Indian Cement Industry Report - Cement Sector Research & Analysis in India - Equitymaster

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Cement Sector Analysis Report


[Key Points | Financial Year '14 | Prospects | Sector Do's and Dont's]

  • The Indian cement industry is the 2nd largest market after China accounting for about 8% of the total global production. It had a total capacity of over 360 m tonnes (MT) as of financial year ended 2013-14. Cement is a cyclical commodity with a high correlation with GDP. The housing sector is the biggest demand driver of cement, accounting for about 67% of the total consumption. The other major consumers of cement include infrastructure (13%), commercial construction (11%) and industrial construction (9%).

  • The Indian cement industry grew at a commendable rate in the previous decade, registering a compounded growth of about 8%. However, the growth slowed down in the period 2011 to 2013 when cement consumption grew at an average rate of 4%. Moreover, the per capita consumption of cement in India still remains substantially low at about 192 kg when compared with the world average which stands at about 365 kg (excluding China). This underlines the tremendous scope for growth in the Indian cement industry in the long term.

  • Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. The Southern region of India has the highest installed capacity, accounting for about one-third of the country's total installed cement capacity.

     Key Points

    Supply The demand-supply situation is highly skewed with the latter being significantly higher.

    Demand Housing sector acts as the principal growth driver for cement. However, industrial and infrastructure sectors have also emerged as demand drivers.

    Barriers to entry High capital costs and long gestation periods. Access to limestone reserves (key input) also acts as a significant entry barrier.

    Bargaining power of suppliers Licensing of coal and limestone reserves, supply of power from the state grid etc are all controlled by a single entity, which is the government. However, nowadays producers are relying more on captive power, but the shortage of coal and volatile fuel prices remain a concern.

    Bargaining power of customers Cement is a commodity business and sales volumes mostly depend upon the distribution reach of the company. However, things are changing and few brands have started commanding a premium on account of better quality perception.

    Competition - Intense competition with players expanding reach and achieving pan India presence. The industry is a lot more consolidated than a couple of decades ago with a few large players controlling substantial market share.

     Financial Year '14

  • During the financial year 2013-14 (FY14), India's cement industry grew by 3-4% year-on-year (YoY). The subdued growth was mainly attributable to slowdown in construction activities, regulatory delays in infrastructural projects, high interest rates, prolonged monsoons and natural disasters such as floods and cyclone in some parts of the country.

  • The industry witnessed high operating costs, including all major cost heads such as raw materials, energy and freight. The steep depreciation of the rupee and hike in rail freight and diesel prices further aggravated the concerns.


  • Cement demand is closely linked to the overall economic growth, particularly the housing and infrastructure sector. Given the Modi government’s thrust on housing and infrastructure development, cement demand is expected to pick up in the coming times. The weakness in the international crude oil prices and other commodities should help bring costs under control and improve profitability of the sector. If inflation comes under control, a likely lowering of interest rates would be a big positive for the cement sector.

  • While temporary challenges remain in the form of excess capacity, the long term drivers for cement demand remain intact. Higher government spending on infrastructure, robust growth in rural housing and rising per capita incomes are likely to augur well for the cement industry.
    Related Links for Cement Sector: Quarterly Results  NEW | Sector Quote | Inputs | Products | Over The Years

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    Oct 8, 2015 (Close)
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