TABLE OF CONTENTS[/b]
[/b]
Page No
1. Introduction 3
2. Indian Cement Industry Analysis 4
3. Aditya Birla Group 9
4. Ultra Tech Cement 14
5. Conclusion 19
6. Bibliography 20
Figures [/b]
1. Cement Demand Drivers 5
2. Hindalco Net Sales 11
3. Birla Nuvo Consolidated Revenues 12
4. Birla Nuvo Revenue Mix 12
5. Ultra Tech Net Earnings 16
6. Ultra Tech Net Worth 16
7. Movement of Share Prices of Ultra Tech 17
Tables[/b]
1. Cement Dispatch Growth 5
2. Ultra Tech Sales Volume 14
3. Ultra Tech Sales Realisation 15
4. Financial Highlights of Ultra Tech 17
5. Ultra Tech and its Competitors 18
INTRODUCTION[/b]
[/b]
The
Indian cement industry is on a roll. Driven by a booming housing sector, global
demand and increased activity in infrastructure development such as state and
national highways, the cement industry has outpaced itself, ramping up
production capacity, attracting the top cement companies in the world, and
sparking off a spate of mergers and acquisitions to spur growth. The recent
boom in the housing and construction industry in India has worked wonders for cement
manufacturing companies with capacity utilization crossing the 100 per cent
mark for the first time in January 2007. [/b]
[/b]
Globally,
India
is the second largest producer of cement. Cement production grew at the rate of
9.1 per cent during 2006-07 over the previous fiscals’ total production of
147.8 mt. Of this, 9.3 million tone of cement was exported. The Indian cement
industry comprises 130 large cement plants and 365 mini-cement plants, with
installed capacities of 165 million tones per annum (tap). Large cement plants
accounted for over 94 per cent of the total installed capacity. [/b]
[/b]
The
booming demand for cement, both in India
and abroad, have attracted global majors to India. In 2005-06, four of the
top-5 cement companies in the world entered India
through mergers, acquisitions, joint ventures or Greenfield projects. These include France's Lafarge, Holcim from Switzerland, Italy's
Italcementi and Germany's Heidelberg Cements.[/b]
[/b]
Despite
the growth of the Indian cement industry, India's
per capita production of 115 kilograms per year lags the world average of over
250 kilograms and China's
production of more than 450 kilograms per year. Clearly there remains room for
growth in the industry in India.
[/b]
[/b]
This
Project is an Analysis on Indian Cement Industry and Ultra Tech Cement.
[/b]
[/i][/b]
[/i][/b]
[/i][/b]
[/i][/b]
INDIAN CEMENT INDUSTRY ANALYSIS[/i][/b]
The Indian
cement industry with a total capacity of about 200 m tonnes (MT) in FY09
is the second largest market after China. The key drivers for cement
demand are real estate sector, infrastructure projects and industrial expansion
projects. Among these, real estate sector is the main key driver and accounted
for almost 55% in FY 07.[/b] [/b]A few of the leading
manufacturers are the UltraTech/Grasim combine, Dalmia Cements, India Cements,
and Holcim etc. With the boost given by the government to various infrastructure
projects, road networks and housing facilities, growth in the cement
consumption is anticipated in the coming years. According to Jyotiraditya
Scindia, Minister of State for Commerce and Industry, cement production could
rise to 236.16 MT in FY11 and touch 262.61 MT in FY12.[/b]
With
almost total capacity utilization levels in the industry, cement dispatches
have maintained a 10 per cent growth rate. Total dispatches grew to 170 MT
during 2007–08 as against 155 MT in 2006–07.Moreover, cement dispatches were
15.95 MT in July 2009, showing a growth of 9.92 per cent as compared to 14.51
MT in July 2008. During July 2009, cement production was 16.23 MT, registering
a growth of 10.63 per cent as compared to 14.67 MT in July 2008. Between April
to July 2009, cement production totaled 66.38 MT while cement dispatches
totaled 65.80 MT.[/b]
Despite the fact that the Indian cement industry
has clocked production of more than 100 MT for the last five years, registering
a growth of nearly 9% to 10%, the per capita consumption of around 134 kgs
compares poorly with the world average of over 263 kgs, and more than 950 kgs
in China. This, more than anything, underlines the tremendous scope for growth
in the Indian cement industry in the long term.[/b]
[/b]
Given the high potential for growth, quite a few
foreign transnational have been eyeing the Indian markets and are planning to
acquire domestic companies. Already, while companies like Lafarge, Heidelberg
and Italicementi have made a couple of acquisitions, Holcim has acquired stake
in domestic companies Ambuja Cements and ACC and has increased its stake
gradually to gain full control. After acquiring stake in big companies,
transnationals eyed median capacity producers. Italcementi acquired 100% stake
in Zuari Cement and 95% stake in Shree Vishnu. Cimpor, the Portugese cement
manufacturer, acquired Grasims stake (53.63%) in Shree Dig Vijay. The global
players put together account of quarter share of the domestic market[/b]
[/b]
[/b]
DEMAND DRIVERS:[/b]
[/b]
Figure 1
[/b]
Cement dispatch growth at 5-year high in April:[/b]
[/b]
Table 1
Strong Growth
Cement dispatches in April [/b]
Year
Dispatch
Growth (%)
2004[/b]
10.63[/b]
17.85[/b]
2005[/b]
11.78 [/b]
10.82[/b]
2006[/b]
13.05[/b]
10.78[/b]
2007[/b]
13.88[/b]
6.36[/b]
2008[/b]
14.73[/b]
6.12[/b]
2009[/b]
16.65[/b]
13.03[/b]
All figures in
million tonnes [/b]
[/b]
ACC, the
country’s largest cement maker had a dispatch growth rate of 4.05 per cent in
April whereas Ambuja Cements registered a rise of 10.74 per cent. The cement
despatches of Aditya Birla group, comprising UltraTech Cement and Grasim, in
April jumped 17.43 per cent while the cement major from north Shree Cement’s
despatches surged a steep 28 per cent. The dramatic rise in April despatches is
due to the low base last year because of the export ban which came into effect
during the same period last year, thereby impacting despatches[/b]
The price
hike of Rs 12-15 for a 50 kg bag of cement during the March quarter of FY09 is
helping cement makers reap the benefits. The market players have always
maintained that pricing of cement is the function of supply and demand. The
government had come up with two stimulus packages which also benefited the
cement sector with excise duty cuts and re-imposition of counter-vailing duty
(CVD) on the imported cement from Pakistan. [/b]
Financial
Year 09:[/b]
FY09, the industry maintained volume growth of
around 10% YoY. The industry added nearly 30 MT in FY09 over the previous year
taking the total capacity to nearly 212 MTPA. India
also has been catering to the cement requirements of the Middle
East and the South East Asian nations. However, the exports were
curtailed in FY09 in order to satisfy the domestic demand and contain
inflation. While demand growth stood at 10% YoY, average industry cement realizations
(average of price per bag of cement) were higher by about 5% YoY. The growth in
realisations slowed down as additional capacities coming on stream eased the
supply pressures.[/b] [/b]
Considering
the financial turmoil witnessed globally, financial institutions have tightened
their credit norms. This cautious stance has led to a credit crunch and the
same has impacted upcoming projects. On account of general economic slowdown
and these issues, the demand for cement has moderated. However, stimulus packages
that included reduction in excise duty announced by the government and
agricultural income gave a fillip to the demand for the commodity[/b].[/b]
The industry volumes and realisations were higher
during FY09 that boosted top line growth. However, cost of operation did also
witnessed northward movement that exerted pressure on margins. To ensure smooth
functioning of plants and lower costs, industry has opted to set up captive
power plants based on coal. This has resulted in increase in demand for coal.
But coal linkages for the industry are poor. Recently the ratio has dropped
below 50%. So the players either have to purchase it from open market or import
it. This has increased cost of operation.[/b]
New
Investments
JSW
Cement, part of the OP Jindal Group, plans to set up cement units near the
group’s steel plants at Kurnool,
Andhra Pradesh, and Vijayanagar, Karnataka. The units which will have a
combined capacity of 5.5 MT per annum will be set up at a cost of US$
393.1 million.[/b]
Anil
Ambani Group Company Reliance Infrastructure will invest US$ 2.1 billion
to set up cement plants with a total capacity of 20 MT per annum over the
next five years.[/b]
Reliance
Cementation, an Anil Dhirubhai Ambani Group (ADAG) company plans to set up
a 5 MT integrated cement plant in Yavatmal district of Maharashtra at a
cost of US$ 463.2 million.[/b]
Jaiprakash
Associates Ltd has inked a MoU with state-owned Assam Mineral Development
Corporation Limited (AMDC) for setting up a 2 MT per annum capacity cement
plant at an estimated cost of US$ 221.36 million.[/b]
Iron
ore mining firm Rungta Mines (RML), the flagship company of SR Rungta
group, plans to set up a one million tonne cement plant in Orissa with an
investment of around US$ 123 million[/b]
[/list]
Mergers
and Acquisitions (M&As)
Holcim
strengthened its position in India by increasing its
holding in Ambuja Cement from 22 per cent to 56 per cent through various
open market transactions with an open offer for a total investment of US$
1.8 billion. Moreover, it also increased its stake in ACC Cement with US$ 486
million, being the single largest acquirer in the cement sector.[/b]
Leading
foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund
and Emerging Market Fund have together bought around 7.5 per cent in
India's third-largest cement firm, India Cements (ICL), for US$ 124.91
million.[/b]
Cimpor,
the Portugese cement maker, paid US$ 68.10 million for Grasim Industries'
53.63 per cent stake in Shree Dig Vijay Cement.[/b]
CRH
Plc, the world's second biggest maker and distributor of building
materials, acquired a 50 per cent stake in My Home Industries Ltd for
almost US$ 372.64 million.[/b]
Vicat
SA, a French cement maker acquired a 6.67 per cent stake in
Hyderabad-based Sagar Cement for US$ 14.35 million.[/b]
[/list]
[/b]
[/b]
[/b]
Prospects:[/b]
·
The industry is likely
to maintain its growth momentum and continue growing at around 8% to 9% in the
medium to long term. Government initiatives in the infrastructure sector and
the housing sector are likely to be the main drivers of growth for the
industry.[/b] [/b]
·
According to a report by the ICRA Industry
Monitor, the installed capacity is expected to increase to 241 MTPA by FY
2010-end. India's
cement industry is likely to record an annual growth of 10 per cent in the
coming years with higher domestic demand resulting in increased capacity utilization.[/b]
In the recent
past, demand has surpassed supply, resulting in healthy cement prices
across the country. However, this scenario is likely to reverse as the
industry has lined up huge capacity expansion plans. With the growth in
the sector and waning demand supply gap, cement producers have lined up
capacity expansion plans. [/b]
Real estate and
construction activities in the urban areas have taken a back seat with
economic slowdown. The importance of the housing sector in cement demand
can be gauged from the fact that it consumes almost 60%-70% of the
country’s cement. If this support wanes, it would impact the growth in
consumption of cement, leading to demand supply mismatch. Also, the hike
in prices of coal and petroleum products could impact cement companies
margins.[/b]
[/list]
[/b]
SWOT
ANALYSIS:[/b]
Strengths:
[/b]
1.
Growing International Presence[/b]
2. Cement
Demand has increased due to the growth in Housing sectors, [/b]
Infrastructure
sectors, Industrial projects etc.[/b]
3.
Capacity Utilization over 90%[/b]
Weakness:
[/b]
1. Cement
Industry is highly regionalized.[/b]
2. Low
value commodity makes transportation over long distances Uneconomical. [/b]
Opportunities:
[/b]
1. Growth
of core sector industries[/b]
2. Rapid
integration with global economy.[/b]
3.
Growing e-commerce business[/b]
4.
Increasing urbanization[/b]
Threats:
[/b]
1. Entry
of global players[/b]
2.
Political Threats[/b]
3. The
impact of foreign currency fluctuations and interest rates.[/b]
[/b]
[/b]