Indian cement deals

Indian cement deals
Published: 08 January 2004

After buying out L&T cement division, Grasim now owns the largest cement capacity in the country, but in terms of market share the Grasim-L&T combine seems to be losing out to ACC-Ambuja combine, who have now emerged market leader. ACC-Ambuja now sells 18 per cent more cement than the former and the gap between the two seems to be increasing every month. Gujarat Ambuja has now overtaken Grasim to emerge as the number two cement maker in the country behind ACC. Till 2001-02, Grasim and L&T put together were the largest cement producers in the country. Says a senior official in one of the cement majors, "Grasim and L&T have lost out to ACC-Ambuja in the volume game." Industry sources say that there has been extra effort on part of ACC and Ambuja to push volumes even if it means selling cement at a lower price. "Out first priority has always been to keep the capacity utilisation as high as possible, "says a senior official in Gujarat Ambuja. 

Grasim and L&T on the other hand are said to be premium players who are willing to forego volume growth in order to maintain their margins. Competitors also attribute Ambuja-ACC success to the sales tax incentive enjoyed by their new larger units like Ambuja's Marathwada unit and ACC's Wadi and Gagal unit. "Both these companies have misused sales tax benefits to grab marketshare from other others," complains a regional player. During 1999-03, while ACC-Ambuja maintained their capacity utilisation level at around 92%, while in case of Grasim-L&T it declined to 80 per cent during 2002-03 from a high of 92 per cent in 1999-00, which is has further come down to 75 per cent during the first eight months of current fiscal. During the same period, ACC-Ambuja combine increased their sales volume by close to 50 per cent from 17.5Mt in 1999-00 to 25.8 mt in 2002-03. The sales volume of Grasim and L&T on the other hand increased by paltry 18 per cent during the period from 20.2Mt during 1999-00 to 23.8Mt in 2002-03. L&T has taken the worst hit whose sales volumes grew by only seven per cent even as its production capacity zoomed by 35 per cent during the period. Grasim grew by 28 per cent, ACC grew by 33 per cent while Ambuja showed 68 per cent jump in sales volume during 1999-2003 period.