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

CONTINUE…

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