Market share shrinks for ACC, Ambuja

Both companies have been shying away from infrastructure contracts, where demand is growing

The once formidable Holcim group’s ACC and Ambuja Cement are now caught in a market share-losing tailspin. Having failed to keep pace with the industry growth rate, the two cement companies have also shied away from infrastructure contracts, where demand is growing.

Based on data available through research reports, ACC held a market share of 8.3 per cent in 2014, which has now fallen to 7.3 per cent in 2018. The story is similar for Ambuja Cement which saw the market share falling to 8.6 per cent in 2018 from 9.4 per cent in 2014.

Analysts and industry officials point out the two cement makers have been unable to invest and diversify enough to keep pace with industry growth rates.

"ACC and Ambuja have not been able to keep up with the price competitive infrastructure tender market. They are a brand oriented company, but with infrastructure pie growing, the two companies are losing out. In addition, they have not invested the way regional players have done to grow market share,” said Nitin Bhasin, head of research at Ambit Capital.

An email query sent to ACC on Thursday remained unanswered, while officials at Ambuja are hopeful its brand premium and synergies with ACC will help sail the tide.

Concerned officials at Ambuja Cements state the company has taken a conscious call for not focussing on infrastructure.  “We have a focused approach towards the building and infrastructure (B&I) segment. Given the current scenario in the infrastructure sector, we are cautious on further exposing ourselves to infrastructure projects,” said a spokesperson for the company. The spokesperson added, “Therefore, we will continue to focus on the retail-centric strategy, which has a better cash conversion ratio. Our focus primarily remains on the retail segment with nearly 82% of our sales are being generated from this segment. Our products are popular among the individual home builders."

However, based on industry estimates, the last few years have seen infrastructure gain a five percent higher edge in the demand pie. Industry experts peg infrastructure share in overall demand at 20 per cent, higher from 15 per cent two years back.

For 2018-2019, the cement industry grew at more than 12 per cent, according to industry estimates. ACC, however, in calendar year 2018 grew at eight per cent and the rate was lower at six per cent for Ambuja Cement in the same period. The two companies follow a calendar year for financial reporting.

“ACC and Ambuja have not been investing enough and, like other players, have to expand grinding and other capacities to capture the growth at the industry level,” said an official from a cement company who did not wish to be identified. The two companies have been unable to keep pace with industry growth rates most times since 2015. For instance, companies reported a year-on-year decline during 2016, in sales volumes, while the industry in FY2016 reported a marginal one per cent growth in volumes.

Ambuja Cement is simultaneously keeping its brand push intact. “The company has developed well-defined marketing and commercial strategies to improve sales of new as well as premium products; as the demand for these products has been growing across India,” the Ambuja spokesperson said. “Our improved synergy with our subsidiary ACC will also help the volume growth in the future,” the spokesperson added.