GUJARAT AMBUJA CEMENT LTD.

A case study

mukul kumar kushwahaGuru prasad mandal mistu banerjee

sonu gupta

EVOLUTION

1981- ambuja cements private limited established by Narotam satyanarayan sekhsaria

1983-changed to gujrat ambuja private limited,public issue, inception of first plant at ambujanagar(MD-sekhsaria, chairman-suresh neotia)

1986-Ambuja Cements' first cement manufacturing plant at Ambujanagar, Gujarat worth 0.7 million tonnes capacity commences production

1987-GIIC sold stakes inGACL to sekhsaria.1993-guratambuja 2nd plant, 1MTPA

1995-3rd plant- ambuja cements himanchal unit

1996-Cement ambuja international limited, mauritius

1996- ceylon ambuja pvt ltd,srilanka

3rd unit at ambujanagar1MTPA

Grinding and packing units at panvel and ropar

1997- aquired sick unit of modi cements, raipur 1.4 MTPA

1998- nadikudi and proddatur limestone mines, andra pradesh

1999-got 51% stake in DLF cements delhi(1.4 MTPA), made the forth largest manufacturer in india. Also 7.2% stake inACC

2001-plant at chandrapur ,maharashtra(2 MTPA)

questions

Some statisticsIndian Cement Industry - Companies and their Marketshare (2001)

REGION  EAST  SOUTH  NORTH  WEST  TOTAL

(Mkt. Size in

million tonnes)  14  23.8  28.1  24.6  90.5

Grasim-L&T

Combine  20  21  13  37  22

GACL-ACC  24  10  36  23  24

JK Group  -  -  16  -  5

India Cements  -  22  -  -  5

Madras Cements  -  22  -  -  5

Lafarge  23  -  -  -  3

Others  33  35  35  40  36

Some statistics Cement Companies - Operating Margins

(%)  FY97  FY98  FY99  FY00  FY01

Grasim  NA  NA  14  13  17

L&T  NA  NA  11  15  17

ACC  14  11  7  9  16

India Cements  25  24  25  23  24

Madras Cements  35  33  31  31  31

GACL  36  36  36  36  37

Some statistics Cement Companies - Capacity Utilization (1996-97)

Company  (in %)

Grasim  79

L&T  87

ACC  95

India Cements  94

Madras Cements  98

GACL  102

Reasons behind the success

• Operational excellence and cost cutting• Aggressive productivity improvement

Operational excellenceLOCATIONS PLANNING

• GACL's units in the states of Gujarat, HP and Punjab also received sales tax incentives

• GACL continually expanded capacities in Gujarat and Punjab.

• Himachal Pradesh plant had the advantage of prioritized power supply

• Himachal Pradesh region was cement deficit at that point of time. Also, the plant was closer to the mines and the Punjab grinding unit

• H P had huge limestone deposits

questions

Operational excellenceTRANSPORTATION

• 3 HILLS BETWEEN QUARRIES AND PLANT AT HP

• IN HOUSE BUILDING OF CONVEYOR(REDUCED DIST. FROM 17 TO 2.8 KMS{800TPH})

questions

Operational excellenceTRANSPORTATION

• GUJRAT TO MUMBAI• PLANT SITE• SHIPPING TERMINAL• SILOS• SHIPS• PUMPED TO

TANKERS(FLUIDISATION)• RAILWAY SIDING• Rs 400/tonne VS

Rs1800/tonne• Reduced packaging cost• Quality increased

cost

Aggressive productivity development

• Sent its engineers to australia for safety practices in mining

• Surface miner used(efficient both in extraction and energy)

• Kiln operations• Preheaters• Computerised process

control system

• Yielded 0.17MTPA more• Improved capacity

utilisation by 24 hr monitoring systems(143%)

• Zero error electronic rotary packing m/c

• Investment in dust suppression systems

• Own captive power, better utilisation

Aggressive productivity developmentfuel

• Coal sources and plant location

• Quality of coal• Import• (96 kwh compared to

industry norm of 115kwh)

• Substitute• Groundnut husk in

saurashtra

• Crushed sugarcane• Saved 3% coal• Flat belts to reduce

energy consumption

QUESTIONS FOR DISCUSSION• Study the evolution of GACL from a start-up to a cement

major over the years. how far do you think the company's success can be attributed to its project location, design and implementation decisions?

• 'GACL's cost management focus was the biggest factor responsible for its success.' Critically comment on the above statement and examine the company's approach to cost reduction and productivity enhancement. How did this approach help it gain a competitive advantage and emerge a leader in the commoditised industry?

• Do you think that GACL's efforts were more driven by market compulsions than a strategic cost focus? Will GACL be able to sustain its superior performance in the years to come? Give reasons to support your stand.

ANY MORE QUERIES???