Presentation on Cement industry in India

1. Presented by:
T Shravani Reddy
M Ramu
M Kasi Viswanath
V Lakshmi chaitanya
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2.  INTRODUCTION
 INDUSTRY BACKGROUND
 CEMENT PLAYERS IN INDIAN MARKET
 MAJOR PLAYERS IN CEMENT INDUSTRY
 ISSUES CONCERING THE CEMENT INDUSTRY
 MARKET SHARE OF INDUSTRY
 ECONOMIC STATUS OF CEMENT INDUSTRY
 BUDGET AND ITS IMPACT
 TAXES IN CEMENT INDUSTRY
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3.  MARKETING MIX
 PEST ANALYSIS
 SWOT ANALYSIS
 PORTERS FIVE FORCES MODEL
 GROWTH DRIVERS
 HR POLICES
 FUTURE SCOPE
 CONCLUSION
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4.  Cement industry, in any country, plays a major role in the growth of the
nation.
 India is the second largest producer of cement after China.
 Total production capacity is of 151.2 million tonnes (MT).
 Due to boost in various infrastructure projects, housing facilities and road
networks, the cement industry in India is currently growing at an enviable
pace.
 Cement production in India expected to rise 324 MT in FY15.
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5.  First unit was setup in Kolkata in 1889.
 But the industry started getting the organized shape in the early 1900s.
 India Cement Company Ltd. was established in 1914 with production
capacity of around 1000 tonnes.
 World War I gave a major impetus for the industry in India.
 Price and distribution control system in the year 1956 was established to
ensure fair price model for consumers as well as manufacturers.
 Later a three tier pricing system was introduced in the industry for
cement produced in high, medium and low cost plants
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6.  Earlier this industry was under full control of Government of India.
 Deregulated after the economic reforms
 But government interference, especially in the pricing, is still evident in
India.
 India falls in the list of lowest per capita consumption of cement with 125
kg.
 But a fast developing country like India, potential for this sector is
phenomenal.
 Around 20 companies dominate 70% production of cement in India.
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7. 04/11/2015 7

8. Dalmia
cement
Chettinad
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9. Company Production* Installed Capacity*
ACC 17,902 18,640
Ambuja 15,094 14,860
Ultratech 13,707 17,000
Grasim 14,649 14,115
India Cements 8,434 8,810
JK Group 6,174 6,680
Jaypee Group 6,316 6,531
Century 6,636 6,300
Madras Cements 4,550 5,470
Birla Corp. 5,150 5,113
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10. High Transportation Cost is affecting the competitiveness of the
cement industry. Freight accounts for 17% of the production cost.
Road is the preferred mode for transportation for distances less than
250km. However, industry is heavily dependant on roads for longer
distances too as the railway infrastructure is not adequate.
Cement industry is highly capital intensive industry and nearly 55-
60% of the inputs are controlled by the government.
There is regional imbalance in the distribution of cement industry.
Limestone availability in pockets has led to uneven capacity
additions.
Coal availability and quality is also affecting the production.
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11. 04/11/2015 11

12. 04/11/2015
Capacity Distribution
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13.  Growth Rate
 Exports
 FDI and GDP
 Investments
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14.  India would require overall cement capacity of around 480
million tonnes.
This would mean the industry will have to add another 150
million tonnes of capacity during the period.
According to the latest report from the working group on
the industry for the 12th five-year Plan (2012-17).
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15. 1.Abounding in about 130 big and 300 small cement plants, India's
cement production capacity stands at 167.36 million tonnes. Currently,
the cement industry in India is positioned at number in the world.
2.With incorporating modern techniques in the production, the Indian
cement industry has not only been able to meet domestic demands but
also serving well to the international arena. Undoubtedly, the credit for
this can be attached to the superlative quality of the cement produced in
India, which in turn has helped in registering boom in exports.
3.During 2007-08, the export of cement from India touched the 2.16
million tonnes mark. However during 2008-09, the cement export from
India stood at 1.46 million tonnes.
-
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16. •The industry occupies an important place in the national economy
because of its strong linkages to other sectors such as construction,
transportation, coal and power.
•The cement industry is one of the major contributors to the exchequer by
way of indirect taxes.
•100% FDI is permitted in the cement industry.
•It contributes approximately 1.3% of GDP and the industy is employing
over 0.14 million people
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17. Cement and gypsum products have received cumulative FDI of US $
1708.69 million between April 2000 and march 2010, according to the
Department industrial Policy and Promotion.
Madras Cements Ltd is planning to invest US $178.4 million to increase
the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT
from 2MT by April 2011.
Shree Cement, plans to invest US $97.13 million this year to set up a 1.5
MT clinker and grinding unit in Rajasthan. Moreover, in June 2010, Shree
Cement signed and MoU with the Karnataka government to invest US
$423.6 million for setting up a cement unit and a power plant.
Jaypee Associates plans to invest US $640 million to increase its cement
capacity.
Swiss cement company Holcim plans to invest US $ 1 billion in setting
up 2-3 greenfield manufacturing plants in the country in the next five
years to serve the rising domestic demand.
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18. 1.The following announcements have been proposed in the Union budget
2014-15
2.A sum of Rs 7060 crore is provided in the current fiscal for the project of
developing one hundred Smart Cities.
3.Allocation of Rs. 4000 crore through NHB for affordable housing and
enhanced allocation to NHB to the tune of Rs. 8000 crore towards the
Rural Housing Scheme. 500 model cities to be built via PPP route.
Rs 100 crore allocated for metro rail projects in Lucknow and
Ahmedabad.
Allocation of Rs. 5,000 crore provided for the Warehouse Infrastructure
Fund.
Slum development to be added to mandatory corporate social
responsibility (CSR) activity.
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19. India: According to Research and Markets, the cement market in India is
expected to grow at a compound annual growth rate (CAGR) of 8.96% in 2014 -
2019.
The cement industry comes under the industrial goods sector. The sector has a
total market capitalization of $31,240.1 billion, while cement industry has a total
market capitalization of $29.80 billion.
cement industry has an average P/E ratio of 33.40 and a P/B ratio of 4.31. The
average return on equity (ROE) for the industry is 2.80 percent, with a dividend
yield of 1.19 percent.
long-term Debt to Equity ratio is 71.90 and a net profie CRH Plc
t margin is 3.10 percent. The two biggest listed cement companies in the US ar
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20.  PRODUCT
 PRICE
 PROMOTION
 PLACE
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21.  A product is seen as an item that satisfies what a consumer needs
or wants
 Cement industry does not have a large product mix and same
applies for various cement companies.
 Major raw materials used include Lime, Clinker, Gypsum Low or
less product differentiation-Product differentiation between two
brands is next to impossible.
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22.  The price is the amount a customer pays for the
product.
 In Cement industry price is used only as a
differentiator between the 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.
 Most of the Cement companies offer a 5-10% margin to
the dealer and particular amount of money against per
Mt.
 The Company providing discount in case of bulk
purchases.
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23.  Promotion comprises elements such as: advertising, public
relations, personal selling and sales promotion
 The sales promotion schemes are not directly implemented for the
end user but channel members are the one who benefit from sales
promotions.
 Apart from this cements companies also come up with
merchandises often where in the masons, contractors are gifted
with caps, key chains-shirts with the logo of Cement Companies to
enhance the brand recall.
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24.  Refers to providing the product at a place
which is convenient for consumers to access.
 Place is synonymous with distribution.
 Various strategies such as intensive
distribution, selective distribution, exclusive
distribution and franchising can be used by the
marketer to complement the other aspects of
the marketing mix.
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25. •Coal rates, power tariffs, railway freight plays a very important
factor in the price determination, interestingly, government
control all of these prices
•Govt is one of the biggest consumers of the cement
POLITICAL
•Future of cement industry is very strong
•A lot government infrastructure and housing projects are under
construction
ECONOMIC
•Indian consumers prefer buying branded cement like LAFARGE,
JAYPEE,BIRLA etc
•Industry will create 25 lakhs jobs in coming years
SOCIAL
•Govt is acquiring new technology from Japan
•Emphasis is on creating highly energy efficient and environment
friendly technology to produce cement
TECHNOLOGY
PEST ANALYSIS
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26. Strengths
 Second largest in the world in terms of capacity
 Low cost of production
Weakness
 Effect of global recession on real estate
 High Interest rates on housing
Opportunities
 Strong growth of economy in the long run.
 Increase in infrastructure projects
Threats
 Excess overcapacity
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27. 04/11/2015
Threat of substitutes - limited
Bargaining
power of
suppliers-
very High
Bargaining
power of
Buyers
Limited
Threat of new Entrants – Limited
Inter Firm Rivalry Intense
Large no of players , high
storage costs , High Exit
barrier ,marginal product
differentiation
Porter’s Five Force Model
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28. 04/11/2015
Firm Rivalry :-High capital costs, Large no of players , high
storage costs , High Exit barrier ,marginal product
differentiation.
Threat of substitutes :-Threat of substitutes limited only bitumen
in road , and engineering plastics in building offer some element
of competition , otherwise No close substitutes are popular in
India
Threat of new Entrants – Limited
High capital Investment , broad distribution network and
oversupplied market deter new entrants . However
Technology and manpower are easily available
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29.  Bargaining power of Suppliers – Very High
 Monopolistic control of external cost element {Coal ,
Power , Transportations & Taxes } results in high
Bargaining power Buyers with the Goi.
 Bargaining power of Buyers– limited
 Rising share of retail Buyers , declining share of bulk
purchase by Goi. Has taken away the bargaining
power of customers.
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30. 04/11/2015
Key Consuming Sectors
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31. 04/11/2015
 segment growth is leading to higher demand for cement for
home building
 The housing segment accounts for a major portion of the total
domestic demand for cement in India.
 According to the Eleventh Five Year Plan (2007–2012),
housing demand is estimated to increase from more than 24
million units in 2007 to more than 26 million units at the end of
the Plan period.
 Growing urbanization, an increasing number of households
and higher employment are primarily driving the demand for
housing.
Housing
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32. 04/11/2015
Infrastructure
The ‘GOI’ is strongly focusing on infrastructure development to
boost the growth in the economy. It plans to increase investment
in infrastructure to US$ 1 trillion in the Twelfth Five Year Plan
(2012–2017), as compared with US$ 514 billion under the
Eleventh Five Year Plan (2007–2012).
The GoI intends to expand the capacity of the railways and the
facilities for handling and storage to ease the transportation of
cement and further reduce its transportation costs.
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33.  Recruitment and Selection
 Training and Development
 Performance appraisal
 Compensation
 Welfare and Safety measures
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34.  Recruitment is a process of attracting a pool of
high quality applicants so as to select the best
among them.
 Due to the complexity of work increases,
organizations that now use more selection
methods that capture the applicant's capability
to do the work
 Selection procedure should able match
applicant's values with the organization
culture.
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35.  Training and development deals with updating of
skills and competencies of the employees through
series of training and development programmes.
 In today’s competitive environment skilled
employees with necessary skills and competencies
able to enhance productivity, organization
competitiveness and performance.
 Training programs yield both tangible and
intangible results. Tangible results like enhanced
productivity and quality of goods and services.
Intangible results are high self esteem, enhanced
morale and high job satisfaction.
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36.  Performance appraisal process is an activity
that ensures mutual understanding between
subordinate and supervisor.
 Performance appraisal is positively related to
organizational performance. Lee & Lee (2007)
posited that successful performance appraisal
systems enhance quality and productivity
 Comprehensive, transparent performance
appraisal systems enhance talent retention
 Performance appraisal influences
organizational performance
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37.  Effective compensation and reward process
enhances productivity, employee retention,
and overall organizational performance
 Compensation encompasses all forms of
monetary, non-monetary return
 Berndardin and Rusell (1993) noted that
reward planning and compensation are key
dimensions of potent HRM practices
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38.  Employee welfare is flexible and elastic and
differs widely with time and region, industry,
social value and customs, degree of
industrialization the general social-economic
development of the people and the political
ideologies prevailing at a particular time
 It is also molded according to the age groups,
socio-cultural background, and educational
level of workers in various industries
 Industrial progress depends on satisfied labour
force and in this connection the importance of
labour welfare measures was accepted long
back
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39.  This need was further emphasized in
independent India by the Constitution, (1950)
which lays down the following articles in this
regard: “Article 42: The state shall make
provision for securing just and humane
conditions of work…
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40.  1. Steady price growth over the next 2-3 years
 2. Housing and government infrastructure spending to translate
into an 8 per cent CAGR in demand
 3. Production costs to increase moderately
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41.  It is evident that there is huge potential for the cost saving in
the cement industry. However this will require a structural
shift in the market place which might not be possible in the
short run
 Players like Ambuja cement and L&T have been successful
in making the best out of their location advantages and
developed means of transport cement.
 In the future as international players get stronger hold of the
market some of the best international practices might
emerges
 It will be very difficult for the companies to completely
eliminate bagged cement sales. But even if a substantial
portion moves to bulk, it would in considerable cost saving
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42. 04/11/2015
Thank
You
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