Project

Proposal

Equity Research: Cement
Sector/Industry in India





Zankhan Chandarana
18021141028
MBA 2018-2020


 A. Project Details
Project Tittle: Equity Research: Cement Sector/Industry in India

I. Description of the project in Brief
The project will feature an indept review of cement industry to begin with, next will be the
analysis of the biggest player in the industry/sector that is ultratech cement, and how can
the investor make the most of their investments based on the movement of the share prices
in the near future.

a. Indian Cement Industry : Overview
Cement Industry has been making noteworthy growth because of its direct relation with the
growth of the Economy. The growth of the economy in terms of Infrastructure has a direct
relation with the consumption of cement. This is attributable mainly due to the government
activities in the area of Housing and Real Estate, Public Infrastructure & Industrial
development.

• Increased allocation •North Eastern India

to infrastructure •Housing, Freight
projects in Union Corridors, Ports and
Budget 2018-2019 other Infrstructure
• Initiative to build 100 Projects
Smart Cities
• Year 2022
Robust Attractive
Demand Opportunities

Long Term Increasing

Potential Investments

•Oligopoly Market
•Low Threat From • By current market
Substitutes players for capacity
•Per Capita Consumption at
210 kg expansion
• Long term growth @ 1.2 • FDI
times GDP growth rate

India is the second largest market in the world in terms of both consumption and
production of cement just behind China.

Also, major players and their continuous innovation in terms of environmental sustainability
and development of new techniques for cost reduction has led to a boom in this particular
sector.

Increasing presence of
Tie – up with overseas
cement players

Recent
Strategies &
Innovations

Alternate Sources of Adoption of cement

Power required for instead of Bitumen and
Clinkers Ready Mix Concrete (RMC)




Mergers and acquisitions to venture into new unexplored territories has led to good positive
outcomes.
• In November 2018, Ultratech Cement received approval for its purchase of Binani
Cement for a consideration of Rs 7,950 crore (US$ 1.10 billion).

• In October 2018, India Cements entered into a share purchase agreement worth Rs
182.89 crore (US$ 26.06 million) for acquisition of Springway Mining. The acquisition
will help the company to enter the Uttar Pradesh market and other markets in North
India.

The project report will be aimed at helping the investors know the current growth prospect
of the Indian Cement industry.

The demand for cement in India can be attributed to three main sectors viz Housing and
Real Estate, Public Infrastructure and Industrial Development. The factors that will lead to
increase in demand from these sectors include:

1. Housing and Real Estate

Government initiatives like Housing For All to push demand in the sector.
Real Estate market in India is expected to reach US$ 1 trillion by 2023 from US$ 120 billion
in 2017.
Strong growth in rural housing and low-cost housing to amplify demand.

 2. Public Infrastructure

Projects like Dedicated Freight Corridors and ports under development.

Metro rail projects already underway in most major cities.
Government of India’s push with Smart Cities Mission and AMRUT

3. Industrial Development

Strong economic growth is expected to lead to growth of the industrial sector and in turn
increase in demand in the long run.

The information provided will help them to compare the stock with its future estimated
prices so they can make the most of the investment opportunities.

b. Objective of the project
• To provide a general overview of the Cement sector in India
• To identify the growth and demand drivers of the particular sector
• To see the impact of the factors affecting the cement industry on the industry leader
Ultratech cement
• Conducting analysis of the share prices by calculation of various ratios and
identifying the investment opportunities for the investors based on the analysis
conducted.

c. ULTRATECH Cement
Facts
Installed capacity of 96.5 Million Tonnes Per Annum (mtpa)
25 grinding units, 19 integrated plants, seven bulk terminals and one clinkerisation plant
Total income of Rs 324.56 billion (US$ 5.04 billion) in FY18 and Rs 268.37 billion (US$ 3.72
billion) in FY19 (between April-December 2018)
The largest manufacturer of ready mix-concrete in India

d. Investor Perspective (Project Proposal)
The information provided in the project will help the investors to compare the stock with its
future estimated prices so they can make the most of the investment opportunities. Using
the esimates for FY2019-2020 and the results announced by the companies for FY 2018-
2019.
Due to the changing trends in the cement industry and its impact on the prices of the major
players, the performance of UltraTech cement vis a vis other few players in the industry will
be evaluated.
The Indian Cement industry as can be seen from above has numerous potential and hence
there will be a number of investment opportunities and the same shall be evaluated during
the course of the project.

 e. Research Methodology
The data collected would be secondary wherein the information collected would be on the
cement sector through various websites, news articles, industry reports etc.

The annual report and annual results of the companies will be the primary source of data
when it comes to collecting data related to the performance of the company.

f. Schedule
The 8 week summer internship programme will be primarily focused towards the learning of
the cement industry. As my guide correctly put it to me, “ You should be able to answer any
question related to cement industry in the future.” The initial 4 weeks will be targeted
towards understanding of the cement industry. The various factors that will affect the prices
of the various raw materials, operating costs etc. April being the month in which most of the
companies will publish their performance for the FY 2019-2020, the second half of the
internship will be more focussed on understanding the annual reports of Ultratech cement
and the potential impact of these factors and the company performance on the future share
price of the company.

g. Limitations
The time limit of 8 weeks is a very limited timespan to conduct the research as the cement
industry is very dynamic. The chances of missing out key areas is high.

The secondary data used for the purpose of the research is not fully reliable.

Natural calamities can totally toss the etsimates

II. Literature Reviews

NAIR N.K. (1991) has studied the productivity aspect of Indian Cement Industry. This study
emphasized that cement, being a construction material, occupied a strategic place in the
Indian economy. This study has revealed that, in 1990-91, the industry had an installed
capacity of 60 million tones with a production of 48 million tones. In this study, the cement
industry was forecasted to have a capacity growth of about 100 million tons by the year
2000. This study has also analyzed the productivity and performance ratios of the cement
industry with a view to identifying the major problem areas and the prospects for solving
them.

SUBIR COKAVN AND REJENDRA VAIDHA (1993) have made and attempt to evaluate the
performance of cement industry after decontrol. He found that the performance of the
cement industry after decontrol was characterized by outcomes that were generally
competitive and welfare enhancing. This study has revealed that the structure of the
industry changed significantly with large magnitude of relative technologically and superior
capacity being created by many new entrants into the industry. It was noticed in this study
that there were significant real price increase and an associated increase in profitability. The
performance of firms across the strategic group was different with firms operating relatively
new and large plants appeared to have an advantage. Further, the study has dealt with the
nature and effect of inter-firm heterogeneities in the cement industry.

CHANDRASEKARAN N (1993) has made an attempt to examine determinants of profitability
in cement industry. He identified that profitability was determined by structural, as well as,
behavioural variables. He also identified that the other variables which influenced
profitability were growth of the firm, capital turnover ratio, management of working capital,
inventory turnover ratio etc. Some of the main changes in the cement industry environment
during 1980’s identified this study were: from complete control to decontrol, number of
new entrants and substantial additions of capacity, changing technology from inefficient
wet process to efficient dry process and from conditions of scarcity of cement to near gloat
in the market.

Faculty Guide Name: Dr.K.P.Venugoapala Rao, Dy. Director, SIBM-Hyderabad






















26th of April 2019 Zankhan Chandarana