By- Sapana Agarwal Shweta Karan Rishal Bhide AMBUJA CEMENT By- Sapana Agarwal Shweta Karan Rishal Bhide

Cement Industry 2

Cement Industry – An Overview India is the world’s second largest producer of cement after China with industry capacity of over 200 million tonnes (MT). Growth by 9 to 10% for the current financial year. India’s cement consumption grew 9.6% yoy. Cement production could rise to 236.16 MT in FY11 and touch 262.61 MT in FY12. There is a total number of 134 large cement plants with an installed capacity of 173.08 MT and more than 350 small cement plants with an estimated capacity of 11.10 MT operating in India presently

Major Players of Cement Industry in India The Associated Cement Companies Limited (ACC) Ambuja Cements Limited UltraTech CemCo Ltd. Grasim Industries Limited The India Cements Limited Century Textiles and Industries Limited Jai Prakash Industries Birla Corp Limited Jaiprakash Industries Limited Lafarge Others

AMBUJA CEMENT LIMITED Ambuja Cements was set up in 1986. In the last decade the company has grown tenfold. The total cement capacity of the company is 18.5 MT. Net Profit Rs. crore 318 for Qtr. Jul – Sep. 2009 whereas Qtr. Jul – Sep 2008 Net Profit Rs. crore 250. Over 40% of the production cost of cement is power. Cheaper and higher quality coal from South Africa & furnace oil from the Middle East.

Annual Capacity Market Cap. : Rs. 12749.06(Cr) Plant Capacity (MT) Gujarat 5.00 Himachal Pradesh/ Punjab 6.00 Rajasthan 2.00 Chhattisgarh/ West Bengal 3.00 Maharashtra 2.50 Total 18.50

BARGAINING POWER OF BUYERS THREAT OF COMPETITORS * Large no. of competitors * Marginal product differentiation * High fixed costs * Lack of switching cost * High exit barriers THREAT OF NEW ENTRANTS * Economies of scale * High Capital requirement * Avg gestation period of 2-3 yrs * Access 2 distribution channels * Oversupplied market BARGAINING POWER OF SUPPLIERS * Large and few sellers * Monopolistic control of external cost element * No substitutes * Seller’s product is important input THREAT OF SUBSTITUTES * Bitumen (construction of roads) * Engineering plastics (construction of buildings) BARGAINING POWER OF BUYERS * Standard product * Rising share of retail purchase and declining share of bulk purchasers * No substitute PORTER’S 5 FORCE MODEL

SWOT ANALYSIS STRENGTHS WEAKNESSES OPPORTUNITIES THREATS Brand name Most profitable cement co. in India Lowest cost producer Sea transportation Captive power plant Fuel efficiency WEAKNESSES Cement industry is highly fragmented Demand-supply gap, overcapacity Increasing cost of production High interest rates Packaging OPPORTUNITIES Government infrastructure spending Investment in industrial and commercial projects Commercial construction activity THREATS Imports from Pakistan affecting markets in North India Excess overcapacity can hurt margins as well as prices Consolidation through Mergers & Acquisitions

Value Chain Analysis Logistics Marketing and Sales Human Resources Management Technological Development Procurement

Business Level Strategies Target niche segment. Lowest cost producer.

Corporate Level Strategies Related Diversification. Vertical Integration.

M&A’s Gujarat Ambuja's acquisition of Modi Cement ($44 per tonne) in 1997. Gujarat Ambuja's acquisition of DLF in 1999 ($108) Gujarat Ambuja acquired a 14.4-per cent stake in ACC from the Tata group in 1999 at Rs 370 per share. Holcim buys a 67-per cent stake in Ambuja Cement India in 2005 for 810million(about 3500crore).

Ambuja Cements Ltd M&A’s Summary Year Acquisitions Stakes Divestitures 2009 2008 2007 2006 2 2005 1 2004 2003 2002 2001 2000 1999 5 1998 1997 Total 8