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Presentation By
Ambuja Cement
November 19, 2003
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Indian EconomyGDP Growth - Estimates
(2003 - 2004)
1Q 2004 (A) Estimated ’03-
04
Service Sector 7.6 % 7.3 %
Industrial Sector 5.8 % 5.0 %
Construction Sector 5.7 % 6.7 %
Agriculture Sector 1.7 % 10.7 %
CMIE - Estimates
Economy expected to grow by about 7.4%
A- Actual
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Cement in India
Why ?
Indian economy will keep growing in band of - 5 - 7% annually
To achieve larger GDP growth rate Country will need more Roads,
Ports, Irrigational facilities & other Infrastructure
Housing will continue to be a major construction area
Cement as a product or technology does not suffer from obsolescence
There is no “Substitute” for Cement
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Roads - New Dimension
Major Investments in Road Development
Special Cess of Rs. 1.50 per liter on petrol and diesel
for Road Development
Total outlay over next 2/3 years - Rs. 600 Billion
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Road Development
Golden Quadrilateral- 5846 Sq.. Km
(Already Completed 1408 km)(Expected completion - June 2005)
North-South & East-West Corridors - 7300 Sq.. Km
( Already Completed 980 km) (Expected completion - 2007)
48 New Road project - 10000 Km. (Expected completion - 2006)
Government commits to 25% Concrete Roads
Expected additional consumption -3/4 mn tonnes per annum
Source : NHAI
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Housing Construction
Huge potential:
Unfulfilled demand - 33 mn units
Increasing disposable income
Younger generation aspiring to have “Own House”
Low real estate prices
Easy availability of Housing Finance - Growing over 30%
Interest Rates have come down by 700 bps in last 3 years
Monthly instalment on mortgage is now equivalent to rentals
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Cement Supply
Other side of the equation
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Cement Supply - The Dynamics
Cement Production 2003 111 mn tonnes
Maximum Clinker Production Capability (Including Sanghi) 103 mn tonnes
Current Clinker to Cement Conversion Ratio (the best in last 5 years) 1.21times
Maximum Cement Production Capability 127 mn tonnesat Conversion Ratio - 1.23
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Cement Supply - A Reality Check
No new cement capacity under construction
Lenders unwilling to fund new cement plants
Maximum Cement production capability at a
conversion ratio of 1.23 - 127 mn tonnes
Existing players going through Consolidation
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Indian Cement IndustryNext 3 Years
Financial Clinker Cement Cement Demand Year Capacity Conversion Production
Ratio at Peak 8% ( Maximum Level)
2003(A) 103 - 111 111
2004(E) 103 1.21 125 117
2005(E)* 105 1.22 128 126
2006(E)* 107 1.23 132 136
mn tonnes
A- ActualE- Estimated
* On account of some debottlenecking
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Cement Outlook
Cement demand growth should exceed 8% if the GDP is growing
at over 6 %
FY 2003-04 would be the First year in last decade to not to have
a single new plant commissioning
Next 2 years also there is no new capacity expected
Cement Demand to expected exceed Supply after a gap of several
years
All these point to good demand & better Cement Prices
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Sea terminalsCement factories
HP
Gujarat
Rajasthan
Chattisgarh WBMaharashtra
Punjab
mn tonnes 1986 2003
Capacity 0.7 14.0
Ambuja Cement
Growth of 20 times in 15 years
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Growth
With
A Sound Business Model
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Our Business Model
Own Infrastructure -Logistics Management
Strong brand & efficient distribution
Presence in prime markets
Lowest cost cement producer
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Own Infrastructure
7 Owned Cement Ships for transporting Cement by Sea
Large port in Gujarat to handle export of Cement
( 2 mn tonnes this year) & Import of Coal / Oil
3 Cement receiving terminals
190 MW of Captive Power Plants at various Cement
Plants to give reliable and cheap power
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Strong Brand
India - A bagged marketIndividual 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
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Lowest Cost Producer
FY 2003 FY 2002 Increase /
(Decrease) (%)
Power 187 179 4
Fuel 227 254 (11)
Raw material 136 133 2
Consumables 47 48 (2)
Direct cost 597 614 (3)
Rs./ tonne
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Gujarat Ambuja Cement - Shareholding
GAC ( 12 mn )
40% ACIL 60% Pvt. Equity Investors
ACC ACEL 14.4% 94% ( 17 mn ) ( 2 mn )
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Convertible Bonds
Brief terms: Date of Issuance January 2001
Coupon 1%p.a.
Maturity January 2006
Conversion Price Rs. 222
Conversion Into GDRs/ Shares
Amount US$ 100 million
Conversion Option of the
Bondholder Any time till maturity
Yield to maturity at
redemption 4.6%
Call Option of company From January 2004 till Maturity
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Gujarat Ambuja Cements Limited(Effect of Conversion)
Before After Sources of FundsShareholders’ Funds 16166 20680Deferred Tax 3053 3053Convertible Bonds 4614 -- Debt 12436 12436Total 36269 36269Application of FundsGross Fixed Assets 30239 30239Less: Depreciation 10120 10120Net Fixed Assets 20119 20119Investments in ACIL 8572 8572 Other Investments 2445 2445Net Current Assets 5133 5133Total 36269 36269
Rs. Million
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%
Tenor
Long Term 79
Short Term 21
Total 100
Mix
Rupee Debt 56
Foreign Currency Debt 44
Total 100
Debt Profile (As of 30.9.2003)
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Gujarat Ambuja Cement LimitedValuation
EV/Ton US$ 90
EV/EBIDTA 9 times
Cash Earning per Shares (CEPS) Rs. 27
Earning Per Shares (EPS) Rs. 14
Price to Cash Earning 10 times
Debt/ Equity -( on Conversion) 0.60
Debt/ EBIDTA - (on Conversion) 2.4 times
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