Overview of Cement Industry
At the beginning we will be seeing the whole cement industry.So we begin with where our state stands in footings of cement industry. The Indian cement industry has a entire capacity of about 200 million metric tons ( MT ) in 2008-09 and comes 2nd in the universe after China. Although in present scenario consolidation has taken topographic point in the Indian cement industry with the top five participants commanding about 60 % of the capacity, but still the balance capacity still remains pretty fragmented. Sing the fact that the Indian cement industry has clocked production of more than 100 MT for the last five old ages, registering a growing of about 9 % to 10 % , the per capita ingestion of around 134 kilogram compares ill with the universe norm of over 263 kilograms, and more than 950 kg production per capita in China market. This shows that there underlines the enormous range for growing in the Indian cement industry in the long term. Cement, a majority trade good, is freight intensive industry and so transporting cement over long distances can turn out to be wasteful. This has resulted in the bifurcation of cement ( being mostly a regional drama ) industry and is divided into five chief parts viz.
North, South, West, east and the cardinal part. The southern part had extra capacity in the past owing to the abundant handiness of limestone, the western and northern parts are the most moneymaking markets on history of higher income degrees. However, with the capacity add-on taking topographic point at a much slower rate as to be compared with growing in demand, late the demand supply equality had besides been restored to some breadth in the Southern part. Considering besides the gait at which infrastructural activity is taking topographic point in different parts, the major participants in the market have lined up there enlargement programs consequently.
Given the high potency for growing, rather a few foreign transnationals are seeing the chance in the Indian markets and are besides be aftering to get the domestic companies. Already, companies like Lafarge, Heidelberg and Italicementi have made some of the acquisitions, Holcim has acquired interest in the domestic companies. Ambuja Cements and ACC are increasing its interest bit by bit to derive full control. After geting interest in large companies, transnationals had now eyes on the average capacity manufacturers.
Italcementi acquires hundred per centum interest in Zuari Cement and 95 % interest in Shree Vishnu. Cimpor, the Portugese cement maker, has acquired the interest of Grasim ( 53.63 % ) in Shree Dig Vijay. However, it must be taken into consideration that the transnationals will happen the traveling tough since cement is the game of volumes of cement produced and with the average capacity of these disconnected participants on which they are banking upon, they will hold to get capacities little by little and this path is filled with tonss of uncertainnesss. The planetary participants, seting all of them together, histories for one-fourth portion of the domestic market. Further, turning around the few of the companies at a clip when the rhythm is at its extremum would be a really hard undertaking.
Sing the long term growing narrative, equity in ratings, disconnected construction of the industry and low geartrain, another moving ridge of consolidation would non come upon us as a surprise. Some of the Keypoints that will do the image clear about the cement industry in India has been analysed as below Supply: -The demand supply state of affairs is tightly balanced with supply marginally higher than the demand. Demand: -Housing sector has besides carried as a chief market for the makers of cement.
Industrial and substructure are besides emerging out fast as good market of cement industry. Barriers to entry: -High capital costs and long gestation periods and entree to the limestone militias has been a major obstruction in the growing of the cement industry. Dickering power of providers: -Shortage of fuel and coal monetary values have ever remained a concern. Licensing of coal and limestone militias, the cement conveyance by the railroads, power from the province grid supply remains a concern for the cement industry. Dickering power of clients: -In cement industry stigmatization is coming up every bit due to choice perceptual experience going heavy on the supply of the cement in the heads of the client. Competition: -Due to presence of larger figure of companies in the market, there is intense battle for endurance in the market
Current province of Cement Industry
In fiscal twelvemonth 2009 the cement industry has maintained its growing to 10 % .
The industry added 30 metric tons and has taken the production to 212 MTPA.India due to its locational advantage has been seeing the demands of the cement demands of the Middle East and the South East Asiatic states. However, the exports were cut out in 2009 fiscal twelvemonth to incorporate rising prices and to run into the domestic demand. The overheated existent estate sector is chilling off now. Sing the fiscal convulsion witnessed globally, fiscal establishments have besides tightened their recognition policies. This cautious position has led to a recognition crunch and the same has an consequence on the approaching undertakings. On the stalking-horse of general economic lag and these issues, the demand for cement has moderated.
However, thanks to the stimulation bundles announced by the authorities and agricultural income that has given a bonus to the demand for the trade good. The industry volumes and realisations which were higher during the class of FY09 has boosted top line growing. However, still the cost of operation besides witnessed upward motion that exerted force per unit area on borders. The tendency is that cement industry on an mean maintains two months stock list of fuel and such costs. The petroleum monetary values have merely started to acquire down November 2008 onwards, the benefit of which will get down fluxing in get downing one-fourth which began on the terminal of March 2009 onwards. Smooth supply of province grid power is another job. So as to guarantee the smooth operation of the workss and to cut costs, industry has opted to put up confined power workss based on coal. This has resulted in the addition in the demand of the coal.
But still coal linkages for the industry are hapless. Recently the ratio has dropped below 50 % of coal likages. So the participants will either hold to buy it from unfastened market or import it. This has led to an addition in the cost of operation. The industry had lined up immense capex programs with that depreciation costs have moved up. All of this has led to a dent in profitableness. Future chances of cement industry analysis: – In the recent yesteryear, as the demand has overtaken supply, ensuing in high and healthy cement monetary values across the state. However, this scenario will change by reversal as the industry is run alonging up for immense capacity enlargement programs.
With the growing in the cement sector and shortening demand supply spread, cement manufacturers are run alonging up at that place capacity enlargement programs either by brownfield or greenfiled enlargement path. The fresh capacities announced boulder clay day of the month has added up to 60 MT to the bing capacity ( 200 MT ) , and is expected to travel on this manner by FY10. As the capacities will go operational, which has already started taking topographic point, supply may one time once more exceed demand seting downward force per unit area on borders.
Having said that, impermanent alleviation can be provided if there are farther any holds in any of the proposed enlargement programs. While substructure disbursement had been a great blessing and there is a strong support from the steady growing of the building sector besides, Recently the demand has slowed down as existent estate and building activities in the urban countries have taken a awkwardness with economic lag. The importance of the lodging sector in ingestion of cement can be gauged from the fact that it consumes about 60 % -70 % of the state ‘s cement. If this support disappears or reduces, it would impact the growing in ingestion of cement, taking to demand supply mismatch. Besides, the rise in monetary values of coal and crude oil merchandises could hold an impact on cement companies ‘ borders.
Cement Industry and Budget
As cement paths GDP growing, the sector is impacted by ups and downs or stagnations of the economic rhythms.
While the average term growing chances has been impacted by the economic lag, the long term growing narrative remains integral. This is chiefly due to enterprises taken up by the authorities in the substructure and lodging sectors that are likely to be the chief drift to growing for the industry in the long tally. Budget Measures: – A batch of inducements have been put up for terminal users of cement such as the lodging sector and development of substructure. Some of them via media of Housing and proviso of basic comfortss to the urban hapless enhanced to about Rs 40 billion. Rs 20 billion has been provided for Rural Housing Fund ( RHF ) . Allotment towards the National Highway Development Programme has increased by 23 % over Fiscal twelvemonth 2009 ( FY09 ) budgeted estimates.
Customs responsibility freedom on concrete batching workss of capacity 50 three-dimensional meters per hr or more has been withdrawn. Such workss will now will be levied with imposts responsibility of 7.5 % . Fringe benefit revenue enhancement ( FBT ) has been abolished. Rate of minimal alternate revenue enhancement ( MAT ) on booking net incomes has been increased from 10 % to 15 % , but it has came with a proviso of transporting frontward the revenue enhancement recognition on MAT to ten old ages from the current seven old ages. Impact of Budget on Cement Industry: The authorities has increased budgetary allotment of money for roads under NHDP.
Further, with more inducements being doled out for the substructure and lodging sector, cement makers will go on to profit from it. Imposition of 7.5 % imposts duty revenue enhancement on concrete batching workss is likely to negatively impact the ready mix concrete makers. However, it wo n’t hold a terrible impact on the industry as a whole because as RMC constitutes non more than 5 % of entire cement ingestion.
Impact of Budget on Company
The increased focal point which is now being shown to infrastructure development and lodging sector is expected to raise demand for cement, which is the cardinal building stuff, and therefore volumes of cement makers such as ACC, Ambuja Cements and Madras Cements. RMC ( ready mix cement ) makers like ACC, UltraTech, would be impacted with the infliction of usage responsibility.
Ambuja Cement on stigmatization
Cement is a trade good, sold mostly on monetary value. Ambuja Cement was the first company that created a trade name out of cement and has commanded a premium.
It was besides the first which introduced a particular cell, that provided proficient services to consumers and Masons. Today, this has become a norm in cement selling. The fast one was to supply a high quality of cement on the consistent footing, backed by an first-class service. And this all was reinforced by the presence of strong trader web. The consequence was, clients were ready to pay a 2-3 % premium for Ambuja Cement for the value they received. Ambuja Cement is now the top trade name in Western, Northern, Central and Eastern India.
Some Accomplishments of Ambuja Cement
1. Inventing a whole new manner of transporting the cement: – In the early 1990s, about all cement in India used to be travelled by rail or route. And it was transported in bags. A manner that involves impairment of both, the quality and volume of the cement. In 1993, Ambuja Cement setted up a complete system of transit of bulk cement via the sea path.
This made it the first company of India to present bulk cement motion by sea. Others followed its stairss and today, unit of ammunition about 10 % cement travels by the sea path. The installation comprises of: A dedicated port nowadays at the Gujarat works, capable of holding 40,000 Deadweight tunnage ( DWT ) vass, three terminuss present at Mumbai, Surat and Sri Lanka, and seven particular bulk cement vass. This capableness has enabled it further to provide fresh cement to many coastal markets – domestic and international. 2.2.
8 kilometre conveyer belt running through three hills was constructed in merely 9 months. 3.Introduced a wholly new system of transporting cement in India – the majority cement transit by sea. 4.Introduced complete blast free limestone excavation by utilizing the surface mineworker in limestone excavation for the first clip in India.
5.Created H2O reservoirs in used up mines and raised the H2O tabular array in waterless countries. 6.Our workss have achieved the lowest pollution degrees – comparable with the most strongest norms present, the Swiss criterions.
Awards and Recognition
National Award for committedness to quality by the Prime Minister of India was given. 2.National Award for outstanding pollution control by the Prime Minister of India was given. 3.Eco-Gold Star by TERI. 4.Best Export Award by CAPEXIL.
5.Award for Corporate Social Responsibility by Business World – FICCI 6.International Award for Rural Development by Asian Management Institute ( AIM ) 7.ISO 9002 Quality Certification. 8.
ISO 14000 Certification for environmental systems.
Environment of Ambuja Cement
From the beginning, Ambuja has believed that a cement works can non boom at the cost of the environment. This is the ground why it adheres to the most strict international environmental norms. The pollution degrees at all its cement workss are comparably lower than the strict Swiss criterions of 100 mg/NM 3. At Gujarat workss, surface mineworkers have been employed to grate the surface of the mines. Therefore guaranting that all the excavation is wholly blast free. There is besides no noise or air pollution. Similarly in the Himachal Pradesh works, Ambuja has employed techniques for excavation that have made the excavation perfectly safe and pollution loose.
Not surprisingly so, the company has systematically won awards for its pollution free workss. Awards every bit esteemed as the National Award for Outstanding Pollution Control and The Eco-Gold Star of Tata Energy Research Institute ( TERI ) .
Ambuja Cement exports about 17 % of its production in a really competitory international environment. For the last 10 old ages, Ambuja Cement remains India ‘s highest exporter of cement. This has been possible for two grounds One, the quality of cement lucifers the best in the universe. Two, the dedicated majority cement transit capableness at its Gujarat works.
Performance during last five old ages
An analysis of above graph indicates that Ambuja cements has holding a monetary value which was ever lifting but in FY09 one-fourth due to economic lag and due to the exposure that supply has increased more than demand. Its dividends had been about changeless over a period of clip.
However entire net incomes show a downward indicant with net incomes going low after a rise in old twelvemonth.
Corporate societal duties
In 1991, the Ambuja ‘s set up Ambuja Cement Foundation to do an all-around development of the people possible around its cement workss. The Foundation decided to track the hard but more productive way which was in assisting the people so that they are able to assist themselves.
With greater dedication and committedness, the foundation made the local people to take part in the procedures and therefore have their development procedure. It became a facilitator and accelerator, instead than a erstwhile fund supplier. It developed easy replicable and sustainable faculties for H2O direction, sustainable agribusiness and health care. All this attempt in dispatching its societal duty has earned the company acknowledgment across Asia.
Findingss and recommendations
There is a enormous range of development in the instance of cement industry as per capita ingestion of cement is really low harmonizing to the universe criterion in India. And to add in cement industry regional competition comes into image as it is hard to transport cement over long distances as it becomes wasteful. Although there is a passage in the position of the consumers as now they are traveling for quality perceptual experience but still lot demands to be done. Indian market is majorly differentiated into five parts north, South, east, west and cardinal part. The southern part has an extra capacity in the past and present due to the handiness of the limestone. The western and northern parts are still the most moneymaking markets on the stalking-horse of higher income degrees population and besides sing the gait at which substructure activity is taking topographic point in the assorted parts, the participants have planned up there enlargement programs consequently. And to add to this point Indian market is still being eyed up by the international companies like Lafarge etc.
Budget has besides given some sort of enterprise to the cement industry this twelvemonth by increasing the route under NHDP and in footings of lodging and substructure sector. Imposition of usage responsibility revenue enhancement on the concrete batching workss will hold an consequence on the cement industry but non every bit much, as ready mix concrete makers account for merely 5 % of entire gross merely.
Ambuja cement being topmost participant in the cement industry in India demands to tackle best out of these inaugural. Now something about Ambuja cement as to where it stands in the market. It has set ends and achieved them with important borders, some of the cardinal distinguishing points achieved are constructing of a cement works in record 13 months,2.8 kilometre conveyer belt running through three hills was constructed in merely 9 months, and debut of a wholly new system of transporting cement in India – the majority cement transit by sea, Introduced complete blast free limestone excavation by utilizing the surface mineworker in limestone excavation for the first clip in India, Created H2O reservoirs in used up mines and raised the H2O tabular array in waterless countries, workss have achieved the lowest pollution degrees – comparable with the most strongest Swiss criterions. From the beginning, Ambuja Cement has propagated a belief that a cement works can non boom at the cost of the environment. That is the ground why it follows the most strict international environmental norms.
The pollution degrees at all its cement workss are even lower than the strict Swiss criterions of 100 mg/NM 3.At the Gujarat workss, surface mineworkers have been employed to grate the surface of the mines. It ensures that all the excavation is blast free. There is no pollution ( noise or air ) . Bing set up in 1986, a decennary subsequently, it has risen as one of universe ‘s most efficient cement companies bring forthing the finest cement in the universe at the lowest cost.
While it adheres to the most rigorous international pollution-control norms. Today, Ambuja is the 3rd largest cement company in India, with an one-year works capacity of 16 million metric tons including Ambuja Cement Eastern Ltd. and gross in surplus of Rs.
3298 crores. More significantly, workss of Ambuja cement are the most efficient 1s in the universe. But the company ‘s most typical property is its attack to the concern. It believes its most valuable assets are n’t cement workss.
They are the people who run the workss. This alone vision is embedded in the company ‘s homegrown doctrine of giving people the authorization to put their ain marks, and the freedom to accomplish their ends. It ‘s called ‘I can ” . This has created an environment where there exists no bounds to excellence, no bounds to efficiency.
And is turn outing to be a powerful engine of growing for the company. And as a consequence, Ambuja has systematically raised the saloon in all facets of the cement industry. Be it transit, works efficiency, trade name edifice or human resource development. Similarly at the Himachal Pradesh works, Ambuja is using techniques that have made excavation perfectly safe and pollution loose. Not surprisingly so, the company has won awards on consistent footing for its pollution free workss. Major awards that company has got includes the National Award for Outstanding Pollution Control and The Eco-Gold Star of Tata Energy Research Institute ( TERI ) . Ambuja Cement is exporting about 17 % of its production in a really competitory international environment.
For the last 10 old ages, Ambuja Cement remains India ‘s highest exporter of cement. This has been possible for two grounds -One, the quality of cement lucifers the best in the universe. Two, the dedicated majority cement transit capableness at its Gujarat works. So there is a immense range of development both in instance of cement industry and Ambuja.