India INFRAstructure

The biggest opportunity for India Infrastructure story lies in the fact that as of today, India has no infrastructure.

• Roads & Highways
• Ports & Airports
• Railways & MRTs
• Pipelines & Irrigation
• EPC/ Turnkey contracts

Jaypee

India's Power Transmission

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India's power woes do not end with generation imbalances.. the problem with electricity is that it cannot be stored.. hence the peculiar importance of POWER TRANSMISSION

Indian transmission can be divided into 3 parts:

a. inter-state transmission [220kv to 765kV]

b. sub transmission [33kV to 220kV]

c. primary transmission [below 33kV]

POWERGRID wheels about 45% of the total power generated in the country on its transmission network.POWERGRID has a pan India presence with around 71,500 Circuit Kms of Transmission network and 120nos. of EHVAC & HVDC sub-stations with a total transformation capacity of 79,500 MVA.

200 crores PAT and 2,500 crores market cap, RPGoenka's KEC International is one of the largest Power Transmission EPC companies in the world with work in India, Middle East and Africa.

90 crores PAT and 1,000 crores market-cap, this companyexecute total turnkey jobs that involve setting up both transmission lines and substations

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TRANSFORMERS

Some of the major listed TRANSFORMER manufacturers are:

BHEL

ABB

Areva

Crompton

EMCO

IndoTech

TRIL

Voltamp

IMP Powers

A transformer is a voltage changer.

Electricity is generated at 11kvA but it's uneconomical to transmit it at such low voltage. Hence you need a step up transformer and then a step down transformer once it is to be distributed to the end user.

70% of demand for transformers comes from SEBs (State Electricity Boards) and balance 30% from private industries/ large factories

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Power Cables

Conductors are bare open non-insulated cables which are used to wheel high tension power.

Power cables are high tension, medium tension and low tension.

Cable market is largely divided into two types of users: Industrial and Domestic.

Cables are sold in kilometres.
In the case of a cable manufacturer, the metal drawing capacity determines the capcaity utilisation.
Contracts of power cable do not have price escalation clause.
Copper, aluminium & PVC are main input costs.

Havells



KEI


Paramount


Finolex




Cords Cable



RPG

Torrent Cables



Universal Cables

Steel- for dummies (like Me)

Steel is an alloy made from iron and carbon. Higher carbon content is called cast iron. Manganese and chrome alloys are also used. Steel is a major component used in buildings, infrastructure, ships, machines, automobiles. When iron is smelted from it’s ore, it contains excess carbon, hence it is melted and continuously cast into long slabs or ingots.

Long steel - railroads, buildings

Flat steel - automobiles, ships, trains, appliances

Steel production (million tonnes) [2008]

World - 1400

China – 500

Japan - 120

USA - 90

Russia - 70

India - 55

S.Korea- 55

EU - 200

Global steel production can be phased in 3 parts

1950-1973: Post WWII saw a healthy growth of 6%p.a as countries were building infrastructure

1974-2001: were stagnant years as oil shocks created slowdown and there were overcapacities. Continuous cost reduction measures were undertaken. Collapse of Soviet Union saw flooding of excess Russian & Ukrainian steel (70 million tonnes combined capacity). 1992-2001 saw a 25% overcapacity in the global steel markets

2002-2007: the Boom years. China manufacturing increased from 180 to 500mtpa.

Steel is highly fragmented industry. Top 5 players account only 16% of production.

Arcelor Mittal – 110

Nippon Steel - 35

Posco - 32

Shanghai Bao- 30

Tata Steel - 26

SAIL - 14

US Steel - 21

Indian steel makers:

M-cap

SAIL - 84,000 cr

Tata Steel - 40,000 cr

Jindal Steel - 10,000 cr

JSW Steel - 17,000 cr

ISPAT - 2,500 cr

Steel Capacities are added in chunks whereas steel demand only grows linear

Steel making process is of 2 types

1. Blast Furnace technique reduces iron ore in a blast furnace using coking coal as a reducing agent. Oxygen is blown into the molten iron to reduce the carbon content.

2. Electric Arc Furnace (EAF) technique was introduced bcoz of inadequate supply of coking coal. In EAF process, steel scrap or Directly Reduced Iron (DRI) is charged in an EAF and is melted using graphite electrodes charged with electricity.

India is the largest producer of DRI (Direct Reduced Iron) or sponge iron.

Bhilai (Chhattisgarh) - 3 MTPA
Bokaro(Jharkhand) - 4.5 MTPA
Durgapur (Bengal) -
Rourkela (Orissa) -
Burnpur -
Salem -

 Jamshedpur (Jharkhand) based world's sixth largest steel company, with an annual crude steel capacity of
31 million tonnes

an ambitious target to achieve a capacity of 100 million tonne by 2015.

Overseas acquisitions have already added up to 21.4 million tonne, which includes

Corus production at 18.2 million tonne,

Natsteel 2 million tonnes

Millennium Steel 1.2 million tonnes

31 January 2007 Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at £6.7 billion

13 million tonnes capacity JSW Steel

10mtpa plant at Vijayanagar Works

Vasind and Tarapur Works is 0.9 MTPA of Galvanised, GALVALUME & Colour Coated Cold Rolled products.

Salem Works 1 MTPA is the only integrated steel plant in Tamil Nadu 

Jindal Steel & Power Ltd


 3 million TPA at Raigarh, Chhattisgarh

also: Bhushan, Jindal Stainless, Usha Martin, Monnet Ispat, Uttam Galva, Mukand

1 million tonnes capacity
Khopoli plant for colour coated sheets auto-grade steel
biggest expansion is in Orissa 3MTPA

ESSAR STEEL



•14 million tonnes per annum of current capacity, 
• 25 million tonnes planned capacity Presence in key markets in Asia and North America
• Fully integrated from mining to retail: Essar owns a global portfolio of coal and iron ore mines and has access to all key raw materials, ensuring steady supply to its plants
• Strong downstream capability with service centres and customer care centres, as well as a global network of retail outlets branded Essar Hypermart
• Specialised plants for value-added steel products, like pipes and plates
• Leadership position in the cold rolling, galvanizing and pre-coated segments

CURRENT OPERATIONS
• Hazira, Gujarat,
 10-million tonne steel plant at Hazira, largest in Western India.
Captive port, power plant, lime plant and oxygen plant.
o Cold Rolling plant: 1.4 million tonnes
o Galvanizing plant: 0.5 million tonnes
o A 1.5-million tonne extra wide plate mill
o A 600,000-tonne pipe mill

• Visakhapatnam, Andhra Pradesh, India: 8-million tonne pellet plant
• Bailadila, Chattisgarh, India: 8-million tonne iron ore beneficiation plant


• Pune, Maharashtra
o 600,000-tonne cold rolling plant
o 500,000-tonne galvanising plant
o 400,000-tonne colour coating plant
o 650,000-tonne pickling line

• Algoma, Ontario, Canada: 4-million tonne steel plant


• West Java, Jakarta, Indonesia:
o 400,000-tonne cold rolling mill and 150,000-tonne galvanising line
o Steel Service Center: 200,000 tonnes


o Essar Hypermart
• Retailing (across India): Over 230 steel retail outlets branded Essar Hypermart
• Services (across India): Largest Steel Service Center facilities in India with an annual
capacity of 2.5 million tonnes located in Pune (Maharashtra), Hazira (Gujarat),
Bahadurgarh (National Capital Region), and Chennai (Tamil Nadu).


UNDER EXECUTION
• Paradip, Orissa, India: A 12-million tonne pellet plant at Paradip close to the port
• Jodha-Barbil area, Orissa, India: A 12-million tonne iron ore beneficiation plant
• Bhuj, Gujarat, India: Steel Service Centre
• Minnesota, USA: A 6-million tonne pellet plant, a concentration plant and a directreduced
iron plant



Hospet-Bellary region of Karnataka state 400,000 tpa of carbon and alloy steels

India emPOWERed

NTPC

Tata Power

NHPC

Reliance Power

Neyveli Lignite

Torrent Power

Indian Banking

Market cap

SBI - 120,000 cr

ICICI Bank - 80,000 cr

HDFC Bank - 70,000 cr

Axis Bank - 35,000 cr

KotakM Bank - 25,000 cr

Bank of India - 20,000 cr

Bank of Baroda- 20,000 cr

Union Bank - 12,000 cr

IDBI Bank - 8,000 cr

Yes Bank - 7,000 cr

Central Bk - 6,000 cr

IndusInd - 5,000 cr

Federal Bk - 4,000 cr

ING Vysya - 2,500 cr

Karur Vysya-2,000 cr

J&K Bank - 2,500 cr

Karnataka B- 1,500 cr

Bank of Raj - 1,000 cr

DCB - 600 cr

CEMENTing India

India has 148 large cement plants (of which 95 plants exceeding 1 million tonne capacity) with aggregate of 220 million tonnes capacity, and total turnover $18.5 billion (Rs 100,000 crores)

[20crores tonnes X 1000 = 20,000 crores kg X Rs 5 per k.g = Rs 1 lac crores market]

Cement making process

Limestone -> Crushing -> Four stage suspension pre-heater -> Rotary Klin -> Clinker -> clinker cooling -> clinker yard=gypsum + fly ash -> Grinding mills/ Ball mills -> Cement

The limestone crusher is used for crushing the limestone boulder into smaller pieces. The crushing is a high power consumption operation.
During 2005, global cement production was 2220 million tones, with China accounting for nearly 45% of the total output followed by India accounting for 6% of the share and the US for 4.5% in world cement production – others - Japan.
At present, 100 per cent foreign direct investment (FDI) is permitted in the cement industry. To set up a cement plant in India, with an investment of over US$ 22 million entrepreneurs are required to obtain environmental clearance from the Ministry of Environment. 100 per cent FDI is also allowed for private cement companies to
set up power projects as well as coal or lignite mines for captive consumption.
Highly fragmented 50 players and 150 plants.
Highly regional – players clustered around limestone deposites
Competition is also regional bcoz low value of the commodity makes long distance transportation unviable. industry being divided into five major regions viz.
north, south, west, east and the central region.
The industry has undergone rapid technological upgradation and growth, and now, some of the cement plants in India are comparable to the world’s best operating plants in all respects. In recent years, the process of consolidation has occurred in cement industry,
The cement industry accounts for only 3% of the total coal requirements. Arising from the lack of availability of quality power, cement companies have been increasingly using captive power to augment their requirements.
The Cement manufacturing is an energy intensive process. Power cost accounts for 13-18% of total cost of cement manufacturing.
Two critical materials for the cement production are Limestone as raw material and coal as
fuel. Cost of procuring coal can constitute as much as 9-11% of total production costs for our cement facility. Gypsum constitutes 0.71% of our total manufacturing cost. Transport cost of cement and our raw material (after taking into consideration transport subsidy) accounts for around 17-23% of the total cost. any increase in price of fuel
Coal having Calorific value of 4500 Kcal /Kg. and ash content as low as 30.06% is available in plenty in Jharkhand.


LB: Power & Fuel cost per tonne of cement sold apprx Rs 700. Consistent strength in international coal prices will continue to impact the profitability of Indian cement companies. Generally cement companies consume 130-140 kg of coal to produce one tonne of cement. assumed that the companies will consume 90 units of electricity to produce one tonne of cement

Ordinary Portland Cement
OPC is produced by inter-grinding clinker, performance improver and gypsum in a cement mill. OPC is further classified, as relevant in our case as, 43 Grade and 53 Grade OPC. OPC is manufactured in three grades, viz. 33 grade, 43 grade and 53 grade, the numbers indicating the compressive strength obtained after 28 days, when tested as per the stipulated procedure.

53 Grade OPC is high strength cement
According to BIS requirements, 53 Grade OPC should have a 28 day compressive strength of not less than 53 MPA.
Portland Pozzolana Cement
PPC is blended cement produced by adding pozzolanic materials, such as fly ash, volcanic ash and calcined clay to clinker. Our Company has encouraged customer awareness and acceptance of PPC (through training programs designed by us for engineers and masons) as it has lower production costs and offers higher margins than OPC. PPC can be used for the majority of construction projects, such as in the building of houses, high-rise
buildings and bridges. The production process for PPC is similar to that for OPC, but fly ash the pozzolanic material which is generally used, is mixed with clinker in the cement mill stage of manufacturing. The fly ash content of PPC produced by us is normally between 20% and 25%. The use of fly ash enables cement to be produced using less clinker. This helps to reduce production costs as fly ash, being a waste product from the operation of coal fired power stations, is readily available and is a cheaper commodity than clinker.
The company is setting up an integrated Clinkerisation and Cement grinding plant of 800 TPD capacity expandable to 1600 TPD in the Hazaribagh district of Jharkhand at Patratu Industrial Estate, for manufacturing Clinker, Ordinary Portland Cement (OPC), Portland Pozzolona Cement (PPC) and Portland Slag Cement (PSC) is Rs 125 crores.

RMC is not yet break-even in India. Only 5% is RMC unlike developed countries where 60% is RMC – BS May09
Cement Supply dynamics
Commodity – Cyclical business
Like in most commodity industries, the business cycle in the cement industry follows a set
pattern.
When the demand-supply gap narrows, price realizations improve and companies
increase their capex outlays for building capacities and increasing their market shares.
Most of the large companies with high level of financial flexibility are the first to take off in good times as they are continuously looking at improving their market share.
DB: Cement prices spiraling to a decadal high have left most Indian cement producers scrambling
for new capacity additions at a frenzied pace for the first time in the last two decades.
HDFC : The Industry planned this massive capacity expansion of 108 mt because they had never seen such a good run till FY2006.
During this period, the capacity utilization rate of the Industry reached an all time high
level of ~99% in FY08. In the period FY05 to FY08, cement demand grew at a CAGR of
10.5% and average retail price increased by a whopping 41% to Rs 230 per bag. Cement
manufacturers made huge profits and the Industry average per tonne of operating profits
crossed Rs 1100. Driven by theses profitability levels, average RoCE level of the Industry
crossed the 25% mark.

cement demand should grow at a CAGR of 16% over FY09- FY11E to absorb the incremental supply, as the effective production capacity is expected to grow at a CAGR of 18% during this period. We expect the oversupply to be 20.1 mt and 45.4 mt during FY10E and FY11E respectively. expect cement prices to remain under pressure. Indian Cement Industry is set to increase production capacity by 28.3 mt in FY09E,
41.4 mt in FY10E and 18.9 mt in FY11E. This will take the aggregate installed capacity
to ~288 mt. Of the new capacities, ~ 41 mt (~50%) is expected to be commissioned in the South, followed by 13.3 mt (~16.4%) in the North and 13 mt (16.1%) in the East.

DB: Actual placement of orders with equipment suppliers should be taken as confirmed with the
first advance payment or letter of intent. While almost all equipment suppliers recognise a
letter of intent as a confirmation of new orders, we believe that the first advance payment
received by them is a better metric to measure equipment orders. Be that as it may, letters
of intent received by cement equipment suppliers point to a total of 73.7MTPA of cement
capacities to be commissioned over FY07-10
Project delays add a different twist to likely capacity additions.
DB: Our analysis shows that only 51m tonnes, i.e. 67% of the ordered capacity and 47% of the announced capacity, will get commissioned till FY2010 (Mar). Imports are unlikely to pose a threat due to tight regional demandsupply and port bottlenecks. Longer term, we expect Indian cement prices to increase in line with inflation – note that India’s low per capita consumption is near an inflection point
Earnings of Shree Cement are the most sensitive to a decline in realization followed by India Cement. However, on the volume front, Ambuja Cement is most susceptible to a possible decline. prefer stocks of companies which have commissioned their capex ahead of their peers or those who have adopted cost savings measures.
cement companies, generally enter into prospecting/mining lease with the respective state Governments. the Government generally controls the prices. Most
of the cement companies are assigned quarterly linkages for coal (fuel) from specific coalfields.

The seven states viz. Madhya Pradesh, Andhra Pradesh, Rajasthan, Gujarat, Karnataka, Tamil Nadu and Maharashtra, account for around 74 per cent of the total domestic capacity
As of December 31, 2003, around 94% of the capacity was based on dry process technology as compared to 84 % in 1993-94. The shift is due to lower coal consumption in the dry process technology

it costs Rs 2.4/ 2.5 to produce 1kg cement (ie Rs 2,400 per tonne) but transport cost is also very high.