Analysis of Cement Sector as an Investment Avenuees



The capital market (securities markets) is the market for securities, where companies and the government can raise long-term funds. The capital market includes the stock market and the bond market. A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately.

Financial markets, financial assets, financial services and financial institutions constitute the financial system. Financial market provide channels for allocation of savings to investment, that is how the savings are canalized into investments thus generating further income, cash or assets. Financial market has two major components viz. money market and capital market. Money market refers to the market where borrowers and lenders exchange short-term funds, to solve their liquidity needs. Money market instruments have low default risk, maturities under one year and high marketability (liquidity).

Low default risk implies that generally the risk of non-payment of money is low. Maturities under one year imply that all contracts are of maximum one year. Capital market is wider that securities market and embraces all form of lending and borrowing. It comprises of institutions and mechanisms through which medium to long term funds are pooled and made available to business, government and individuals.

Securities market refers to the markets for those financial instruments/claims/obligations that are commonly and readily transferable by sale. This implies that the title to ownership is with the holder; whosoever holds the securities is deemed to be the owner of the securities, unless proved otherwise. These do not contain the name of the holder and hence are transferable by sale. Securities market consists of primary market and secondary market


The following are the main objective which has been undertaken in the present study:

  1. Understanding the various activities in an E- Broking firm.
  2. To get acquainted with all the workings of online trading.
  3. To gain practical knowledge in share trading
  4. To analyze the financial market & the share movements in order to study the prospects of investing in a particular stock or sector.

The aim of the project is to understand the overall equity market, to get to know the trading, clearing & settlement aspect of the equity market. As far as this project is concerned, it will help us to understand the overall working of the equity market & its importance to the economy of the India. A huge amount of money flows & millions of shares exchange hands in a single market day. This exchange of shares enables the flow of money in & out of a firm. The company whose shares are listed & the government who plays a pivotal role through the policies formed in the market, helps them to raise long term funds which can be used for the benefit & the growth of the companies & also give back some part of their profit to the investor in the form of dividends.


The Indian cement industry is second largest in the world after China and has grown at a CAGR of 8% in the last decade. The sector has evolved significantly in the last two decades, going through all the phases of a typical cyclical industry. After having gone through a period of over-supply and the phase of massive capacity additions (latter half of the previous decade), the industry is currently in a consolidation phase, with capacity additions coming up to cater to the increasing demand. Demand has been driven by a booming housing sector and increased activity in infrastructure development such as state and national highways. While the demand is growing at a robust pace of 8% to 10% annually, the paucity of major capacity additions is putting upward pressure on the cement prices.

The Indian cement industry with a total capacity of 151.2 million tonnes (including mini plants) in March 2003 has emerged as the second largest market after China, surpassing developed nations like the USA and Japan. Per capita consumption has increased from 28 kg in 1980-81 to 110 kg in 2003-04. In relative terms, India’s average consumption is still low and the process of catching up with international averages will drive future growth. Infrastructure spending (particularly on roads, ports and airports), a spurt in housing construction and expansion in corporate production facilities is likely to spur growth in this area. South-East Asia and the Middle East are potential export markets. Low cost technology and extensive restructuring have made some of the Indian cement companies the most efficient across global majors. Despite some consolidation, the industry remains somewhat fragmented and merger and acquisition possibilities are strong. Investment norms including guidelines for foreign direct investment (FDI) are investor-friendly. All these factors present a strong case for investing in the Indian market.

The Indian cement industry with a total capacity of about 165 m tonnes in FY07 is the second largest market after China. Although consolidation has taken place in the Indian cement industry with the top five players controlling almost 50% of the capacity, the balance capacity still remains pretty fragmented. Despite the fact that Indian cement industry has clocked a production of more than 100 m tonnes for the last five consecutive years, the per capita consumption of around 130 kgs compares poorly with the world average of over 260 kgs and more than 450 kgs in China.

This, more than anything 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 cement 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. While the southern region is excess in capacity owing to abundant availability of limestone, the western and northern region are the most lucrative markets on account of higher income levels. Given the high potential for growth, quite a few foreign transnational have been eyeing the Indian markets and are planning to acquire domestic companies.

Already, while companies like Lafarge, Heidelberg and Italicementi have made a couple of acquisitions, majors like Holcim managed to partner a domestic company, Gujarat Ambuja, and acquire a stake in ACC. After acquiring stake in big companies, transnational are now eyeing median capacity producers. However, it must be noted that the transnational will find the going tough since cement is a game of volumes and with the median capacity of fragmented players being just about 1 m tonne, the transnational will have to acquire capacities piecemeal and this route is fraught with a lot of uncertainties.

Reference :

· Financial Management by Prasanna Chandra
· www.indiainfoline.com
· www.geojit.com
· www.icicidirect.com
· www.moneycontrol.com
· www.nseindia.com
· www.bseindia.com
· www.ibef.org






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