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April, 2010

Sector structure/Market size

India is the world's second largest producer of cement with total capacity of 219 million tonnes (MT) at the end of FY 2009, according to the Cement Manufactuer’s Association.

According to the Cement Manufacturer’s Association, cement despatches during 2009-10 were 159.43 million tonnes (MT) increasing by 12 per cent over 142.23 in 2008-09. Cement production during 2009-10 was 160.31 MT an increase of 12.37 per cent over 142.65 MT in 2008-09.

Moreover, the government’s continued thrust on infrastructure will help the key building material to maintain an annual growth of 9-10 per cent in 2010, according to India’s largest cement company, ACC.

In January 2010, rating agency Fitch predicted that the country will add add about 50 million tonne cement capacity in 2010, taking the total to around 300 million tonne.

New Investments

Cement and gypsum products have received cumulative foreign direct investment (FDI) of US$ 1.71 billion between April 2000 and February 2010, according to the Department of Industrial Policy and Promotion

  • In January 2010, Swiss cement company Holcim announced plans to invest US$ 1 billion for setting up 2-3 greenfield manufacturing plants in India in the next five years. The expansion will take the company’s total cement-making capacity to 60 mtpa (million tonnes per annum) from 50 mtpa currently.
  • Jaiprakash Associates Ltd will invest US$ 984.1 million to take its cement manufacturing capacity from 20 mtpa to 33 mtpa by 2012.
  • Madras Cements Ltd is planning to invest US$ 178.4 million to increase the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT from 2 MT by April 2011.
  • Monnet Ispat & Energy (MIEL) will set up cement plants in Chhattisgarh and Gujarat with an investment of about US$ 527.9 million. Work on the two plants will begin in the October-December quarter under a new division of the company to be christened Monnet Cement.
  • Ambuja Cements, the country’s third-largest cement maker, plans to spend around US$ 756.3 million to expand its capacity to 24 mtpa from the current 19 mtpa by year-end to meet strong demand from the infrastructure sector.

Mergers and Acquistions (M&As)

  • Dalmia Cement has increased its stake in OCL India to 45.4 per cent from 21.7 per cent at an investment of US$ 38.24 million as part of its plan to expand its footprint in eastern India.
  • In April 2010, French cement maker Vicat bought 51 per cent in Bharathi Cement.
  • Ultratech Cement, the country’s second-largest cement maker and a part of Aditya Birla group is acquiring Dubai-based ETA Star Cement for an enterprise value of US$ 382.1 million.

Government Initiatives

Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban development, continue being the main drivers of growth for the Indian cement industry.

  • Increased infrastructure spending has been a key focus area. In the Union Budget 2010-11, US$ 37.4 billion has been provided for infrastructure development.
  • The government has also increased budgetary allocation for roads by 13 per cent to US$ 4.3 billion.

Exchange rate used:
1 USD = 45.46 INR (as on March 2010)
1 USD = 44.49 INR (as on April 2010)