summers report on indian cement industry(specially ultra tech cement)

SUMMER TRAINING REPORTON

SALES AND DISTRIBUTION NETWORK OF ULTRA TECH CEMENT

SUBMITTED IN PARTIAL FULFILLMENT OF POST GRADUATE DEPLOMA IN BUSINESS AND

MANAGEMENT

SUBMITTED BY:

KAPIL KUMARPGDM2007-09SECTION-A

INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT GRADUATE SCHOOL OF MANAGEMENT

KNOWLEDGE PARK IIGREATER NOIDA

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INDEX

ACKNOWLEDGEMENT. . . . . . . . . . . . . . . . . .

PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. CEMENT AND ITS TYPES

2. INDIAN CEMENT INDUSTRY 1.1 OVERVIEW1.2 STRUCTURE1.3 MAJOR PLAYERS1.4 GOVT. POLICIES1.5 CEMENT EXPORTS1.6 PORTER’S 5-FORCE MODEL1.7 SWOT ANALYSIS

3. INTRODUCTION ULTRA TECH CEMENT 3.1 PRODUCTION UNITS 3.2 ULTRA TECH ADVANTAGES 3.3 AWARDS 3.4 EXPORTS

4. PROJECT WORK 4.1 OBJECTIVE OF THE STUDY 4.2 RESEARCH DESIGN 4.3 DATA ANALYSIS & FINDINGS 4.4 LIMITATIONS 4.5 RECOMMENDATIONS

5. CONCLUSION 6. ANNEXURE 7. BIBLIOGRAPHY

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ACKNOWLEDGEMENT

PERSEVERANCE, INSPIRATION AND MOTIVATION HAVE

ALWAYS PLAYED A KEY ROLE IN THE SUCCESS OF ANY

VENTURE.SO HEREBY, IT’S MY PLEASURE TO RECORD

THANKS & GRATITUDE TO THE PERSONS INVOLVED.

FIRST, I THANK Mr.SUBODH JAIN, DSM, ULTRA TECH

CEMENT, FOR HIS CONTINUOUS SUPPORT, STIMULATING

SUGGESTIONS AND HELPING ME ALL THE TIME DURING MY

PROJECT.

A SPECIAL THANK GOES TO MR.ROSHAN LAL & MR.VIKAS,

ULTRA TECH CEMENT.BOTH OF THEM WERE ALWAYS READY

TO LISTEN & GIVE ADVICE.MR..VIKAS HAS BEEN A FRIEND

AND A GUIDE.HE WAS ALWAYS THERE TO MEET & TALK

ABOUT MY IDEAS.

I AM ALSO GREATLY INDEBTED TO MY MENTOR MR.GANESH

SINGH.HE WAS THERE TO LISTEN ME & HELP ME OUT IF I

EVER HAD ANY PROBLEM.HE HAS BEEN SO LENIENT ALSO.

AT LAST, THANKS TO MY FAMILY MEMBERS & ALSO TO

FRIEND NAVIN FOR BEING SO SUPPORTIVE.

KAPIL KUMAR

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PREFACE

Indian economy is facing a boom in the real estate. This is directly

related with the cement sector. Ultra Tech cement being one of the

top three players in the Indian market and the most exported Indian

cement is an important part of the sector.

During my project, I carried out a research for Ultra Tech cement

and tried to find out its current market position, reasons behind any

shortcomings and also found out some methods of increasing Ultra

Tech cement sales.

The report also gives a detailed idea about the Indian cement

industry and the key players.

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WHAT IS CEMENT?

Cement is a mixture of limestone, Clay, Silica and Gypsum. It is a fine

powder which when mixed with water sets to a hard mass as a result of

hydration of the constituent compounds. It is the most commonly used

construction material. Cement is manufactured by burning a mixture of

limestone and Clay at high temperatures in a kiln, and then finely

grinding the resulting clinker along with Gypsum. The end product thus

obtained is called Ordinary Portland Cement (OPC).

Different Types of Cement

There are different varieties of cement based on different compositions

according to specific end uses, namely Ordinary Portland Cement, Portland

Pozolona Cement, Portland Blast Furnace Slag Cement, White Cement and

Specialized Cement. The basic difference lies in the percentage of clinker

used.

1. Ordinary Portland cement (OPC):

OPC, popularly known as grey cement, has 95% clinker and 5% of

Gypsum and other materials. It accounts for 70% of the total

consumption. White cement is a variation of OPC and is used for

decorative purposes like rendering of walls, flooring etc. It contains a

very low proportion of iron oxide. Ordinary Portland cement is the most

commonly used cement for a wide range of applications. These

applications cover dry-lean mixes, general-purpose ready-mixes, and

even high strength pre-cast and pre-stressed concrete.

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2. Portland Pozolona Cement (PPC):

Portland pozzolana cement is Ordinary Portland Cement blended with

pozzolanic materials (power-station fly ash, burnt clays, ash from burnt

plant material or Siliceous earths), either together or separately. Portland

clinker is ground with Gypsum and Pozzolanic materials which, though

they do not have cementing properties in themselves, combine

chemically with Portland cement in the presence of water to form extra

strong cementing material which resists wet cracking, thermal cracking

and has a high degree of cohesion and workability in concrete. PPC has

80% clinker, 15% pozolona and 5% gypsum and accounts for 18% of the

total cement consumption. It is cheaply manufactured because it uses fly

ash/burnt clay/coal waste as the main ingredient. It has a lower heat of

hydration, which helps in preventing cracks where large volumes are

being cast.

3. Portland Blast Furnace Slag Cement (PBFSC):

PBFSC consists of 45% clinker, 50% blast furnace slag and 5% Gypsum

and accounts for 10% of the total cement consumed. It has a heat of

hydration even lower than PPC and is generally used in construction of

dams and similar massive constructions. Portland blast-furnace slag

cement contains up to 70 per cent of finely ground, granulated blast-

furnace slag, a nonmetallic product consisting essentially of Silicates and

Aluminum-silicates of Calcium. Slag brings with it the advantage of the

energy invested in the slag making. Grinding slag for cement

replacement takes only 25 per cent of the energy needed to manufacture

Portland cement. Using slag cement to replace a portion of Portland

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cement in a concrete mixture is a useful method to make concrete better

and more consistent. Portland blast-furnace slag cement has a lighter

colour, better concrete workability, easier finish ability, higher

compressive and flexural strength, lower permeability, improved

resistance to aggressive chemicals and more consistent plastic and

hardened consistency.

4. White Cement:

White Portland cement has essentially the same properties as gray

cement, except for color, which is a very important quality control issue

in the industry. It is manufactured using fuel oil (instead of coal) and with

iron oxide content below 0.4% to ensure whiteness. Special cooling

technique is used. It is used to enhance aesthetic value, in tiles and for

flooring. White cement is much more expensive than grey cement.

5. Specialized Cement:

Oil Well Cement: is made from clinker with special additives to prevent

any porosity.

Rapid Hardening Portland cement: It is similar to OPC, except that it

is ground much finer, so that on casting, the compressible strength

increases rapidly.

Water Proof Cement: OPC, with small portion of calcium stearate or

non-saponifibale oil to impart waterproofing properties.

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INDIAN CEMENT INDUSTRY-AN OVERVIEW

Cement production commenced in India as early as 1914.

The first cement unit was set up at Porbandar in 1914 with a

capacity of 1,000 tones per annum.Cement is the preferred building material

in India. It is used extensively in household and industrial construction.

Earlier, government sector used to consume over 50% of the total cement

sold in India, but in the last decade, its share has come down to 35%. Rural

areas consume less than 23% of the total cement. Availability of cheaper

building materials for non-permanent structures affects the rural demand.

Demand for cement is linked to the economic activity in any country.

Broadly, it can be categorized into demand for housing construction (homes,

offices etc.) and infrastructure creation (ports, roads, power plants etc). The

real driver of cement demand is creation of infrastructure; hence cement

demand in emerging economies is much higher than developed countries

where the demand has reached a plateau. In India too, the demand for

cement will be affected by spending on infrastructure (including housing).

With the boost given by the government to various infrastructure projects,

road network and housing facilities, growth in the cement consumption is

anticipated in the coming year. The favorable housing finance environment

is expected to fulfill the vast housing requirements, both in rural and urban

areas. The increase in infrastructure projects by the government coupled

with the construction of the Golden Quadrilateral and the North-South and

East-West corridor projects have led to an increase in consumption of

cement. This increase is expected to continue in the future. The reduction in

import duties is not likely to affect the industry as the cement produced is at

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par with the international standards and the prices are lower than those

prevailing in international markets. The graph below show the consumption

of cement in different areas of housing, infrastructure and industries.

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Structure of the industry

Domestic players:

Associated Cement Companies Ltd (ACCL)

Associated Cement Companies Ltd manufactures ordinary Portland cement,

composite cement and special cement and has begun offering its marketing

expertise and distribution facilities to other producers in cement and related

areas. It has twelve manufacturing plants located throughout the country

with exports to SAARC nations. The company plans capital expenditure

through expansion of existing units and/or through acquisitions. Non-core

assets are to be divested to release locked up capital. It is also expected to

actively pursue overseas project engineering and consultancy services.

Birla Corp

Birla Corp's product portfolio includes acetylene gas, auto trim parts,

casting, cement, jute goods, yarn, calcium carbide etc. The cement division

has an installed capacity of 4.78 million metric tones and produced 4.77

million metric tones of cement in 2003-04. The company has two plants in

Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar

Pradesh and holds a market share of 4.1 per cent. It manufactures Ordinary

Portland cement (OPC), Portland pozzolana cement, fly ash-based PPC,

Low-alkali Portland cement, Portland slag cement, low heat cement and

sulphate resistant cement. Large quantities of its cement are exported to

Nepal and Bangladesh. Going forward, the company is setting up its captive

power plant to remain cost competitive.

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Century Textiles and Industries Ltd (CTIL)

The product portfolio of CTIL includes textiles, rayon, cement, pulp &

paper, shipping, property & land development, builders and floriculture.

Cement is the largest division of CTIL and contributes to over 40 per cent of

the company's revenues. The company has an installed capacity of 4.7

million tones with a total cement production of 5.43 million tones in 2003-

04. CTIL has four plants that manufacture cement, one in Chattisgarh, two in

Madhya Pradesh and one in Maharashtra. Going forward, the company has

scripted a three-pronged strategy closing down its shipping business,

continuing with its chemicals and adhesive division, and

Focusing on cement, rayon and paper as its long-term business plan.

Grasim-UltraTech Cemco

Grasim's product profile includes viscose staple fiber (VSF), grey cement,

white cement, sponge iron, chemicals and textiles. With the acquisition of

UltraTech, L&T's cement division in early 2004, Grasim has now become

the world's seventh largest cement producer with a combined capacity of 31

million tones. Grasim (with UltraTech) held a market share of around 21 per

cent in 2005-06. It has plants in Madhya Pradesh, Chattisgarh, Punjab,

Rajasthan, Tamil Nadu and Gujarat among others. The company plans to

invest over US$ 9 million in the next two years to augment capacity of its

cement and fiber business. Its also plans to focus on its international

ventures, ramping up the capacity of Alexandra Carbon Black in Egypt to

1,70,000 tone per annum (from 1,20,000 tpa) and raising the capacity of the

carbon black plant in China from 12,000 tpa to 60,000 tpa.

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Gujarat Ambuja Cements Ltd (GACL)

Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of

commercial production at its 2 million tonne plant in Chandrapur,

Maharashtra. The group has clinker manufacturing facilities at Himachal

Pradesh, Gujarat, Maharashtra, Chattisgarh, Punjab and Rajasthan. The

company has a market share of around 10 per cent, with a strong foothold in

the northern and western markets. Its total sales aggregated US$ 526 million

with a capacity of 12.6 million tonne in 2003-04. Gujarat Ambuja is one of

India's largest cement exporter and one of the most cost efficient firms.

GACL has a 14.45 per cent stake in ACC, making it the second largest

cement group in the country, after Grasim-UltraTech Cemco. The company

has free cash flows that it is likely to use to grow inorganically. The

company is scouting for a capacity of around two million tonne in the

northern and western markets. It has also earmarked around US$ 195-220

million for acquisitions

India Cements

India Cements is the largest cement producer in southern India with a total

capacity of 8.81 million tonne and plants in Andhra Pradesh and Tamil

Nadu. The company has a market share of 5.4 per cent with a total cement

production of 6.36 million tonne in 2003-04. Its product portfolio includes

ordinary portland cement and blended cement. The company has limited its

business activity to cement, though it has a marginal exposure to the

shipping business. The company plans to reduce its manpower significantly

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And exit non-core businesses to turnaround its fortune. It also expects the

export market to open up, with the Gulf emerging as a major importer.

Jaiprakash Associates Limited

Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is

part of the Jaypee Group with businesses in civil engineering, hospitality,

cement, hydropower, design consultancy and IT. It has an annual capacity of

4.6 million tonne with plants located in Rewa & Bela (Madhya Pradesh) and

Sadva Khurd (Uttar Pradesh). The company has a market share of 3.8 per

cent with the cement division contributing US$ 172 million to revenue

in 2003-04. The company is upgrading its capacity to 6.5 million tonne

through the modernizing of the existing units and the commissioning of a

new grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163

million. Jaiprakash Associates has decided to concentrate on its core

business of construction and engineering and leave its cement plant to its

subsidiary Jaypee Rewa Cement Ltd. The company manufactures a wide

range of world class cement of OPC grades 33, 43, 53, IRST-40 and special

Blends of pozzolana cement.

JK Synthetics

JK Synthetics, a Singhania Group company, started manufacturing nylon at

Kota in 1962. Subsequently, it diversified into PSY/PFY, nylon tyre-cord,

cement (in 1975), acrylic and white cement (in 1984). The company has a

market share of 2.7 per cent. JK Synthetics Limited is restructuring its

business divisions into two separate entities- JK Cements and JK Synthetics.

After the restructuring, it will be left with a cement plant at Nimbahera in

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Rajasthan, with a capacity of 3.26 million metric tonne and manufacturing

white cement.

Madras Cements

Madras Cements Ltd is one of the oldest cement companies in the southern

region and is a part of the Armco group. The company is engaged in cement,

clinker, dolomite, dry mortar mix, limestone; ready mix cements (RMC) and

units generated from windmills. The company has three plants in Tamil

Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It has a

total capacity of 5.47 million tonne annually and holds a market share of 3.1

per cent. Madras Cements plans to expand by putting up RMC plants.

As Karnataka is a promising market, the company is further expanding its

capacity from the present 1.5 million tonne to 3.4 million tonne through an

investment of US$ 9 million.

Foreign players:

Holcim

Holcim, earlier known as Holder bank, has a cement production capacity of

141.9 million tonne. It is a key player in aggregates, concrete and

construction related services. It has a strong market presence in over 70

countries and is a market leader in South America and in a number of

European and overseas markets. Holcim entered India by means of a long-

term strategic alliance with Gujarat Ambuja Cements Ltd (GACL). The

alliance aims to strengthen their clinker and cement trading activities in

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South Asia, the Middle East and the region adjoining the Indian Ocean.

Holcim also intends to use India as an additional base for its IT operations,

R&D projects as well as a procurement sourcing hub to generate additional

synergies and value for the group.

Italcementi Group

The Italecementi group is one of the largest producers and distributors of

cement with 60 cement plants, 547 concrete batching units and 155 quarries

spread across 19 countries in Europe, Asia, Africa and North America.

Italcementi is present in the Indian markets through a 50:50 joint venture

company with Zuari Cements. All initiatives in southern India are routed

through the joint venture company, while Italcementi is free to buy deals

In its individual capacity in northern India. The joint venture company has a

capacity of 3.4 million tonne and a market share of 2.1 per cent.

Lafarge India

Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement

capacity of 5 million tonne and a clinker capacity of 3 million tonne in the

country. Lafarge commenced operations in 1999 and currently has a market

share of 3.4 per cent. It exports clinker and cement to Bangladesh and Nepal.

It produces Portland slag cement, ordinary portland cement and portland

pozzolana cement. The Indian cement plants are located in Chhattisgarh and

Rajasthan. Lafarge Cement has become the largest cement selling firm in the

Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.

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Two players call all the shots;

For the first time in India, two companies - Grasim and Gujarat Ambuja,

along with their associate companies, control almost 50% of India’s cement

capacity and supply. In a commodity business, where profits move

disproportionately with even small changes in cement prices, this is a

significant development The emphasis laid by the government on the

development of physical infrastructure mainly roads, airports, seaports and

railroads and the boom in housing driven by easy availability of cheap

housing credit have been the key growth drivers for the sector.

Government is the single largest buyer of cement. Historically, in the last

year, drive to complete pending infrastructure project has driven demand

growth. One of the major cement consuming projects is the Golden

Quadrilateral Project-Besides construction and modernization of four

airports and two seaports. Gujarat Ambuja has always traded at a premium

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to its peers due to its higher operational efficiency, presence in high growth

markets and fiscal benefits. This edge got further sharpened post ACC

acquisition that added to scale as well as geographical diversity. Grasim and

ultra tech on the other hand are doing so well to capture the more and more

market share.

Major Consolidations

With an installed capacity of around 157 million tonne per annum (mtpa) at

end-March 2007, large cement plants accounted for 93% of the total

installed capacity in India. The installed capacity is distributed over across

approximately 129 large cement plants owned by around 54 companies. The

structure of the industry is fragmented, although, the concentration at the top

is increasing. The fragmented structure is a result of the low entry barriers in

the post decontrol period and the ready availability of technology. However,

cement plants are capital intensive and require a capital investment of over

Rs. 3,500 per tonne of cement, which translates into an investment of Rs.

3,500 million for a 1 mtpa plant. The cement industry has witnessed

substantial reorganization of capacities during the last couple of years.

Some examples of the consolidation witnessed during the recent past

include: Gujarat Ambuja taking a stake of 14% in ACC; Gujarat Ambuja

taking over DLF Cements and Modi Cement; India Cement taking over

Raasi Cement and Sri Vishnu Cement; Grasim's acquisition of the cement

business of L&T; Indian Rayon's cement division merging with Grasim;

Grasim taking over Sri Dig Vijay Cements; L&T taking over Narmada

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Cements; ACC taking over IDCOL. Multinational cement companies have

also initiated the acquisition process in the Indian cement market. Swiss

cement major Holcim has picked up 14.8% of the promoters stake in Gujarat

Ambuja Cements (GACL). In January 2006, Holderind Investments (Holcim

Mauritius), an indirect, wholly-owned subsidiary of Holcim, acquired 200

million equity shares of GACL at a price of Rs.105 per share from the

promoters. Post-sale, the share of promoters in the company is 9%. Holcim

also made an open offer to acquire an additional 20% stake in GACL at Rs.

90.64 per share. Earlier, Holcim had entered into a strategic alliance with

GACL, and acquired a 67% controlling stake in Ambuja Cement India.

Through this holding company, Holcim acquired a majority in Ambuja

Cement Eastern and a substantial stake in ACC. Ambuja Cement India holds

a 34% share in ACC and a 97% share in Ambuja Cement Eastern. Holcim's

acquisition has led to the emergence of two major groups in the Indian

cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine

(capacity of 33.5 mt) and the

Aditya Birla group through Grasim Industries and Ultratech Cement

(combined capacity of 31.1 mt). Lafarge,

the French cement major, had acquired the cement plants of Raymond and

Tisco in the recent past, and has an installed capacity of 5 mtpa. Italy based

Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries'

cement plant in AP, with a capacity of 3.4 mtpa. Recently, Heidelberg

Cement has entered into an equal joint-venture agreement with S P Lohia

Group controlled Indo-Rama Cement. Heidelberg Cement is expected to

take a 50% controlling stake in Indo-Rama's grinding plant of 0.75 mtpa at

Raigad in Maharashtra. As on March 2006, ACC was the largest player with

a capacity of 18.64 mtpa. UltraTech CemCo Ltd.1 now occupies the second

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slot with a capacity of 17 mtpa (which includes 1.5 mtpa of subsidiary

Narmada Cement).

The Gujarat Ambuja group has emerged as the third largest player with a

capacity of 14.86 mtpa. Grasim ranks fourth with a capacity of 14.12 mtpa.

Other leading players include India Cements, Jaypee group, Century

Textiles, Madras Cements, Lafarge, and Birla Corp.

Reasons behind these consolidations;

As discussed above, the cement industry is witnessing a number of Mergers

& Acquisitions (M&As). The extent of concentration in the industry has

increased over the years. This concentration is mainly because of the focus

of the larger and the more efficient units to consolidate their operations by

restructuring their business and taking over relatively weaker units. The

relatively smaller and weaker units are finding it difficult to withstand the

cyclical pressure of the cement industry. Some of the key benefits accruing

to the acquiring companies from these acquisition deals include:

❑ Economies of scale resulting from the larger size of operations

❑ Savings in the time and cost required to set up a new unit

❑ Access to new markets

❑ Access to special facilities / features of the acquired company

❑ And, benefits of tax shelter.

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State wise Capacity

As cement is a low value commodity, freight costs assume a significant

proportion of the final cost. Transporting costs render the prices of cement in

distant destinations uncompetitive. For instance, it is financially infeasible to

transport cement by road over 250 kms. Railways are mostly used to

transport cement over longer distances. However, its bulky nature and

infrastructure bottlenecks render even rail transport unviable over very long

distances (that is why Madras Cements or India Cements, located in the

south, can hardly make a difference to the fortunes of west-based companies

like Gujarat Ambuja). Therefore, manufacturers tend to sell cement at the

nearest market first and sell in distant markets only if additional realization

is greater than freight costs incurred. This is the reason for showing regional

demand rather than state demand in case of cement.

Region wise Capacity

The Indian cement industry has to be viewed in terms of five regions:-

North (Punjab, Delhi, Haryana, Himachal Pradesh, Rajasthan,

Chandigarh, J&K and Uttranchal);

West (Maharashtra and Gujarat);

South (Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Pondicherry,

Andaman & Nicobar and Goa);

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East (Bihar, Orissa, West Bengal, Assam, Meghalaya, Jharkhand and

Chhattisgarh); and

Central (Uttar Pradesh and Madhya Pradesh).

Northern Region

Punjab 2173.34

Delhi 500.00

Haryana 172.00

Himachal Pradesh 4060.00

Rajasthan 16299.34

J&K 200.00

TOTAL 23404.68

West

Maharashtra 8950.00

Gujarat 12937.00

TOTAL 21887.00

South

Tamil Nadu 12913.18

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Andra Pradesh 19831.02

Karnataka 9744.00

Kerala 420.00

TOTAL 42908.20

East

Bihar 1000.00

Orissa 2761.00

West Bengal 2291.66

Assam Meghalaya 400.00

Jharkhand 3475.01

Chattisgarh 11287.33

TOTAL 21215.00

Central

U.P. 6297.00

M.P. 16185.00

TOTAL 20482.00

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South accounts for 33.03% of cement production capacity of the country,

with Andra Pradesh accounting for 15.27% of the total production capacity

of India. It has an installed capacity of around 20mn tons of cement and

ranks first in the country, followed by Tamil Nadu with 9.94% of the total

production capacity. North accounts for 18.02% of the total production

capacity, with Rajasthan at 12.55% of the total production capacity of the

country. West accounts for 16.85% of the total production capacity.

Maharashtra and Gujarat have production capacity of 6.89% and 9.96%

respectively. East and Central Regions account for 16.33% and 15.77% of

the total production capacity of the country respectively.

Trade between these regions is on a very low scale mainly because of the

transportation bottlenecks and uncompetitive cost of transportation. The

Southern region dominated the cement consumption at 44.5 mn tonnes in FY

07, accounting for about 30% of total domestic cement consumption. During

FY 03-07, Southern region has witnessed highest CAGR of cement demand

growth at 10.4% followed by Northern and Eastern regions at 8.9% and 9%,

respectively

Mechanics of Distribution Channels of Sector

Companies invariably hire agents or transport cements to own or

government warehouses either via roadway or railways. Incase of exports,

cement reaches the nearest port via roadways or railways and is then

transferred to the importing country. Domestically, from agents or

warehouses the cement is transported to the dealers/distributors and

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in turn to sub dealers who finally sell it to the end users. There may or may

not be physical ownership of goods. In the second case, dealers and sub

dealers take order from buyers and place it to the companies, co ordinate and

monitor the timely dispatch of said orders,

ENERGY AND TRANSPORT REQUIREMENTS

The cement industry is dependent on three major infrastructural sectors of

the economy: coal, power and transport. The inputs from these three sectors

account for roughly 50% of the cost of cement. Both the availability and the

cost of these inputs have a vital bearing on the fortunes of the cement

players. All these sectors are largely in the State sector, and, historically

cement companies have had virtually no control on the cost or availability of

these inputs. Hence, the industry response has largely been in the form of

achieving efficiency gains and finding alternatives (captive power, use of

waterways). One additional external influencer of the cement industry

performance is the taxes and levies imposed by the Central and State

Governments. These together account for around 30% of the selling price of

cement in the Indian context.

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The shortage in domestic coal production coupled with the poor quality has

resulted in cement companies resorting to importing coal, or going in for

open market purchase of coal, or using alternative fuel such as lignite or pet

coke.

Use of imported coal has become an essential feature of the Indian cement

industry and has shown a rising trend during the last few years.

Power and Fuel cost form the largest proportion of the cost structure. This

reflects the effects of the trend in rising global oil and fuel prices. On the

other hand Employee costs form the smallest proportion of over all cost.

This is essentially because cement industry is a very capital intensive

industry. This also accounts for the huge depreciation and interest costs

which accrue on the plant and machinery. Moreover, the labour employed is

essentially semi-skilled excluding the top management which bring down

labour costs.

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GOVERNMENT POLICIES

Government policies have affected the growth of cement plants in India in

various stages. The control on cement for a long time and then partial

decontrol and then total decontrol has contributed to the gradual opening up

of the market for cement producers. The stages of growth of the cement

industry can be best described in the following stages:

Price and Distribution Controls (1940-1981):

During the Second World War, cement was declared as an essential

commodity under the Defense of India Rules and was brought under price

and distribution controls which resulted in sluggish growth. The installed

capacity reached only 27.9 MT by the year 1980-81.

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Partial Decontrol (1982-1988):

In February 1982, partial decontrol was announced. Under this scheme, levy

cement quota was fixed for the units and the balance could be sold in the

open market. This resulted in extensive modernization and expansion drive,

which can be seen from the increase in the installed capacity to 59MT in

1988-89 in comparison with the figure of a mere 27.9MT in 1980-81, an

increase of almost 111%.

Total Decontrol (1989):

In the year 1989, total decontrol of the cement industry was announced. By

decontrolling the cement industry, the government relaxed the forces of

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demand and supply. In the next two years, the industry enjoyed a boom in

sales and profits. By 1992, the pace of overall economic liberalization had

peaked; ironically, however, the economy slipped into recession taking the

cement industry down with it. For 1992-93, the industry remained stagnant

with no addition to existing capacity

The things that primarily control the price of cement are coal, power tariffs,

railway, freight, royalty and cess on limestone. Interestingly, all of these

prices are controlled by government.

Coal:

The consumption of coal in a typically dry process system ranges from 20-

25% of clinker production. This means for per ton clinker produced 0.20-

0.25 ton of coal is consumed. This contributes 35-40% of the production

cost. The cement industry consumes about 10mn tons of coal annually.

Since coalfields like BCCL supply a poor quality of coal, NCL and CCL the

industry has to blend high-grade coal with it. The Indian coal has a low

calorific value (3,500-4,000 kcal/kg) with ash content as high as 25-30%

compared to imported coal of high calorific value (7,000-8,000 kcal/kg) with

low ash content 6-7%. Lignite is also used as a fuel by blending it with coal.

However this process is not very common.

Electricity:

Cement industry consumes about 5.5bn units of electricity annually while

one ton of cement approximately requires 120-130 units of electricity. Power

tariffs vary according to the location of the plant and on the production

process. The state governments supply this input and hence plants in

different states shall have different power tariffs. Another major hindrance to

the industry is severe power cuts. Most of the cement producing states like

28

AP, MP, experience power cuts to the tune of 25-30% every year causing

substantial production loss.

Limestone:

This constitutes the largest bulk in terms of input to cement. For producing

one ton of cement, approximately 1.6 ton of limestone is required.

Therefore, the cement plant location is determined by the location of

limestone mines. The major cash outflow takes place in way of royalty

payment to the central government and cess on royalties levied by the state

government. The total limestone deposit in the country is estimated to be 90

billion tons. AP has the largest share -- 34%, Karnataka 13%, Gujarat 13%,

M.P 8%, and Rajasthan 6.5%. The plants near the limestone deposit pay less

transportation cost than others.

Transportation:

Cement is mostly packed in paper bags now. It is then transported either by

rail or road. Road transportation beyond 200 kms is not economical

therefore about 55% cement is being moved by the railways. There is also

the problem of inadequate availability of wagons especially on western

railways and southeastern railways. Under this scenario, manufacturers are

looking for sea routes, this being not only cheap but also reducing the losses

in transit. Today, 70% of the cement movement worldwide is by sea

compared to 1% in India. However, the scenario is changing with most of

the big players like L&T, ACC and Grasim having set up their bulk

terminals.

Incentives in States:

Most state governments, in order to attract investments in their respective

states, offer fiscal incentives in the form of sales tax exemptions/deferrals. In

29

some states, this applies only to intrastate sales, like Madhya Pradesh and

Rajasthan. States like Haryana offer a freeze on power tariff for 5 years,

while Gujarat offers exemption from electric duty.

Opening up the FDI channel:

The impact of government policies on cement demand has been

steadily decreasing with the sector being gradually deregulated. At

present, 100 per cent foreign direct investment (FDI) is permitted

in the cement industry. Lafarge was the first foreign company to

enter the Indian market in 1999.

The French

Declining Role of Public Sector:

Historically, cement has been one of the most important areas of operations

for the Indian private sector. Unlike much of heavy industry and utilities,

cement was not deemed to be the exclusive preserve of the State sector in

the post-independence development strategy. Cement was also the industry

of choice of many corporate diversifying away from the troubled traditional

areas of jute and textiles.

Over the years, the share of the public sector in cement production has

declined. While the private sector (large companies) accounts for around

95% of the total installed capacity, the share of public sector companies has

declined from a level of 11% in FY1996 to around 4.4% in FY2006. The

share in production of the public sector companies is even lower at 1.2% in

FY2006 as compared to 6.5% in FY1996.

30

Export of cement from India

The Indian cement industry exported around 6 mt of cement during FY2006,

accounting for around 4% of the total production. There has been a

significant year on year variation in the export trend, implying that

Companies rely on cement exports to balance out the domestic demand

supply situation. As seen from above there is excess production, so the

difference in supply and demand is met by exporting. The export of Indian

cement has increased over the years, giving a boost to the Indian cement

industry.

The demand for cement in the foreign countries is a derived demand, for it

depends on industrial activity, real estate, and construction activity. Since

growth is taking place all over the world in these sectors, Indian export of

cement is also increasing.

The cement industry in India has around 300 mini cement plants and 130

large cement plants. The total production capacity of these plants is around

167.36 million tons. The India cement industry is technologically very

advanced, as a result of which the quality of Indian cement is now

considered the second best in the world. This has given a major boost to the

Indian export of cement. The production of cement in India is not only able

to meet the domestic demand, but large amounts are also exported. A fair

amount of clinker and cement by-products are also exported by India. As the

quality of Indian cement is very good, its demand in the international market

is always high.

31

The graph shows that the production of cement in India is at 2nd place after

China, this higher production is a good reason for exporting cement .

In 2001-2002, 3.38 million tons of cement was exported from India. That

figure stood at 3.47 million tons in 2002-03, and 3.36 million tons in 2003-

04. In 2001-2002, 1.76 million tons of clinker was exported from India. In

2002- 2003 clinker exports amounted to 3.45 million tons, and in 2003-

2004 the figure stood at 5.64 million tons. This shows that the export of

Indian cement has been increasing at a steady pace over the years.

32

The major companies exporting Indian cement are:

Gujarat Ambuja

Ultra Tech Cement

L&T Limited

Export of Indian cement has registered growth a fair amount of growth,

giving a boost to the Indian economy. India has an immense potential to tap

cement markets of countries in the Middle East and South East Asia due to

its strengths of locational advantage, large-scale limestone and coal deposits,

Adequate cement capacity and world-class cement production with the

latest technology. India has an estimated total of 90 billion tonnes of

limestone deposit in the country.

33

Indian technology advantage

The manufacturing process of cement consists of the mixing, drying

and grinding of limestone, clay and silica into a composite mass.

The mixture is then heated and burnt in a pre-heater and kiln to

be cooled in an air cooling system to form clinker, which is the

Semi-finished form. This clinker is cooled by air and subsequently

ground with gypsum to form cement. The dry and semi-dry processes are

more fuel-efficient. The wet process requires 0.28 tonne of coal and 110

kWh of power to manufacture one tonne of cement, whereas the dry process

requires only 0.18 tonnes of coal and 100 kWh of power. Coal and power

costs account for 35 per cent of the total cement production costs. With 95

per cent of the total capacity based on the modern dry process technology,

the Indian cement industry has become more cost efficient.

34

Top companies in the cement industry match quite well with world

standards in terms of energy (thermal energy Kcal/kg of clinker - India 665

against 690 of Japan)

and pollution norms (SPM of 40 in India against 20 in Japan).

35

PORTER’S 5-FORCE MODEL FOR CEMENT

INDUSTRY

Threat of New

Entrants: The high capital costs acts as a major entry barrier for the entry

of new players. The high freight costs make it difficult to import cement.

Cement being a high volume low value commodity results in high freight

costs, which makes cement imports economically unfeasible. Domestic

Cement industry is highly insulated from global cement markets. With GoI

intervention, making cement duty free, cement is being imported from

neighboring countries. However, due to logistics issues and lack of port

36

handling capabilities, imports of cement will remain negligible and do not

pose a threat to domestic industry.

Bargaining power of

Suppliers: The major inputs are coal and power. The Prices of both coal

and power are determined by the government. To mitigate the high costs of

power the cement players have set up captive power plants.

Competitive rivalry

between existing players: Previously the rivalry was strong among the

players, as the industry was not consolidated. During the last few years the

industry has become more consolidated with the Top 3 players having a

combined market share of 49 percent in 2005-06 as compared to 32

percent in 1999-2000.

Bargaining power of

Buyers: Retail sales constitute about 80 percent of the total sales and the

rest is institutional sales. The retail buyers don’t have any bargaining power

while the institutional buyers get a discount of 5 to 10 percent as they buy

cement in bulk.

Threat of Substitutes: There are no good substitutes for cement.

37

SWOT ANALYSIS

Strengths: Double digit growth rate  

Cement demand has grown in tandem with strong economic growth;

derived from:

-Growth in housing sector (over 30%) key demand driver;

-Infrastructure projects like ports, airports, power projects, dam & irrigation

projects

-National Highway Development Programme

-Bharat Nirman Yojana for rural infrastructure

-Rise in industrial projects

-Export potential also demand driver

Capacity utilization over 90%

Weakness: Low value commodity

Cement Industry is highly fragmented

Industry is also highly regionalized

Low – value commodity makes transportation over long distances un-

economical

Opportunities: Demand–supply gap

Substantially lower per capita cement consumption as compared to

developing countries (1/3 rd of world average) Per capita cement

consumption in India is 82 kgs against a global average of 255 kgs

and Asian average of 200 kgs.

38

Additional capacity of 20 million tons per annum will be required to

match the demand  

Limited green field capacity addition in pipeline for next two years,

leading to favorable demand – supply scenario

Threats: Rising input costs

Government intervention to adjust cement prices

Possibility of over bunching of capacities in the long term as some of

the players have already announced new capacities

Transportation cost is scaling high; bottleneck due to loading

restrictions

39

Coal prices climbing up; industry players say current shortage of coal

in the country is estimated to be over 10 million tonnes 

PRICES

The regional variation in the Indian market has resulted in the cement prices

across regions witnessing movement within a band, with no appreciable

increase in any region. Differences in regional demand supply situation have

translated into price differences across regions. Prices are lower in Southern

regions where there is normally a supply surplus. However, prices are higher

in Eastern and Western regions where shortages exist. The surplus position

had resulted in significant pressure on price realizations in recent years.

.The cyclical trough in the late-1990s had a severe impact on the industry

financials. However, cement prices have firmed up during the last few years

due to improvement in demand-supply position and increasing consolidation

in the industry. The Wholesale Price Index (WPI) for cement increased 3.9%

during FY2005, as compared with a growth of 1.2% during FY2004. The

WPI for March 2006 was 11% higher than the WPI for March 2005.

40

Margins

Cement prices have firmed up during the last few years due to improvement

in demand-supply position and increasing consolidation in the industry. The

trend in gross sales realization is similar for the cement companies in our

sample (comprising pure cement companies accounting for around two-

thirds of industry production and sales).

The operating profits and margins for cement companies are most sensitive

to cement sales realizations. During FY2004-05, riding on high average

sales realizations, the cement companies posted increased operating profits

and margins. This reversed the decline in operating profits and margins

during FY2002-03. This was mainly because of excess capacity and the

consequent low price realizations. While sales volume of the sample

companies improved 7%, operating income (OI) increased 24.2% to Rs.

183.45 billion

41

RETURNS:

The key driver of profitability is cement prices, which fluctuate depending

on outlook on demand-supply gaps. The fluctuating fortunes of the Indian

cement industry are very typical of a commodity industry. The companies

make bumper returns during the boom years (FY1994-96, and FY2003-06)

while the performance goes down drastically during the lean years (FY1997-

2001). The returns have improved significantly since FY2003 because of

higher capacity utilizations, operational efficiency and cost control measures

supplemented with higher sales realizations.

the Indian cement industry has undergone vital changes through

technological changes in the pursuit of cost efficiency and drive for

consolidations. Most of the companies are making profits.

42

43

INTRODUCTION

ULTRA TECH CEMENT

44

UltraTech is the second largest cement manufacturer in India. It is the part of

Aditya Birla group and is subsidiary of Grasim. It has a capacity of 17

million tonnes. The company is the largest exporter of cement and clinker

from India. UltraTech has a presence in the west, south, north and east. The

western and southern regions are its major markets. The company exports

both clinker and cement. The company exports are moving towards cement

from clinker owing to the higher realization in the cement. In 2005-06 the

company exported 1.52 million tonnes of cement. With UltraTech Cement,

the Aditya Birla Group has established itself as not only the most respected

domestic player but also among the global leaders in cement. Now a look at

Aditya Birla group’s cement capacity:

Currently, the Aditya Birla Group is the 11th largest cement producer in the

world and the seventh largest in Asia and Ultra Tech and Grasim together,

make it the largest cement producer in India.

 The group mainly has two cement units – Grasim and Ultra tech.

 UltraTech Cement Limited, a Grasim subsidiary has an annual capacity of

17 million tonnes. It manufactures and markets Ordinary Portland Cement,

Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. It has

five integrated plants. This also includes the integrated plant and two

grinding units of the erstwhile Narmada Cement Company Limited, a

subsidiary, which has been amalgamated with the company in May 2006.

45

Grasim, on the other hand, manufactures grey and white cement. In grey

cement, the company has the capacity to manufacture 14.20 mtpa. This

includes Grasim’s capacity of 2.06 mtpa, Vikram Cement 4.2 mtpa, Aditya

Cement 1.5 mtpa, Rajashree Cement 4.2 mtpa, the acquired and merged

Dharni Cement 1.16 mtpa and the acquired Digvijay Cement 1.08 mtpa.

 Grasim and Ultra Tech together have a cement capacity of 31.20 mtpa. And

when the B K Birla cement companies also come into the fold, the Aditya

Birla group would have a cement capacity of 37.86 mtpa, making it clearly

the largest cement maker of India.

The Aditya Birla Group bought over the cement business of L&T for

around Rs. 2,200 crore. L&T allowed its name to be used for about a year.

Then from 19th November 2003,the name was changed to ultra tech

cemco.This name also didn’t last for long and finally the ultra tech cemco

was changed to Ultra Tech cement. These stages of evolution of ultra tech

cement are listed below:

2001

:: Grasim acquires 10 per cent stake in L&T. Subsequently increases stake

to 15.3 per cent by October 2002

:: Durgapur grinding unit

2002

46

::

The Grasim Board approves an open offer for purchase of up to 20 per

cent of the equity shares of Larsen & Toubro Ltd (L&T), in accordance

with the provisions and guidelines issued by the Securities & Exchange

Board of India (SEBI) Regulations, 1997.

:: Grasim increases its stake in L&T to 14.15 per cent

:: Arakkonam grinding unit

2003

:: The board of Larsen & Toubro Ltd (L&T) decides to demerge its cement

business into a separate cement company (CemCo). Grasim decides to

acquire an 8.5 per cent equity stake from L&T and then make an open

offer for 30 per cent of the equity of CemCo, to acquire management

control of the company.

2004

:: Completion of the implementation process to demerge the cement

business of L&T and completion of open offer by Grasim, with the latter

acquiring controlling stake in the newly formed company UltraTech

2006

Narmada Cement Company Limited amalgamated with UltraTech

47

pursuant to a Scheme of Amalgamation being approved by the Board for

Industrial & Financial Reconstruction (BIFR) in terms of the provision

of Sick Industrial Companies Act (Special Provisions)

ULTRA TECH PRODUCTION UNITS:

Ultra Tech’s subsidiaries are Dakshin Cement Limited and UltraTech

Ceylinco (P) Ltd.UltraTech has five integrated plants, five grinding units

and three terminals — two in India and one in Sri Lanka. These include an

integrated plant and two grinding units of the erstwhile Narmada Cement

Company Limited, a subsidiary, which has been amalgamated with the

company in May 2006.The details of its different production units is shown

on the next page.

Details of units:

48

PLANT/UNIT KILN CAPACITY(tpd) CAPACITIES(million tpa)

A. Composite integrated Plants.

1. AndraPradesh Cement 8000 2.3 Works.

2. Awarpur Cement works 9500 3.3

3. Gujrat cement works 15000 5.3

4. Hirmi cement works 8050 1.6

5. Narmada cement works 4350 0.4

B.Grinding Units

6. Arakkonam cements works 1.2

7. Jharsuguda cements works 0.8 8. Narmada cement (Ratnagri) 0.4 Works

9. Narmada cement(Magdala) 0.7 Works

10.West-Bengal cement works 1.0

TOTAL 17.0

THE ULTRA TECH ADVANTAGE

49

UltraTech Cement Ltd is one of the largest premium quality cement

producer in India. UltraTech Cement is manufactured in the state of the art

dry process plant at Tadipatri (Andhra Pradesh) and grinding unit at

Arakkonam (Tamil Nadu). Advanced instrumentation systems,

computerized process control and online quality control through X-ray

ensure consistently high quality product at UltraTech Cement plant. The

quality of UltraTech Cement has been globally accepted and is India's

largest exporter of clinker and cement.

UltraTech Cement due to its consistently superior quality has become the

first choice amongst discerning users and construction professionals.

Raw Material :

Careful selection and scientific proportioning of raw material with the use of

latest technology enables manufacturing of high quality cement. Rigorous

hourly tests are conducted on raw material. Laboratories at all plants are

equipped with sophisticated facilities.

World Class process Technology ensures Quality and Consistency :

Quality Assurance is an integral part of Ultra Tech’s manufacturing

philosophy. The quality attributes are consistently ensured through rigorous

application of advanced technology. Key features include:

Use of good quality limestone and careful selection of other raw

material

Computerized mining operation and homogenization of crushed

limestone

Perfect proportioning of raw materials by QCX ( Quality Control

through X-ray )

Online process control through CCR ( Computerized Control Room )

50

High-quality clinkerisation and close-circuit grinding for optimum

particle size distribution

UltraTech Cement plants have been accredited with ISO 9001, 14001,

18001 Certifications by DNV of Netherlands

Distinct Features:

Higher Compressive strength

Optimal fineness

Balanced physical and chemical properties

Optimal setting time

Consistency in quality

Low-level of Chloride

High-soundness

Advantages:

Higher workability

Lower consumption

Enhanced durability

Quicker construction

Overall economy

Customer Care and Guidance:

UltraTech Cement offers customers a range of "product plus" services. A

full- fledged Technical Services Network has been set up exclusively for

51

technical advice and guidance in usage of cement

UltraTech Cement is marketed nationwide through large network of

stockist's, sales officers and representatives. Cement dumps have also been

established at strategic locations to facilitate faster delivery of cement.

Value Added Services :

Mobile concrete lab services ( Concrete cube testing facilities )

Training Programmes for masons, site supervisors on good

construction practices

Field visits by qualified civil engineers

Educating individual house builders on various aspects of building

material and construction

Non-destructive testing of concrete

Any other customer specific services

Applications :

1. All Kinds of constructions including precast and prestressed concrete,

masonry works

2. Slip form constructions

3. Rehabilitation and retrofitting works

4. Cement based products such as pipes, tiles, blocks, poles,etc.

5. Roads, runways, bridges and flyovers

6. Water retaining structures

AWARDS FOR ULTRA TECH

52

Export awards

Worldwide, clients have consistently endorsed Ultra Tech’s highest quality standards. The list of export awards it has won is testimony to Ultra Tech’s uncompromising standards on product quality. Ultra Tech has been on the roll call of top exporters of the Chemicals & Allied Products Export Promotion Council (Capexil), year after year.

Ultratech won the Capexil Certificate of Export Recognition - Top Exporter - Cement, Clinker, Asbestos and Cement Products for the years 2000, 2002 and 2003.

Other awards that have come its way have included:Year Award

2001 and 1999Capexil Certificate of Export Recognition - Highest Export in Non-mineral Sector

1999Capexil Certificate of Outstanding Export Performance - Chemicals & Allied Products (for Portland cement)

1998Capexil Certificate of Export Recognition - Top Exporter- Cement, Asbestos, Cement Products

1998 Certificate of Outstanding Export Performance, Gujarat state

1997Capexil Certificate of Export Recognition - Certificate of Merit for Export Achievement in Cement and Clinker

National awards won by Awarpur Cement Works Year Award

2000-2001Indo-German Greentech Environment Excellence Awards by the Greentech Foundation, New Delhi

1999-2000 Business / Trade Award Jamanalal Bajaj Uchit Vyavahar Purashkar

1999 ISO 14001 Certification By M/S Det Norske Veritas in November

1996ISO 9001 Certification By M/S Der Norske Veritas

FIMI National Social Awareness Awards

1995-96 FIMI National Social Awareness Awards

1995Indira Priyadarshini Vrikshmitra (IPVM) National Award By Ministry of Environment & Forests, Goverment of India

1994-95Special Gold Award By The Council of Industry & Trade Development for Quality

1994Delhi Commendation Certificate - Rajiv Gandhi National Quality Award By Bureau of Indian Standards

Awards won by Gujarat Cement Works:

53

Year Award

2004Bhartiya Udyog Ratan Award presented to Sh. KYP Kulkarni By Indian Economic Development & Research Association (IEDRA), New Delhi

2002-2003 Greentech Gold Safety Award By Greentech Foundation, New Delhi

2002 Gujarat State Safety Award By Gujarat Safety Council (GSC), Vadodara

2001-2002Greentech Environment Excellence Award By Greentech Foundation, New Delhi

2001Awards for Excellence in "Industrial Relations" By Federation of Gujarat Industries (FGI), Vadodara

Awards won by Andhra Pradesh Cement Works:Year Award

2004-2005 State and Zonal level I prize for overall performance in Mines safety

2003-2004 Energy efficient unit award from CII

2002-2003

Energy Conservation Award from PCRA

Excellence Award in Water Conservation & Pollution Control by APPCB

Gold medal for Six Sigma Project on Optimisation of Compressed air energy at HIMER National Conference

FIMI environment award for mines

2001-2002

Award for six sigma project on reduction in specific fuel consumption at NIQR

Energy efficient unit award from CII

Best rural development effort award from FAPCCI

Appreciation award from NSC for achieving OHSAS-18001

Awards won by Hirmi Cement Works:Year Award

2001-2002 Environment Energy Foundation award for water conservation.

2001-2002Fuller Energy award for reduction in specific power consumption (KWH/T) per tonne of cement

ULTRA TECH CEMENT EXPORTS

UltraTech Cement recently bagged an award for being the highest exporter

of the year from CAPEXIL for the eighth time in a row for its sterling

performance. A leading cement exporter, its plants have also received

54

various awards for environment protection, social awareness, safety and

management of better industrial relations.

The company has been credited with boosting its exports of cement and

clinker last year by 25 per cent to 4 million tonnes from 2.8 million tonnes in

2005-2006. stringent quality control and testing in the best laboratories

ensure that cement and clinker produced from its plants conform to and

surpass international standards. The laboratory is equipped to test cement as

per ASTM, British and Euro standards. All the plants are ISO 9001 certified

for the latest production process and 14001 certified for environmental

management. The cement plant in Gujarat has an additional OHSAS 18001

certification as well for occupation hazards and safety parameters.

The company has a captive jetty at the Gujarat plant. The jetty length of 337

meters and width of 23 meters is capable of handling ships of 45,000 DWT

with 11 meters draft. Loading of cement and clinker onto the ship is carried

out by a ship loader, which is fed by a four km long conveyor belt that

connects the plant to the jetty. UltraTech Cement is the first and only Indian

cement company to obtain an EC certification for this plant. The

accreditation, given by Bureau Veritas, is a pre-requisite to supply cement to

EC member countries. UltraTech is one of the few Asian cement companies

to receive this recognition. The export markets span countries around the

Indian Ocean, Africa, Europe and the Middle East.

The Hirmi Cement Works in Chattisgarh and the Jharsuguda Cement Works

in Orissa make them ideal locations for export of cement and clinker to

Nepal and Bangladesh. With captive railway sidings to facilitate loading of

railway rakes and a high-tech production facility for cement and clinker,

UltraTech Cement has found wide acceptance in these neighboring countries

55

OBJECTIVE OF THE STUDY

Primary objective:

To study the distribution channel of Ultra Tech cement along with other

brands, in Sonepat and Kurukshetra distt. Of Haryana.

Secondary objectives:

56

1. To find out the market share of Ultra Tech cement.

2. To find out the major competitors of Ultra Tech cement in a particular

area.

3. To find out the problems faced by the Ultra Tech dealers/retailers and

try to minimize these problems.

4. To help the ultra tech dealers/retailers to increase their sales.

5. To find out the possible newer methods for advertisement and

methods for increasing sales of Ultra Tech cement.

RESEARCH DESIGN

(a) General Methodology:

The methodology adopted for this project was completely base on

primary information. The locale of the study was distt. Sonepat and

kurukshetra of Haryana.The first stage included gathering information about

the general cement market of the two cities. That was, to find out which are

57

major players, what is general distribution pattern, what type of incentive

schemes the different brands are using.

The second stage comprised determining

the objective of the study and drafting the questionnaire. The questionnaire

was designed keeping in mind the objective of the study. It was designed

with due guidance of the company guide. It was assured that the

questionnaire didn’t exceed more than 10 questions. Keeping in mind the

education level of the respondents who were mainly dealers/retailers, the

questionnaire was kept simple and precise.

b) Data Sources:

The research called for gathering primary data only. Hence, primary sources

were considered for the collection of data.

*Primary source

The primary data is gathered for specific purpose and is collected by the

researcher himself. It includes direct communication and feedback from the

customers. For the purpose of collecting information from customers a

structured questionnaire was formulated and is contacted directly.

c) Research Approach:

The research conducted was exploratory in nature and the goal was to gather

preliminary data to shed light on the real nature of problems and to suggest

possible solutions. For the purpose of this project, we went for a

questionnaire- based survey of customers. A pilot test of this questionnaire

was done for the preparation of final questionnaire. It involved, applying the

draft questionnaire to a sample of 5 people. This was done to ascertain

58

which questions are ambiguous, wrongly worded or in any way

objectionable.

(d)Research Instrument:

1. Personally administered questionnaire

2. Structured interview

3. Unstructured interview

For the purpose of this project, a questionnaire was designed to collect data

that consisted of close ended questions & open ended questions. A survey

technique is being used to collect the data. During the project a survey of

customers using personal interview was done at random locations in sonepat

and kurukshetra and a predetermined structured questionnaire was

administered to them. The areas covered were as following:

1.Sonepat:

(a) Kundali

(b) Bahalgarh

(c) Kharkhoda

(d) Guhana

(e) Gannaur

2. Kurukshetra:

(a) Pehowa

(b) Ismailabad

(c) Ladwa

(d) Pipli

(e) Shahabad

59

e)Sampling Plan:

* Sampling Unit

The study was restricted to sonepat and kurukshetra only.

Keeping in mind the objective of the study we sampled

dealers and retailers of each and every brand. We try to

explore out as many shops as could be possible.

*Sample Size

The sample size taken for the purpose of study was around

150 respondents from the two distt.All the respondents were

chosen randomly.

*Sampling Procedure

We try to find out almost all of the cement dealers and

retailers in the market.

*Contact Method

I personally visited most of the customers after seeking prior

appointment. Few shopkeepers due to their busy schedule or

loyalty for their brand refused to respond at all.

60

f) Analytical tools:

The data, which was collected, was summarized and

tabulated on MS-excel for further analysis. The analysis

performed was mainly comparative analysis using statistical

analytical tools. The tools that have been used are as follows:

Bar Chart

Pie Chart

Line Graph

DATA ANALYSIS & FINDINGS

Market share graph for distt.Sonepat:

61

The graph clearly shows that the Ultra Tech Cement has largest market share

in Sonepat, followed by J.K. cement and J.P. Cement.The main reason

behind this excess market share goes to the higher number of dealers of

Ultra Tech cement than other brands.J.K. Cement on the other hand is

having a good market share due to a nicely balanced supply chain of dealers

along with many retailers. All the other brands like Sri Ram and Bangur are

struggling to find market in Sonepat.

Market Share Graph for kurukshetra:

62

The graph shows that the Ultra Tech is lagging behind ACC cement in

kurukshetra.although it has a good 20% share. The credit for ACC success

goes to the no. of dealers it has in kurukshetra.Its no. of dealers is almost

double than the Ultra Tech dealers plus retailers. The possibility behind

Ultra Tech success lies at the chances of getting some more retailers.

Satisfaction level of Dealers/Retailers:

63

highly satisfied

satisfied

averagenot satisfied

highly dissatisfied0

10

20

30

40

50

60

70

highlysatisfied

satisfied average not satisfied highlydissatisfied

the graph clearly shows that most of the dealers are well satisfied with the

services provided to them by the brand they deal in. The services include

timely supply of cement, regular visits by the company officials, different

type of incentive schemes meant for the dealers etc.The other side of the fact

can be that-being loyal to their respective cement brands, the dealers didn’t

want to give a poor image of the company.i.e.they were not satisfied with

the company but responded positively.

Want to Shift to Other Brand?

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NO

YES

MAY BE

0

10

20

30

40

50

60

70

80

90

NO YES MAY BE

The graph shows that about 84% of the dealers and retailers don’t want to

shift to any cement brand other than the one in which they are currently

dealing. But the last portion of the graph i.e. MAY BE part is of crucial

importance for Ultra Tech.This portion shows the dealers who may shift to a

new brand if it proves beneficial for them. So if Ultra Tech assures them

some better services and mainly the better incentives then these can be the

new suppliers for it

The major competitor for Ultra Tech in Sonepat is J.K. Cement.The

reason behind this is the presence of more no. of retailers for J.K.

Cement.The two brands under J.K. i.e. J.K. SUPER & J.K. LUXMI

are both well established here.J.K. Provides the benefit of low cost

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and quality to the customers as compared to higher price of Ultra Tech

cement.

The competitor for Ultra Tech in Kurukshetra is ACC cement. It

seems that ACC has given more importance to Kurukshetra.It has just

4 dealers in Sonepat but in Kurukshetra it has about 12 dealers.

The total cement consumption in Sonepat is much higher than that in

Kurukshetra.The reasons behind this are construction of a no. of

malls, presence of major real estate players like ANSAL, DLF etc and

other Govt.projects in Sonepat.So Ultra Tech need to concentrate

more in Sonepat.

Ultra Tech cement lags behind other brands only at the price point. It

costs nearly 4-5 rupees higher than the other cements. This is the main

reason for some lower sales. On the other hand, customers are very

sure about the thing that Ultra Tech cement provides much better

quality.

Ultra Tech should try to increase the number of ‘MOBILE

CONCRETE HELP’ vans. These vans are the feature that no other

brand is offering. These are very popular among the local customers.

So Ultra Tech should introduce some more of these vans.

LIMITATIONS OF THE STUDY

1. The major problem of the survey was that most of the respondents

being very loyal to their brands didn’t give exact answers .like they

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didn’t talk much about what problems they are facing, what are the

different marketing schemes of the brand in which they deal etc.

2. Once we got the questionnaire filled, we need to restart the

conversation in a very generalized way and talk about the local market

conditions. Like who is the main dealer, which cement is mostly sold

in that area etc.so this survey demands a good piece of time while

talking to the respondent. Also Sonepat & Kurukshetra are both big

Distts. With a number of small towns and villages. So to complete the

survey within 2 months time seems to be a bit difficult.

3. Some of the respondents may have told their average monthly sale

more than the actual. Because all of them think that the monthly sale

attached with the market image of their shop.

4. Many of the dealers/retailers refused to answer any question atall.So

the actual figures can be somewhat different from the one that we

have found out

.

5. Being new to the Distts of Sonepat & Kurukshetra, it is quite possible

that I was unable to explore some of the dealers/retailers.

RECOMMENDATIONS

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Based upon the time spent by me in the market, usefull suggestions of the

dealers & retailers and the findings from the survey, following

recommendations can be suggested for increasing sales and effectiveness of

Ultra Tech Cement:

What matters for most of the cement buyers is the price of the cement

and then the quality. While visiting market for cement purchase, they

don’t care about which brand they are going to buy. They simply

know that X is ongoing price of the cement, if any brand costs higher

than X, they will not buy that brand. Ultra Tech Cement usually costs

4-5 Rs. Higher than the other counterparts. So the buyers, to much

extant not interested in buying Ultra Tech cement. This extra price is

the main reason behind lower sales.therefore, Ultra Tech need to take

some serious steps to reduce the selling price somehow.

The second thing is that a good percentage of buyers is still unaware

of the fact that Ultra Tech cement is the changed name of Birla

cement.Birla cement had a very good image and it is still very popular

among the customers. But people are not so much sure about Ultra

Tech cement. so Ultra Tech need to take some steps to make people

familiar with the’ Birla cement and Ultra Tech’ relation. Because this

will bring the old Birla loyal customers to Ultra Tech cement.

The number of retailers and sub dealers for Ultra Tech cement is very

less as compared to the main competitors ACC, J.K. etc.So Ultra Tech

need to be oriented in this direction. They need to increase the no. of

retailers as much as possible. Although Ultra Tech has taken a right

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step with the ‘retailer registration scheme’ to increase the no. of

retailers. but this scheme needs some improvements. For ex-margin

for the retailers can be increased, we can assure them some gifts also.

While working, I saw that the main condition for this new scheme was

that the retailer will not sell any other brand of cement. Most of the

retailers refused the scheme due to this particular reason. So Ultra

Tech needs to give them some relaxation in this case.

Many of the Ultra Tech dealers used to shop other type of building

materials along with cement, in the same shop. This should not be

permitted by Ultra Tech.Because selling of these building materials is

more profitable than cement, so the cement selling becomes less

important for these dealers. They don’t give proper attention to the

company officials and also to the various schemes of increasing sales.

This in turn brings reduced sales to the company

Ultra Tech Cement has market image of a modern cement with very

good quality. It should try to encash this image. Its mainly the

younger section of people who care about quality first and then the

price. So Ultra Tech needs to give proper attention to the youngsters.

May be, they are not the cement buyers at present but future

possibility lies with them.

Ultra Tech also should have a check on the upcoming threat of

imported cement from Pakistan. The import of cement from Pakistan

has just started and very quickly it has become successful in the

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southern markets. The main reason behind this success is the lower

price. The Pak cement brands like Lucky, Mapple Leaf and Elephant

costs 10-15 Rs. Lesser than the local Indian brands. Ultra Tech which

is already facing charges of higher price needs to be prepared for this.

Some of the Ultra Tech dealers complained that they are losing the

customers loyal to their shops, due to the high price of the cement

provided by them. So at some point, the dealers are not satisfied with

the company. This need to be taken seriously by Ultra Tech.Some

more incentive schemes should be introduced for the dealers and also

the frequency of visits from company officials need to be increased.

POSSIBLE ADVERTISEMENT METHODS

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All of the cement brands use the similar methods of advertising like-

painting walls, use banners, giving free gifts to the dealers and masons

etc.There are still many possible methods of advertisement and creating

brand awareness, which are untouched. Some of these methods are as below:

Local cable T.V. can be used for advertising as well as to give details

about the major dealer/dealers in the city. Details like address, contact

no. of the dealer, different schemes, current market price etc can be

shown.

Local F.M. stations of sonepat and Karnal are also reaching a good

part of listeners. So these can also be used for the same purpose.

Banners, paintings are used mainly on the tractor trolleys, dealer’s

shop and on walls only. We can think about using banners on

rickshaws and autos also.

Different type of incentive schemes, free gifts are mainly for dealers

and sometimes for the masons. As a change, we can also try to attract

the customers directly. For ex-discount coupons, small free gifts,

scratch cards etc can be made available for the customers.

A number of meetings are organized by all the cement companies

with the local masons. Most of the masons are very less educated.

They attend many meetings. So it may become difficult for them to

recognize a particular cement brand. What we can do in this case is to

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take help of Handvertising i.e. we need to put the Ultra Tech logo on

the hands of these masons. So that next time they saw this logo, they

found themselves a bit familiar with the company.

The ‘masons meet’ are organized by the company regularly. This

needs some improvements. We need to decrease the frequency of

these meets. What we can do is that organize a big meet with a no. of

people, higher company officials, entertainment, and snacks for all.

The presence of company officials in the meeting is not alone

sufficient. We need to call some big personalities from that city only.

The people like these masons are more impressed by the presence of

Govt.officials.

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Ultra Tech has two major competitors- J.K. CEMENT and ACC

CEMENT.

Ultra Tech is well established in the markets as far as quality is

concerned.

Introduction of new attractive incentive schemes can bring new

dealers & retailers for Ultra Tech cement.

Price is the major factor that matters for a customer while purchasing

cement

Market share increases with the increase in no. of dealers.

ANNEXURE 1

QUESTIONNAIRE

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SOLICITATION

Dear Sir/Madam, We are conducting a survey on behalf of ultra tech cement as a part of my ‘summer training project.’ I would be extremely benefited if you answer the following questions.I assure you that the information provided by you will be used for my project work only.

NAME: _ _ _ _ _ _ _ _

ADDRESS & CONTACT NO. : _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

WHICH CEMENT YOU DEAL IN: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

YOU ARE A:>DEALER>RETAILER >SUB DEALER

YOUR AVERAGE MONTHLY SALE (IN BAGS): _ _ _ _ _ _ _ _ _ _ _

HOW MUCH ARE YOU SATISFIED WITH THE SERVICES PROVIDED TO YOU BY THE BRAND YOU DEAL IN:>HIGHLY SATISFIED>SATISFIED>AVERAGE>DISSATISFIED>HIGHLY DISSATISFIED

WHAT TYPE OF PROBLEMS ARE YOU FACING WITH YOUR CURRENT BRAND(IF ANY): _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

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_ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _

WHAT ARE THE REASONS FOR SELLING THIS PARTICULAR BRAND: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

DO YOU WANT TO SHIFT TO ANY OTHER BRAND:>YES>NO>MAY BE

USEFUL COMMENTS: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

THANKS A LOT

KAPIL KUMAR

ANNEXURE 2

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76

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BIBLIOGRAPHY

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► www.cemnet.com

► www.pca.com

► www.ceicdata.com

► WWW.ULTRATECH.COM

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