MINOR PROJECT REPORT

CUSTOMER PERCEPTION ABOUT J K LAKSHMI

CEMENT

SUBMITTED TO : SUBMITTED BY:

MR. RAJEEV DAHIYA AKASH SHARMA

ASSISTANT PROFESSOR 02914901709

BBA (GEN.) 3rd SEM

MAHARAJA SURAJMAL INSTITUTE

DEPARTMENT OF BUSINESS ADMINISTRATION

RECOGNISED BY UGC, U/S 2 (F)

(AFFILATED TO GURU GOBIND SINGH

INDRAPRASTHA UNIVERSITY)

C-4, JANAKPURI , NEW DELHI-110058

CERTIFICATE

This is to certify that the project entitled “Customer Perception about J K Lakshmi

Cement” prepared by Akash Sharma has been completed under my guidelines and I am

completely satisfied with the work carried out by her. The project was successfully

carried out by Akash in partial fulfillment of BBA,

IIIrd Semester required for the award of degree of BBA of Maharaja Surajmal Institute.

Project Guide

Mr. Rajeev Dahiya

Assistant Professor

( Deptt. Of Business Administration)

2

ACKNOWLEDGEMENT

This project work , which is my first step in professionalism , has been successfully

accomplished only because of timely support of my well wishers. I would like to pay my

sincere regards to those , who directed me at every step in my project work. First of all, I

would like to express my thanks to PROF. AZAD S. CHILLAR (Director, Maharaja

Surajmal Institute) for giving me such a wonderful opportunity to widen the horizons of

my knowledge. I extend my thanks to my project guide Ms. Sumita Chadha for her

scholarly guidance, constant supervision and encouragement. It is due to her personal

interest and initiative that the project work is published in the present form. Last but not

the least, I would also like thank all the staff members of Maharaja Surajmal Institute,

friends and parents who have directly or indirectly contributed in making this project a

success, it is a tribute for their valuation. Despite all efforts I have no doubt that error and

obscurities remain that seen to afflict a working project for which I am capable.

AKASH SHARMA

Roll no.- 02914901709

BBA (Gen.) 3rd Sem.

3

TABLE OF CONTENTS

CHAPTER 1:- INTRODUCTION 2-22 Objectives

Research Methodology

Limitations

CHAPTER 2:- PROFILE OF THE COMPANY 23-25

Company’s profile

CHAPTER 3:- ANALYSIS AND INTERPRETATION 26-47 OF DATA

Competition Analysis Customer Value Analysis

CHAPTER 4:- CONCLUSION AND RECOMMENDATIONS 48-52

ANEXTURE

BIBLIOGRAPHY

QUESTIONNAIRE

4

Chapter 1: INTRODUCTION

5

INTRODUCTION

The cement industry in India has come a long way since 1914, when the first cement

plant was commissioned with a production level of 1000 tons/ annum. Today India is the

second largest cement producer in the world with a production level of about 99 million

tones (about 5% of world production ~ 2000 million tonnes). The installed capacity is

about 119 million tonnes and at an expected 10 % growth rate the production is likely to

grow to about 158.5 million tones at the end of 2006-2007.

However, cement consumption per capita in our country at about 99-kg/ capita is one of

the lowest. The world average is about 267 kg/capita.  While that of China is 450

Kg/capita. Similarly in Japan it is 631 kg/capita while in France it is 447 kg/capita. Over

the years, the growth of the industry has been uneven.  With traditionally cement deficit

regions covering the most of the major growth centers of the country. Cement plants in

our country have mostly changed from the wet process to the energy efficient dry

process. Out of 157 kilns, 117 are dry process based, 32 are based on wet process and 8

on semi dry. Though the best of our industry matches 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 of Japan) but the average performance

of the Indian industry is lagging behind. In the coming years, in order to survive and

grow in the globalize market, rapid modernization and adoption of cost effective energy

efficient and environment friendly technologies will be the prime mover for the viability

of the industry in the global canvas.

The industry should increasingly look for other cheaper fuel options like sludge from

paper plants, sugar cane trash, biogases, jute dust, textile dust, biogas refinery waste like

6

pet coke etc. The industry should be known in future as savior of the country for

sustainable development by consuming most of the industrial wastes.

Large Plants

(Large Plants means capacity more than 0.198 Mn.T. per annum)

Companies (Members) (Nos.) 54

Cement Plants (Nos.) 129

Installed Capacity (Mn. T.) 153.59

Cement Production (Mn. T.) 2004-05 127.57

Plants with Capacity of Million tones and above (Nos.)71

Manpower Employed (Nos.) Approx. 1,35,000

Turnover in 2001-02 (Mn. US$) around 6,000

Mini Plants (Mini Plants means capacity less than 0.198 Mn.T. per

annum)

Cement Plants (Nos.) 365

Installed Capacity (Mn. T.) 11.10

Cement Production (Mn. T.) 2003-04 6.00 (P)

7

Overview of the Indian Cement Industry:

Indian cement industry dates back to 1914 - first unit was set-up at Porbandar

with a capacity of 1000 tonnes

Currently India is ranked second in the world with an installed capacity of 114.2

million tonnes.

Industry estimated at around Rs. 18,000 crores (US $ 4185 mn)

Current per capita consumption - 85 kgs. as against world standard of 256 kgs

Cement grade limestone in the country reported to be 89 bt. A large proportion

however is unexploitable.

55 - 60% of the cost of production are government controlled

Cement sales primarily through a distribution channel. Bulk sales account for <

1% of the total cement produced.

Ready mix concrete a relatively nascent market in India

Price

Price fluctuations high 

Essentially determined by demand 

Prices also vary with grades

Table: Cement Prices

Rs/bag

(50kgs)

August

2005

August

2004

%Change(yoy) July 2005 %Change

(mom)

Mumbai 180 170 5.9 178 1.1

Chennai 160 160 0.0 157 1.9

Kolkata 172 174 (1.1) 167 3.0

Delhi 165 146 13.0 160 3.1

Lucknow 158 150 5.3 152 3.9

Source: Capitalineplus

The prices of cement are likely to move upward as the absence of new capacity additions

would tighten up the supply. The brown field expansions and debottlenecking of plants to

be carried out by several manufacturers would contribute marginally to the total output

and as the industry is already operating at around 90% capacity utilization, any rise from

8

here is unlikely. The result being that, the manufacturers, particularly in northern and

western regions would fall short to meet the incremental demand and this might result

into further increase in prices of retail cement.

Regional

Plants located close to limestone centres

Resulted in cross regional movement

80% of the production consumed within the states

except Madhya Pradesh

Major clusters

 Satna, MP (11.77 mntpa)

 Chandrapur, Maharashtra/ AP

(9.59 mntpa)

 Gulbarga, Karnataka/ AP (6.83

mntpa)

 Yerranguntla, AP (1.9 mntpa)

 Nalgonda, AP (5.85 mntpa)

 Bilaspur, MP (9.7 mntpa)

 Chandoria, Rajasthan/ MP

(7.03 mntpa)

 Non cluster (47.60 mntpa)

Concerns

Cement industry going through a consolidation phase in the last few years

Transportation

Transportation costs high - freight accounts for 17% of the production cost

Road preferred mode for transportation for distances less than 250kms. 

However, industry is heavily dependant on roads as the railway infrastructure is

not adequate - shortage of wagons.

Capacity additions

Acquisitions have been the mainstay of the business

Regional imbalance resulting in cross regional movement - limestone availability

in pockets has led to uneven  capacity additions

9

Capacity additions have slowed down

Industry inputs

Highly capital intensive industry

Nearly 55-60% of the inputs controlled by the government

Facing problems due to power shortage

Coal availability and quality affecting production

Mini plants realisation of revenue lower than large plants, survival difficult

Future

Demand drivers

Infrastructure & construction sector the major demand drivers. Some demand

determinants

 Economic growth

 Industrial activity

 Real estate business

 Construction activity

 Investments in the core sector

Future

Signs of a revival

growth in the housing sector

central road fund established for national  highways and

railway over bridges to provide the necessary impetus

expansion plans, greenfield projects on the anvil

Demand - supply balance expected in the next 12 - 15 months

Higher capacity utilisation likely in the future

Encouraging trend in demand due to pick-up in rural housing demand and

industrial revival

10

Industry likely to grow at 8-10% in the next few years

11

INDUSTRY PROFILE

Cement is a key infrastructure industry. It has been decontrolled from price and

distribution on 1st March 1989 and deli censed on 25th July 1991. However, the

performance of the industry and prices of cement are monitored regularly. The

constraints faced by the industry are reviewed in the infrastructure Coordination

Committee meetings held in the Cabinet secretariat under the Chairmanship of Secretary

(Coordination). The Cabinet Committee on infrastructure also reviews its performance.

HISTORY

Portland cement, the basic ingredient in concrete, was first produced and patented in

1824 by a British stonemason. Cement is the basic ingredient of concretes and mortars

Cements is an artificial hydraulic binder that binds the particles of sand and aggregates

together, Cement, first developed in the early 19th century, and today stands as the second

biggest consumer product in the world, just after water.

The Invention of Cement

1817 – A historical year

The year 1917 considered being the starting point for the revival of the construction

industry. It was early in the 1800’s that Louis Vicat (1876 – 1861) a young, 22 year old

civil engineer conducted work on the hydraulically of the “lime-volcanic ash” mixture.

This blinder, which had been used since Roman times, remained the only material known

to set in contact with water.

Louis Vicat was the first person to accurately determine the proportions of limestone and

silica required to make the mixture, which was then fired at a given temperature and

crushed to obtain an industrializable hydraulic binder—artificial cement Louis Vicat

published the results of his research, but did not take out a patent. By refining the

composition of the cement developed by Louis Vicat, the Scotsman Joseph Asdin (1778 –

1855) succeeded in patenting slower-setting cement in 1824. He called this new cement

Portland cement due to the fact that in appearance and hardness, it was similar to the

upper Jurassic rock found in the region of Portland, in southern England.

12

In France, the first cement plant was opened in 1846 in Boulogne-sur-Mer, et the very

first cement was produced in pouilly, in Burgundy Lafarge started making cement in

1868, at the Le Test site in Ardeche, where it had been mining the limestone deposits

since 1833 to produce lime. However, the cement industry truly took when new

manufacturing tools were created, such as the rotary kiln and the ball mill. As it was, in

1870, a took nearly 40 hours to produce one ten of clinker which today can be made in

just three minutes.

COMPONENT OF INDUSTRY

Key stages in cement production

Cement production is one of the world’s most energy intensive industries. Key

production stages can be summarized as.

Key stages in cement production

Cement production is one of the world’s most energy intensive industries. Key

production stages can be summarized as

1. Raw materials

These are generally combinations of limestone, shells or chalk, and shale, clay sand or

iron ore, usually mined from a quarry close to the plant where they undergo reduction

using primary and secondary crushes. When the reduced materials reach the cement plant

they are proportioned to create a cement of specific chemical composition. Much work is

being done on the use of alternative raw materials o often the by-products of other

industrial processes. These can minimize the effects of quarrying reduce the impact of the

cement plant on the local environment and enable the cement industry to become a major

player in materials recycling.

There are two basic methods used in Portland cement production –wet and dry. In the dry

process dry materials are proportioned, ground to a powder, blended and fed into the kiln

dry. The wet process involves adding water to the proportioned raw materials and

completing the grinding and blending operations in slurry form.

2. Pre-heater

13

To conserve energy, most modern cement plants pre-heat raw materials before they enter

the kiln, using the hot exhaust gases from the kiln itself.

3. Kiln

The mixture of raw materials is fed into the upper end of a rotating, cylindrical kiln,

which achieves temperatures in excess of 10000C. It passes through at a rate controlled by

the slope and rotational speed of the kiln. Chemical reaction inside the kiln leads to the

fusion of the raw materials to produce clinker. Traditionally kiln fuels have been

powdered coal or natural gas, but increasingly alternative fuels are being used. These

include materials such as scrap tyres, processed sewage sludge and packing waste.

4. Cooling / finish grinding

Clinker is discharged from the lower end of the kiln and transferred to various types of

coolers. Cooled clinker is combined with gypsum and ground to a fine powder in a ball

mill to produce the final grade cement.

WORKING OF INDUSTRY

Cement is a hydraulic binder. That means it is a material that sets and hardens when

mixed with water. Cement is made up from clinker, the result of the chemical

combination at very high temperature of the constitutive elements of limestone and clay.

It is obtained after a burning process (clinker preparation) and the grinding with additives

to optimize the setting time and mechanical characteristics.

The quarry:

The raw materials that go into the production of cement, primarily limestone and shade,

are extracted from the quarry blasting. They are then crushed and transported to the plant,

where they stored and homogenized.

Raw, Grinding and Burning:

Very fine grinding provides a fine power known as raw meal, which is then pre-heated

and then enters the kiln. Flames reached temperatures of 2000oC heat the material to

14

15000C before drastically cooling it by all blasts. The burning process produces cement

clinker, the basic material required for the production of all cement.

Cement, Grinding and Shipping:

Clinker ad gypsum are finely ground together to obtain a “pure cement” Secondary

Constituents are also added to make blended cements. Lastly, the finished products are

also added to make blended cements. Lastly, the finished products are stored in large

silos from where they are dispatched in bulk, or in bags to where they will be used.

15

INDIAN CEMENT INDUSTRY

Cement industry is one of the main beneficiaries of the infrastructure boom. While on the

one hand several big and small cement companies are actively considering expansion

plans in anticipation of further growth in demand for cement, on the other, a phase of

acquisitions and mergers among the existing players is also not being ruled out in the

immediate future. The present scenario of cement industry is very good in terms of

demand and with the prices going above Rs 160 to Rs 180 everywhere. Most importantly,

the gap between the demand and supply does not exist any longer in any part of the

country. Domestic consumption with 11 per cent increase and exports keeping up with

the last year levels, the Indian cement industry is expected to cross 150 million tonnes in

dispatches, including domestic consumption, and exports during 2005-06 from all plants

put together, including mini cement plants. Mini cement plants everywhere are operating

at 100 per cent capacity utilisation. The margins are improving in line with others.

Cement consumptions are as follows: South 30 per cent (26 per cent), East 17 per cent

(17 per cent), North 20 per cent (21 per cent), Central 16 per cent (17 per cent), and West

18 per cent (20 per cent). Earlier in 2004-05, the housing sector alone consumed 65 per

cent of the total domestic consumption. With the launch of several infrastructure projects,

the housing consumption may come down to 55 per cent as the infrastructure and other

sectors are expected to move up to 45 per cent from the present 35 per cent.

Still, the main sector of consumption continues to be housing, including commercial

space, occupying more than 60 per cent. The current demand in the state for 2005-06 is

expected to cross 15 million tonnes (11.5 million tonnes). We expect the demand here to

go past the 17.5-million mark in 2006-07 in view of irrigation and infrastructure projects

being taken up in the state.

By 2008, about 21.5 million tonnes capacity is expected to be added by expansions. This

year’s domestic demand will be 140 million tonnes. Now that the GDP is expected to

grow to 8 per cent, growth in the cement consumption is also expected to remain above

12 per cent per year. This means, we need an additional 50 million tonnes for the next

16

three years. So, it clearly shows that the proposed expansions will not impact the

margins.

The Indian cement industry is 70 years old. Some of the latest installations are the best in

the world. Unlike in the past, today the best technology is available for mini cement

 

17

MAJOR PLAYERS AND THEIR MARKET SHARE

· Associated Cement Companies

· Gujarat Ambuja Cements

· Ambuja Cement Eastern

· Ambuja Cement Rajasthan

· Birla Corporation Ltd.

· Chettinad Cement

· Dalmia Cement

· Jaiprakash Industries

· JK Udaipur

· Mangalam Cements

· Mysore Cements

· Narmada Cements

· Panyam Cements

· Saurashtra Cements

· Shree Cements

· Shri Vishnu Cements

· India Cements

· Grasim

· Madras Cements

· Larsen & Toubro

· Century Textiles

· Raymond

· Priyadarshini

· Prisim Cement

18

DOMESTIC MARKET SHARE OF MAJOR BRANDS

19

OBJECTIVES

Objective is to study the perception that JK Lakshmi cements is able to create in the

minds of the customer.Other objectives to accomplish are:

Influence of Advertisements on preference for a particular cement selection.

Assess the scores of J.K Lakshmi on the various services cape elements.

Relationship if any between Brand name and other servicescape variables (like

facilities provided)

The contentment level of customers after usage of cement

20

RESEARCH METHODOLOGY

Exploratory Research:

This Approach is used for discovering the general nature of a problem, the

possible decision alternative and relevant variable that need to be considered. This

methodology was extensively used in the project that related to gathering all the

information from the Dealers and also the final Customers of the various other

companies and finding out their experience. The required information was

gathered by visiting various construction sites.

Descriptive Research:

The purpose of this approach is to provide an accurate snapshot of some aspect of the

market environment. It is focused on the description of the variables in the problem

model. The project mainly involved knowing impact of consumers buying behaviour of

Cement. A questionnaire was designed keeping in mind the various aspects regarding

consumers and a sample was selected.

Casual Research:

This research attempts to specify the nature of the functional relationship between two or

more variables in the problem model.

This research was used in my project where I tried to describe the relationships between

all the variables in our questionnaire.

Sources of Data

Primary Data:

Calling up and working collected the primary data on the secondary data provided by the

company. Since in most of the cases, the company data had become Obsolete, the recent

data was collected by following up on the given data and that became the primary data

that was required.

Secondary Data:

21

We used the local company data base together the addresses and the contact numbers,

which served as the Secondary data. It helped in getting a general idea about the work I

am going to do.

Sample Size

For the project to find out the Customer Perception about Cement, the sample size had to

be 100

Sample Area

Delhi.

LIMITATIONS

1. The sample was collected using sampling techniques. As such result may not give an

exact representation of the population.

1. Most of the data being secondary can be biased towards the company.

3. Shortage of time is also a reasonn for incomprehensiveness.

4. Most of the information was taken from secondary sources being based on previously

printed data.

22

CHAPTER 2: PROFILE

OF THE COMPANY

23

COMPANY PROFILE

JK Lakshmi Cement Limited

The Group's principal activities are to manufacture and market cement in India. JK

Lakshmi Cement Ltd. is part of the prestigious JK Organization. It has one of the largest

single location cement plants in India and a track record of consistency in growth. A

forerunner in providing customer delight in the area of construction inputs, it has been

creating excellent opportunities for all its stakeholders. They are one of the Top 10

Companies as per the recent TNS-Mercer-BT Survey on "Best Companies to work for in

India" in areas of employee engagement and HR effectiveness.

JK Lakshmi Cement Ltd., formerly JK Corp, is a multi-business entity with interests in

strawboard, paper, cement, polyester fiber, audio magnetic tapes and others. The

Company's paper division was merged with another group company, Central Paper Mills,

to form JK Paper. Subsequent to which the core business has been in cement, along with

a financial holdings division. Lakshmi Cement is the cement division of the Company.

Lakshmi Cement has acquired the technology from M/S Blue Circle Industries, PLC of

the United Kingdom and the equipments from M/S Fuller International of America. The

annual installed capacity of the two plants at Jaykaypuram in Sirohi district of Rajasthan

is three million tons.

J K Lakshmi Cement has reported a major jump in net profits for the quarter ending in

March, 2006. During the quarter, the company reported a 104.84% rise in profits from

Rs 115.7 million to Rs 237 million. Sales for the quarter rose 42.81% to Rs 1,797.8

million compared with the corresponding quarter, a year ago.

Operating margins increased to 19.27% during the quarter, a rise of 1,476.17 basis points

compared with the corresponding quarter.  Net margins, on the other hand, rose from

8.99% to 13.08% during the quarter.

24

As atMarch,

2006(3)

March,

2005(3)%Change

 Rs.

million

Rs.

million 

Sales of

Products/Services1797.80 1258.90 42.81

Other Income 13.70 28.10 -51.25

Total Income 1811.50 1287.00 40.75

Total Expenses 1298.20 1087.50 19.37

Stock Adjustments 0.00 0.00  

OPBDIT 499.60 171.40 191.48

Operating

Margin(%)19.27 4.51

1476.17

bp*  

Interest 119.50 10.80 1006.48

Depreciation 153.10 114.60 33.60

ExtraOrdinary

Items0.00 15.70 -100.00

Prior Period

Adjustments0.00 0.00  

Provision for Tax 3.70 4.30 -13.95

After Tax Profit 237.00 115.70 104.84

Net Margin(%) 13.08 8.99 409.32 bp*

EPS in reported

Period (Rs.)4.76 2.09 127.75

25

CHAPTER 3 ANALYSIS

AND INTERPRETATION

26

INDUSTRY ANALYSIS

The Indian cement industry with a total capacity of 151.2 million tonnes (including mini

plants) in March 2003 has emerged as the second largest market after China, surpassing

developed nations like the USA and Japan. Per capita consumption has increased from 28

kg in 1980-81 to 110 kg in 2003-04. In relative terms, India’s average consumption is

still low and the process of catching up with international averages will drive future

growth. Infrastructure spending (particularly on roads, ports and airports), a spurt in

housing construction and expansion in corporate production facilities is likely to spur

growth in this area. South-East Asia and the Middle East are potential export markets.

Low cost technology and extensive restructuring have made some of the Indian cement

companies the most efficient across global majors. Despite some consolidation, the

industry remains somewhat fragmented and merger and acquisition possibilities are

strong. Investment norms including guidelines for foreign direct investment (FDI) are

investor-friendly. All these factors present a strong case for investing in the Indian

market. India is the second largest cement producing country in the world. Cement

demand in the country grows at roughly 1.5 times the GDP growth rate. The industry had

a turnover of around US$ 7.8 billion in 2003-04 and according to CRISIL is expected to

grow at a CAGR of around 7 per cent in the next five years. The demand for cement is

closely related to the growth in the construction sector. Consequently, cement demand

has been posting a healthy growth rate of around 8 per cent since 1997-98, propelled by

the increased thrust on infrastructure development, and the higher demand from the

housing sector and industrial projects. This trend is likely to continue in the coming

years.

The cost advantage

The Indian cement industry has undergone vital changes though technological

upgradation in the pursuit of cost efficiency and the drive for consolidation.

Modernisation at the plants and the improvement of plant processes have helped reduce

manpower requirements. The Indian business group, Grasim, is amongst the top ten

companies in the world. Indian major, Gujarat Ambuja is one of the most cost efficient

27

firms in the world. Most Indian cement majors in fact compare favourably to the world

cement majors in terms of profitability.

Cement - Varieties and Technology

There are different varieties of cement based on different compositions according to

specific end uses, namely, Ordinary Portland Cement, Portland Pozzolana Cement, White

Cement, Portland Blast Furnace Slag Cement and Specialised Cement.

The basic difference lies in the percentage of clinker used.

• Ordinary Portland Cement (OPC):

OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent gypsum

and other materials. It accounts for 70 per cent of the total consumption.

• Portland Pozzolana Cement (PPC):

PPC has 80 per cent clinker, 15 per cent pozolona and 5 per cent gypsum and accounts

for 18 per cent of the total cement consumption. It is manufactured because it uses fly

ash/burnt clay/coal waste as the main ingredient.

• White Cement:

White cement is basically OPC - clinker using fuel oil (instead of coal) with an iron oxide

content below 0.4 per cent to ensure whiteness. A special cooling technique is used in its

production. It is used to enhance aesthetic value in tiles and flooring. White cement is

much more expensive than grey cement.

• Portland Blast Furnace Slag Cement (PBFSC):

PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent

gypsum and accounts for 10 per cent of the total cement consumed. It has a heat of

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

similar massive constructions.

• Specialised Cement:

Oil Well Cement is made from clinker with special additives to prevent any porosity.

• Rapid Hardening Portland Cement:

Rapid Hardening Portland Cement is similar to OPC, except that it is ground much finer,

so that on casting, the compressible strength increases rapidly.

28

• Water Proof Cement:

Water Proof Cement is similar to OPC, with a small portion of calcium stearate or non-

saponifibale oil to impart waterproofing properties.

Usage pattern

The end-users of the cement industry include housing, infrastructure and corporate

segments. While government demand (for infrastructure) accounts for around 25 per cent

of the total demand, the share of the housing sector accounts to more than 50 per cent of

the total cement.

Deconstructing costs

Energy (including the landed cost of coal), freight and limestone costs are the major cost

components of the cement industry. These costs account for around 35 per cent, 22 per

cent and 9.5

per cent of the total production costs respectively. Indian cement companies have been

able to curtail costs through the setting up of captive power plants. There has been a

decline in the average coal consumption from 0.18 tonnes per tonne of cement to 0.17

tonnes per tonne due to pyroprocessing systems, increased usage of imported coal (with

higher calorific value) and the higher production of blended cement. The switch from the

wet process to the dry process of cement manufacturing has also aided in saving energy

costs.

29

Regional dimension

Transporting cement, a bulk commodity, it over long distances is uneconomical. This has

resulted in cement being largely a regional play with the industry divided into five main

regions. north, south, west, east and the central region. The southern region accounts for

the largest share in overall production (29 per cent) due to the vast availability of

limestone. This is followed by the northern (21 per cent) and the western regions (19 per

cent).

Regional consumption

Cement consumption varies across regions due to the differences in the demand-supply

balance, per capita income and the level of industrial development in each state. In 2003-

04, northern India accounted for the highest proportion of cement consumption (32 per

cent), followed by the southern (28 per cent), western (25 per cent) and eastern regions

(15 per cent). Over the years it has been observed that demand in the east has been driven

by the housing sector, whereas infrastructure, investments in industrial projects and the

housing sector (in varying proportions) have propelled demand in the western, northern

and southern regions. The western and northern regions are the most lucrative markets

due to their higher price realizations.

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.

There are three types of processes to form cement - the wet, semi-dry and dry processes.

In the wet/semi-dry process, raw material is produced by mixing limestone and water

(called slurry) and blending it with soft clay. In the dry process technology, crushed

limestone and raw materials are ground and mixed together without the addition of water.

30

The dry and semi-dry processes are more fuel-efficient. The wet process requires 0.28

tonnes 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. 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).

Technological development in the future indicates a tremendous scope for waste heat

recovery for co-generation of power, use of industrial by-products as a raw mix

component, incineration of combustible wastes in kiln, production of reactive belite

clinker, increasing manufacturing of blended cements, use of energy efficient

equipment/systems as well as the use of solar and wind energy in order to reduce the

carbon dioxide emission level.

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 tonnes and produced 4.77 million metric tonnes of cement in 2003-

04. The company has two plants in Madhya Pradesh and Rajasthan and one each in West

31

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.

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 tonnes with a total cement production of 5.43 million tonnes in 2003-04.

CTIL has four plants that manufacture cement, one in Chhattisgarh, 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 fibre (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 tonnes. Grasim (with UltraTech) held a

market share of around 21 per cent in

2003-04. It has plants in Madhya Pradesh, Chhattisgarh, 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 fibre business. Its also plans to focus on

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

1,70,000 tonne 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.

Gujarat Ambuja Cements Ltd (GACL)

32

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,

Chhattisgarh, 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 tonnes in 2003-04. Gujarat Ambuja is

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 tonnes 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 tonnes 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 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 tonnes 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

tonnes through the modernising of the existing units and the commissioning of a new

33

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.

Madras Cements

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

a part of the Ramco group. The company is engaged in cement, clinker, dolomite, dry

mortar mix, limestone, ready mix cement (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 tonnes 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 tonnes to 3.4 million tonnes through an investment of US$ 9

million.

Foreign players

Holcim

Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million

tonnes. 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 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

34

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 tonnes 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 tonnes and a clinker capacity of 3 million tonnes 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.

35

SURVEY RESULTS

Market Share of Major Brands in Delhi as per the Dealer Survey:

ACC Gujarat

Ambuja

Sri

Ram

Bangur J.P.

Buland

J.K

Laxmi

Binani J.K.

Super

Shree Birla

21 24 20 2 2 5 4 7 5 10

36

ANALYSIS FOR USER

Q.1 Which cement you are using?

Findings: Some of the popular brands used by end users are:

Gujarat Ambuja

ACC

Birla Plus

Shree Cement

Binani

J K Lakshmi

And other smaller Brands

As far the raking is concerned the best Cement as ranked by users is:

37

Gujarat Ambuja followed by ACC. Shree Cement and Birla Plus follow the above major

brands. J K Lakshmi though is ranked after these brands but has a considerable market

share.

Are you satisfied with the cement you are using currently?

Yes No. Can’t Say

95 5 -

Findings: 95% respondents were satisfied with the present brand of cement they were

using.

38

Q.2 Why are you buying above answered cement? Rank them.

Findings: The most important reason for buying a particular brand of cement was the

Brand name, followed by quality and price.

39

Q.3 What influences your buying decision? Rank Them.

Findings: The most important influencer in purchase of Cement is the mason and the

Contractor. The Advertisements influence the purchase a lot. In some cases the Cement

Dear also influences the purchase. The least influencer as per respondents are friends and

relatives.

40

Q4. If, advertisements then which medium has greater effect on you while buying

cement? Rank Them.

Findings: The most important advertisement medium that influence in purchase of

Cement is T. V., followed by Wall Mounting and Hoardings. The Newspaper and

Magazine & Radio Advertisements have the lowest influence on the purchase.

41

Q.5 Rank the following cement companies on the visibility.

Findings: ACC and Gujarat Ambuja are the major selling brands in the market.

42

Q6 On what technical specification do you buy cement? Rank them.

Setting Time Strength Colour Anti Corrosion

Findings: the most important factor for the purchase of cement is the setting time and the

strength.

43

Q.7 Does packaging of cement bags attract you while buying?

Yes No. Can’t Say

85 15 -

Findings: Packing of the cement i.e. cement bags affects the purchase. Because packing

helps in good storage of cement and protects it from getting hard due to water. So for

people buying cement for bigger construction cement packaging is important.

44

Q.8 Are you aware of JK Lakshmi cement?

YES NO

86 14

Findings: Most of the respondents were aware of the J K Lakshmi brand of cement.

45

Q.9 What brand image you perceive about JK Lakshmi?

Very Good Good Average Poor

- 67 33 -

Findings: The general perception about the J K Lakshmi brand that it’s a good brand and

for some people it’s an average brand.

46

ANALYSIS

1. The most popular brands in the market are ACC and Gujarat Ambuja. J K

Lakshmi has a substantial presence in the Delhi market but it is marginal in

comparison to the major brands.

2. Most of the respondents were satisfied with the present brands of cement they

were using. But the most important factor that was interpreted after the survey and

that influences the purchase of cement is the brand name and the quality.

3. The main influencer in the purchase of Cement is Mason, Contractor and

Advertisements. T.V. Ads and wall Mounting and Hoardings influence the most.

4. The setting time of cement and strength are the most important technical

specifications of cement.

5. Packaging of cement is important in the purchase of cement.

6. The brand image of the J K Lakshmi cement is good and it has good brand

awareness.

47

CHAPTER 4:

CONCLUSION AND

RECOMMENDATIONS

48

CONCLUSION AND RECOMMENDATIONS

J K Cement Ltd (JKCL) is one of the largest cement manufacturers in north India and the

second largest white cement producer in the country. The company has two grey cement

plants in Rajasthan, with production capacities of 2.8 million tonnes and 0.75 million

tonnes per annum, respectively, and a white cement plant in Rajasthan with a capacity of

0.30 million tonnes per annum.

In the northern region, it commands a 13% market share for grey cement. JKCL holds

leadership position in Haryana, with a market share of 18.4% (nine months ended

December 2005). Its other markets are Delhi, Rajasthan and Punjab, where it ranks

among the top six players.

JKCL’s cement manufacturing facilities and operations were originally owned and

operated by JK Synthetics (JKSL), which had two businesses: man-made fibre and

cement. In 1990s, the man-made fibre division accumulated losses while the cement

division was still profitable. Under the rehabilitation scheme, JKSL’s cement division

was demerged into JK Cement from November 4, 2004.

Leading player in the northern India grey cement market

JKCL is concentrated in the northern region and is among the top five players. Northern

india is biggest market accounting for nearly 35% of the total consumption in the

country. Northern Indian cement manufacturers have consistently operated at  high

capacity utilization levels compared to the other four regions. Based on capacity

expansion plans announced in the northern region and the government's thrust on

infrastructure development, demand for grey cement is likely to remain strong in the

medium term. Being the fourth largest player in the region, JKCL is well positioned to

capitalize on the positive demand scenario for grey cement and can look forward to

sustained growth in its revenues.

Second largest white cement producer in India

White cement industry in india is highly concentrated with two large players accounting

for substantial majority of India's production capacity. JKCL is the second largest player

in white cement industry with white cement contributing about 16.6% of its cement

49

revenue in FY05 and 15.5% for half year ended September 2005. Prices of white cement

have been relatively less volatile and it has contributed 35.2% of the adjusted EBITDA in

FY05. The company with its position as the second largest producer of white cement in

India is optimally positioned to take advantage of the upturn in the infrastructure

industry.  

Cost savings due to proximity to large reserves of high quality limestone

JKCL has access to large reserves of limestone for both  grey and white cement

operations, which would be sufficient to sustain its  current and planned capacity. for

both grey and white cement. The manufacturing plants are located in close proximity to

the limestone reserves and this results in savings in transportation costs. 

Extensive marketing and distribution network

JKCL has a wide distribution network for grey cement in Northern India, and a strong all-

India distribution network for white cement. It has 66 feeder depots and more than 4,000

retail stores that stock its grey and white cement products. The strength of its distribution

network and its relationship with dealers enable JKCL to distribute its products widely

and effeciently.

Investment Concerns

High debt burden and interest cost

JKCL has a debt to the tune of Rs 620 crore and interest burden for the same is Rs 28.46

crore, which is almost 7% of the turnover of the company. Profitabilty and cash flow will

have to show robust growth if the company has to cut down on its substantial debt

burden.

Sizeable receivables from a group company can affect profitability and cash flows

J K  Synthetics Ltd (JKSL) owes JKCL Rs 62 crore, the recovery of which is doubtful.

This is likely to be a negative and drag on the earnings and cash flows of JKCL. 

Capacity build up in Northern region to reduce demand supply gap

By FY08, a capacity build up of 8-10 million tonnes is expected in the northern region.

50

This is likely to reduce the demand supply gap and thereby putting pressure on the price

of cement in the region. JKCL, which is installing captive power plants to reduce its

power cost would be able to realise power cost savings only in FY08. The savings in

power cost are likely to be neutralised by the pressure on prices due to the capacity build

up by FY08. The expected increase in profit due to savings in power cost may not

materialise to the extent expected.

Financials

JKCL reported sales of Rs 406 crore for H1FY06 and a net profit of Rs 8.4 crore. For

FY05, JKCL reported a sales of Rs 329.3 crore and a net profit of Rs 6.29 crore. The

operating margin for FY05 stood at 13.6% and the net profit margin stood at 1.9%. Due

to the recent upturn in the cement cycle, the cement prices have risen significantly and

JKCL has been able to show a higher operating margin. JKCL's high interest burden is a

drag on its profitabilty and the company has a low net profit margin of 1.9%. Any decline

in the cement prices can impact the margins of the company and with JKCL's low net

profit margin, it is a major cause for concern. JKCL is not likely to see any significant

volume growth in the future and its earning growth will be dependent on getting better

price realisation and saving in power cost that are likely to come only in FY08.

Valuation

JKCL is investing in captive power plants to reduce its power costs. The power projects

would take 18-24 months to be completed and the benefit of cost reduction will only be

visible in FY08. JKCL's issue price on the basis of price band is available at a discount of

almost 8-14% to the current market price of Rs 170 and is trading at a TTM PE of 47.7.

TTM PE for the cement - north sector is 29. Though the issue seems to be costly,

investors can subscribe to the issue as the stock is available at a discount to its prevailing

market price to get listing gains.  

After analyzing all the data I had collected during the project, I reached on conclusion

that despite of the fact that the product J K lakshmi is the cement with maximum strength

51

in India has a very low market share and its position in the market is also not satisfactory.

Company should try to reposition the product in the market.

Following are the recommendations I would like to give:

More advertising of the product should be done to make the product known in the

market.

1. Company representatives should at least visit those retail shops which are selling

other Cement products and convince them for selling J K Lakshmi also.

2. Company should come up with some more promotional schemes through which

wholesalers can be motivated for selling J K Lakshmi Cement.

3. There should be some scheme for retailers also because all the schemes company

launched were either for wholesalers or customers.

4. It should be mentioned in the advertisements that this is the cement with

maximum strength in India.

5. Company should organize some conference for retailers where all of them can be

briefed about the product.

6. Company should also try to reach building contractors and engineers.

7. And last but the most important possible there should be a reduction in price at

least for some time till the product gains some market.

52

Bibliography

www.cma.org

www.jklakshmicement.com

www.adityabirla.com

www.google.com

www.indianfoline.com

www.yahoo.com

www.lafarge.com

www.investrajasthan.com

Marketing Management: Philip Kotler

Company Literature

53

QUESTIONNAIRE

1. Which cement you are using?

(a) Ambuja

(b) JK Lakshmi

(c) Birla Plus

(d) ACC

(e) Shree

(f) Binani

2. Why are you buying above answered cement? Rank them.

(a) Price

(b) Quality

(c) Services

(d) Easy Availability

(e) Brand Name

3. What influences your buying decision? Rank Them. Are you satisfied with the cement

you are using currently?

(a) Yes (b) No (c) Can’t Say

54

4.If advertisements then which medium has greater effect on you while buying cement?

Rank Them.

(a) T.V.

(b) Newspapers/Magazines

(c) Hoardings

(d) Wall Paintings

(e) Radio

5. Rank the following cement companies on the visibility.

(a) Shree

(b) Binani

(c) Birla Plus

(d) JK Lakshmi

(e) Ambuja

(f) ACC

6.On what technical specification do you buy cement? Rank them.

a. Setting Time

b. Strength

c. Colour

d. Anti Corrosion

55

7.Does packaging of cement bags attract you while buying?

(a) Yes (b) No (c) Can’t Say

8.Are you aware of JK Lakshmi cement?

(a) Yes (b) No

9. What brand image you perceive about JK Lakshmi?

(g) Very Good

(h) Good

(i) Average

(j) Poor

56