Consolidation in the Indian Cement Industry
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Case Details:
Case Code : BSTR162
Case Length : 27 Pages
Themes: Acquisition strategy | Consolidation
Period : 1997 - 2005
Organization : -
Pub Date : 2005
Teaching Note :Not Available
Countries : India
Industry : Engineering,
Construction, and
Real Estate
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Introduction Contd...
Holcim entered India by investing in Kalyanpur Cements in 1990, Lafarge commenced its Indian operations by acquiring Tisco's cement plants in 1999, while Italcementi entered India through a joint venture with the KK Birla Group to acquire a 50% stake in Zuari Cement in 2000. With the government increasing its planned expenditure in infrastructure5, the cement industry in India is expected to consolidate some more in the future (Refer Exhibit III for the highlights of Indian cement industry in 2004).
Industry Background
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It was in 1914 that the first cement manufacturing unit in India was set up by
India Cement Company at Porbandar, Gujarat, with a capacity of 1000 tonnes. The
following decades saw increase in production and in the 1950s capacity expanded
at a rate of 12% per annum with capacity utilisation at 85%. In the next two
decades there was a decline in capacity growth rates.
In 1980-81, capacity of the cement industry in India was 27 million tonnes (MT)
and production was 18.1 MT. The low capacity utilization (67%) could be
attributed to government controls on production, pricing and distribution.
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The industry was decontrolled in 1989. This led to an increase in production.
In 1991-92, manufacturing capacity stood at 65 million tonnes with capacity
utilization of 82%. But
post-1995, demand did not grow fast enough, and plants worked at a
capacity utilisation of 80 % (Refer Exhibit IV for production and
despatch details of cement between 1996-97 and 2003-04). Though growth plateaued from 1996-1998, the year 1999 saw cement consumption surging
15% to 93 MT, up from 81 MT in 1998.
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The increased consumption in 1999 came from a 21% demand increase in the
northern market, 13.4% demand increase in the southern market and a
22.5% demand increase in the eastern market (Refer Exhibit V, VI, VII
for details about cement production and consumption based on region and
cement varieties).
In the late 1990s, while the average international per capita cement
consumption was 250 kg, India had a per capita consumption of 80 kg.
"India is the second largest cement market in the world and is expected
to continue to grow, while cement demand in many parts of the world has
hit a plateau,"said Ashok Jain, Executive Director, Associated Cement
Companies (ACC)6... |
Excerpts >>
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