| INDUSTRY STRUCTURE AND DEVELOPMENTS |
| TYRE |
| The Indian Tyre Industry is dominated by five major Indian manufacturers – Apollo Tyres, Birla Tyres, Ceat Tyres, JK Tyres and MRF – who together account for more than 85% of the industry turnover. The major market segments of business are replacement, institutional (Original Equipment Manufacturers- ["OEM"] and State Transport Undertakings) and exports. In terms of products, the market is split into two broad segments – Commercial Vehicle Tyres (trucks & buses, light commercial vehicles, agriculture and specialty vehicles) and Personal Vehicle Tyres (car, SUV, motorcycle, scooter and moped). |
| Commercial vehicle tyres continue to constitute the largest segment of the Indian market. A few years back, these tyres constituted more than 80% of the market. Over the last few years, however, the Indian passenger vehicle industry (cars as well as two wheelers) has grown at a pace that outstrips growth of commercial vehicle sales, driven by greater disposable incomes, the rising aspirations of a burgeoning middle class, and the presence of almost every international vehicle manufacturer in India. Growing passenger vehicle sales in the country has meant the proportion of commercial vehicle tyres in the total tyre industry has dropped to a little more than 60% today. |
| A key trend in the Indian market is the shift away from the old technology cross-ply tyres to radials. While radialisation is greater than 95% in passenger vehicles today, in commercial vehicle tyres it is still below 25%. This is, however, picking up and India should soon catch up with the world on this parameter. Growing preference for radials by fleets on account of their better performance, increasing fitment of radials by OEMs and massive investments in increasing capacities for truck and bus radials by industry players seems to be driving this change. Radialisation in the truck and bus segment is forecast to cross 40% in the next few years. |
| The automotive market has a direct correlation with the growth of the Indian economy. The deceleration in the Indian economy has had a negative impact on the automotive industry as a whole. Declining growth of economic activity slows the demand for commercial vehicles something that is evident in India today. Consequently, the overall domestic truck and bus tyre market also saw stagnation in 2011-12 as compared to the previous year, which had seen a growth of over 20%. Sales of passenger vehicles suffered a mid-year slump resulting in lower offtake of tyres by OEMs. Nonetheless, towards the end of the Financial Year 2011-12, indications were that sales were beginning to look up once again. |
| On the cost front, volatility in raw material prices, especially of natural rubber, has been a major factor impacting the fortunes of the Indian Tyre Industry in the previous year. Volatile raw material prices continue to pose the biggest risk for the tyre business. |
| CEMENT |
| China continues to be the world's largest cement producer followed by India. India has the facilities and technology to produce world class cement. |
| The cement industry in India is estimated to have recorded a growth of 6% during the Financial Year 2011-12 as against a growth of 5% during the previous year. This was achieved despite a perceptible slow down in the housing and infrastructure space, the major cement consumer. |
| Cement capacity utilisation in India during the Financial Year 2011-12 is estimated to have been around 75%. New capacities are being continuously added much ahead of the increase in demand. Such additions have tended to impact higher capacity utilisations. |
| The capacity utilisation in the country's Southern Region, where the Company's cement plants are located, is estimated to have been only 61% during the Financial Year 2011-12 as against 65% during the previous year. Moreover, a de-growth of 3% in the consumption of cement is reported to have been also recorded in this Region during Financial Year 2011-12. |
| RAYON |
| The demand for Viscose Filament Yarn (VFY) was subdued during Financial Year 2011-12 owing to severe competition from other competing fibres. The inventory of the industry increased substantially as compared to the previous year. Consequently, the unit price realisations for the industry as a whole came under intense pressure. |
