Cement, Energy and Environment

companies capturing bigger market shares, smaller ones may find it difficult to expand their limited area of operation. In the current oversupply situation, industry experts say small cement makers are impacted more than the bigger ones. And, the regional nature of the business is likely to make the prospects of small companies bleak if expansion doesn't happen. The regional variation in demand and supply help pan-India players to some extent, while regional players get hit on profitability. Andhra Cements, Saurashtra Cement, Gujarat Sidhee, Rain Commodities, Penna Cement, Sanghi Industries, Panyam Cements, Prism Cement, Barak Valley, Sagar Cements, Burnpur Cement and Shiva Cement are among the smaller cement companies. Of the 50-plus companies in the industry, the top five control more than half the market share. Swiss cement giant Holcim, through its Indian subsidiaries, ACC and Ambuja Cements, and the Aditya Birla Group alone control close to 40 per cent of the market share in the country. The two groups have reasonable presence in almost all regions. Kamakhya Chamaria, Managing Director of northeast based Barak Valley Cement, says: "In coming years, it will be difficult to operate in the market, as bigger players are fast consolidating. As a result of this, pricing power will go out of the regional players' hands." The negativity associated with regionality in the business forced mid-sized companies such as India Cements, Shree Cement, Jaiprakash Associates, J K Lakshmi Cement, J K Cement and Lafarge to expand outside their home markets. Rupesh Sankhe, analyst at Angel Broking, says, "Many of these smaller players have old plants which are less efficient than the modem bigger units. With high operating costs, their margins are under pressure and they cannot away from their local market." Expansion is costly Agreeing, the research head at a domestic brokerage house says setting up a factory with a capacity of a million tones would require close to Rs. 400 crore. "If they have not accumulated cash, expansion does not seem possible for at least the next two years for smaller players. They would have no option but to wait till 2014, when the cement cycle peaks," she adds. Many international cement majors such as Holcim, Lafarge, ltalcementi, Heidelberg, Vicat and Cimpor have already taken foothold in the domestic space. The higher valuation of the latest deals in the sector signals that the potential in cement is still attracting players, despite the current slowdown in the market. The deal between French giant Vicat and Andhra-based Bharathi Cement was the latest in the category, at a valuation of close to $200 per tonne. The units of Murli Industries, another small-sized player, with a capacity of around three million tonnes, is on the block. According to RP Gupta, Managing Director of Orissa based Shiva Cement, "There are limitations for smaller players. Though one can go of one's territory and expand, setting up a new plant, that too in a new market, is not easy." Nikhil Deshpande, analyst at PINC research, says, "Presently, no player wants to expand and smaller players do not seem to be in a hurry to go for it. Apart from having a limited market to cater to, they do not even have captive power plants, which takes the costs up and profitability gets hit". Agreeing, Chamaria adds, "Going forward , profit margins will go down. For a small unit, overhead costs are higher than a big plant." Industry sources said with Bharathi Cement getting a higher valuation, smaller players are less willing to sell their assets. "They ask for a valuation of $200 per tonne, while acquirers are not willing to go beyond $160 per tonne. Unless this gap is bridged, further consolidation may not be on the anvil ," they add. Cement makers say the current slowdown is a temporary phase and the prospects are promising beyond 2012. "It's quite possible that small players might be eyeing the higher valuations to quit the business then," says an analyst. Courlesy: The Business Standard Mumbai, 26. 8.2010. AMBUJA CEMENT WILL SET UP 2.2 MT PLANT IN RAJASTHAN Holcim-owned Ambuja Cement has signed an agreement with the Rajasthan State Industrial Development and Investment Corporation to set up a 2.2 million tonne of cement plant in Nagaur district with a capital outlay of Rs.2,200 crore. Courlesy: The Hindu Business Line Nagpur, 10.10.2010. HC INDIA EXPANSION HeidelbergCement India informed the Bombay Stock Exchange that the company's Board of Directors has approved 23