Cement Analysis

The cement industry of any nation plays an important role in its development through the construction of infrastructure. India's cement production has increased at a compound annual growth rate (CAGR) of 9.7 per cent to reach 272 million tonnes (MT) during FY 06-13. Presently, India is the second largest producer of cement in the world with a current capacity of around 370 MT which is expected to grow to 550 MT by FY 20.

India has huge potential in infrastructure and construction and the cement sector in India is set to receive a major boost. The Government of India is allocating funds to several infrastructure projects in the urban as well as rural areas, as per the Union Budget being announced recently in July 2014.

Also, many foreign companies are looking for investing in the Indian cement industry to cash in on the opportunities in this market. For instance, Holcim Ltd and Lafarge SA are involved in major discussions to form a potential global merger which could result in the formation of the largest cement maker in India, overtaking the current market leaders, Ulltratech.

In addition, there are a number of notable infrastructural projects already coming up in the country. For instance, Indian engineers are working in the Himalayas to build the world's highest railway bridge which is expected to be 35 metres taller than the Eiffel Tower when completed in 2016.

Market size

Cement is a cyclical commodity with a high correlation with GDP. The housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total consumption. The other major consumers of cement include infrastructure at 13 per cent, commercial construction at 11 per cent and industrial construction at 9 per cent.

The cement industry in India is divided into five regions, viz, north, south, west, east and the central region. The southern region of India has the highest installed capacity, accounting for about one-third of the country's total installed cement...