It is action time now for the Indian cement industry which was plagued by fragmentation and overcapacity. A booming infrastructure sector coupled with a vibrant housing sector has injected a new lease of life into the sector, which had almost become moribund just a couple of years ago. However, as a result of consolidation over the last five years, the players have not only been able to achieve economies of scale but also have improved their efficiency. Indeed a spate of big ticket acquisitions and greater capacity utilization have brought about the much needed zing in the rather insipid industry. Global cement major Holcim shook the market when it, in a giant stroke, acquired controlling stakes in Gujarat Ambuja and, in turn, in domestic major ACC. Today, nine major players account for over 65% of the market share. In terms of installed capacity too, a group of 11 major players share among themselves close to 70% of the total installed capacity of 157 million tons per annum (mtpa) as of FY 2006. In terms of production during the said fiscal, these players account for over 72% of the total production, while the rest shared among smaller, fragmented players.
And it won't be surprising to see further consolidation in the industry given the huge untapped demand in the country, which is the second largest producer of cement in the world after China and well ahead of the third and fourth largest producers US and Japan, and as the growth of the domestic economy continues to be robust; India's per capita cement consumption at 125 kg per year is well below the international standard. Growing domestic demand is the main driver behind the good show of the cement industry. Of the sectors pushing the demand is the housing, which now accounts for the largest share of over 55%, followed by infrastructure sector (25%) and, commercial projects (20%). The figures further suggest that during FY2006, the domestic demand grew by 10% to 135.56 mtpa.
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