Concrete
Shaping the Future
Published
2 months agoon
By
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Jigyasa Kishore, Vice President Enterprise Sales and Solutions, Moglix discusses the critical role of cement capacity expansion in India’s infrastructure development, highlighting the importance of technological advancements, sustainability and strategic investments amid market challenges.
With an installed cement capacity of 600 million tonnes, India is the second-largest cement producer in the world. Cement consumption in India is expected to reach 450.78 million tonnes by the end of FY27, owing to rapid urbanisation and smart city development plans. Infrastructure, typically, receives the most funding from the government which bodes well for the cement industry. At a time when India is urbanising and building infrastructure at breakneck speed, the role of cement capacity expansion is becoming critical. This expansion, today, supports the market demands as well as contribute towards the nation’s economic ambitions.
Setting a firm foundation
Cement is an essential component in the construction of any nation. Roads and bridges, airports and public buildings all indicate cement’s critical importance in infrastructure development. Urbanisation is fuelled by it through the creation of housing projects aimed at achieving economic growth and development. Here’s why capacity expansion of cement production is critical:
Urbanisation: The demand for cement increases as urbanisation intensifies. This is further evidenced by the budget estimate for the Pradhan Mantri Awas Yojana for affordable housing, which has been pegged at US$ 9.63 billion (Rs.79,590 crore) for the first time, registering an increase of 66 per cent over the previous year’s budget.
Major infrastructure projects: Large infrastructure projects like highways, bridges, and city-development require considerable quantities of cement. Capacity expansion can ensure steady supplies of good-quality cement to these large-scale projects and see their timely and expeditious completion. The National Infrastructure Pipeline (NIP) has been widened to 9,735 projects worth $1,828.48 billion. Many of the upcoming projects will be heavily dependent on the cement industry. In addition, the PM Gati Shakti National Master Plan for infrastructure is further driving up the
cement demand.
Employment Generation: Increased production capacity directly results in job creation in the cement industry. Additionally, a corresponding demand for further employment in complementary sectors such as construction, logistics, and retail is also generated. This bolsters holistic economic development and prosperity.
Regional Economic Growth: New cement plants are often set up in regions with abundant raw materials but stunted industrial development. By setting up new plants in these regions, local resources can be leveraged and the overall growth story of the region can be improved. For instance, Dalmia Bharat recently announced a $10.9 million investment for further expansion of its already existing cement plant in the small town of Banjari in Bihar. The increasing presence of small and mid-size cement players across various regions helps dilute market concentration of industry leaders, leading to a more competitive and diverse market landscape.
Reinforcing the Structure
India’s cement industry is currently experiencing a tough fiscal year and there has been a downturn in pricing. Moderate demand is expected for H1FY25. Temporary setbacks such as labour shortage and heavy monsoons have also caused the demand for cement to take a dip in the past couple of months.
Needless to say, expanding capacity during periods of subdued demand involves risk. Cost implications of such investments can be significant. And firms could fail to recoup their investments if market conditions don’t improve as planned. Over-expansion could also result in an oversupplied market and further impact the prices as well as profit margins. Cement producers are currently under pressure due to reduced prices and slow demand. While this price dip might adversely affect profits in the short term, it could be seen as market adjustment ahead of a surge in anticipated demand during the second half of the fiscal year
Periods of uncertainty can be looked at as opportunities for companies to diversify risks and invest in innovation. Developing and launching new cement products for specific use-cases would contribute to the top line. Targeting export markets for better demand can also ensure the optimal use of additional capacities. At the same time, focusing on operational efficiencies would help the companies keep the cost of production in check.
New investments made in cement production facilities automatically come with the latest technological advancements that can enhance efficiency, minimise environmental impacts, and improve the quality of cement. This leads to construction practices that are more durable and sustainable. JSW, for instance, has initiated research on the integration of supplementary cementitious materials (SCMs) like fly ash, slag, calcined clay, and more. These materials not only improve the durability and strength of cement but also contribute towards reduction of carbon footprint of the cement industry. In order to meet energy demands sustainably, we must look at better industry practices such as usage of waste heat recovery systems, high-efficiency coolers and preheaters, and transition towards clean energy sources like solar or wind power.
There is also a growing need for cement companies to become environmentally conscious. Modern cement plants are increasingly adopting greener technologies owing to the decarbonisation pressure. Capacity expansion while keeping sustainability at its core will help check environmental impact of cement production while also aligning with the challenging global environment-conservation goals. Recently, UltraTech announced that it had received Environmental Product Declaration (EPD) certificates for four of its cement products. Similarly, Dalmia Bharat (Cement) has announced plans to produce 100 per cent low-carbon cement by 2031 and has a US$ 405 million carbon capture and utilisation (CCU) investment plan to achieve this goal. Such efforts are laudable and set a fine example for all industry players.
Shaping a Stronger Nation
Cement capacity expansion is a strategic move for the Indian cement industry. While short-term market fluctuations present challenges, continued investment in capacity expansion reflects a long-term vision for shaping India’s future infrastructure landscape. The current economic climate demands agility and innovation from Indian cement players. The leaders need to lead by example. By adopting industry best-practices, aiming for sustainable development, and working towards continuous growth and advancement, the cement industry is sure to rise like a phoenix from the ashes.
About the author
Jigyasa Kishore comes with 15+ years of experience at building brands, enabling enterprise growth, and transforming organisational performance with a technology-first approach. At Moglix, she leads brand growth as a digital supply chain solutions architect for large manufacturing enterprises.
She is an alumnus of the Indian
School of Business, Hyderabad, and Bangalore University.
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Concrete
Indian cement makers to invest $ 14.3 bn
The bulk of this growth will come from the top-three cement producers–Ultratech, Ambuja and Shree Cement
Published
1 day agoon
September 6, 2024By
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Indian cement manufacturers are set to invest approximately USD 14.3 billion over the next four years to increase capacity by 25 %. This move, driven by rising domestic demand, is expected to add an additional 160-170 million tons of cement production annually. The industry’s expansion will be predominantly funded through internal accruals, with minimal reliance on debt. The expansion is spurred by government’s massive infrastructure push, with plans to invest USD 1.7 trillion in infrastructure projects by 2030. According to S&P Global Ratings, the demand for cement in India is projected to grow at a compounded annual growth rate (CAGR) of 7 % over the next four years, aligning with the planned capacity additions.
The bulk of this growth will come from the top-three cement producers–Ultratech, Ambuja and Shree Cement, which will account for over 70 % of the country’s total capacity increase. This expansion equates to an annual capital expenditure of close to Rs 300 billion, which will be more than double the average annual capex of the past decade. The leading cement companies, which produce 70 % of India’s total cement output, are in a strong financial position to support this expansion. Rising cement prices have bolstered their balance sheets, allowing them to reduce debt significantly while maintaining robust cash flows.
Concrete
SEBI Places JSW Cement’s Rs.4,000 Cr IPO on Hold
SEBI halts JSW Cement’s ?4,000 crore IPO.
Published
3 days agoon
September 4, 2024By
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The Securities and Exchange Board of India (SEBI) has placed the proposed ?4,000 crore Initial Public Offering (IPO) of JSW Cement on hold, citing regulatory concerns. This development comes as a significant pause in the cement manufacturer’s plans to raise capital through the public markets, a move that was expected to bolster its expansion and growth strategies in the competitive construction sector.
IPO Overview: JSW Cement, a key player in the Indian cement industry, had announced its intentions to launch a ?4,000 crore IPO. The offering was aimed at raising funds to support the company’s ongoing expansion projects, reduce debt, and improve operational efficiency.
SEBI’s Decision: SEBI, the regulatory body overseeing the capital markets in India, has decided to withhold its approval for the IPO. The decision was made after careful scrutiny of the draft red herring prospectus (DRHP) submitted by JSW Cement. While specific reasons for the hold have not been disclosed, it is understood that SEBI has sought further clarifications on certain aspects of the filing.
Impact on JSW Cement: The postponement of the IPO is likely to impact JSW Cement’s financial planning and expansion initiatives. The company had intended to use the proceeds from the IPO to fund new projects, including the construction of additional cement plants, modernization of existing facilities, and investments in sustainable practices.
Market Reactions: The decision by SEBI has led to a cautious response in the market. Investors and market analysts are closely monitoring the situation, as the delay could affect investor sentiment towards the company and its future fundraising efforts. The construction sector, which heavily relies on capital-intensive projects, may also be impacted by this development.
SEBI’s Concerns: SEBI’s decision to put the IPO on hold highlights the regulatory body’s commitment to ensuring transparency and investor protection in the capital markets. The regulator may be seeking additional information regarding JSW Cement’s financials, corporate governance practices, or other disclosures to ensure that the IPO meets all necessary requirements.
JSW Cement’s Response: JSW Cement is reportedly working closely with SEBI to address the concerns raised and to provide the required clarifications. The company remains optimistic about receiving the necessary approvals in due course and proceeding with the IPO as planned.
Industry Context: The Indian cement industry has seen significant activity in recent years, with companies looking to expand their capacities to meet growing demand. IPOs have become a popular route for raising capital, allowing companies to fund expansion and reduce debt. However, the regulatory environment remains stringent, with SEBI playing a crucial role in maintaining market integrity.
Future Prospects: While the IPO is currently on hold, JSW Cement’s long-term growth prospects remain robust, driven by its strong market position and ongoing investments in capacity expansion. The delay in the IPO may prompt the company to explore alternative fundraising options, such as debt financing or private equity, to meet its immediate capital needs.
Regulatory Environment: SEBI’s decision underscores the importance of regulatory compliance in the IPO process. Companies looking to tap the capital markets must ensure that their disclosures are thorough and transparent, meeting all regulatory standards to gain investor confidence.
Conclusion: The hold placed by SEBI on JSW Cement’s ?4,000 crore IPO is a reminder of the challenges that companies face in navigating the regulatory landscape. While this may delay the company’s fundraising plans, it also provides an opportunity to strengthen its disclosures and align with regulatory expectations, ultimately benefiting both the company and its investors.
JSW Cement now faces the task of addressing SEBI’s concerns to move forward with its IPO, a crucial step in its growth trajectory within the Indian cement industry.
Concrete
Smart Building Choices: Enhancing Life with Green Practices
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September 3, 2024By
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