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INDIAN CEMENT INDUSTRY
• India is the world's second largest producer of cement with total
capacity of 219 million tonnes (MT) at the end of FY 2009.
• The Indian cement industry will add bout 50 million tonne cement
capacity in 2010, taking the total to around 280 million tonne.
• The government’s initiatives in the infrastructure and housing
sectors are likely to be the main drivers of growth for the industry in the long run. Good agricultural income has supported demand for the commodity despite slowdown in real estate sector.
Janaki Rao.U Analyst Equity Research Desk
• The Indian government has considered spending more than US$
V.S.R. Sastry Vice President Equity Research Desk 91-22-25276077
500 billion on infrastructure in the 11th Five Year Plan. This plan includes building road infrastructure, which will require 75 million metric tons of cement and power infrastructure that demands around 45 million metric tons of cement.
• The upcoming SEZs in areas such as Bangalore, Bhubaneswar,
Indore, Nasik and Pune would further boost the demand for cement.
Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer firstname.lastname@example.org
• Industry experts forecast that the growth pattern in cement is
expected to continue further due to the increased level of construction activities taking place across India.
• The government’s continued thrust on infrastructure will help the
key building material to maintain an annual growth of 9-10 per cent in 2010.
• Indian population growing at the rate of 1.5% would also act as a
benefit for the cement industry as it would boost the overall demand for housing and in turn cement.
• Banking on continued buoyancy in cement demand, foreign
institutional investors (FIIs) raised their stake in top Indian cement companies during the quarter ended March 31, 2010.
• The induction of advanced technology has helped the industry
immensely to conserve energy and fuel and to save materials substantially and hence reduce the cost of production.
June 23rd, 2010
1. Sector Overview 2. Current Trends 3. Profile of top three Indian Companies 4. SWOT Analysis 5. Conclusion
June 23rd, 2010
1. Sector Overview
Sector structure/Market size
India is the world's second largest producer of cement with total capacity of 219 million tonnes (MT) at the end of FY 2009, according to the Cement Manufactuer’s Association. According to the Cement Manufacturer’s Association, cement despatches during 200910 were 159.43 million tonnes (MT) increasing by 12 per cent over 142.23 in 2008-09. Cement production during 2009-10 was 160.31 MT an increase of 12.37 per cent over 142.65 MT in 2008-09. Moreover, the government’s continued thrust on infrastructure will help the key building material to maintain an annual growth of 9-10 per cent in 2010. In January 2010, rating agency Fitch predicted that the country will add add about 60 million tonne cement capacity in 2010, taking the total to around 280 million tonne.
Industry Key Prospects: Strong Growth in Economy: The industry is likely to maintain its growth momentum and continue growing at around 8% to 9% in the medium to long term. Government initiatives in the infrastructure sector and the housing sector are likely to be the main drivers of growth for the industry. In the recent past, demand has surpassed supply, resulting in healthy cement prices across the country.
this scenario is likely to reverse as the industry has lined up huge capacity expansion plans. there was also a strong cushion from the steady growth of the construction sector (read housing). Growing Infrastructure spending While infrastructure spending has been a boon. which has started taking place. The relief may be provided if there are delays in any of the proposed expansion plans. supply may once again outstrip demand putting downward pressure on margins. with more incentives being spelled out for the infrastructure and housing sector. cement manufacturers will continue to benefit. However. 4 . and are expected to go on stream by FY11. we believe that it is the market dynamics that will determine these variables. the hike in prices of coal and petroleum products could impact cement companies’ margins. leading to demand supply mismatch. As the capacities become operational. it would impact the growth in consumption of cement.June 23rd. Further. The importance of the housing sector in cement demand can be gauged from the fact that it consumes almost 60%-70% of the country’s cement. With the growth in the sector and waning demand supply gap.The fresh capacities announced till date will add up around 65 MT to the existing capacity (219 MT). Also. recently the demand has slowed down as real estate and construction activities in the urban areas have taken a back seat with economic slowdown. If this support wanes. cement producers have lined up capacity expansion plans either by brownfield or greenfiled expansion route. 2010 Huge capacity expansion plans However. The government has increased budgetary allocation for roads under NHDP. The budget measures such as increasing excise duties have proved to be futile and in the future too.
Going forward. Status of the Indian Cement Industry over the periods Trends in the Cement Industry during Five-Year Plans 5 . we believe the government’s initiatives in the infrastructure and housing sectors are likely to be the main drivers of growth for the industry in the long run.June 23rd. 2010 Raising agricultural income Good agricultural income has supported demand for the commodity despite slowdown in real estate sector.
2010 Indian Cement Industry Demand Drivers Future prospectus of the Indian Cement Industry High spending on infrastructure projects and growing demand for housing units will fuel the Indian cement industry. This plan includes building road infrastructure. 6 .June 23rd. Despite the gloomy outlook for the world economy. Infrastructure: The Indian government has considered spending more than US$ 500 billion on infrastructure in the 11th Five Year Plan. which will require 75 million metric tons of cement and power infrastructure that demands around 45 million metric tons of cement.
30 million tonnes of the 2008. railways. 67 Estimated exports: The target for export has been estimated to be 11 million tonnes and 13 million respectively for 2011 and 2012. says the report. Besides this. the number of houses constructed is expected to increase from 3. airports. many nationalized banks have reduced their interest rates on housing loans. ports. the housing sector is also one of the key drivers for the cement industry and accounts for more than 40% of total cement demand.June 23rd.0 million tonnes in 2009 from 198. As a result. 7 . Commonwealth Games: Industry experts forecast that the growth pattern in cement is expected to continue further due to the increased level of construction activities taking place across India. To further boost the housing demand in the country. shopping malls and multiplexes will be the main sectors driving the demand of cement in the country. urban infrastructure. Estimated Production: The current cement industry is expected to grow to produce 223. One of the reasons for this is that Delhi. the capital of India. 2010 Apart from this. IT & ITES sector.6 million in 2007 to 6 million units by 2011. is home to the 2010 Commonwealth Games. organized retailing. This concrete growth in the housing sector will lead to huge cement demand in the country.
June 23rd. • In April 2010. Increase in Population: Indian population growing at the rate of 1. Mergers and Acquistions (M&As) • Dalmia Cement has increased its stake in OCL India to 45.4 per cent from 21.5% would also act as a benefit for the cement industry as it would boost the overall demand for housing and in turn cement.24 million as part of its plan to expand its footprint in eastern India.7 per cent at an investment of US$ 38. the country’s second-largest cement maker and a part of Aditya Birla group is acquiring Dubai-based ETA Star Cement for an enterprise value of US$ 382. 8 . Bhubaneswar. • Ultratech Cement. Indore.1 million. 2010 SEZs Developments: The upcoming SEZs in areas such as Bangalore. French cement maker Vicat bought 51 per cent in Bharathi Cement. Nasik and Pune would further boost the demand for cement.
Work on the two plants will begin in the October-December quarter under a new division of the company to be christened Monnet Cement. according to the Department of Industrial Policy and Promotion • In January 2010.4 million to increase the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT from 2 MT by April 2011. • Monnet Ispat & Energy (MIEL) will set up cement plants in Chhattisgarh and Gujarat with an investment of about US$ 527.1 million to take its cement manufacturing capacity from 20 mtpa to 33 mtpa by 2012.June 23rd.71 billion between April 2000 and February 2010. The expansion will take the company’s total cement-making capacity to 60 mtpa (million tonnes per annum) from 50 mtpa currently. • Madras Cements Ltd is planning to invest US$ 178. • Jaiprakash Associates Ltd will invest US$ 984.9 million. 2010 New Investments Cement and gypsum products have received cumulative foreign direct investment (FDI) of US$ 1. 9 . Swiss cement company Holcim announced plans to invest US$ 1 billion for setting up 2-3 greenfield manufacturing plants in India in the next five years.
4 billion has been provided for infrastructure development. • Increased infrastructure spending has been a key focus area. 2010 • Ambuja Cements. Government Initiatives Government initiatives in the infrastructure sector. coupled with the housing sector boom and urban development.June 23rd.3 million to expand its capacity to 24 mtpa from the current 19 mtpa by year-end to meet strong demand from the infrastructure sector. plans to spend around US$ 756. In the Union Budget 2010-11. US$ 37.3 billion. • The government has also increased budgetary allocation for roads by 13 per cent to US$ 4. the country’s third-largest cement maker. 10 . continue being the main drivers of growth for the Indian cement industry.
5% growth in FY10 Buoyant demand from the infrastructure space and individual home builders in rural and semi-urban regions of the country has made the cement industry hit double-digit growth in 2009-10.01 million tonne in the previous year .47 14.08 17.a rise of 10. Laying IT on Month-wise growth in FY10 Month April May June July August September Dispatches 16.72 15.70 16. 2010 Current Trends: Cement industry hits 10.73 Growth % (y-o-y) 13.June 23rd.97 10.37 11. after a gap of three years.95 15.10 12.51 16.29 6. The industry with over 50 players despatched 199.98 million tonne of the building material compared with 181.48 per cent.20 11 .
34 8. the average national price of a 50 kg bag of cement is in the range of Rs 245-250. The despatches for the month stood at 19.33 per cent. The year saw consistently robust demand through the year which helped cement makers raise the prices too.77 6.19 17.73 17. the industry is expected to add around 40 million tonnes more capacity to take it to 300 million tonnes. 2010 October November December January February March Total 15. the year-ending month witnessed lower than expected demand as industry could clock only a growth of 8.01 11.June 23rd.98 7.63 199. In the current financial year.62 12. taking the production capacity to around 260 million tonne from 219 million tonne last year.87 18.63 million tonnes against industry’s experts’ anticipation of over 20 million tonnes.37 15.33 10. Currently.The industry added close to 40 million tonnes in 2009-2010. 12 .48 All figures in million tonnes Source : Cement Manufacturers' Association & companies However.11 19.48 9.
For instance.25 mt against 0.26 13 .26 14.6 mt last year.45 15. (Million Tonnes) Description Apr-10 Mar-10 Apr-09 2010-2011 2009-2010 (Apr) Cement Production Cement Despatches 14. Its despatches were 57 per cent more.38 mt in April.89 13.2 per cent in its despatches at 3.40 14. Continued robust demand and newer capacities going on stream have helped.40 14. on the back of robust despatch figures posted by the major companies. the Aditya Birla Group has posted a rise of 6.70 13.June 23rd. North-based Jaiprakash Associates continued to perform far better. at 1.8 mt in April last year. as its despatch stood at 1. 2010 Robust growth in April The 252-million-tonne domestic cement industry showed year-on-year growth of 9 per cent in April.9 mt against 1.70 15.45 13.85 13. Holcim-owned Ambuja Cements sold 16 per cent more.
10 4.83 11. 2010 FIIs eye cement sector. with the national average at 96 per cent. too. In early 2009.14 27. Cement consumption witnessed double-digit growth at 10. demand remained robust and prices were firm.17 4.56 24. all projections of a slowing in demand were belied — capacity addition got delayed.June 23rd. Cement production.87 10. Domestic cement demand has been robust in spite of capacity additions in the sector.70 14 .91 27. 2009 (in %) 2. However. the Indian economy was in a recession and the cement industry faced prospects of substantial capacity addition. foreign institutional investors (FIIs) raised their stake in top Indian cement companies during the quarter ended March 31 (see chart).93 12. while there was no sign of demand going up.08 22. Most companies saw capacity utilisation well in excess of 100 per cent. grew 10. raise stakes in firms Banking on continued buoyancy in cement demand. Concrete Plans Company Prism Cement Shree Cement UltraTech ACC Ambuja India Cements Source: BSE FII stake as on Dec 31.43 4. 2010 4.48 FII stake as on Mar 31.8 per cent to 201 million tonnes.6 per cent to about 200 million tonnes in the 12 months ended March 31.
000 crore pegged in the financial year 2009-10 to Rs 5. 2010 Growth was registered across all regions.” says the 2009 annual report of ACC.June 23rd. Surya Group expects its turnover to grow from Rs 2.000 crore investment lined up for a possible five million metric tonne cement plant in Gujarat. Banking on the commencement of its large GI and API pipes plant in Bhuj as well as expansion of its lighting systems unit in Gwalior. Having commenced production of its first factory in Gujarat of GI and API pipes at an investment of Rs 400 crore. with high levels of capacity utilisation in most regions. in the near future. the country’s biggest cement producer.000 crore in next two years. Surya to set up 5 MMTPA cement plant in Gujarat With a Rs 4. Madras Cements to invest Rs 800 cr Madras Cements Ltd is planning to invest around Rs 800 crore to increase the manufacturing capacity of its Ariyalur plant in Tamil Nadu. the group now intends to sign a memorandum of understanding (MoU) with the state government for a mega cement plant in Kutch district at the upcoming Vibrant Gujarat Global Investors' Summit (VGGIS) 2011. The demand-supply scenario was generally at balance. 15 . Surya Group is mulling public issue of its subsidiary company Surya Global Cement Ltd. The company has also proposed to set up a 65-Mw coal-based power plant for captive purpose. led by rapid developments in infrastructure and a stable housing sector.
2010 My Home Industries to invest Rs 4. The construction of the plant started in January last year and involved an investment of Rs 300 crore.The plant was inaugurated by Chief Minister P K Dhumal. It will use a fully automated production process with the help of German technology. 16 . The Nalagarh unit allows easy access to all important markets of the state and the neighbouring states of Punjab and Haryana. known for its Maha Shakthi' brand of cement.5 million units per annum. The grinding unit is located near Nalagarh in the Himalayan foothills close to the Punjab border. a 50:50 joint venture between the Hyderabad-based My Home Group and Ireland's building material major CRH Plc. plans to scale up its cement production capacity from the existing five million tonne per annum (mtpa) to 15 mtpa by 2016. Ambuja opens Nalagarh cement plant new grinding unit of Ambuja Cements Ltd (ACL) came into operation in the industrial town of Nalagarh in Himachal Pradesh.June 23rd. The plant has a manufacturing capacity of 1. The cement will be made available in specially designed 50 kg bags that are tamper-proof and seepage proof.500 crore). would undertake this capacity expansion at a cost of $1 billion (around Rs 4.500 crore My Home Industries Limited (MHI). The unit will use the clinker produced at ACL’s Rauri unit some 95 km from the plant. This is Ambuja’s third cement unit in the hill state and the 12th in the country. MHI.
with a variety of factors supporting the price rise. while increasing the duty from Rs230/ tonne to Rs290/tonne for cement sold at less than Rs190 per bag.75 for cement sold above Rs190. 2010 Holcim to invest $1 bn in 3 new plants Swiss cement company Holcim plans to invest $1 billion in setting up 2-3 greenfield manufacturing plants in the country in the next five years to serve the rising domestic demand. which led to a hike in the input costs. The increase in excise duty on cement is likely to have an impact of Rs3 per bag for cement sold below Rs190 and a minimum Rs3. On account of a short-term demand-supply mismatch. thereby pushing up the input costs further. The Budget increased the Excise duty from 8% to 10% for Cement prices above Rs190 per bag. depending on the region. All-India Cement Prices rise during the quarter Cement prices increased across the country during the quarter. After the Budget. cement manufacturers have managed to increase their prices by over and above the rise in input costs. 17 . The budget also imposed a clean energy cess of Rs50 per tonne on imported and domestic coal. to pass on the increase in input costs. The expansion will take India’s second largest cement company’s total cement-making capacity to 60 million tonne per annum from 50 million tonne currently. a senior company executive said. The major factor that caused the price rise was the increase in the excise duty on cement in the Union Budget and the hike in the prices of fuel.June 23rd. cement companies have increased the prices by Rs10-12/bag.
Robust demand from infrastructure projects resulted in a price rise in the Eastern and Central regions as well. The coal prices were up by close to 30% during 4QFY2010. The prices rebounded in the Southern region as well due to the improvement in the political scenario of Andhra Pradesh and the commencement of government-sponsored infrastructure activities. All-India Capacity Utilisation at 84% All-India capacity utilisation during January-February 2010 remained robust at 84%. mainly due to healthy demand. The prices were up in the Northern region due to healthy demand from the infrastructure segment and construction activities related to the Commonwealth Games.June 23rd. The Northern and Western regions also clocked healthy utilisation rates of 98% and 89%. Coal prices surge Cement manufacturers use coal for power generation and in the kiln for cement production. respectively. Since Power forms a major portion of the overall costs involved in cement manufacturing. 2010 Demand-side factors also contributed to the rise in prices. 18 . the utlisation rates remained low in the Southern Region at 70% due to overcapacity and modest demand. However. The Central region clocked the highest utilisation rate of 114% during the same period. the price of coal (the primary raw material in power generation) has a major effect on the profitability of cement manufacturers. despite the huge capacity additions.
The cement will be made available in specially designed 50 kg bags that are tamper-proof and seepage proof. Major developments during the quarter Ambuja Cements Capacity Addition: A new 1. With the addition of this capacity.June 23rd. a portion of the funds raised is also expected to be used for capital expenditure plans. with the help of German technology. This unit allows easy access to all important markets of the state. India Cements QIP Issue: India Cements has raised US $65mn via the QIP route. which is 95km from the Nalagarh Plant. coal prices were higher even on a sequential basis. Thus. as it would result in margin erosion.5mtpa grinding unit of Ambuja Cements Ltd (Ambuja) came into operation at Nalagarh in Himachal Pradesh. which we believe is primarily for the redemption of the US $75mn of FCCBs due in May 2011. and the neighbouring states of Punjab and Haryana. The increase in coal prices is a negative for cement manufacturers. The Nalagarh unit will use the clinker produced at Rauri unit. Further. Ambuja's overall cement capacity has touched 25mtpa. 2010 The average prices of the New Castle Mccloskey coal stood at around US $95/tonne during 4QFY2010 (as against US $73/tonne witnessed in 3QFY2010). the FCCBs are unlikely to be converted into equity. The conversion price of the FCCBs is at Rs350. The plant has been set up at an investment of Rs300cr. 19 . It will use a fully-automated production process. which is far above the company's current market price.
and resulting in an equity dilution of close to 9%. The two franchisees for Pune and Kochi were auctioned for US $370mn and US $333mn. to part finance its Rs1. the company has a capacity of 5. 2010 The company.7mtpa capacity at Chhattisgarh.550cr greenfield projects in the Northern and Eastern parts of the country. The company is expected to use these funds to part finance the building of a 2. for US $91mn in 2008 for a 10-year period. the governing board of the IPL completed the auction for inducting two more new teams into the league. During the quarter. and is targeting to raise this capacity to 8mtpa in five years. IPL auction: India Cements acquired its Indian Premier League (IPL) franchisee. well above the fixed base price of US $250mn. Currently. Chennai Super Kings.3mtpa. The huge price at which the new teams have been auctioned is expected to push up the valuations of the existing franchisees (such as India Cement). JK Lakshmi Cement Fund raising: JK Lakshmi Cement announced its plans to raise Rs600cr through a combination of External Commercial Borrowings (ECBs) and rupee term loans. which is expected to be commissioned by 2013E. is also in the process of setting up two 50MW power projects. 20 .5mn tonne plant in Rajasthan through its subsidiary Indo-Zinc. The QIP has been made at a price of Rs120. which is currently setting up a 1.June 23rd.
and several zonal offices. are also set to increase. of 792bp. Freight and forwarding costs. South-based players are expected to witness the highest decline in margins due to the double whammy of a fall in realisations and increase in the input costs. 20 sales offices.June 23rd. 21 . 2010 Margins to show yoy decline in 4QFY2010 We expect the Operating Margins (OPM) of the cement players to decline substantially on a yoy basis during the quarter. Profile of Top Indian Cement Companies: 1. largely due to the increase in the cost of power and raw materials (such as limestone and gypsum). Grasim is expected to report a 458bp yoy increase in the OPM. on account of robust operating performance from the company's VSF Business. more than 30 Ready mix concrete plants. However. ACC LTD • ACC’s brand name is synonymous with cement and enjoys a high level of equity in Indian market. which form a substantial portion of the overall operating costs. due to a hike in fuel costs and increase in lead distance. ACC's operations are spread throughout the country with 14 modern cement factories. thereby resulting in margin erosion. It is the only cement company that figures in the list of Consumer Super Brands of India. • ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. India Cements is set to witness the highest decline in the OPM.
During the quarter. Net sales for the quarter rose 3. the profit of the company decline 1.June 23rd. Company posted earnings of Rs 20. it believes that more orders may start flowing in from housing and commercial sectors in near future.92 million. 22 . while total income for the quarter rose 3. Meanwhile. • During the quarter company has acquired a 100% equity stake in Encore Cements & Additives Private Limited (ECAPL).79 million from Rs 3993. registering 1.400 crore next year to augment its capacity.42 million in the same quarter previous year.81% to Rs 22762.66% decline over prior year period. 2010 • ACC is going to spend Rs 1.62% to Rs 3928. Investment Highlights Results Update (Q1 CY10) 1. • The Company is planning to increase its annual Cement capacity to 30 million tonnes. when compared with the prior year period.81% to Rs 23022. ACC Ltd ACC Ltd reported a marginal decline in consolidated net profit for the quarter ended March 2010.44 million.90 a share during the quarter.
09 21926.10 22762. Company expects the remaining part of their Karnataka expansion project also to be completed in the second quarter.42 21. c. Orissa: The Bargarh expansion project was completed in this quarter.1 million tonnes per annum.66) • Modernizations and Expansion a.62) (1.26 %Change 3.44 3928. 2010 Quarterly Results – Consolidated (Rs in mn) As at Net Sales Net Profit Basic EPS Mar . thus raising the plants installed capacity to 2.90 Mar .81 (1. Maharashtra: Work on the new line of 3 million tonnes per annum of cement at Chanda together with a 25 MW captive power plant is on track and scheduled for completion in the third quarter of this year. 23 . Karnataka: The grinding plants at Thondebhavi and Kudithini are stabilizing.June 23rd.50 3993.79 20. b.
Cement House. a sustainable residential township in the new plant at Kudithin .The Cement production and despatch figures for the month of March 2010 as follows: Particulars Cement Production Cement Despatch Particulars Cement Production Cement Despatch March 09 1. Company commissioned their third energy farm in March 2010 near Satara in Maharashtra made up of two turbines of 1. 2010 • Sustainable Development Update a. the central control room building in the upcoming Chanda expansion project and hostel accommodation in the training establishment in the Thane complex. Wind Energy: Continuing with the aim to promote the use of renewable energy sources.54 million tonnes 5.June 23rd.01 million tonnes January-Mar 09 5.64 million tonnes March 10 1. in Karnataka.94 million tonnes 1. The company is implementing three other unique green projects viz. b.25 MW capacity each. ACC now has total wind power capacity of 19 MW. Green Buildings: The company’s 70 year old headquarters building.55 million tonnes 24 . which was recently renovated received the Gold Shield from Indian Green Buildings Council in the leadership in energy and environmental design under new construction and major renovation category.99 million tonnes 2.60 million tonnes 5.94 million tonnes January-Mar10 5.
3 million tonnes in the Solan District of Himachal Pradesh and is setting up an additional 1million tonne grinding facility Alternative Fuels and Raw Materials. These include four coal blocks in Madhya Pradesh. exclusively for ACC. ACC was successful in getting allotments of coal blocks in Madhya Pradesh and West Bengal. Initial exploratory and preparatory work has already commenced. 2010 • Coal Projects During the year. The business has also increased its portfolio and has successfully coprocessed 27 different types’ of industrial waste streams at our plants. which the company will develop in a joint venture with MP State Mining Corporation Ltd. The company's AFR business registered a substantial increase in the usage of alternative fuels and raw materials through the co-processing of industrial waste at all our plants. • Investments In December 2009. Asian Cement has a cement grinding plant of capacity 0. The company has also been allotted a 14% stake in a coal block In West Bengal which would be developed along with other co-allottees. the company entered into an agreement with the promoters of Asian Concrete & Cement Private Limited (Asian Cement) to acquire a 45% equity stake in that company.June 23rd. 25 .
• Inaugurates Thondebhavi Cement Works in Karnataka ACC has inaugurated its newest cement plant in Thondebhavi.70 billion. in Gauribidanur Tehsil of Chikballapur District. this new plant becomes the company`s sixteenth cement plant in its national network and the fourth in the state of Karnataka. This new generation fully automated cement grinding plant has an annual capacity to produce 1. ACC Thondebhavi Cement Works was set up as a Greenfield project in the picturesque Thondebhavi village.`Kudithini cement works`. 2010 • Acquired stake in Encore Cement ACC. • Inaugurates 4th cement plant in Karnataka ACC has inaugurated its fourth cement plant in the state of Karnataka . Karnataka. Encore Cement & Additives has a 2 lakh ton capacity slag grinding unit in Vishakhapatnam.June 23rd. The project involved an outlay of about Rs 3. Financial details of the deal were not disclosed. This acquisition will help the company further strengthen its presence in coastal Andhra Pradesh. Located in Kudithini village which is 25 kilometers from the district headquarters town of Bellary. 26 . India`s foremost cement manufacturer has acquired a 100% equity stake in Encore Cement & Additives.2 million tons of cement of superior quality. Karnataka. With the said acquisition. Encore has now become a wholly owned subsidiary of ACC.
1400 crore on capacity expansion ACC is going to spend Rs 1. The plant will have its own railway siding. 27 .400 crore next year to augment its capacity.50 billion. The bond has a coupon rate of 8. • ACC to spend Rs. • ACC allots 1575 shares on exercise of employee stock options Cement major ACC has allotted 1. it believes that more orders may start flowing in from housing and commercial sectors in near future. Clinker is received by rail from ACC`s modern cement plants at Wadi in Gulbarga district. 2010 Installed at a cost of about Rs 3.45% payable annually and is for a period of five years.000 secured non-convertible debentures (NCDs) of the face of Rs 10 lakh each. • ACC mops up Rs.60 million tons per annum and will produce fly-ash based Portland pozzolana cement. this cement grinding plant has a capacity of 1.June 23rd.575 shares against exercise of Employee Stock Options under the ESOS 2004 scheme. Meanwhile. The company has completed the issue of 3.300 crore through private placement route ACC has mopped up Rs 300 crore through the private placement route.
2010 • ACC board recommends final dividend ACC Ltd has recommended payment of a final dividend at the rate of 130%.(Rupees Twenty three only) per share. lower inventory carrying costs and. the total dividend for the year is Rs. 13/. Along with the Interim Dividend of Rs.each.(Rupees Thirteen only) per equity share of Rs. 10/. Bicharpur. consistent and better quality of the product. a Madhya Pradesh (MP) government run entity.will form a joint venture with MPSMC to explore and mine four coal blocks at Marki Barka. The move will help the company to stop sourcing coal from e-auctions and open market and will also lead to improved performance of the company's cement plants as a direct result of better supply assurance. Kymore. 23/. Accordingly. As per the terms of the agreement.ACC Mineral Resources (AMRL) -.These mines are expected to become operational in next 4-5 years. Tikaria and Lakheri locations. this will translate to Rs. 10/. a wholly-owned subsidiary of the company -. above all. 28 . • ACC in pact with MP government for coal blocks ACC has signed an agreement with the Madhya Pradesh State Mining Corporation (MPSMC). Semaria Piparia and Niorga IV blocks. with total reserves of around 200 million tonne.per share paid earlier. The coal find from these blocks will be supplied to ACC’s cement plants at Gagal.June 23rd.
33 -7246. 2010 Financial Results 12 Months Ended Profit & Loss Account (Consolidated) Value(Rs.00 16128.29 0.82 102739.21 93399.38 80000.80 30133.75 -4104.81 19427.77 1879.58 15639.00 27478.20 10.42 23374.60 0.13 772.80 27081.07 -7653.June 23rd.00 187.40 89982.70 10.42 -60572.00 -930.64 CY09A 12m CY10E 12m CY11E 12m 29 .89 -5251.07 0.26 -65846.00 187.00 187.29 22506.36 16247.73 28364.04 16128.72 -3731.80 -73458.00 29202.94 90.93 -4514.32 -843.58 852.88 58.77 0.94 83.00 17034.62 811.28 10996.22 103591.53 0.70 10996.00 26237.29 1879.86 24688.61 -399.11 1.25 -3205.47 1878.19 0.04 1114. in million) CY08A 12m Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Exceptional Items Gross Profit Depreciation Profit before Tax Tax Profit after Tax Minority Interest Net Profit Equity Capital Reserves Face Value Total No.49 19453.64 94211.99 87254.43 -6867.879.00 187.90 15638.78 0.80 46363.53 86481.12 -60172.40 56819.26 10. of Shares EPS 78886.30 17034.49 10.53 -885.94 85.85 425.40 72947.
2010 Quarterly Ended Profit & Loss Account (Consolidated) Value(Rs.27 -1051.84 5112.June 23rd.11 21905.49 3577.12 0.879.94 273.39 -143.10 1.63 0.90 23672.44 260.18 0.41 10.00 187. in million) 30-Sep-09 3m Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Exceptional Items Gross Profit Depreciation Profit before Tax Tax Profit after Tax Minority Interest Net Profit Equity Capital Face Value Total No.00 7232.49 -1898.879.00 6928.58 -956.74 1.22 6812.63 1.27 4326. of Shares EPS 21146.85 -17090.47 -135.40 -1030.50 23946.92 -16210.91 22.00 4699.37 7064.37 6180.92 296.75 5645.879.00 187.74 0.48 23022.84 2620.06 7375.09 10.01 -412.84 -14232.00 2620.30 0.02 31-Dec-09 3m 31-Mar-10 3m 30-Jun-10E 3m 30 .95 -876.71 3928.07 -1121.00 4326.91 -1854.65 -1716.94 0.94 20.00 187.92 4155.00 187.94 13.94 -0.31 4154.52 0.46 6052.41 10.15 3928.879.70 -136.93 22202.94 23.00 6676.40 10.56 150.44 -16571.94 22762.28 21296.79 1.
4 21.66x for CY10E and CY11E respectively.9x for CY10E and CY11E respectively.) P/BV CY08 58.64% 36.53 24.10 256.02 0.78 0.30 0.82 30.78 1.57% 8.00.18% 6. the stock trades at 6.04 CY11E 90.14 2. the stock trades at a P/E of 9.33% 16.09 312. 2010 Key Ratios Particulars EPS (Rs.48% 6.07 398.33 2. 31 .908.77 3.51 22. • On the basis of EV/EBDITA.66 Outlook and Conclusion • Net sales and PAT of the company are expected to grow at a CAGR of 9% and 16% over 2008 to 2011E respectively.37% 17.21 31.9 18.06 488.02x and 5. • At the current market price of Rs.54% 26.63% 13.94% 15.91 CY10E 85.27% 9.31% 18.4x and 8.91 26.June 23rd.22% 5.64 29.66 0.79% 30.) EBITDA Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) EV/EBITDA (x) Debt-Equity Ratio Book Value (Rs.55% 30.08% 10.54 CY09 83.58% 8.
• ACC Mineral Resources (AMRL). 32 .70 billion. it believes that more orders may start flowing in from housing and commercial sectors in near future. 2010 • Price to Book Value of the stock is expected to be at 2. a wholly owned subsidiary of the company has inked a pact with Madhya Pradesh State Mining Corporation (MPSMC). • ACC has inaugurated its fourth cement plant in the state of Karnataka . • The Ministry of Coal allocated a coal block in the state of West Bengal to a consortium in which the Company is a member.00 for Medium to Long Term Gains. • ACC has acquired a 100% equity stake in Encore Cement & Additives. This acquisition will help the company further strengthen its presence in coastal Andhra Pradesh. This new generation fully automated cement grinding plant has an annual capacity to produce 1. Meanwhile.950. • The company could expand its margins due to improved operating efficiencies.June 23rd.66 respectively for CY10E and CY11E.400 crore next year to augment its capacity.`Kudithini cement works`. We recommend ‘BUY’ in this particular scrip with a target price of Rs. • ACC is going to spend Rs 1.04 and 1. ACC benefited from lower coal prices and fuel costs. The Company plans to carry out mining activities through a joint venture company to be formed. Encore Cement & Additives has a 2 lakh ton capacity slag grinding unit in Vishakhapatnam. The project involved an outlay of about Rs 3.2 million tons of cement of superior quality.
33 . The Company has access to huge limestone resources and plans to expand capacity by de-bottlenecking and optimization of existing plants as well as by acquisitions.Sankar Super Power. • The Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra.4321.38054. • The Company has well established brands.3543. EPS for the year stood at Rs.80mn of same period of last year.11. Coromandel Super Power and Raasi Super Power. India Cements Ltd Rating: HOLD • The India Cements Limited is the largest producer of cement in South India. It aims to achieve a 35% market share in the near future.60 which is 3. • The Company is the market leader with a market share of 28% in the South.10.40mn from Rs.June 23rd.00 each.7% decrease than that of a year ago. 2010 2.39515. • The topline of the company are expected to grow at a CAGR of 5% over 2012E. Total revenue for the year stood at Rs. 2009A to Investment Highlights • FY10 Performance Net profit of the company decreased at 18% yoy Rs.50 mn from Rs.54 per equity share of Rs.
2010 Operating profit of the company stood at Rs. Interest expenses for the year stood at Rs. Results Updates (Q4 FY10) The bottomline of the company for the quarter decrease at 59% yoy that is Rs.1426. OPM for the year stood at 24%.938.1.20mn from Rs.9743.EPS for the quarter stood at Rs.80mn.10.29011.June 23rd.25 per equity share of Rs.60mn of same period of last year. Expenditure of the company decrease 3% YoY to Rs.9070.383.60 which is 2% decrease than that of a year ago.40mn.80 mn.9905.00 mn from Rs. Total revenue for the fourth quarter stood at Rs.00 each. 34 .
40 35 .8260.60 3.June 23rd.25 3071.6 938.90mn from Rs. Quarterly Results .7696.20 1.70 Mar-09 9905.368.3% YoY to Rs.32 2824.7mn.0 383.standalone (Rs in mn) As At Net sales PAT Basic EPS Equity Capital Mar-10 9743. OPM & NPM for the quarter stood at 16% and 4% respectively. Interest expenses for the quarter stood at Rs. 2010 Expenditure of the company increase 7.50mn of same period of last year.
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