Industry Overview

Indian cement industry is an essential part of Indian economy and contributes considerably to
its GDP. It was deregulated in 1982 which attracted lot of investments. The Indian cement
industry is still trying to achieve global standards of production although it contributes a
major portion to
Indian cement industry is second biggest globally after China. It resonates well with the fact
that India being a developing nation requires execution of many infrastructure project. Thus
cement industries thrive well in a developing economy like India. The current production
capacity of India is 390 million tonnes (MT), which is expected to reach 550 MT. 98% of the
producers in India are the private players, while the rest are government enterprises. The top
20 companies account for 80% of the total production in India. Of the total, 188 large plants
account for 97% of the total production while the remaining 365 small plants account for the
rest 3%. Indian cement industry accounts for 8% of the global cement market. The major
consumers of cement are housing (67%), infrastructure (13%), commercial construction
(11%) and industrial construction (9%). Indian cement industry has grown at a considerable
pace in the last decade at a compounded growth of around 8%. Even though the compounded
growth for the cement industry has been good, the per capita consumption of cement is very
low around 190 kg, whereas the world per capita consumption is about 360kg. Thus there is a
considerable scope of growth in the per capita consumption in India.
Cement requires transportation over distances. It is uneconomical to transport cement over
long distances as it is very heavy. Therefore, the cement manufacturers are mostly regional
players divided into 5 main groups north, south, east, west and central region. The southern
region contributes one third of the countrys total cement installation. Thus major cement
companies are located in the southern region. This could be attributed to the fact that majority
of the minerals and raw material for cement manufacture could be found in the southern
region. The hilly topography of the southern region has embedded raw materials used for
cement manufacturing process.
The above statistics display skewedness in the cement production. Recently there has been a
strong focus by the Govt. of India on infrastructure development. This is bound to help
cement demand. The GOI plans to invest nearly US$ 1 trillion in the 12 th (2012 2017) 5
year plan. The government is also contemplating improved railway facilities for easy
transportation of the cement and infrastructure to enhance the storage capacity.

Sagar Cements
Sagar cements belongs to Hyderabad based Sagar group. Sagar group is into diversified
businesses of cement manufacturing, hydel and wind power generation. Sagar cements was
included in Sagar groups portfolio in 1981. Sagar cements manufacture different kinds of
cements, namely: Ordinary Portland Cement, Portland Pozzalona Cement and Sulphate
Resistance Cement. AP/Telengana have traditionally been the main markets for Sagar
cements, however the market has reduced over the time and company generates more than
60% of its revenue outside AP/Telengana.
In the last few years, cement companies expanded their capacities expecting investment by
the new central government in infrastructure development projects. However in the last year
2013 2014 the company suffered decrease in profit due to increasing cost of coal and the
other raw material. Since, Sagar cement sells more than 60% of its produce outside the state,
freight costs form a major chunk of expenditure. The company has taken major steps to
optimize its operations and thus increase the profit. Some of them are as following:

1.) Equipment Installation

To optimize the production capacity of the plant, the following equipments have been
installed at the manufacturing facility:
Secondary Limestone Crusher
VRPM as pre-grinder
CFD analysis for complete pre-heater
2.) Railway Line
Sagar cements transports most of its produce outside the state. Due to rising fuel cost,
road transport costs more. Thus company is contemplating a Railway Line siding in
its plant to market the cement in far flung states like Orissa, Assam and Kerala. The
railway siding will bring down the per ton transportation cost, thereby increasing the
profits. Also, railway siding will enable Sagar cements to find new markets.
The future outlook of the company looks good owing to the industry growth projections,
however still there are a few threats than are considered while evaluating this firm. These
threats are as following:

1.) Constraints on input

The cement manufacturing requires lot of energy and constant supply of raw material.
The energy is generated through coal, which is a scarce resource. The raw material is
limestone which also incurs costly transportation.
2.) Stagnant demand
Cement industrys major consumer is the housing industry. With a slowdown in
economy, the housing sector took a hit which consequently made cement demand
stagnant.
3.) Entry of Global players
India being a developing country attracts various global cement manufacturers. These
global players pose a threat for the domestic players as the global players are
equipped with better technology and knowhow.
4.) Outlook
The government outlook towards development and infrastructure projects defines
future of the cement industry. The government spending in housing, road projects,
port development projects further helps to increase the demand for cement.