The concentration in the industry is also likely to increase with a number of small regional players giving way to larger ones. ICRA expects five leading companies including Larsen & Turbo, ACC, Grasim Industries, Gujarat Ambuja Cements and India Cements to dominate the industry and further consolidate their position by the turn of the century.

The northern region, which has suffered the most due to low capacity utilisation of around 75 per cent as against 80 per cent in the South, is expected to see better times as most of the new capacity additions will be in the southern and western regions. Cement units inthe traditionally better off regions of southern and western India will have to watch out as a surplus might emerge in the area, says the report.

At present, operating margins of cement units in Tamil Nadu is over 30 per cent whereas in the northern regions margins are hovering between 10-15 per cent. According to the report margins in North India will go up in the coming years due to better capacity utilisation.

Certain key factors determining a unit's success as per the study are energy efficiency and cost control, plant location and product distribution logistics, size of operation, access to capital and growth through expansions and acquisition.

Icra's valuation analysis of the existing players shows that there are a number of smaller regional companies available at attractive valuations. The process of consolidation is therefore expected to continue. In the regional markets also, concentration is like to increase. Icra feels that each region will be dominated by a maximum of three players. Globalcement players are also likely to increase their presence in the industry.