Cement  plays a key role in the economic development of the country. It is extensively used In infrastructure development including construction of roads, bridges, flyover etc., real estate development, rural and urban housing, commercial buildings etc. India is the largest producer of cement in the world excluding China and accounts for approximately 8% of total cement production in the world. The dimension of the cement industry is undergoing rapid changes in India. The big companies are growing up either by quick capacity expansion and or purchasing plants from the smaller players or by taking over them. The Indian cement industry has undertaken an expeditious modernization plan by adopting state of the art technology and taking measures for energy efficiency. The industry is now  more environment friendly than ever before.

Higher budget allocation in successive years for infrastructure development  along with emphasis on rural and urban housing has given a strong fillip to the cement industry. Buoyant industrial sector is also aiding the growth of the cement sector. The result of such initiatives is that the cement demand and output has been consistently growing for the last many years. Burgeoning cement demand has prompted the companies to expand aggressively to capture the market and consolidate their position. The larger cement  companies are not only expanding capacity but availing every opportunity to buy out smaller companies or their plants to hike their capacity. The result is that there is capacity expansion of 7% or more in recent years. The growth of the cement industry is facilitated by easy availability of limestone, one of its chief raw materials spread over the whole of the country as well as the healthy cash flow of the larger and some mid sized companies.

Notwithstanding its capacity expansion on a regular basis, per capita consumption of cement in India is approximately 300 kg whereas the world average is 500kg and in China it is 1000kg leaving much scope for increase of per capita consumption.

The production of cement is well spread over India – 32% in South India, 20% in North India, 13% in central India, 15% in Western India and 20% in East India according to one report. As regards capacity, it has already been spelt out that it is increasing every year. As per report of the DPIIT (Department for Promotion of Industry & Internal trade), Ministry of Commerce & Industry, posted on 10th Feb’2024 by Press Information Bureau, Govt. of India, the cement capacity of India is 600 MTPA at the end of 2022-23 and cement production in 2022-23 is 391 million tonnes. Assuming 6% increase in 2023-24 the cement capacity and  production  come to around 636 metric ton and 415 metric ton respectively The Indian cement industry is set to add 150-160 metric ton of capacity by 2027-28 according to the report by Crisil Ratings.

We may now take up a few companies for assessment of their financial performance, efficiency and future plan. The results shown below are for the quarter October 23 to December23.

COMPANY	EQUITY(In Cr.)	SALES(In Cr.)	NET PROFIT(In Cr.)	EPS (Quarterly)	MARKET PRICE(As on 3rd May 2024)
UltraTech Cement	288	16137	1696	58.86	9816
Ambuja Cement	439.54	4439	513	2.59	622
ACC Cement	188	4918	527	28	2531
Shree Cement	36	4900	734	203	25746
JK Cement	77.27	2784	290	37.46	3983
JK Lakshmi Cement	59	1586	124	10.54	798
Ramco Cement	23.6	2106	93	3.95	772

UltraTech, the largest cement player in India with an installed capacity of 151 MTPA is on an expansion spree. It has consistently added to capacity by setting up new plants and or taking over small plants and synergising their business. It has recently commissioned cement plants of 7.8 MTPA , acquired a grinding unit with capacity of 1.1MTPA from India Cements at a total cost Rs.315 crore and decided to set up a new unit there. It is also in the process of taking over the cement business of Kesoram Industries for which approval of Competition Commission of India(CCI) has been obtained. UltraTech cement is a highly profitable company with a net profit margin of more than 10%(of sales) as is evident from the third quarter financial results of the company shown above. In the fourth quarter the financial results of the company have further improved with revenue of ₹20555 cr. and net profit of ₹2258 cr. The way UltraTech Cement is expanding and synergizing their businesses deserves investors’ attention.

Ambuja Cement and its subsidiary ACC are also very efficient cement producers with high profit margins. The company has made significant progress in capacity expansion. It has acquired cement capacities of more than 11 MTPA from  different companies including Sanghi Industries. The total capacity of the Adani group company now stands at 78.9MTPA. The promoter group is increasing stake in the company(Ambuja Cements) by infusing funds through conversion of warrants. Recently it has brought in funds to the tune of ₹8340 cr. and raised stake in the company to 70,3%.Flush with funds the company is well set to achieve the  target of 140 MTPA capacity  by 2027-2028.  Both the  companies have meanwhile declared  the financial results of the fourth quarter(Dec.23 to Mar.’24)which show very good growth of profit. 

	ACC	Ambuja Cements(standalone)
Sales (In Cr.)	5398	4780
Profit (In Cr.)	748.54	532.29
EPS(Quarterly)	39,86	2.68

Shree Cement, another large company which is highly efficient, is also expanding capacities. It has also announced an investment of ₹7000cr. to increase its capacity from the existing 50.4 MTPA(including overseas capacity of 4 MTPA) in keeping with the target of the company to have 80 MTPA capacity by 2030.

Many mid-sized companies like JK Cement, Birla Corporation, JK Lakshmi Cement etc. are also embarking on  expansion  to take advantage of the rising demand and some of them may be considered for investment. In such scenarios some of the small and very small companies, irrespective of whether they are profit making or not, are likely to be taken over by the large companies resulting in enhancement of their stock market price due to open offers to be made in conformity with takeover rules.