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Next to Agriculture, Real Estate is the second largest employer in the economy.

It comprises of four subsectors housing, retail, hospitality, and commercial. While housing contributes to five-six percent of the countrys GDP, the remaining three sub-sectors are also growing at a rapid pace, meeting the increase in infrastructural needs. Responsible for 7-8 percent of global cement production, India is the second largest cement market in the world, and also an exporter to 30 countries. According to the Cement Manufacturers Association (CMA), there are 39 large cement plants and 365 mini and white cement plants in the country. Overview With a market size of USD 66.8bn, the Real Estate sector contributes around 5 percent to the nations GDP. While the market is growing, there remains a housing shortage across both urban and rural areas, estimated to be 20.5 million and 26 million respectively. This demand for residential space is projected to grow sharply at a CAGR of 19 percent in 2010-2014. Currently, there are few big players like DLF and Unitech that drive this segment. Commercial space demand is arising from metro cities like Delhi-NCR, Mumbai and Bengaluru, and will see an upward trend at a CAGR of 7 percent between 2010 and 2014. Few large players dominate the market and hold pan-India presence. However, the overall business in this domain is witnessing a shift from sales to lease and maintenance. Though retail space accounts for a small portion of the overall real estate market and organised retailers are few, increasing collaborations between international retail brands and Indian partners is likely to promote a strong growth in the retail space. Hospitality market comprises hotels, service apartments and convention centres. NCR and Mumbai remain the biggest hospitality markets in India. The cement industry in India is divided into five geographical segments, wherein the North and South regions are the leading suppliers of cement. The East, West and Central regions face deficit of cement, thereby relying on purchases from the North and South. Leading players in this sector (by market share) are Shree Chem, Ultratech, Ambuja, Binani, ACC, India Cem, Dalmia Cem, Madras Cem, Lafarge, and OCL India. Factors that will drive growth in this sector Robust economic growth is driving the demand for commercial property. Urbanisation and growing household income is boosting demand for residential real estate. Hospitality space is gaining from increased flow of foreign tourists to the country (CAGR of 6.6 percent during 2005-10). FDI in real estate and construction is on an uptrend, accounting for 22 percent of total FDI. 110 deals were closed in the sector between 2001 mid 2011. Housing segment growth is leading to higher demand for cement for homebuilding. Governments 12th Five Year Plan focuses on increasing infrastructure (upgraded airports, ports, railway expansion, etc.) to drive construction activity. Rise in commercial and retail spaces, along with hotels in near future, will account for increased demand for cement. Government initiatives Introduction of few policies by the Government is allowing the growth of the real estate and construction sector: Housing finances are becoming feasible with the housing loan limit being raised to US $52080 for priority sector lending. US$ 625 million have been allocated for the Rural Housing Fund to provide homes to economically weaker sections. FDI up to 100 per cent is allowed with government permission for developing townships and settlements. FDI up to 100 per cent is also allowed in hotel and tourism sector through automatic route. Demand for professionals CMA predicts that cement production of one million tonnes will generate downstream employment for 50,000 people. According to the 'Real Estate and Construction Professionals in India by 2020' study by Royal Institute of Chartered Surveyors (RICS) in November 2011, there is a demand-supply gap in the order of 82-86 percent in the number of professionals and the skill sets for the core, namely civil engineering, architecture and planning. The study indicates a supply-demand gap of 44 million core professionals by 2020.

A
ACC LimitedAmbuja Cements LimitedAndhra Cements Ltd

B
Barak Valley Cements LtdBheema Cements LtdBinani Cement LtdBirla Corporation LimitedBurnpur Cement Ltd

C
Chettinad Cement Corporation Limited

D
Dalmia Cement (Bharat) LimitedDeccan Cements Ltd.

E
Everest Industries Ltd

G
Grasim Industries LimitedGujarat Sidhee Cement Ltd

H
Heidelberg Cement India LtdHyderabad Industries Ltd

I
Indian Hume Pipe Company Ltd

J
J. K. Cement LimitedJK Lakshmi Cement Ltd

K
Kalyanpur Cements Ltd.Katwa Cements LtdKesoram Industries Ltd.

M
Madras Cements LimitedMangalam Cement Ltd.

N
NCL Industries Ltd.Nirman Cements Ltd

O
OCL India Ltd.

P
Panyam Cements & Mineral Inds. LtdPrism Cement Ltd

R
Rose Zinc Ltd

S
Sagar Cements Ltd.Sainik Finance & Inds. Ltd.Sanghi Industries LtdSaurashtra Cement Ltd.Shiva Cement LtdShree Digvijay Cement Company Ltd.Somani Cement Company LtdSri Vasavi Inds. LtdSrichakra Cements LtdStresscrete India Ltd

T
The India Cements LimitedThe India Cements Limited

U
Udaipur Cement Works LtdUltraTech Cement Limited

V
Vinay Cements LtdVisaka Industries Ltd The Indian cement industry is the 2nd largest market after China. It had a total capacity of about 300 m tonnes (MT) as of financial year ended 2010-11. Consolidation has taken place with the top three players alone controlling almost 35% of the capacity. However, the balance capacity still remains quite fragmented.

Despite the fact that the Indian cement industry has grown at a commendable rate in the last decade, registering a growth of nearly 9% to 10%, the per capita consumption still remains substantially poor when compared with the world average. While China registered the highest per capita cement consumption in 2010 of about 1,380 kg, India stood much lower at 230 kg. This underlines the tremendous scope for growth in the Indian cement industry in the long term.

Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. With capacity addition taking place at a faster rate as compared to demand, prices have remained southbound, especially in the last one year. Nevertheless, considering the governments thrust on infrastructure, long term demand remains intact. Given the high potential for growth, quite a few foreign transnational companies have displayed their interest in the Indian markets. Already, while companies like Lafarge, Heidelberg and Italicementi have made a couple of acquisitions, Holcim has increased its stake in domestic companies Ambuja Cements and ACC to gain full control. Considering the long term growth story, fair valuations, fragmented structure of the industry and low gearing, another wave of consolidation would not come as a surprise.

Key Points Supply The demand-supply situation is high skewed with the latter being significantly higher. Housing sector acts as the principal growth driver for cement. However, recently industrial and infrastructure sectors have also emerged as demand drivers. High capital costs and long gestation periods. Access to limestone reserves (key input) also acts as a significant entry barrier. Licensing of coal and limestone reserves, supply of power from the state grid etc are all controlled by a single entity, which is the government. However, nowadays producers are relying more on captive power, but the shortage of coal and volatile fuel prices remain a concern. Cement is a commodity business and sales volumes mostly depend upon the distribution reach of the company. However, things are changing and few brands have started commanding a premium on account of better quality perception. Intense competition with players expanding reach and achieving pan India presence.

Demand

Barriers to entry

Bargaining power of suppliers

Bargaining power of customers

Competition

During financial year 2010-11 (FY11), the cement industry added nearly 28 MT over and above the 60 MT added in the previous year taking the total capacity to nearly 300 MT. However, cement demand during the year grew at a paltry rate of 5.3%, the lowest since 2003-04. A significant slowdown was witnessed following the first quarter of FY11 mainly on account of the several hikes in key lending rates by the Reserve Bank of India aimed at curbing the inflationary pressures. The credit crunch resulting from the monetary tightening impacted real estate, infrastructure and other construction projects. Prolonged

monsoons and logistical constraints further dampened the construction work. As a result, average industry capacity utilisation fell as low as 70%. The impact was even worse in the southern region, which witnessed the highest capacity additions.

The low cement demand severely affected average industry realisations (average price per bag of cement). Additional capacities coming on stream further intensified the oversupply situation. On the cost front, rising input and fuel costs severely hurt the margins of cement players. Export markets also remained sluggish due to the slowdown in the global economy, and particularly the sagging construction activity in the Gulf region. TOP

Prospects

The growth of the Indian economy has slowed down in recent times on account
of the rising inflation, high interest rates, high prices of commodities and fuels. The growth prospects of the cement industry are closely linked to the growth of the overall economy and the real estate and construction sector in particular. The importance of the housing sector in cement demand can be gauged from the fact that it consumes almost 60-70% of the countrys cement. If the slowdown in real estate persists for an extended period, it would impact the growth in consumption of cement. In such a case, the small and medium-sized cement players would be the worst hit.

Despite the overcapacity situation weighing on the cement industry, several


major capacity additions are expected in the next few years. Hence, the supply overhang is likely to persist for at least 2-3 years. This will keep a constant pressure on cement realisations. On the demand front, the cement industry is likely to maintain its growth momentum and continue growing at around 8% to 9% in the medium to long term. Government initiatives in the infrastructure sector and the housing sector are likely to be the main growth drivers.

In the Union Budget 2011-12, the government restructured the excise duty on
cement in a way that would effectively increase the tax incidence on the cement industry. However, certain initiatives chalked out to benefit the user industries would in turn boost demand for cement. Custom duties on key inputs such as petcoke and gypsum were also reduced which would provide some marginal relief against the rising costs of inputs.

After posting the poorest show in a decade in 2010-11, at sales growth of less than five per cent, Indias cement industry put up a better performance in financial year 2011-12, thanks to the robust demand revival in the second half of the year. The 330-million-tonne industry grew 6.4 per cent against less than five per cent in FY11. This was better than the cement makers earlier estimates of six per cent. However, later in the year when demand revived, industry officials and sector analysts turned positive, with growth projections of 6.5-7 per cent.

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The industry sold 223.02 million tonnes of the building material, compared with 209.5 million tonnes in FY11. Production, too, rose to 223.6 million tonnes against 210.5 million tonnes, up 6.2 per cent.

During the first half of the year (April-September), the industry managed to grow a mere 3.23 per cent. However, the strong revival in demand from the third quarter of FY12 helped cement makers raise prices, which improved their profitability. In November, the industry notched up sales growth of 19.5 per cent (one of the highest in many years in a month). Though, the demand growth later tapered, it remained in double digits till February. It was during this time that prices hit an all-time high of Rs 300 for a 50-kg bag. This level prevails even now. The industry witnessed demand rise across the country. In particular, western, central and northern regions were the main contributors for strong demand revival, says the research head of a Mumbaibased brokerage. However, the ending month of FY12 could not remain in line with the earlier few months, as sales dipped to single-digit. In March, the industry sold 22.5 million tonnes, a rise of 7.5 per cent against the corresponding month last year. Going forward, industry officials are optimistic and project growth at eight to nine per cent. The Holcim group of companies ACC and Ambuja Cements have chalked out expansion plans worth Rs 5,000 crore, while Aditya Birla Groups UltraTech Cement has plans to add 25 million tonnes of capacity in the next few years.

According to the latest report from the working group on the industry for the 12th five-year Plan (2012-17), 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. Currently, the top players UltraTech, ACC, Ambuja Cements, Jaiprakash Associates, India Cements and Shree Cement, collectively control more than half of the cement market in the country. There are 40 players in the industry across the country.

Published in April 2011, The Global Cement Report Ninth Edition tracks the dramatic volatility in the global cement markets, reflecting the turmoil in international financial markets. Key information is presented for over 160 countries covering the 2008-12 period for cement consumption and production data, import and export statistics, recent pricing information and new plant projects. Each country assessment combines key statistical data with in-depth market knowledge to present a concise analysis of the economic and construction indicators driving cement consumption, as well as a supply-demand balances influencing cement pricing trends and international trade. This country-by-country view is supplemented with an in-depth world overview of key industry trends and company profiles of the leading cement producers. Subscribers to the Global Cement Report Ninth Edition also receive a unique CD with a 20-year Statistical Review covering data from 1990-2010, collated from all editions of the report and presented in a variety of formats enabling global and regional research assessments.