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June 2006 Housing RoadBridges. 2 Disclaimer Certain statements in this release concerning our future growth prospects are forward-looking statements,

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Presentation on theme: "June 2006 Housing RoadBridges. 2 Disclaimer Certain statements in this release concerning our future growth prospects are forward-looking statements,"— Presentation transcript:

1 June 2006 Housing RoadBridges

2 2 Disclaimer Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding our ability to successfully implement our strategy, our growth and expansion plans, change in market prices for cement, changes in competitors pricing and other competitive strategies, change in weather patterns that affect consumer demand for cement, loss or shut down of operations at any of our plants,adverse outcome in the legal proceedings in which we are involved, actions by our authorized dealers and distributors that adversely affect business, labour unrest or other difficulties, change in interest rates and in exchange rates, change in construction activity in India, change in cement demand and prices, change in raw material and energy prices, general economic conditions affecting our industry. JK Cement may, from time to time, make additional written and oral forward looking statements, including our reports to shareholders. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

3 3 Agenda Projects North India : Favourable Environment Summary An Introduction

4 4 Leading Cement Producer with Significant Market Share n Cement operations since over 30 years experience in the Indian cement industry n Third largest grey cement producer and fifth largest market share in Northern India (1) with aggregate grey cement capacity of 3.55 MnTPA n Second largest producer of White Cement (0.3 MnTPA) in a pre-dominantly two producer market (2) (1) Source : CMA (2) Based on capacity and production published by select players in their annual report in white cement industry in India Gotan Mangrol Nimbahera 0.75 MnTPA Grey Cement (2001) 2.8 MnTPA Grey Cement (1975) 0.3 MnTPA White Cement (1984) Key grey cement market for JK Cement Northern India ( ) Number in bracket represents year of commissioning of plant commissioning of plant Significant Market Share in Key Markets in North India

5 5 Second Largest White Cement Producer in a Predominantly Two Producer Market n Predominantly 2 producer market n Strong entry barriers ä Limited access to high quality limestone reserves ä Restricted market size n Stable cash flow Less volatile earnings during industry downturn in grey cement n Access to high quality limestone provides us with a competitive advantage

6 6 Large Reserves of High Quality Limestone Reserves n Access to large reserves of limestone for both grey and white cement operations n JK Cement being one of the first cement producers in Northern India was able to choose limestone reserves in an area with high quality limestone resources High Quality Limestone Mines n Sufficient to support current and planned capacity for approximately 40 years for both grey and white cement Large Reserves of Limestone n Our cement plants located in close proximity to our limestone reserves, resulting in lower transportation costs Proximity to mines

7 7 Experienced Management Team and Strong Processes n Professionally managed company - supported by an experienced senior management and operating team n Most of our senior management have been with the company for more than 20 years n Good labour relations n Nimbahera plant selected as the Regional Training Centre for Northen India, by the World Bank and DANIDA n Grey cement plant at Nimbahera : ä ISO 9001 : 2000 QMS;ISO :2004 EMS certified n White cement plant at Gotan : ä ISO 9001 : 2000 QMS; ISO : 1998 EMS and OHSAS : 2005 certified ProcessPeople Continuously Improving Productivity (1) (1) Combined production of grey and white cement divided by total number of full-time employees (2) Production in FY months annualised (2)

8 8 Strong Sales and Distribution Network n Well developed distribution network for Grey Cement in North India n Strong national distribution network for White Cement Sales Handling Team Cater to more than 1,400 industrial consumers (White Cement) 64 Warehouses 4,000 Retailers Customer Works closely with the distribution channel Marketing Team Grey Cement 79 Members White Cement 101 Members n Works closely with customers to retailers and increase awareness and usage of white cement producers Strong Brands n Co-ordinate with dealer network and direct consumer: n Efforts to increase production of blended cement to meet growth in demand

9 9 Agenda Projects North India : Favourable Environment Summary An Introduction

10 10 JK Cement : The Journey Grey Cement plant at Nimbahera commenced commercial production White Cement plant established in Gotan A captive thermal power plant was set up at Bamania Commissioning of 0.75 MnTPA grey cement plant at Mangrol Acquisition of cement business by JKCL from JKSL Public Issue of Shares of JK Cement Nov 04Feb Period of Financial Distress for JK Synthetics Post Restructuring n Following the separation of our cement business from a BIFR company: äWe have recently been sanctioned a working capital of Rs.650mm n Strengthen company by investing net proceeds in: äCaptive power projects äCapacity expansion n Part of a BIFR company (JK Synthetics) : äInability to build low cost captive power sources äNo working capital arrangement with banks Future…

11 11 Approx 86% of our power requirement in FY05 can be met from the low cost source of captive power proposed Correcting the Power Situation n Potential of using Waste Heat to generate power n Does not involve any fuel consumption n Potential to generate revenue from carbon trading ä Waste Heat Recovery project registered with United Nations Framework Convention on Climate Change (UNFCCC) ä Amongst the few cement companies in the world to be registered for carbon trading ä Expected to generate around 70,800 carbon credit (CER) per annum n Low operational cost due to ZERO fuel requirement We expect to reduce our cost through captive power projects 4.3 Power Cost (Rs./kwh) 1 Developing Captive Power Sources Grid power purchase cost (September 30, 2005) (1) Estimates as per techno-economic feasibility report by Holtec (2) In the second year of operation 1.33 Average power cost in FY05 3.9

12 12 Capacity Expansion Grey Cement n Expansion at Nimbahera grey cement facility n Increase in grinding capacity to produce more blended cement (PPC) n Rs.190mm (3) out of project cost of Rs.225mm already incurred n Increased production of blended cement will reduce overall cost of production äPPC constitutes 29% of our grey cement sales (4) (1) Trail run to expand from 0.30 to 0.35 million tonnes capacity currently under progress; expansion funded from internal accruals (2) Based on capital expenditure of Rs 90 mm to expand from 0.35 to 0.40 million tonnes (3) As on March 31, 2006; (4) By volume; for six months ended September 30, n Increase in production capacity at white cement at Gotan n Phase I to increase capacity to 0.35MnTPA under commissioning and trial run – Funded from Internal Accruals n Rs.27mm (3) out of project cost of Rs.90mm for Phase II already incurred White Cement Increasing Capacity of Grey and White Cement Plants

13 13 Agenda Projects North India : Favourable Environment Summary An Introduction

14 14 Indian Cement Industry Overview n Cement demand dependent on the general economic condition n Focus on infrastructure development n Increasing demand from housing and commercial construction (1) Source : CMIE, CMA (2)Source : CMA Cement Demand Growth (1) Demand Potential : Low per Capita Cement Consumption (2)

15 15 Demand Drivers (1)Source : CRIS INFAC, Data represents construction in infrastructure (2)Source : CMIE; Capital Investments includes proposed, announced and under implementation projects (3)Includes Airports and Ports, Telecom and Tourism Infrastructure n Government has indicated commitment to developing infrastructure and undertaking large projects involving construction of ports, airports, power plants and highways linking different parts of the country Housing Sector n Housing Sector growth driven by declining retail interest rates and incentives for housing loans India: Investing in Infrastructure (1) Commercial Projects India Inc.: Capital Investment Plans (2) n Increased focus on infrastructure development, together with increasing demand for housing and commercial construction expected to drive growth in cement industry

16 16 NorthEastSouthWestCentralIndia (1)Source: CMA data (2)Includes export of cement and clinker; FY05 data; All regions capacities adjusted for non-operational plants Northern India : Favourable Environment Capacity :28.8 Production :29.7 Capacity Utilization :103% Capacity :22.2 Production :20.1 Capacity Utilization :90% Capacity :47.9 Production :45.4 Capacity Utilization :95% Capacity :28.7 Production :27.1 Capacity Utilization :94% Capacity :21.2 Production :22.5 Capacity Utilization :106% NorthSouthEastWestCentral Northern India : High Capacity Utilization (FY05) (1)(2) Northern India : High Growth Demand Region (1) n Northern India has reported capacity utilization consistently higher than any other region

17 17 Northern India : Favourable Environment (1) Retail price of Cement in Delhi; Source: CRIS INFAC

18 18 Agenda Projects North India : Favourable Environment Summary An Introduction

19 19 Financial Summary Please refer to page 25 (Presentation of Financial Data) for discussion on financials Net Sales (1) EBITDA White Cement : Low Earnings Volatility (Rs. mm) (1) Excludes Excise Duty and Sales tax White Cement EBITDA (Rs.mm)

20 20 Summary : JK Cement Investment Case North India : Favourable Environment Leading Cement Player White Cement Producer in a Pre-Dominantly 2 Producer Market High Quality Limestone Reserves Strong Sales & Distribution Network Experienced Management Team and Strong Processes

21 21 Summary FY08 n Restructuring wherein cement business was acquired by JK Cement n Higher cement prices n Sanction of Working Capital Facility n Capacity expansion n Replacement of existing non-operational 7.5 MW turbine with 10.0 MW turbine at Bamania n Captive power projects to reduce cost of production FY07 FY06 FY05

22 Annexure

23 23 Restructuring Exercise n As part of restructuring of JK Synthetics, the cement operations were hived off into JK Cement ä Purchase consideration was used by JK Synthetics for one-time settlement with Banks / Financial Institutions / Secured Lenders ä One share of JK Cement issued for every 10 shares held by shareholders of JK Synthetics; Consequently, JK Cement was listed on BSE on June 30, 2005 n There exists no cross-holding of shares between JK Synthetics and JK Cement Shareholders Lenders JK Synthetics Man-made Fibres Kota, Jhalawar Cement (Grey, White) Nimbahera, Mangrol, Gotan JK Cement Rs.5,300 mm Business Transfer with effect from Nov 4, 2004 Issue of shares ~ 14 %post issue capital Debt Rs.4,970 mm Promoters ~ 86 % post issue capital

24 24 Presentation of Financial Data n Pursuant to the Scheme of Rehabilitation, with effect from November 4, 2004, the JKSL Cement Division was acquired by the Company. Prior to such acquisition, the Company did not have any significant operations. ä The financial information for fiscal 2003 and 2004 and as of and for the six months ended September 30, 2004 represents financial information relating to the JKSL Cement Division, which was one of the two business segments of JKSL prior to its acquisition by the Company. The other business segment of JKSL was the JKSL Man-made Fibre Division ä As the Scheme of Rehabilitation became effective in the middle of fiscal 2005, in order to facilitate a more meaningful comparison, we have presented the aggregate of the results of the JKSL Cement Division for the period from April 1, 2004 to November 3, 2004 and the results of the Company for the period from November 4, 2004 to March 31, 2005 as our results of operations (until the line item profit before depreciation, interest and tax in our profit and loss account) in fiscal However, the actual results of the Company would vary from the information presented for fiscal 2005 had the Scheme of Rehabilitation become effective as of April 1, 2004 ä In addition, certain administrative and other expenses incurred by JKSL were not allocated to either the JKSL Man-made Fibre Division or the JKSL Cement Division in its audited financial statements. We have for purposes of presentation of the financial information allocated 50% of such expenses to the results of operations of the JKSL Cement Division ä You are cautioned not to place undue reliance on this financial information comparison.

25 25 Shareholding Pattern : Increasing Public Float post Offering Pre-Issue Post-Issue (post March 10, 2006)

26 26 Financial Summary (1) Includes Capital Work in Progress (2) Includes secured and unsecured debt (3) Includes registered office and corporate office expenses and prior period items (4) Includes JKSL cement division financials pre-acquisition and Company financials post-acquisition Balance Sheet Income Statement


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