Analysis on Cement Industry and Ultratech Cement

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The Indian cement industry is witnessing a rapid expansion due to the high demand from the housing sector and the need for increased infrastructure development, including state and national highways. This growth has led to an increase in cement production capacity, attracting major global companies in the cement industry and driving mergers and acquisitions for further expansion. The thriving housing and construction sector in India have greatly benefited cement manufacturers, with capacity utilization surpassing 100% in January 2007.

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India is the second largest cement producer in the world. Its growth rate during 2006-07 was 9%, compared to the previous fiscal’s total production of 147.8 mt. Of this, 9.3 million tons were exported. The Indian cement industry comprises 130 large plants and 365 mini-plants, with a total installed capacity of 165 million tons per annum (tap). Over 94% of this capacity comes from large plants. The high demand for cement in India and other countries has attracted major global companies to invest in India. In the year 2005-06, four out of the top five global cement companies entered India through mergers, acquisitions, joint ventures or Greenfield projects.

Several international cement companies, including Lafarge from France, Holcim from Switzerland, Italcementi from Italy, and Heidelberg Cements from Germany, operate in India. However, despite the growth of the Indian cement industry, the country’s annual per capita production is only 115 kilograms. This figure is lower than both the global average of over 250 kilograms and China’s production rate of over 450 kilograms.

Based on these statistics, it can be inferred that there is still potential for growth in India’s cement industry. Therefore, this project aims to analyze the Indian cement industry with a specific focus on Ultra Tech Cement.

Examining the Indian Cement Industry

India’s cement industry is the second largest globally, following China. Its total capacity in FY09 was around 200 MT. The main drivers of cement demand in India are the real estate sector, infrastructure projects, and industrial expansion initiatives. In FY07, the real estate sector alone accounted for approximately 55% of the demand. Key players in this industry include UltraTech/Grasim combine, Dalmia Cements, India Cements, and Holcim. Additionally, government support for infrastructure projects like road networks and housing facilities is expected to boost cement consumption in the future.

Jyotiraditya Scindia, Minister of State for Commerce and Industry, predicts that cement production will rise to 236.6 MT in FY11 and reach 262.61 MT in FY12. Currently, the industry is operating at full capacity and has been experiencing a consistent growth rate of 10% in cement dispatches. In the fiscal year 2007-08, total dispatches increased from 155 MT in the previous year to 170 MT. In July 2009, there was a growth of 9.92% in cement dispatches with a total of 15.95 MT compared to July 2008’s figure of14.51 MT . Cement production also increased by10.63% in July 2009 with an output of16.23MT compared to July2008’s figureof14.67MT.

Between April to July 2009, the production of cement was 66.38 MT and the dispatches totaled 65.0 MT. Despite the fact that the Indian cement industry has consistently produced more than 100 MT for the past five years with a growth rate of approximately 9% to 10%, the per capita consumption is only around 134 kgs. This is significantly lower than the world average of over 263 kgs and China’s consumption of over 950 kgs. These statistics highlight the great potential for long-term growth in the Indian cement industry. As a result, many foreign transnational companies are showing interest in the Indian markets and considering acquiring domestic companies.

Already, Lafarge, Heidelberg, and Italicementi have made some acquisitions. In contrast, Holcim has acquired a stake in Ambuja Cements and ACC. Over time, Holcim has increased its stake to achieve complete control. Meanwhile, after acquiring stakes in prominent companies, international companies have targeted medium-sized capacity producers. For instance, Italcementi acquired a 100% stake in Zuari Cement and a 95% stake in Shree Vishnu. Additionally, Cimpor, a Portuguese cement manufacturer, acquired a 53.63% stake in Shree Dig Vijay previously held by Grasims. Together, these global players now account for a quarter of the domestic market.


ACC, the largest cement maker in the country, experienced a dispatch growth rate of 4.5% in April. In contrast, Ambuja Cements saw a rise of 10.74%. The Aditya Birla group, consisting of UltraTech Cement and Grasim, witnessed a significant increase of 17.43% in cement despatches for April. Additionally, Shree Cement, a major cement producer in the north region, observed a steep surge of 28% in despatches. This remarkable growth in April’s despatches can be attributed to the low base of the previous year due to the export ban implemented during the same period. Consequently, there has been an impact on despatches. The recent price hike of Rs 12-15 for a 50 kg bag of cement during the March quarter of FY09 has proven to be advantageous for cement manufacturers.

Market players state that cement prices are determined by supply and demand. The government’s implementation of two stimulus packages also had a positive effect on the cement sector, including a reduction in excise duty and the imposing of counter-vailing duty (CVD) on imported cement from Pakistan.

In FY09, the industry experienced a volume growth rate of about 10% compared to the previous year. During this time, the industry expanded its capacity by approximately 30 million metric tons (MT), resulting in a total capacity of around 212 million metric tons per annum (MTPA).

Furthermore, India has been fulfilling the cement demands of Middle Eastern and Southeast Asian countries.

Exports were reduced in FY09 to meet domestic demand and control inflation, despite a 10% YoY increase in demand growth. However, the average industry cement prices rose by approximately 5% YoY. The availability of more capacity slowed down the growth in prices as it eased supply pressures. Additionally, the global financial turmoil has led to financial institutions tightening their credit requirements, resulting in a credit shortage that has affected upcoming projects.

Due to a general economic slowdown and other issues, the demand for cement has decreased. However, the government’s stimulus packages, which included a reduction in excise duty, as well as agricultural income, helped increase the demand for cement. This led to higher industry volumes and sales during FY09, resulting in overall growth. However, the cost of operations also increased, putting pressure on profit margins. To reduce costs and ensure efficient operations, the industry has chosen to establish captive power plants that use coal as a source of energy.

Due to insufficient coal linkages, the industry has witnessed an upsurge in demand for coal, resulting in a ratio below 50%. Consequently, players in the industry are compelled to either purchase from the open market or import coal, leading to increased operational expenses. JSW Cement, which is associated with OP Jindal Group, has outlined plans to construct cement units near their steel plants in Kurnool, Andhra Pradesh and Vijayanagar, Karnataka. These units will collectively have a capacity of 5.5 MT per year and will be established at a cost of $393.1 million.

Furthermore, Reliance Infrastructure, a subsidiary of Anil Ambani Group Company, aims to invest $2.1 billion over five years for the development of cement plants with a total capacity of 20 MT per year.

Reliance Cementation, an ADAG company, plans to establish a 5 MT integrated cement plant in Yavatmal district of Maharashtra for $463.2 million. Jaiprakash Associates Ltd has signed a MoU with state-owned AMDC to build a cement plant with a capacity of 2 MT per annum costing around $221.36 million. RML, the flagship company of SR Rungta group, intends to set up a 1 million tonne cement plant in Orissa with an investment of approximately $123 million.

Mergers and Acquisitions (M)

Holcim significantly increased its ownership in Ambuja Cement in India from 22% to 56% through multiple open market transactions. This investment totaled $1.8 billion. Additionally, Holcim became the largest buyer in the cement industry by increasing its stake in ACC Cement for $486 million. Several prominent foreign funds, including Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund, and Emerging Market Fund, collectively purchased approximately 7.5% of India’s third-largest cement company, India Cements (ICL), for $124.91 million.

Cimpor, a cement maker from Portugal, bought Grasim Industries’ stake of 53.63% in Shree Dig Vijay Cement for US$68.10 million. CRH Plc, the second-largest producer and distributor of building materials worldwide, acquired a 50% stake in My Home Industries Ltd worth around US$372.64 million.

Furthermore, Vicat SA, a French cement producer, purchased a 6.67% stake in Hyderabad-based Sagar Cement for US$14.35 million.

According to the ICRA Industry Monitor report, the construction industry is predicted to sustain its growth rate of approximately 8% to 9% in the medium to long term. Government initiatives in both the infrastructure and housing sectors are expected to be key factors driving this growth. The report projects that by the end of FY 2010, the installed capacity will reach 241 MTPA.

India’s cement industry is expected to grow by 10% annually due to increased domestic demand and improved capacity utilization. In recent years, there has been a shortage of cement supply compared to demand, leading to favorable prices nationwide. However, this situation is set to change as the industry plans significant capacity expansions. Cement manufacturers are preparing for these expansions in response to sector growth and the narrowing gap between supply and demand. The economic downturn has resulted in a slowdown in the urban real estate and construction sectors.

The housing sector is vital for cement demand, making up around 60%-70% of the country’s consumption. Any decrease in this support will harm cement consumption growth and create an imbalance between supply and demand. Additionally, rising coal and petroleum prices can also affect cement companies’ profit margins.



  • Growing International Presence
  • Cement Demand has increased due to the growth in Housing sectors, Infrastructure sectors, Industrial projects etc.
  • Capacity Utilization over 90%


  • Cement Industry is highly regionalized.
  • Low value commodity makes transportation over long distances Uneconomical.


  • Growth of core sector industries
  • Rapid integration with global economy.
  • Growing e-commerce business
  • Increasing urbanization


  • Entry of global players
  • Political Threats
  • The impact of foreign currency fluctuations and interest rates.


The Aditya Birla Group, a multinational corporation valued at US $29.2 billion and listed in the Fortune 500, has a diverse workforce of 130,000 employees from 30 countries. In India, it is known as “The Best Employer” and ranked among the top 20 employers in Asia by the Hewitt-Economic Times and Wall Street Journal Study in 2007. Furthermore, over half of its revenue comes from international ventures.

The Aditya Birla Group operates in a global scale, with operations in 25 countries including India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg,
Myanmar,Bangladesh,Vietnam,Malaysia,and Korea. The group is well-known globally for its metals expertise and is particularly acknowledged for its exceptional cost-efficiency in aluminum and copper production.

Hindalco-Novelis is the largest aluminum rolling company in Asia and one of the top three producers of primary aluminum. It also operates the largest single location copper smelter. In addition to that, it is the fourth largest producer of insulators and the number one producer of viscose staple fiber. Furthermore, Hindalco-Novelis ranks as the fourth largest producer of carbon black and the 11th largest cement producer globally – the seventh largest in Asia and the second largest in India. Additionally, it is recognized among the world’s top 15 BPO companies and one of India’s top four. The company’s energy efficient fertilizer plants are considered some of the best in India. Moreover, Hindalco-Novelis has established itself as a premier branded garments player and is the second largest player in viscose filament yarn.

The company is a major player in various industries. It ranks second in the chlor-alkali sector and is also among the top five mobile telephony companies. Additionally, it holds a leading position in life insurance and asset management and is one of the top three supermarket chains in retail business.


Consolidated sales increased from Rs. 60013 crores in FY08 to Rs. 65625 crores, which includes a non-cash unrealized derivative loss of approximately Rs. 2,381 crores. These derivatives mainly relate to customer fixed-price contracts, other commodities, and currency. The revenue for the Aluminum business was Rs. 54306 crores and its PBIT was Rs. 25 crores, while Copper generated Rs. 10760 crores in revenue with a PBIT of Rs. 374 crores. Hindalco standalone’s Aluminum business segment performance during FY09 was severely affected due to a significant decline in LME and downstream product demand. The average LME was 15% lower than the previous year.

The company expanded its aluminum operations by increasing metal production and improving plant efficiencies. They produced 523 KT of hot metal compared to 478 KT in the previous year. This year, the company achieved its highest-ever primary aluminum production and became the first Indian company to produce over 0. Mn tonnes in a year. The turnover in the aluminum business grew by 6.4% to Rs. 7,604 crores, compared to Rs. 7,145 crores in the same period last year, thanks to the record-breaking metal volumes.

Percentage of total sales revenue

The entry of Novelis into the Aditya Birla Group has given Hindalco a distinct advantage as a global metals player. Novelis is the exclusive company capable of manufacturing high-quality aluminum rolled products across all four continents where it operates. Being the leading producer of flat rolled aluminum products, it holds the top position in Europe, South America, and Asia, and is the second largest in North America. In addition to aluminum rolling, Novelis also has bauxite mining, alumina refining, primary aluminum smelting, and power generation facilities in Brazil, which are linked to its rolling plants there. Its technologically advanced assets are unrivaled, making its manufacturing technology stand out.


The Company experienced a 15% increase in consolidated net income from operations, with significant contributions from the Telecom, Life Insurance, Carbon Black, Fertilizers, and Garments businesses. Revenues from subsidiaries and joint ventures, in which the Company has made substantial investments, also grew by 12% from Rs. 7,908 Crores to Rs. 8,857 Crores. The consolidated revenues were primarily driven by the ‘Growth’ businesses, accounting for 72% of the total.


Idea Cellular Limited expanded its operations to 16 service areas through the acquisition of Spice Communications Limited, which operated in Punjab and Karnataka service areas, and through the roll out of operations in Mumbai, Orissa, and Bihar. Additionally, the company launched two new apparel retailing concepts during the year. Under the brand ‘Peter England People’, five family stores were opened catering to menswear, women’s wear, and kids wear segments. In order to serve the growing telecom and financial services sectors, the BPO business is expanding its delivery capacities in India.


The cement production capacity increased from 18.20 mtpa at the end of FY08 to 21.90 mtpa on 31st March, 2009. This was a result of capacity expansion at the Company’s Unit at Andhra Pradesh Cement Works (APCW) and the establishment of a new split grinding Unit at Ginigera, Karnataka. The net turnover increased by 16% due to higher domestic sales volume and improved prices in local and export markets. Exports make up 9% of the Company’s net sales, while the Ready Mix Concrete (RMC) segment accounts for 7%.


UltraTech Cement Limited produces and sells various types of cement, including Ordinary Portland cement, Portland Blast Furnace Slag Cement, and Portland Pozzalana Cement. It also manufactures ready mix concrete. With an annual capacity of 18. million tonnes, UltraTech Cement Limited operates five integrated plants, six grinding units, and three terminals, located in India and Sri Lanka. In addition to being the largest exporter of cement clinker in the country, UltraTech Cement exports its products to countries across the Indian Ocean, Africa, Europe, and the Middle East. Subsidiaries of UltraTech Cement include Dakshin Cement Limited and UltraTech Ceylinco (P) Limited.

The company exports over 2.5 million tonnes per annum, accounting for approximately 30% of the country’s total exports. The export market includes countries around the Indian Ocean, Africa, Europe, and the Middle East. Exporting is a key focus in the company’s growth strategy.


The cement production capacity increased from 18.20 mtpa at the end of FY08 to 21.90 mtpa on 31st March, 2009. This was achieved through the expansion of capacity at the Company’s Unit at Andhra Pradesh Cement Works (APCW) and the establishment of a new split grinding Unit at Ginigera, Karnataka.

The rise in realization was not as high as the increase in cost, which negatively affected profits. The Middle-Eastern region experienced a rise in demand and a stable exchange rate, resulting in better export prices until the third quarter of fiscal year 2009. However, export prices began to decline from the fourth quarter of fiscal year 2009 due to a slowdown in the Middle East. Net Turnover increased by 16% due to higher sales volume domestically and improved prices in both local and export markets. Exports make up 9% of the company’s net sales, while the Ready Mix Concrete (RMC) segment makes up 7%.

Operating Profit and Margin

  • Energy cost per tonne went up by 26% from Rs. 670 in FY08 to Rs. 847 in FY09 due to a substantial hike in imported and indigenous coal prices coupled with higher exchange rate.
  • Freight and Handling expenses increased by 11% from Rs. 969 crores in FY08 to Rs. 1,071 crores in FY09 given higher volume of RMC and domestic cement sales and increase in rail freight /HSD prices.
  • Raw Material cost per tonne was up by 11% from Rs. 245 in FY08 to Rs. 272 in FY09, consequent to higher prices of all critical inputs viz. ypsum, fly ash, iron ore and inward freight.
  • Employee costs escalated on account of revision in compensation structure in line with market, growth in the number of RMC Plants and manpower deployed in new projects, which were in various stages of commissioning.

Interest and Finance Charges significantly increased from Rs. 82 crores in FY08 to Rs. 126 crores in FY09 due to additional borrowing for ongoing large capital expenditures and repayment of existing low-cost debts. These expenses were financed through high-cost borrowing, resulting in the increase. Additionally, depreciation costs were incurred.

Depreciation increased by 36% from Rs. 237 crores in FY08 to Rs. 323 crores in FY09 due to the capitalisation of Line II at APCW, grinding Unit at Ginigera, and Thermal Power Plants (TPPs) at various locations. Additionally, the useful life of some assets were revised during the year, resulting in an increase in depreciation by Rs. 17 crores. The net profit for FY09 was Rs. 977 crores, compared to Rs. 1,008 crores in FY08.


India is becoming increasingly recognized as a robust economy and a major global player. The nation is currently experiencing rapid development and growth, with all important industries and sectors showing signs of expansion and attracting investors. The cement industry is no exception, as it is anticipated to maintain steady growth in 2009-2010, even amidst the economic recession and decline in demand from the housing sector. In fact, the industry is expected to further enhance its capacity by an additional 50 million tons.

According to industry experts, the sector is projected to grow by 9 to 10% during the current financial year, assuming India’s GDP grows at 7%. In order to increase production capacity by 2.5 million tonnes per annum, UltraTech Cement, owned by the Aditya Birla Group, plans to invest Rs. 200 crore to resolve bottlenecks in their plants. This expansion process is expected to take a couple of years. The Aditya Birla Group, which includes UltraTech and Grasim Cement, currently has a total capacity of 31 million tonnes per annum. UltraTech contributes 17 million tonnes of cement while Grasim contributes 14 million tonnes. However, demand for cement was low at approximately 4.7% during the first six months of this fiscal year.

However, the forecast predicts a growth of approximately 8 to 9% during the post-monsoon period, driven by the housing sector and the government’s focus on infrastructure development. UltraTech aims to increase revenue by 12% to Rs. 2,700 crore for this fiscal year compared to the previous fiscal year’s earnings of Rs. 2,400 crore. The Aditya Birla Group anticipates a 10% increase in turnover to Rs. 5,500 crore from Rs. 5,000 crore in the previous year.

The merger between UltraTech Cement Limited and Samruddhi Cement Limited, a wholly-owned subsidiary of Grasim Industries Limited, will make UltraTech the biggest cement company in India and the 10th largest globally. The combined entity will have the following capacities: 48. million TPA of grey cement spread across 22 plants, 504 MW of captive thermal power plants, and 11. 7 million cubic meters of ready mix concrete across 68 plants.


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  2. “You just have to be connected to India”, The Economic Times 20 November 2009.
  3. “Global in Attitudes and true to one’s Roots”, The Economic Times 10 August 2009
  4. “Hope is back in Business Today”, India Today 8 June 2009.

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Analysis on Cement Industry and Ultratech Cement. (2018, Jun 03). Retrieved from

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