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GUJARAT AMBUJA

CEMENT LIMITED

Presentation By
Bhavesh Chaudhari
CEMENT INDUSTRY-AN OVERVIEW

Second largest producer in world after China with
capacity of approximately 160 MT in 2006.

Growing at approx CAGR of 9% since last 5 years

54 companies exist at present

The cement industry accounts for approximately
1.3% of GDP and employs over 0.14 million people.

Location Specific
CONTINUE…

Highly fragmented (low entry barriers)
Highly capital & energy intensive
Heavily taxed sector
High bulk (volume) low value product
Heavy dependence on 4 sectors viz. coal,
power and transport, Infrastructure
Cyclical industry
Indian cement industry – Major players
in 2006

ACC
Ultratech
12.6 Gujarat Ambuja
34.8 9.7 Grasim Industries
Century Textiles and Industries
Birla Corp Ltd
10.6 India Cements
3.2
10.3 Jaiprakash Industries (Jaypee)
5.9 3.6 4.7
4.5 Lafarge
Others
Market Share in Last 6 Years
ENVIRONMENT ANALYSIS—
PORTER’S MODEL
SWOT ANALYSIS

Strength Weakness
•Growth at approx CAGR of 9% in last 5 years • High Oil Prices, Cost of Power increase
•Growing Domestic cement consumption at production cost
approx CAGR of 8% in last 3 years •Supply exceeds Production lead to
• Highly Capital Incentive so difficult for competition in price
small entrant •Low Quality as compared to international
• Not much restriction by govt. standard but improving
• Market consolidation taking place

Opportunity Threat
•High Mortgage Penetration - Low Interest •Further Hike in Oil Prices
Rates •Use of plastic engineering in construction
•Easy loan availability for housing finance •Sub prime market loss may affect
•Increased investments in Infrastructure
•Increased govt. outlay on BHARAT
NIRMAN, GOLDEN QUADRILATERAL,
BRTS etc.
Recent Trends

Dry technology in place of Wet technology
Market consolidation
• Flurry of consolidation in the last couple of years.
Notable ones include:
• Gujarat Ambuja picking up 14% in ACC
• Grasim acquiring cement business of L & T forming
Ultratech
• Holcim taking stake in GACL and ACC
• Heidelberg Cement acquiring 50% in Indorama
Cement
GACL-MILESTONES

Ambuja Cements was set up in 1986.
In the last decade the company has grown tenfold
The total cement capacity of the company is 16.5 million tonnes
It touched to capacity utilization of 100% in 1st 6 months.
Capacity built up from 0.7 MT in 1986 to16.5 MT as of
today at CAGR of 18%
Organic growth through acquisitions
2001 – Private equity investors (American International Group
and Government of Singapore) invested in ACIL
2005 – ACIL restructured as a joint venture with Holcim
2006 – Founder promoters sold part of their holding in ACL in
favor of Holcim
ACL is a Holcim Group company since May 2006
Strategies Adopted By GACL

MARKET ENTRY
Presence of strong competitors at the time of entry

Speedy setup of plant

100% utilization in first 6 months only

Emphasis on Quality
HUMAN RESOURCE POLICY

Unlocking Potential of Employees
Employed Experienced people from other companies
More stress was on enthusiasm not on experience
Motivating factor was empowerment to perform than monetary
factor
Free access to senior official including VP
Communication Meetings on regular basis to discuss and sort
out grievances
Preference to existing employees for higher position
Reward to suggestions
Operation and Control- Positioning in
INDIA
North Central Region Eastern Region
8.0 millon t 1 3.0 million t 1

South West Region
7.5 million t 1
Cement plant
Grinding station
Terminal
Port

1 Cement Capacity
Continue…

Hub & Spoke Strategy - Grinding close to markets
Strong Control
Problem is seen as Joint problem not as mechanical,
electrical or marketing problem
Modification in operation was allowed to be done by
junior and after that it is reported resulting into
speed, trust and responsibility
Control data was generated 48 times a day for better
control
Interruption was reduced to 2 per day from 4-5 days
Marketing Strategy

Emphasis was on Quality
High Advertisement for BRANDING-3 times than
ACC at one time
Improvement in Packaging by information provided
by suppliers
Extensive & primarily exclusive distribution
network-Over 6,000 dealers and 20,000 retailers
Promotion through seminar, workshops for masons,
architects, contractors etc by providing info on use of
AMBUJA CEMENT
Advertising and Publicity campaign
Transportation and Logistics

Sea transportation- Seven dedicated vessels for faster & cheaper
transportation Ahmedabad

GACL was the 1st Cement Ambujanagar
Surat
company to use Sea as Maratha
transportation
Muldwarka, Gujarat: All Panvel

weather port, 8 kms from our
Ambujanagar plant. Handles
ships with 40,000 DWT. is also
equipped to export clinker and
cement and import coal and
furnace oil.
A fleet of 350 self financed
trucks was also their for easy
transportation
Cochin
R&D

Own R&D Department in 1989
Encouraged Experiments at all level
Use of Mechanical conveyors instead of pneumatic
conveyors against industry trend
Use of Industrial waste to reduce fuel consumption
Cost Reduction

Speedy set up of plant
Reduction in energy cost
Captive infrastructure - Port, Receiving Terminals and
Captive Power Plants (260 MW)

Electricity (Kwh/T of Cmt)
90 Coal/Other Fuel (Kcal/Kg of Clinker) 745

88
740 Shift from liquid to
solid fuel to reduce
735
730

cost of captive energy.
86
725
720
84
715

82 710
705
80 700
2002-03 2003-04 2004-05 2006 2007

§ Consumption per unit of Production
Expansion Strategy

Starting with a plant with a capacity of 0.7 MT in
Gujarat, GACL is now having plants at different
place with total 16.5 MT.
Plant Capa
It has adopted organic growth. city

Gujarat 5
H.P/Punjab 4.5
Rajasthan 2

W.B/Chhattisgarh 2

Maharashtra 3

Total 16.5
Expansion projects
Clinker Cement
2007 2008 2009 2010 (million t) (million t)
Location Cluster

Rauri North Clinkering 2.2 -

Dadri North Grinding - 1.5

Nalagarh North Grinding - 1.5

Surat SW Grinding - 1.0

Ahmedabad SW Grinding - 1.5

Cochin SW Terminal
Clinker -
Bhatapara East 2.2

Barh East Grinding _ 1.0

Total 4.4 6.5

Greenfield Brownfield

Major Capital outlay (in Rs. Crores.)

§ Clinker plants 1600
§ Grinding units 1050
§ Captive power plants 545
§ Ships & Terminals 245
Consolidation Strategy

In 1995, GACL floated a wholly owned subsidiary in Mauritius
– Cement Ambuja International Ltd. (CAIL).
A year later, GACL floated another subsidiary, Ceylon Ambuja
Cements (Private) Ltd., through which it acquired a small
company, Midigama Cement, in Sri Lanka.
In 1997, GACL acquired Modi Cements’ sick 1.4 mtpa plant at
Raipur (Madhya Pradesh) for Rs 1.66 billion. This plant was
renamed Ambuja Cement Eastern Ltd.
In 1998, GACL acquired the Nadikudi (around 100 kms from
Guntur) and Proddatur (near Cuddaph) limestone mines in
Andhra Pradesh to strengthen its presence in southern India.
Continue…

In December 1999, GACL acquired a 51% stake in Delhi based
DLF Cement for Rs 3.5 billion.
After this merger, GACL became the fourth largest cement
manufacturer in India after ACC, L&Tand Grasim.
In the same month, GACL also acquired a 7.2% stake in
Associated Cement Companies (ACC) for Rs 4.55 billion which
was later on increased to 14.4%
2001 – Private equity investors (American International Group
and Government of Singapore) invested in ACIL
2005 – ACIL restructured as a joint venture with Holcim
ACL is a Holcim Group company since May 2006
Share Holding Pattern

GDR, 3.39%
Public 12.54%

Insurance / MF / FI
Holcim, 45.68%
14.07%

FIIs 23.50% Founder family 0.82%
Summary
Solid market position built up within short period of
time through organic growth and acquisitions
Pin-pointed positioning tied to substantial captive
infrastructure to serve markets including sea
transportation, capability to export
High use of alternative raw materials in production
of composite cements
Substantial greenfield and brownfield expansion
plans to grow within the attractive markets and an
internal financing capability to fund expansion
projects
Continue…

Strong Brand by emphasis on quality to make
present in competitive market
Expansion through proper merger and acquisition at
proper time.
Thank You