indian cement industry 1 - I ND IAN CEMENT INDUSTRY...

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INDIAN CEMENT INDUSTRY
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PREPARED BY: KANU.VIJ
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SUV ASINI AGARWAL INTRODUCTION The Indian cement industry with a total capacity of about 190 m tonnes in financial year-2008 is the second largest market after China. Despite the fact that the Indian cement industry has clocked production of more than 100 m tonnes for the last five years, registering an average growth of nearly 9%, the per capita consumption of around 150 kgs compares poorly with the world average of over 260 kgs and more than 450 kgs in China. This, more than anything underlines the tremendous scope for growth in the Indian cement industry in the long term .Although consolidation has taken place in the Indian cement industry with the top five players controlling almost 50% of the capacity, the balance capacity still remains pretty fragmented.Cement, being a bulk commodity, is a freight intensive industry and transporting cement over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region.
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While the southern region always had excess capacity in the past owing to abundant availability of limestone, the western and northern region are the most lucrative markets on account of higher income levels. However, with capacity addition taking place at a slower rate as compared to growth in demand, the demand supply parity has been restored to some extent in the Southern region for the medium term. Considering the pace at which infrastructural activity is taking place in different regions, the players have lined up expansion plans accordingly. Despite the growth of the Indian cement industry, India’s per capita production of 115 kilograms per year lags the world average of over 250 kgs and China’s production of more than 450 kgs per person. Clearly there remains room for tremendous growth in the industry in India. But if India is to reach its potential, the free hand of the market must be left unfettered. For this to happen, the Indian government must make sure that foreign companies that have a history of price fixing and market collusion receive appropriate regulation. If market shares get fixed, India will be the loser and the gap
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between India and China will only grow in the race to become the next economic superpower. MAJOR PLAYER’S OF THE INDUSTRY This section provides the overview and financial information on prominent players in the Indian cement sector, like o Associated Cement Company Ltd. (ACC), o Grasim Industries Ltd., o Ambuja Cements Ltd., o UltraTech Cement Ltd., o J.K. Cement Limited, o Madras Cements Ltd., o Jaypee Group. o Binani Cement Limited o Prism Cement Limited
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Ambuja Cements :- HSBC value Ambuja Cements at a target 2010e EV/EBITDA of 5.5x, which is at a discount to its historical trading range of 7-10x and in line with its industry peers. “We value Ambuja Cements in line with ACC, which we believe is its closest comparable. Our target price is Rs 50 and we have an Underweight rating on the stock,”
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indian cement industry 1 - I ND IAN CEMENT INDUSTRY...

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