Develop Marketing Strategy Targeting at Increase in Market share for Jaypee Cement

1. “DEVELOP MARKETING
S T R AT E G Y F O R J AY P E E
C E M E N T TA R G E T I N G AT
INCREASE IN MARKET SHARE “

2. EXECUTIVE SUMMARY
"Many small things have been made large by the right kind of advertising."
Mark Twain
While working with Jaiprakash Associates during my 8 weeks summer internship I came to know about various
aspects of marketing and various process that occurs in marketing/sales department. And I suppose sole aim of
marketing is to create satisfied customers and selling more to more number of people, more often at higher prices.
The Jaypee Group is an Indian conglomerate based in Noida, India. It was founded by Jaiprakash Gaur which is
involved in well diversified infrastructure conglomerate with business interests in Engineering & Construction,
Power, Cement, Real Estate, Hospitality, Expressways, Sports & Education (not-for-profit).
After getting the opportunity to undergo my 8 weeks summer training in Jaiprakash Associates Ltd. I carried out
my project” Develop the marketing strategy for Jaypee cement targeting at increasing market share “.
I spent the first week in getting knowledge about the company profile, got the product knowledge from company’s
marketing department followed of various function and knowing how to find the target customer (Dealers, Sub-
Dealers& Retailers).
The remaining time I spent in studying, analyzing and finding potential for Jaypee cement brand and other
competitive brand in the Ghaziabad segmented market (area wise segmentation).
My product was Cement and my aim was to search the Market Potency of particular brand, to find out which
brand is most preferable in the market, and develop a strategy to increase the market share
My product’s cement complies with IS: 8112 -1989 for 43 Grade Ordinary Portland Cement and surpasses
IS:1489:1991, the laid down BIS standards for fly ash based PPC cement.
Features of my product are:
• High Compressive Strength and rate of strength gain.
• The superfine particles of cement provide great finish to the structure.
• Cement provides unsegregated concrete of better integrity.
• Impermeable concrete for durable construction.
• Resistant under aggressive environment even in coastal areas.
• Resistance to corrosive attack on steel reinforcement.
• Resistant to lime leaching.

3. • Low heat of hydration – Crack less construction.
• Reduces shrinkage and swelling.
• Beneficial effect on workability due to spherical shape of particles and their high fineness.
We categorize target customers by Cement Company as Dealer, Sub-Dealer, and Retailer etc.
During the Industry analysis I have found that in the last ten years cement sector has recorded a CAGR of 8%,
against the world cement industry average of 3.5% and China’s cement industry growth rate of 7.2%. Today this
industry not only outshines that of developed countries such as US and Japan but also has become the second
largest cement producer in the world after China.
The growth of cement industry has been trajectory in fashion over the past ten years. Domestic cement demand
growth has surpassed the economic growth rate for the past three years. Cement demand in the country grows at
roughly 1.5 times the GDP growth rate. According to CRISIL industry is expected to grow at a CAGR of around 8 per
cent in the next five years.
The key drivers for cement demand are real estate sector, infrastructure and industry expansion projects.
Among these real estate sector is the key driver of cement demand. The demand for cement is closely related to
the growth in the construction sector. Consequently, cement demand has been posting a healthy growth rate of
around 8 per cent since 1997-98, propelled by the increased thrust on infrastructure development, and the higher
demand from the housing sector and industrial projects.
Cement being a bulky commodity cannot be easily and economically transported over long distances. This
makescement a regional market place, with the nation being divided into five regions. Each region is characterized
by its own demand-supply dynamics.
With increase in infrastructure development activity with projects such as state and national highways, and global
demand has led Indian cement industry to increase their production capacity. This in turn has attracted the top
cement companies in the world to enter the Indian market and take the advantage of growth in demand.
I have also done detailed financial analysis of Jaiprakash Associated Ltd. to understand the its financial position.
Since Jaiprakash Associates Ltd. does not publish its cement division financial statements, the comparative analysis
has been done between ACC Cement Ltd. and Ambuja Cement Ltd. for last three year.
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4. INTRODUCTION& OBJECTIVES
Introduction to Jaiprakash Associates Ltd.
The Jaypee group is a Rs. 18,000 crore well diversified infrastructure conglomerate with business interests in
Engineering & Construction, Power, Cement, Real Estate, Hospitality, Expressways, Sports & Education (not-for-
profit). It is India's third largest cement producer, the largest private sector hydropower company with 1,700 MW
in operation. The Group has successfully completed projects in 18 states of India, and in Bhutan.
The Jaypee Group — has also been in the limelight after a group staged India's first Formula One race on October
30, 2011
Introduction to Summer Internship Project
Today’s successful companies share one thing in common: “Strong customer oriented approach and strong
commitment to marketing.”
Marketing, more than any other business function, deals with customers. Marketing can be defined as a process to
create satisfied customers at minimal cost.
In my Summer Internship project I had to develop a marketing strategy for Jaypee cement targeting at increase in
market share by understanding my customers and the market place environment and delve deeper into market
strategies and tactics used by its competitors.
Introduction to Internship Report
In this report I tried to understand the cement industry on a whole i.e. its structure, political economic, social and
technical factors and also how hostile is this Industry for all companies in it.
I have done the financial analysis of Jaiprakash Associated Ltd. And as it doesn’t publish its cement division
financial statement I have done comparative analysis between ACC Ltd. and Ambuja cement Ltd.
Objectives
To understand the various processes of marketing and sales department and develop marketing strategy
for Jaypee cement targeting at increase in market share.
To understand the structure of the cement industry.
To know how various Political, Economic, Social, and Technological factors affect the cement industry.
To know about the strengths & weaknesses of cement sector and the various opportunities and threats
present in the industry
To do the financial analysis of the company.
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5. Company Profile
SHRI JAIPRAKASH GAUR JI
With a single mined focus to pioneer a myriad of feats in civil engineering, ShriJaiprakash Gaur Ji, the founding
father of Jaiprakash Associated Ltd. Acquired a diploma in civil engineering in 1950 from the University of Roorkee.
After a stint with government of U.P he branched off on his own, to start as a civil contractor in 1958 with the
steadfast determination to contribute in nation building. This has been possible with the active support of his
honest colleagues such as ShriS.K.Jain, Shri N.C. Sharma, Shri G.P. Gaur, Shri P.K Jainanad Young Generation Ably
Headed By ShriManoj Gaur And Shri Sunil K. Sharma. Transforming challenges into opportunities has been the
hallmark of the Jaypee Group, ever since its inception four decades ago.
The Jaypee group is a Rs. 18,000 crore well diversified infrastructure conglomerate with business interests in
Engineering & Construction, Power, Cement, Real Estate, Hospitality, Expressways, Sports & Education (not-for-
profit).
The Group has always believed in “growth with a human face” and to fulfill its obligations it has set up
JaiprakashSewaSansthan (JSS), a ‘not-for-profit trust’ which primarily serves the objectives of socio-economic
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6. development, reducing the pain and distress in society .
The Group has always believed in “growth with a human face” and to fulfill its obligations it has Set up
JaiprakashSewaSansthan (JSS), a ‘not-for-profit trust’ which primarily serves the Objectives of socio-economic
development, reducing the pain and distress in society For over 4 decades now, Jaypee Group has supported the
socio-economic development of the Local environment in which it operates and ensured that the economically and
educationally Challenged strata around the work surroundings are also benefited from the Group’s growth by
Providing education, medical and other facilities for local development.
The Group also undertakes Comprehensive Rural Development Programme (CRDP) which Covers a wide range of
projects such as free medical camps, health check-ups for village school Children, literacy campaigns like Balwadi’s
for young boys and girls, safe drinking water supply, Creating huge water reservoirs in different villages, self-
employment which includes tailoring Classes for women and animal husbandry. Some other important activities
undertaken include. The renovation of old temples, other schools and hospital buildings in the adjoining adopted
Villages.
Today the group is the 3rd largest cement producer in the country .The groups cement facilities Are located in the
Satna Cluster (M.P.), which has one of the highest cement production growth Rates in India. The group produces
special blend of Portland Pozzolana Cement under the brand Name ‘Jaypee Cement’ (PPC). Its cement division
currently operates modern, computerized Process control cement plants with an aggregate capacity of 22.80
MnTPA. The company is in The midst of capacity expansion of its cement business in Northern, Southern, Central,
Eastern and Western parts of the country and is slated to be 37.55 MnTPA by FY12 (expected) with Captive
Thermal Power plants totaling 672 MW.
The company is awarded with "National Safety Award" by the national safety council of India for developing and
implementing effective management systems.
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7. PROMISE
We remain committed, as a Group to strategic business Development in infrastructure,as the key to nation
building in the 21st century.We aim to achieve perfection in everything we undertake and we have acommitment
to excel. It is the determination to transform every challenge intoopportunity; to seize every opportunity to ensure
growth and to grow with a Human facethat drives us.
Jaiprakash Gaur -Chairman
VISION STATEMENT
“To be dynamic and vibrant responsive to the changing economic scenario: and flexibleenough to absorb
Environmental and physical fluctuations. Harness and inherentstrength of available human resource and material
have a capacity to learn from successand, more than anything else, ensure Growth with human face “
MISSION STATEMENT
“Our solitary Mission is to achieve Excellence in every sector that we operate in - be itEngineering & Construction,
Cement, Real Estate or Consultancy. To augment our corecompetencies and adopt the most comprehensive
modern technology to overtake theobstacles in our path of achievement.To obtain sustainable development
andsimultaneously enhancing the shareholders’ value and fulfilling our obligations towardsbuilding a better India".
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8. SUBSIDIARIES
The Jaypee Group operates through its various subsidiaries in different business segments.
Jaiprakash Power Ventures Limited (JPVL)
The company with its operational power plants - 300 MW Baspa-II (Himachal Pradesh) and 400 MW Vishnuprayag
(Uttarakhand) is India’s largest Private sector Hydropower producer and is on its way to be an integrated power
producer with expansion in Thermal & Power Transmission.
www.jppowerventures.com
JaypeeKarcham Hydro Corporation Limited (JKHCL)
The Government of Himachal Pradesh again invited the group for the KarchamWangtoo a 1000 MW project. The
group formulated JKHCL for this project. Still under execution, the project is to commence its operations in the
year 2011.
Jaypee Arunachal Power Limited
The company is setting up two hydropower projects - Lower Siang Project (2700 MW) and the Hirong Project (500
MW) in Joint Venture with the Government of Arunachal Pradesh.
Bina Power Supply Co. Limited
BPSCL, the wholly owned subsidiary of JPVL, is setting up a Coal based Thermal Power Plant of 500 MW (2x250
MW) in the first phase against the total proposed capacity of 1500 MW at Bina, Distt. Sagar, MP.
Jaypee Power Grid Ltd. (JPL)
JPL has been formed for execution of the transmission system between Wangtoo in Kinnaur district of Himachal
Pradesh &Abdullapur in Yamuna Nagar district of Haryana for evacuation of 1000 MW power from
KarchamWangtoo HEP in Himachal Pradesh.www.jaypeepowergrid.com
BhilaiJaypee Cement Limited (BJCL)
Incorporated in the state of Chhattisgarh as a Joint Venture with Steel Authority of India Ltd. (SAIL). The said
company is to produce a 2.2 MTPA split-located Cement Plant at Bhilai in the State of Chattisgarh and at Babupur,
Satna in the State of Madhya Pradesh.www.bjcl.co.in
Gujarat Jaypee Cement & Infrastructure Limited (GJCIL)
The Group has signed an Agreement with Gujarat Mineral Development Corporation Limited (GMDCL) for setting
up of a 2.4 MTPA capacity cement manufacturing plant with captive power station and captive Jetty in district
Kutch of Gujarat.
BokaroJaypee Cement Limited (BOJCL)
BOJCL, the second joint venture between the Company and SAIL with management control vested in the Company,
is incorporated to set up a 2.1 MTPA capacity cement plant at Bokaro in Jharkhand.
Madhya Pradesh Jaypee Minerals Limited (MPJML)
A Joint Venture company between JAL and the Madhya Pradesh State Mining Corporation Limited (MPSMCL) to
develop the Amelia (North) Coal block.
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9. PRESENCE ACROSS INDIA
With its solitary mission is to achieve excellence in every sector that the group operates in - be it Engineering &
Construction, Cement, Real Estate or Consultancy, the Jaypee Group has marked its presence all over the nation
overtaking the obstacles in path of achievement. The group has not only obtained sustainable development but
also enhanced the shareholders’ value and fulfilled obligations towards building a better India.
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10. PRODUCTS
Jaypee produces a wide variety of cements, which are specifically designed to cater to the customer’s
requirements for different types of cements in each of its markets. All the brands, which the Company produces,
are so evolved in their characteristics and properties that they will surpass BIS Standards. For each brand, the
relevant BIS standards are mentioned in enclosed table along with a comparison with the BIS requirement.
The state-of-the-art cement plants operated by the Jaypee Group are equipped with the most modern technology
from the globally leading technology providers. Extensive Instrumentation & fully automatic and computerized
process control system, custom designed Quality Control software like QSO Expert and CADES in the Mines, Cross
Belt Expert Analyzer using the Prompt Gamma Neutron Activation Analysis - for the first time in India, X-Ray
Fluorescence and X-Ray Diffraction analyzers and optical microscope, enable production of cement of the highest
quality consistently on a sustained basis. JaypeeRewa Plant Quality control laboratory is accredited laboratory
from National Accreditation Board for Calibration & Testing Laboratories, for chemical and mechanical Cement
testing.
All brands are marketed in attractive HDPE bags, containing 50 Kgs of quality cement from Jaypee. Bags are
identified with a conspicuous Jaypee Logo, which also over the years has come to be regarded as a “Hallmark” of
quality. Jaypee produces & markets both Portland Pozzolana Cement (PPC) & all grades of Ordinary Portland
Cement (OPC). A brief introduction of each brand is enumerated as below:-
JAYPEE CEMENT (PPC)
Jaypee Cement (PPC) is a market leader among all blended/composite cements in the markets of U.P, Bihar, M.P.,
Punjab, Haryana, and Delhi& Nepal. Its unique design and blend, with high strength clinker and superior quality fly
ash has made it the popular cement for construction of large number of strong and durable structures in these
states.
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11. Qualities of Jaypee Cement PPC
Unmatched characteristics of Jaypee Cement (PPC) which form the basis of sound & durable Construction are:
Better workability due to spherical shape of fly ash particles and better slump retention.
Better palpability – provides more cohesive concrete and mortar.
Superfine particles provide great finish to the structure.
Provides un-segregated concrete of better integrity.
Low heat of hydration.
Reduced shrinkage and swelling.
Better pore refinement, reduced permeability.
Better resistance to chloride and sulphate attack
Better resistance to alkali-silica reaction.
Resistance to corrosive attack on steel reinforcement.
Reduced lime leaching.
High compressive strength.
High modulus of elasticity especially at later ages.
Improved bondage of concrete to steel.
Long term strength gain.
USAGE:-
Jaypee Cement (PPC) is being used for a number of applications like housing, commercial complexes, roads, wells,
canals, dams etc. which establishes Jaypee preferred choice of the discerning customer. It is particularly well suited
for the tropical climatic conditions of India.
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12. ORDINARY PORTLAND CEMENT
43 Grade Conforming to IS: 8112-1989
53 Grade Conforming to IS: 12269-1987
53 S Grade Conforming to IRST-40(53 S)
Jaypee Cement (OPC-43 Grade)
Jaypee Cement (OPC-43 Grade) is produced from enriched limestone most suited to make high quality clinker,
which on grinding gives a cement with characteristics surpassing those specified in IS: 8112 1989. Jaypee Cement
(OPC-43 Grade) is available in 50 Kgs HDPE bags of a distinctive design and cover. Jaypee Cement (OPC-43 Grade),
has emerged as the top choice of Engineers and Engineering Companies engaged in construction of mega projects
– such as National Highways, Bridges, Transmission lines, power plants, Industrial and Residential structures.
Jaypee Cement (OPC-53 Grade)
One of the very few cement manufacturers having the potential to manufacture this special grade of super fine
cement which due to its enhanced quality and performance parameters has been approved by the RDSO of Indian
Railways for manufacture of “RAILWAY SLEEPERS”.
Jaypee Cement (OPC-53 S Grade) is also used in heavily loaded or pre stressed structures, which are subjected to
high dynamic loads due to rapidly moving volumes, be it a train passing on the railway sleepers or a great volume
of water moving at high speed to generate electricity in a penstock .
Source: http://www.jalindia.com/cementbrands.htm
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13. PRICE
In cement industry price is the key factor that differentiate various competitors’ brands. The prices of different
brands in the same segment remain more or less similar, with just a difference of 2-5 rupee per bag. Sometimes
price varies with the type of order placed by the customer (trader or non-trade).
Pricing decisions in the cement industry largely depend on the price of the inputs like clinker, other raw materials,
excise duties and taxes and the general operating profits. Generally increase or decrease of input cost affects all
brands in the market. Most of the cement companies offer a 5% -10% margin to the dealer and particular amount
of money against per tonnes of the sales to the sales organizers for promoting their sales in his region. Due to
internal competition, the dealers pass on this advantage to the customers by reducing their own margins by 2- 3%.
This is a cause of concern for the cement companies as they are not able to fix the prices and have to keep a
constant check on the market. Cement companies offer lot of discounts like cash discounts, volume discounts,
seasonal discounts, foreign tours and allowances to dealers for promoting healthy sales.
Jaypee produces a wide variety of cements, which are specifically designed to cater to the customer’s
requirements for different types of cements in each of its markets. All the brands, which the Company produces,
are so evolved in their characteristics and properties that they will surpass BIS Standards. Thus basic prices for
different brands of JAYPEE CEMENT in Ghaziabad are given below:
JAYPEE CEMENT (PPC) PPC stands for PORTLAND POZZOLANA CEMENT
Price of Jaypee Cement (PPC) containing 50 Kgs is INR 270-320 per bag.
Jaypee Cement (OPC-43 Grade) Jaypee Cement (OPC-53 Grade)
OPC stands for Ordinary Portland Cement
Price of Jaypee Cement (OPC-43 Grade INR. Rs.250-340per bag
contains 50 Kgs is INR 250-340 per bag
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14. DISTRIBUTION NETWORK
Jaypee cement has around 156 cement dumps and all are networked using State-of-the-art TDM/TDMA VSATs
along with a dedicated hub to provide 24x7 connectivity between the plants and the points of cement
distribution.This insures “track – the – truck” initiative and provides seamless integration. This initiative is the first
of its kind in the cement industry in India.
JAL has set up new capacities in Northern, Central, Western & Southern parts of the country and is targeting a
capacity of 26 MTPA in 2010 and 32.80 MTPA by 2012, along with Captive Thermal Power Plants (CPPs) totaling
375 MW.
Now the group has 12 integrated cement plants supported by 375 MW of captive thermal power, 9 split location
plants, 11 railway sidings and a jetty, giving the group a pan-India presence in the cement sector.
Source:http://www.jalindia.com/geographicalspread.htm
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15. Jaypee Cement Blending Unit (JCBU) JaypeeAyodhya Grinding Operations (JAAGO)
Village-SadwaKhurd, ParaganaArail P.O HusainpurSudhana, Village Khanaura
Tehsil-Bara, Distt. Allahabad (U.P.) Teh: Tanda, Distt. Ambedkar Nagar (U.P)
Phone: (0532) 2425012 Phone: (05273) 284809, 281020, 281015
Mob: 09956290958 Fax : (05273) 284609
Mob: 09935522345 CAPACITY – 1.0 MTPA
CAPACITY – 0.6 MTPA
Dalla Cement Factory (DCF) Chunar Cement Factory (CCF)
(A Unit Of Jaiprakash Associates Ltd.) (A Unit Of U.P Cement Plant)
S.H.5,Kota, PO: Dalla, Sonebhadra(UP) P.O. Chunar, Mirzapur (U.P)-231311
Phone : (05445) 265778, 265801 Tel: (05443) 222926, 222265, 222602
Fax : (05445) 265776 Fax:(05443) 225079
CAPACITY – 0.5 MTPA CAPACITY – 2.5 MTPA
JaypeeRewa Plant (JRP) JaypeeBela Plant (JBP)
Jaypee Nagar P.O. Jaypee Nagar JaypeePuram P.O. JaypeePuram
Rewa 486450 (M.P) Rewa 486450 (M.P)
Tel : (07662) 400700, 229601-09 Tel : (07662) 409301
Fax : (07662) 229218 Fax : (07662) 229662
CAPACITY – 3.0 MTPA CAPACITY – 2.4 MTPA
Jaypee Cement Grinding Unit (JCGU) Jaypee Himachal Cement Blending Unit (JHCBU)
Village Khukhrana, P.O: Asan Kala, Vill. – Tikari (Pandiyana)
Teh: Madlauda P.O. – Khilian, Tehsil – Nalagarh,
Distt.Panipat (Haryana) Solan (H.P.)-174101
Phone: (0180) 2566811 Phone: (01795) 229100, 266937,266934
Phone: (0180)2566812 Fax: (01795) 266935
Fax: (0180) 2566164 CAPACITY – 2.5 MTPA
CAPACITY – 1.5 MTPA
JaypeeSidhi Cement Plant (JSCP) Gujarat Anjan Cement Limited (GACL)
JaypeeVihar, Majhigawan “Sewagram” Vill. Vayor, Taluka – Abdasa
P.O. Bharatpur, Sidhi – 486776 Distt.Kutchh (Bhuj), Gujarat – 370511
Phone: (07802) 276701 - 276714 Phone: (02831) 279200
Fax: (07802) 276715 Fax : (02831) 279279
CAPACITY – 2.0 MTPA CAPACITY – 2.4 MTPA
Jaypee cement division has 7 state of the art fully computerized ingenerated cement plants- ICP, 6 grinding units &
2 blending units with an aggregate capacity of 21.3 MTPA (million tonnes per annum.)
JAL is in the process of setting up new capacities in Northern, Central, Western & Southern parts of the country
and is targeting a capacity of 26 MTPA and 32.80 MTPA, along with Captive Thermal Power Plants (CPPs) totaling
375 MW.0
Once the expansion plans have been implemented, the group will not only have 12 Integrated Cement Plants
supporting 375MW of captive thermal power but also 9 split location plants, 11 railway sidings and a jetty, giving
the group a pan-India presence in the cement sector.
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16. Distribution Channel
A channel to market is the method of getting the product into the customer’s hand. Channel components vary with
change in category of sale (direct sale or indirect sale). In direct sale the product is delivered to end customer
directly from manufacturers. But in indirect sales channel involves various components such as sale promoters,
distributors, retailers. Most of the companies have two tier distribution channels i.e. they only have
distributors/dealers and retailers whereas Jaypee cement follows three tier distribution channels. They include
sales promoters in their distribution channel to promote their sales. Companies invariably hire C & F agents to
transport cements to own or government warehouses either via roadway or railways. Incase of exports, cement
reaches the nearest port via roadways or railways and is then transferred to the importing country.
Domestically, from C & F agents or warehouses the cement is transported to the dealers/distributors and in turn to
sub-dealers who finally sell it to the end users. There may or may not be physical ownership of goods. In the
second case, dealers and sub dealers take order from buyers and place it to the companies, co -ordinate and
monitor the timely dispatch of said orders, transportation of goods and final delivery. Distributor network in
cement industry is of high importance and companies are compelled to hire them as the companies do not really
have that rapport and touch with the end consumer. The distributors have storage facilities which help them in
controlling the entire supply chain as they are the ones who bring orders.
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17. PROMOTION
Jaypee Cement’s advertising has created brand awareness, highlighted what the brand has to offer and has
consistently brought all of it top-of-the-mind for the customer. But the outreach effort does not end there. Jaypee
Cement has recognized the importance of communicating to and involving key players who influence the final
brand choice. These include channel partners, contractors and masons, on whom Jaypee cement focuses by
initiating and developing innovative activities and promotions. This helps build the Jaypee cement family so that
customers get a high degree of personalized service and professional guidance to facilitate their final decision.
The company also does press releases to tell about their achievements and upcoming projects to market.
Jaypee Group to Invest Rs 33,000 Crore in Gujarat
New Delhi, January 15, 2011: “Jaiprakash Associates Ltd (JAL) has
committed to invest Rs 33,000 crore more in Gujarat over the next 3 to 5 years.
Hon’ble CM of Gujarat, Shri Narendra Modi inaugurates
Jaiprakash Associates cement plant in Gujarat
“JAL invested Rs 1500 crore in the cement plant having capacity of 2.4 MTPA
JAL’s first cement plant in Gujarat”
Jaiprakash Associates to set up cement plant in Assam.
“Total project cost is Rs 1050 crore 2.00 MMTPA plant in JV with
Assam Mineral Development Corporation Limited”
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18. INDUSTRY OUTLOOK
Cement is one of the core industries in India which plays a vital role in the growth and expansion of the nation. The
industry places itself at an important place because of its strong linkages to other sectors such as Construction,
Coal, Power and Transportation. At present India is the second largest producer of cement around the globe.
Keeping in tune with global standards the Indian cement industry has transited itself into more advanced stage. It
is engaged in several varieties of cement such as ordinary Portland cement (OPC), Portland Pozzolana Cement
(PPC), White cement, etc. The products are produced in compliance with the Bureau of Indian Standards (BIS)
Specifications and Standards to make their quality comparable with the best in the world.
At present as per Cement Manufacturing Association (CMA, India) there are around 365 mini and 140 large
cement plants in India with combined production capacity of approximately 234 million tones (Mt). Government
initiatives in the infrastructure sector and the housing sector provide stimulus towards growth of cement industry
in India.
Currently, the top Players in Indian cement industry as per the data available on websites are Ultratech, Ambuja,
ACC, Jaiprakash Associates, India cements, Shree cement. These companies collectively hold more than half of the
cement market of India. Over all there are around 40 players in the industry across the country.
Due to the general economic slowdown, financial institutions have tightened their credit norms. This led to a credit
crunch and impacted upcoming real estate, infrastructure and other projects. With that the demand for cement
has moderated. However, stimulus packages and agricultural income, government spending on the infrastructure,
rural demand gives an impetus to the demand for the commodity. The cement industry is likely to maintain its
growth momentum and continue growing at around 8% to 8.5% in line with the development of the economy.
According to data provided by CMA it can be concluded that Indian cement industry has performed better in
FY2012. The industry has grown by 6.4% in 2011-12 as against less than 5% in 2010-2011. The cement production
has increased from 137.16 million tonnes (MT) in 2010-2011 to 145 million tonnes (MT) in 2011-2012. While the
cement dispatches increased from 136.18 MT to 143.96 (MT).
The main drivers of cement demand are
Housing Growth
Buoyant real estate market
Government spending in various infrastructure projects.
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19. STRUCTURE OF THE INDIAN CEMENT INDUSTRY
It is a fragmented industry. There are 40 cement companies in India, operating 140 large and 365 mini plants,
where majority of the production of cement (94%) in the country is by large plants.
HIGHLIGHTS OF INDIAN CEMENTINDUSTRY AS ON 31 ST MARCH 2011
STATISTICS –LARGE CEMENT PLANTS STATISTICS –MINI & WHITE CEMENT PLANTS
Companies (Members) (Nos.) 42 Cement Plants (Nos.) 365
Cement Plants (Nos.) 140 Installed capacity (Mn.t) 11.10
Installed capacity (Mn.t.) 234.3 Cement Production (Mn.t) 2010-11 6
Cement Production (mn.t.)2009-2010 168.29
Plants with capacity Million tones 97
& above (Nos.)
Manpower employed(approx.) 120000
Turnover in 2010 (Mn. US$) around 18000
Source :CMA , India
Cement industry is being segmented regionally i.e. Central Souther
Region Region
Northern, Central, Western, Southern and Eastern. 12% 36%
Cement, being a bulk item transporting it over long Western
distances can prove to be uneconomical as it attracts Region
16%
very high amount of freight.
Northern
Region Eastern
Thus, it has resulted in cement being largely a regional 22% Region
play with the industry divided into five main regions. 14%
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20. Regional (capacity) Segmental Information
Source: http://www.iseindia.com
India has total capacity of 257 MT in FY 2010 comprised of Northern Region 55.6 MT, Central Region 30.7
MT, Eastern Region 36.89 MT, Western Region 40.4 MT and Southern Region 93.4 MT.
Rajasthan, Andhra Pradesh, TamilNadu, Madhya Pradesh and Gujarat are the prominent cement industry
contributor states.
The southern region having the biggest share (36 %), it generally has an excess capacity trend in the past
owing to profuse availability of limestone whereas the western and northern regions generally have more
demand than availability. 19 | P a g e

21. PRICING THE CEMENT
The demand for cement heavily depends on the level of development and the rate of growth of the economy. At
present there are no actual substitutes for this product. The demand for cement is, therefore, price inelastic. This
implies that price cutting does not help in boosting the demand in an oversupply condition. At the same time if
supply falls short of demand, the prices can increase substantially without hurting the demand. This makes the
industry conducive for growing monopolies.
Since the government directs a main portion of the cost of production, through administered prices of fuel and
power and through taxes, there is very little scope for cost cutting. The companies can therefore either raise
prices or volumes in order to increase their profits. In a competitive market scenario, it is difficult for a single
manufacturer to control prices. The companies can increase their volumes or market share through product
differentiation or through acquisitions. There is limited scope of product differentiation given the nature of the
product. One of the key factors that seem to have a major say on stock price movements of cement companies is
the price of cement.
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22. PEST ANALYSIS
Technology
Social Environment Political
Economical
PEST ANAYLSYS aid us in understanding the big picture of the Political, Economic, Socio-Cultural and Technological
environment in which the industry operates in.
Political
The price of cement is primarily governed by the coal rates, power tariffs, railwaytariffs, freight, and royalty.
Interestingly government controls all of these prices. Government is also one of the biggest consumers of the
cement in the country. Most state governments, in order to attract investments in their respective states, offer
fiscal incentives in the form of sales tax exemptions/deferrals. States like Haryana offer a freeze on power tariff for
5 years, while Gujarat offers exemption from electric duty.
Government Initiatives
The Government of India has approved a package of fiscal incentives and other concessions for the North
East Region, namely the North East Industrial and Investment Policy, 2007
In a bid to attract foreign investors to its ambitious highways building programme, the Ministry of Road
Transport plans to roll out projects worth US$ 120 billion by 2016
With an aim of accelerating and sustaining growth in the cement industry the Government has taken
various measures in the Union budget 2011-12. The infrastructure sector has received an impetus in the
form of improved funds and tax related incentives offered to attract investors for tapping the
infrastructure opportunities around India. Introduction of tax free bonds, formation of infrastructure debt
funds and formulating a comprehensive policy for developing public private partnership projects (PPPs)
are some of the steps that will provide required stimulus for growth.
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23. Measures taken in the Union Budget 2011-12 include:
Allocation of Rs 214,000 crore (US$ 46.5 billion) for infrastructure in 2011-12. This is an increase of 23.3 per
cent over 2010-11
Government to come up with a policy for developing PPP projects
IIFCL to achieve cumulative disbursement target of Rs 20,000 crore (US$ 4.3 billion) by March 31, 2011 and
Rs 25,000 crore (US$ 5.4 billion) by March 31, 2012
Under take out financing scheme, seven projects sanctioned with debt of Rs 1,500 crore (US$ 325.6
million). Another Rs 5,000 crore (US$ 1.1 billion) will be sanctioned during 2011-12
To boost infrastructure development, tax free bonds of Rs 30,000 crore (US$ 6.5 billion) proposed to be
issued by Government undertakings during 2011-12
Source:http://www.ibef.org
Economic
Current Scenario
At present, our country is the second major cement producing country after China; we have 140 large and 365 mini
cement plants. Leading players in the industry are Ultratech Cement, Gujarat Ambuja Cement Limited, JK Cements,
ACC Cement, Madras Cements etc. Indian Cement Industry is engaged in the production of several varieties of
cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag
Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement, White
Cement, etc. Their production is strictly as per the Bureau of Indian Standards (BIS) specifications to make their
quality comparable with the best in the world.
The demand for cement mainly depends on the level of development and the rate of growth of the economy.
There are no close substitutes for cement and hence the demand for cement is price inelastic. During the October
– 2011 14.78 MT were produced and 14.38MT was consumed.
Source: http://www.iseindia.com
As per the data available on iseindia.co, for the FY 2011 – 12 (Apr - Oct), 97.84 MT was consumed where 98.91 MT
was produced. During the first half of the year, there was marginally poor off take in cement demand due to
passive construction activity, which leads to excess supply, thus putting downward pressure on realizations. This
has been coupled with rise in input costs, especially prices of coal and petroleum products. As a result, both the
top line and bottom line have been affected, leading to demand supply mismatch. And, this demand supply
mismatch scenario is expected to prevail for some time until we have stable prices in substitute products.
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24. Growth of Cement Industry
Over the past ten years, the cement industry has grown in tandem with India’s economic growth. And this growth
in domestic cement market is likely to remain strong, with the resumption in the housing markets, regular
government spending on the rural sector and infrastructure. The average growth in the demand for cement in the
country was 9.1%, while its average GDP Growth was 7.1% during the period of FY01-FY10.
Cement Manufacturing Association (CMA) is targeting to achieve 550 MT capacities by 2020 as revealed in
research paper published at Iseindia. Few international cement players like Holcim, Lafarge, Italcementi, etc. have
already entered the domestic cement market seeing the potential growth of this industry. Our country stands
second among major cement producing country following the China having a total capacity of around 230 MT
(including mini plants). However, on account of low per capita consumption of cement in the country (156
Kgs/year as compared to world average of 260 Kgs) there is an enormous potential for growth of the industry.
Cement dispatches rose by 4.5% to 2088 lakh tonnes during the
financial year ended March 2011, compared to the previous year, as
per data released by the Cement Manufacturers Association.
A sharp growth in dispatches was recorded by Ultra Tech Cement
and Jaiprakash Associates at 87.2% and 38.6%, respectively.
Although growth in demand for cement has slowed down in
financial year 2010-2011, cement companies have been raising
prices since February 2011 on account of higher raw material prices.
A sharp rise in cost of raw materials, which account for 70-75% of
the cost of cement production, has been exerting downward
pressure on profit margins of cement manufacturers.This Increase
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25. in cement prices resulted in higher realizations for the companies. However, it did not compensate fully for the rise
in costs.
Social
Usually, the cement industry in India consists of both the organized sector and the unorganizedsector. Organized
sector comprises of the well-known cement manufacturing companies whilethe main players of the unorganized
sector are the regional and local cement-producing units invarious states across the state.
Key Players in Indian Cement Industry
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26. DOMESTIC PLAYERS:
Jaiprakash Associates Limited
Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the Jaypee Group with
businesses in civil engineering, hospitality, cement, hydropower, design consultancy and IT. Jaypee's cement
business is housed in Jaiprakash Associates, a listed company that has a cement-making capacity of 28 million
tonnes a year, making it India's third-largest cement producer, behind capacities owned by Germany's Holcim and
the Aditya Birla Group.
The company is in the midst of capacity expansion of its cement business in Northern, Southern, Central, Eastern
and Western parts of the country and is slated to be a 35.90 MnTPA by FY13 (expected) with Captive Thermal
Power plants totaling 672 MW.Jaiprakash Associates has decided to concentrate on its core business of
construction and engineering and leave its cement plant to its subsidiary JaypeeRewa Cement Ltd. The company
manufactures a wide range of world class cement of OPC grades 33, 43, 53, IRST-40 and special Blends of
pozzolana cement. At present, the company has a market share by installed capacity of 7 per cent with the cement
division contributing Rs.13, 904.07crore to revenue in 2010-11.
The Jaypee Group — which has been in the limelight after a group company staged India's first Formula One race
on October 30 — has said it plans to raise capacity to 35 million tonnes by the middle of 2012. The cement
business generated revenues of Rs 5,455.79 crore in FY 2010 but that was dwarfed by debt of Rs 11,500 crore.
The group's three listed companies have a total debt of over Rs 40,000 crore, the result of rapid expansion. Apart
from Jaiprakash Associates, the cement-maker, the other listed firms are JaypeeInfratech, which executes real
estate and infrastructure projects, and Jaiprakash Power Ventures, which builds power plants and transmission
systems.
"Right now, the type of solid assets the company has and the growth plan the company is working on would enable
the company to deliver and register growth, not just comparable to but better than peers."
Associated Cement Companies Ltd (ACCL)
ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread
throughout the country with 16 modern cement factories, more than 40 Ready mix concrete plants, 21 sales
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27. offices, and several zonal offices. It has a workforce of about 9,000 persons and a countrywide distribution
network of over 9,000 dealers.
The history of ACC spans a wide canvas beginning with the lonely struggle of its pioneer F E Dinshaw and other
Indian entrepreneurs like him who founded the Indian cement industry. Their efforts to face competition for
survival in a small but aggressive market mingled with the stirring of a country's nationalist pride that touched all
walks of life - including trade, commerce and business.
The house of Tata was intimately associated with the heritage and history of ACC, right from its formation in 1936
up to 2000. Between the years 1999 and 2000, the Tata group sold all 14.45 per cent of its shareholding in ACC in
three stages to subsidiary companies of Gujarat Ambuja Cements Ltd (later called Ambuja Cement Ltd), who then
became the largest single shareholder in ACC.
A new association was forged between ACC and the Holcim group of Switzerland in 2005. In January 2005, Holcim
announced its plans to enter into a long-term strategic alliance with the Ambuja Group by acquiring a majority
stake in Ambuja Cements India Ltd. (ACIL), which at the time held 13.8 per cent of the total equity shares in ACC.
Holcim simultaneously announced its bid to make an open offer to ACC shareholders, through Holcim Cement Pvt.
Limited and ACIL, to acquire a majority shareholding in ACC. An open offer was made by Holcim Cement Pvt.
Limited along with Ambuja Cements India Ltd. (ACIL), following which the shareholding of ACIL increased to 34.69
per cent of the Equity share capital of ACC. Consequently, ACIL filed declarations indicating their shareholding and
declaring itself as a Promoter of ACC. Presently market capitalization of ACC is Rs. 22,826.53 cr.
Ultratech Cement
Ultratech Cement Limited is India's largest manufacturer of cement with an installed capacity of 52 Million Tonnes
Per Annum.Ultratech's products include Ordinary Portland Cement, Portland Pozzolana Cement and Portland Blast
Furnace Slag cement. Ultratech is the most trusted and preferred brand of Engineers, builders, contractors and
individual house builders.
Ultratech’s success is attributed to its diverse product offerings. Different products are handled by different
product groups, which are also known as profiles. Product groups decentralize control and encourage innovation.
They also ensure better customer segmentation, which in turn leads to better customization of product offerings
and guarantees cent percent customer satisfaction. Ultratech Cement, Birla White, Ultratech Concrete, Ultratech
Building Products and Ultratech Solutions are the different profiles of Ultratech, each catering to varied needs. This
versatility has been a key competitive advantage for Ultratech over the years.
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28. Company has produced 32.92 MMT of cement with effective capacity utilization of 81% in 2011. Company’s Net
turnover stood at Rs.13210 crore with net profit after tax of Rs.1404 crore.
Ambuja Cements Ltd (ACL)
Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing companies in India. The Company, initially
called Gujarat Ambuja Cements Ltd., was founded by Narotam Sekhsaria in 1983 with a partner, Suresh Neotia.
Sekhsaria’s business acumen and leadership skills put the company on a fast track to growth. The Company
commenced cement production in 1986. The global cement major Holcim acquired management control of ACL in
2006. Holcim today holds little over 46% equity in ACL. The Company is currently known as Ambuja Cements Ltd.
Its current cement capacity is about 25 million tonnes
SHREE Cement Ltd.
Shree Cement Ltd (SCL) is present in the cement and power sector. It is the largest cement producer in North India
and among top six cement manufacturing groups in the country. It has cement capacity of 13.5 million ton and
power capacity of 560 MW. SCL has manufacturing facilities at Beawar and Ras in Ajmer and Pali district and
grinding units at Khushkhera, Suratgarh and Jaipur respectively in Rajasthan and Roorkie in Uttarakhand. SCL
boasts of highly recognized brands like Shree Ultra Jung Rodhak, Bangur Cement and Rockstrong. SCL is an ISO
9001, ISO 14001, OHSAS 18001 and SA 8000 certified company and pursues best practices in Manufacturing,
Energy Conservation and Environment Management. SCL has received numerous awards and recognitions at
national and international levels for Excellence in Energy Management, Environment Management and Corporate
Governance practices.
Company’s turnover for 12 months period of April’11-March’12 was Rs 4625 cores. SCL is a consistent dividend
paying company (120% dividend for April’11-March’12). SCL commitment to energy efficiency and environment
management is reflected in the fact that it set up Waste heat recovery plants of 46 MW which is the largest such
capacity in the world cement industry excluding china. SCL commissioned Unit VIII in World Record time of 330
days against average period of 630 days. It enjoys approx. 19% market share in North India and is leader in markets
of Rajasthan, Delhi and Haryana.
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29. FOREIGN PLAYERS:
Heidelberg
Heidelberg Cement is the global market leader in aggregates and a prominent player in the fields of cement,
concrete, and other downstream activities, making it one of the world’s largest manufacturers of building
materials. In 2011, Group revenue amounted to €12.9 billion. The core activities of Heidelberg Cement include the
production and distribution of cement and aggregates, the two essential raw materials for concrete. We
supplement our product range with downstream activities such as ready-mixed concrete, concrete products, and
concrete elements, as well as other related products and services. Around 52,500 employees in more than 2,500
locations make sure on a daily basis that our slogan “for better building “is brought to life.
Source: www.in.heidelberg.com/
Italcementi Group
The Italcementi group is one of the largest producers and distributors of cement with 60 cement plants, 547
concrete batching units and 155 quarries spread across 19 countries in Europe, Asia, Africa and North America.
Italcementi is present in the Indian markets through a 50:50 joint venture company with Zuari Cements. All
initiatives in southern India are routed through the joint venture company, while Italcementi is free to buy deals .In
its individual capacity in northern India. The joint venture company has a capacity of 3.4 million tonne and a
market share of 2.1 per cent
Source: www.italcementigroup.com/ENG/Italcementi+Group/A.../India/
Lafarge India
Lafarge the world's largest cement manufacturer entered the Indian market in 1999 through its cement business,
with the acquisition of Tata Steel's cement activity. This acquisition was followed by the purchase of the Raymond
Cement facility in 2001.
Lafarge is one of the leading players in the cement industry in Eastern and Central India, with its leading brands -
Concreto and Dura guard. The company currently has four cement plants in India: two integrated cement plants in
the state of Chhattisgarh (Sonadih and Arasmeta) and Grinding Units in Jharkhand (Jojobera) and West Bengal
(Mejia).
Lafarge's total cement production capacity in the Indian market is currently over 8 million tons and the Group has
launched an ambitious program to more than double its capacity in the next five years.
Source: http://www.lafarge.in/
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30. Holcim
Holcim, earlier known as Holder bank, has a cement production capacity of 141.9 million tonne. It is a key player in
aggregates, concrete and construction related services. It has a strong market presence in over 70 countries and is
a market leader in South America and in a number of European and overseas markets. Holcim entered India by
means of a long-term strategic alliance with Gujarat Ambuja Cements Ltd (GACL).
The alliance aims to strengthen their clinker and cement trading activities in South Asia, the Middle East and the
region adjoining the Indian Ocean. Holcim also intends to use India as an additional base for its IT operations, R&D
projects as well as a procurement sourcing hub to generate additional synergies and value for the group.
Source: http://www.holcim.com
TECHNOLOGY
From mining to production the entire process depends on technology. Several companies have adopted innovative
strategies and technologies to reduce their operational and production costs. The Government of India is also
looking forward to study and possibly acquire new technologies from the cement industry of Japan. The
government is discussing technology transfer in the field of energy conservation and environment protection to
help improve efficiency of the Indian cement industry.Cement industry has made tremendous strides in
technological up-gradation and assimilation of latest technology.
Cases of successful use of alternate fuels in cement production
Company/Plant Strategy Benefit
Madras Cement’s Use bioenergy through burning of Annual Cost Savings of USD 1.7
Alathiyur Plant coffee husk and cashew nut shells million
India Cements Ltd.’s Use low sulphur heavy stock sludge Annual savings of USD 6500 approx.
Dalavoi Plant as alternate fuel
Ultratech Gujarat Use tyre, chips and rubber dust as Reduction of about 30,000 tonnes
Cement Works alternate fuel of carbon emission annually
Source: CMA
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31. PORTERS FIVE FORCES MODEL
Threat of New Entrants (High):The existing companies are struggling hard to expand their production
capacity to face therising competition. With the announcement of the Indian Government in the budget for the
FY2010-2011 to pump in more than Rs.1.73 trillion in infrastructure (Thomson Reuters Corporate), the cement
industry becomes a very attractive market to enter, thus increasing the threat ofnew entrants.
But the high capital costs acts as a major entry barrier for the entry of new players. Cement being a high volume
low value commodity results in high freight costs, which makes cement imports economically unfeasible.
Acquisitions by foreign cement giants in Indian Cement Industry Since 1999
S.No New Entrant Country Purchased
1 Holcim Ltd. Switzerland 14.8% of Ambuja Cement
2 Lafarge Cement France Raymond Cement
TISCO
3 Italcementi Italy Zuari Industries
4 Heidelberg Germany Indo Rama Cement
Mysore Limited
Diamond Cement
Companies that have announced their plans to enter the Indian Cement Industry in future
Future Companies Current Business
Reliance ADAG Infrastructure
Wonder Marbles
Murli Agro Agro Products
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32. Competitive rivalry between existing players (High):Being a non-consolidated industry the
rivalry is strong among the players. During the last few years the industry has become more consolidated with the
Top 3 players having a combined market share of 70 percent in 2011-12 as compared to 32 percent in 1999-
2000.Still rivalry persist to great extent to acquire maximum market share.
The Indian cement industry has large number of cement producers thus making it a lowconcentration market. The
four biggest cement players in the Indian cement industry are:
1. Ultratech cement
2. Ambuja Cement
3. ACC cement
4. Jaypee Cement
Bargaining power of Buyers (Low):In the present day context, cement producers have become more
powerful than buyer because of housing growth. In thecurrent situation, most of the companies are moving into
direct marketing, thus removingmiddlemen.
Despite enough competition from high institutional demand of cement, small-timebuyers are still targeted as a
primary market by the cement companies.Around 80 percent of the total sales are being contributed by retail and
the rest by institutional sales. But as institutional players buy in bulk they get a discount of 5%-1. Thus the primary
target isnot left with much bargaining power.
Bargaining power of Suppliers (Low):The basic raw materials used in the cement manufacturing
process are limestone, sand, shale, clay, and iron ore. The main material, limestone, is usually mined on site while
the other minormaterials may or may not be mined there. Since all the raw materials are natural resources, they
are under the Government’s control. To mitigate the high costs of power the cement players have set up captive
power plants .Hence, Companies have to buy rights from the government to setup the cement plant. So there are
no such suppliers in the cement industry.
Threat of Substitutes (Low):Now-a-days Timber is also being considered as one of the substitutes of
cement. Inmany countries like Japan, Indonesia, Singapore etc. are now using timber in construction sincethose
areas are high earthquake affected. They now prefer timber which is cheap and long lastingfor years.But timber
cannot be considered, as one of the major substitutes of cement, thereforecement is one of the main components
of any construction. Without cement, construction workis next to impossible as it provides strength to the
building.
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33. INDUSTRY SWOT ANALYSIS
Strength Weakness
Opportunities Threats
Strengths: Double digit growth rate
Cement demand has grown in tandem with strong economic growth; derived from:
 Growth in housing sector key demand driver;
 Infrastructure projects like ports, airports, power projects, dam & irrigation projects
 National Highway Development Programme
 Bharat Nirman Yojana for rural infrastructure
 Rise in industrial projects
 Export potential also demand driver
Weakness: Low value commodity
Cement Industry is highly fragmented
Industry is also highly regionalized which leads to threat of infiltration
Low – value commodity makes transportation over long distances uneconomical
Opportunities: Demand–supply gap
Substantially lower per capita cement consumption as compared todeveloping countries.
Limited green field capacity addition in pipeline for next two years, leading to favorable demand – supply
scenario
Threats: Rising input costs
Government intervention to adjust cement prices
Transportation cost is scaling high; bottleneck due to loading restrictions
Coal prices climbing up; industry players say current shortage of coal in the country is estimated to be
over 10 million tones
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34. ROAD AHEAD
Cement companies were able to raise prices as the demand picked up across the country. However, the demand
for cement is likely to subside during the monsoon season as construction activity slows down and interest on
home loans rise. Also, with new capacities likely to come on stream in the coming months, cement prices are
expected to fall from the current levels. Prices are expected to gradually recover post-monsoon. Availability of rail
wagons also affects dispatches, post rains, as railway wagons get diverted to transport fertilizers as a priority.
Cement production in the country is estimated to increase to 315-320 million tonnes by end of financial year 2011-
12 from the current 300 million tonnes, according to CMA. This reflects nearly 6% year-on-year growth in
production compared to FY 2011. CMA is targeting to achieve 550 million tonnes capacity by 2020.
Increased focus of cement companies using alternate fuels for manufacturing has likely to result in lower fuel cost
burden on the companies in the medium term period. Cement companies are using alternate sources like tyre
chips, rubber dust, coffee & rice husk, hazelnut shells or paper sludge among other inputs for producing energy.
However, coal will continue to remain the primary source of fuel for cement companies.
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35. FINANCIAL ANALYSIS
Jaiprakash Associates Ltd. Ratio Analysis
Liquidity Ratio
2009 2010 2011 2009-2011 FY2010 FY2011
Current asset 916160 1309899 1315233 43% 0% 44%
Current liability 503670 585289 564665 16% -4% 12%
Liquid Asset 793298 1154536 1148588 46% -1% 45%
Current Ratio 1.81896877 2.238037961 2.329227064 23% 4% 28%
Quick Ratio 1.57503524 1.972591318 2.034105177 25% 3% 29%
The Liquidity ratios are mainly used to determine a company's ability to pay off its short-terms debts. The higher
the value of the ratio, the larger is the margin of safety that the company possesses to cover short-term debts.
Current Ratio:It is an indication of a company's ability to meet short-term debt obligations; the higher the
ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the
current assets of a company are more than twice the current liabilities, then that company is generally considered
to have good short-term financial strength. If current liabilities exceed current assets, then the company may have
problems meeting its short-term obligations.
Current ratio =
Analysis:The current ratio of the company has increased by 28 % from FY09 to FY11. This increase is because of 44
percent increase in company’s current assets with respect to 12 percent increase in its current liabilities from
FY09-FY11.
The current ratio of the company was less than the ideal ratio which is 2:1; hence, we can say that company might
have problems paying its bills on time. It might requireextra time for raising extra finance to pay its creditors
during FY09. However, the ratio has been more than the ideal ratio in FY10 &FY11, indicating that the company
possesses the larger margin of safety to cover its current debts. It may also imply the inefficient use of cash and
other short-term assets.
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36. Quick Ratio: It is a measure of a company's liquidity and ability to meet its obligations. Quick ratio often
referred to as acid-test ratio, is obtained by subtracting inventories from current assets and then dividing by
current liabilities. Quick ratio is viewed as a sign of company's financial strength or weakness (higher number
means stronger, lower number means weaker).
Quick Ratio=
Analysis:Quick ratio of the company has shownsignificant increase of 29% from 2009-2011. The reason for this is
45 percent growth in quick assets with respect to 12 percent growth in current liabilities from FY09-FY11. It reflects
that the company is at a better financial position and is using its liquid assets efficiently to pay of its current
liabilities in FY11 than in FY09.
Since thecompany’s quick ratio has been higher than ideal ratio which is 1:1 from 2009 to 2011, it implies the
sufficient availability of cash within the company.
Profitability Ratio
2009 2010 2011 2009-2011 FY2010 FY2011
Net Profit 89701 170836 116778 90% -32% 30%
Total Asset 2555706 3350940 3797208 31% 13% 49%
Total equity 669801 850072 939737 27% 11% 40%
ROA 3.50983251 5.098151563 3.075364847 45% -40% -12%
ROE 13.3921866 20.09665064 12.42666831 50% -38% -7%
Profitability ratios are used to assess a business's ability to generate earnings as compared to its expenses and
other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value
relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing
well.
ROA Ratio:The return on assets ratio looks at the ability of a company to utilize its assets to gain net profit.
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37. Analysis:The ROA of the company increased considerably from 2009 to 2010 by 45%. This shows that company
was making an effective use of its assets to generate profit in FY10. The reason for this surge wasan increase in net
operating profit by 90% compared to total assets which increased by 31%. It implies that the company was getting
favorable returns on money invested.
The ratiodecreased in the financial year 2011 by 40 percent from FY10.The reason for this fall is increase in assets
by 13% and decrease in company’s net profit by 32%. This decrease in ratio indicates that the company was in a
better financial position in FY10 as it generatedhigher net income from the utilization of its assetscompared to the
FY11.
ROE Ratio:ROE ratio measures how well a company uses reinvested earnings to generate additional earnings.
It is used as a general indication of the company's efficiency; in other words, how much profit it is able to generate
given the resources provided by its stockholders. Investors usually look for companies with returns on equity that
are high and growing.
Analysis:The ROE of the company increased considerably by 50 percent in FY2010. Its net profit increased by 90
percent compared to a 27 percent increase in shareholder funds. This shows that company was able to satisfy its
shareholders in FY10 by proper utilization of funds.
The ratio has decreased in the financial year 2011 by 38 percent from the financial year2010. This decline in ratiois
the result of a decrease of 32% in the net profit with respect to 11 percent increase in shareholder’s funds from
FY10. This means that the company was in a better position to satisfy its shareholders in FY10 than in FY11.
Return on Capital Employed (ROCE):Return on capital employed establishes the relationship
between the profit and the capital employed. It indicates the percentage of return on capital employed in the
business and it can be used to show the overall profitability and efficiency of the business. ROCE should always be
higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders'
earnings.
ROCE
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38. Analysis:ROCE has increased significantly by 131 percent from FY09 to FY10 because of increase in capital
employed. The reason for this rise is the significant hike in EBIT by 211 percent with respect to an increase in the
capital employed by 35 percent from FY09-FY10, leading to increase in shareholders’ earnings.
Due to the fall in EBIT by 4 percent and increase in capital employed by 17 percent from FY10 to FY11 the ROCE
decreased by 17 percent, leading to an overall increase of 91 percent in ROCE from FY09-FY11.This overall increase
in ratio indicates that the company is more profitable in FY11 than FY09.
Activity Ratio
2009 2010 2011 2009-2011 FY2010 FY2011
Inventories 122862 155363 166645 26% 7% 36%
Total Sale 614793 1167178 550963 90% -53% -10%
Sundry Debtors 102204 228503 281063 124% 23% 175%
Net Sales 223600 362272 493495 62% 36% 121%
Fixed Asset 1189985 1451032 1830956 22% 26% 54%
Inventory Turnover Ratio 5.00393124 7.512586652 3.306207807 50% -56% -34%
Debtors Turnover Ratio 6.01535165 5.107932937 1.960282926 -15% -62% -67%
Fixed Asset Turnover Ratio 0.18790153 0.249665066 0.269528596 33% 8% 43%
Inventory Turnover Ratio:Inventory turnover ratio measures how well a company is turning their
inventory into sales.
The costs associated with retaining excess inventory and not producing sales can be burdensome. If the inventory
turnover ratio is too low, a company may look at their inventory to appropriate cost cutting.
Analysis:The inventory turnover ratio was 5.0 in 2009, 7.5 in 2010 and 3.3 in 2011. The inventory turnover ratio
measures the velocity of conversion of stock into sales. The increase in ratio signifies that the company is
effectively managing its inventory and cutting its cost associated with retaining the inventory.
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39. The ratio increased in FY10 by 50 %. This implies that the company was managing its inventory efficiently and
reducing its cost associated with holding the inventory. The ratio decreased by 56 % in FY11 from FY10. The reason
for this fall is significant fall in sales (53%) compare to 7% raise in inventory. This implies that the company was
more efficient in managing its inventory in FY10 than FY11.
Debtor Turnover Ratio:The debtor turnover ratio is used to calculate how well a company is managing
their receivables. The lower the amount of uncollected money from its operations, the higher this ratio will be. In
contrast, if a company has more of its revenues awaiting receipt, the lower the ratio will be.
Analysis:The debtor turnover ratio was 6.01 in 2009, 5.1 in 2010 and 1.96 in 2011. It implies companies’
inefficiencyin managing its debtors.
Fixed Asset Turnover Ratio:This ratio indicates the company’s ability to generate net sales revenue
from its fixed assets such as property, building and other equipment. The higher the ratio, the better it is for the
company.
Analysis:The fixed assets turnover ratio of the company has increased from 0.18 in 2009 to 0.26 in 2011. The
reason for this increase is increase in net sales by 121 percent compared to increase of 54% in fixed assets. This
implies that the company is efficiently utilizing its assets to generate net sales revenue.
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40. Leverage Ratio
2009 2010 2011 2009-2011 FY2010 FY2011
Debt 1382621 1886479 2292806 36% 22% 66%
Total Equity 669801 850072 939737 27% 11% 40%
EBIT 125098 389352 375650 211% -4% 200%
Interest Expenses 50432 105579 139418 109% 32% 176%
Total Asset 2555706 3350940 3797208 31% 13% 49%
Debt Equity Ratio 2.81619615 2.907716052 3.040713519 3% 5% 8%
Interest Coverage Ratio 2.48052824 3.68777882 2.694415355 49% -27% 9%
Debt Ratio 0.73807042 0.737634216 0.752518956 0% 2% 2%
Leverage ratios are those accounting ratios that measure a company’s ability to meet its financial obligations.
Debt Equity Ratio:Investing in a company with a higher debt/equity ratio may be riskier, especially in
times of rising interest rates, due to the additional interest that has to be paid out for the debt. It is important
to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1,
assets are primarily financed through equity.
Analysis: Debtequity ratio has shown the gradual increase of 8 percent from 2009-2011. This increase in ratio
indicates that the company has been aggressive in financing its growth with debt and could be at risk if the interest
rates were also rising.
Interest Coverage Ratio:Interest coverage ratio is used to measure a company's earnings relative to the
amount of interest that it pays. The interest coverage ratio is considered to be a financial leverage ratio in that it
analyzes one aspect of a company's financial viability regarding its debt.
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41. Analysis:The interest coverage ratio of the company has increased considerably by 49% from FY09-FY10. This
means that the company’s debt burden decreased to a great extent .There is increase inEBIT(by 211 %) in FY10
with respect to the interest expenses (by 109%).
The interest coverage ratio in 2011 of the company has decreased by 27 %, implying that the company is not
generating enough profit to meetitsinterest payments on outstandingdebt in FY11. Consequently, the financial
position of the company is growing weak.
Debt Ratio:This ratio implies how much the company relies on debt to finance assets
Analysis:The Debt ratio of the companyincreased in FY11 to 0.75 from 0.73. The reason for this 2 percent increase
is 16 percent increase in debt in FY11 with respect to 13 percent increase in total assets. Thus, the company is
unfavorable in the eyes of creditors as they prefer low debt ratios. The lower the ratio, the greater is the cushion
against creditors’ losses. It also reflects that the company’s reliance on debt for asset formation is decreasing.
Hence, making the company more risky.
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42. Analysis of Consolidated Cash Flow Statement of
Jaiprakash Associated Ltd.
Jaiprakash Associates Ltd.
Rs in lakhs
Cash flow from Operating Activities 2009 2010 2011
Net Profit before tax & exceptional items as per P&L account 94571 200679 308769
Add back
a) Depreciation 33260 47220 64635
b) Deffered Revenue on account of advance against depreciation 6260 7530 7905
c) Miscellaneous Expenses(Amortized) 3478 2015 1419
d) Interest of Borrowings 70617 128638 187469
e) Employee compensation expense 0 21194 0
f) Loss on sale of Assets[Net] 747 98 179
114362 206695 261607
208933 407374 570376
Deduct:
a) Interest Income 13838 15840 23749
b) Dividend Income 575 758 1561
c) Profit on sale of shares from in beneficiary trust 0 131635 51316
d) profiton sale/redemption of share/mutual funds 24 849 180
e) other Income 60 119 426
14497 149201 77232
operating Profit beforeWorking CapitalChanges 194436 258173 493144
Deduct:
a) (Increase)/decrease in Sundory Debtors 885 -68884 -121506
Less:Transfer from Transferor companies -808 0 0
1693 -68884 -121506
b) (Increase)/decrease in inventory -27271 -34375 -24741
Less:Transfer from Transferor companies 485 0 0
-26786 -34375 -24741
c) (Increase)/decrease in projects under develeopment -46374 -265268 -148225
Less:Transfer from Transferor companies 0 0 0
-46374 -265268 -148225
d) (Increase)/decrease in other receivables -515 656 1114
Less:Transfer from Transferor companies 0 0 0
-515 656 1114
e) (Increase)/decrease in loan & advances -112803 -117516 -105000
Less:Transfer from Transferor companies 5560 0 0
-107243 -117516 -105000
-179225 -485387 -398358
15211 -227214 94786
Add:
a) Increase/ (Decrease) in Trade payables & other liabilities 104721 161391 160930
Less:Transfer from Transferor companies -6210 98511 0 161391 160930
cash generated from operations 113722 -65823 255716
Deduct:
a) TaxPaid(Including frindge benefit tax) -37709 -35690 -80547
Cash Inflow/(Outflow) from operating activities 76013 -101513 175169
Investing Activities
B 2009 2010 2011
Outflow Rs in lakhs
a) Purchase of fixed assets(including CWIP) -691329 -1050815 -1290924
less:Transfer from Transferor activities 19643 -671686 0 -1050815 0
b) Purchase of investments -107608 -181003 -341395
less:Transfer from Transferor activities 81963 -25645 0 -181003 0
c) Miscellaneous Expenditure -447 -2995 -301
d) good will on consolidation -10494 -18
-708272 -1234831 -1632620
Inflow
a) sale/transfer of fixed assets 18825 2336
less:Adjustment is on account of Jaypee Hotels Limited, Gujarat Anjan Cement Limited and Jaypee Cement Limited amalgamating -18309 516 3702
with the Parent Company, Consequently extinguishing as subsidiary of the Parent Company w.e.f. 01.04.2008
b) sale of investments 10024 149185 310568
c) Interest received 17050 13204 22433
d) Dividend received 575 758 1561
e) Other Income 60 119 426
f) sale of share held in trust 0 168079 57316
28225 335047 394640
Deduct:
tax paid on sale os shareheld in trust 0 -22371 -10228
Net cash used in Investing Activities -680047 -922155 -1248208
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