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Gujarat AmbuJa: Cost Leader In the Indian Cement Industry
This:eMS was wrlIten by M.ne} Kum.r SllIfIIme/u. las Center for Management Research. It was compiled from published sources, and is intended to be used as a basis for class discussion ret". than to /lJuftrate either effilcflve or ineffe.r:f;V/J hs/ldfing of II mensgem8nt situation.

Loyola Institute of Business Administration, Sterting Road, Nungambakkam,Chennai. Order No: 030910045403, September 03,2010. licensed to print 05 copie.!, License vBfid upto 02 December 2010.


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2004, ISS Center for Management Research. All rights reserved.

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In 2003.". ~ . low power tariff and low fuel costs had helped it to become the cost leader in the industry. The company's engineers had picked up best practices during visits to overseas plants in countries like Japan and Australia. which had grown tenfold during the late 1990s.. (ACPL) in 1981 by Narotam Satyanarayan Sekhsaria (Sekhsaria).¥ :'. Sterling Road. ! J.5 mn tonnes and generated revenue in excess of Rs.. Ceylon Ambuja Cements (Private) Ltd. GACL had cut energy costs by reducing the usage of coal through use of substitutes like crushed sugarcane.!>" ~ . through which it. Loyola Institute of BUSiness AdministJation. GACL was the lowest cost producer in the Indian cement industry. the company floated a public issue and its name was changed to GACL. freight and handling terminals. lack of substitutes and limited competition. low manpower costs. Originally a cotton trader. i· :~ \ I .. large kilns. (CAlL). The company had posted a net profit ofRs 221. named Ambuja Cements Himachal Unit in 1995.J. ~ • }f ~ Background Note GACL was established as Ambuja Cements Private Ltd.2010. . acquired a small company. In 1993. set up APCL... 2.jO r '.l IcmfJndia .Chennai. Order No: 030910045403. Low-cost funds had helped GACL to cut the cost of capital.. . a businessman from Gujarat in western India." '~~-r~:i~ '\i.¢ -.. r: ~ . GACL had also reduced pollution levels at its cement production plants and complied with the Swiss standards of 100 milligrams per cubic nanometer. I!I.• . GlIC sold its stake in GACL in two tranches to Sekhsaria in 1987 and 1990.~ i"" ·I~:. I . The company had won various awards for management excellence.. In 1983. Midigama Cement. GACL's modem plants. high degree of automation.. Suresh Neotia was appointed Chairman while Sekhsaria took charge as the Managing Director. license valid upto 02 December 2010..I'IIIt ICIVIR OPEAl002 ~e!OOrc~ Olii. ')1 r. Licensed to print 05 copies.' i_ i· p . GACL's quest for cost leadership had been driven by productivity improvement and cost cutting measures..73 crore for the year ended June 30. In the same year. was the third largest producer of cement in India in 2004 next only to Birla Groups (consisting of Grasim Cements and Larsen & Toubro Cements) and Associated Cement Companies (ACC) &. GACL floated a wholly owned subsidiary in Mauritius ..Cement Ambuja International Ltd. and environment management. 2003. named Ambuja Cements. production started at a 0. September 03. · . in Ambuja Nagar. fJ :_ . The same year. GACL set up a 1.. 1 . The company had pioneered the use of ship transportation to cut freight costs and also established the necessary infrastructure like ports. GACL operated most of its plants at above 100% capacity utilisation. Suresb Neotia and Vinod Neotia. in Sri Lanka.7 million tons per annum (mtpa) plant. named Gujambuja Cements. GACL floated another subsidiary.IBSCantG' lor Management .. . '. Nungambakkam. Attracted by buoyant cement demand in the northern regions. the company had believed in doing things in innovative and unconventional ways. With the support of Gujarat Industrial Investment Corporation (GllC). 'n':-': . Ever since its inception. j Gujarat Ambuja: Cost Leader in the Indian Cement Industry Introduction Gujarat Ambuja Cement Ltd (GACL). :.~.. In 1996.j '~. Gujarat.ill •J . -_ ~ _.5 mtpa plant at Suli in Himachal Pradesh (HP)... Sekhsaria liked the cement business because of its stable demand.'J:. GACL had a capacity of 12. quality. .500 crores. GACL commissioned its second cement plant at Ambuja Nagar (capacity I mtpa). Sekhsaria and his two partners.t ["" .- .

Leading cement companies like Grasim.53 109.9% per annum (54 mt to 98 mt).7% and dispatched 111.0 mtpa. 2 .45 2002-03 111. . with the balance being made up by an annual growth of27 .66 billion. ACC.67 115. the capacity increased at an average.2 130 12.35 million tonnes of cement. The Indian Cement Industry In 2003. Maharashtra.e Capacity % Change Operating rates (%) Source: Crisinfac..5 mtpa.4 mtpa.5% for the fiscal year ending March 2003.000 crore to their market capital as the combined market capital had touched Rs 31. L&T and Grasim. India Cement. GACL also established grinding and packing units at Ropar (Punjab) and Panvel (Maharashtra). Larsen & Toubro. GACL set up its third plant at Ambuja Nagar. In 1997. after China. an increase of 8. In FY 2003. Between FY1992 and FY2001.72 4.II (capacity 1 mtpa).14 Production % Chane. This plant was renamed Ambuja Cement Eastern Ltd.40 crore in Dec 2003. with a total capacity of 144 mn tonnes (including mini plants).34 85.. ACC had a total capacity of over 11 mtpa. The rest of the companies. GACL paid Rs 3. With 14 manufacturing units in India. named Guj Line . GACL became the fourth largest cement manufacturer in India after ACe. Madras Cement and Shree Cement alone had added over Rs 20.724. lndia's cement capacity had increased from 3 mtpa in 1950-51 to around 130 mtpa in 2003. GAeL began trial production at a new 2 mtpa plant in Chandrapur. Indian cement companies had produced 111.18 138.6% per annum.Or9 Gujarat Ambuja. In the same month. the Indian cement industry was the second largest in the world.06 million tonnes of cement. After this merger.in cement exports. Exhibit: .99 9. The domestic consumption growth had been marginally lower at 6. It was one of the largest integrated cement companies in the world. GAeL revamped its processes to bring them on pat with the standards of its other plants. The top five companies accounted for over 48.ICmrindia. GACL acquired the Nadikudi (about 100 kms from Guntur) and Proddatur (near Cuddaph) limestone mines in Andhra Pradesh to strengthen its presence in southern India.2% stake in ACC for Rs 4.4 mtpa plant at Raipur (Madhya Pradesh) for Rs 1.7 Rivalry in the Indian cement industry was intense with over SO companies operating around 120 plants.03 15. After the acquisition.8% per annum.4 -0.66 80. Gujarat Ambuja.57 2001-02 101.89 80.36 9. an' increase of 8. In December 2001.92 5.5 to 2. at a growth rate of 7. were operating single-location plants with capacities ranging from 0.5 billion to acquire a 51% stake in Delhi based DLF Cement.55 billion. the company recorded a sales figure of Rs 2173 crores and a PAT of Rs 293 crores. In 1996.JOU< www. typically. In December 1999. 94. IndiaD Cemeat Production 1999-00 2000-01 93. GACL acquired Modi Cements' sick 1. DLF Cement had started its operations in 1997 in Rajasthan with a plant capacity of 1.5% of the total capacity. In 1998.8% per annum (67 mtpa to 130 mtpa) while production and despatches grew at 6.15 78. GACL also acquired a 7. taking its total capacity to 12.3%.96 6. 7.

8 4.ent Industry (2003) Company ACC Gujarat Ambuia Grasim Ind L&T India Cement Century Textiles Jaypee Birla Corp Lafarge Madras Cement Zuari Chettinad Cement Surashtra Cement ..2 10..i t: ..7 0..1 4.4 2.1 4.----- .4 0..1 1. -¥~ ''!.6 4.' I··'. org www.7 10.8 2.5 Apr-May03 2..J l" '!: ~:'".6 2.8 0.~ Andhra Cement ccr 2.~ \ 3. ~" 16.4 3.!cmrlndlo Figure (i) ~arketS~are(2003) ~.8 5 5. ~ .4 100 Others Total Source: CMA..3 4. The excess output was sold in states like Maharashtra.7 3.-_.1 12.. " : 2 1 0.1 12.9 10.---- ----- _----'. some foreign multinationals had entered the country.3 1.1 .~. .9 34.3 3.~ 1.6 0.8 ~ ."_' - .. Rajasthan and Kerala.: - ACC Gujarat Ambuja Others Grasim Ind India Cement ~ --1= : r: Source: CMA...4 .6 4. . 8.. In view of the huge market potential.4 1. I~~ Exhibit: n Major Players in the Indian Cem..3 24.8 0. r . ". 19.8 0.~ Capacity % share Production % share Latest in total 11.5 14.6 1 0. " 3 .1 3. I '.5 1.1 17 8.8 24.2 . The total cement demand was.9 2 1.7 4.5 3.1 140 6.3 0. .· _.9 . however.4 100 .t.3 3. .6 .:.9 0. Gujarat was the largest cement producing state with a capacity of around 15 million tonnes in end 2003.6 3.-----.3 2 in total 13.1 5. . only around 6 MT.3 11.9 2.1 0.. Companies like Lafarge and Italicementi had made acquisitions and other majors like Holcim and Cemex were waiting for a favourable opportunity to do the same.. ~1 -'~ KJ\lR --_--- GuJarat Arnbuja •.2 0.

clay. When mixed with water.4 Demd 8.. These road projects were expected to generate a demand for cement of 4-Smn tons pa (i. which does not allow air to be trapped between the cement molecules during hardening. Hence. Manufacturing In 2003. etc for building cheaper nonpenn anent structures. Tamil Nadu. Cement was consumed in large quantities by the infrastructure sector. Mumbai. grinding and blending of raw materials. which typically completed one revolution per minute.e.91 16.ICMR Gujarat Ambuja . GACL also had three grinding mills at Ropar (punjab).000 kms of National Highways. Exhibit: m Demand & Supply by Region (in mn tonnes) FY02 FY03 Cap 41.66 % Change Cap 9. clinker was mixed with retarders' such as gypsum. The National Highway Development Project (NHDP) had been initiated to upgrade the existing highways to connect the four metropolitan cities Delhi. and finish grinding. The material flowed towards the hot end of the kiln and was heated to a temperature of 1300-1400 degree.8 41. The heating process in the kiln resulted in dehydration (removal of water vapour) and calcination (removal of carbon dioxide). In rural areas. The Indian government was a major consumer of cement. The product fonned in the kiln was a dark and hard nodule.. Maharashtra. The performance of cement companies was dependent on infra-structural investments made by the government.5 21. dispersing and water proofmg agents' were added. After air cooling. Almost 25% of these roads were expected to be concretised. clinker production.42 38. Chennai and Kolkata by the Golden Quadrilateral and the North-South and East-West Corridors. cement demand in emerging economies was much higher than in developed countries. lime.48 1 8. Andhra Pradesh.96 107. The cement manufacturing process involved four stages: quarrying and crushing.] 6.96 29. A chemical. This project involved upgradation to four/six lanes of about 13.15 16.34 44. 1 4 . Ii I ! I I 2 The components used to extend the retarding time of cement. silica and gypsum.1 6.lcmrtndtc. Crushed and pulverized coal was used as the fuel. Then air entraining". plaster or calcium lignosulfonate. Madhya Pradesh. Uttar Pradesh and Bihar. The demand for cement in India was roughly split between the urban and rural areas. which was cooled to form clinker.2 7 4. The mixture was fed to the grinding mills. www.27 130 Demd 25.centigrade for 1 hour. which produced cement.9 99 138. 4-5% incremental growth) over the next two years. penetration levels were still low as cement was substituted by cheaper building materials like mud.5 2.1 13.61 Demd 34.08 31.59 Source: Crisinfac.org The demand for cement was closely linked to the performance of the Indian economy. cement formed a hard mass due to the hydration of the constituent compounds. ) A chemical added to withstand water molecule pressure. The raw materials after grinding and blending were fed into a pre-heater followed by a kiln. GAeL had manufacturing plants in five different locations (Exhibit: IV).3 26. GACL along with ACC had plants in Kamataka.01 22.7 8.7 Cap North West East South Total 28. ! i . The basic raw materials used in cement manufacturing were limestone.06 26.

co.67 1918. semi-dry and dry were used to produce cement. However.00 1. and blended with soft clay.695 5. a h. The slurry had 30 to 40 % water content.alf times to three times than in the wet process.org Gujarat Ambuja .00 2. It reduced fuel consumption from 330 kg (in the wet process) to 250 kg of coal for a ton of cement. MAH) !Daburji (Rupnagar PUN) Suli (Solan..21.930 13.50 2. Exhibit: IV Plant Locations and Their Capacities (June 2003) Location ~bujanagar {Amreli. Capacity '000 tonnes 4150 520 1730 Production qty '000 tonnes 4876.00 12.42 1734. GUn_ ~hatinda (Bathin_da. 4.indiacements.age to Total 94 2 4 100 Source: www. the raw material was prepared by mixing limestone and water (called slurry). the slurry was evaporated to remove water content..00 3.in (April 2003). Also.50 'Three types of processes .-----_. HP) Source: CMIE. Before it was powdered. the output in the dry process ~as ~o and. Exhibit: VI Cement Capacity in India (Break up by process) Process Dry Semi-Dry Wet Total: Capacity (TPD) 3.45 335.8 1400 1200 Exhibit: V Capacity by Region: GACL & Its Subsidiaries (2003) Gujarat Himachal Pradesh! Punjab Rajasthan Chattisgarh/ West Bengal Mabarashtra Total Source: Company Website._P_!lli)_ Chandrapur (Chandrapur..40. .845 o/. In the wet process.96 974. for a given kiln size.---i • IC!\JR -----www. The vertical shaft technology employed by mini-cement umts used the wet process whereas the rotary kiln technology employed by the large plants used the modem dry process.icmrlndla..wet. -. _. .220 3. The dry process had become popular over the years. The wet process consumed more energy compared to the dry process. the dry process required high capital investment.

lcmrlndla. drying Additive preparation: Crushing.•. and White cement. Figu. supply Fuel Preparation: Crushing. Portland Pozzolona cement. blending Clinker Production ~ Bagging & transport Source: www. calcination. Some of the popular ones were Ordinary Portland cement. These grades differed in the percentage of clinker used in making cement.re (ii) The Cement Manufacturing Process Raw Material Supply: Quarrying. mining. 6 . Homogenising. clinkering. cooling Clinker nodules Cement Grinding: Grinding. grinding. Portland Blast Furnace Slag cement. drying ~ Additives Materials Preparation: Grinding.ghgprotoool.IClIIR ------www.r2002.org Gujarat Ambuja . drying or slurring ~o-processing: Pre-heating.org Figure (iii) Cement Manufacturing Flow Diagram Source: www.com There were different varieties of cement based on their composition and use.

15 percent pozzolona and 5 percent gypsum. Portland Pozzolona Cement (PPC) required 80 percent clinker. It was useful in marine construction. ope was the most common cement used in general concrete construction when there WIUi no exposure to sulphates in the soil or groundwater.5 tons of limestone.3% of its total power requirements. It contained a small quantity of iron oxide to act as a filler between ceramic tiles. The quality of limestone significantly affected the operating efficiency of the plant.ICMR ------www.25 ton of coal. gas was used as fuel instead of coal. Limestone was the key raw material. and 0. The cement was used for decorative purposes like rendering" of walls. Normally about 1. GACL replaced coal with crushed sugarcane. In terms of calorific value. In the process. flooring. 1316 per tonne.05 ton of gypsum were needed per ton of cement. 120 kwh of power. White cement was a slight variation of OPC. While its total installed capacity was around 5 mtpa. 1.30 per kilowatt (excluding interest and depreciation). GAeL's coal consumption of 170 kg per tonne of cement was also the lowest in the industry against an industry average of 250 kg per tonne. GAeL engineers attempted to reduce coal consumption by using groundnut husk to fire the kilns.2 . The ash content in white cement had to be low.50 per kilowatt for power supplied by Electricity Boards. Relatively small amounts of white cement were produced in the country. Since the Kodinar plant was located in the agricultural belt of Saurashtra area. It accounted for 18 percent of the total cement consumption in the country. it was 743 kcal per ton of clinker compared to the industry nonn of 850 kcal. the balance being mostly gypsum. compared to Rs. husk was available in plenty.productivity and consumption of coal and power. GAeL brought the energy bill down by Rs. GAeL had achieved more than ·100 % capacity utilization from 1999. Its captive power plants (40 MW and 12 MW added in Gujarat and Himachal Pradesh respectively during 1998) had reduced dependence on the more expensi ve power supplied by State Electricity Boards and supplied around 60. leading to fluctuations in the kiln temperature. GACL's captive power generation cost was only Rs. 20 for every tonne of crushed sugarcane used. 0. etc. 4.org Gujarat Ambuja: •. GACL's average production cost was Rs. It was capable of bonding mineral fragments into a compact whole when mixed with water. significantly lower than any of its nearest rivals. Portland Blast Furnace Slag Cement (PBSF) required 45 percent clinker. It accounted for 70 percent of the total consumption of cement in the country. 7 . GAeL's total cost management (TCM) drive had concentrated on two key areas . This hydration process resulted in a progressive stiffening. In the second plant in Ambuja Nagar. 4 A first layer of plaster on stone or brick. because it was almost three times more expensive than ordinary cement. PozzoJona materials were siliceous and aluminous materials that did not possess cementing properties but developed these properties in the presence of water. Ordinary Portland Cement (OPC) required 95 percent clinker. hardening and strength development. 50 percent blast furnace slag and 5 percent gypsum and accounted for 10 percent ofthe total cement consumed in India.1. GAeL consumed only 96 kwh of power per ton of cement against the industry average of 110-115 kwh per ton. The use of sugarcane created problems because water content differed with every batch. In 2003. In the early 2000s. GAeL designed a special mechanical system that could adjust the rate of feeding to ensure a stable temperature in the kiln. the company produced almost 6 mtpa (excluding the Modi Cements plant).icmrindlc. Hence.

Even though mechanical conveyors gave problems like spillages and breakdowns. by adjusting the retention time. 8 . 180 229 146 187 224 134 51 606 56 601 Jut-Sept 2003 183 230 140 67 620 GACL replaced V belt drives (which consumed more energy due to friction) by flat belt drives. Instead. Exhibit: vn Power Cost Oct-Dec 2003 tunits consumed least (Rs. maximum temperature and the rate of cooling.ICMR -----www.rron) 85 180 Jul-Sept 2003 90 183 2002 86 187 Source: Company Website. GAeL engineers successfully reduced the power costs. By studying the structure of the crystal. Exhibit: IX Cost ofProductioD Oct-Dec Z003 2002 Power Fuel Raw material Consumables Direct cost Source: Company Website. from 120 units/ton to 90 units/ton. the company devised an improved version of the mechanical conveyor to eliminate the drawbacks. which consumed more power.•.rron) Source: Company Website. GACL did not shift to pneumatic conveyors. the Japanese engineers determined whether the clinker had been heated to the right temperature. Exhibit: VITI Fuel Cost Od-Dec 2002 2003 718 729 229 224 Jul-Sept 2003 727 230 iK.lcmrlndla. during a visit to a plant in Japan. GACL engineers observed that clinker pieces were being extracted from the kiln and scanned under the microscope to examine their crystal structure.org GuJarat Ambuja . caU Kg of Clinker Cost (Rs. Cement plants often overcooked the clinker. In the early 1990s. Learning from this experience.

Explosives used in mining were on the negative list of imports and substantial costs were involved in implementing safety measures.~.. which occurred during the conventional drilling.~·-c~~~'~~~"~'T.--~ -~ . but also recovered more material from a given area. GACL sent its engineers to Australia to study the extraction of metals. In 1997.· .. ...'~~·~~~·-7"··r··-. GACL implemented the 'ripping' technology that could access limestone in smalJer areas where blasting was 110t possible. blasting and crushing process.. 597 614 GACL had made coordinated efforts to reduce mining expenses.~~~~') ~+-~~~~~~~~~----~~~~~~ 35+C~~~~~~~~~~~~~~~~~ 30 __ ~~~~~~~~~~~~--~--~~~~ 20~--'_~-r~~~~~~--~---.~~r-~ 1994 1995 1996 1997 Source: unSEL estimates.. which bad visual display screens. www.•. I' I . j 9 " . I tn) FY 2003 Power Fuel Raw material Consumables Direct eest Source: Company Website.·.~~"~c~~." 1998 1999 2000 2001 2002 .. GACL introduced an Australian device called Surface Miner. 1 '. FY 2002 179 Increase I (Decrease) (%) 187 227 136 47 4 -11 2 -2 -3 -~ 254 133 48 . I.. and an interlocking system connecting crucial stacks.. To reduce the noise and vibration.. The entire plant was monitored by a computerized process control system from a central control room._' I .':( !-. IOtR Gujarat Ambuja . On their return.icmrlndie.org Exhibit: X Expenses (Rs.. . The input of raw materials into the kiln was also regulated from the control room. GACL's information system facilitated easy access of data by different departments.--- -.---~. Mines were not only extremely destructive environmentally. It was a normal practice for cement companies to operate their own limestone mines. "\. but were also expensive to operate. Figure (tv) Trends in Operating Margin 45.' I "'" . The Surface miner was not only energy efficient.

In the case 0[50 kg bags. dispatch to the transporters.. At each manufacturing unit. GAeL had streamlined its quality control practices. Starting with the optimum raw material mix. 10 . The company used Zero Error Electronic Rotary machines.•. GAeL had adopted a fully computerized system..- II .~. The recommendations were forwarded to the top management for immediate action. a cross functional committee was responsible for the efficient manageme-nt of logistic functions.. GAeL was one of the first cement producers of the country to introduce an Integrated Logistics System (ILS). The committee met at regular intervals and reviewed the working of the total system. • Total power . which checked the quantity of cement in randomly picked bags. Improvement in efficiency and lower shutdowns rate led to an increase in capacity utilization from 143 percent in 1991-92 to 149 percent in 1992-93. GAeL permitted a maximum variation of 200 gm. Machines were also continuously monitored for any malfunctioning. Over the years. flow of information about the orders from generation to had to be processed quickly and accurately. The earlier practice had been to report quality control data once a day. Order Processing Systems Order Processing Systems involved the order fulfilment. GAeL had attempted to ensure that bags contained the right quantity of cement. Logistics Cement. . including Electronic Data Exchange (EDE) and MRP systems.-----"". 150 i! 8 Domestic Freight on domestic sales ~ 100 50 0 ..1RP) systems facilitated timely and accurate processing Effective order processing systems involved transmission of customer order.000 operational parameters helped in improving quality at each step of the production process.org Gujarat Ambuja . . GAeL had Wide Area Network (WAN).-~--~--. Later... paper processing.-.! .. Orders once received.~ Figure (v) GAeL: Cost Movement 350 300 2SO 200 . GAeL introduced the practice of reporting the data 48 times a day. Electronic Data Exchange (J\. retrieval from the warehouse.lcmrindlc. the computerized control over 3. linked all the major offices through a (EDE) and Material Resources Planning of orders.. adjustment of the inventory level and transmission of information to the department of production planning.. being freight intensive industry.ICJ\lR -----www. various initiatives had been taken up by GACL to streamline its logistics." 1996 Source: unSEL 1997 1998 1999 2000 2001 2002 estimates.

it took 1. GAeL set up ports and freight handling terminals at . GACL linked its inventory management process to most of the functions such as production planning. GACL became the first cement company in India to use water transportation for domestic as well as export consignments.. it was reduced to 50 per cent. There was the problem of inadequate availability of wagons especially on western railways and southeastern railways. 0. Traditionally. I 4 Pac. Manufacture of each tonne of cement involved the transportation of 1..000 dispatches per day using 10-tonne trucks or 250 dispatches using 40-tonne trucks. GAeL was the first to use paper bags for cement packaging. packaging was done using jute bags. one of the basic raw materials. l- f Transportation Cement was highly freight intensive in nature. Rai130% and Sea 30%. At the production site. 580/tonne for rail and Rs. not only reduced time. When the government allowed the privatisation of ports. Each bag of cement contained the brand name. In 2003. 0. Limestone..lcmrlndlo. 70% of the cement movement worldwide was by sea compared to only about 1% in India. Cement packaging at GACL followed the international norms of specific colours of packaging for different types of cement. In 2002.: I r' ~ [ .----.. the company maintained a buffer of about 10 to 20 days depending upon the location of the production unit. ordering etc. and appearance. Paper bags offered a significant advantage over traditional jute bags. the cement industry had to pack 70 per cent of the production in jute sacks as per the provisions of Jute Packaging Materials (Compulsory Use in Packing Commodities) Act.. and net weight of the bag.25 tonnes of coal.\. ----. Since road transportation beyond 200 kms was not economical. price of the bag. better preservation. I. Iron Ore and Red Ochre were the basic raw' materials needed for the production of cement GACL had a well-developed system for inbound raw materials. a single sbip could carry 40. when to order (timing) and how much to order (quantity). 55 % of cement was moved by the railways. Online ordering. the lSI logo with identification number.OOO-tpd plant in India.kaging Cement was usually packed in 25 kg or 50 kg bags. GACL's freight mix was Road 40%. This frequently caused problems like pilferage and leakage.. This helped GACL to cut inventory carrying cost drastically. Raw materials were transported either by rail or road. For a IO. Freight accounted for about 18 % of the total cost. Coal.. . through low pilferage.6 tonnes of limestone."... Management had to balance the cost of carrying larger inventory against resulting sales and profit. In 1995. 190/tonne as against Rs. Limestone extracted from near by mines was transported to the production site with the help of Overland Belt Conveyer (OBC) and in some cases with the help of trucks. but also transaction costs. (Coal.. 1987 (JPMA).org Gujarat Ambuja . at a cost of only Rs. The industry was freed from the controls of JPMA in 1998 after intense lobbying. '. Gypsum. It sourced other raw materials from various places across India. was sourced all the way from Bihar and some times from Meghalaya). In this scenario. date of manufacturing and location of plant (manufacturing unit). From 1987 to 1994. This process ran for sixteen hours a day and provided sufficient stocks to enable the plant run smoothly' round the clock.000 tons.670/tonne for road transport. In 1997. It also gave total information about the quality.05 tonnes of gypsum and I tonne of the finished product. This reduced the transportation cost dramatically.. IDventory Management Inventory decisions involved knowing botb. raw material planning. II .~- ICl\JR www. manufacturers were looking seriously at sea routes.

were decided taking into account various factors like transportation facility. f" it. Muldwarka (about 8 kms from the company's plant at Ambuja Nagar). The company had set up a two million ton Greenfield Maharashtra at an investment of Rs. etc. GACL had a storage capacity of 17. 1 The place where the ship is loaded and unloaded. and again placed in silos. The Bulk Cement Terminal in Surat had a storage capacity of 15. availability of trained and cheap manpower. GACL had conveyor belts running up to the dispatch yard for loading trucks and wagons. and cement unit in existing Gujarat Company Records. ' Future Outlook In line with the company's vision to become the leader in Indian cement industry.ICJ\1R ------www. capacity expansion. the Dumps and Trans-shipment point storage. . the unloading facilities available at the destination point etc... 9 A process by which small particles are made to behave like gases and liquids.000 tonnes and it also had a bulk cement unloading facility. GAeL also had a bulk cement terminal in Galle. before being pumped into the sealed road tankers. Key inputs that went into scheduling of the dispatch of the material were the location and distance of the destination. the receiving party. apart from scheduling instructions given in the order. It entered into an agreement with the Cochin Port Trust for building cement storing and packing infrastructure in Wellington Island (Kerala). Maharashtm and Kerala. In 2003. Routing and scheduling decisions were important in the cement industry.i ILl' 12 . The company used two types of warehouses. GACL arranged special packing facilities at the unloading terminals. For a customer who preferred to have bagged cement. it was poured into airtight holds in the ships. GACL set up captive breakwater" and jetty' facilities in Gujarat. 500 crores. GACL conducted route surveys periodically to arrive at the best possible route for each destination. 6 . availability of packing space.. This allows pumping the material through pipelines. Customers were provided small storage tanks into which cement was pumped from the sealed tankers by a 'fluidisation" process. a Large containers that store cement till it is transferred to the ship for transport. aggressive takeovers. Sri Lanka. i Warehousing & DistributionGAeL had recognized the importance of effective warehousing. was equipped to export clinker and cement and import coal and furnace oilS.. -'" . In Panvel (strategically located near India's biggest cement market Mumbai). The company had also acquired five ships for transporting cement in bulk. pursuing a combination of strategies like strategic alliances. GACL transported cement in sealed road tankers from the plant site to the shipping terminal.. the cement was unJoaded from ship holds. where it was transferred to silos'.org Gujarat Ambuja .500 tonnes and a bulk cement unloading facility. The warehouses were connected online with the marketing office and the production units to facilitate efficient delivery of goods.lcmrlndla. From these silos. A fleet of around 350 self-financed trucks and a railway siding in its factory premises provided flexibility in the mode of transportation. and Vashi (near Mumbai). 120 kms from Colombo. To improve the transport infrastructure. the terminal in Muldwarka. It had expanded capacity at the S GACL had been new plants. At the destination. To facilitate movement by ships. An artificial canal dug to bring the ships closer to the place of loading/unloading. GACL also had plans to build a bulk terminal at Kochi in Kerala. The locations of the dumps and trans-shipment points. Surat (South Gujarat). the road conditions.

600 crores. -. To enhance its presence in the south._t Source: Company Website.t. ' 13 I I· .5 I' . 100 crores.: i {J.ICMR ------www. org . the company planned to set up a Rs.7 . It had also set up one million ton grinding units. Site from three million to four million at an incremental cost just of Rs. one at Bhatinda and another in West Bengal. Figure (vi) Gujarat Ambuja's Markets (2002) .. 0. .. in the wake of competition from multinationals like Lafarge.icmrlndlo Gujarat Ambuja ••.. . which were eyeing to enter into Indian Cement Industry. But the management realised it could not be complacent. o '* • Cement Plants Sea Markets Capacity 1986 2003 12. the demand for which was expected to grow in the future. two million ton greenfield project in Andhra Pradesh. GACL had also started offering ready-mix cement. \.... GACL looked well placed in the Indian cement industry. '. i b . As 2004 got under way.

1 17(64 253.1S:. Rltw"maten'ars.26 12.. " ..48 14.".."89 2'.64 115.~ i .: f' ..34" 36.'::-'" ~ 2"7l~'.25 427.' " Change in stocks No. ·"-'··"··T·-·"".. stores. leaserent) .18 36f.71 3'30:'78'1 .51 I. "Siles-' '.12 j3~55'· 246.32 5t29 .- ~r-~"··'~·r • ..! 425:47 556.~...1 -16.64 YY.· t Adverfis1rig &'marke"tmg"expenses ' . Figure (vii) GAeL: Share Holdiog Pattern (2003) Bank. !' Expenditure r I.22 12§:'5g ~"._.l. _oI.n-re~l1J!in~ncome i 'I i r 1252.J<li'!'""l" ... .24 168.45.45 DIvIdends Retamed eammgs Source: CMIE.93 93.58 .79 417.etc:r·· .31' f\ I u--201.org Gujarat Ambuja •. eXl?enses ~~ 1.13 28. 23% .'f".2 430....32·'~ 27g.'_ ~ r'. ~ . Crore ~on-~uaUsed) {JuD-99 - JUB-OO .48' 64.....74 222.41 6.41 92. _" 139.- . 68.94 22.96 84.82 ]67..58. 296.05 45.05_ ~-_ 42.1 W - 13:42 5. 19'.~8 DiStribution expenses " 164.~ Source: Report by LKP Sbares & Securities Ltd.08 294'.J . 37.11 K5.99 28..01 If.97 150:35 152.71 N(:m"rec~~~.f i ICi\IR -----www.57 121. 478. . Rs.\r': ~...~~.]4 33.I1''r· .~--.Summarised Profit aad Loss Statement T Gujarat Amb~ja Cements Ltd..87 275.12 9. ..68 0.. "~ .57 131.~f9'j~23··"-·".Fla.09 122.88 7S.-~-other income Income -·· . ..- Promoton 29% I . <DR. '" I' r i r • .-------.. 'tJepredation ~ 403.37 309.lcmrlndlo. • 1-" 12 mtbs 12 mths 12 mtbs 12 mtbs 2033'.56 " 'ssbJtH"'" i23:89' 456.52 192. j!9~3 Tax provision PAT Appropriation of profits 207.5 Others _ 89.! ..49 ]41.. mdlJ'ect·i8Xes'(excise. . jit~§6150.73 -12.. 323. T8'7~"36:·''''·T80..11 178.3'1.79 1..77 Profits I losses PBmt' P'Bl)T PBi FiDancial charges (incl.l .47 125.95 18Al 202.05 6.2t-'~·'-1448:6j'·~ Y584 ..49 -'46. 17._-------. .·"~eo"'~'·..53 ' 44..97 j4lS..Yl 705.6 294.36 23... ... MF.55 14 .42 145.' ~ .78 lOH.37 [ 1.94 12. .c=.19 .3·- 12.83 31.72 229.12 150. etc: Wages &'salarles Energy (power -& fuel).79 107. T .52 69.87131:82 224.. I..16' l . . Exhibit: XI GAeL ." JUD-Ol Juo-02 Juo-03 ~ 12 mtbs .02 ""nij3...

"Is 'India Shining' or is it mere hyperbole?. .domain-Bicom.Interview with Ani! Singhvi". 04111 May 2003. Vaidya Nathan. 17.' -_." www. www. "An interview with Anil Singhvi".projectsmonitor. 11." A Report by Environmental Energy Technologies Division of International Energy Studies Group.N. org Bibliograpby L Lakshmi Narasimhan. I 1.t ... "Cementing its position".moneypore. Namrata Datt & Surendar.com. 20.indiainfoline. Bala Gopal Menon. Business World.i L ~~ ~. www. I can. www." www. I can. www. . ICRA Ltd. Kasturirangan.domainb.hdfcsec.com. ~ .myiris. I' ._-.com 6.. "Efficiency.V.com 7. -{ -~--------- _. July 1999.com 8. 16th September 2001.' ''V''-~ '~ . July 2000. ICl\lR GuJarat Ambuja .gov. ~4 <.~." Financial Express. "Gujarat Ambuja Cements all set for expansion.Report on Gujarat Ambuja. 62 .. 20th July 2003.com 4..com._ i 15 .Interview with Vipul Mehta". 10111 January 2000. 071h April 2004. :e ~. Arun Agrawal. p. July 1999.~ .com. p.: ~ ~ . 48-52 5. 9.myiris. Abba Singh.Interview with Anil Singhvi". Katja Schumacher and Jayant Sathaye. 7. www.ppfas." www. Parag Parikh Financial Advisory Services Ltd . "Straddling the Indian market.hdfcsec. Roshni Jayakar.lbl. ~. www.-.. "Gujarat Ambuja .Company Website. Sangeetha Singh.onitor. "India's Cement Industry: Productivity. 25th March 2000. 30th September 2002.capltalideasonltne.com.www.lcmTindie. Websites 1. "Investment Ideas From India's Money Masters . 16.66 15. 18. 3. Anirudha Dun. 13111 February 1999.com. www. 16lh October 2000.naviamarkets. P. '~ .~.. 091h August 2003. "CEO Talk. Utpal Sheth and Navin Agarwal." www. Energy Efficiency and Carbon Emissions. Sandeep Banzai." www.com . The Hindu Business Line." The Hindu Business Line. \ • !t-. www. p.. CMIE Database (Centre for Monitoring Indian Economy) 19. www. 13. 4.. "Cement selling gets imaginative. 70 -75 8. Nair. "Mandatory jute packaging .Spaisa. "Cementing the future". Kohinoor Mandai. com. 18th June 2003.com 3. www. 12. http://ies. 28th November 2001.indiairfoline. India (Investment Information and Credit Rating Agency).. Chetan Parikh._. /. 231(1 September 2003. Datam... Business Today.fmancialexpress. www. 23rd May 2003.com 2. 6.Ministry yet to pin down errant cement. cost-control key to viability .gujaratambuja. 14." Business India. An interview with Ani! Singhvi.icraindia..:. 10.com 5. www. "ICRA reaffirms high safety ratings assigned to Gujarat Ambuja Cements Limited. ." www. "Cementing its hold. "Leader Speak .------~_ ".utisel.com. 2.I can.com.

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