Ambuja Cement

Indian cement industry-Ambuja
INDIAN CEMENT INDUSTRY-AN OVERVIEW WITH

REFERECE TO AMBUJA CEMENT
The cement industry accounts for approximately 1.3% of GDP

and employs over 0.14 million people. It is a significant contributor
to the revenue collected by both the central and state governments
through excise and sales taxes. For example, central excise
collections from cement industry aggregated Rs. 45.23 billion in
FY2005 and accounted for 4.3% of total excise revenue collected by
the government. Cement has consistently figured among the top 5-7
commodities. It is a heavily taxed commodity and the duties amount
to around 30% of the selling price of cement. India is the second
largest producer of cement in the world.
In 2005, India produced 142 mt of cement, accounting for 6.4% of
global production of 2.22 billion tonnes. India is the second largest
producer-behind China (1,000 mt), but ahead of the US (99 mt) and
Japan (66 mt). India's cement industry-both installed capacity and
actual production-has grown significantly over the past three
decades, with production increasing at an average rate of 8.1% per
year between 1981 and 2004-05. In recent years, the cement sector
has accounted for a declining share of gross bank credit (GBC) of
scheduled commercial banks (SCBs), largely because of decline in
credit during FY2004. With GBC of Rs. 61.12 billion in March 2005,
the cement industry accounted for 1.67% of industry GBC of SCBs
in March 2005, as compared with 1.81% in March 2000.
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Duties on Cement
Traditionally, cement has been a heavily taxed sector with both the
central and the state governments levying the taxes. The major taxes/
levies comprise central excise duty; sales tax levied by the respective
state governments; royalty and cess on limestone and coal; and,
duties on power tariff.
These duties account for around 30% of the sale price of cement or
around 70% of the ex-factory price (excluding local transport and
dealer margins).
2
The excise duty rates on cement are on specific basis, as against ad

valorem rates on most products. These specific rates have risen
manifold from Rs. 65 per tonne in 1977 to the current level of Rs.
400 per tonne. The excise revenue collection from the cement
Industry has shown an increasing trend over the years. The duties in
India (relative to the selling price of cement) are among the highest
in the world.
DEMAND-SUPPLY POSITION
Robust Production Growth

India's cement production increased 11.2% during FY2006 to 141.81
mt. By comparison, production increased 8.6% during FY2005, and
5.5% during FY2004. Production has increased at a 3-year
compound annual growth rate (CAGR) of 8.4%. On a decadal basis,
India's cement production increased at an annual average of 8.2%
during FY1996-2006, as compared with 6.9% during FY1986-96.
3
During FY2006, after the slack of the monsoon season, cement

production registered high growth since October 2005. High growth
in the cement sector reflected robust demand from the construction
sector and high exports.
As cement is a basic construction material with virtually no
substitute, it is used worldwide for all construction work. Thus, the
growth in the construction industry has a direct relation with the
production and consumption of cement.
GDP from the construction industry has grown at a high rate over the
last three years-12.1% during FY2006, 12.5% during FY2005, and
10.9% during FY2004.
This has had a positive impact on cement consumption, which
increased 10.1% during FY2006, as compared with 8.1% during
FY2005.
4
The increased growth in cement consumption since 2004 has had a

positive impact of the capacity utilization of cement producers.
Capacity utilisation increased from 76% in FY2002 to around 90% in
FY2006.
Regional Production Patterns
The Indian cement industry is comprised of 129 large cement plants

and 300 mini-cement plants, with installed capacities of 153.6 mtpa
and 11.10 mtpa, respectively at end-FY2005. Since cement is a high
bulk and low value commodity, the growth of the cement industry
has been around the limestone deposits. Proximity to limestone
deposits contributes considerably to pushing down the costs of
transportation of heavy limestone. If units are located close to
limestone resources, trucks can be used to move limestone instead of
5
railways. The proximity of coal deposits constitutes another

important factor in cement manufacturing. Nearly 68% of the coal
required by the cement industry during FY2005 was transported by
rail; the balance 32% was moved by road. There are at present seven
clusters-Satna (Madhya Pradesh), Chandrapur (North Andhra
Pradesh and Maharashtra), Gulbarga (North Karnataka and East AP),
Chanderia (South Rajasthan + Jawad & Neemuch in MP), Bilaspur
(Chattisgarh), Yerraguntla (South AP), and Nalgonda (Central AP)-
with a total capacity of 75.23 mtpa at end-March 2005, accounting
for 48.4% of the total installed capacity.
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AP is the largest cement producing state with an installed capacity of

24.9 mt. Cement production during FY2006 was 19.9 mt. Other
major cement producing states include Rajasthan, Madhya Pradesh,
and Gujarat.
In terms of regional concentration, the Southern region accounts for

32% of installed capacity, followed by Western region. MP is
traditionally considered a part of the Western region although as
much as 65% of cement output from this state serves the Northern
and Eastern regions.
7
Major Players (Capacity-wise)

As discussed, ACC is the largest player with a capacity of 18.64
mtpa at end-March 2006. UltraTech CemCo Ltd. now occupies the
second slot with a capacity of 17 mtpa (which includes 1.5 mtpa of
subsidiary Narmada Cement). The Gujarat Ambuja group has
emerged as the third largest player with a capacity of 14.86 mtpa.
Grasim ranks fourth with a capacity of 14.12 mtpa. Other leading
players include India Cements, Jaypee group, Century Textiles,
Madras Cements, Lafarge, and Birla Corp.
8
Locational Issues
Cement being a high bulk and low value commodity, outward freight
accounts for close to one fifth of the total manufacturing cost. In
addition, for every tonne of cement produced, close to 1.7 tonnes of
raw material (including coal) is transported. In this scenario, the
location of the cement plant becomes crucial. While deciding on the
plant location, there is a trade-off between proximity to raw material
sources and proximity to markets. A split-location cement plant can
be a good compromise between the two options. The plant also has to
address issues of logistics (evacuation of cement by rail, road or
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waterways), power availability in the region, and availability of

materials (limestone, coal, slag, etc).
The bulk of the cement manufactured is consumed near urban
centres. In the manufacture of cement, for every 1 tonne of clinker,
about 1.6-1.7 tonnes of limestone and coal need to be assembled. For
OPC, another 50 kg of gypsum is required while grinding the clinker
down.
For PPC, up to another 250 kg of pozzolonic material such as fly ash
requires to be assembled. Thus, there can be two broad locational
strategies, stemming from the principal objective, which is not
merely to minimise unit-manufacturing cost, but to minimise unit
delivered
cost as well. The first strategy is to locate manufacturing facilities
near the consuming centres. In this case, outward freight is
minimised and marketing flexibility enhanced at the cost of higher
raw material assembly costs. The second strategy is to locate the
plant close to the mineral deposits, so as to minimise raw material
assembly costs. Given that 1.4-1.5 tonnes of limestone are required
per tonne of clinker, locating the plant along the limestone deposits is
the logical corollary. Occasionally, as in areas like Satna, Rewa, and
Raipur, the coal pitheads are also quite close by. As long as retention
prices were the norm, outward freight was of no concern to cement
companies. All the cement plants thus naturally gravitated to one of
the several large limestone bearing areas in the country. With the
introduction of partial, and later full, decontrol, outward freight has
become a critical issue in determining a company's profitability.
However, if the list of new plants which have come up since 1982 as
well as those under implementation today, is examine, it may be
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observed that barring some, all companies continue to opt for the
limestone-deposit bias in locating new capacity. However, a hybrid
strategy exists. The clinker to cement ratio is virtually 1:1 for OPC,
with the addition of gypsum being only 5%. For PPC, with fly ash
addition, the clinker to cement ratio is 0.8:1. Split location plants thus
become a distinct possibility, with the clinker manufacture near
limestone deposits and grinding and bagging facilities near the
consuming centres. The advantages of this split location strategy
derive from the ease of transporting clinker in open-to-sky condition
(rather than bagged cement under protective cover), lower handling
losses in transit and ease of storage of clinker (as opposed to cement
at the market centred grinding mills).
This is especially true for PPC/PBFS, since fly ash/slag is available

from the thermal power stations/steel plants, which are located in,
and around the country's urban centres. Flyash disposal by power
utilities has become a contentious environmental issue. Similarly,
steel producers face problems in disposing slag. Therefore, utilisation
of these materials in this manner can improve the cement company's
profitability while benefiting the environment. By locating such
grinding units close to the markets, the distribution costs are reduced
to a great extent. If the grinding unit is near a port with a steel mill or
power plant near by, this becomes an ideal situation for targeting the
export markets. Such possibilities exist near Mangalore, Vizag and
Cochin, where the clinker can also be moved economically by
coastal shipping from plants located in North-western India.
However, this strategy will be limited somewhat by the extent in
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which PPC is accepted in the market. Over the last decade, the share
of PPC/PBFS has increased significantly from 28.3% in FY1995 to
55.6% in FY2005.
High Growth in Domestic Cement Consumption

India's cement consumption increased 10.1% during FY2006 to
135.56 mt. By comparison, consumption 8.1% during FY2005, and
5.8% during FY2004. Production has increased at a 3-year
compound annual growth rate (CAGR) of 8%.
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On a decadal basis, India's cement consumption has increased at a

10-year CAGR of 8.2% during FY1996- 06. Demand has largely
been driven by a shift in housing construction preferences to concrete
and the rapidly rising population. The healthy growth beginning in
FY2005 is also due to increased demand from National Highway
Development Projects (NHDP). In India, the percentage of pucca
houses in urban areas increased from 73% in 1991 to 75% in 2001,
whereas the percentage of semi-pucca and kutcha houses in the urban
areas has declined. The percentage of pucca houses in rural areas
increased from 31% in 1991 to 35% in 2001. This implies that use of
permanent building materials for the construction of walls and roofs
is becoming more popular in rural areas also. Data from the 58th
Round of Survey by National Sample Survey Organisation (NSSO)
indicates that the percentage of pucca dwellings in urban areas
increased from 74% in 1993 to around 77% in 2002-03. Over the
13
same period, the percentage of pucca dwellings in rural areas

increased from 32% to 36%.
Housing completions in urban areas in each decade has shown an

increasing trend from 11.55 million in 1971-81 to 19.53 million in
1991-2001. Similarly, housing completions in rural areas has also
increased from 19.16 million to 25.61 million. Apart from increased
preference for pucca constructions, housing size has also increased in
urban areas. Overall, while the share of 1-room houses has declined
from 45% in 1981 to 39% in 2001, the share of 3-or more rooms has
increased from 27% to 32%.
14
In India, cement consumption and sales follows a seasonal

pattern with lean sales during the monsoon season
(July-September) and higher sales during October-March
In terms of regional consumption, the Southern region accounted for

29% of the total consumption of approximately 135.6 mt during
FY2006, followed by Northern and Western regions. Although, there
has been an year to year variation in the region-wise consumption
growth rates, the relative shares of each region has more or less
remain stable across the past few years.
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Regional disparity has been witnessed in the consumption growth.

During FY2006, the Southern region witnessed the strongest
consumption growth, driven by higher construction activities from
both Government and private sector projects. By comparison, while
consumption in Western region increased 5.4% during FY2006,
consumption in Central region increased only 0.8%.
The major consumption states for cement in India include

Maharashtra (16.8 mt in FY2006), UP (14.2 mt), Andhra Pradesh
(11.5 mt), and Tamil Nadu (11.1 mt). Over the last three years,
consumption growth has outpaced the national average in Andhra
Pradesh, Haryana, Rajasthan, and Karnataka.
16
17
As cement is a low value, high bulk commodity, freight cost

becomes a significant factor in determining the landed cost of
cement. This has resulted in a very low volume of international trade
in cement. World cement trade has averaged just around 6-7% of the
total production. Although, world trade in cement is limited because
of high freight costs, there are countries, which either import a
significant share of their total consumption or export a major share of
their total production. Countries, which import a significant share of
their consumption, appear to be falling in the developing world
category, where the public expenditure on infrastructure projects is
very high. The Middle East countries (although not falling in the
developing world category) have huge requirements of cement
because of construction work in projects in the oil sector. Also in
these countries, unfavourable conditions (for example, inadequate
cement limestone reserves) have discouraged cement capacity
creation. Countries, which export a large share of their domestic
18
production, appear to be having one thing in common. Countries with

high export thrust opt for bulk transportation for exporting cement.
Demand-Supply Position
Overview
The cement industry has been in a surplus position since a long time.
This has resulted in increased exports over the last few years.
Although there exists a surplus of cement in the country, the surplus
has declined from 0.42 mt in FY2005 to 0.23 mt during FY2006,
mainly because of higher growth in consumption. This has resulted
in capacity utilisation increasing from 84% in FY2005 to 90% in
FY2006. India's annual per capita cement production of 0.13 tonnes
in FY2006 is significantly below the world average of 0.3 tonnes and
China's production of 0.76 tonnes during 2004. It has been observed
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that cement consumption increases along with the rise in per capita
income in developing countries. Thereafter, once all the major
developmental projects are in place and the country has a per capita
income comparable with that of the developed nations, the demand
for cement stagnates/declines.
Accordingly, the per capita cement consumption also
stagnates/declines. Growth in population density is a minor (but
steady) driver of demand growth for cement in all countries. Cement
consumption has a strong co-relation with GDP growth. High GDP
growth leads to high cement consumption. The reverse is true when
GDP growth declines. The cement intensity of GDP (i.e. rate of
growth of cement consumption relative to GDP growth) is different
for different countries. For a under-developed country, the cement
intensity of GDP is very low. It rises with the progress in economic
development, reaches a peak level, and then starts declining once all
the developmental projects are in place and the country has achieved
a very high level of economic growth. While the Indian cement
industry is in a surplus position since a long time, the surplus
position is gradually declining. While limited greenfield capacity is
envisaged in the near to medium term, it is very easy to increase
capacity through either brownfield projects or by resorting to
manufacturing blended cements. As per present expansion plans, an
additional 6.6 mtpa of capacity is expected to be operational in
FY2007. Considering an expected production and consumption
growth of 10% during FY2007, the demand supply position of the
Indian cement industry is expected to improve.
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MAINTENANCE AND STORES REQUIREMENTS

The two important items of stores and spares in the case of cement
manufacture are refractory material and grinding media. For grinding
media, high chrome grinding balls are normally used. In the case of
refractory materials, companies go in for two kinds of refractory
bricks-high alumina and high chrome. Typically, the life of the
refractory material is 6-8 months (with the indigenously made high-
alumina bricks), after which the kiln has to be stopped and the
affected sections relined, a process, which takes 3-4 days. Kiln
relining is normally made to coincide with the normal planned
shutdown. Some companies are also experimenting with imported
high-chrome bricks, which provide for a longer uninterrupted
operational life of 18-24 months. In practice, this can extend the
availability of calendar hours and thereby enhance the actual capacity
of the plant.
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ENERGY AND TRANSPORT REQUIREMENTS

The cement industry is dependent on three major infrastructural
sectors of the economy: coal, power and transport. The inputs from
these three sectors account for roughly 50% of the cost of cement.
Both the availability and the cost of these inputs have a vital bearing
on the fortunes of the cement players. All these sectors are largely in
the State sector, and, historically cement companies have had
virtually no control on the cost or availability of these inputs. Hence,
the industry response has largely been in the form of achieving
efficiency
gains and finding alternatives (captive power, use of waterways).
One additional external influencer of the cement industry
performance is the taxes and levies imposed by the Central and State
Governments. These together account for around 30% of the selling
price of cement in the Indian context.
Coal
Coal is an important input in cement manufacture and accounts for
15-20% of the total cost. Coal serves a dual role in cement
manufacture. Firstly, the heat value in coal provides the thermal
energy required for the operation of the kiln. Secondly, the mineral
content in coal (basically, silica content) acts as a constituent in
clinker. For every tonne of clinker, around 200-220 kg of coal is
consumed. Coal consumption by cement plants has increased from
19 mt in FY2000 to around 33 mt in FY2005. Cement accounts for
around 4.5% of India's coal demand. Consumption of coal for
production of cement has not increased proportionately with cement
22
production because of the switch to the dry process, efficiency

improvements in cement kilns and the increased use of fly ash
produced in power plants and granulated slag produced in blast
furnaces of steel plants in the production of cement. In India, overall
coal distribution was statutorily governed by the Colliery Control
Order of 1945.
Subsequently, this order has been amended and the new Colliery
Control Order 2000 has been notified according to which the price
and distribution of all grades of coal have been deregulated with
effect from 1.1.2000. To ensure smooth and co-ordinated supplies of
coal to all consumers, the Government and the coal companies have
adopted a system of linking of supply sources with consuming units
and their requirement. All consumers are broadly classified into two
different categories viz. core sector and non-core sector. Cement
comes under the core sector. Each consumer is given a linkage
(allocation) of quantity on an appropriate field. The linkages to
cement plants and power utilities are decided by the Standing
Linkage Committee (SLC). Key members of the SLC include
representatives from the Ministry of Coal, the Ministry of Railways,
the Ministry of Power/Industry, the Planning Commission, the coal
companies and the Central Fuel Research Institute (CFRI). The
quantity, and the coalfields from where the coal is to be supplied to a
particular cement plant, is decided by the SLC even before the
cement plant is commissioned. The actual movement programme is,
however, drawn up by the SLC every quarter indicating the
quantities to be moved, the mode of transport and the coal Fields /
Coal Company with which the cement company is to be linked. To
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meet the requirement of Indian consumers, there are seven grades of

coal available from Indian collieries. The classification is done based
on the Useful Heat Value content of coal, as mentioned below:
Transportation
Outward freight on cement is an important element in the operating
cost of a cement plant. It accounts for around one third of the total
variable costs. Most of the cement plants in India are located in and
around the limestone clusters. These clusters are distant from the
collieries and the markets for cement. Cement has an average lead of
around 535 km. Thus, cement companies have to rely on extensive
transportation for moving coal from the coal pitheads to the cement
plants and for despatching cement from the plant to the markets. As
both coal and cement are of low value and bulky in nature, freight
costs are considerably high for cement plants. Cement companies use
both road and rail transport to transport cement and to receive coal.
Rail dispatches amount for about 33% while roads carry the balance
66%. The balance 1% is accounted by Sea transporation. The share
of road over rail has only gone up over the years. For coal
transportation, the dependence on rail network is still very high and
accounts for around 70% of coal movement.
24
Although rail transportation is more economical for distances beyond

250-300 km, cement companies have started preferring road
transportation even for longer distances because of several reasons.
Rising railway traffic coupled with insufficient investments by the
railways for increased wagon supplies and the fact that the cement
industry is not an important customer of the Railways (cement cargo
accounts for just 7-8% of the total railway freight) have resulted in a
shortage of wagon supply to the cement industry. The railways had
launched the "Own Your Wagon" scheme-a scheme where
companies could buy wagons and lease it to the Railways and the
Railways would in turn operate these wagons and ensure their
availability to the owner. But the unfavourable terms and conditions
of this scheme prevented its successful commercialization.
25
The Railways have also increased their tariff on a regular basis (often
higher than the increases in the road sector), making them
uneconomical vis-à-vis road tariffs even for longer distances.
26
MAJOR PLAYERS
Domestic players
Associated Cement Companies Ltd (ACCL)
Associated Cement Companies Ltd manufactures ordinary portland

cement, composite cement and special cement and has begun
offering its marketing expertise and distribution facilities to other
producers in cement and related areas. It has twelve manufacturing
plants located throughout the country with exports to SAARC
nations. The company plans capital expenditure through expansion of
existing units and/or through acquisitions. Non-core assets are to be
divested to release locked up capital. It is also expected to actively
pursue overseas project engineering and consultancy services.
Birla Corp
Birla Corp's product portfolio includes acetylene gas, auto trim parts,
casting, cement, jute goods, yarn, calcium carbide etc. The cement
division has an installed capacity of 4.78 million metric tonnes and
produced 4.77 million metric tonnes of cement in 2003-04. The
company has two plants in Madhya Pradesh and Rajasthan and one
each in West Bengal and Uttar Pradesh and holds a market share of
4.1 per cent. It manufactures Ordinary portland cement (OPC),
portland pozzolana cement, fly ash-based PPC, Low-alkali portland
cement, portland slag cement, low heat cement and sulphate resistant
cement. Large quantities of its cement are exported to Nepal and
Bangladesh. Going forward,
27
the company is setting up its captive power plant to remain cost

competitive.
Century Textiles and Industries Ltd (CTIL)
The product portfolio of CTIL includes textiles, rayon, cement, pulp

& paper, shipping, property & land development, builders and
floriculture.
Cement is the largest division of CTIL and contributes to over 40 per
cent of the company's revenues. The company has an installed
capacity of 4.7 million tonnes with a total cement production of 5.43
million tonnes in 2003-04. CTIL has four plants that manufacture
cement, one in Chhattisgarh, two in Madhya Pradesh and one in
Maharashtra. Going forward, the company has scripted a three-
pronged strategy closing down its shipping business, continuing with
its chemicals and adhesive division, and focusing on cement, rayon
and paper as its long-term business plan.
Grasim-UltraTech Cemco
Grasim's product profile includes viscose staple fibre (VSF), grey

cement, white cement, sponge iron, chemicals and textiles. With the
acquisition of UltraTech, L&T's cement division in early 2004,
Grasim has now become the world's seventh largest cement producer
with a combined capacity of 31 million tonnes. Grasim (with
UltraTech) held a market share of around 21 per cent in 2003-04. It
has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan,
Tamil Nadu and Gujarat among others. The company plans to invest
28
over US$ 9 million in the next two years to augment capacity of its
cement and fibre business. Its also plans to focus on its international
ventures, ramping up the capacity of Alexandra Carbon Black in
Egypt to 1,70,000 tonne per annum (from 1,20,000 tpa) and raising
the capacity of the carbon black plant in China from 12,000 tpa to
60,000 tpa.
Ambuja Cements Ltd (ACL)
Ambuja Cements Ltd was set up in 1986 with the commencement of

commercial production at its 2 million tonne plant in Chandrapur,
Maharashtra. The group has clinker manufacturing facilities at
Himachal Pradesh, Gujarat, Maharashtra, Chhattisgarh, Punjab and
Rajasthan. The company has a market share of around 10 per cent,
with a strong foothold in the northern and western markets.
Its total sales aggregated US$ 526 million with a capacity of 12.6
million tonnes in 2003-04. Ambuja is India's largest cement exporter
and one of the most
cost efficient firms. ACL has a 14.45 per cent stake in ACC, making
it the second largest cement group in the country, after Grasim-
UltraTech Cemco. The company has free cash flows that it is likely
29
to use to grow inorganically. The company is scouting for a capacity

of around two million tonne in the northern and western markets. It
has also earmarked around US$ 195-220 million for acquisitions
India Cements
India Cements is the largest cement producer in southern India with a
total capacity of 8.81 million tonnes and plants in Andhra Pradesh
and Tamil Nadu. The company has a market share of 5.4 per cent
with a total cement production of 6.36 million tonnes in 2003-04. Its
product portfolio includes ordinary portland cement and blended
cement. The company has limited its business activity to cement,
though it has a marginal exposure to the shipping business. The
company plans to reduce its manpower significantly and exit non-
core businesses to turnaround its fortune. It also expects the export
market to open up, with the Gulf emerging as a major importer.
Jaiprakash Associates Limited
Jaiprakash Industries, now known as Jaiprakash Associates Limited

(JAL) is part of the Jaypee Group with businesses in civil
engineering, hospitality, cement, hydropower, design consultancy
and IT. It has an annual capacity of 4.6 million tonnes with plants
located in Rewa & Bela (Madhya Pradesh) and Sadva Khurd (Uttar
Pradesh). The company has a market share of 3.8 per cent with the
30
cement division contributing US$ 172 million to revenue in 2003-04.

The company is upgrading its capacity to 6.5 million tonnes through
the modernising of the existing units and the commissioning of a new
grinding unit at Tanda (Uttar Pradesh) with an investment of US$
163 million. Jaiprakash Associates has decided to concentrate on its
core business of construction and engineering and leave its cement
plant to its subsidiary Jaypee Rewa Cement Ltd. The company
manufactures a wide range of world class cement of OPC grades
33,43,53, IRST-40 and special blends of pozzolana cement.
JK Synthetics
JK Synthetics, a Singhania Group company, started manufacturing

nylon at Kota in 1962. Subsequently, it diversified into PSY/PFY,
nylon tyre-cord, cement (in 1975), acrylic and white cement (in
1984). The company has a market share of 2.7 per cent. JK
Synthetics Limited is restructuring its business divisions into two
separate entities- JK Cements and JK Synthetics. After the
restructuring, it will be left with a cement plant at Nimbahera in
Rajasthan, with a capacity of 3.26 million metric tonnes and
manufacturing white cement.
Madras Cements
Madras Cements Ltd is one of the oldest cement companies in the
southern region and is a part of the Ramco group. The company is
engaged in cement, clinker, dolomite, dry mortar mix, limestone,
ready mix cement (RMC) and units generated from windmills. The
company has three plants in Tamil Nadu, one in Andhra Pradesh and
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a mini cement plant in Karnataka. It has a total capacity of 5.47

million tonnes annually and holds a market share of 3.1 per cent.
Madras Cements plans to expand by putting up RMC plants. As
Karnataka is a promising market, the company is further expanding
its capacity from the present 1.5 million tonnes to 3.4 million tonnes
through an investment of US$ 9 million.
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Foreign players
Holcim
Holcim, earlier known as Holderbank, has a cement production
capacity of 141.9 million tonnes. It is a key player in aggregates,
concrete and construction related services. It has a strong market
presence in over 70 countries and is a market leader in south America
and in a number of European and overseas markets.
Holcim entered India by means of a long-term strategic alliance with
Gujarat Ambuja Cements Ltd (GACL) now Ambuja Cement Limited
(ACL) . The alliance aims to strengthen their clinker and cement
trading activities in South Asia, the Middle East and the region
adjoining the Indian Ocean. Holcim also intends to use India as an
additional base for its IT operations, R&D projects as well as a
procurement sourcing hub to generate additional synergies and value
for the group.
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Italcementi Group
The Italecementi group is one of the largest producers and
distributors of cement with 60 cement plants, 547 concrete batching
units and 155 quarries spread across 19 countries in Europe, Asia,
Africa and North America. Italcementi is present in the Indian
markets through a 50:50 joint venture company with
Zuari Cements. All initiatives in southern India are routed through
the joint venture company, while Italcementi is free to buy deals in
its individual capacity in northern India. The joint venture company
has a capacity of 3.4 million tonnes and a market share of 2.1 per
cent.
Lafarge India
Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total
cement capacity of 5 million tonnes and a clinker capacity of 3
million tonnes in the country. Lafarge commenced operations in
1999 and currently has a market share of 3.4 per cent. It exports
clinker and cement to Bangladesh and Nepal.
It produces Portland slag cement, ordinary portland cement and
portland pozzolana cement. The Indian cement plants are located in
Chhattisgarh and
Rajasthan. Lafarge Cement has become the largest cement selling
firm in the Indian markets of West Bengal, Bihar, Jharkhand and
Chhattisgarh.
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Consolidations in the industry
As discussed above, the cement industry is witnessing a number of

Mergers & Acquisitions (M&As). The extent of concentration in the
industry has increased over the years. This concentration is mainly
because of the focus of the larger and the more efficient units to
consolidate their operations by restructuring their business and taking
over relatively weaker units. The relatively smaller and weaker units
are finding it difficult to withstand the cyclical pressure of the
cement industry.
Some of the key benefits accruing to the acquiring companies
from these acquisition deals include:
• economies of scale resulting from the larger size of
operations
• savings in the time and cost required to set up a new unit
• access to new markets
• access to special facilities / features of the acquired
company and
• benefits of tax shelter.
Though mini-cement plants consume fewer units their power costs

are comparable to those of large cement plants. Further, reliance on
SEB power implies exposure to frequent power cuts. Primarily, the
mini cement plant was conceived to utilise isolated limestone
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deposits too small to support a large cement plant. Strategically, the

policy makers may have viewed them as a counter weight against
concentration, both in terms of output and as a means of reducing the
threshold entry barrier. However, most of these plants are yet to
make an upgradation from mini to large cement plant. Even with the
excise concession, these plants have not made any significant inroads
into the Indian cement market.
One reason is that the quantity produced by these plants is extremely
insignificant to give any real price competition to large cement
companies. The realisations achieved by mini-cement plants are
lower compared to large cement plants due to the quality perceptions
of the established brands of large companies. Further, most of the
mini cement plants are to some measure dependent on clinker from
the large cement plants.
Their flexibility to be price setters is limited by their poor financial
health.
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MARKETSHARE OF COMPANIES
The relative market share of large players in the cement industry has
changed significantly over the years. Consolidation of capacities has
seen UltraTech, Grasim, India Cement and Gujarat Ambuja emerge
as the leading players apart from ACC, which has been the market
leader during all the years excepting FY2001. All the players have
resorted to a combination of greenfield capacities as well as takeover
of existing capacities for growth.
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FINANCIAL PERFORMANCE
Cost Structure
The cement industry is one of the most energy-intensive sector
within the Indian economy. Clinker production is the most energy
intensive step, accounting for nearly 75% of the energy used in
cement production. In India, an estimated 90-94% of the thermal
energy requirement in cement manufacturing is met by coal. The
remaining is met by fuel oil and high-speed diesel oil. For each kg. of
clinker, the cement industry on an average requires 800 K. Cal of
coal for dry process and 1350 K. Cal. of coal for wet process. Over
the years, there has been deterioration in the quality of coal. In
particular, the ash content has increased implying lower calorific
values for coal, and improper and inefficient burning, etc. Coal
consumption thus increased resulting in higher fuel and
transportation costs. In order to reduce these problems, the cement
industry started implementing coal washeries which reduce the ash
content of the coal at the mine itself. Generally, the cement industry
in India on an average requires 90-105 units of power in the wet
process, and 100-110 units of power in the dry process to produce
one tonne of cement. The energy costs and cement freight costs are
the two most important elements in the cost structure of a cement
company. While, the share of energy costs has increased marginally,
freight cost has experienced a decline in its share of total operating
costs. The share of other costs (such as stores & spares,
manufacturing overheads, and administrative expenses) have
declined. The share of costs on account of material, repair and
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maintenance, employees and selling expenses have more or less

remained stable.
The average energy costs for cement companies have increased from
Rs. 482/tonne (of cement production) in FY1994 to Rs. 637/tonne in
FY1998. This represents a CAGR of 7.3%. The costs increased
despite successful efforts by the companies to reduce specific energy
consumption in cement manufacture. Since then, the average energy
cost per tonne have however declined from Rs. 590 in FY2000 to Rs.
568 in FY2005. Cost control measures such as: increased reliance on
imported coal; greater stress on producing cement through captive
power; and focus on reducing power consumption have resulted in
this development.
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Healthy demand growth during FY2007, and sustained price growth

is expected to have a positive impact on revenues, profits, and
margins during FY2007. However, the location of the plant and the
trend in its operating costs would be the other determinants of the
actual profitability.
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Ambuja Cements, Ltd. operates as a cement manufacturing company

in India. The company's plants primarily cater to the domestic
markets of Punjab, Haryana, Rajasthan, Delhi, Himachal Pradesh,
Jammu & Kashmir, Uttar Pradesh, Uttaranchal, Maharashtra, Andhra
Pradesh, and Madhya Pradesh. The company’s major international
market includes the Middle East. Partnership with Holcim The
company has entered into a partnership with Holcim Limited of
Switzerland through Ambuja Cement India Limited (ACIL) to
increase its participation in the cement market of India. Holcim is a
cement producer. Holcim and the Company, apart from participating
in the cement market in India, targets to strengthen their presence in
Middle East Asia, South Asia and the Indian Ocean markets. Bulk
Cement Terminals The company has bulk cement terminals at
Panvel, Surat and Muldwarka. The Company has a fleet of seven
ships for carrying bulk cement from Muldwarka to the cement
terminals at Panvel and Surat. Subsidiaries The company’s main
subsidiaries include GACL Finance Limited; GGL Hotel and Resort
Company Limited; Indo Nippon Special Cements Limited; Cement
Ambuja International Limited; Ceylon Ambuja Cements (Private)
Limited; and Midigama Cements (Private) Limited. Joint Ventures
The company's joint ventures include Bengal Ambuja Housing
Development Limited and Bengal Ambuja Metro Development
Limited. History The company, formerly known as Gujarat Ambuja
Cements, Ltd., was founded in 1986. It changed its name to Ambuja
Cements, Ltd. in April 2007.
Ambuja Cements Limited is principally engaged in the manufacture

and distribution of cement in India. The product portfolio of the
company includes cement and clinker. The company markets its
products in India and International markets. The operations of the
company include 5 cement plants, 6 grinding stations and 4 bulk
cement terminals. The company’s plants are located in Gujarat,
Himachal Pradesh, Rajasthan, Chhattisgarh, and Maharashtra. The
company has production capacity of 22 million tones of cement and
produced 18.83 million tones of cement in 2009. The company is
headquartered at Mumbai, Maharashtra in India.
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Ambuja Cements Limited Key Recent Developments
Mar 28, 2010 Ambuja Cement opens new cement plant in Nalagarh,
India
This comprehensive SWOT profile of Ambuja Cements Limited

provides you an in-depth strategic analysis of the company’s
businesses and operations. The profile has been compiled by
GlobalData to bring to you a clear and an unbiased view of the
company’s key strengths and weaknesses and the potential
opportunities and threats. The profile helps you formulate strategies
that augment your business by enabling you to understand your
partners, customers and competitors better.
The profile contains critical company information including,
• Business description - A detailed description of the company’s

operations and business divisions.
• Corporate strategy - Analyst’s summarization of the
company’s business strategy.
• SWOT Analysis - A detailed analysis of the company’s
strengths, weakness, opportunities and threats.
• Company history - Progression of key events associated with
the company.
• Major products and services - A list of major products,
services and brands of the company.
• Key competitors - A list of key competitors to the company.
• Key employees - A list of the key executives of the company.
• Executive biographies - A brief summary of the executives’
employment history.
• Key operational heads - A list of personnel heading key
departments/functions.
• Important locations and subsidiaries - A list and contact details
of key locations and subsidiaries of the company.
• Detailed financial ratios for the past five years - The latest
financial ratios derived from the annual financial statements
published by the company with 5 years history.
• Interim ratios for the last five interim periods - The latest
financial ratios derived from the quarterly/semi-annual
44
financial statements published by the company for 5 interims

history.
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SWOT ANALYSIS
This comprehensive SWOT profile of Gujarat Ambuja Exports Ltd

provides you an in-depth strategic analysis of the company’s
businesses and operations. The profile has been compiled by
GlobalData to bring to you a clear and an unbiased view of the
company’s key strengths and weaknesses and the potential
opportunities and threats. The profile helps you formulate strategies
that augment your business by enabling you to understand your
partners, customers and competitors better.
Gujarat Ambuja Exports Ltd (GAEL) is an India based company

active in the global agro-processing sector. The company is engaged
in the sales and export of agro based products such as cotton, deoiled
cakes, edible oil, yarn and many others. In addition, the company is
also engaged in cotton yarn, solvent extraction, and electric power
generation segments. GAEL had made investment in seven wind
turbines with total capacity of 6.95 Megawatt. GAEL has various
subdivisions like solvent extraction, wheat milling, cotton yarn, bio-
chemicals, cattle feed, vanaspati, vegetable oil refinery and oil mill.
The company has various operating sites located throughout the
country. Gujarat Ambuja Exports Ltd is headquartered in
Ahmedabad, India.The company reported revenues of (Rupee) INR
16,249.80 million during the fiscal year ended March 2009, a
decrease of 11.92% from 2008. The operating profit of the company
was INR 455.50 million during the fiscal year 2009, a decrease of
58.48% from 2008. The net profit of the company was INR 242.50
million during the fiscal year 2009, a decrease of 66.06% from 2008.
This company report forms part of GlobalData’s ‘Profile on Demand’

service, covering over 50,000 of the world’s leading companies.
Once purchased, GlobalData’s highly qualified team of company
analysts will comprehensively research and author a full financial
and strategic analysis of Gujarat Ambuja Exports Ltd, including a
detailed SWOT analysis, and deliver this direct to you in pdf format
within two business days.
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Competitors of Ambuja
COMPANY SYMBOL
Ambuja Cements Ltd. AMBCEL
ACC Ltd. ACCLTD
Andhra Cements Ltd. ANDCEM
Barak Valley Cements Ltd. BARVAL
Binani Cement Ltd. BINCEM
Birla Corporation Ltd. BIRCOR
Burnpur Cement Ltd. BURCEM
Ambuja cement competitors

Companies Last Price Market Cap Sales Turnover Net Profit
Total Assets
(Rs. cr.)
UltraTechCement 1,116.85 30,604.32 6,436.96 977.02
6,213.17
Ambuja Cements 151.65 23,148.82 7,181.48 1,218.37
6,636.60
ACC 1,089.60 20,477.94 8,190.90 1,606.73
6,583.14
Samruddhi Cem 520.85 13,629.79 4,290.63 617.96
7,128.74
Shree Cements 2,296.45 8,000.19 3,643.24 676.10
3,840.48
India Cements 122.30 3,756.76 3,805.45 354.34
6,268.54
Birla Corp 418.85 3,225.37 2,198.44 557.18
2,441.80
Prism Cement 60.90 3,065.442, 856.03 251.05
1,971.07
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Madras Cements 127.00 3,022.21 2,813.80 353.68

4,124.67
Chetinad Cem 535.00 2,043.70 1,366.07 96.63
1,622.59
Ambuja Cements : Branding a Commodity
Corporate Brand : Ambuja Cements

Company : Ambuja Cements Ltd ( Holcim Group Company)
Agency : Grey
Brand Analysis Count : 423
Ambuja Cements formerly Gujarat Ambuja is one of India's largest

cement brands. The company came into existence in 1984. Ambuja
Cements is a classic example of a successful commodity branding.
Indian cement market is different from the rest of the world because
the largest segment of buyers of cement in India is the individual
home owners rather than the institutions. Although this scenario is
witnessing a change due to the boom in the organized realty sector,
individual home owners form a significant segment that no cement
marketers can ignore.
Although these individuals shell out the money to purchase cement,
they are not the decision makers in the buying process.
The intermediaries like the contractors , masons etc take up the role
of the influencer/decision makers in the purchase of this product.
Since the consumers view this product as a commodity, the
involvement of ordinary home owners in the purchase .
Ambuja Cements is one of the companies that realized the potential

of brand as a differentiator. Even in the eighties, Ambuja cements
started its activities for building the brand. Infact according to
Superbrands report, Ambuja cements is the first cement brand to start
advertising in television. Ambuja Cements also used the outdoors
extensively to reinforce the brand image and enhance brand recall.
Ambuja Cements also focused on influencing the other players in the
business like the contractors/masons and engineers through camps
and meets.
These initiatives helped Ambuja to charge a premium over other

brands. With the competition hotting up from Grasim + Ultratech,
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Ambuja Cements could hold on to its share because of the brand

equity it had created over these years.
While branding the cement commodity,Ambuja Cements

concentrated on its core brand promise of " Strength ". All through its
campaigns, the brand was very consistent on reinforcing its
positioning as the " Strongest " cement . The brand was also very
clever in selecting a unique logo.
Commodities are boring products . But for smart marketers, this is

also an opportunity to make a difference. Ambuja cements bought in
lot of humor to this ( otherwise) boring product. Most of its
campaigns are humorous which makes the consumers stick to the
advertisements . The ad which I like most is the ad where the
brothers ( Boman Irani) try to break the wall which they put up to
separate their houses when they were fighting with each other.
These ads reinforce the core positioning of Ambuja as a strong

cement. Strength is a very highly relevant attribute as far as customer
is concerned.
While branding a commodity, the critical question is whether these

ads can influence the consumers to change their commodity mindset
towards this category. The answer is definitely affirmative. I have
noticed many home owners directly procuring these products for
their home construction because they don't trust the contractors. In
these scenarios, high brand recall will give the edge for the brands.
Branding can change the perception of consumers towards

commodity. The point is to create a compelling reason to do so.
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Some of the products of Ambuja

WATERPROOF CEMENT COATING
POZZOCRETE - A CEMENT REPLACEMENT PRODUCT
CEMENT CONCRETE BLOCKS-APPLICATION
SUPERGRIP PVC SOLVENT CEMENT
Cement Mosaic Tiles
Birla White Cement
Starlite a white cement based plaster
Interior Wall Finishes (CEMENT PRIMER OIL BASE)
Interior Wall Finishes (CEMENT PRIMER WATER BASE)
DECORATIVE WATERPROOF CEMENT

COATING(Supremcem)
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Ambuja Cement: Wall-to-wall advertising

By Devina Joshi, agencyfaqs!, Mumbai, January 09, 2008
Section: News Category: Advertising
Share
In an ad for Ambuja Cement, Grey Worldwide has ensured that the
strength of the cement rides on the strength of emotion
There’s something about walls and advertising. It’s ironic, really. On

the one hand, you have telecom brand Airtel talking of breaking
down walls (‘Deewarein Gir Jaati Hain’), while on the other, you
have Ambuja Cement talking of unbreakable walls (‘Yeh Deewaar
Nahin Tootegi’). Obviously, the context is vastly different in the two
cases, but one can’t help but notice the strikingly opposite thoughts,
executed along similar lines.
The demolition talks in progress
Boy, interrupted
Bulldozer fails
The stumped builder
Rejoicing children
'Ambuja Cement. Yeh
Deewaar nahin tootegi'
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A new television commercial (TVC) for Ambuja Cement, created by

Grey Worldwide, revolves around the story of a wall that doesn’t
break, seasoned with an emotional (almost humanitarian) twist.
The TVC opens on a shot of the caretaker of an orphanage

introducing the children to a Mr Choksi. She tells them that Choksi is
going to build a hotel on the site of the orphanage. At this point, a
little boy says to Choksi, “Sir, par last time...,” but he is shushed by
an older boy. The following morning, the heartless Choksi arrives
with bulldozer in tow. At his signal, the bulldozer delivers a powerful
blow on the building, but is unable to bring it down. The little boy
tries to explain again, but is stopped midway again by the elder one.
Choksi tries his best, but is not able to demolish the orphanage. As he
wonders about the strength of the building, the little boy says, “Arre
sir, last time bhi yeh deewar nahin tooti thi (Sir, even last time, this
wall could not be broken down).” As a disappointed Choksi leaves
with his men, the children and their caretaker start dancing in joy,
and the voiceover concludes, “Ambuja Cement. Yeh Deewaar Nahin
Tootegi.” (Submit your opinion on this ad.)
For the longest time ever, Ambuja has been harping on its ‘giant
compressive strength’ proposition; the brand even created the visual
of a ‘giant’ and then a broken hammer. Perhaps its most memorable
ad was the one involving two estranged brothers trying to break
down the wall that runs between their houses (Bhai Bhai, featuring
Boman Irani, which was released six years ago). After that humorous
attempt, came some ads which presented the brand in a sentimental
vein (the Dadi ad), a move that Vivek Deshpande, Ambuja Cement’s
vice-president for brand and promotions, agrees was rather
disastrous, so much so that the Bhai Bhai ad was recalled. “Our new
ad is a correction of this,” he says, adding that the brand will now
strike a balance between emotion and humour.
The new film clearly explores a situation where a wall should not
break for the right reasons. Priti Nair, national creative director, Grey
Worldwide, says that the strength of the wall was juxtaposed with the
strength of character of the orphanage caretaker and the children.
“Cement is a low involving category,” says Nair. So, the children
element and the often used Bollywood type plot (victory of good
over evil) were added to make the ad more entertaining.
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Nair and her team wanted to stay away from the stereotypical
‘milavat (adulteration)’ type ads for cement, or even those involving
big buildings and pride of ownership. “We wanted to show the
victory of the underdogs,” she explains.
The ad has been directed by Abhinay Deo of Ramesh Deo

Productions, who says that the film had to strike a perfect pathos-
humour balance. Interestingly, the initial idea was to show that the
kids are also surprised when the wall doesn’t crack. “But we ruled
that out,” Deo says, because the innocence of a small boy trying
desperately to make the big, bad builder understand what his
predecessors couldn’t do, would add to the fun element. “Another
older child warning him to stay quiet in a rather knowing fashion
builds the suspense,” he grins.
Motivation Perception Image Insight…. Question Bank

1. How would you describe Hit as a person vs Raid vs Baygon? 2.
Imagine 10 years from now, where would you see these people…
(individually) 3. Can you describe their family members 4. Which
animal would you associate with the following brands? 5. Which Car
would you associate with eash of the above brands? 6. Which
celebrity / sport person would you associate with each of the above
brands? 7. Which kind of person do you think will use the above
brands?
Local prices
Jan 2005 Jan 2004 June 2004
Bombay 171 153 168
Delhi 131 112 137
Kolkatta 178 155 175
Ahmedabad 134 132 146
Jaipur 136 108 147
Hyderabad 117 122 130
Chennai 155 159 160
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Challenges
 Cement is energy intensive industry
 Coal, Power & Oil constitute major costs
 Increasing cost of fuel
 Better realisation only in few markets
Strategy
 Presence in the growing markets of North & West
 Retail Focus – Premium pricing
 Largest Exporter of cement – 15% of Production
 35% Cement transport by sea - Cheapest Mode
 And ... Lowest Cost Cement Producer
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Gujarat Ambuja Cements Limited

(Consolidated Income Statement)
Rs in mn
1H 2005 1H 2004 Growth(%)
Sales 14425 9764 48
Operating Profit 4113 2262 82
Interest 455 485 (6)
Depreciation 1204 1002 20
Profit Before Tax 2454 1219 101
Profit After Tax 2038 844 141
Minority Interest 112 58 93
Net Profit 1926 786 145
Net Operating 28 23 -
Margin (%)
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A Comparative Analysis
(Oct - Dec 2004)
Ultra Tech Grasim# ACC GACL

Production
- Clinker 3.20 3.02 2.90 3.10
- Cement 3.36 3.32 4.17 3.70
Sales
- Qty (mn tonnes) 4.15* 3.33 4.18 3.70
- Value 6877 6885 9553 7353
Operating Profit 577 1087 1526 1986
Profit Before Tax (194) 504 741 1162

Operating Margin(%) 8 16 16 27
O/P per tonne (Rs.) 139 329 365 537
Parameters CAGR (%)

Capacity 20
Sales 29
Net Profit 35
Networth 30
Return to Shareholders 25
Wtd. Avg. EBIDTA Margin 33
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Directors Report Year End : Jun '03
The Directors present the Eleventh Annual Report together with the
audited Statement of Accounts of the Company for the corporate
financial year ended 30th June, 2003.
During the financial year 2002-2003 the cement industry grew by 8.7%.
This growth, notwithstanding, supply overhang continued to plague our
home market Rajasthan leading to even poorer realisations than the
previous year. Despite the lower realisations, the Company was able to
reduce the current year's loss to Rs. 25.46 crores from Rs. 31.17
crores. This was possible due to untiring efforts made towards cost
cutting in major areas. The accumulated loss of the Company at the end
of the financial year i.e. 30' June 2003 stood at Rs. 339.40 crores.
FINANCIAL RESULTS
The highlights of the financial results for the corporate financial

year ended 30th June, 2003 are as under:
Current Year Previous Year

(Rs. in Lacs) (Rs. in Lacs)
Sales 31,090.91 28,467.02
Operating Profit before Interest,

Depreciations Tax 4,020.87 4,077.29
Less: Interest & Financial

charges 4,016.13 4,683.23
Gross Profit/(Loss) before

Depreciations Tax 4.74 (605.94)
Add: Depreciation 2,550.42 2,511.40
Loss before taxation 2,545.68 3,117,34
Provision for tax - -
Loss after taxation 2,545.68 3,117.34
Add/(Less):
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Adjustment relating to prior period - -

Net Loss 2,545.68 3,117.34
Loss carried forward from previous period
31,394.25 28,276.91
Accumulated Loss carried forward to next year
33,939.93 31,394.25
ECONOMY AND BUSINESS ENVIRONMENT

While the cement industry grew by 8.7%, the Indian economy as a whole,
registered growth of 4.3%. Growth would have been better if the
agriculture sector was not adversely affected by the severe drought
conditions which prevailed in large swathes of the country, resulting
in negative growth of 3.2% in that sector.
Growth in the cement industry was powered largely by infrastructure,

housing and commercial construction. Growth picked up particularly
smartly in the housing sector due to attractive interest rates on
housing loans. As a result, all of a sudden, housing which , was out of
reach of many households became much more affordable to own.
Consolidation in the cement industry continued, albeit at a slow pace.

Faster consolidation would have helped to ease the tremendous pressure
on prices in the market place due to fragmented, irresponsible
supplies, which led to a continued trend of declining prices.
The Directors believe that the worst is behind us considering the good
monsoon this year and the on-going thrust being given by the Government
to the infrastructure and housing sectors. Present indicators point to
economic growth of 6.5 - 6.8% in 2003-2004.
DIVIDEND
No dividend is proposed in view of losses.
REVIEW OF PERFORMANCE
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Plant Operations
The Company produced 14.51 lac tonnes of cement (last year: 12.73 lac
tonnes) and 13.53 lac tonnes of clinker (last year 13.44 lac tonnes),
an increase of 14% and 1% respectively. Emphasis on quality assurance
continued.
Improvement in production was accompanied by significant improvements

in energy consumption and, as a result, the cost of. production.
Specific power consumption improved to 91 KWH/tonne from 100 KWH/tonne
Of cement in the previous year. Simultaneously, specific fuel
consumption improved to 721 kcals/kg clinker from 735 kcals/kg. clinker
in the previous year.
The thrust on saving in logistics cost has continued during the year,
and despite a sharp increase in the price of HSD, economy in freight
cost were achieved. Part of this saving was a result of a further shift
towards more cost effective road transportation compared
with the more expensive option of rail transportation.
Power generation from the captive thermal power plant increased to

1,095 lac KWH from 895 lac KWH in 2001 -2002 representing growth of 22%
and a PLF of 83%. Approximately 88% of the total electrical energy
requirements were met from captive generation sources, compared with
80% last year. Power cost came down further by 3% despite higher
production and input cost increases, especially USD.
Marketing
Total sales of cement and clinker in the year 2002-2003 were 14.58 lac
tonnes and 1.70 lac tonnes respectively compared to 12.67 lac tonnes
and 1.55 lac tonnes in the previous year. Inspite of increase in sales
by 14%, sales value increased by only 9% due to extremely depresses
selling prices.
The Company has substantially increased its share in the trade segment
and developed a potential network of Dealers/Stockists. Reorientation
of marketing strategy continues with a strong focus on the Company's
natural markets. The Company's brand name Ambuja continued to gain
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wider preference due to its superior quality and the Company's fair
practices with its dealers and stockists.
Cost Impacts
Raw Materials-There was a marginal increase of 5% in cost of raw
materials in the year 2002-2003 compared to the previous year, mainly
due to raw mix optimisation for improved cement quality and higher
production of pozzolona portland cement by 18%.
Coal - There was a saving of 8% in cost of coal due to lower

consumption and more production of pozzolona portland cement.
Power-Power requirements continued to be met largely from captive

generation with only 12% of the total being sourced from the grid. The
reduced dependence on grid power helped in reducing the total power
cost by 3%.
Logistics Management - Further savings of Rs. 237 lacs were achieved in

freight and forwarding due to dynamic management of logistics.
Interest- The Company saved a large amount in interest cost due to

continuing restructuring of its debt by way of replacement of high
cost funds by low cost funds. The overall interest burden of the Company
was reduced by almost 14%over and above the 13%achieved last year.
PROPOSED AMALGAMATION OF THE COMPANY

WITH GUJARAT AMBUJA CEMENTS LTD.
The Company, through Operating Agency, ICICI Bank Ltd., submitted draft
Rehabilitation Scheme to the Board for Industrial & Financial
Reconstruction (BIFR) with the proposal of amalgamation of the Company
with Gujarat Ambuja Cements Limited (GACL) for the approval of BIFR. As
per the proposal, when approved by Hon'ble BIFR, the shareholders of
the Company will get one equity share of Gujarat Ambuja Cements Limited
in lieu of every fifty equity shares of the Company held as on the
record date to be fixed for this purpose. BIFR's sanction to the scheme
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is awaited.
SOME RISKS & CONCERNS
Coal, power, Government levies and duties are major cost components in
the cement industry and the same are under the control of the
Government. Cement demand also depends heavily on the Government's
policy on infrastructure and housing development. Therefore, any
change in government policy may have significant impact on the
industry. In the Union Budget 2003-2004, the excise duty on cement
which was already very high has been further increased from Rs.350/- to
Rs.400/- pertonne. This has put further strain on the Company's
profitability.
The proposal for implementation of Value Added Tax (VAT) when made
effective will pose a challenge to trade and industry.
INTERNAL CONTROL SYSTEMS
The Company is committed to maintain high standards of internal control

systems. The Company has its Internal Audit Department headed by a
senior Chartered Accountant which monitors internal controls,
compliance with procedures and their adequacy from time to time. The
department submits its report to the Audit Committee on quarterly basis
or earlier if required by the Audit Committee.
The Company believes that its Internal Control Systems are adequate
keeping in view the nature and size of the Company's operations. This
department is enlarging its scope and size to meet the fast changing
business scenario and the Company's philosophy to strive for high
standards of Corporate Governance.
HUMAN RESOURCES
The Company maintained cordial relationship with its employees at all
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levels. In order to improve the ability and skills of its employees the
Company organized in-house workshops and conferences covering
wide-ranging subjects. Employees were also deputed to attend seminars
externally to widen their exposure. These programmes have helped to
motivate the employees and to integrate them with the core ethos of the
organisation.
ENVIRONMENT MANAGEMENT & COMMUNITY DEVELOPMENT
Drought in Rajasthan was widespread. The Company continued with

assistance to neighbouring villages by constructing anicuts and
earthern dams to help in water preservation. Free grain and lentils
were distributed to more than 270 individuals identified to be the
hardest hit due to drought. Drinking watertankers were supplied to
nearby villages and fodder for cattle was distributed in many parts of
Pali district.
In addition, Ambuja Cement Foundation (ACF) also widened their

activities by:
- Alleviating the drinking water problem due to drought conditions

prevalent for four years by supplying drinking water through tankers,
constructing Roof Rain Water Harvesting Structures & Waterstorage
tanks, deepening existing wells, installing new hand pumps and
maintaining existing hand pumps.
- Conducting cattle camp for examination of animals, distributing water

and fodder and bringing home to farmers the beneficial aspects of
sustainable farming practices, plantation, horticulture, drip
irrigation etc.
- Conducting regular health check-up camps and distributing free

medicines through the mobile dispensary.
- Supplying furniture, notebooks, sports kits, uniforms and utensils

(for mid-day meal programmes) and conducting training programmes
for women.
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DIRECTORS
Shri Suresh Neotia and Shri A. C. Singhvi, Directors of the Company,

retire by rotation and being eligible, offer themselves for re-
appointment. The Board recommends their re-appointment.
AUDITORS
M/s. A. F. Ferguson & Co., Auditors of the Company, will retire at the
ensuing Annual General Meeting and are eligible for reappointment.
M/s. A. F. Ferguson & Co. have confirmed that their appointment, if
made, shall be within the limits under Section 224( 1 B) of the
Companies Act, 1956. The Board of Directors recommend reappointment of
the Auditors and fix their remuneration.
M/s. P. M. Nanabhoy & Co., Cost Accountants, have been appointed Cost
Auditor of the Company for the year 2003-2004.
CORPORATE GOVERNANCE
The Company has complied with the Corporate Governance Code in

accordance with the listing agreement with Stock Exchanges. A separate
section on Corporate Governance, along with a certificate from the
Auditors confirming compliance is annexed and forms part of the
Directors' Report.
PUBLIC DEPOSITS
The Company has neither invited nor accepted any deposits from the
public within the meaning of Section 58A of the Companies Act, 1956,
during the year under review.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND

FOREIGN EXCHANGE EARNINGS AND OUTGO
Information with respect to Conservation of Energy, Technology
83
Absorption, Foreign Exchange Earnings and Outgo, required to be given

pursuant to Section 217(1)(e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988 is set out in Annexure I and forms part of this
Report.
EMPLOYEES
As required by the provisions of Section 217(2A) of the Companies Act,

1956 read with the Companies (Particulars of Employees) Rules, 1975, as
amended, the name and other particulars of the employee is set out in
the Annexure 11 to the Directors' Report.
DIRECTORS' RESPONSIBILITY STATEMENT

As required u/s 217(2AA) of the Companies Act, 1956, the Directors
hereby confirm that:
i) In the preparation of the Annual Accounts, the applicable accounting

standards have been followed along with proper explanations relating to
material departures;
ii) Appropriate accounting policies have been selected and applied

consistently and have made judgements and estimates that are reasonable
and prudent, so as to give a true and fair view of the state of affairs
of the Company as on 30*' June, 2003 and of the loss of the company for
the year ended 30th June, 2003;
iii) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
iv) The annual accounts have been prepared on a going concern basis.
ACKNOWLEDGEMENTS
The Directors express their gratitude to the Government of Rajasthan,

Local Authorities, Financial Institutions, Bankers to the Company and
various other agencies for the co-operation and guidance extended to
the Company. The Directors also express their gratefulness to all of
84
you, the shareholders for your support to the Company. The Directors
also place on record their appreciation for the contribution made by
employees at all levels.
ANNEXURE I
DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY,

TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO AS
REQUIRED UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE BOARD OF
DIRECTORS' REPORT) RULES, 1988.
A. CONSERVATION OF ENERGY
(a) Energy conservation measures taken :
i) Further optimization of raw mill, coal mill and cement mills.
ii) Installation of dip tubes in 3rd cyclone of both strings and

modification of cyclone flap valves of one string.
iii) Installation of refratherm bricks.
iv) Optimization of clinker cooler fans & ESP retrofitting.
v) Refurbishing of WHR system.
vi) Partial replacement of bags in bag house by membrane bags.
vii) Plant operation studies by FL Smidth, Denmark and ACC-RCD.
viii) Transport of dry fly ash from STG to cement mill fly ash hopper.
ix) Improved plant operation.
(b) Additional investments and proposals, if any, being implemented for

reduction of consumption of energy:
85
i) Further optimization of crusher,raw mill,coal mill & cement mills

operation.
ii) Installation of energy efficient blower for coal firing.
iii) Installation of small size cooler ID fan & motor in parallel with
the present fan.
iv) Efficiency improvement of cooler RFT fans.
v) VVVF drives for cooler seal air fan & bag house reverse air fan.
vi) Up-gradation of cement mills ESP fan impeller.
vii) Up-gradation of cement mills separator fan cone & impeller.
viii) Further optimization of utilities.
ix) Conducting energy audit to identify scope for improvement.
x) Installation of modified flaps in cyclones of other PH string.
xi) Efficiency improvement of various jet pulse filter systems.
xii) Total investment on account of above is estimated at Rs.64 lacs.
(c) Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods :
Measures referred to in (a) above will result in saving of Rs. 234 lacs
approximately per year and (b) above will also result in energy saving
of Rs.86 lacs per year.
(d) Total energy consumption and energy consumption per unit of

production :
Information given in the prescribed Form-A annexed.
B. TECHNOLOGY ABSORPTION
Efforts made in technology absorption are given in the prescribed

Form-B annexed
86
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
(a) Activities relating to exports; initiatives taken to increase

exports; development of new export markets for products & services; and
export plans:
Export was not viable for the year ended June 30, 2003.
(b) Total foreign exchange used and earned :
For the For the

Year ended Year ended
June 30,2003 June 30,2002
(Rs. in lacs) (Rs. in lacs).
Used 240.20 838.86

Earned Nil Nil
Form for disclosure of particulars with respect to absorption.
A. RESEARCH AND DEVELOPMENT (R & D)
1 Specific areas in which R & D carried out by the Company:
i) Optimization of raw-mix design.
ii) Optimisation of particle size to improve raw mix burnability.
iii) Optimisation of Kiln operation by microscopy.
iv) Installation of XRD for mineralogical analysis of raw mix.
2 Benefits derived as a result of above R & D :
i) Improved productivity, quality & power and fuel efficiencies.
3. Future plan of actions:
i) Upgradation of XRD software.
87
ii) To procure microscope to continue microscopic studies of raw

materials and clinker.
iii) Differential thermal analysis (DTA) and thermal gravimetry (TG) of

kiln feed samples.
4. Expenditure on R & D :
For the For the

Year ended Year ended
June 30,2003 June 30,2002
(Rs. in lacs) (Rs. in lacs)
i) Capital Expenditure Nil Nil

ii) Recurring Expenditure 69,91 7.75
iii) Total Expenditure 69.91 7.75
iv) Total R & D Expenditure as
As a percentage of total turnover 0.225 0.027
B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
1. Efforts, in brief, made towards technology absorption, adaptation

and innovation :
The technology has been fully absorbed.Company had continuous

interaction with the main plant supplier- FL Smidth & Co. A/S, Denmark
and others to keep abreast with the latest technological advancements.
Plant operation and maintenance personnel were imparted in-house
training and deputed for external seminars/training courses.
2. Benefits derived as a result of above efforts :
Power & fuel efficiencies,improved productivity and better operations

and maintenance practices.
3. Information regarding technology imported during last five years :
i) Technology imported: a) IKN technology (Germany)

for clinker cooling.
ii) Year of import a) 2000-01
88
iii) Has technology been fully absorbed: Yes.

iv) If not fully absorbed, areas where this
has not taken place, reasons therefor,
and future plans of action: Not applicable
89
Ambuja Gujarat, Rajasthan propose merger news
16 July 2002
Mumbai: The boards of directors of Gujarat Ambuja Cements Ltd

(GACL) and Ambuja Cement Rajasthan Ltd (ACRL), formerly known
as DLF Cement Ltd, have unanimously approved the merger of ACRL
with GACL, subject to necessary approvals.
They have recommended an exchange ratio of 1 new

share of GACL to be issued for every 50 shares of
ACRL, which is based on the valuation report of M/s
NM Raiji and Company.
The management control of ACRL was acquired by

GACL in March 2000. ACRL has a 1.5 million-tonne cement plant
along with a captive power plant of 21 mw located in Rajasthan.
It markets its cement under the brand name Ambuja Cement and enjoys
a leadership position in the markets of Rajasthan, Haryana and Delhi.
Since last two years, it has acquired a good market share in each of
these markets.
Gujarat Ambuja whole-time director Anil Singhvi says in view

of the strategic location of ACRLs cement plant, which fits
well into GACLs market strategy of having leadership in the
cement markets of north and west India, the proposed merger
will not only benefit in terms of this marketing strategy but will also
reduce lots of cost on selling and administrative overheads of both the
companies. "With the proposed merger GACL will have a leadership
position in all the markets from Maharashtra to Jammu and Kashmir."
The current share capital of ACRL is about Rs 261 crore, out of which
Rs 128 crore (49 per cent) is owned by GACL. Based on the valuation
ratio, GACL will issue 26,62,424 shares to the shareholders of ACRL.
This will increase GACLs share capital from Rs 155.19 crore to Rs
157.85 crore, an increase of 1.7 per cent.
Upon merger, the cement capacity of GACL will go up to 10.5 million

tones, and with its subsidiary ACEL the total capacity is 12.5 million
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tonnes. The proposed merger is subject to necessary approvals from

shareholders, the Board of Industrial and Financial Reconstruction and
any other approvals as may be necessary.
91
CEMENT MAKING PROCESS
STEP 1: QUARRY
Basic Elements
For it’s raw materials, cement uses minerals containing the four
essential elements for it’s creation: calcium, silicon, aluminum, and
iron.
Raw materials
Most plants rely on a nearby quarry for limestone. The most common
combination of ingredients is limestone(for calcium) coupled with
much smaller quantities of clay and sand( as sources of silica,
aluminium, and iron). Other raw materials, such as mill scale, shale,
bauxite and fly ash, are brought in from outside sources when
necessary.
Crusher
Rock blasted from the quarry face is transported to the primary

crusher, where chair sized rocks are broken into pieces the size of
baseballs. A secondary crusher reduces them to the size of gravel.
Some plants now crush materials in a single stage.
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STEP 2: PROPORTIONING, BLENDING & GRINDING
Proportioning and Blending

The raw materials are now analyzed in the plant laboratory, blended
in the proper proportion, and then ground even finer.
Grinding
Plants grind the raw materials with heavy, wheel-type rollers that
crush the materials into powder against a rotating table. After
grinding, the material is now ready for the kiln or preheater,
depending on plant type.
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STEP 3: PREHEATER TOWER
Tower
The preheater tower supports a series of vertical cyclone chambers
through which the raw materials pass on their way to the kiln.
Hot Gases
To save energy, modern cement plants preheat the materials before
they enter the kiln. Rising more than 200 feet, hot exit gases from the
kiln heat the raw materials as they swirl through the cyclones.
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STEP 4: KILN
Raw materials
Raw materials now enter the huge rotating furnace called a kiln. It’s
the heart of the cement making process – a horizontally sloped steel
cylinder, lined with firebrick, turning from about one to three
revolutions per minute. The kiln is the world’s largest piece of
moving industrial equipment.
Intense Heat
From the preheater, the raw material enters the kiln at the upper end.
It slides and tumbles down the kiln through progressively hotter
zones toward the flame. At the lower end of the kiln, fuels such as
powdered coal and natural gas feed a flame that reaches 3400 F
(1870 C) – one-third of the temperature of the sun’s surface. Here in
the hottest parts of the kiln, the raw materials reach about 2700 F
(1480 C) and become partially molten.
Clinker
This intense heat triggers chemical and physical changes. Expressed
at its simplest, the series of chemical reactions converts the calcium
and silicon oxides into calcium silicates, cement’s primary
constituent. At the lower end of the kiln, the raw materials emerge as
a new substance: red hot particles called clinker.
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STEP 5: CLINKERCOOLER & FINISH GRINDING
Cooler
The clinker tumbles onto a grate cooled by forced air. Once cooled
the clinker is ready to be ground into the gray powder known as
Portland cement.
Re-circulate
To save energy, heat recovered from this cooling process is
recirculated back to the kiln or preheater tower.
Ball-Mill
The clinker is ground in a ball mill – a horizontal steel tube filled
with steel balls. As the tube rotates, the steel balls tumble and crush
the clinker into a super-fine powder. It can now be considered
Portland cement. The cement is so fine it will easily pass through a
sieve that is fine enough to hold water. A small amount of gypsum is
added during final grinding to control the set.
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STEP 6: BAGGING & SHIPPING
Silos
From the grinding mills, the cement is conveyed to silos where it
awaits shipment.
Transportation
Most cement is shipped in bulk by trucks, rail, or barge.
Bagged
A small percentage of the cement is bagged for customers who need
only small amounts or for special uses such as mortar.
Most cement is shipped to ready-mixed concrete producers. There,

it’s combined with water, sand, and gravel to make concrete
delivered in the familiar trucks with revolving drums. Cement is also
used for a wide array of precast concrete products.
CEMENT – VARIETIES AND TECHNOLOGY
There are different varieties of cement based on different

compositions according to specific end uses, namely, Ordinary
Portland Cement, Portland Pozzolana Cement, White Cement,
Portland Blast Furnace Slag Cement and Specialised Cement. The
basic difference lies in the percentage of clinker used.
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• Ordinary Portland Cement (OPC):

OPC, popularly known as grey cement, has 95 per cent clinker and 5
per cent gypsum and other materials. It accounts for 70 per cent of
the total consumption.
• Portland Pozzolana Cement (PPC):

PPC has 80 per cent clinker, 15 per cent pozolona and 5 per cent
gypsum and accounts for 18 per cent of the total cement
consumption. It is manufactured because it uses fly ash/burnt
clay/coal waste as the main ingredient.
• White Cement:
White cement is basically OPC - clinker using fuel oil (instead of
coal) with an iron oxide content below 0.4 per cent to ensure
whiteness. A special cooling technique is used in its production. It is
used to enhance aesthetic value in tiles and flooring. White cement is
much more expensive than grey cement.
• Portland Blast Furnace Slag Cement (PBFSC):

PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag
and 5 per cent gypsum and accounts for 10 per cent of the total
cement consumed. It has a heat of hydration even lower than PPC
and is generally used in the construction of dams and similar massive
constructions.
• Specialised Cement:
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Oil Well Cement is made from clinker with special additives to

prevent any porosity.
• Rapid Hardening Portland Cement:

Rapid Hardening Portland Cement is similar to OPC, except that it is
ground much finer, so that on casting, the compressible strength
increases rapidly.
• Water Proof Cement:

Water Proof Cement is similar to OPC, with a small portion of
calcium stearate or non- saponifibale oil to impart waterproofing
properties.
There are three types of processes to form cement - the wet, semi-
dry and dry processes. In the wet/semi-dry process, raw material is
produced by mixing limestone and water (called slurry) and blending
it with soft clay. In the dry process technology, crushed limestone
and raw materials are ground and mixed together without the
addition of water. The dry and semi-dry processes are more fuel-
efficient. The wet process requires 0.28 tonnes of coal and 110 kWh
of power to manufacture one tonne of cement, whereas the dry
process requires only 0.18 tonnes of coal and 100 kWh of power.
Coal and power costs account for 35 per cent of the total cement
production costs. With 95 per cent of the total capacity based on the
modern dry process technology, the Indian cement industry has
become more cost efficient. Top companies in the cement industry
match quite well with world standards in terms of energy (thermal
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energy Kcal/kg of clinker - India 665 against 690 of Japan) and

pollution norms (SPM of 40 in India against 20 in Japan).
Scale of Operations
The cement industry has witnessed a significant change in the scale
of operations. In 1961, the largest kiln in operation had a capacity of
750 tpd. In 1970, of the total 119 kilns, 1 had over 1,000 tpd
capacity, with 55 having under 400 tpd capacity. In 1980, 11 of the
total 141 kilns were over the 1000 tpd mark, with 1 kiln having a
capacity larger than 3,000 tpd (roughly 1 mtpa). The 1990s saw still
higher capacity 4500-5000 tpd (or 1.5 mtpa) kilns. The recent
practice for a large size plant is to have 6,500-7,000 tpd (or 2.5 mtpa)
capacity. As of end-FY2006, there were 7 plants with a capacity
exceeding 3 mtpa at a single location, and 71 plants with a capacity
exceeding 1 mtpa at a single location. Plants with a capacity
exceeding 1 mtpa at a single
location had a cumulative installed capacity of 126.2 mtpa at end-
FY2006, accounting for 80.3% of total installed capacity.
100
The average kiln capacity of a dry process technology plant is around

2,880 tpd (0.9-1 mtpa). These large sizes contribute towards
reduction in energy consumption, and provide the units with scale
benefits. The minimum economic size also appears to have risen
because of the rise in investment cost per tonne of cement. This
investment cost has risen from Rs. 650 per tonne in the late 1970s to
around Rs. 3,500 today.
101
CASE STUDY-1
Case study of ambuja

Ambuja Cements : ERP Masonry
Connecting 200 locations, training 2,500 end-users, and migrating
data from 8 different legacy systems onto the ERPall in 14 months
flat
Priya Kekre
One of Indias largest cement manufacturing companies, Ambuja

Cements has taken many IT initiatives to integrate the latest
technologies into its operational systems, so as to reap business
benefits at every level of the supply chain. The IT team at Ambuja
has always been forthcoming in experimenting new technologies. For
eg, in 2001 the cement company was one of the first to deploy Red
Hat Linux at remote sites for critical business applications.
Trend-setter
102
Last year, Ambuja Cements launched Connect India Plus, which has
proved to be one of the most significant, large scale IT deployment
within the company so far. As the companys manufacturing plants
are located in remote areas where the scope of connectivity was
minimal, the resources, namely hardware, software and people were
located at plant sites. The overall integration of data was transferred
and carried out in batches. During 2006, Ambuja decided to go for
SAP as it is a standard system for all group companies.
Within two years, Ambuja rolled out Connect India Plus that was
conceived as an ERP implementation program for installing SAP
with all its modules at 200 locations across India and 2,500 users
with a single instance on a server in Mumbai. The project kicked off
on June 1, 2007 and went live on August 1, 2008a period of just
fourteen months.
Bihag Lalaji, CIO, Ambuja Cement
Deployed Connect India Plusan SAP ERP implementation program
across 200 locations to connect 2,500 users
The enterprise wide ERP went live in a period of just 14 months and
helped Ambuja easily align with other group company processes
One of the prime reasons for deploying this ERP was to have a
uniform, standard, and ubiquitous system across the organization not
only in India but abroad, so that Ambuja Cement could easily align
with other group company processes, says Bihag Lalaji, CIO,
Ambuja Cement. The project also promised a reduction in cost of
operations and maintenance of the IT system. It would also enable
Ambuja Cements to respond quickly to changes in the business
environment.
Challenges
However, the IT team faced immense challenges while implementing
this enterprise-wide ERP. Since the company had multiple plants,
each with their own computer systems and processes, there was a
need to create a single business blueprint across the organization. On
the people front, there was a need to integrate individuals with
diverse background to be able to work as a focused team.
Besides the core team consisting of 75 members, there were 150

people involved indirectly or directly for data migration, training, etc.
All this required enormous amount of man-management skills.
Infrastructure refreshes was another critical challenge as the IT team
103
took on the task of setting up an adequate and reliable WAN using

MPLS and VSATS, connecting 200 locations including factories,
bulk cement terminals, grinding units, regional offices and
warehouses.
Data migration was another major challenge since data had to be

imported from eight different legacy systems. The standard master
data codes had to be mapped with the legacy codes and data had to
be updated at one go. We had a dedicated team and full support of
business users from various locations, who worked relentlessly to
achieve this mammoth task, says Lalaji.
After the successful implementation of SAP, the company has been

exploring some cutting edge technologies to improve supply chain. It
has implemented a sophisticated smart-card based vehicle tracking
system to improve operational efficiency in terms of cycle-time
monitoring and fleet management. This has helped the company
determine the exact cycle for a vehicle carrying cement from the
factory to a destination and carrying raw material as a return load
back to the factory. The information is dispatched to customers via
SMS.
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CASE STUDY-2
Salinity mitigation by Industry: A case study of Ambuja
Cements Limited, Junagadh
This presentation describes the work of Ambuja Cements Limited, in

managing salinity in groundwater, as part of its Corporate Social
Responsibility initiative, in coastal Junagadh region of Gujarat.
Water harvesting and conservation work was taken up through

building check dams, rooftop rainwater harvesting, building
percolation and drinking water wells, deepening of ponds, micro-
irrigation, cropping pattern interventions and more. As a result of the
work, the groundwater level improved by over 30 feet, the river
flows improved by 6 months, agricultural productivity and farmer
incomes improved significantly and drinking water quality improved.
This work won the CII-GBC National Award (Beyond the Fence
Category) for Excellence in Water Management in 2008.
Location
Junagadh, GJ, India
Latitude: 21.515471, Longitude: 70.456444
Category: Ponds, Salinity Mitigation, Agriculture, Irrigation, Cement
Industry, Check Dams, Corporate Social Responsibility (CSR),
Drinking Water, Rainwater Harvesting, Recharge Wells, Rooftop
Rainwater Harvesting, Salinity, Water for Industry, Wells
Associated People / Organizations: Ambuja Cements Limited
Author: Ambuja Cements Limited
Source: Confederation of Indian Industry (CII)
Location / Time: Junagadh, India, Gujarat, 2008
Difficulty Level: Beginner
Ambuja Cements : Branding a Commodity
Corporate Brand : Ambuja Cements
Company : Ambuja Cements Ltd ( Holcim Group Company)
Agency : Grey
Brand Analysis Count : 423
Ambuja Cements formerly Gujarat Ambuja is one of India's largest
cement brands. The company came into existence in 1984. Ambuja
Cements is a classic example of a successful commodity branding.
105
Indian cement market is different from the rest of the world because
the largest segment of buyers of cement in India is the individual
home owners rather than the institutions. Although this scenario is
witnessing a change due to the boom in the organized realty sector,
individual home owners form a significant segment that no cement
marketers can ignore.
Although these individuals shell out the money to purchase cement,
they are not the decision makers in the buying process.
The intermediaries like the contractors , masons etc take up the role
of the influencer/decision makers in the purchase of this product.
Since the consumers view this product as a commodity, the
involvement of ordinary home owners in the purchase .
Ambuja Cements is one of the companies that realized the potential
of brand as a differentiator. Even in the eighties, Ambuja cements
started its activities for building the brand. Infact according to
Superbrands report, Ambuja cements is the first cement brand to start
advertising in television. Ambuja Cements also used the outdoors
extensively to reinforce the brand image and enhance brand recall.
Ambuja Cements also focused on influencing the other players in the
business like the contractors/masons and engineers through camps
and meets.
These initiatives helped Ambuja to charge a premium over other

brands. With the competition hotting up from Grasim + Ultratech,
Ambuja Cements could hold on to its share because of the brand
equity it had created over these years.
While branding the cement commodity,Ambuja Cements
concentrated on its core brand promise of " Strength ". All through its
campaigns, the brand was very consistent on reinforcing its
positioning as the " Strongest " cement . The brand was also very
clever in selecting a unique logo.
Commodities are boring products . But for smart marketers, this is
also an opportunity to make a difference. Ambuja cements bought in
lot of humor to this ( otherwise) boring product. Most of its
campaigns are humorous which makes the consumers stick to the
advertisements . The ad which I like most is the ad where the
brothers ( Boman Irani) try to break the wall which they put up to
separate their houses when they were fighting with each other
Some other ads
106
These ads reinforce the core positioning of Ambuja as a strong

cement. Strength is a very highly relevant attribute as far as customer
is concerned.
While branding a commodity, the critical question is whether these
ads can influence the consumers to change their commodity mindset
towards this category. The answer is definitely affirmative. I have
noticed many home owners directly procuring these products for
their home construction because they don't trust the contractors. In
these scenarios, high brand recall will give the edge for the brands.
Branding can change the perception of consumers towards
commodity. The point is to create a compelling reason to do so.
107
QUESTIONNAIRE
Q1. What is the present scenario of the Indian cement

industry?
Ans. At present in the industry, demand exceeds supply.
Cement companies are finding it difficult to cope up with the
huge demand for cement, hence the companies are going in for
capacity expansion. Overall it is a good time for the
companies.
Q2. Which of the sectors are contributing the most to the

demand for cement?
Ans. The housing sector and the Government have contributed
the most to the demand for cement.
Q3. What types of cement does Ambuja Cement Limited

(ACL) manufacture?
Ans. There are mainly three types of cement namely 43 Grade,
53 Grade and Portland Pozzolana Cement (PPC). ACL is
mainly into PPC.
Q4. Where are ACL’s cement plants located and what are
their individual capacities? Does the company face any
locational issues?
Ans. Individual capacities: Maratha Plant (3mt), Khodinar
Plant (4mt), Rajasthan (2 mt), Himachal Pradesh (2mt), Other
Plant(1mt).
As far as locational issues are concerned power is the most
common problem faced by all cement companies. To solve this
problem ACL generates its own power.
Q5. Which is your main market in the western region?

How do you supply cement to the market? Is there any
scope for its future growth in the next few years?
Ans. In the western region, our main market is Mumbai. It is a
vast market, the real estate boom as well as infrastructure
development activities are the drivers of growth in Mumbai.
Cement is supplied to Mumbai from our Khodinar Plant
located near Veraval in Gujarat. From Khodinar cement is
transported by our company’s ships to Ulva Reti Bunder near
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Panvel. Here we have our own packing unit. At Ulva Reti

Bunder, cement is stored in silos. From here it is packed and
sent to Mumbai.
Q6. Do you export cement? If yes, to which countries?

Ans. Yes, we export cement to countries like South Africa and
UAE. However exports have slowed down in recent times
since the domestic demand itself is huge.
Q7. What are the expansion plans?

Ans. ACL plans to expand its Maratha plant by 1 mt and
Khodinar plant by 1 mt.
Q8. Ambuja’s marketshare was 10.6% in 2006, compared

to ACC’s 12.6%. How do you plan to become the No.1
player in the industry?
Ans. In order to achieve the No.1 position, we are focusing on
increasing brand awareness among dealers and customers. We
are offering attractive schemes to dealers to motivate them to
push our product in the market besides offering holiday
packages abroad to dealers who achieve sales targets. In
addition, the company also provides scholarships to children of
deserving dealers.
Q9. Which is your preferred mode of transportation for

cement? Why?
Ans. For transportation of cement, ACL prefers ships since it
is a cheap mode of transport. It reduces the overall cost to a
great extent.
Q10. Cement is a low value, high bulk commodity, hence

freight cost becomes a significant factor in determining the
landed cost of cement. What steps has Ambuja taken to
reduce freight cost?
Ans. As mentioned earlier, we transport cement from Gujarat
to Mumbai by ships, this greatly reduces the cost of cement.
From Panvel to Mumbai the cement is transported by trucks.
These trucks belong to a subsidiary of the company –
GANESHA TRANSPORT, hence it is a win-win situation for
the company.
109
Q11. Where do you source your raw materials like

limestone, gypsum etc. from?
Ans. Limestone is found locally. Infact cement plants are setup
near limestone deposits, so limestone is available easily.
Gypsum and coal are imported. Coal is imported from
Australia.
Q12. Cement industry is one of the most polluting

industries, what steps has ACL taken to reduce pollution?
Any special environmental initiatives?
Ans. Ambuja uses state-of-the-art technology which keeps
pollution to the minimum. We have planted trees around our
cement plants to reduce pollution and increase the green cover.
In fact, ACL received the Rajiv Gandhi Award for pollution-
free plant.
Q13. Does your company utilize fly ash to manufacture

blended cement? Does it have any advantages?
Ans. Yes we utilize fly ash to manufacture blended cement.
Fly ash is obtained from the power sector. It is unavoidable
and poses a waste disposal problem, hence the Government
has made it mandatory for cement companies to use flyash. Its
advantages are the use of these wastes also enables cement
companies to increase their profits.
Q14. Which process technology does ACL use? What are

the advantages?
Ans. ACL uses dry process technology. The dry process is
more fuel-efficient. The wet process requires 0.28 tonnes of
coal and 110 kWh of power to manufacture one tonne of
110
cement, whereas the dry process requires only 0.18 tonnes of

coal and 100 kWh of power.
111
Conclusion
I concluded that the cement industry in india is on great
boom and accounting a lot to Indian GDP. In india the cement
was mostly demanded by housing sector The cement sector is
expected to witness strong production and consumption
growth of 10% during FY2007 in line with the economic
growth because of the strong co-relation with GDP and the
increased activity in the construction sector.
It is estimated that requirement of new dwelling units
over a period of 25 years (1996-97 to 2020-21) will be around
140 million units requiring an investment of approximately Rs.
20,000 billion. Besides, demand from infrastructure projects
and industrial/commercial ventures account for 20% each.
Even as NHDP-I (comprising the Golden Quadrilateral or GQ
and North-East-South-West or NESW) near completion (GQ
by end-2006, and NESW by 2009), demand in the port and
airport segments may pick up, keeping demand buoyant.
Further, NHDP-III to NHDP-VII (2006-15) envisages
construction of another 36,000 kms of roads at an estimated
cost of Rs. 1,270 billion. Overall, from the demand
perspective, the fundamentals look bright, and cement demand
in the medium term is expected to grow by around 9%. The
Planning Commission's Working Group on Cement Industry
predicts cement production in India to grow at a rate of 10%
during the Tenth Five-Year Plan (2002-2007). By comparison,
the cement industry is expected to grow at around 8-10%
during the 2003-07 period. Growth of 9% per annum from
FY2006-10 would result in cement production increasing to
around 196 mt in FY2010. By comparison, consumption could
increase to 190 mt in FY2010. China, the world's largest
producer of cement, has seen sustained cement production
average annual growth of 10% since 1980, mostly due to the
enormous infrastructure development that country has
experienced over this period.
112
Bibliography
Religare Technova
WWW.GOOGLE.COM
WWW.YAHOO.COM
www.icra.in
www.ibef.org
www.cement.org
www.equitymaster.com
www.cseindia.org
Newspapers Referred
1. Economic Times
2. Times of India
113

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What is the size and growth of the Indian cement industry?

What is the size and growth of the Indian cement industry?

What are the major taxes imposed on the cement industry in India?

What are the major taxes imposed on the cement industry in India?

Indian cement industry-Ambuja

INDIAN CEMENT INDUSTRY-AN OVERVIEW WITH

The cement industry accounts for approximately 1.3% of GDP

The excise duty rates on cement are on specific basis, as against ad

Robust Production Growth

During FY2006, after the slack of the monsoon season, cement

The increased growth in cement consumption since 2004 has had a

Regional Production Patterns

The Indian cement industry is comprised of 129 large cement plants

railways. The proximity of coal deposits constitutes another

AP is the largest cement producing state with an installed capacity of

In terms of regional concentration, the Southern region accounts for

Major Players (Capacity-wise)

waterways), power availability in the region, and availability of

This is especially true for PPC/PBFS, since fly ash/slag is available

High Growth in Domestic Cement Consumption

On a decadal basis, India's cement consumption has increased at a

same period, the percentage of pucca dwellings in rural areas

Housing completions in urban areas in each decade has shown an

In India, cement consumption and sales follows a seasonal

In terms of regional consumption, the Southern region accounted for

Regional disparity has been witnessed in the consumption growth.

The major consumption states for cement in India include

As cement is a low value, high bulk commodity, freight cost

production, appear to be having one thing in common. Countries with

MAINTENANCE AND STORES REQUIREMENTS

ENERGY AND TRANSPORT REQUIREMENTS

production because of the switch to the dry process, efficiency

meet the requirement of Indian consumers, there are seven grades of

Although rail transportation is more economical for distances beyond

Associated Cement Companies Ltd manufactures ordinary portland

the company is setting up its captive power plant to remain cost

Century Textiles and Industries Ltd (CTIL)

The product portfolio of CTIL includes textiles, rayon, cement, pulp

Grasim's product profile includes viscose staple fibre (VSF), grey

Ambuja Cements Ltd (ACL)

Ambuja Cements Ltd was set up in 1986 with the commencement of

to use to grow inorganically. The company is scouting for a capacity

Jaiprakash Associates Limited

Jaiprakash Industries, now known as Jaiprakash Associates Limited

cement division contributing US$ 172 million to revenue in 2003-04.

JK Synthetics, a Singhania Group company, started manufacturing

a mini cement plant in Karnataka. It has a total capacity of 5.47

Consolidations in the industry

As discussed above, the cement industry is witnessing a number of

Though mini-cement plants consume fewer units their power costs

deposits too small to support a large cement plant. Strategically, the

maintenance, employees and selling expenses have more or less

Healthy demand growth during FY2007, and sustained price growth

Ambuja Cements, Ltd. operates as a cement manufacturing company

Ambuja Cements Limited is principally engaged in the manufacture

Ambuja Cements Limited Key Recent Developments

This comprehensive SWOT profile of Ambuja Cements Limited

The profile contains critical company information including,

• Business description - A detailed description of the company’s