Read this before investing in a cement company

The milestone is set. The government's Vision 2047 scheme envisions India becoming a $30 trillion economy to mark the 100th year of an independent India. But to turn this vision into reality, it needs more roads, airports, highways, and, most importantly, cement. Simply put, India's march towards becoming a developed nation is bound to push the cement industry to new heights. And for investors, this means new opportunities. So, let's look closer at the cement industry, from how it is made and who the major players are to how to analyse it. Conjuring the concrete The first step to analysing any industry is understanding the product and how it is made. When it comes to the cement industry, the first part is rather simple. It is a basic material used to build anything, from schools to airports. The second part, however, needs a bit of explaining. Cement production starts with mining limestone, which is then mixed and ground with clay and some other materials. Next, this mixture is heated at high temperatures and then cooled to create a hard material called clinker. Then, the clinker is crushed and mixed with gypsum, and that is it. You have your everyday cement. Nature of the beast You must decipher the industry dynamics to pick the best from the rest for any industry. The cement industry is a push industry , meaning the focus is on making the products widely available. Marketing and branding take the back seat. So, how do you know which cement manufacturer is slated for success? There are essentially two factors you should look at to assess if a cement company is worth investing: cost and scale. Controlling the costs In a push market, maintaining a cost advantage is key to gaining an edge. So, whoever can maintain quality while keeping a tight lid on costs has significantly higher chances of climbing the industry ladder. Here are the three major costs for manufacturing cement and the companies saving the most on them. Raw material costs: The primary raw material for cement is limestone. Manufacturers procure it through mines, which require licences and carry considerable royalty charges. Hence, the trick is to produce the most quantity using the least amount of limestone. Cement producers achieve this by mixing limestone with other materials, such as fly ash and limestone. Mixing for margins Adding other materials to clinker reduces overall cost Items in proportion (%) OPC PPC PSC Clinker 95 65-45 45-25 Gypsum 5 5