INTRODUCTION

WHAT IS CEMENT?

1

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.

2. Portland Pozolona Cement (PPC):

2

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 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,

3

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.

INDIAN CEMENT INDUSTRY-AN OVERVIEW

4

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 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.

5

Structure of the industry

6

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 tons and produced 4.77 million metric

tons 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.

7

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

8

(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)

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

commercial production at its 2 million tone 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 tone and plants in Andhra Pradesh and Tamil Nadu.

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

9

of 6.36 million tons 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 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

10

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

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:

11

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 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

12

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.

Two players call all the shots;

13

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 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

14

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 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

15

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 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;

16

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.

State wise Capacity

17

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

18

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);

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

Chhattisgarh); and

Central (Uttar Pradesh and Madhya Pradesh).

Northern Region

Punjab2173.34

Delhi500.00

Haryana172.00

Himachal Pradesh4060.00

Rajasthan16299.34

J&K200.00

TOTAL23404.68

West

Maharashtra8950.00

19

Gujarat

12937.00

TOTAL21887.00

South

Tamil Nadu12913.18

Andra Pradesh19831.02

Karnataka9744.00

Kerala420.00

TOTAL42908.20

East

Bihar1000.00

Orissa2761.00

West Bengal2291.66

Assam Meghalaya400.00

Jharkhand3475.01

Chattisgarh11287.33

TOTAL21215.00

Central

U.P.6297.00

20

M.P.

16185.00

TOTAL20482.00

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

21

Companies invariably hire agents or transport cements to own or government

warehouses either via roadway or railways. In case 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

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.

22

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.

23

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 from the smallest proportion of overall 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 labor employed is essentially semi-skilled

excluding the top management which bring down labor costs.

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.

24

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):

25

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

decontrolling the cement industry, the government relaxed the forces of 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

26

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 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.

27

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 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.

28

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.

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.

29

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.

30

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.

31

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.

32

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.

33

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).

34

INTRODUCTION

ULTRA TECH CEMENT

35

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.

36

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

37

2002

::

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

38

2006

Narmada Cement Company Limited amalgamated with UltraTech 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.

39

Details of units:

PLANT/UNIT KILN CAPACITY(tpd)

CAPACITIES(million tpa)

A. Composite integrated

Plants.

1. AndraPradesh Cement Works.

8000 2.3

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

40

7. Jharsuguda cements works

- 0.8

8. Narmada cement (Ratnagri) Works

- 0.4

9. Narmada cement(Magdala)

- 0.7

10. West-Bengal cement workers

- 1.0

TOTAL - 17.0

THE ULTRA TECH ADVANTAGE

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.

41

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 )

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

42

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 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.

43

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

44

AWARDS FOR ULTRA TECH

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 1999 Capexil 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

45

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

1994-95 Special 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:

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

2001-2002 Greentech 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:

46

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

47

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 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

48

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

49

OBJECTIVE OF THE STUDY

50

Primary objective:

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

in Sonepat and Kurukshetra distt. Of Haryana.

Secondary objectives:

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.

51

RESEARCH METHODOLOGY

52

(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 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.

53

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 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

54

(b) Bahalgarh

(c) Kharkhoda

(d) Guhana

(e) Gannaur

2. Kurukshetra:

(a) Pehowa

(b) Ismailabad

(c) Ladwa

(d) Pipli

(e) Shahabad

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

55

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.

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

56

SWOT ANALYSIS

A SWOT analysis focuses on the internal and external

environments, examining strengths and weaknesses in the

internal environment and opportunities and threats in the

external environment.

57

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

58

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.

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

 

59

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

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

the country is estimated to be over 10 million tonnes 

60

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.

61

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

62

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.

63

64

LIMITATIONS OF THE STUDY

65

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 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

.

66

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

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

67

DATA ANALYSIS & FINDINGS

68

Market share graph for distt.Sonepat:

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.

69

Market Share Graph for kurukshetra:

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.

70

Satisfaction level of Dealers/Retailers:

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.

71

Want to Shift to Other Brand?

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

72

Do you have any exclusive distribution pack with the company?

The graph shows that about 80% of the dealers and retailers are satisfied with

the current pack. But the last portion of the graph i.e. NO part is of crucial

importance for Ultra Tech.This portion shows the dealer that they want a

exclusive distribution pack. So if Ultra Tech assures them some better services

and mainly the better exclusive distribution pack then these can be the new

suppliers.

73

Do the company is following the policy of exclusive policy in your area?

The graph shows that about 65% of the dealers and retailers are satisfied with

the current policy. But the last portion of the graph i.e. NO part is of crucial

importance for Ultra Tech.This portion shows the dealer that they want a

exclusive policy. So if Ultra Tech assures them some better services and mainly

the better exclusive policy then these can be the new suppliers.

74

Do you have conflicts with co-distributer regarding the sales price of

the cement?

The graph shows that about 75% of the dealers and retailers are satisfied with

the current sale price. But the last portion of the graph i.e. NO part is of crucial

importance for Ultra Tech.This portion shows the dealer that they want a

exclusive price pack. So if Ultra Tech assures them some better services and

mainly the better exclusive price pack then these can be the new suppliers.

75

Is the company is providing you the detailed technical aspect of the

cement, so that you can satisfy the customer question?

The graph shows that about 80% of the dealers and retailers are satisfied with

the detailed technical aspect o the cement. But the last portion of the graph i.e.

NO part is of crucial importance for Ultra Tech.This portion shows the dealer

that they want more detailed information. So if Ultra Tech assures them some

better services and mainly the better exclusive distribution pack then these can

be the new suppliers.

76

What types of promotional support are provided to you by the

company?

The graph shows that about 45% of promotion is done by advertisement,20%

are by publicty,20%by sales promotion and 10% are by events the dealers and

retailers are satisfied with the current promotion. Still Ultra Tech assures them

some better services and mainly the better promotional distribution pack. So

that these can be a new suppliers.

77

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 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.

78

RECOMMENDATIONS

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

dealers & retailers and the findings from the survey, following

79

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

80

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

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

81

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 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.

82

POSSIBLE ADVERTISEMENT METHODS

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.

83

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 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.

84

CONCLUSION

85

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.

86

ANNEXURE

87

ANNEXURE

QUESTIONNAIRE

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.

1) NAME: _ _ _ _ _ _ _ _

2) ADDRESS & CONTACT NO. : _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

3) WHICH CEMENT YOU DEAL IN: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

88

4)YOU ARE A:

>DEALER

>RETAILER

>SUB DEALER

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

6) HOW MUCH ARE YOU SATISFIED WITH THE SERVICES PROVIDED TO YOU BY THE BRAND YOU DEAL IN:

>HIGHLY SATISFIED

>SATISFIED

>AVERAGE

>DISSATISFIED

>HIGHLY DISSATISFIED

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

89

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

9) DO YOU WANT TO SHIFT TO ANY OTHER BRAND:

>YES

>NO

>MAY BE

10)Do you have any exclusive distribution pack with the company?

>YES

>NO

11) Do the company is following the policy of exclusive policy in your area?

>YES

90

>NO

12) Do you have conflicts with co-distributer regarding the sales price of the cement?

>YES

>NO

13) Is the company is providing you the detailed technical aspect of the cement, so that you can satisfy the customer question?

>YES

>NO

14) What types of promotional support are provided to you by the company?

>Advertisement

>Publicity

>Sales promotion

>Events

91

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

THANKS A LOT

92

BIBLIOGRAPHY

BIBLIOGRAPHY93

Baron S and Harrisk – services Market ing/ Palgrave /2 n d Edit ion.

Love lock Chritopher - services Marketing/ pearson educat ion/5 t h Edit ion

Zeithaml - services Market ing/ Tata mc Graw Hi l l /3 r d Edit ion.

Woodruff Helen – services Marketing/ Macmil l ian/ 1 s t Edit ion.

► www.cemnet.com

► www.pca.com

► www.ceicdata.com

► www.ultratcch.com

94