Ambuja Cement

1
Ambuja Cement
August 2005
2
Indian Economy

• In a Sustainable high growth mode
• Impetus on Service Sector
• Changing Demography - A Growth Driver
• Economy getting delinked from Agriculture
  unpredictable monsoons

3
Agrarian to a Service Economy
GDP
Constituent 1997 - 98 2004 - 05
Agriculture 40 23 Industry
35 25 Services 25 52
()
4
Cement Growth A Proxy to GDP Growth
5
Other Asian countries experience has been that
whenever Per Capita GDP crosses USD 500 there
is a substantial rise in the cement consumption
India set to witness this growth in Cement
Consumption
6
Cement Growth in IndiaNot a ChallengeAs
Demand has been growing at a CAGR
of 7 over last Decade
7
Cement Demand(Apr - June)

• Mn. Tonnes Growth ()
• 2005 - 06 34.3 12
• 2004 - 05 30.7 3

8
Momentum of Growth to continuedue to Initiatives
in Housing Infrastructure Development
9
Enabled by

• Large forex reserves
• Abundant liquidity
• Consumer Driven
• Low interest rates

Infrastructure Development now Not only Viable
but Profitable
10
Expected Cement Demand
mn tonnes

• 
  2005-06 2006-07
• Base Domestic Demand 121 131
• Growth - 8 10 10
• Expected Domestic Demand 131 141
• Exports (Potential to be even higher) 4
  4
• Expected Cement Demand 135
  145

11
Cement Production Capability
mn tonnes

• 
  2005-06 2006-07
• Base Clinker Production 108 111
• Increased Production due
• to improvements 3 4
• 
  111 115
• Clinker Export 6 6
• Clinker for Cement Grinding 105
  109
• Blending Ratio
  1.27 1.29
• Cement Production 133
  141

12
Demand set to outstrip Supply
13

• As
• Last Plant was set up in March 03
• No new supply expected till March 06

It Never happened in past
14
Structural change in Pricing Scenario
Result
15
Cement Prices- Domestic -
Rs. / per Bag

• July 2005 July 2004
  Dec 2004
• Bombay 172 165
  158
• Delhi 158 134 135
• Kolkatta 174 176 173
• Ahmedabad 151 148 110
• Jaipur 139 144 135
• Hyderabad 114 123 117
• Chennai 145 155 160

16
- International -
US (FOB)

• Cement Clinker
• 2004 - 05 37 28
• 2005 - 06 (E) 42 32

(E) - Expected
17
Ambuja Cement
1986 - 0.7 Mn. Tonnes Today - 14 Mn.
Tonnes
HP
Punjab
A growth of 18 times since inception
Rajasthan
Gujarat
Cement factories
Maharashtra
Sea terminals
Mn. tonnes
Gujarat 5.0 North India
6.0 Maharashtra 3.0 Total
Capacity 14.0

18
Growth With A Sound Business Model
19
Our Business Model

• Huge owned Infrastructure
• Presence in the growing markets of North West
• Premium Brand - only selling in Retail Markets.
• Largest Exporter of cement 15 of Production
• 35 Cement transport by sea - Cheapest Mode
• Low Cost Cement Producer

20
Own Infrastructure

• 7 Owned Ships for transporting Cement by Sea
• Large port in Gujarat to handle export of Cement
• 3 Cement receiving terminals
• 200 MW of Captive Power Plants at various Cement
  Plants to give reliable and cheap power

21
Premium Brand

• India - A bagged market
• Individual home builder - key driver of demand

• Our focus
• Best quality cement
• Good packaging
• Logistic management - strong distribution network
  
• Customer service

Ambuja Cement - Most preferred brand
- Fetching higher realisation
22
Direct Cost
Rs./ tonne

• FY 2005
• Power 202
• Fuel 298
• Raw material 172
• Consumables 49
• Direct cost 721
• US 16.4

USD/INR Rs. 44
23
A Comparison (April - June 2005)
Rs. Mn.

• Ultratech Grasim ACC GAC
• Sales
• - Volume (mn tonnes) 4.00 3.34
  4.44 3.28
• - Net Sales 8471 7381 9848
  7205
• Operating Profit 1691 1726 2335
  2350
• Operating Margin () 20 23
  24 33
• O/P Per tonne (Rs.) 423 516
  525 716
• (US) 9.6 11.8
  12.2 16.3

Including Export Sale of clinker - 0.40 mn.
tonnes
USD/INR Rs. 44
Source Stock Exchange Filing
24
Gujarat Ambuja Cements Limited(Consolidated
Income Statement)
Rs. Mn.

• FY2005 FY 2004 Growth ()
• Sales 30855 24150 28
• Operating Profit 9278 7098 31
• Interest 902 900 -
• Depreciation 2195 2082
  6
• Profit Before Tax 6181 4116
  50
• Prior Period Adjs (credit) - 425
  -
• Tax 831
  688 20
• Profit After Tax 5350 3853 39
• Minority Interest 169 229 (26)
• Net Profit 5181 3624 43
• Operating Margin 30 29 --

25
Gujarat Ambuja Cements Limited (Consolidated
Balance Sheet)
Rs. Mn.

• FY2005 FY2004
• Sources of Funds
• Shareholders Funds 24873 17314
• Minority Interest 79 6375
• Deferred Tax 3811 3209
• Net Debt
  8447 11845
• Total 37210 38743
• Application of Funds
• Gross Fixed Assets 39210
  44434
• Less Depreciation 14792 16005
• Net Fixed Assets 24418 28429
• Investments 10835 9637
• Net Current Assets 1957 677
• Total 37210 38743

26
Ratios

• FY 2005 FY 2004
• Interest Cover 9.4 7.5
• Operating Margin 31 30
• Net Debt / EBIDTA 1.1 2.2
• Net Debt / Networth 0.37 0.61
• ROCE 17 12
• RONW 21 18

27
Our Score Card (1987 - 2005)

• Parameters CAGR ()
• Capacity 18
• Sales 29
• Net Profit 36
• Networth 30
• Return to Shareholders 29
• Wtd. Avg. EBIDTA Margin 33
  

28
Our Shareholders
Others
Management
17
24
Domestic Pension
FII's (Incl. GDR)
Mutual Funds
41
18
29
Strategic Alliance with Holcim
30
Structure
Before
Current
AIG/GIC

GACL
GACL
HOLCIM
33
67
60
40
ACIL
ACIL
ACC 34.70
ACC 13.8
ACEL 97
ACEL 94.6
Due to this Structure GACLs effective
shareholding in ACC goes up to 11.5 from 8.3
without any fresh investments by GACL.
31
Salient Features of the Partnership

• Holcim Investments in India through ACIL only
• Access to Holcims best practices in areas such
• as waste heat recovery, use of alternative
  fuels, human resources and Information
  technology
• Opening of new cement trading opportunities in
  Middle East and Indian Ocean

32
Ambuja Growth Plans

• Plan to increase capacity by 3 to 4 mn. tonnes in
  immediate future
• Growth to be funded from free cash flows

33
Thank You