Professional Documents
Culture Documents
Company Details
As per the Working Group report on Cement Industry for the formulation
of the 11th Plan, the cement demand is likely to grow at 11.5 per cent per
annum during the 11th Plan and cement production and capacity by the
end of the 11th Plan are estimated to be 269 million tones and 298 million
tones, respectively, with capacity utilization of 90 per cent.
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1.2 Introduction to Ambuja Cement
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
million tonnes. Its plants are some of the most efficient in the world. With
environment protection measures that are on par with the finest in the
developed world.
The Company also operates a hotel through its subsidiary GGL Hotel and
Resort Company. It has shown innovation in utilizing measures like sea
transport, captive power plants, and imported coal and availing of govt.
sops and subsidies to constantly check the costs.
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Ambuja Cement – 2009
Capacity to increase from 16 mn. Tonnes to 22 mn.
tonnes
Clinker Cement
Capacity Capacity
Eastern India
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Total 16.5 22.0
Capacity
MISSION:
VISION:
To be India’s most admired company
OBJECTIVE OF COMPANY:
The management of Gujarat Ambuja decided some objectives to become
topper in the market. And the objectives are:
• Better quality then other company.
• Fair returns to share holders.
• A higher productivity to cover maximum market.
• Maximum customer satisfaction.
• Clean & healthy Environment for employee’s growth.
• Try to lower pollution to fulfillment of social responsibilities
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1.5 Broad Strategies Applied by the Management
in Functional Areas
COMPANY’S STRATEGY:
MARKETING STRATEGY:
⇒ Emphasis was on Quality
⇒ High Advertisement for BRANDING-3 times than ACC at one time
⇒ Improvement in Packaging by information provided by suppliers
⇒ Extensive & primarily exclusive distribution network-Over 6,000
dealers and 20,000 retailers
⇒ Promotion through seminar, workshops for masons, architects,
contractors etc by providing info on use of AMBUJA CEMENT
⇒ Advertising and Publicity campaign
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⇒ More stress was on enthusiasm not on experience
⇒ Motivating factor was empowerment to perform than monetary
factor
⇒ Free access to senior official including VP
⇒ Communication Meetings on regular basis to discuss and sort out
grievances
⇒ Preference to existing employees for higher position
EXPANSION STRATEGY:
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1.6 Impact of Internet or Other Technological
Innovation on the Company
SAP IMPLEMENTATION:
The new system will greatly enhance the company’s capability to capture
and process a comprehensive range of data to be used for decision-
making and day-to-day operations, while automating some processes
which were not part of the IT legacy system.
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Chapter 2
Competitors and Strategies
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2.1 Corporate Level Strategy
UNRELATED DIVERSIFICATION:
The Company also operates a hotel through its subsidiary GGL Hotel and
Resort Company. It has shown innovation in utilizing measures like sea
transport, captive power plants, and imported coal and availing of govt.
sops and subsidies to constantly check the costs.
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2.2 Business Level Strategy
A) BCG Matrix
Ambuja Cement enjoys the position of STAR in the BCG Matrix i.e. high
market share & high market growth.
Compared to others, Ambuja has highest Net Profit having market share of
18.12% in the cement industry. Overall it has 3rd largest sales turnover.
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Secondly, if we look at the overall cement industry it is having high
market growth as cement industry depends on infrastructure, housing,
roads, irrigation, etc which are currently in the booming stage.
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C) SWOT Analysis
Strength
Weakness
Opportunity
Threat
2.3 Competitors
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Market Share of Major Players of Cement Industry (April
2008)
Market
Sales
Last Cap. Net Total % Market
Particulars
Price Turnove Profit Assets share
(Rs. cr.)
r
1,598.5
Shree Cements 5,568.73 2,740.57 577.97 2,644.31 7.91
0
Madras
114.8 2,731.89 2,538.50 363.52 3,723.65 7.32
Cements
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2.4 Competitive Advantage
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EXTERNAL FACTOR:
• Government Policies:
Government policies have affected the growth of cement plants in
India in various stages. The control on cement for a long time and
then partial decontrol and then total decontrol has contributed to
the gradual opening up of the market for cement producers. The
stages of growth of the cement industry can be best described in
the following stages:
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with it. For 1992-93, the industry remained stagnant with no
addition to existing capacity.
• Government Controls:
The prices that primarily control the price of cement are coal, power
tariffs, railway, freight, royalty and cess on limestone. Interestingly,
all of these prices are controlled by government
• Demand Drivers:
The demand from the housing sector is ~53% of the total Indian
cement demand.
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(USD25bn) to INR1,950bn (USD48.75bn) for completion over the
next 24-30 months.
INTERNAL FACTORS
1. Applicability
The Code of Conduct will apply to all the members of the Board of
Directors and
all the employees of the Company in M grade. clause 25 of this Code
requiring annual confirmation is applicable to Directors and employees in
grades MOA and above.
3. Conflict of Interest
The Company expects that the Directors or Employees of the Company
shall not engage in any business relationship or activity which might
conflict with the interest of the Company. The following are examples of
situations, which may constitute a conflict of interest:
When
a Director or an Employee engages in a business relationship or
activity which is or is perceived to be in conflict with the interest of the
Company with anyone who is party to a transaction with the Company.
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The Management shall ensure that all business transactions shall be
recorded in true, fair and timely fashion in accordance with the accounting
and financial reporting standards, as applicable to the Company. They will
ensure the reliability and accuracy of its accounts, records and reports.
5. Confidentiality
a. The Directors and Employees shall strive to protect confidential
information acquired, generated, gathered or which otherwise comes into
their possession during the course of business. All such information should
be maintained in strict confidence, except when disclosure is expressly
authorised by the Company or required by the law.
7. Fair Competition
The Company is committed to respect the principles and rules of fair
competition prohibiting anticompetitive behaviour and abuse of a
dominant market position.
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suppliers and stakeholders with respect and dignity. There should not be
any coercive measures used while dealing with any of the stakeholders.
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2.6 Formal Forces Affecting the Organization
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processes in the company, including the application of a systematic risk
management framework.
The scope and authority of the function are governed by the Internal Audit
Charter, approved by the Audit committee. Internal Audit plays a key role
by providing an assurance to the Board of Directors, and value adding
consultation service to the business operations
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Chapter 3
Financial Details
Coal: Coal is a wild card for the cement industry. Coal is used by the
company both as a fuel in the cement manufacturing process as well as in
captive power generation. This entails the effective sourcing of coal, both
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in terms of quality and pricing, which is very critical for the overall
performance of the company.
Imported coal: Prices for imported coal have raised sharply during the
year, from less that US per tonne (CIF) in December 2006 to US 0 per
tonne in December 2007. The company has drawn plans to meet the coal
requirements in a planned and cost- effective manner.
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3.2 Profitability and its impact & Shareholder’s
Value
Profitability Statement
Current Previous
year Year
Particulars
31.12.200
8 31.12.2007
Appropriations
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200 200 15225994 214.7
8 8 Equity Share 214.75 214.75 24 2 5
200 200 15223754 214.7
7 7 Equity Share 214.75 214.75 22 2 5
200 200 15168285 214.7
5 6 Equity Share 214.75 214.75 90 2 5
200 200 13518826 214.7
4 5 Equity Share 214.75 214.75 23 2 5
200 200 17939995
3 4 Equity Share 214.75 179.45 1 10 179.4
Highlights
Shareholder’s Value
Competitors Comparison
Particulars Last Market Sales Net Total
Price Cap. Profit Assets
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(Rs. cr.)
Turnov
er
14,880. 7,474.1 1,212.7 5,409.7
ACC 792.75
42 5 8 6
14,070. 6,281.7 1,402.2 5,961.5
Ambuja Cements 92.4
76 1 7 4
10,451. 6,436.9 5,743.7
UltraTechCement 839.6 977.02
83 6 3
1,598.5 5,568.7 2,740.5 2,644.3
Shree Cements 577.97
0 3 7 1
3,524.8 3,470.7 5,619.4
India Cements 124.75 432.18
1 8 1
2,731.8 2,538.5 3,723.6
Madras Cements 114.8 363.52
9 0 5
2,345.9 1,809.7 1,515.4
Birla Corp 304.65 323.51
7 0 8
1,489.7
Prism Cement 49.95 629.86 96.23 661.65
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1,454.4 1,778.6 3,606.4
Dalmia Cement 179.7 158.63
8 8 8
1,366.8 1,497.3 1,254.7
Binani Cement 67.3 108.66
7 2 3
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Comparative Valuations
Profitability Ratios
Operating Profit Margin(%) 27.92 28.12 34.71 36.2 28.85
Profit Before Interest And Tax
Margin(%) 18.72 20.39 29.13 31.35 24.04
Gross Profit Margin(%) 25.01 25.44 33.74 36.26 24.65
Cash Profit Margin(%) 24.95 25.29 29.04 34.61 21.17
Adjusted Cash Margin(%) 22.19 23.41 28.29 23.44 21.17
Net Profit Margin(%) 16.63 17.85 23.86 30.53 22.11
Adjusted Net Profit Margin(%) 13.83 15.93 23.09 19.35 22.11
Return On Capital Employed(%) 13.4 16.94 43.76 38.84 28.19
Return On Net Worth(%) 16.66 21.5 43.05 37.95 24.73
Adjusted Return on Net Worth(%) 13.91 19.24 41.77 24.09 19.06
Return on Assets Excluding
Revaluations 8.3 11.45 27.56 26.94 17.88
Return on Assets Including
Revaluations 8.3 11.45 27.56 26.94 17.88
Return on Long Term Funds(%) 13.76 16.94 43.77 38.84 28.19
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Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 47.62 46.06 34.98 35.22 27.94
Dividend Payout Ratio Cash Profit 31.69 32.45 28.73 31.06 23.55
Earning Retention Ratio 42.75 48.4 63.85 44.44 63.75
Cash Earning Retention Ratio 64.32 64.89 70.49 54.13 70.81
Adjusted Cash Flow Times 2.82 1.84 0.49 0.24 0.22
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appropriate performance measures for the enterprise. Four general
perspectives have been proposed by the Balanced Scorecard:
• Financial perspective;
• Customer perspective;
• Internal process perspective;
• Innovation and learning perspective.
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Financial Perspective
FIVE YEAR PERFORMANCE:
(Rs.
Crores)
2006 (18 2007 (12 2008 (12
2004 2005
Months) Months) Months)
Sales 1968 2606 6286 5705 6235
Operating Profit 587 799 2247 2239 1954
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KEY NUMBERS:
⇒ Cement production up 5%, at 17.8 million tonnes.
⇒ Domestic cement sales up 9%, at 16.8 million tonnes.
⇒ Average Net Sales Realisation up 5%, at Rs. 3,544 per tonne.
⇒ Net Sales up 11%, at Rs. 6,235 crore.
⇒ EBITDA down 12%, at Rs. 1,833 crore.
⇒ Profit before Tax down 27%, at Rs. 1,970 crore.
⇒ Net Profit down 21%, at Rs. 1,402 crore.
⇒ Exceptional Income Rs. 308 crore compare to Rs. 786 crore in 2007.
⇒ Cash Position Rs. 852 crore at 31 December 2008.
Fly ash - The waste product that helped them to produce larger volumes
of cement.
Over the years, they have spent time and capital at their R&D cell, to see
how they could use this waste in manufacturing cement without
compromising on the quality.
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• Regulatory and Social
The company has initiated various activities at our plants and corporate
offices. All these activities are geared towards awareness generation and
prevention.
They recognize that their workplace programme must reach out to those
in supply chain. They have a large programme for their truckers who are
an important part of this chain.
Since the railways also form a significant part of the cement supply chain,
they have initiated an awareness programme for the labourers working at
their cement yards. They began with the yards in Mumbai and are
gradually expanding it to include other yards across Maharashtra. In
course of time, they are sure this will have a multiplier impact on other
railway yards across the country.
• Training Programmes
• Systems
• Climate of organization
The health and safety of the people at Holcim is a key priority. This not
only includes its own employees but also for the personnel of sub-
contractors and for visitors. The implementation of the Holcim Safety
Pyramid – “Passion for Safety” encompasses events, which on successful
implementation would help us achieve our goal of “no harm” environment
within the company Environment Management: We won the Environment
Excellence Gold Award for outstanding achievement in environment
management
They are also very conscious about noise pollution. They follow
sophisticated method of blast control using delayed detonators in mines
and hence there is minimal noise during blasting. This also ensures that
the surrounding areas are not affected as the vibrations are of lower
intensity.
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3.5 Expense Centers
ENGINEERED EXPENSES
Engineered costs are those for which the right or the proper amount can
be estimated with reasonable reliability.
DISCRETIONARY EXPENSE
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• Loss on Assets sold, scrapped or discarded and written off
• Commission to Non-executive Directors
• Commission on sales
• Discount on sales
• Selling and Distribution Expenses
• Advertisement and Publicity
• Bonus, Allowances, etc
• Turnover Tax, Additional Tax and Purchase Tax
• R&D Expenses
It is expected that over the next 5 to 7 years, new capacities of over 110
million tonnes would be set up across the country.
While there are high growth opportunities, there also lie big challenges
ahead. Bunching of new capacity in a short span could lead to pressure on
prices and distribution network in 2009. We are gearing up to meet these
challenges.
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Bibliography
www.gujaratambuja.com
www.moneycontrol.com
www.motilaloswal.com
www.icicidirect.com
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