Cement-Sept 2016. QR

INDIAN CEMENT SECTOR
Demand growth improvement likely to support cement prices; energy cost

benefits to reverse in H2 FY2017
ICRA RESEARCH SERVICES
ICRA RATING FEATURE
Contacts
Sabyasachi Majumdar
+91 124 4545304
sabyasachi@icraindia.com
Avneet Kaur
+91 124 4545319
avneetk@icraindia.com
Anupama Reddy
+91 40 40676516
anupama.reddy@icraindia.com
September 2016
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CONTENTS
1. Summary Opinion
2. Domestic Dynamics in Cement Industry
Trends in cement production
Estimates on cement demand in FY2017
3. Supply Dynamics in Cement Industry
Trends in capacity addition
Trends in capacity utilization
4. Market Structure
5. Trends in Cement Prices
Region wise trends in wholesale cement prices
6. Trends in Input Costs
7. Profitability Analysis of Cement Companies
8. Industry Outlook
9. Company Section
ACC Limited
Ambuja Cements Limited
JK Cement Limited
JK Lakshmi Cement Limited
OCL India Limited
Prism Cement Limited
Shree Cement Limited
The India Cements Limited
The Ramco Cements Limited
Ultratech Cement Limited
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INDIAN CEMENT SECTOR

Demand growth improvement likely to support cement prices; energy cost benefits to reverse in H2 FY2017
Industry Update
September 2016
Summary
Cement production during April-July 2016 witnessed a modest growth of 4.6%, which is higher when compared to 1.4% growth during April-July 2015 on a YoY basis - while
production growth was lower in April-May 2016, the same picked up in June 2016 supported by pre-monsoon demand. ICRA expects demand growth to pick up to 6% during
FY2017 and 7% during FY2018. The demand outlook for FY2017 remains relatively more favourable when compared to 4.6% during FY2016, driven mainly by the pick-up in
the infrastructure segment, primarily road projects and the housing segment, and the likelihood of a recovery in the rural demand from H2 FY2017, given a better monsoon
season. This is likely to support cement prices in the near term. Notwithstanding the improved sentiments in these sectors, a number of structural constraints need to be
sorted out for project implementation to gather pace in the other infra sub segments. While the Governments emphasis on the infrastructure projects is likely to result in
increased public sector investments, revival of public private partnership is critical for improving the pace of infrastructure development. The pace of recovery in the cement
industry is likely to mirror the trends in economic recovery. Given the capacity overhang, the capacity utilisation is likely to remain moderate at 68% in FY2017. With the
pace of new capacity addition slowing down and improvement in the supply-demand scenario, utilisation is likely to increase to 71% in FY2018, which should support
cement prices and profitability indicators for cement manufacturers, especially in FY2018. While the energy cost savings are likely to be diluted going forward, given the
increase in the coal and pet coke prices during H1 FY2017, North Indian cement manufacturers would report better profit numbers for H1 FY2017 vis-a-vis H1 FY2016
supported by the significant increase in cement prices. The recent reconfirmation of penalty imposed by the Competition Commission of India (CCI) in August 2016 (earlier
order was in June 2012) on most cement companies has not had any major negative impact on cement prices.
All-India cement production reported a moderate growth of 4.6% in FY2016, (to 282 million MT from 270 million MT in FY2015), with the growth rate being lower than the
5.6% witnessed in FY2015. During April-July 2016, the production at 99 million MT, reported a growth of 4.6%, while modest has improved when compared to April-July
2015 at 1.4%. While the production growth during April-May 2016 was lower at 3.4% when compared to the 9%-13.5% growth reported during Q4 FY2016, the demand has
picked up in June 2016 and the production increased by 10.4% when compared to June 2015. The decline in the demand growth during April-May 2016 has been primarily
due to the continued weak rural demand (especially in Maharashtra, which is facing a drought) and slowdown in the pace of infrastructure execution due to the
unavailability of water. During June 2016, demand improved in most regions supported by the pre-monsoon demand. During July 2016, production has been at 23.33 million
MT, a 10.5% decline on MoM basis due to the onset of monsoons in most regions.
With an estimated capacity addition of 16 MTPA during FY2017 and an estimated demand growth of 6%, the incremental demand would just exceed the incremental supply,
resulting in a marginal increase in capacity utilisation to ~68% from 66% in FY2016. Cement production growth during FY2017 is likely to be driven by the pick-up in the
infrastructure segment, mostly road projects and the housing segment. Further, in the southern markets, the demand is likely to recover during H2 FY2017, supported by
the construction of a new capital for Andhra Pradesh and with the focus on irrigation and water grid schemes by the Telangana Government. Notwithstanding the improved
sentiments in the road sector and the housing segment, a number of structural constraints need to be sorted out for project implementation to gather pace in the other
infra sub-segments. Further, the new project announcements from the private sector continue to remain weak. The stalled projects remain sizeable with many projects
delayed due to unfavourable market conditions, funding constraints, absence of raw-material linkages etc. While the Governments emphasis on the infrastructure projects
is likely to result in increased public sector investments, revival of the public private partnership is critical for improving the pace of infrastructure development.
However, the capacity addition is expected to slow down considerably in FY2018 with the industry likely to add only 13 MTPA of capacity. ICRA expects steady growth in
demand (around 7% p.a. in FY2018), which is likely to result in an improvement in capacity utilisation to 71% in FY2018. The eastern region will lead the capacity expansion,
while the southern region, which had witnessed the highest capacity addition in the last five years, will see a considerable slowdown in capacity addition during this period.
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Summary
The demand uptick, followed by a strong pricing discipline, has resulted in a price rebound in the North to Rs. 305-345/bag in April-July 2016 from Rs. 225-240/bag in
January 2016. During April August 2016, cement prices in the North were higher by around Rs. 60/bag, compared to April August 2015. On the contrary, in the
Hyderabad market, the collapse of the pricing discipline resulted in pressure on prices from January 2016. However, there has been a rebound in cement prices during MayAugust 2016 to Rs. 330/bag from Rs. 260/bag in April 2016. On an average, in the Hyderabad market, the cement prices during April-August 2016 at around Rs. 300/bag,
have been lower by Rs. 35/bag when compared to April-August 2015. In other southern markets, the prices are relatively stable, with Chennai reporting the same at Rs. 375395/bag and Bangalore, between Rs. 340-370/bag. In the western markets, cement prices continued to remain subdued during April-August 2016 in the range of Rs. 260270/bag and the average cement price during April August 2016 at around Rs. 265/bag is largely similar to that during April August 2015. In the eastern markets, there
has been a decline in the cement price in during April May 2016, however, prices increased during June-August 2016 to Rs. 335/bag from around Rs. 315/bag in April 2016.
On an average, cement prices in the East during April-August 2016, has been lower by Rs. 30/bag, compared to April-August 2015.
The CCI, in its order dated August 31, 2016 has reconfirmed the penalty imposed on ten cement companies to the tune of Rs. 6316 crore and the Cement Manufacturers
Association (CMA) to the tune of Rs. 0.73 crore for cartelisation in the cement industry (equal to earlier order June 20, 2012). Through a separate order, the CCI has also
imposed a penalty on Shree Cement for Rs. 397 crore. The CCI has given a time of 60 days from the date of receipt of this order to deposit the penalty amount. The amount
of penalty is the same as per the earlier order of June 2012 (with the addition of Shree Cements Ltd) and amounts to 50% of the net profit for FY2010 and FY2011 of the
companies. However, it is likely that the cement companies will appeal to the Competition Apellate Tribunal. This imposition of penalties by the CCI has not had any major
negative impact on the recent cement prices.
Energy and freight costs are under pressure on the back of rising pet coke, coal and diesel prices in the recent months. During H2 FY2016, pet coke prices reported a decline
of ~30% when compared to the corresponding period in the previous year. However, pet coke prices have been increasing since February 2016 and reached at around Rs.
6400/MT in August 2016, an increase of ~78% when compared to the low of January 2016. This has been due to the higher domestic demand of pet coke, coupled with the
supply constraints. Pet coke prices during July August 2016 are higher by 8% when compared to the corresponding period last year, hence, going forward, the cost savings
are likely to get diluted. Further, the coal prices, which declined during FY2016, have witnessed some recovery during May-July 2016. In July 2016, coal prices were higher by
12.5% as against the price recorded during July 2015. The recovery in coal prices can be primarily attributed to supply side cuts and improved demand from China. Also,
during April-August 2016, there has been a nearly 15% increase in diesel prices when compared to Q4 FY2016 and around 6% when compared to the April-August 2015. This
is likely to put pressure on freight costs of the cement companies during FY2017.
Most cement companies in the ICRA sample* reported either a decline or a modest YoY increase in revenues in Q1 FY2017. Only two companies, namely JK Lakshmi Cement
Limited and Shree Cement Limited - registered a healthy double-digit YoY revenue growth. The profitability margins of most cement companies reported an increase on a
YoY basis during Q1 FY2017 when compared to Q1 FY2016. A significant price hike for North-based companies coupled with lower power and fuel costs reported a healthy
growth in operating margin during Q1 FY2017 on a YoY basis. While the cement prices are lower during Q1 FY2017 for the South and East-based companies, the operating
profitability is supported by cost side benefits such as lower power and fuel expenses due to lower pet coke costs and higher pet coke consumption on a YoY basis. Increase
in the operating profitability resulted in higher interest coverage ratio during Q1 FY2017, compared to Q1 FY2016. While the power cost savings are likely to be diluted going
forward and the freight costs relatively higher, North Indian cement manufacturers would report better profit numbers for H1 FY2017 vis-a-vis H1 FY2016, supported by the
significant increase in cement prices.
*ICRA Sample Includes ACC Limited, Ambuja Cements Limited, JK Cement Limited, JK Lakshmi Cement Limited, OCL India Limited, Prism Cement Limited, Shree Cement Limited, The India Cements Limited, The Ramco
Cements Limited and Ultratech Cement Limited
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Demand Dynamics in Cement Industry
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Exhibit 1: All-India Cement Production
Exhibit 2: Trend in Construction GVA
Source: Office of Economic Advisor, Index of Core Industries
Cement production in FY2016 is at 282.5 million MT, an increase of 4.6% on a YoY basis; however, pick-up in demand seen in Q4 FY2016
All-India cement production reported an increase by a moderate 5% in FY2016 to 282 million MT from 270 million MT in FY2015, with the growth rate being lower than the 6%
witnessed in FY2015. The same is reflected in the construction Gross Value Added (GVA) growth, which declined to 4% in FY2016 from 4.4% in FY2015. Cement demand has
recorded a rebound during Q4 FY2016, with all-India cement production registering a growth of 11.4% on a YoY basis, after a period of stagnancy for 9M FY2016. The growth in
Q4 FY2016 was supported by higher demand from the eastern markets and some demand revival in the northern and southern markets; powered by a pick-up in the
infrastructure segment following Government spending. As against this, during the first 9M FY2016, all-India cement production had registered a weak growth of 2% on a YoY
basis, being impacted by continued muted demand from key consumer industries (real estate and infrastructure).
Cement production growth increased on a YoY during 4M FY2017; however, is lower when compared to Q4 FY2016
During Q1 FY2017, the cement production at 75.64 million MT, reported a moderate growth of 5.7% over Q1 FY2016. While the production growth during April-May 2016
was lower at 3.4% when compared to the 9%-13.5% growth reported during Q4 FY2016, the demand has picked up in June 2016 and the production increased by 10.4%
when compared to June 2015. The decline in the demand growth during April-May 2016 has been primarily due to the continued weak rural demand (especially in
Maharashtra, which is facing a drought) and slowdown in the pace of infrastructure execution due to the unavailability of water. During June 2016, demand improved in
most regions supported by the pre-monsoon demand. Also, in the North, the pick-up in demand was due to the pick-up in the execution of infrastructure projects and
irrigation projects in Uttar Pradesh. In the East, demand continues to remain healthy, driven by rural housing and infrastructure (road) segments. During July 2016,
production has been at 23.33 million MT, decline by 10.5% on a MoM basis due to the on-set of monsoons in most regions.
During 4M FY2017, the production growth at 4.6%, while modest has improved when compared to 4M FY2016 at 1.4%.
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Exhibit 3: Quarterly Trend in Growth Rate of Cement Production
Growth
Exhibit 4: Monthly Production Trends
Source: Office of Economic Advisor, Index of Core Industries
New investments and revivals decline in Q1 FY2017

New project announcements witnessed a sharp slowdown to Rs. 1.25 trillion in Q1 FY2017 compared with a quarterly average of Rs. 2 trillion during FY2016. Similarly, new
investment activity also has been low in the Q1 FY2017 with awarding of only 356 new projects (projects with outlay of Rs. 10 million and above). This is the lowest level of new
investment activity in any quarter since June 2004. During Q1 FY2017, the revival of projects also has been low at Rs. 0.14 trillion. As a result, the net addition to the stock of
investment projects for implementation increased by only Rs. 1.39 trillion during the Q1 FY2017 - the lowest addition in the last 14 quarters. The share of the private sector in
total projects under implementation has been on a declining trend since FY2012, as while there has been robust growth in the Government projects, new projects taken up by
the private sector has been low due to various factors including leveraged balance sheets, and weak sentiments.
Pace of stalling of projects declined but stalled projects remained high as of June 2016
While projects that are under implementation continue to get stalled, their numbers have come down. Around 49 projects worth Rs. 547 billion were stalled during Q1 FY2017,
the smallest number stalled in the last six years. Eleven of the 49 projects were stalled due to unfavourable market conditions, while eight projects were stalled due to weak
promoters financials, making it difficult to arrange funds.
The overall value of stalled projects, nevertheless, remained high at Rs. 11.2 trillion as of June 2016, marginally lower than Rs. 11.3 trillion as of March 2016. While the stock of
stalled Government projects seems to have peaked at around Rs. 2.8 trillion in the first half of FY2016, stalled projects in the private sector continue to increase. About 56% of
the total stalled projects are in the power and metals sectors. Land acquisition, regulatory clearances, raw-material availability, lack of investor interest, funds, and unfavourable
market conditions continue to remain the key reasons behind stalled projects. As a majority of the stalled projects are from the private sector, with challenging market
conditions, the recovery of stalled projects could take more time.
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Infrastructure credit remains under stress
The infrastructure sector has faced multiple headwinds over the last two to three years. Many infrastructure projects faced delays on account of clearances and land acquisition
resulting in time and cost overruns, which impacted their viability. Many projects were supported by their parent companies which had locked capital and increased dependence
on external borrowings for these developers, thereby constraining the availability of funds for equity requirement in new projects. Due to these factors, many infrastructure
projects have witnessed stressed liquidity. The stress in the infrastructure sector is also reflected by the increase in non-performing assets (NPAs) in the infrastructure sector.
Among the infrastructure segments, power, roads, and telecom comprise a major part of the credit for infrastructure. The infrastructure credit in India is dominated by banks and
NBFCs. While banks have been the major source of providing infrastructure credit in India, their capacity to continue to provide funds to meet the growing requirement of the
infrastructure sector is constrained. However, with banks facing a huge stressed asset problem, their ability to extend credit to the already stretched sectors like infrastructure will
remain constrained and other avenues of funding (such as through alternate investment funds (AIF), and InvITs) need to be strengthened.
Exhibit 6: Credit growth
Exhibit 5: Movement in credit
Source: ICRA Research
All India cement production to increase by 6% during FY2017; recovery in infrastructure and real estate key to demand recovery
ICRA expects the growth in FY2017 to be around 6%. This is likely to be driven by the pick-up in the infrastructure segment, mostly road projects and the housing segment. In the
road sector, the Governments focus over the last two years in addressing several execution bottlenecks - speedy resolution of stuck projects, fast clearances and increasing limits
on sand mining have yielded positive results. This is reflected in the 43% increase in the pace of execution, with execution rate reaching 5.53 km/day during FY2016 as against 4.11
km/day during FY2015. The pace of execution increased, by 8% during Q1 FY2017 to 5.95 km/day, from 5.49 km/day during Q1 FY2016. The awards by NHAI during FY2016
increased to 4,390 km as compared to 3,076 km in FY2015 and NHAI intends to award 6,615 km during FY2017. These factors are likely to give cement demand a push. However,
the financial closure of road projects in the private sector continues to remain a challenge (given in Exhibit 6). Government thrust towards programmes like Housing for All and
rural housing is likely to result in a demand uptick from the housing segment, supported by an improvement in monsoons during the year. Further, in the southern region, the
demand is likely to recover further during H2 FY2017, supported by the construction of a new capital for Andhra Pradesh and a focus on irrigation and the water grid schemes by
the Telangana Government.
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Notwithstanding the improved sentiments in the road sector and the housing segment, a number of structural constraints need to be sorted out for project implementation to
gather pace in the other infra sub-segments. Further, the new project announcements from the private sector continue to remain weak. While the order book position of the
construction companies improved on the back of push from the Government on roads and urban infrastructure segments, the execution has not gained significant movement as
the order books continue to be burdened with slow moving or stalled projects and also many companies continue to face weak liquidity. As mentioned above, the stalled projects
remain sizeable with many projects delayed due to unfavourable market conditions, funding constraints, absence of raw-material linkages etc. Further, banks with stressed balance
sheets limit funding sources for new projects.
However, on the positive side, with the savings from lower crude oil prices and the Governments emphasis on infrastructure projects, public sector investments are expected to
increase in the medium term. Nevertheless, higher public sector investments alone may not be sufficient for revival of the construction/infrastructure sector as public sector
spending is also constrained by fiscal deficit targets and other increased expenditures on account of recently announced pay revisions, etc. Hence, the revival of public private
partnership is crucial to improve the pace of infrastructure development.
We expect the demand to pick up and gradually improve in the medium term, in line with the recovery in infrastructure, investment cycle, and the overall economy. Pick-up of real
estate and industrial activity, infrastructure projects and the overall investment cycle will remain critical for the sector over the near-term.
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Supply Dynamics in Cement Industry
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Supply Dynamics in Cement Industry

Exhibit 7: Trend in Capacity Utilisation
Aggressive capacity expansion in the past, coupled with demand slowdown, put
pressure on capacity utilisation
The industry has seen a slowdown in addition to the new capacities, mainly due to the
demand slowdown and the supply glut faced in recent times. For instance, between FY2013FY2016, the industry added 109 MTPA cement capacities in a four-year period (Refer Exhibit 6)
as against 149 MTPA in the preceding five-year period FY2007-FY2012. The recent period
witnessed a considerable slowdown in cement demand due to a delay in infrastructure
projects on account of issues pertaining to land acquisition, delays in securing the requisite
approvals and problems in achieving financial closure. Cement production grew by 5.3% during
FY2013-FY2016 as against 7.2% during FY2009-FY2012. As a result, capacity utilisation declined
from 73% in FY2012 to 66% in FY2016, despite a slowdown in fresh capacity addition.
Exhibit 8: Region wise capacity addition
Source: Company Announcements & Media Releases, Company Annual Reports,

CMA, Office of Economic Advisor Index of Core Industries, ICRA Research
Capacity utilisation to improve going forward with recovery in demand and

slowdown in capacity addition
The cement industry added 27 MTPA capacity in FY2015 and an estimated capacity of 24 MTPA
was added during FY2016. Capacity addition is expected to slow down and is estimated at 16
MTPA in FY2017 and 13 MTPA in FY2018 as against the peak addition of 45 MTPA in FY2011.
The East is expected to lead the expansion and will add about 13 MTPA capacities during
FY2017-FY2018. Some of the major expansions in this region have been by ACC Limited, Shree
Cement Limited, JSW cement and Emami Cement. The southern region, which had witnessed
the highest wave of capacity addition in the last five years, will witness considerable slowdown
in capacity addition during FY2017-FY2018. With an estimated capacity addition of 16 MTPA
during FY2017 and an estimated demand growth of 6%, the incremental demand would just
exceed the incremental supply, resulting in a marginal increase in capacity utilisation to ~68%.
ICRA expects steady growth in demand (around 7% p.a. in FY2018), which is likely to result in
an improvement in capacity utilisation to 71% in FY2018. Delays in project execution and
project commissioning may result in higher utilisation.
Future slowdown in capacity additions

Capacity additions in cement beyond FY2018 are expected to slow down further, given the lack of quality limestone resources. Moreover, with the proposed auctions of limestone
reserves under the Mines and Minerals (Development and Regulation) Amendment bill, the acquisition price for limestone reserves is likely to increase. While incumbent players
with existing mining licences will be better positioned to expand their capacities, as compared to new entrants; acquisition of existing assets with limestone sources will gather
pace as compared to investments in new plants.
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Market Structure
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Market Structure
Cement in India is a fragmented industry with more than 160 players having a combination of large cement plants (~210) and mini and white cement plants (~370). The size of the
cement industry is estimated to be in the range of 425-430 million MTPA. Currently, the top three cement producersHolcim-controlled ACC Ltd and Ambuja Cement Ltd, Aditya
Birla Groups Ultratech Ltd, and Dalmia Cementhold about 35% of the cement market in India. With cement being a bulk, transport-expensive commodity, the production has
been concentrated on regional basis. India is divided into five main regions northern, eastern, western, southern and central. The southern has the highest installed capacity and
the main cement production states in India are Andhra Pradesh, Tamil Nadu (both in the southern region) and Rajasthan (northern region).
Recent spurt in consolidation in the industry

There has been a recent spurt in the merger and acquisition activity in the Indian cement industry. While Lafarges sale of its 11 million MTPA capacity to Nirma Limited was driven
by regulatory issues, debt overhang among a few players has also driven consolidation. Reliance Infrastructure in February sold its cement assets (5.5 million tonne) to Birla
Corporation for Rs. 4,800 crore to pare its bloated debt. For the same reason, the Jaypee Group has entered into a deal with Ultratech Cement for the sale of its cement plants in
Madhya Pradesh, UP, Himachal Pradesh, Uttarakhand and Andhra Pradesh, with a total capacity of 21.2 million MTPA, post which Ultratech's cement capacity will stand
augmented to 91.1 million MPTA, including its overseas operations.
However, the industry still remains fragmented as most of this wave of consolidation has been restricted to the top five players. The combined capacity in the hands of the top ten
cement producers in India remains largely unchanged even after the recent mergers and acquisitions. Post the various deals, Nirma Group and Birla Corp. Ltd are the two new
entrants in this list, as Lafarge India and Jaypee Group make an exit.
Northern & Central region
Exhibit 9: Region wise consolidation
Uttar Pradesh, Rajasthan, Punjab, Delhi and Haryana are the key markets in the northern
region, which collectively account for more than 85% of the overall cement consumption
in the region with the balance demand coming from Uttarakhand, Himachal Pradesh,
Jammu & Kashmir, and Chandigarh. About 80% of the production in the northern region
is concentrated in Rajasthan. In the central region, Madhya Pradesh (MP) has large
limestone deposits in the Satna cluster and most clinker plants are located here.
80%
60%
40%
20%
0%
North
ACC+Ambuja
Dalmia cement
JAL+JSW+Orient
Source: ICRA Research
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South
East
Ultratech
India+Ramco+Chettinad
West
Shree+JAL+Birla Corp
Nirma+JAL
The Holcim Group (ACC & Ambuja) is the market leader in the North, followed by Shree
Cement, Ultratech Cement, Jaiprakash Associates and Birla Corporation Limited. The top
five players collectively accounted for around 60% of the market share in the northern
region as on March 2016, thus making the region reasonably consolidated.
With the planned acquisition of Jaiprakash Associates cement works located in Uttar
Pradesh, Himachal Pradesh and Uttarakhand, Ultratech is going to emerge as the largest
player in the northern region. Birla Corporation has also emerged as one of the top five
players in the region after acquiring the cement business of Reliance Infrastructure
Limited. Completion of these deals is going to result in an increased level of
consolidation, with the top five players accounting for around 64% of the capacity.
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Market Structure
Southern region
Owing to abundant raw material availability i.e. large limestone reserves located in South India enjoys the highest share of cement capacities in India. Tamil Nadu, Andhra Pradesh
and Karnataka are the key consuming markets. The southern region is relatively more fragmented compared to the other regions, with the top five players accounting for around
40% of the total market share. The top five players in the South are Ultratech Cement, India Cements, Ramco Cement, Dalmia Cement and Chettinad Cement.
Eastern region
Out of the cement national capacity of ~420 million MTPA, the eastern regions contribution with 65 million MTPA capacity is 15-16%. Over the last five years, the eastern region
registered healthy growth in cement consumption, due to a good demand from states such as Orissa, Bihar, Jharkhand and Chhattisgarh. The other markets include West Bengal
and the North Eastern states.
The Holcim Group companies (ACC & Ambuja) enjoy the largest market share in the region, followed by the Dalmia Group, Ultratech Cement, the Nirma Group and the Jaypee
Group. The eastern region demonstrates relatively higher level of consolidation as compared to other regions, with the top five players accounting for almost 71% of the market
share. Amongst the key players, Nirma Limited has been a new entrant after the acquisition of Lafarges 11 million MTPA capacity, three-fourth of which is based in the East.
Western region
Maharashtra is one of the key cement consuming states in India and the largest cement consumer in the western region. Cement demand in Gujarat is also high with cement
consumption witnessing fast growth over the past few years on account of high infrastructure spending in the state. Ultratech Cement and the Holcim Group have a large
presence in the western market. Other key players in the western market are JSW Cement, Jaiprakash Industries and Orient Cement with a collective market share of almost 54%.
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Trend in Cement Prices
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North: Rebound in cement prices during April July 2016
The demand uptick, followed by a strong pricing discipline, has resulted in a price rebound in the North to Rs. 305-345/bag in April-July 2016 from Rs. 225-240/bag in January
2016. While in the Chandigarh market, there has been a decline in the price to around Rs. 335/bag in August 2016, in the Delhi market the price increased to Rs. 315/bag from
Rs. 300/bag in July 2016. In the Chandigarh market, there has been an increase in cement prices by around Rs. 15/bag to Rs. 325/bag in May 2016 when compared to April
2016 and the prices further increased by Rs. 10-15/bag in June 2016 to Rs. 335/bag and by Rs. 5-10/bag in July 2016 to Rs. 345/bag. Similarly, in the Delhi market, cement
prices increased by Rs. 5-10/bag to around Rs. 290/bag when compared to May 2016 and by around Rs. 10/bag to around Rs. 300/bag in July 2016 when compared to June
2016.
During April August 2016, the cement prices in the North were higher by around Rs. 60/bag, compared to April August 2015.
West: Prices continue to remain subdued

Cement demand in the West has been affected by the drought. Though there has been some improvement in the prices during Mar-Apr 2016 to Rs. 260-265/bag, the prices
continue to remain subdued on account of weak demand. The cement price in Apr, 2016 is lower by Rs. 15/bag around Rs. 260/bag when compared to Apr, 2015. There has
been a marginal increase in the cement price by Rs. 5-10/bag during April August 2016 to Rs. 270/bag. They continued to remain weak in the range of Rs. 260-270/bag during
April August 2016. On a YoY basis, the average cement price during April August 2016 around Rs. 265/bag has been largely similar to that during April August 2015.
East: Prices largely remain range bound

While the demand remains relatively stable, new supplies from Ultratech Cement continue to put pressure on cement prices. In the eastern markets, there has been a decline
in the cement price in Apr-May 2016 to Rs. 315/bag from Rs. 330/bag in Mar 2016. The price increased by Rs. 10/bag in June 2016 and by Rs.10/bag in July-August 2016 to Rs.
335/bag.
On an average, cement prices during April-August 2016, priced at Rs. 320/bag, has been lower by Rs. 30/bag, compared to April-August 2015.
South: Rebound in cement prices in May-August 2016 after a decline in March-April 2016 in Hyderabad; relatively stable in other southern markets
In Hyderabad, the collapse of the pricing discipline has put pressure on prices in Q4 FY2016. The price in April 2016, at Rs. 263/bag, is lower by around Rs. 90/bag when
compared to April 2015. However, there has been a rebound in cement prices by Rs. 20/bag in May 2016 to Rs. 282/bag and to Rs. 310/bag in June 2016. In July 2016, the
cement prices have been largely sustained at the previous month level, which thereafter increased to Rs. 330/bag in August 2016. On an average, in the Hyderabad market,
cement prices during April-August 2016 stood at around Rs. 300/bag, lower by Rs. 35/bag when compared to April-August 2015.
In other southern markets, cement prices have been relatively stable, with Chennai reporting Rs. 375-395/bag and Bangalore, between Rs. 340-370/bag.
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Exhibit 10: Region-wise Trend in Wholesale Cement Prices
Exhibit 10A: Cement Prices in Ahmedabad
Exhibit 10B: Cement Prices in Mumbai
Exhibit 10C: Cement Prices in Delhi
Exhibit 10D: Cement Prices in Chandigarh
Exhibit 10E: Cement Prices in Kolkata
Exhibit 10F: Cement Prices in Hyderabad
Source: CMIE
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CCI imposes penalties on cement companies for cartelisation
The CCI in its order dated August 31, 2016 has reconfirmed the penalty imposed on ten cement companies and CMA for cartelisation in the cement industry. The CCI has also
imposed a fine of Rs. 73 lakh on the industry association - CMA. Through a separate order, the CCI has also imposed penalty on Shree Cement Limited for Rs. 397 crore, which
has been given time of 60 days from date of receipt of this order to deposit the penalty amount. The amount of penalty is the same as per an earlier order of June 2012 (with
the addition of Shree Cements Ltd) and amounts to 50% of net profit for FY2010 (20 May 2009 onwards since the enforcement provisions of the Act have come into effect) and
FY2011 of respective companies. The cement companies and CMA have been directed to not indulge in any activity relating to agreement, understanding or arrangement on
prices, production and supply of cement in the market. CMA has been further directed to disengage and disassociate itself from collecting wholesale and retail prices through
member cement companies or otherwise. Also, CMA has been restrained from collecting and circulating the details relating to production and dispatch by the cement
companies.
The CCI has only reconfirmed the earlier findings and imposed the penalties on cement companies. These companies are likely to challenge the CCI penalty order back in the
Competition Appellate Tribunal (COMPAT) and can further challenge (in case of adverse judgment in COMPAT) in the higher jurisdiction. This imposition of penalties by CCI has
not had any major impact on the recent cement prices.
Exhibit 11: Penalty of individual companies
Net profit (FY2010) taking into account
period of contravention post notification on
pro rata basis (Rs. Billion)
9.7
Net profit (FY2011) (Rs.

Billion)
13.3
0.5 times of net profit of FY2010 and

FY2011 (0.5 times of column 2 and 3)
(Rs. Billion)
11.5
10.6
2.4
12.6
0.9
11.6
1.7
The India Cements Limited
3.1
3.1
2.4
0.7
2.7
1.9
JK Cement Limited
Lafarge India
1.9
5.7
0.6
4.1
1.3
4.9
The Ramco Cements Limited

Ultratech Cement Limited
3.1
9.5
2.1
14.1
2.6
11.8
JP Associates Limited
Shree Cement Limited
14.8
11.7
13.2
3.9
ACC Limited
Ambuja Cement Limited
Binani Cement
Century Textiles Limited
Total
ICRA LIMITED
67.1
18
Trend in Input Costs
ICRA LIMITED
19

Raw material costs during Q1 FY2017 remained largely similar on a YoY basis
The Government increased the royalty on limestone in FY2015 to Rs. 80/MT from Rs. 60/MT. Further, royalty contribution on limestone to the District Mineral Foundation
(DMF)/National Mineral Exploration Trust (NMET), effective from Jan 15, has impacted raw material costs in FY2016. In the case of all mining leases executed before Jan 12,
2015, the miners are expected to contribute nearly 30% of the royalty to the DMFs and those granted after Jan 12, 2015, would have to pay 10% of the royalty. Also, 2% of
royalty, as levy, is to be made to NMET for detailed exploration of minerals. At the current level of royalty collection and the above mentioned prescribed rates of contribution, it
is likely that around Rs.6000 crore could be utilised for the development of mining in different states.
The raw material costs as a % of operating income during Q1 FY2017 for most of the cement companies in ICRAs sample have remained largely similar to that during Q1 FY2016
(Exhibit 9).
Limestone was the first non-coal mineral to be auctioned through the online process, following the enactment of the amended Mines and Minerals (Development and
Regulation) Act, 2015 on January 12, 2015. Earlier, State Governments allotted limestone mining leases through an allotment process and not through auctions. For existing
cement capacities, the limestone prices will continue depend upon power and fuel costs for mining limestone as well as State Government duties levied on the same. For
incremental cement capacities, according to the MMDR Act, 2015, there will be a price disadvantage on account of lower availability of new limestone mines, which have to be
sourced through the bidding route. Under this Act, even in case of mergers and acquisitions (M&A), the transfer of mineral leases was only allowed for those that have been
auctioned out. Post the amendment of MMDR Act, 2015, the MMDR Bill, 2016 allows for the transfer of mining leases, which have been granted through procedures other than
auction, and where the minerals are used for captive purposes.
Exhibit 12: % Raw material costs / operating income
Exhibit 13: % Power and fuel costs / operating income
Source: Companys quarterly results, ICRA research
Note: ICRAs sample analysis includes ACC Limited (ACC), Ambuja Cements Limited (ACL), JK Cement Limited (JKCL), JK Lakshmi Cement Limited (JKLC), OCL India Limited (OCL), Prism Cement
Limited (PCL), Shree Cement Limited (SCL), The India Cements Limited (ICL), The Ramco Cements Limited (RCL) and Ultratech Cement Limited (UCL)
ICRA LIMITED
20

Exhibit 15: Trends in Pet Coke Prices
Exhibit 14: Trends in International Coal Prices
Source: ICRA research
Increase in coal prices during May-July 2016

International coal has declined in FY2016 by 11%, compared to the previous years on account of shift in fuel mix in the US and a weak demand for coal imports from China.
Some of the South-based companies, heavily dependent on imported coal, have gained from the decline in the coal prices. However, coal prices have witnessed some recovery
during May-July 2016. In July 2016, price is also higher by 12.5% as against the price recorded during the corresponding month of previous year. The recovery is prices can be
primarily attributed to supply side cuts and improved demand from China.
While pet coke prices have been lower during Q1 FY2017 on a YoY basis, the prices have increased on a QoQ basis
During H2 FY2016, pet coke prices reported a decline of ~30% when compared to the corresponding period previous year. This has been primarily due to the speculation on a
ban of high sulphur pet coke in China, which led to a significant reduction in Chinese pet coke imports. However, pet coke prices have been increasing since February 2016 and
reached to around Rs. 6400/MT in August 2016, an increase of ~78% when compared to the low of January 2016. This has been due to the higher domestic demand of pet coke,
coupled with the supply constraints. While the pet coke prices are higher by 21% during Q1 FY2017 when compared to Q4 FY2016, they are lower by 20% when compared to Q1
FY2016. Also, most companies had low cost inventory, which supported the lower power and fuel costs in Q1 FY2017. Pet coke prices during July August 2016 are higher by 8%
when compared to the corresponding period last year, hence, going forward, the cost savings are likely to get diluted.
Lower pet coke prices coupled with the increase in the pet coke consumption in the fuel mix by most cement companies during Q1 FY2017 has resulted in significant power
savings when compared to Q1 FY2016 as reflected in Exhibit 10.
ICRA LIMITED
21

Exhibit 16: Movement of Road Freight Index vis--vis Diesel Price
Exhibit 17: % Freight costs / operating income
Freight costs
The rail-road mix and average lead distances are the key determinants for freight costs. Freight costs were on the rise during FY2014 and FY2015 due to an increase in Indian
Railways freight rates, an increased reliance on the relatively costlier road transport due to shortage of railway wagons, and an increase in lead distances. While the road freight
costs declined in FY2016 due to a drop in diesel prices, there was an increase in rail freight costs. During April-August 2016, there has been a nearly 15% increase in diesel prices
when compared to Q4 FY2016 and around 6% when compared to the April-August 2015. This is likely to put pressure on freight costs of the cement companies during H1 FY2017.
Companies take steps to optimise cost structures

Given the moderate pricing flexibility in a modest demand scenario, many cement companies are focusing on measures to reduce their costs. Companies have increasingly started
using pet coke and lignite instead of expensive coal as a source of fuel and utilising waste heat gases to produce power. Steps are also being taken to optimise power consumption
and reduce the power consumed per tonne of cement. Further, companies are focusing on using higher proportion of additives such as fly-ash and cement to bring down their
cost of production.
ICRA LIMITED
22
Profitability Analysis of Cement Companies
ICRA LIMITED
23

Exhibit 18: Revenues and Profitability of Key Players (Q1 FY2017)
Operating income (Rs.
Billion)
Q1 FY2017
Revenue
Growth (%)
YoY
PBDITA/OI (%)
Interest Coverage
Q1 FY2017
Q1 FY2016
Q1 FY2017
Q1 FY2016
ACC Limited (ACC)
29.2
-3.3%
15.7%
11.1%
26.3
25.0
Ambuja Cements Limited (ACL)
25.6
2.1%
23.5%
15.3%
29.3
12.2
JK Cement Limited (JKCL)

JK Lakshmi Cement Limited (JKLC)
9.0
7.8
10.0%
31.6%
19.7%
15.1%
10.9%
8.5%
2.6
2.5
1.3
1.1
OCL India Limited (OCL)

Prism Cement Limited (PCL)
7.1
12.9
4.3%
-1.3%
25.5%
7.6%
20.4%
4.9%
5.5
1.8
4.3
1.0
Shree Cement Limited (SCL)

The India Cements Limited (ICL)
22.3
12.1
29.0%
-1.6%
34.0%
17.0%
20.7%
16.4%
27.4
2.5
13.5
2.1
The Ramco Cements Limited (RCL)

Ultratech Cement Limited (UCL)
9.7
62.3
2.6%
3.8%
31.3%
22.8%
26.8%
19.2%
10.4
9.3
5.1
8.2
TOTAL (ICRA Sample)

Source: Financial Results of Companies
197.9
5.1%
21.8%
16.1%
8.1
5.4
Modest growth in operating income on a YoY basis

Most cement companies reported either a decline or a modest YoY increase in revenues in Q1 FY2017. Only two companies, namely JK Lakshmi Cement Limited and Shree
Cement Limited registered a healthy double-digit YoY revenue growth. The revenues of ICRA sample registered a modest 5.1% YoY growth.
Increase in operating profitability in Q1 FY2017 on YoY basis
The profitability margins of most cement companies reported an increase on a YoY basis during Q1 FY2017 when compared to Q1 FY2016. The operating profitability of the
ICRA sample increased to 21.8% during Q1 FY2017 from 16.1% during Q1 FY2016. Significant price hike for the North-based companies (JK Cement Limited and JK Lakshmi
Cement Limited) coupled with lower power and fuel costs reported a healthy growth in operating margin during Q1 FY2017 on a YoY basis. While the cement prices are lower
during Q1 FY2017 for the South (The Ramco Cements Limited and The India Cements Limited) and the East (OCL India Limited)-based companies, the operating profitability is
supported by cost side benefits such as lower power and fuel expenses due to lower pet coke costs and higher pet coke consumption on a YoY basis. Increase in the operating
profitability resulted in higher interest coverage ratio for ICRA Sample at 8.1 times in Q1 FY2017 when compared to 5.4 times in Q1 FY2016.
Increase in the cement prices, coupled with the lower power and fuel costs resulted in an increase in the profitability of most North-based companies during Q1 FY2017 on a
YoY basis. While the power cost savings are likely to be diluted going forward, North Indian cement manufacturers would report better profit numbers for H1 FY2017 vis-a-vis
H1 FY2016 supported by the significant increase in the cement prices.
ICRA LIMITED
24

Exhibit 19: Operating Margins of Cement Companies
19 A: Companies with All-India Operations
19 B: Companies in South India
19 C: Companies in North and East India
Source: Financial Results of Companies
ICRA LIMITED
25
Industry Outlook
ICRA LIMITED
26
Industry Outlook - Stable

ICRAs outlook on the Indian cement industry is stable. Cement production during April-July 2016 witnessed a modest growth of 4.6%, which is higher when compared to 1.4%
growth during April-July 2015 on a YoY basis - while production growth was lower in April-May 2016, the same picked up in June 2016 supported by pre-monsoon demand. ICRA
expects that the demand growth to pick up to 6% during FY2017 and 7% during FY2018. The demand outlook for FY2017 remains relatively more favourable when compared to
4.6% during FY2016, driven mainly by the pick-up in the infrastructure segment, primarily road projects and housing segment, and the likelihood of a recovery in the rural demand
from H2 FY2017, given better monsoons. Notwithstanding the improved sentiments in these sectors, a number of structural constraints need to be sorted out for project
implementation to gather pace in the other infra sub-segments. The stalled projects remain sizeable with many projects delayed due to unfavourable market conditions, funding
constraints, absence of raw-material linkages etc. While the Governments emphasis on the infrastructure projects is likely to result in increase public sector investments, revival
of public private partnership is critical for improving the pace of infrastructure development. The pace of recovery in the cement industry is likely to mirror the trends in economic
recovery.
Given the capacity overhang, the capacity utilisation is likely to remain moderate at 68% in FY2017. However, with the pace of new capacity addition slowing down and
improvement in the supply-demand scenario, capacity utilisation is likely to increase to 71% in FY2018, which should support cement prices and profitability indicators for cement
manufacturers. Improvement in the capacity utilisation in the North, West and East is likely to support the cement prices in these regions in the near term. While the demand is
expected to improve in the South, the capacity utilisation is likely to continue to be moderate. Thus, pricing discipline will remain critical for the profitability of the mills in the
South in the near term.
While the power cost savings are likely to be diluted going forward, given the increase in the coal and pet coke prices during H1 FY2017, North Indian cement manufacturers are
likely to report better profit numbers for H1 FY2017 vis-a-vis H1 FY2016 supported by the significant increase in the cement prices. Pick-up of real estate and industrial activity,
infrastructure projects and the overall investment cycle will remain critical for the sector over the near-term.
ICRA LIMITED
27
Company Section
ICRA LIMITED
28
ICRA Ratings
ACC Limited (ACC)

Decline in operating income; however increase in profitability driven by cost reduction in Q1 FY2017 on a YoY basis
FACT SHEET
Year of Incorporation
Aug 1936
Chairman
Mr. N.S. Sekhasaria
Product Portfolio
Cement, ready mix concrete
Manufacturing Facilities
North, Central , East and South

India, Maharashtra
Year ending
December
Capacity as on Dec 2015
~31 million MTPA
Consolidated
CY2015
Rs. 114.33 Billion
Net
sales-
Consolidated PAT CY2015
Rs. 5.88 Billion
Operating Income
Growth (%) - YoY
OPBDIT
Less: Depreciation
Less: Interest Charges
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT (Concern Share)
Q2
CY2015
30.15
2%
3.35
1.68
0.13
0.22
0.00
1.75
0.46
1.29
Q2
CY2016
29.17
-3%
4.58
1.44
0.17
0.22
0.00
3.18
0.81
2.37
Q1
CY2016
29.91
-3%
4.34
1.46
0.16
0.42
0.00
3.14
0.91
2.27
OPBDIT/OI (%)
PAT/OI (%)
11.12%
4.27%
15.68%
8.13%
14.50%
7.59%
Operating Income
Growth (%) - QoQ
OPBDIT
PAT (Concern Share)
OPBDIT/OI (%)
PAT/OI (%)
Q2 CY2014
30.6
1%
4.52
2.43
14.80%
7.90%
Q3 CY2014
28.2
-8%
3.79
1.93
13.50%
6.80%
Q4 CY2014
28.4
1%
2.57
3.26
9.10%
11.50%
Not Rated by ICRA
Revenue Growth ACCs consolidated operating income decreased

marginally by 3% YoY to Rs. 28.7 billion in Q2 CY2016 from Rs. 29.6
billion in Q2 CY2015 mirroring the performance of cement division which
is the mainstay of ACCs business. The revenues of RMC business
increased by 7% YoY driven by volume growth of 9%, while the
realizations were weaker. However, the cement division reported a
decline of 4% in its revenues owing to a 3% decline in the realizations,
and a decline of 1.3% in its volumes to 6.1 million MT in Q2 CY2016. On a
sequential basis, ACCs operating income decreased by 3.1% owing to a
5% decline in volumes even as realizations grew by 3%.
Profitability ACCs operating margins improved to 15.7% in Q2 CY2016
from 11.1% in Q2 CY2015. PBIT margins from cement division improved
from 5.7% in Q2 CY2015 to 11.4% in Q2 CY2016 mainly due to reduction
in the per tonne cost of producing cement by the company, even as the
realizations remained subdued. The net margins also improved on the
lines of operating margins, with the net margins improving to 8.1% in Q2
CY2016 from 4.3% in Q2 CY2015.
Shareholding pattern (%)

Promoters
50.34%
FIIs
15.71%
DIIs
17.69%
Others
16.26%
Total
100.00%
Price Performance (%)

3M
12M
ACC
0.40%
20.21%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 1173.3-1738.0

Bloomberg Code: ACC: IN
Market Capitalisation: Rs. 301.40
Billion
Q1 CY2015
30.8
8%
6.09
2.36
19.79%
7.53%
Q2 CY2015
30.2
-2%
3.35
1.33
11.12%
4.27%
Q3 CY2015
27.9
-8%
3.13
1.15
11.23%
4.13%
Q4 CY2015
29.12
4%
2.80
1.02
9.60%
3.52%
Q1 CY2016
29.91
3%
4.34
2.27
14.50%
7.59%
Q2 CY2016
29.17
-2%
4.58
2.37
15.68%
8.13%
Valuations
CY16e
CY17e
CY18e
33.11
23.49
19.10
EV/EBITDA
17.66
Source: Bloomberg
13.26
10.21
Price
/Earnings
Source: Company Data, ICRA Research; Consolidated Financial Results; Amounts in Rs. Billion
ICRA LIMITED
29
ACC Limited (ACC)

Key Takeaways from ACCs Media Release (July 2016)
31
6.6
30
6.4
30
6.2
29
29
6.0
28
5.8
28
5.6
27
5.4
27
26
Despatches (Million MT)
Net Sales (Rs. Billion)
ACCs Cement Dispatches and Revenues
5.2
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
CY14 CY14 CY14 CY15 CY15 CY15 CY15 CY16 CY16
Net sales
Capex plans
Despacthes
ACCs Realizations and Profitability

5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
25%
20%
15%
10%
5%
0%
Q2
CY14
Q3
CY14
Q4
CY14
Realisation
Q1
CY15
Q2
CY15
Q3
CY15
EBIT/tonne
Q4
CY15
Q1
CY16
Q2
CY16
EBIDTA margins
EBIDTA margins (%)
Realisation and EBIDTA (Rs./ MT)
Net sales realization of cement business for the quarter declined by 3% as compared to the
corresponding quarter of the previous year.
With the sales volume of the company reporting a decline of 1.3% during Q2 CY2016 to 6.1
million MT as compared to 6.4 million MT in Q2 CY2015, the net sales have reported a decline
of 4.1% in Q2 CY2016 to Rs 27.04 billion over Q2 CY2015.
PAT increased by 79% to Rs. 2.38 billion in Q2 CY2016 from Rs. 1.33 billion in Q2 CY2015
ACC continues to focus on cost optimization through its customer excellence programme
With prospects of the economy gradually picking up in the infrastructure, housing and
construction sectors during the quarter, the demand for cement is expected to register a
perceptible increase in the coming quarters.
ACC is setting up a new clinker production facility of 2.79 million MTPA and an allied grinding facility
of 1.1 million MTPA at Jamul. The Jamul clinkering unit has attained commissioning during July 2016.
The grinding facility is expected to achieve commissioning within Q3 CY2016. The existing clinkering
and grinding lines at Jamul which include a clinker capacity of 0.76 million MTPA and cement
capacity of 1.58 million MTPA will be phased out. The Company is also planning two decentralized
grinding stations in Eastern India which will use clinker produced at Jamul. Work at one of these
sites in Sindri, Jharkhand for 1.35 million MTPA grinding unit is on and the unit is expected to be
completed by Q3 CY2016. The second plant with an annual capacity of 2.7 million MTPA is
scheduled to be built in Kharagpur.
Company Profile
Incorporated in 1949, ACC is a leading cement manufacturer with pan-India presence. The company
is a part of Holcim group which also has a stake in Ambuja Cements Limited. ACC has a pan-India
presence (Orissa, Jharkhand, Maharashtra, West Bengal, Himachal Pradesh, Chattisgarh, Karnataka,
Andhra Pradesh, Rajasthan, Tamil Nadu, Madhya Pradesh and Uttar Pradesh) with a grinding
capacity of about 31 million MT as on December 31, 2015.
Source: Company Data
ICRA LIMITED
30
ICRA Ratings
Operating profitability increased on a YoY basis in Q2 CY2016

Revenue Growth ACLs operating income at Rs. 25.61 billion during Q2
CY2016 is higher by 2% on a YoY basis. This is majorly driven by an increase
in the cement sales realizations by 4.05% YoY during Q2 CY2016. However,
decline in the cement sales volumes by 2.04% YoY during Q2 CY2016
moderated the increase in the operating income to an extent.
FACT SHEET
Chairman
1983
Mr. N.S. Sekhsaria
Year ending
December
Manufacturing facilities
North, West, East and Central
Capacity as on June 30, 2016
29.65 MTPA
Standalone Net sales- CY2015
Rs. 94.61 Billion
Standalone PAT- CY2015
Rs. 8.08 Billion
Q2 CY2015
Q2 CY2016
Not Rated by ICRA
Q1 CY2016
Operating Income
25.08
25.61
24.45
Growth (%)
-7.70%
2.09%
-0.75%
OPBDIT
3.84
6.01
4.50
Less: Depreciation
1.49
1.51
1.48
0.32
0.21
0.18
Other Income
1.06
1.17
1.36
0.00
0.00
0.00
PBT
3.09
5.47
2.84
Less: Tax
0.83
1.47
1.16
PAT
2.26
4.00
3.04
OPBDIT/OI (%)
15.30%
23.47%
18.40%
PAT/OI (%)
9.02%
15.60%
12.43%
Profitability ACLs operating margins increased on YoY basis from 15.30%

in Q2 CY2015 to 23.47% in Q2 CY2016. During Q2 CY2016, the energy costs
per MT of cement sold were lower by ~18% on a YoY basis due to low fuel
costs and higher consumption of pet coke and the distribution costs per
MT of cement sold were lower by ~6% due to low packing costs which
coupled with the various other cost optimization initiatives undertaken by
the company resulted in increase in the operating profitability. On a
sequential basis, the operating profitability of the company increased from
18.40% in Q1 CY2016 to 23.47% in Q2 CY2016. During Q1 CY2016,
additional provision to District Mineral Foundation has impacted the
operating profitability.
Increase in operating profitability coupled with low interest and
depreciation expenses resulted in higher net profitability at 15.60% during
Q2 CY2016 when compared to 9.02% during Q2 CY2015.
Shareholding Pattern (%)

Promoters
61.62%
FIIs
20.26%
DIIs
10.98%
Others
7.14%
Total
100%

3M
12M
ACL
1.57%
27.09%
CNX
6.90%
10.18%
Stock Movement
Going forward, the company would continue its thrust on improving

efficiencies and focus on customer and commercial excellence.
52wk range: Rs. 185.0-282.0

Q3 CY2014
Q4 CY2014
Q1 CY2015
Q2 CY2015
Q3 CY2015
Q4 CY2015
Q1 CY2016
Q2 CY2016
Operating Income
22.02
24.05
24.63
25.08
21.11
23.79
24.45
25.61
Growth (%) - QoQ
-19%
9%
2%
2%
-16%
13%
3%
5%
OPBDIT
3.93
3.58
5.09
3.84
3.10
3.28
4.50
6.01
2.39
3.29
3.17
2.26
1.54
1.10
3.04
4.00
OPBDIT/OI (%)
17.9%
14.9%
20.7%
15.3%
14.7%
13.8%
18.4%
23.5%
PAT/OI (%)
10.9%
13.7%
12.9%
9.0%
7.3%
4.6%
12.4%
15.6%
PAT
Source: Company Data, ICRA Research; Standalone Financial Results; Amounts in Rs. Billion
ICRA LIMITED
Bloomberg Code: ACEM:IN

Market Capitalisation Rs. 511.11
Billion
Valuations
CY16e
CY17e
CY18e
31.71
25.01
19.97
EV/EBITDA
23.84
Source: Bloomberg
15.49
10.07
Price
/Earnings
31

ACLs Realizations and Profitability
Business Overview
Improvement in sales volumes: ACLs cement sales volumes declined by 2.04% during Q2
CY2016 to 5.76 million MT from 5.88 million MT in Q2 CY2015. During quarter ended June, 2016,
the All-India cement demand growth was around 6%. ACLs average sales realization increased by
4.05% YoY to Rs. 4411/MT in Q2 CY2016 from Rs. 4250/MT in Q2 CY2015. This is majorly driven
by the significant increase in the cement prices in the North on a YoY basis.
Capex plans: ACL has undertaken the following expansion projects:
Green-field project in North India for setting up of a 2.7 MTPA clinkerization unit at
Marwar Mundwa, Rajasthan and three grinding units of 1.5 MTPA capacity each in
Rajasthan, Uttar Pradesh (Dadri) and Madhya Pradesh (Osara) at an approximate cost of
Rs. 40 billion.
Brown-field expansion project at Sankrail (West Bengal) to expand the grinding capacity
of the unit by 0.8 million MT (from 1.5 million MT to 2.3 million MT).
Construction of railway siding at Rabariyawas, Rajasthan
ACLs Cement Despatches and Revenues
Outlook as per ACLs press release (Q2 CY2016): The medium to long term outlook for cement
demand is positive considering the Governments emphasis on the housing, concrete roads,
smart cities and infrastructure development.
th
Update on Coal Block: The Supreme Court vide its order dated 24 September 2014 cancelled
the coal block allocated to ACL along with other parties at Dahegaon, Maharashtra. The company
had not commenced any activity at this coal block and the cancellation does not have any
material impact on the financials.
In Mar 2015, ACL participated in the e-auction of coal blocks conducted by the Nominated
Authority of the Ministry of Coal, Government of India and has successfully secured the block at
Gare-Palma Sector-IV/8 in Chhattisgarh at a bid price of Rs. 2291/ MT. The estimated capex for
the development of this coal block would be approx Rs. 370 crore and the mining operation is
expected to commence in 2018.
Source: Company Data, ICRA Estimates
ICRA LIMITED
In July 2016, ACL secured a linkage of 96,000 MT of coal at Rs. 1,050 per tonne from Junadih
siding of South Eastern Coalfields. In August 2016, ACL has secured coal linkage of 20,400 MT at
Rs. 1,810 per tonne from Western Coalfields (Niljai colliery), 16,500 MT at Rs. 1,095 per tonne
from South Eastern Coalfields (Kusmunda siding) and 82,300 MT at Rs. 1,070 per tonne from
South Eastern Coalfields (Gevra siding).
32

Penalty by CCI: In August 2016, CCI has reconfirmed the penalty imposed on ACL which was to the tune of Rs. 1163.91 crore for cartelization in cement industry. Earlier, during
June 2012, CCI against ten cement manufacturers, including ACL, has imposed penalty. ACL has subsequently filed an appeal before COMPAT for setting aside the said order of
the CCI. The COMPAT passed an interim order granting stay on the penalty imposed by the CCI, conditional upon the company depositing 10% of the penalty, which was
complied. In December 2015, COMPAT passed an order setting aside the order of the CCI and told CCI to take up the matter for fresh adjudication. Consequently, the 10%
deposit amount was refunded to the company.
In August 2016, CCI, after hearing the matter afresh, has again published an order against the same cement manufacturers while adding one more to the list, including ACL,
levying the same penalty of Rs. 1163.91 crore on ACL. ACL has decided to file an appeal with COMPAT regarding the same.
Holcims plans to restructure its Indian operations: Holcim, which holds majority stake in ACC and ACL plans to restore its operations in India. As a part of the restructuring
process, ACL will acquire 24% stake in Holcim India from Holderind Investments Limited (Mauritius) for a cash consideration of Rs. 35 billion. Post this Holcim India will be
merged with ACL based on merger swap ratio of 1 ACL share for 7.4 Holcim India shares. ACL will issue net 434 million new equity shares of ACL to Holcim as consideration for
the merger. Post the merger, the expanded capital base of ACL (post cancellation of the shares held by Holcim India in ACL and the issuance of new shares as aforesaid) will
increase by 28% and comprise of 1.98 billion shares. Holcim will then own 61.39% of ACL and ACL will in turn own 50.01% of ACC.
The High Courts of Gujarat and Delhi; and CCEA have approved the scheme of Amalgamation of Holcim (India) Pvt. Ltd. with the company. The effect of the scheme will be
given on the fulfillment of certain conditions precedent specified therein.
Company Profile
ACL (formerly known as Gujarat Ambuja Cements Limited) is one of the leading cement manufacturing companies in India. The company was founded by Narotam Sekhsaria
and Mr. Suresh Neotia in 1983 and commenced cement production in 1986. In 2006, global cement major Holcim acquired management control of ACL. As on June 2016,
Holcim had an equity stake of 50.8% in ACL. ACL is a pan-India player with manufacturing facilities in Northern, Eastern and Western region and has an aggregate grinding
capacity of 29.65 million MT (as on June 2016).
ICRA LIMITED
33
ICRA Ratings
Robust growth in profitability driven by higher revenues and lower power & fuel costs
Not Rated by ICRA
FACTSHEET
Chairman
Dr. Gaur Hari Singhania
Rajasthan and Karnataka
Products
Grey and white cement and wall putty
Manufacturing Facilities
Rajasthan, Haryana, Karnataka, UAE
Capacity as on Mar 2016
Grey Cement-10.5 million MTPA

White Cement-0.6 million MTPA
Wall Putty-0.7 million MTPA
UAE - 0.6 MTPA White Cement
Net Sales- FY2016
Rs. 35.31 Billion
PAT- FY2016
Rs. 1015.4 Million
Operating Income
Q1 FY2016
Q1 FY2017
Q4 FY2016
8161.4
8977.6
9725.9
Growth (%) YoY
2%
10%
5%
OPBDIT
889.7
1767.2
1959.4
Less: Depreciation
Other Income
386.0
663.5
149.6
425.0
675.1
173.0
418.6
683.4
116.9
PBT
0.0
-10.1
-111.1
729.0
0.0
857.4
Less: Tax
-20.7
120.5
268.7
PAT
10.6
608.5
705.6
OPBDIT/OI (%)
10.9%
19.7%
20.1%
PAT/OI (%)
0.1%
6.8%
7.3%
Revenue Growth JKCL reported 10% YoY increase in revenues from

Rs. 8161.4 million in Q1 FY2016 to Rs. 8977.6 million in Q1 FY2017
supported both by volume growth (~4%) and a 5% growth in the
blended realizations. The increase in volumes was due to higher
demand in the North markets and higher white cement volumes
(~25% y-o-y) driven by a capacity expansion of 0.2 MTPA in wall putty.
On a sequential basis, the revenues declined by 7.7% mainly due to
decline in the cement volumes, which was offset partially by the
significant increase in realizations during Q1 FY2017.
Profitability The operating profitability of the company improved
from 10.9% in Q1 FY2016 to 19.7% in Q1 FY2017 due to savings in
power & fuel costs. In line with higher operating profits, the net profits
also reported a substantial increase from Rs 1.06 crore in Q1 FY2016
to Rs 60.85 crore in Q1 FY2017.
In FY2016, the company reported PAT of Rs. 1015.4 million on an
operating income of Rs. 35603.2 million as against PAT of Rs. 1569
million on operating income of Rs. 33571.7 million in FY2015.

Promoters
67.02%
FIIs
1.55%
DIIs
23.50%
Others
7.93%
Total
100.00%

3M
12M
JKCE
27.22%
32.04%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 425.0-847.9

Bloomberg Code: JKCE:IN
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Operating Income
8032.3
8306.8
7986.4
9160.6
8161.4
8703.1
9032.82
9725.79
8977.6
Growth (%) Q0Q
-4%
3%
-4%
15%
-11%
7%
4%
8%
-8%
OPBDIT
1003.7
904
1006.7
1638
889.7
1087.8
1264.1
1959.4
1767.2
PAT
380.3
323.2
167.3
698.4
10.6
137.3
170.9
705.6
608.5
Price /Earnings
OPBDIT/OI (%)
12.50%
10.90%
12.60%
17.90%
10.90%
12.50%
14.0%
20.1%
19.7%
PAT/OI (%)
4.70%
3.90%
2.10%
7.60%
0.1%
1.58%
2.0%
7.3%
6.8%
EV/EBITDA
12.19
Source: Bloomberg
ICRA LIMITED
Market Capitalisation Rs.58.57 Billion

Valuations
FY17e
FY18e
FY19e
27.34
14.63
9.63
9.21
6.98
34

Business Overview
Plants largely located in Northern India: JKCL has five grey cement plants with an aggregate grinding capacity of 10.5 million MTPA- three plants are in Rajasthan and one
each in Haryana and Karnataka. The company also has a white cement capacity of 1.2 million MTPA, manufactured at Gotan (India) and Fujairah (UAE).
White cement contributes a significant portion of companys revenues: JKCL has a diversified product portfolio comprising of grey cement, white cement and wall putty. In
grey cement segment, JKCL sells PPC (56%), OPC (40%) and PSC (4%). Grey cement accounted for 70% of companys revenues in FY2016 and white cement (including wall
putty) constituted the remaining 30% revenues. The proportion of white cement in overall revenue mix of the company has increased over the years from 21% in FY2012 to
30% in FY2016.
Recent capex: The company has commenced commercial despatches during May, 2016 from its white cement based Wall Putty manufacturing plant at Katni, Madhya
Pradesh with an installed capacity of 2 Lac tonnes per annum. With this the Company has achieved white cement based Wall Putty manufacturing capacity of 7 Lac tonnes.
Penalty by CCI: In August 2016, CCI has reconfirmed the penalty imposed on JKCL which was to the tune of Rs. 128.54 crore for cartelization in cement industry. Earlier,
during June 2012, CCI against ten cement manufacturers, including JKCL, has imposed penalty. JKCL has subsequently filed an appeal before COMPAT for setting aside the
said order of the CCI. The COMPAT passed an interim order granting stay on the penalty imposed by the CCI. In December 2015, COMPAT passed an order setting aside the
order of the CCI and told CCI to take up the matter for fresh adjudication.
In August 2016, CCI, after hearing the matter afresh, has again published an order against the same cement manufacturers while adding one more to the list, including JKCL,
levying the same penalty of Rs. 128.51 crore on JKCL. JKCL is examining the order and is to decide about filing its appeal against the order at appropriate forum in due course.
Company Profile
JK Cement Limited, a part of JK Group, three grinding units in Rajasthan, one in Karnataka and one in Haryana with an aggregate capacity of 10.5 million MTPA. The company
also has a white cement plant at Rajasthan and 0.6 million MTPA white cement plant at Fujairah, UAE. The company also manufactures wall putty, installed capacity of which
is at 0.7 MTPA located in Rajasthan. The companys product offering consists of grey cement, white cement and wall putty.
ICRA LIMITED
35
ICRA Ratings
Significant growth in both revenues and profitability during Q1 FY2017 on a YoY basis
FACTSHEET
Chairman
Mr. Bharat Hari Singhania
Rajasthan, Haryana and Gujarat
Products
Cement, RMC
Capacity- as on April 2016
8.4 million MTPA
Capacity Utilization- FY2016
84%
Net Sales FY2016
Rs. 26198.5Million
PAT- FY2016
Rs. 62.8 Million

Q1 FY2016
Q1 FY2017
ICRA Limited
Q4 FY2016
7772.30
7350.90
-2%
32%
27%
OPBDIT
505.00
1175.10
858.80
Less: Depreciation
392.00
411.90
401.00
457.50
463.20
495.30
Other Income
44.40
104.10
342.60
-54.50
0.00
0.00
PBT
-354.60
404.10
305.10
Less: Tax
-119.80
117.70
-178.70
PAT
-234.80
286.40
483.80
Growth (%)-YoY
Revenue Growth JKLC reported 32% y-o-y growth in revenues from Rs.
5907.5 million in Q1 FY2016 to Rs. 7772.3 million in Q1 FY2017. The same
has been driven by healthy growth in both the cement volumes and
realizations.
On a sequential basis, the company reported a growth in operating income
of 5.7% in its Q1 FY2017 from Rs. 7350.90 million in Q4 FY2016.
5907.50
Operating Income
Not
Rated
by ICRA
ICRA
Ratings
Profitability The operating profitability has reported significant

improvement from 8.5% in Q1 FY2016 to 15.1% in Q1 FY2017. This has
been driven mainly by savings in the power & fuel costs due to lower fuel
prices and increased efficiency in coal consumption norms.
In line with the operating profits, net profitability increased significantly
from net loss of 4% in Q1 FY2016 to a net profit margin of 3.7% in Q1
FY2017.

Not
Rated by ICRA
Promoters
45.94%
FIIs
12.57%
DIIs
19.80%
Others
21.69%

Total
Promoters
100.00%
45.9%
FIIs

DIIs
Others
JKLC
CNX
3M
14.4%
18.4%
12M
21.3%
27.58%
32.74%
6.90%
10.18%
Stock Movement
JKLC
CNX Nifty
3M
12M
-15.09%
-17.01%
-8.08%
-7.64%
Stock Movement
52wk range: Rs. 253.0 -505.8
OPBDIT/OI (%)
8.55%
15.12%
11.68%
PAT/OI (%)
-3.97%
3.68%
6.58%
Operating Income
Growth (%)
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
6004.20
5725.80
5559.10
5781.50
5907.50
6457.30
6482.80
7350.90
7772.30
-7%
-5%
-3%
4%
2%
9%
0%
13%
6%
OPBDIT
1134.80
891.50
753.80
714.50
505.00
666.60
669.10
858.80
1175.10
PAT
404.60
306.10
184.80
60.50
-234.80
-149.50
-36.70
483.80
286.40
OPBDIT/OI (%)
18.9%
15.6%
13.6%
12.4%
8.6%
10.3%
10.3%
11.7%
15.1%
PAT/OI (%)
6.7%
5.3%
3.3%
1.0%
-4.0%
-2.3%
-0.6%
6.6%
3.7%
Bloomberg Code: JKLC:IN

Bloomberg Code: JKLC:IN
Rs.38.28 Billion
Market Capitalization Rs.58.12Billion
Valuations
FY16e
FY17e
FY17e
FY18e
FY18e
FY19e
71.28
42.07
16.48
19.47
10.13
14.13
14.28
EV/EBITDA
15.60
Source: Bloomberg
9.03
10.71
6.69
8.42
Price
/Earnings
Source: Bloomberg
Source: Company Data, ICRA Research; Amounts in Rs. Million
ICRA LIMITED
36

Business Overview
Favourably placed in Northern market where demand prospects remain good During FY2016, the JKLC managed to maintain effective capacity utilisation of 84%.
Capex Plan JKLC started commercial production from 1.7 million MPTA integrated plant at Durg, Chattisgarh during March 15. It has also received all clearances for grinding
unit at Cuttack, Orissa and expects it to get commissioned by Q2 FY2017.
Company Profile
JKLC is a part of JK Group which consists of companies such as JK Lakshmi Cement Limited, JK Sugar Limited (sugar), Fenner (I) Limited (industrial and automotive belts, oil
seals, power transmission accessories and textile yarn), JK Agri-Genetics Limited (hybrid seeds), Umang Diaries Limited (dairy products), JK Paper Limited (paper
manufacturing). The company has grinding units in Rajasthan, Gujarat, Chhattisgarh and Haryana with an aggregate capacity of 8.35 million MTPA. It also has captive power
plants to meet its energy requirements. The companys product offering consists of cement and ready mix concrete.
ICRA LIMITED
37
ICRA Ratings
Costs savings drive growth in profitability in Q1 FY2017 on a YoY basis
Long term rating: [ICRA]AA

Short term rating: [ICRA]A1+
Long-term Rating: [ICRA]AA
Outlook: Stable
Short-Term Rating: [ICRA]A1+
Jan 2016
Outlook: Stable
Jan 2016
FACT SHEET
1949
Chairman
Mr. Pradip Kumar
Product Portfolio
Cement (mainly Portland Slag Cement) and

refractory products
Cement: Rajgangput and Kapilas (Orissa)

Medinipur (West Bengal)
Clinker: Rajgangpur (Orissa)
Capacity as on Mar 2016

Net sales- FY2016
Cement: 6.70 million MTPA

Rs. 26356.6 Million
PAT- FY2016
Revenue Growth OCLs revenues increased marginally by 4% on an

YoY basis to Rs. 7086.2 million in Q1 FY2017, majorly owing to a modest
growth of 2% y-o-y in the revenues from cement division to Rs. 6289.2
million in Q1 FY2017, while the Refractory division reported a recovery
of 33% in revenues to Rs. 797 million. While the cement volumes
reported growth during the quarter from 1.35 million MT in Q1 FY2016
to 1.41 million MT in Q1 FY2017, a marginal decline in the realizations
led to an overall modest growth for the division. On a sequential basis
also, the companys operating income declined by 15.5% in Q1 FY2017.
Rs. 2362.9 Million
Operating Income
Growth (%)
OPBDIT
Less: Depreciation
Other Income
PBT
Less: Tax
PAT
OPBDIT/OI (%)
PAT/OI (%)
Q1
FY2016
6792.2
25%
1388.5
401.0
325.5
124.9
Q1
FY2017
7086.2
4%
1804.2
329.8
328.6
299.1
Q4
FY2016
8348.2
25%
2057.5
471.9
338.5
498.2
786.9
246.1
540.8
1444.9
386.5
1058.4
1247.1
410
1335.3
20.44%
7.96%
25.46%
14.94%
24.65%
16.00%
Profitability OCLs operating profitability increased significantly to

25.5% in Q1 FY2017 from 20.4% in Q1 FY2016. While, the EBIT margins
of the cement division increased from 20% in Q1 FY2016 to 28.5% in Q1
FY2017, the refractory division reported losses, thus offsetting the
impact of cement profits to some extent. The EBIDTA / tone for cement
increased to ~Rs1250/ tonne in Q1 FY2017 from Rs. 820/tonne in Q1
FY2016 mainly owing to significant decline in production costs resulting
from various cost reduction initiatives taken by OCL.
On a sequential basis also, the overall operating margins reported an
increase from 24.6% to 25.5% in Q1 FY2017, due to continued cost
savings in the cement division.

Promoters
74.89%
FIIs
2.17%
DIIs
0.28%
Others
Total
22.67%
100.00%

3M
12M
OCL
36.94%
66.60%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 386.0-920.0
Q4 FY2014
Q1 FY2015
Q2 FY2015
Q3 FY1205
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Operating Income
5386.2
5462.9
4733.2
5442.5
6651.9
6786.1
5371.5
6144.9
8348.2
7086.2
Growth (%) - QoQ
29%
OPBDIT
918.4
1%
971.7
-13%
572.2
15%
871.1
22%
1011.3
2%
1326.2
-21%
745.9
14%
1064.4
36%
2057.5
-15%
1804.2
PAT
416.4
361.5
127.4
287.7
360.1
488.2
16.87
370.7
1335.3
1058.4
OPBDIT/OI (%)
17.10%
17.80%
12.10%
16.00%
15.20%
19.54%
13.89%
17%
25%
25%
PAT/OI (%)
7.70%
6.60%
2.70%
5.30%
5.40%
7.19%
3.14%
6%
16%
15%
Bloomberg Code: OSC:IN

Valuations
Price /Earnings
FY17e
FY18e
15.44
12.96
EV/EBITDA
7.00
Source: Bloomberg
ICRA LIMITED
38
6.27

Business Overview
Leading player in Eastern Region OCL is a leading player in the eastern region with an aggregate grinding capacity of 6.70 million MTPA. The companys key markets include
states like Orissa, Bihar, West Bengal and Jharkhand which together constituted 99% of its total sales in FY2016. In terms of product mix, slag cement accounted for majority of
the sales volumes accounting for 95%-100% of the total sales volumes during the period FY2008 to FY2012. However, there were concerns regarding slag availability in the
region owing to new cement capacities in Eastern region and no corresponding increase in slag availability, which had led to increase in slag prices. Thus, in order to reduce its
dependence on slag and also to utilize the fly ash being generated at its CPP, the company started manufacturing Pozolena Portland Cement (PPC), which accounted for 10% of
the total cement volumes in FY2013 and 15% in FY2014. Recently, increased slag availability at low prices in its area of operations has led to the company increasing its
percentage usage of slag from 48% to 54% in line with its recent initiative to reduce raw material costs.
With the setting up of 54 MW captive power plant, OCL has become self-sufficient in power OCL has set up a 54 MW (2X27) captive power plant at Rajgangpur, Orissa. The
first phase of 27 MW became operational in September 2011 and the second phase in Apr 2012. OCL is now self-sufficient in its power requirements. Captive power plant also
results in significant savings in power and fuel costs. Besides flyash produced during power process can be used to manufacture Pozzolana Portland Cement.
Capex Plans
Increase in stake by Dalmia Cement (Bharat) Limited: In Q4 FY2015, Dalmia Cement (Bharat) Limited increased its stake in OCL from 48.06% to 74.66% by acquiring the
shareholding of other promoter group entities. As a result, OCL has now become a subsidiary of Dalmia Cement (Bharat) Limited w.e.f Februray 25, 2015.
Increased market share due to commissioning of new capacity in West Bengal: The new plant at Medinipur, West Bengal achieved a quick ramp up in its first year of
operations FY2015, which has enhanced the companys access to west Bengal market. This together with launch of newly introduced premium brand Konark DSP in FY2014,
has led to a significant increase in its market share from 8.3% in FY2014 to 9.9% in FY2015 and further to 10.9% in FY2016.
Company Profile: OCL India Limited, a part of the Dalmia Group, has two business divisions- cement and refractory with cement division accounting for ~ 91% of OCLs
revenues and 108% of its profits in FY16, with the profits being offset to some extent by the losses reported in the refractory division. OCL is a regional cement player with
focus in Eastern India. The company has two grinding units in Orissa located at Rajgangpur (4 MTPA capacity) and Kapilas (1.35 MTPA capacity) and a clinkerisation unit (2.9
MTPA capacity) at Rajgangpur. The company has commissioned a 1.35 MTPA cement grinding unit at Medinipur, West Bengal in April 2014. The company is mainly involved in
the manufacturing of Portland Slag Cement (PSC) which constitutes around 85-90% of its total sales. OCLs refractory division manufactures a wide range of products such as
fireclay bricks, basic burnt bricks, silica bricks, magnesia carbon bricks, castables etc catering to a wide variety of industries.
OCLs Segment-wise performance

Q1 FY2016
Q1 FY2017
Q4 FY2016
Revenues
Cement
Refractory
6191.4
600.8
6289.2
797.0
7707.7
640.5
2%
33%
-18%
24%
PBIT
Cement
Refractory
1246.7
-26.3
1790.5
-28.8
2419.4
-215.3
44%
-26%
28.47%
-3.61%
31.39%
-33.61%
PBIT %
Cement
20.14%
Refractory
-4.38%
Amount in Rs. Million
Source: Company, ICRA Research
ICRA LIMITED
YoY Growth
QoQ Growth
39
ICRA Ratings
Improvement in operating profitability during Q1 FY2017 on a YoY basis
Long-term Rating: [ICRA]AShort-term Rating: [ICRA]A1

Outlook: Stable
Sep 2015
Revenue Growth The operating income of the company marginally

decreased by 1% YoY from Rs. 13071.8 million in Q1 FY2016 to Rs.
12901.9 million in Q1 FY2017. This is on account of decline in the
revenues from the Tiles, Bathroom and Kitchen (TBK) division by 15% in
Q1 FY2017 on a YoY basis. The decline in the revenues from TBK division is
moderated to a large extent by increase in the revenues from cement
division and RMC by 10% and 5% respectively in Q1 FY2017, compared to
the corresponding period last year.
FACTSHEET
Year of incorporation
Chairman
Product Profile
Manufacturing
facilities
Capacity- April 2016
1992
Mr. Rajesh Kapadia
Cement, Tiles, Ready mix Concrete
Cement- Madhya Pradesh
Tiles- Maharashtra, Karnataka, MP,
Pondicherry
5.6 million MTPA
Net Sales FY2016

Net Profit FY2016
Rs. 55503.6 Million

Rs. 83.6 Million
Q1 FY2016
Q1 FY2017
Q4 FY2016
Operating Income
13071.8
12901.9
14554.7
Growth (%) - YoY
-1%
-1%
-5%
OPBDIT
641.0
984.9
987.8
Less: Depreciation
390.2
408.5
486.5
620.7
553.5
539
Other Income
167.5
196.3
645.2
0.0
0.0
0.0
PBT
-202.4
219.2
607.5
Less: Tax
-53.4
62.7
-11.3
PAT
-149.0
156.5
618.8
OPBDIT/OI (%)
4.9%
7.6%
6.8%
PAT/OI (%)
-1.1%
1.2%
4.3%
Profitability Operating profitability of PCL increased to 7.6% in Q1

FY2017 from 4.9% in Q1 FY2016 supported by increase in the operating
margins of the cement and RMC divisions. The improvement in the
cement division profitability is largely due to various cost rationalization
measures undertaken by the company such as importing coal, increase in
pet coke consumption and reduction in power consumption per unit of
production.
Improvement in operating profitability coupled with decline in the
interest expenses resulted in net profitability of 1.2% in Q1 FY2017,
compared to loss/operating income at 1.1% in Q1 FY2016. The company
reported a net profit of Rs. 156.5 million in Q1 FY2017 as against net loss
of Rs. 149.0 million in Q1 FY2016.

Promoters
74.87%
FIIs
9.81%
DIIs
6.36%
Others
8.96%
Total
100.00%

3M
12M
PCL
10.68%
18.45%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 55.0 118.6

Bloomberg Code - PRSC: IN
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Operating Income
13371.9
13375.5
15295.3
13071.8
13983.4
13278
14554.7
12901.9
Growth (%) - QoQ
-4%
0%
14%
-15%
7%
-5%
10%
-11%
OPBDIT
465.5
367.6
843.6
641.0
519.9
712.9
987.8
984.9
Price /Earnings
PAT
-197.6
-406.7
618.9
-149.0
-332.6
-122.2
618.8
156.5
OPBDIT/OI (%)
3.5%
2.7%
5.5%
4.9%
3.7%
5.4%
6.8%
7.6%
EV/EBITDA
12.89
Source: Bloomberg
PAT/OI (%)
-1.5%
-3.0%
4.0%
-1.1%
-2.4%
-0.9%
4.3%
1.2%
Valuations
FY17e
FY18e
FY19e
37.28
15.85
15.14
9.12
8.56
ICRA LIMITED
40

Business Overview
Cement division performance The cement division reported an increase in the revenues by 10% YoY in Q1 FY2017 to Rs. 6352.10 million, led by increase in cement sales
volumes by 14% to 1.55 million MT in Q1 FY2017 from 1.36 million MT in Q1 FY2016. EBITDA/MT (including operating income) during Q1 FY2017 stood at Rs. 707/MT, a
significant increase when compared to Rs. 507/MT in Q1 FY2016. As per the mandated Indian Accounting Standards, EBITDA/MT stood at Rs. 605/MT in Q1 FY2017. This resulted
in improvement in the PBIT margins from the division during Q1 FY2017 to 12.9% from 7.8% in Q1 FY2016.
Supply agreement with ECO Cements Limited (ECL) PCL has entered into a supply agreement with ECL, which operates 0.6 million MTPA grinding unit in Bihar. ECL will
manufacture and supply cement to PCL as per PCLs quality and specifications. This arrangement is expected to PCL optimize its logistic costs and improve local availability of the
product in Bihar.
Stake acquisition in BLA Power Private Limited (BLA) PCL acquitted 15.23% equity stake for Rs. 21 crore in BLA, which is into thermal power generation. PCL entered into power
supply agreement for power purchase and consumption of 25 MW power from BLA for its cement plants at Satna, Madhya Pradesh under group captive arrangement. The
power supply has commenced and this is expected to reduce the power costs going forward.
Coal Block PCL has successfully bid for 120,000 MTPA of coal from South Eastern Coalfields Limited in an auction held for coal linkages for cement industry. The allocation has
been done at floor price.
TBK Division - TBK division reported a YoY decline of 15.0% in revenues to Rs. 4456.80 million in Q1 FY2017. The division continues to be in consolidation phase reporting losses.
Loss before interest and tax is at Rs. 182.20 million in Q1 FY2017 on revenues of Rs. 4456.80 million as against loss before interest and tax at Rs. 93.50 million on revenues of Rs.
5273.10 million in Q1 FY2016. While PCL has focused on marketing, strengthening channel distribution and various other initiatives for cost rationalization, it intends to focus on
increasing the utilization levels and better working capital management going forward.
Q2 FY2015
Q2 FY2016
Growth
Q3 FY2015
Q3 FY2016
Growth
Q4 FY2015
Q4 FY2016
Growth
Q1 FY2016
Q1 FY2017
Growth
5249.10
5218.40
2945.90
5311.50
5638.10
3073.00
1%
8%
4%
5128.00
5322.00
2971.10
4665.80
5638.30
3008.40
-9%
6%
1%
5632.10
6610.50
3094.40
5112.60
6107.30
3374.10
-9%
-8%
9%
5750.60
5273.10
3196.30
6352.10
4456.80
3352.30
10%
-15%
5%
347.20
2.40
-42.90
229.60
-122.00
27.60
-34%
81.80
-37.00
-8.80
359.00
-55.00
55.60
339%
446.90
-13.10
66.20
464.60
-92.40
129.10
4%
448.50
-93.60
41.70
819.00
-182.20
107.90
83%
6.6%
0.0%
-1.5%
4.3%
-2.2%
0.9%
1.6%
-0.7%
-0.3%
7.7%
-1.0%
1.8%
7.9%
-0.2%
2.1%
9.1%
-1.5%
3.8%
7.8%
-1.8%
1.3%
12.9%
-4.1%
3.2%
Revenues
Cement
TBK
RMC
PBIT
Cement
TBK
RMC
164%
732%
95%
PBIT Margins
Cement
TBK
RMC
ICRA LIMITED
41
159%

RMC Division - The revues of Ready-Mix Concrete (RMC) division reported a YoY growth of 5% in Q1 FY2017 to Rs. 3352.30 million from Rs. 3196.30 million in Q1 FY2016. PBIT as
a % of revenues improved to 3.2% in Q1 FY2017 from 1.3% in Q1 FY2016. This has been on account of several cost control programs pertaining to sourcing of raw material and
transportation.
Company Profile
PCL, promoted by the Rajan Raheja group, was incorporated in 1992 and has been in the business of manufacturing and selling cement since 1997. The company has three
divisions namely the Cement, Tiles, Bathroom and Kitchen (TBK) and Ready Mix Concrete (RMC) divisions. PCLs cement division operates two units, both based in Satna, MP
with a combined installed cement capacity of 5.6 MTPA. It caters to the major markets in Uttar Pradesh, Uttaranchal, Madhya Pradesh and Bihar. PCL also has 51% stake in
Raheja QBE General Insurance Company Limited, a JV with QBE group in Australia.
ICRA LIMITED
42
ICRA Ratings
Improvement in revenues and profitability during Q1 FY2017 on a YoY basis
Not Rated by ICRA
Revenue Growth SCLs operating income increased by 29.02% YoY to

Rs. 22.25 billion in Q1 FY2017, compared to Q1 FY2016 at Rs. 17.25
billion. This is driven by increase in the revenues of the cement division
increased by 51.0% YoY to Rs. 22.88 billion in Q1 FY2017 as against Rs.
15.15 billion in Q1 FY2016. The revenues from the power division at Rs.
4.01 billion in Q1 FY2017 are largely similar to that in Q1 FY2016.
FACT SHEET
1979
Chairman
Mr. B.G. Bangur
Year ending
March
Business Segments
Cement, Power
Manufacturing
Cement
Rajasthan and Uttarakhand
facilities-
Capacity as on September
2016
Cement- 27.20 million MTPA

Power- 627 MW
Net sales - FY2016
Rs. 55677.3 Million
PAT- FY2016
Rs. 4549.3 Million
Profitability Operating profitability of the company increased from

20.7% in Q1 FY2016 to 34.0% in Q1 FY2017. This is primarily supported
by higher profitability from both the cement and power divisions in Q1
FY2017 on a YoY basis. PBIT as a % of revenues from cement division
increased to 17.0% in Q1 FY2017 as against loss at 3.1% in Q1 FY2016 on
account of lower power and fuel expenses in this division due to higher
petcoke consumption coupled with lower petcoke costs. Further, PBIT as
a % of revenues from power division increased to 55.6% in Q1 FY2017
from 46.3% in Q1 FY2016.
June 2015
June 2016
Mar 2016
Operating Income
Growth (%) - YoY
17245.90
22250.40
20174.20
4.10%
29.02%
28%
OPBDIT
3567.70
7572.00
5050.30
Less: Depreciation
2382.50
1540.40
3337.70
263.60
275.90
285.80
Other Income
392.30
714.80
754.90
-239.90
0.00
-0.90
PBT
1074.0
6470.50
2180.80
Less: Tax
32.90
1393.80
-52.60
PAT
1041.10
5076.70
2233.40
OPBDIT/OI (%)
20.70%
34.0%
25.0%
PAT/OI (%)
6.00%
22.8%
11.1%
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q1 FY2017
16080.80
15445.00
15764.00
17245.90
17242.50
18288.30
20174.20
22250.40
871%
-4%
2%
9%
0%
6%
10%
10%
OPBDIT
3404.20
3060.80
3405.80
3567.70
3892.80
4259.50
5050.30
7572.00
PAT
1088.10
936.80
1197.30
1041.10
1287.30
1028.60
2233.40
5076.70
23.3%
25.0%
34.0%
5.6%
11.1%
22.8%
Operating Income
Growth (%)
6.1%
7.6%
64.79%
FIIs
13.81%
DIIs
15.43%
Others
Total
5.97%
100.00%

3M
12M
SCL
16.61%
48.40%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 9350.0-18100.0

Bloomberg Code : SRCM:IN
Market Capitalisation Rs.589.43Billion
Valuations
OPBDIT/OI (%)
6.8%
Promoters
Increase in the operating profitability coupled with higher other income

resulted in higher net profitability at 22.8% in Q1 FY2017 as against net
profitability of 6.0% in Q1 FY2016.
21.2%
19.8%
21.6%
20.7%
22.6%
DISHMAN PHARMACEUTICALS
& CHEMICALS
LIMITED: Business
Overview
PAT/OI (%)
6.0%
7.5%
FY17e
Price
/Earnings
37.90
EV/EBITDA
21.88
Source: Bloomberg
ICRA LIMITED
43
FY18e
FY19e
29.04
17.53
21.74
14.61

Business Overview
Favorably placed in northern market where demand prospects remain good SCL has an installed capacity of 27.20 MTPA, spread over ten manufacturing units, of which five
are in Rajasthan, one in Bihar, one in Chhattisgarh, one in Haryana, one in Uttarakhand and one in Uttar Pradesh. The demand prospects in Northern India have remained
strong with this region recording the highest capacity utilization.
Energy efficient operations of the cement division SCL has one of the lowest specific power consumption per tonne of cement. The companys product mix is skewed towards
Pozolena Portland Cement whose production is less power intensive. SCL has captive power plants and is self-sufficient in its power requirements. The companys power plants
are dependent on pet coke or imported coal.
Efficient power operations SCL has consistently added power generation capacity in the last 5 years. Currently, the company has an installed capacity of 627 MW of coal based
and waste heat recovery based power generation. Further, provision of accelerated depreciation on power plants has resulted in tax savings and income from power plants is
entitled to 100% exemption for a period of 10 years under 80 IA.
Capex The company has proposed to add new clinker unit of 2.8 MPTA at Raipur, Chhattisgarh which is expected to cost around Rs. 700 crore and be completed by quarter
ending March, 2018. SCL is expanding the existing cement grinding capacity from 3.6 million MTPA to 5.6 million MTPA in Bihar which is expected to cost around Rs. 285 crore
and proposed to be completed by March 2018.
Penalty by CCI- In December 2015, COMPAT passed an order setting aside the initial order of June 2012 by the CCI (imposing penalty on ten cement companies) and told CCI to
take up the matter for fresh adjudication. In August 2016, CCI, after hearing the matter afresh, again published an order against the same cement manufacturers while adding
SCL to the list, levying penalty of Rs. 397.51 crore on SCL. SCL is examining the order and is to decide about filing its appeal against the order at appropriate forum in due course.
SCLs Segment-wise Performance

Qtr ending
Sep 2014
Sep 2015
Growth
Dec 2014
Dec 2015
Growth
Mar 2015
Mar 2016
Growth
Jun 2015
Jun 2016
Growth
Cement
14170.70
15267.90
8%
13516.40
16469.00
22%
14632.50
18013.8
23%
15152.80
22879.80
51%
Power
3482.60
3804.70
9%
3433.90
3701.20
8%
2964.80
4259.5
44%
3984.30
4009.30
1%
Cement
291.90
203.10
-30%
182.90
-269.50
-247%
-366.70
-386.5
5%
-475.60
3896.40
Power
923.90
1078.00
17%
878.70
1496.80
-70%
1186.10
2205.6
86%
1845.40
2227.80
Cement
2.1%
1.3%
1.4%
-1.6%
-2.5%
-2.1%
-3.1%
17.0%
Power
26.5%
28.3%
25.6%
40.4%
40.0%
51.8%
46.3%
55.6%
Revenues
PBIT
21%
PBIT %
Company Profile SCL was incorporated in the year 1979 and is owned and managed by the Bangur group, which is based in Kolkata. The company has its business activities
in the cement and power sector. Presently the company operates 27.20 million MTPA of cement manufacturing capacity. SCL has five grinding units of 16 million MTPA
capacity across different locations in Rajasthan (Beawar, Ras, Suatgarh, Jobner and Khushkhera), one unit of 1.5 MTPA capacity in Uttarakhand, one unit of 3.6 MTPA capacity
in Bihar, one unit of 1.5 MTPA in Panipat, Haryana (acquired from Jaiprakash Associates Limited), one unit of 2.6 MTPA in Chhattisgarh and one unit in Uttar Pradesh. SCL also
has 627 MW of power capacity, which not only makes it a fully self reliant unit for meeting its power requirements but also enables it to export surplus power.
ICRA LIMITED
44
ICRA Ratings
Increase in profitability during Q1 FY2017 on a YoY basis
No rated by ICRA
Revenue Growth ICLs standalone operating income declined by 1.6% YoY

to Rs. 12.06 billion in Q1 FY2017 from Rs. 12.26 billion in Q1 FY2016. This is
mainly on account of decline in the cement sales realization by 9.3% to Rs.
5212/MT in Q1 FY2017 on a YoY basis. However, the impact of the same is
moderated on account of increase in the cement sales volumes by 9.9% to
23.1 lakh MT in Q1 FY2017 on a YoY basis.
FACT SHEET
1946
Chairman
Shri.N.Srinivasan
Product Portfolio
Cement
Year ending
March
Manufacturing facility
Tamil Nadu, Andhra Pradesh,

Rajasthan and Maharashtra
Capacity- March 2016
ICL- 14.05 million MTPA

ICL+subsidiaries- 15.55 million
MTPA
Standalone Net sales- FY2016
Rs. 42489.5.0 Million
Standalone PAT FY2016
Rs. 1378.1 Million
In Rs. Million
Q1
FY2016
Q1
FY2017
Q4
FY2016
Operating Income
Growth (%) - YoY
OPBDIT
Less: Depreciation
Other Income
PBT
Less: Tax
PAT
12257.0
-12.9%
2004.4
553.9
965.3
0.0
-107.2
378.0
0.0
378.0
12057.2
-1.6%
2046.1
511.3
824.5
0.0
0.0
710.3
270.5
439.8
11540.8
10.6%
2184.1
522.2
912.7
0.6
0.0
749.8
237.7
512.1
OPBDIT/OI (%)
PAT/OI (%)
Operating Income
Growth (%) -QoQ
OPBDIT
PAT
OPBDIT/OI (%)
PAT/OI (%)
16.4%
3.1%
Q2 FY2015
11357.1
-8%
1831.6
74.9
16.1%
0.7%
17.0%
3.6%
Q3 FY2015
10402.2
-8%
1630.4
-116.8
15.7%
-1.1%
On a sequential basis, the operating income increased by 4.5% in Q1

FY2017. This is largely due to increase in the cement sales realization 13.4%
while the cement sales volumes declined by 6.9% in Q1 FY2017, compared
to Q4 FY2016.

Promoters
28.63%
FIIs
24.22%
DIIs
17.59%
Others
29.56%
Total
100.00%

Profitability ICLs operating profitability reported an increase to 17.0% in
Q1 FY2017 from 16.4% in Q1 FY2016. This was mainly on account of decline
in the power and fuel expenses in Q1 FY2017. Power and fuel expenses as a
% of operating income declined to 16.7% in Q1 FY2017 from 19.2% in Q1
FY2016 on account of lower petcoke costs and higher petcoke
consumption. Higher operating profitability coupled with lower interest
and depreciation expenses has resulted in higher net profitability of 3.6% in
Q1 FY2017, compared to 3.1% in Q1 FY2016. In absolute terms, net profit in
Q1 FY2017 is at Rs. 439.80 million as against net profit of Rs. 378.0 million
in Q1 FY2016.
On a sequential basis, the operating profitability declined to 17.0% in Q1
FY2017 from 18.9% in Q4 FY2016, mainly on account of higher general and
admin expenses. Though the interest and depreciation expenses are lower
on a QoQ basis, lower operating profitability resulted in low net profit of
Rs. 439.8 million in Q1 FY2017 as against Rs. 512.10 in Q4 FY2016.
18.9%
4.4%
Q4 FY2015
10431
0%
2002.3
366
19.2%
3.5%
Q1 FY2016
12257.0
18%
2004.4
378.0
16.4%
3.1%
Q2 FY2016
10823.7
1%
2319
410.4
21.4%
3.8%
Q3 FY2016
9370.5
-13%
1536.4
54.6
16.4%
0.6%
Q4 FY2016
11540.8
23%
2184.1
512.1
18.9%
4.4%
Q1 FY2017
12057.2
4%
2046.1
439.8
17.0%
3.6%
3M
12M
ICL
42.93%
91.35%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 63.9 156.4

Bloomberg Code : ICEM: IN
Market Capitalisation Rs.45.14
Billion
Valuations
Price
/Earnings
FY17e
FY18e
FY19e
18.01
12.69
10.20
6.95
6.38
EV/EBITDA
7.91
Source: Bloomberg
ICRA LIMITED
45

Penalty by CCI: In August 2016, CCI has reconfirmed the penalty imposed on ICL which was to the tune of Rs. 187.48 crore for cartelization in cement industry. Earlier, during
June 2012, CCI against ten cement manufacturers, including ICL, has imposed penalty. ICL has subsequently filed an appeal before COMPAT for setting aside the said order of
the CCI. In December 2015, COMPAT passed an order setting aside the order of the CCI and told CCI to take up the matter for fresh adjudication.
In August 2016, CCI, after hearing the matter afresh, has again published an order against the same cement manufacturers while adding one more to the list, including ICL,
levying the same penalty of Rs. 187.48 crore on ICL. ICL has decided to file an appeal with COMPAT regarding the same.
Company Profile:
Incorporated in 1946, India Cements (ICL) is a leading cement player in South India. The installed capacity of the company is at 14.05 million MTPA with the cement grinding
units located in Telangana, Andhra Pradesh, Tamil Nadu, Maharashtra and Rajasthan. The company primarily manufactures two standard types of cement: Ordinary Portland
Cement (OPC) and Portland Pozzolana Cement (PPC), the mix being 30:70. Apart from cement, the company is also engaged in shipping business and has a wind farm in
Coimbatore.
ICRA LIMITED
46
The Ramco Cements Limited (RCL) (formerly Madras Cements Limited)
ICRA Ratings
RCL reports increase in revenues and profitability in Q1 FY2017 on YoY basis

andSHEET
adjusted bet profit
FACT
Chairman
1957
Sri.P.R.Ramasubrahmaneya Rajha
Year ending
March
Product Portfolio
Cement, RMC, dry mortar, power

generation (wind mills)
Andhra Pradesh, Tamil Nadu, Karnataka
Capacity FY2016
12.50 million MTPA
Standalone
FY2016
Net
sales-
Rs. 36,781.80 Million
Rs. 5,582.60 Million

Q1 FY2016
Q1 FY2017
Q4 FY2016
Operating Income
9474.20
9720.90
10148.80
Growth YoY (%)
-2.84%
2.60%
1.78%
OPBDIT
2537.50
3042.10
3453.90
Less: Depreciation
667.30
663.20
652.10
492.90
291.40
444.20
Other Income
18.20
18.60
28.00
0.00
0.00
0.00
PBT
1395.50
2106.10
2357.60
Less: Tax
403.10
546.80
342.40
PAT
992.40
1559.30
2043.20
OPBDIT/OI (%)
26.78%
31.29%
34.03%
PAT/OI (%)
10.47%
16.04%
20.13%
In Rs. Million
Operating Income
Improvement in operating profitability coupled with lower interest

expenses resulted in increase in the net profitability to 16.04% in Q1
FY2017 from 10.47% in Q1 FY2016. The company reported a net profit of
Rs. 1559.30 million in Q1 FY2017 as against Rs. 992.40 million in Q1
FY2016.
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
9591.5
8159.3
-14%
9971.2
22%
9474.2
8914.7
8209.2
10148.8
9720.90
-5%
-6%
-8%
24%
-4%
1299
2743.4
2537.5
2910.0
2536.5
3453.9
3042.10
1387.2
1177.3
2043.2
1559.30
Growth (%)
-3%
OPBDIT
1714
2163.4
OPBIT/OI (%)
Profitability RCLs operating margins improved from 26.78% in Q1

FY2016 to 31.29% in Q1 FY2017. This is mainly driven by lower raw
material costs, power costs and freight costs during Q1 FY2017 on a YoY
basis. Raw material costs as a % of operating income, power and fuel costs
as a % operating income and freight costs as a % of operating income are
lower at 12.50%, 13.30% and 18.23% respectively during Q1 FY2017,
compared to 13.49%, 15.38% and 19.32% respectively during Q1 FY2016.
Power and fuel costs benefits have been largely due to lower petcoke and
coal costs coupled with higher petcoke consumption during Q1 FY2017 on
a YoY basis. Decline in the diesel prices on a YoY basis during Q1 FY2017
has also resulted in lower freight expenses.
Q1 FY2015
9514.3
-1%
PAT
Revenue Growth The operating income of RCL increased by 2.60% YoY

to Rs. 9720.90 million in Q1 FY2016 when compared to corresponding
period last year driven by increase in the revenues from cement division.
The increase in the revenues from cement division is primarily on account
of 15% increase in the cement sales volumes during Q1 FY2017 on a YoY
basis. However, the increase in the cement sales volumes is moderated to
a large extent by the decline in the cement realizations during Q1 FY2017
on a YoY basis.
362.6
897.1
229.6
934.2
992.4
17.90%
22.70%
15.92%
27.51%
26.78%
32.64%
30.90%
34.03%
31.29%
2.81%
9.37%
10.47%
15.56%
14.34%
20.13%
16.04%
AMBUJA
LIMITED (ACL)
PAT/OI (%) CEMENTS3.80%
9.40%
Long-term rating- [ICRA]AA+

Short-term rating- [ICRA]A1+
Outlook- Stable
June 2016

Promoters
42.30%
FIIs
15.91%
DIIs
24.88%
Others
16.91%
Total
100.00%

3M
12M
TRCL
7.33%
89.19%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 312.2 622.8

Bloomberg Code: TRCL:IN
Billion
Valuations
FY17e
FY18e
FY19e
21.90
18.58
14.79
EV/EBITDA
13.60
Source: Bloomberg
12.18
10.27
Price /Earnings
ICRA LIMITED
47
The Ramco Cements Limited (RCL) (formerly Madras Cements Limited)

Business Overview
Cement division- The revenues from cement increased by 4% YoY to Rs. 9429.20 million in Q1 FY2017 primarily on account of a 15% increase in the sales volumes from 1.81
million MT in Q1 FY2016 to 2.08 million MT in Q1 FY2017. However, the increase in the cement sales volumes was partly off-set by the decline in cement realizations. The
PBIT margins from cement division improved supported by lower raw material costs, energy costs and freight costs.
Windmill division- The power generation has been higher by 84% at 71 million units in Q1 FY2017 from 38 million units in Q1 FY2016. This is primarily attributed to on-set of
wind season in Q1 FY2017 as per schedule when compared to delay in the on-set of the wind season during the corresponding period last year. Also, better evacuation by
Tamil Nadu Generation and Distribution Corporation Limited in Q1 FY2017 as against frequent backing down of wind electric generators in Q1 FY2016.
Penalty by CCI: In August 2016, CCI has reconfirmed the penalty imposed on RCL which was to the tune of Rs. 258.63 crore for cartelization in cement industry. Earlier, during
June 2012, CCI against ten cement manufacturers, including RCL, has imposed penalty. RCL has subsequently filed an appeal before COMPAT for setting aside the said order of
the CCI. The COMPAT passed an interim order granting stay on the penalty imposed by the CCI, conditional upon the company depositing 10% of the penalty, which was
complied. In December 2015, COMPAT passed an order setting aside the order of the CCI and told CCI to take up the matter for fresh adjudication. Consequently, the 10%
deposit amount was refunded to the company.
In August 2016, CCI, after hearing the matter afresh, has again published an order against the same cement manufacturers while adding one more to the list, including RCL,
levying the same penalty of Rs. 258.63 crore on RCL. RCL has decided to file an appeal with COMPAT regarding the same.
Company Profile- RCL is the flagship company of the Ramco Group which has interests in cement, fibre cement sheets, textiles (cotton yarn) and information technology.
The Ramco Group was founded in 1938 by Late Mr. PAC Ramasamy Raja and is presently managed by his son, Mr. P R Ramasubrahmaneya Rajha. RCL is largely a regional
cement player with capacity of 12.50 million MTPA in South India (apart from grinding capacities of 4.00 million MTPA which is proposed to be expanded to 5.00 million MPTA
with a new facility planned at West Bengal). RCL manufactures and markets cement under the Ramco brand. The name of Madras Cements Limited was changed to The
Ramco Cements Limited in August 2013. TRCL has windmill capacity of 125.95 MW (post the transfer of 33.23 MW to a newly formed subsidiary, Ramco Windfarms Limited,
during 2013-14) and captive thermal power plants with capacity of 157 MW.
ICRA LIMITED
48
ICRA Ratings

Increase in revenues increase and profitability in Q1 FY2017 on a YoY basis
Revenue Growth UCLs operating income increased by 4% YoY in Q1
FY2017 to Rs. 62.33 billion supported by increase in the cement sales
volumes by 6% YoY. However the increase in the sales volumes is partly
offset by decline in the cement realizations by 4% in Q1 FY2017 when
compared to the corresponding period last year. On a sequential basis,
the operating income of the company declined by 4% in Q1 FY2017 on
account of decline in the sales realizations by 4%. The cement sales
volumes have remained similar during Q1 FY2017 to that in Q4 FY2016.
FACT SHEET
Chairman
Mr. Kumar Mangalam Birla
Year ending
March
Products
Grey and white cement, RMC,

building products and building
solutions
Pan-India Presence
Capacity as on March 16
66.3 million MTPA
Standalone Net sales - FY2016
Rs. 241.07 Billion
Rs. 21.75 Billion

Q1 FY2016
Q1 FY2017
Q4 FY2016
Operating Income
Growth (%)
OPBDIT
Less: Depreciation
Less: Interest
Other Income
PBT
Less: Tax
PAT
60.07
5.53%
11.53
2.85
1.40
1.18
0.00
8.46
2.42
6.04
62.33
3.76%
14.23
3.03
1.52
1.50
0.00
11.18
3.43
7.75
65.04
4.71%
13.53
3.49
1.11
0.38
0.00
8.92
2.49
6.81
OPBDIT/OI (%)
PAT/OI (%)
19.20%
10.06%
22.82%
12.43%
20.80%
10.48%
Q2 FY2015
Q3 FY2015
Not Rated by ICRA
Profitability UCLs operating profitability at 22.82% in Q1 FY2017 is

higher than 19.20% in Q1 FY2016. This is majorly on account of lower
energy costs (15% of operating income in Q1 FY2017 as against 18% in
Q1 FY2016) and freight costs (25% of operating income in Q1 FY2017 as
against 26% in Q1 FY2016) during Q1 FY2017 on a YoY basis. Despite
higher interest and depreciation expenses during Q1 FY2017 when
compared to Q1 FY2016, improvement in operating profitability resulted
in higher net profitability at 12.43% in Q1 FY2017, compared to 10.06%
in Q1 FY2016. The net profit is at Rs. 7.75 billion in Q1 FY2017 as against
net profit at Rs. 6.04 billion in Q1 FY2016.
The operating profitability of the company increased sequentially from
20.80% in Q4 FY2016 to 22.82% in Q1 FY2017. This is on account of
lower power and fuel expenses and lower general & admin expenses in
Q1 FY2017. Consequently, net profitability increased from 10.48% in Q4
FY2016 to 12.43% in Q1 FY2017.
Promoters
Not Rated by ICRA
FIIs
62.27%
19.64%
DIIs
6.75%
Others
11.34%
Total
100.00%

3M
12M
UCL
15.28%
43.99%
CNX
6.90%
10.18%
Stock Movement
52wk range: Rs. 2579.0 4130.0

Bloomberg Code: UTCEM: IN
Billion
Valuations
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
FY17e
FY18e
FY19e
Price /Earnings
33.65
25.67
20.34
EV/EBITDA
19.10
15.24
12.05
Q1 FY2017
Operating Income
54.3
56.0
62.1
60.1
56.8
58.3
65.0
62.3
Growth (%) QoQ
-5%
3%
11%
-2%
-7%
3%
11%
-4%
OPBITA
8.8
9.6
13.1
11.5
9.9
11.2
13.5
14.2
PAT
4.1
ULTRATECH
(UCL)
OPBIT/OI (%) CEMENT LIMITED
16.2%
3.6
6.2
6.0
3.9
5.1
6.8
7.8
17.1%
21.1%
19.2%
17.41%
19.27%
20.80%
22.82%
PAT/OI (%)
6.5%
9.9%
10.1%
6.93%
8.73%
10.48%
12.43%
7.6%
Source: Bloomberg
Source: Company Data, ICRA Research; Amounts in Rs. Billion
ICRA LIMITED
49

UCLs Realization and EBIDTA margins
Key Highlights from Q1 FY2017 Press Releases of UCL
Growth in despatches: UCLs combined cement and clinker sales volumes grew by 6% YoY
from 12.41 million MT in Q1 FY2016 to 13.20 million MT in Q1 FY2017. The capacity
utilization on existing plants is around 80% while the new plants are in ramp up mode.
Overall the capacity utilization declined from 80% in Q1 FY2016 (installed capacity at 60.15
million MTPA) to 77% in Q1 FY2017 (installed capacity at 66.25 million MTPA).
Decline in sales realizations in Q1 FY2017: Cement prices declined by 4% YoY to ~Rs.

4685/MT in Q1 FY2017 from ~Rs. 4865/MT in Q1 FY2016. Despite decline in the cement
prices, the company was able to report better profitability numbers supported by energy
cost and freight savings in Q1 FY2017.
Outlook on cement industry: Cement demand is expected to improve with Governments

focus on infrastructure and housing spends. Cement prices are expected to remain steady.
Source: CMA, Company Data, ICRA Research
Business Overview
Board Approval received for acquisition of Jaiprakash Associates cement units: The board of directors at its meeting on 31/03/2016 approved signing of definitive
agreements for the acquisition of identified cement plants of Jaiprakash Associates Limited and its subsidiaries in the states of Madhya Pradesh, Uttar Pradesh, Himachal
Pradesh, Uttarkhand and Andhra Pradesh having cement capacity of 21.20 MPTA at an enterprise value of Rs. 15,900 crores. The transaction is subject to approval from
shareholders and creditors, sanction of scheme of amalgamation by the High Courts, approval of the Competition Commission of India and all other statutory approvals.
Projects commissioned during Q1 FY2017: During Q1 FY2017, UCL commissioned grinding units at Nagpur, Maharashtra and Patliputra, Bihar.
Update on coal block: As per Supreme Court order dated 24.09.2014, two coal blocks in Chattisgarh which were awarded to UCL jointly with other parties have been cancelled.
No mining activities had commenced in these blocks.
UCL participated in the e-auction of coal blocks conducted by the nominated authority of the Ministry of Coal, Government of India and won the auction conducted for the
Coal Block at Bicharpur, Madhya Pradesh. Its bid of Rs. 3003/ MT was the highest. UCL has started the process of possession of the mines. Commercial production from this
mine is expected to commence from FY2018.
Penalty by CCI: In August 2016, CCI has reconfirmed the penalty imposed on UCL which was to the tune of Rs. 11.8 billion for cartelization in cement industry. Earlier, during
June 2012, CCI against ten cement manufacturers, including RCL, has imposed penalty. UCL has subsequently filed an appeal before COMPAT for setting aside the said order of
the CCI. The COMPAT passed an interim order granting stay on the penalty imposed by the CCI. In December 2015, COMPAT passed an order setting aside the order of the CCI
and told CCI to take up the matter for fresh adjudication.
In August 2016, CCI, after hearing the matter afresh, has again published an order against the same cement manufacturers while adding one more to the list, including UCL,
levying the same penalty of Rs. 11.8 billion on UCL. UCL is examining the order and is to decide about filing its appeal against the order at appropriate forum in due course.
ICRA LIMITED
50

Company Profile: UltraTech Cement Limited, an Aditya Birla Group Company, is the largest cement manufacturer in India with an installed capacity of 66.3 million tonnes. UCL
and its subsidiaries together have 12 integrated units, 15 grinding units, 2 white cement and wall putty units, clinkerisation plant and bulk terminals across India, UAE, Bahrain,
Bangladesh and Sri Lanka. UCL is also the largest producer of white cement, wall care putty and ready mix concrete in India. UCL offers solutions for the construction industry
with its presence in building products - dry mix mortar, concrete blocks and water proofing.
ICRA LIMITED
51
ICRA Limited
CORPORATE OFFICE
Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002
Tel: +91 124 4545300; Fax: +91 124 4545350
Email: info@icraindia.com, Website: www.icra.in
REGISTERED OFFICE
1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001
Tel: +91 11 23357940-50; Fax: +91 11 23357014
Branches: Mumbai: Tel.: + (91 22) 24331046/53/62/74/86/87, Fax: + (91 22) 2433 1390 Chennai: Tel + (91 44) 2434 0043/9659/8080, 2433 0724/ 3293/3294, Fax + (91 44)
2434 3663 Kolkata: Tel + (91 33) 2287 8839 /2287 6617/ 2283 1411/ 2280 0008, Fax + (91 33) 2287 0728 Bangalore: Tel + (91 80) 2559 7401/4049 Fax + (91 80) 559 4065
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0194/95/96, Fax + (91 20) 553 9231
Copyright, 2016, ICRA Limited. All Rights Reserved.

All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. Although reasonable care
has been taken to ensure that the information herein is true, such information is provided 'as is' without any warranty of any kind, and ICRA
in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such
information. Also, ICRA or any of its group companies, while publishing or otherwise disseminating other reports may have presented data,
analyses and/or opinions that may be inconsistent with the data, analyses and/or opinions presented in this publication. All information
contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use
of this publication or its contents.
ICRA LIMITED
52

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INDIAN CEMENT SECTOR

Demand growth improvement likely to support cement prices; energy cost

ICRA RESEARCH SERVICES

ICRA RATING FEATURE

INDIAN CEMENT SECTOR

Demand Dynamics in Cement Industry

Demand Dynamics in Cement Industry

Exhibit 2: Trend in Construction GVA

Source: Office of Economic Advisor, Index of Core Industries

Demand Dynamics in Cement Industry

Exhibit 4: Monthly Production Trends

Source: Office of Economic Advisor, Index of Core Industries

New investments and revivals decline in Q1 FY2017

Demand Dynamics in Cement Industry

Exhibit 6: Credit growth

Exhibit 5: Movement in credit

Source: ICRA Research

Demand Dynamics in Cement Industry

Supply Dynamics in Cement Industry

Supply Dynamics in Cement Industry

Source: Company Announcements & Media Releases, Company Annual Reports,

Capacity utilisation to improve going forward with recovery in demand and

Future slowdown in capacity additions

Recent spurt in consolidation in the industry

Northern & Central region

Exhibit 9: Region wise consolidation

Source: ICRA Research

Trend in Cement Prices

Trend in Cement Prices

West: Prices continue to remain subdued

East: Prices largely remain range bound

Trend in Cement Prices

Exhibit 10B: Cement Prices in Mumbai

Exhibit 10C: Cement Prices in Delhi

Exhibit 10D: Cement Prices in Chandigarh

Exhibit 10E: Cement Prices in Kolkata

Exhibit 10F: Cement Prices in Hyderabad

Trend in Cement Prices

Net profit (FY2011) (Rs.

0.5 times of net profit of FY2010 and

The India Cements Limited

The Ramco Cements Limited

Trend in Input Costs

Trend in Input Costs

Exhibit 13: % Power and fuel costs / operating income

Source: Companys quarterly results, ICRA research

Trend in Input Costs

Exhibit 14: Trends in International Coal Prices

Source: ICRA research

Increase in coal prices during May-July 2016

Trend in Input Costs

Exhibit 17: % Freight costs / operating income

Companies take steps to optimise cost structures

Profitability Analysis of Cement Companies

Profitability Analysis of Cement Companies

ACC Limited (ACC)

Ambuja Cements Limited (ACL)

JK Cement Limited (JKCL)

OCL India Limited (OCL)

Shree Cement Limited (SCL)

The Ramco Cements Limited (RCL)

TOTAL (ICRA Sample)

Modest growth in operating income on a YoY basis

Profitability Analysis of Cement Companies