GUJARAT AMBUJACEMENT LIMITED
Presentation ByBhavesh Chaudhari
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
CEMENT INDUSTRY-AN OVERVIEW
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
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Indian cement industryIndian cement industry –– Major playersMajor playersin 2006in 2006
12.69.7
10.6
10.34.73.65.94.5
3.2
34.8
ACCUltratechGujarat AmbujaGrasim IndustriesCentury Textiles and IndustriesBirla Corp LtdIndia CementsJaiprakash Industries (Jaypee)LafargeOthers
Market Share in Last 6 Years
ENVIRONMENT ANALYSIS—PORTER’S MODEL
SWOT ANALYSIS
Strength•Growth at approx CAGR of 9% in last 5 years•Growing Domestic cement consumption atapprox CAGR of 8% in last 3 years
• Highly Capital Incentive so difficult forsmall entrant
• Not much restriction by govt.• Market consolidation taking place
Weakness• High Oil Prices, Cost of Power increase
production cost•Supply exceeds Production lead tocompetition in price
•Low Quality as compared to internationalstandard but improving
Opportunity•High Mortgage Penetration - Low InterestRates
•Easy loan availability for housing finance•Increased investments in Infrastructure•Increased govt. outlay on BHARATNIRMAN, GOLDEN QUADRILATERAL,BRTS etc.
Threat•Further Hike in Oil Prices•Use of plastic engineering in construction•Sub prime market loss may affect
Recent Trends
Dry technology in place of Wet technologyMarket 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 tenfoldThe total cement capacity of the company is 16.5 million tonnesIt touched to capacity utilization of 100% in 1st 6 months.Capacity built up from 0.7 MT in 1986 to16.5 MT as oftoday at CAGR of 18%
Organic growth through acquisitions2001 – Private equity investors (American International Groupand Government of Singapore) invested in ACIL2005 – ACIL restructured as a joint venture with Holcim2006 – Founder promoters sold part of their holding in ACL infavor of HolcimACL is a Holcim Group company since May 2006
Strategies Adopted By GACL
MARKET ENTRYPresence 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 monetaryfactor
Free access to senior official including VP
Communication Meetings on regular basis to discuss and sortout grievances
Preference to existing employees for higher position
Reward to suggestions
Operation and Control- Positioning inINDIA
South West Region7.5 million t 1
North Central Region8.0 millon t 1
Eastern Region3.0 million t 1
Cement plant
Grinding station
Terminal
Port
1 Cement Capacity
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Hub & Spoke Strategy - Grinding close to marketsStrong Control
Problem is seen as Joint problem not as mechanical,electrical or marketing problemModification in operation was allowed to be done byjunior and after that it is reported resulting intospeed, trust and responsibilityControl data was generated 48 times a day for bettercontrolInterruption was reduced to 2 per day from 4-5 days
Marketing Strategy
Emphasis was on QualityHigh Advertisement for BRANDING-3 times thanACC at one timeImprovement in Packaging by information providedby suppliersExtensive & primarily exclusive distributionnetwork-Over 6,000 dealers and 20,000 retailersPromotion through seminar, workshops for masons,architects, contractors etc by providing info on use ofAMBUJA CEMENTAdvertising and Publicity campaign
Transportation and Logistics
Sea transportation- Seven dedicated vessels for faster & cheapertransportation
SuratAmbujanagar
Maratha
Panvel
Ahmedabad
Cochin
GACL was the 1st Cementcompany to use Sea astransportation
Muldwarka, Gujarat: Allweather port, 8 kms from ourAmbujanagar plant. Handlesships with 40,000 DWT. is alsoequipped to export clinker andcement and import coal andfurnace oil.
A fleet of 350 self financedtrucks was also their for easytransportation
R&D
Own R&D Department in 1989Encouraged Experiments at all levelUse of Mechanical conveyors instead of pneumaticconveyors against industry trendUse of Industrial waste to reduce fuel consumption
Cost Reduction
Speedy set up of plantReduction in energy costCaptive infrastructure - Port, Receiving Terminals andCaptive Power Plants (260 MW)
§ Consumption per unit of Production
Shift from liquid tosolid fuel to reducecost of captive energy.
80
82
84
86
88
90
2002-03 2003-04 2004-05 2006 2007700
705
710
715
720
725
730
735
740
745Electricity (Kwh/T of Cmt)Coal/Other Fuel (Kcal/Kg of Clinker)
Expansion Strategy
Starting with a plant with a capacity of 0.7 MT inGujarat, GACL is now having plants at differentplace with total 16.5 MT.It has adopted organic growth. Plant Capa
city
Gujarat 5
H.P/Punjab 4.5
Rajasthan 2
W.B/Chhattisgarh 2
Maharashtra 3
Total 16.5
Expansion projects
NorthNorthNorthSWSWSWEastEast
ClusterLocation 2007 2008 2009 2010Cement
(million t)
Terminal
Grinding
Grinding
Grinding
Grinding
ClinkeringRauriDadriNalagarhSuratAhmedabadCochinBhataparaBarh
Total
Clinker(million t)
Grinding
Clinker
2.2-
-
-
-
2.2_
4.4
-1.5
1.5
1.0
1.5
-
1.0
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 AmbujaCements (Private) Ltd., through which it acquired a smallcompany, Midigama Cement, in Sri Lanka.
In 1997, GACL acquired Modi Cements’ sick 1.4 mtpa plant atRaipur (Madhya Pradesh) for Rs 1.66 billion. This plant wasrenamed Ambuja Cement Eastern Ltd.
In 1998, GACL acquired the Nadikudi (around 100 kms fromGuntur) and Proddatur (near Cuddaph) limestone mines inAndhra Pradesh to strengthen its presence in southern India.
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In December 1999, GACL acquired a 51% stake in Delhi basedDLF Cement for Rs 3.5 billion.
After this merger, GACL became the fourth largest cementmanufacturer in India after ACC, L&Tand Grasim.
In the same month, GACL also acquired a 7.2% stake inAssociated Cement Companies (ACC) for Rs 4.55 billion whichwas later on increased to 14.4%
2001 – Private equity investors (American International Groupand 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
Public 12.54%GDR, 3.39%
Holcim, 45.68%
Founder family 0.82%FIIs 23.50%
Insurance / MF / FI14.07%
Summary
Solid market position built up within short period oftime through organic growth and acquisitionsPin-pointed positioning tied to substantial captiveinfrastructure to serve markets including seatransportation, capability to exportHigh use of alternative raw materials in productionof composite cementsSubstantial greenfield and brownfield expansionplans to grow within the attractive markets and aninternal financing capability to fund expansionprojects
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Strong Brand by emphasis on quality to makepresent in competitive marketExpansion through proper merger and acquisition atproper time.
Thank You