Spotlight on India Cements

Spotlight on India Cements
Published: 10 July 2006

When Mr N Srinivasan took over as vice chairman and managing director of India Cements Ltd. in 1989, the company had an annual production capacity of 1.6Mt and sales of 1.30 billion rupees (US$28.3m). Today it has a production capacity of nine million tons and annual sales of 18 billion rupees. 
And as India’s construction boom catches on in the south of the country, bringing demand in line with industry capacity, prices for India Cements products have risen. India Cements has also cut debt by selling assets, opened new markets, including abroad, and trimmed its production costs, leading to a return to profit after several years of losses. Profit in the fiscal year ended March 31, 2006, at 453.1 million rupees, was 10 times that of the previous fiscal year, following losses in the three previous fiscal years. The company also has interests in sugar and power. 
Mr. Srinivasan: India is the second largest consumer of cement after China. But unlike in the rest of the world, where cement is sold in bulk, it is still sold by the bag in India. And except in China, most of the other markets are ruled by four or five big companies. But in India the big players account for 50%-60% of the market, and the rest is fragmented and fractured. The industry is growing by 8%-10% a year, but it is still not a mature market. And the concept of selling cement in the form of ready-mix concrete hasn’t yet taken off. But I would say the skills, technology, efficiency available here are equal to, if not better than, the rest of the world. 

The cement industry in India is cyclical not because demand growth is cyclical, but because capacity-creation takes place in bunches. When all new capacity comes on stream, it can have an impact on prices. Our philosophy is that, so long as you have a low level of debt, you can ride out a particularly weak phase. The last time we were caught in a weak phase, two years ago, we opened exports and started exporting. We looked for new markets and cut costs. In a nutshell, a low level of production costs and a low level of debt works.