaria

business acumen and leadership skills the company registered

good growth rate. The company commenced cement production in 1986. The global cement

major Holcim acquired management control of ACL in 2006. Holcim holds a little over 46%

equity in ACL. It has a capacity of 25 million tonnes from its five integrated cement

manufacturing plants and eight cement grinding units from across the country.

Its environment protection measures are on par with global standards. It is the first cement

company to built 3 captive ports along the west coast of India to facilitate timely, cost

effective and environmentally cleaner shipments of bulk cement to its customers.

Cement Manufacturing Unit in Gujarat.

7

Slogan:

With “Viraat Compressive Strength” as their tagline Ambuja Cements Limited the company

appeals to its target consumers as the strongest cement available in the market.

Vision:

“To be the most admired and competitive company in our industry.”

Major Milestones:

Year Actions

1986 First cement manufacturing plant set up at

Ambujanagar, Gujarat worth 0.7 million

tonnes capacity commences production.

1988 Undertook the Van-Vihar project to convert a

mined area into an environmentally restored

and scenic location.

1992 Setting up plants at Ambujanagar, Gujarat and

at Suli, Himachal Pradesh. Also the company

Kodinar Taluka under its CSR initiative

1996 Achieves highest ever export by any Indian

Cement Company.

1997 Setting up of power plants at Gujarat and

Himachal Pradesh.

1999 Cement plant set up in Sri Lanka.

2002 Over 100% capacity utilisation achieved at

Chandrapur Plant.

2007 Chairman Suresh Neotia is awarded with

Padma Bhushan.

2008 Corporate communications department set up.

2011 Achieves water-positive status, as certified by

an independent foundation, Det Norske

Veritas.

8

UltraTech Cement Limited:

History:

One of the most important players in Indian Cement

Industry is UltraTech Cement Limited. It belongs to the

group of Grasim Industries under the house of Birlas

(Aditya Vikram Group). The inception of the company

can be traced back to mid 1980s (1983-85) with the establishment of Grasim’s first cement

plant at Jawad in Madhya Pradesh. In 2001 with the positive vibe of industrialization and

growth of economy the management decide to increase its reach. In the process Grasim

acquired a stake in L&T Cement. The stake was further increased to majority stake in 2003

thereby giving them a pan-India presence and increased market share. The demerger of L&T

business was completed in 2004 and Grasim acquired a controlling stake in L&T cement Ltd

and the name was changed to UltraTech Cement. In 2010 Samrudhhi Cement Ltd was

amalgamated with UltraTech Cement in July 2010. In September 2010, UltraTech Cement

acquired management control of ETA Star Cement Company, along with its operations in the

UAE, Bahrain and Bangladesh, thereby putting UltraTech on the global map. It is now the

10th

largest producer of grey cement in the world.

Advertisement showing the takeover of L&T Cement

9

Slogan:

With a strong a tagline of “The Engineer’s Choice” UltraTech Cement appeals to its

consumers as the cement that is even preferred by Civil and Construction engineers.

Vision:

Their vision is driven by their values of

INTEGRITY: Honesty in Every Action

Acting and taking decisions in a manner that these are fair, honest, following the

highest standards of professionalism and are also perceived to be so.

COMMITMENT: Deliver on the Promise

On the foundation of Integrity, doing whatever it takes to deliver value to

stakeholders.

PASSION: Energised Action

A missionary zeal arising out of emotional engagement with the organisation that

makes work joyful and inspires each one to give his or her best.

SEAMLESSNESS: Boundary Less in Letter and Spirit

Thinking and working together across functional silos, hierarchies, businesses and

geographies.

SPEED: One Step Ahead Always

Continuously seeking to crash timelines and choosing the right rhythm to optimise

organizational efficiencies.

Major Milestones:

Year Action

1983 Awarpur Cement Works Plant I acquired.

1987 Awarpur Cement Works Plant II acquired.

1994 Hirmi Cement Works acquired.

1995 (IPVM) National Award By Ministry of

Environment & Forests, Government of

India.

10

1998 IMC Ramakrishna Bajaj National Quality

Award. Capexil Certificate of Export

Recognition - Top Exporter- Cement,

Asbestos, Cement Products

1999 Narmada Cement Company Limited

acquired. Ratnagiri Cement Works

acquired.

2001 Grasim acquires 10 per cent stake in

L&T. Subsequently increases stake to

15.3 per cent by October 2002. Durgapur

grinding unit becomes functional.

2002 The Grasim Board approves an open offer for

purchase of up to 20% of the equity shares of

Larsen & Toubro Ltd (L&T), in accordance

with the provisions and guidelines issued by

the SEBI Regulations, 1997. Grasim

increases its stake in L&T to 14.15%.

2004 L&T cement business demerged. New

entity formed named as UltraTech

Cement.

2006 Narmada Cement Company Limited

amalgamated with UltraTech under the

provision of Sick Industrial companied

Act.

2008 Golden Peacock National Quality Award.

2010 Acquired management control of ETA

Star Cement together with its operations

in the UAE, Bahrain and Bangladesh.

Samrudhhi Cement Limited amalgamated

with UltraTech Cement Limited in July

2010.

2011 ASSOCHAM CSR Excellence Award for

its "truly outstanding" CSR activities.

11

JK Cement Limited:

History:

JK Cement is an affiliate of the J.K. Organization, which

was founded by Lala Kamlapat Singhania. Commercial

production commenced in May 1975 at our first plant at

Nimbahera, Rajasthan. At Nimbahera, we started with a single kiln with a production

capacity of 0.3 million tons. After adding two more kilns and precalciner with a capacity of

0.4 million tons in 1988, capacity at Nimbahera increased to 1.54 million tons. During the

years 1998 through 2003, continuous implementation of modifications to each of the kilns,

increased the aggregate capacity at Nimbahera to 2.8 million tons as of September 30, 2005.

Today, J. K. Cement Ltd. is one of the largest cement manufacturers in Northern India. They

are also the second largest white cement manufacturer in India by production capacity. While

the grey cement is primarily sold in the north Indian market, the white cement enjoys demand

in the export market including countries like South Africa, Nigeria, Singapore, Bahrain,

Bangladesh, Sri Lanka, Kenya, Tanzania, UAE and Nepal.

Nimbahera Unit, Rajasthan.

12

Slogan:

With their tag line “Deewarien Bol Uthengi” JK Cement Limited emphasizes on their quality

and customer satisfaction.

Vision:

Their vision is expansion through balancing equipment keeping in mind customer satisfaction

with a constant focus on quality control.

Major Milestones:

Year Action 1975 Nimbahera Unit commenced production with

initial capacity of 0.3 million tonnes per annum.

1979 Second production line at Nimbahera Unit

increased production to 0.72 MnTPA.

1982 Third production line at Nimbahera Unit

increased production to 1.14 MnTPA.

1984 Lime-based white cement plant was established

at Gotan, with an initial capacity of 0.05 MnTPA.

1987 A captive thermal power plant was installed at

Bamania.

1988 A pre-calciner was installed at Nimbahera,

increasing the total capacity to 1.54 MnTPA.

1990 The JKSL Cement Division instituted Architect

of the Year award.

2000 The total capacity of the white cement plant at

Gotan was increased to 0.3 MnTPA.

2005 The Company was listed on the BSE.

2006 JK Cement finalised the issue price of its recently

concluded Initial public offering (IPO) at Rs 148

per share.

2009 The installed capacity of grey cement increased

to 7.5 MnTPA with the merger of Jaykeycem

Ltd.

13

Comparison

Market Share:

Company Market Share By installed capacity (%)

ACC 10.30

UltraTech 18.30

Ambuja 9.60

JK Cement 3.90

Others 57.90

Prices:

The following chart describes the price of cement in various parts of India from Jan, 2012 to

April, 2012.

Region\Months Jan(`/50kg) Feb(`/50kg) Mar(`/50kg) Apr(`/50kg)

East 290 302 305 310

West 260 280 305 300

North 275 270 280 278

South 288 285 300 300

Central 255 250 270 280

14

Distribution Network:

Export Domestic

Cement Plant/Manufacturing Unit

Export/

Domestic

Transport Agents Transport Agents

Railways/

Roadways

Railways/

Roadways

PORTS Distributors/Dealers

End User

15

ACC Limited

Ambuja Cements.

UltraTech Cement.

JK Cement.

16

Promotions:

ACC Limited:

With the tag line of their product “Sada Atoot Raho” they focus on the longevity of their

product. With the actors in the commercial as common people they have been successful in

reaching the common masses as they could relate to themselves more to the advertisement.

Ambuja Cements Limited:

With this television commercial Ambuja Cement focuses on its quality and strength of its

product. This feature also comics the Indian family problem of division of property. The

depth of the advertisement is not only to promote the product but also has the moral of not

building walls between relationships.

17

UltraTech Cement Limited:

UltraTech appeals to its masses by conveying the message that it’s the engineer’s choice

thereby giving reliability and trustworthiness. Also they were among the front runners in

sponsoring the IPL team Rajasthan Royals thereby making its presence felt at the most

happening cricket tournament in India.

JK Cement Limited:

JK Cement in an aggressive promotional action finalized on explosive Indian batsman

Virender Sehwag as their brand ambassador. It was a good choice as he is a popular figure in

India and also belongs to the northern part of India which is where maximum business of JK

Cement comes from.

18

Observations

Cement production (in million tonnes) for the period 2009 to 2011:

Profit after TAX in `crores for the period 2009 to 2011:

Company\Year 2009 2010 2011

ACC 21.37 21.14 23.46

UltraTech 15.87 17.64 32.92

Ambuja 18.83 20.13 20.97

JK Cement 4.58 5.5 5.7

Company\Year 2009 2010 2011

ACC 1607 1120 1325

UltraTech 977 1093 1719

Ambuja 1218 1264 1229

JK Cement 142 226 64.05

19

Sales volume in million tonnes for the period 2009 to 2011:

Net worth in ` crores for the period 2009 to 2011:

Company\Year 2009 2010 2011

ACC 21.5 21.29 23.73

UltraTech 15.8 17.77 33.23

Ambuja 18.79 20 20.91

JK Cement 4.55 5.45 5.7

Company\Year 2009 2010 2011

ACC 6016 6469 7192

UltraTech 3602 4609 10666

Ambuja 6468 7330 8069

JK Cement 901.62 1082.41 1522.1

20

Cement Industry: Overview

CMA is targeting to achieve 550 million tonnes capacity by 2020. The data for

Capacity and Production for the fiscal period of 2009 to 2011 are as follows:

The data for Cement production and despatch (as % of total capacity) for the

previous two Fiscal Year is as follows:

Fiscal Year Capacity in MnT Production in MnT

2009 230.6 187.6

2010 266.2 201

2011 285.8 211

Year Cement Production(%) Cement Despatched(%)

2011-2012 98.81 97.84

2010-2011 96.75 96

21

Being a bulk item transporting cement over long distances can prove to be

uneconomical as it attracts very high amount of freight. Thus it has been segmented

regionally i.e. Northern, Central, Western, Southern and Eastern. As it is a freight

intensive industry, the segment is completely domestic driven and exports account for

very negligible percentage of the total cement off take.

India ranks 2nd

in the world cement producing countries.

Cement Industry now meets with the pollution standards and is in fact one major

consumer of fly ash from Thermal Power Plants and slag from Steel Industry.

The sector operates on high level of fixed cost and therefore volume growth is

necessary for good growth margins. It is a highly Capital-Intensive Sector.

Access to raw materials and consuming markets is very necessary as it is a very bulky

commodity.

The sector is energy intensive in nature as Power plays an important role in the cost of

the product. Hence many companies resort to captive power plant for energy supplies.

22

Michael Porter’s Five Forces analysis of the Cement Sector:

BCG Matrix of the Companies studied in this article:

It is expected that in 2012-13 subdued demand along with excess capacities would

lead to a fall in capacity utilisation.

23

Capacity utilization (%) for the period of 5 years from 2008-12 is as below:

The demand is expected to grow by 8% YOY in 2012-13. This is likely to be

spearheaded by infrastructure and household projects in urban places from the west

and the east.

The price of cement is expected to remain constant.

News that would boost the cement market:

o Ministry of Roadways, Transport & Highways to roll out $120 billion project

to widen National Highways.

o DLF & Unitech plans a total of `7,000 crores investment in malls.

o Strong balance sheet of the Cement manufacturing companies to fund for

future growth.

o The penalty at three times the profits made via cartelisation by Competition

Commission of India is harsh, subjective in nature and may not materialise.

Major Challenges:

o Economic slowdown and high taxation such as sales tax, VAT, royalty, etc.

o Price of domestic coal is on the rise as well importing coal for energy is

becoming costlier due to the weakening Rupee.

Major relief actions by government:

o Overall taxation can be reduced by 20-25% and also by reducing the cross

subsidy burden on electricity, railway freight.

Manufacturers need to maximize production of blended cement by using industrial

waste & by using efficient machines which lowers input cost.

24

Bibliography

http://www.equitymaster.com

http://www.aceanalyser.com

http://www.jkcement.com

http://www.acclimited.com

http://www.ambujacement.com

http://www.ultratechcement.com

Annual Report : JKCement 2009-10

Annual Report : JKCement 2010-11

Annual Report : UltraTech Cement 2009-10

Annual Report : UltraTech Cement 2010-11

Annual Report : ACC Limited 2009-10

Annual Report : ACC Limited 2010-11

Annual Report : Ambuja Cement 2009-10

Annual Report : Ambuja Cement 2010-11

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http://www.ibef.org

http://www.bseindia.com

http://economictimes.indiatimes.com

http://www.business-standard.com

http://www.constructionupdate.com