CARE Research Presentation

2

ABOUT CARE RESEARCH

3

Industry Research: CARE Research offers value research in the form of industry research reports which are subscribed to by investors, bankers, analysts, corporates etc. The industry research has been in existence since inception of CARE as its integral part to provide support to the rating business. However, it has now become a separate division since 2006. The reports contain high quality data, trends, opinions and are updated on monthly/quarterly basis. At present research reports are available on 46 sectors. The services today are subscribed by a vast number of clients. We also do Industry write-ups for capital market offering, and have covered 28 niche sectors CARE Industry Risk Metrics (CIRM): CIRM reports have been started since January 2012. These reports evaluate risk associated with iindustry, assessing various critical parameters which can impact cash flow and debt servicing capabilities of the industry for the next 2–3 years. The risks on various parameters are quantified by assigning a score to each parameter. Some of the key parameters used for scoring are demand, supply, competition, factors of production, government policies and regulations and the financial structure of the industry. At present evaluation reports are available on 116 sectors. Customised Research: CARE Research customised solutions for corporate helps in gauging business opportunities, competitive scenario, regulatory procedures, etc which would enable them in making better investment decisions. CARE Research utilizes huge internal databases that have been built over the years or undertakes a mix of primary as well as secondary research for accomplishing the task.

Industry Research

CARE Industry

Risk Metrics

Customised

Research

LIST OF RESEARCH REPORTS

4

LIST OF INDUSTRIES

Sector Updates Sector Updates

1 Aluminium Monthly 24 Passenger Vehicle Monthly

2 Apparel Industry Quarterly 25 Pesticides Quarterly

3 Auto Component Annual 26 Pharmaceutical Monthly

4 Banking Monthly 27 Pipe Quarterly

5 Cement Monthly 28 Power Generation Quarterly

6 Chlor-Alkali Monthly 29 Retail Quarterly

7 Coal Quarterly 30 Roads & Highway Quarterly

8 Commercial Vehicle Monthly 31 Roads Freight Transport Annual

9 Construction Quarterly 32 Shipbuilding Monthly

10 CRAMS Industry Quarterly 33 Shipping Quarterly

11 Crude Oil Quarterly 34 Steel Monthly

12 Education Annual 35 Sugar Monthly

13 Express Service None 36 Tea-Coffee Industry Monthly

14 Gems & Jewellery Monthly 37 Telecom Tower Half Yearly

15 Hospital Industry Quarterly 38 Telecom-Wireless Quarterly

16 Hotel Monthly 39 Tractor Quarterly

17 Iron Ore Annual 40 Two Wheeler Monthly

18 Man Made Fibre Monthly 41 Tyre Monthly

19 Manganese Ore Annual 42 Renewable Energy Sources Quarterly

20 Natural Gas Quarterly 43 Refining and Marketing Quarterly

21 Zinc and Lead Monthly 44 Seeds Industry Quarterly

22 Cotton and Cotton Yarn Quarterly 45 Housing Finance Industry Quarterly

23 Paper Quarterly 46 Business Process Management Half Yearly

ABOUT CARE RESEARCH

5

Industry Research: CARE Research offers value research in the form of industry research reports which are subscribed to by investors, bankers, analysts, corporates etc. The industry research has been in existence since inception of CARE as its integral part to provide support to the rating business. However, it has now become a separate division since 2006. The reports contain high quality data, trends, opinions and are updated on monthly/quarterly basis. At present research reports are available on 40 sectors. The services today are subscribed by a vast number of clients. We also do Industry write-ups for capital market offering, and have covered 28 niche sectors CARE Industry Risk Metrics (CIRM): CIRM reports have been started since January 2012. These reports evaluate risk associated with iindustry, assessing various critical parameters which can impact cash flow and debt servicing capabilities of the industry for the next 2–3 years. The risks on various parameters are quantified by assigning a score to each parameter. Some of the key parameters used for scoring are demand, supply, competition, factors of production, government policies and regulations and the financial structure of the industry. At present evaluation reports are available on 116 sectors. Customised Research: CARE Research customised solutions for corporate helps in gauging business opportunities, competitive scenario, regulatory procedures, etc which would enable them in making better investment decisions. CARE Research utilizes huge internal databases that have been built over the years or undertakes a mix of primary as well as secondary research for accomplishing the task.

Industry Research

CARE Industry

Risk Metrics

Customised

Research

LIST OF CIRM REPORTS

6

LIST OF INDUSTRIES

No Sectors No Sectors

1 Agri - Edible Oil 29 NBFC Housing Finance

2 Agri - Food Processing 30 NBFC Micro - Finance

3 Air Conditioners 31 NFM -Aluminium

4 Airlines/Civil Aviation 32 NFM-Other Metals excl Al & Zn

5 Airports 33 NFM-Zinc

6 Auto Tractors 34 Organized Retailing

7 Auto-2/3 Wheelers 35 Packaging

8 Auto-4 Wheelers/Cars/Sports Utilities (PV) 36 Paints

9 Auto-Commercial Vehicles 37 Paper and Paper products

10 Automotive Components 38 Paper -Newsprint

11 Banking 39 Petrochemicals

12 Bearings 40 Petroleum - Gas Transportation Distribution

13 Biopharma 41 Petroleum - Oil and Gas Exploration

14 Breweries and Distilleries 42 Petroleum - Oil and Gas Service Provider Upstream

15 Broadband 43 Petroleum - Refinery and Marketing

16 Casting and Forging 44 Pharma - Bulk Drugs

17 Cement and Cement Products 45 Pharma - Formulations

18 Ceramics and Sanitary ware 46 Plastics and Polymers

19 Chemical Organics 47 Power - Cables

20 Chemicals – Agrochemicals 48 Power - Distribution

21 Chemicals - Inorganic/Chloro Alkali 49 Power - Equipment

22 Chemicals Dyes Pigments 50 Power - Generation

23 Chlor Alkali 51 Power - Transmission

24 Coffee 52 Power Renewable IPPs

25 Compressors 53 Printing and Publishing

26 Construction Equipment 54 Pumps

27 Construction-Erection ,Commissioning, Maintenance 55 CRAMS

28 NBFC Asset & Retail Finance 56 Cycles

LIST OF CIRM REPORTS ….contd

7

LIST OF INDUSTRIES

No Sectors No Sectors

57 Diesel Engines 87 Services - Brokers

58 Domestic Freight RFTI 88 Services - Educational Institutions

59 Electrical Goods/Components/Appliances 89 Services - Hospitals

60 Engineering/Manufacturing - General 90 Services - Hotels

61 Fertilizer 91 Services- Hotels-Budget/Midmarket

62 FMCG 92 Services - Mutual Funds

63 Gems and Jewellery 93 Services - Specialised Institutions and others

64 Glass and Glass Products 94 Ship Building / Ship Yard

65 Iron and Steel - Stainless Steel 95 Shipping

66 Iron and Steel -Alloy Steel 96 Sugar

67 Iron and Steel –HR 97 Tea

68 Iron and Steel –CR & GPGC 98 Telecom Infrastructure

69 Iron and Steel-Secondary 99 Telecom Services

70 IT-Enabled Services 100 Textile Denim

71 IT-Hardware 101 Textile Jute

72 IT-Software 102 Textiles - Machinery

73 Lead Acid Batteries 103 Textiles- Cotton / Natural fibre

74 Leather and Leather products 104 Textiles- Cotton Fabric

75 Logistics , Cargo Handling and Warehousing 105 Textiles- Garments & other products

76 Lubricants 106 Textiles- Manmade /silk /woolen

77 Machine Tools 107 Tobacco and Tobacco Products

78 Media and Entertainment - Film Production 108 Trading

79 Media and Entertainment-Print 109 Tyres

80 Media and Entertainment-TV Broadcasting 110 White Goods / Consumer Durables / Electronics

81 Media and Entertainment-TV Content 111 Wood and Wood Products

82 Mining 112 Wood and Wood Products

83 Real Estate 113 Refractories

84 Roads 114 Sponge Iron

85 Rubber and Rubber Products 115 Primary Dealer

86 Sea Ports 116 Renewable Equipments

ABOUT CARE RESEARCH

8

Industry Research: CARE Research offers value research in the form of industry research reports which are subscribed to by investors, bankers, analysts, corporates etc. The industry research has been in existence since inception of CARE as its integral part to provide support to the rating business. However, it has now become a separate division since 2006. The reports contain high quality data, trends, opinions and are updated on monthly/quarterly basis. At present research reports are available on 40 sectors. The services today are subscribed by a vast number of clients. We also do Industry write-ups for capital market offering, and have covered 28 niche sectors CARE Industry Risk Metrics (CIRM): CIRM reports have been started since January 2012. These reports evaluate risk associated with iindustry, assessing various critical parameters which can impact cash flow and debt servicing capabilities of the industry for the next 2–3 years. The risks on various parameters are quantified by assigning a score to each parameter. Some of the key parameters used for scoring are demand, supply, competition, factors of production, government policies and regulations and the financial structure of the industry. At present evaluation reports are available on 116 sectors. Customised Research: CARE Research customised solutions for corporate helps in gauging business opportunities, competitive scenario, regulatory procedures, etc which would enable them in making better investment decisions. CARE Research utilizes huge internal databases that have been built over the years or undertakes a mix of primary as well as secondary research for accomplishing the task.

Industry Research

CARE Industry

Risk Metrics

Customised

Research

CUSTOMISED RESEARCH

9

Identifying key

industry challenges

• Regulatory framework

• Supply chain

management

• Availability of capital

• Cost benefit analysis

• Cost indexation

Assessing market

potential

Tool for business

planning

Evaluating

competitive scenario

• Demand sizing

• Demand supply gap

analysis

• Identifying potential

markets

• Identifying macro-

economic drivers

• Analysis competitive

landscape

• Assessing size of

organized and

unorganized players

• Assessing operational

parameters like

manufacturing capacity ,

utilisation levels

• Market entry

strategy

• Expansion of

business operations

• New product launch

CARE Research – Key Clients

CARE Research – Key Clients

CARE Research – Knowledge Partners

Flow of Presentation

• Current Scenario

Overview

Regional Scenario

Competitive landscape

Industry Aggregates - Costs, Margins & Prices

• Outlook

Overall Demand & Supply

Price & Margins

Break even Analysis

Consolidation- an open opportunity…

Overview

4

5

6

7

8

9

10

11

12

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

%

GDP growth vs. Cement consumption growth

GDP Cement Consumption

During FY06-10, cement consumption grew at a CAGR 9.9%

During FY11-13, cement consumption grew at a CAGR 5.6%

Regional Scenario

North 74.8 mn tonnes

(23% )

East 43.8 mn tonnes

(13% )

Central 41.1 mn tonnes

(13% )

West 46.3 mn tonnes

(14% )

South 118.7 mn tonnes

(37% )

Regional Scenario

0

20

40

60

80

FY08 FY 09 FY 10 FY11 FY12 FY13

mn

to

nn

es

North

Demand Capacity

0

10

20

30

40

50

FY08 FY 09 FY 10 FY11 FY12 FY13

mn

to

nn

es

East

Demand Capacity

020406080

100120140

FY08 FY 09 FY 10 FY11 FY12 FY13

mn

to

nn

es

South

Demand Capacity

0

10

20

30

40

50

FY08 FY 09 FY 10 FY11 FY12 FY13

mn

to

nn

es

West

Demand Capacity

Dem.– 4.3% Cap. – 13.9%

Dem.– 7.5%

Cap. – 7.8%

Dem. – 7.8% Cap. – 9.5%

Dem.– 11.4% Cap. – 8.6%

Regional Scenario

0

10

20

30

40

50

FY08 FY 09 FY 10 FY11 FY12 FY13

mn

to

nn

es

Central

Demand Capacity

Dem.– 7.7% Cap. – 7.8%

0

100

200

300

400

FY08 FY 09 FY 10 FY11 FY12 FY13

mn

to

nn

es

All India

Demand Capacity

During the period FY08-13,

• Demand has grown at CAGR of

7.3%.

• Capacity has grown at CAGR of

10.4%.

•Industry witnessed a capacity

addition of 126.4 mn tonnes.

Inter-Regional cement movement

North

East

South

West

Centre

4.2

8.2

1.8

13.8

9.7

14.1

0.7

12.0

2.4

8.5

9.9

(7.5)

10.2

(11.4)

(1.2)

Inbound Outbound Net

Inter-Regional movement (mn tonnes)

Competitive Landscape

Holcim

(ACC+Ambuja)

18%

A V Birla Group

(UltraTech)

15%

Jai Prakash Associates

11%

India Cements

5% Madras Cement

4%

Shree Cement

4%

Chettinad Cement

3%

Century Textiles

3%

Birla Corp.

3%

Lafarge India

3%

Others

31%

Player wise share of capacity at the end of FY13

Industry Average- Cost & Margins

Trends in Industry averages

PAT Margin

(%) PBDIT Margin

(%) Freight cost

(Rs. per tonne) Power & fuel cost

(Rs. per tonne) Net Realisation (Rs. per tonne)

FY13 11.1 22.5 950 1,039 4,695

FY12 10.2 21.0 721 991 4,083

FY 11 8.8 20.0 700 908 3,611

FY10 15.1 29.4 622 801 3,698

FY09 14.8 27.8 582 896 3,659

FY 08 20.8 33.2 570 708 3,540

Average cement prices

170

190

210

230

250

270

290

310

330

350

370

FY10 FY11 FY12 FY13

Rs.

pe

r b

ag

City wise Retail price

Ahmedabad Mumbai Delhi Kolkata Chennai Hyderabad All India

Outlook

Projected overall demand supply scenario

324.7

348.1

368.2

390.4

233.8

249.0

268.3

293.6

90.8

99.1

99.9

96.7

90

92

94

96

98

100

102

150

200

250

300

350

400

FY 13 FY 14 (P) FY 15 (P) FY 16 (P)

mn

to

nn

es

mn

to

nn

es

Total Capacity Total Demand Surplus capacity

Demand from infrastructure sector

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000

Power

Road

Railway

Irrigation

Airport

Port

Expected investment (Rs. bn)

Expected cement demand

12

22

14

25

65

6

Figure in oval represents expected cement demand in mn tonnes

Cement consumption to revive going ahead

4

5

6

7

8

9

10

11

12

FY10 FY11 FY12 FY13 FY14(P) FY15(P) FY16(P)

%

GDP growth vs. Cement consumption growth

GDP Cement Consumption

During FY113-16, cement consumption to grow at a CAGR 7.9%

During FY11-13, cement consumption grew at a CAGR 5.6%

Region wise capacity additions

0 5 10 15 20 25

North

South

East

West

Central

mn tonnes

Capacity additions

FY14 FY15 FY16

Trends in utilization rate

79

73

72

73 72

74

76

68

70

72

74

76

78

80

FY10 FY11 FY12 FY13 FY14 (P) FY15 (P) FY16 (P)

%

Capacity utilization

Cement prices to remain elevated in FY14…

170

190

210

230

250

270

290

310

330

350

370

FY12 FY13 FY14 (P)

Rs.

per

bag

Cement price projection

Ahmedabad Mumbai Delhi Kolkata Chennai Hyderabad All India

Break even cushion

3.1

2.3 2

1.2

1.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

200

400

600

800

1,000

1,200

1,400

FY 08 FY 09 FY 10 FY11 FY12

tim

es

Rs.

per

to

nn

e

Fixed cost per tonne Contribution per tonne Break-even Cushion

Inorganic opportunity, is this the right time?

81 77

36

140

46

185 185

180 186

93

84

66

52 46

96

30

227 217

137

184

58

86

0

50

100

150

200

250

300B

irla

Co

rp.

Ind

ia C

emen

ts

OC

L I

nd

ia

Pri

sm C

emen

t

Sau

rash

tra

Cem

.

Sh

ree

Cem

ent

Ult

raT

ech

Cem

.

AC

C

Am

bu

ja C

em.

Hei

del

ber

g

Cem

.

Rai

n

Co

mm

od

itie

s

US

$ p

er t

on

ne

31st March 2012 10th July 2013

Replacement cost

In a nut shell

• Domestic cement demand is estimated to grow at a CAGR of 7.9 % in the

period FY 13-16.

• Focus on infrastructure development and low cost housing to keep the long

term demand for cement intact.

• Industry’s operating rate is expected to increase to a level of 76% by the end

of FY16.

• The cement prices are expected to remain elevated in FY14.

• PBDIT margin of the industry to remain under pressure in FY 14, due to higher

Power & fuel and Freight costs.

Thank you