Produced by: ABN AMRO

Bank NV India Branch

Tuesday 27 November 2007 Change of target price

India Cements Buy

Absolute performance

n/a
Well positioned for growth Short term (0-60 days)

Neutral
IC's recently announced plan to set up 4mmt of capacity in North Market relative to region

India should not only secure a 20% volume CAGR for the next four Materials
years, but also reduce its exposure to a single region. We raise our India
FY08-10F EPS by 2-5% and our target price to Rs350.65.
Price

Rs285.00
Key forecasts
Target price
FY06A FY07A FY08F FY09F FY10F Rs350.65 (from Rs287.76)
Revenue (Rsm) 15401.1 20498.6 31323.0 39466.5 43996.2 Market capitalisation
EBITDA (Rsm) 2593.2 6618.5 11794.7% 14832.9% 14479.0%
Rs68.40bn (US$1.72bn)
Reported net profit (Rsm) 436.8 4496.2 7769.6% 9277.1% 8807.4%
Avg (12mth) daily turnover
Normalised net profit (Rsm)¹ 341.1 4496.2 7769.6 9277.1 8807.4
Normalised EPS (Rs) 1.55 20.5 28.6 34.2 32.5 Rs166.28m (US$3.96m)
Dividend per share (Rs) 0.00 1.00 3.00% 3.50% 3.50% Reuters Bloomberg
Dividend yield (%) 0.00 0.35 1.05 1.23 1.23 ICMN.BO ICEM IN
Normalised PE (x) 183.4 13.9 9.95 8.34 8.78
EV/EBITDA (x) 32.1 12.1 5.64 4.60 4.89
Price/book value (x) 6.95 4.38 2.45 1.89 1.56
ROIC (%) 2.62 8.41 14.2 15.5 11.2
1. Post-goodwill amortisation and pre-exceptional items year to Mar, fully diluted
Accounting Standard: Local GAAP
Source: Company data, ABN AMRO forecasts
Price performance (1M) (3M) (12M)
Price (Rs) 295.4 217.3 227.4
Company prepares itself for the next leg of growth Absolute % -3.5 31.2 25.3
Rel market % -3.5 -1.7 -10.8
IC is working on capex of Rs8.4bn to raise capacity from 9.5mmt to 14.1mmt by
Rel sector % 2.9 24.5 0.8
FY09 at its plants in South India. Last week it announced a plan to set up greenfield
cement plants in Rajasthan and Himachal Pradesh, totalling 3.5-4mmt, at a capital Nov 04 Dec 05 Dec 06
350
cost of Rs14.5bn. The board has approved an equity fund raising of US$150m (about 300
Rs6bn) for the proposed expansion. IC expects to become an 18mmt cement 250
company by end-FY10, with around 25% of its sales generated in North India. 200
150
Stay positive on the cement sector, but we see little upside to margins 100
We expect overall capacity in the Indian cement industry to rise 96.5mmt over FY08- 50

10 - 14mmt in FY08, 54.1mmt in FY09 and 28.5mmt in FY10. We forecast a 0

moderate surplus of 4.2mmt on an all-India basis, adjusting for initial low utilisation ICMN.BO Sensex

and as we expect most of the capacity addition in 2H09. However, the surplus would Stock borrowing: n/a
be more evident in the northern and central markets, where we expect some pricing Volatility (30-day): 57.06%

pressure in late FY09. In FY10, we expect the surplus to rise to 21.5mmt, putting Volatility (6-month trend): ↑
52-week range: 322.80-145.00
further pressure on cement prices. We assume a 5% drop in average realisations in
Sensex: 19247.54
FY10. BBG AP Construction: 346.08
Source: ABN AMRO, Bloomberg
We raise our EPS estimates by 2-5% on a fully diluted basis
We raise our FY09 and FY10 volume estimates by 5% each, and now expect cement
sales of 11.5mmt in FY09 and 13.5mmt in FY10. We also dilute the equity to factor in
the proposed fundraising of US$150m. We raise our EBITDA estimates by 12-14%
and EPS estimates by 2-5% for FY08-10.

Maintain Buy with a increased target price of Rs350.65

We value IC at a 28% discount to the average FY09F EV/EBITDA valuations of ACC
and Ambuja Cements, due to the risks inherent in the geographical concentration of
IC's capacity. Reflecting our earnings revisions, we raise our target price to Rs350.65
Analyst
(from Rs287.76), implying an FY09F PER of 10.2x.
Mohan Swamy
India
+91 22 6715 5304
mohan.swamy@in.abnamro.com
Important disclosures can be found in the Disclosures Appendix.
Priced at close of business 23 November 2007. Use of %& indicates that the line item has changed by at least 5%.
www.abnamroresearch.com

83/84 Sakhar Bhawan, Nariman Point, Mumbai 400 021, India

I N V E S T M E N T V I E W

Strong visibility on volumes

IC plans to raise capacity at its existing plants from 9.5mmt to 18mmt by

FY10. The expansion is to be at a very economical capital cost of US$33/mt
(a third of the cost of setting up a greenfield plant).

IC plans to invest Rs8.5bn over the next 15 months to raise its cement capacity from
the current 9.5mmt to 14mmt. These expansions are being done at its existing
cement plants in South India at a very economical cost of US$33/mt (the cost of
setting up a greenfield cement plant is around US$100).

Table 1 : India Cement's expansion plans

Expansion plans Capacity increase (mmt) Status of commissioning

Modernisation of Sankaridurg plant 0.6 Commissioned
Expansion of Vishnupuram plant 0.8 April-June 2008
Upgradation of capacities in other plants 0.6 Dec 07-Sep 08
Cement grinding unit at Chennai 1 April-June 2008
Cement grinding unit at Perili 1 April-June 2008
Second line at Visaka, A.P 1.2 Oct-December 2008
Source: India Cement

The board of directors, at its 19 November meeting, also announced a plan to set up
two greenfield units in Rajasthan and Himachal Pradesh, where the company has
secured mining rights for limestone. This expansion is to be done at a capital cost of
Rs14.5bn, which is to be partly funded by an equity fundraising of US$150m. The
company expects to commission the plants in 2010. The move is in line with the
company’s strategy of diversifying geographically into the northern markets.

An 18% CAGR in cement volumes over the next four years

We expect IC’s cement volumes to show an 18% CAGR over the four years, ensuring
above-industry average earnings growth. We expect cement prices to fall in FY10,
but IC’s strong volume growth should largely mitigate the negative impact of this.

Table 2 : Summary of cement volume momentum

Strong visibility of cement volumes

FY08F FY09F FY10F FY11F FY12F
Capacity (mmt) 9.5 14.1 14.1 18.1 18.1

Volumes mmt 9.3 11.5 13.5 15.5 18

% change 23% 24% 17% 19% 16%
Source: ABN AMRO forecasts

IN DIA CEMENT S 27 NOVE MBE R 20 07

2
A P P E N D I X

Table 3 : Forecast revision

FY08F FY09F FY10F
EPS (Old) 28.17 32.68 31.485
EPS (New) 28.63 34.19 32.46
% change 2% 5% 3%

EBITDA (old) 10500.1 13065.6 12971.4

EBITDA (new) 11794.73 14832.94 14479.01
% change 12% 14% 12%
Source: ABN AMRO forecasts

Table 4 : Relative performance of cement companies ( April-September 2007)

Ambuja India Madras
Ultratech ACC
Cements Cements Cements
Cement sales (mmt) 8.2 8 10.2 4.6 2.8

EBITDA (Rsbn) 10.45 8.2 9.9 5.87 4.02

EBITDA/mt 1273 1014 971 1283 1423

EBITDA margin (%) 36.9% 31.5% 29.7% 39.7% 41.3%

Growth in EBITDA (yoy) 28.3% 24.7% 27.1% 70.5% 34.4%

Source: Company releases

Table 5 : India Cements’ valuations on a EV/mt basis

India Cements's valuation when all expansions are completed

Fully diluted equity
Current (Rsm) 2,514
Proposed fund raising of US$150m (Rsm) 200.00
(assuming an issue price of Rs300/share)
Fully diluted equity (Rsm) 2,714
Market cap (Rsm) 81408

Debt as of FY10F 2743.753

Enterprise value (Rsm) of India Cements 84,151

Capacity (mmt) 18
EV/mt (Rs) 116.9

Enterprise value of Ambuja Cements for 18mmt, currently (Rsm) 217,362

Source: ABN AMRO estimates

IN DIA CEMENT S 27 NOVE MBE R 20 07

3
APP ENDI X

Table 6 : All India cement demand supply scenario

Cement Total
Net effective Potential Supply Domestic exports Exports Demand/Supply
FY08E Capacity # at 95% utilisation demand
North 47.1 41.8 50.6 -8.8
East 17.5 15.3 25.7 0.7 -11.1
Central 32.4 30.6 7.6 23.0
North+East+Central 97.1 87.7 83.9 0.7 3.1

West 28.4 27.0 31.1 7 -11.1

South 52.4 48.0 49.7 -1.8
South+West 80.8 74.9 80.8 7 -12.9
Total All India 177.8 162.6 164.7 4.5 7.7 -9.7

Total Cement sales 169.17 9.1%

Total sales 172.37 9.0%
Incremental 14.00 9.3 15.5
Cement demand growth 9.1%
Capacity utilisation rate 96.9%
Capacity growth 8.5%
# Gross capacity would be 6.2mmt more, adding the non-operational capacity

FY09E
North 62.5 52.4 57.2 -4.8
East 24.7 20.3 28.0 0.7 -8.5
Central 35.4 32.3 8.5 23.8
North+East+Central 122.6 105.0 93.8 0.7 10.5

West 33.9 29.7 35.1 6 -11.4

South 75.4 61.3 56.2 5.1
South+West 109.3 91.0 91.3 6 -6.3
Total All India 231.9 196.0 185.1 4.5 6.7 4.2

Total Cement sales 189.55

Total sales 191.75
Incremental 54.1 33.3 20.38
Cement demand growth 12.0%
Capacity utilisation rate 82.7%
Capacity growth 30.4%
# Gross capacity would be 6.2mmt more, adding the non-operational capacity

FY10E
North 70.0 63.1 64.0 -1.0
East 29.7 26.0 31.0 0.7 -5.7
Central 35.9 33.9 9.6 24.3
North+East+Central 135.6 123.0 104.6 0.7 17.7

West 44.9 37.7 39.3 5.5 -7.1

South 79.9 73.9 62.9 10.9
South+West 124.8 111.6 102.3 5.5 3.8
Total All India 260.4 234.5 206.8 4.5 6.2 21.5

Total Cement sales 211.34

Total sales 213.04
Incremental 28.5 38.6 21.8

Cement demand growth 11.5%

Capacity utilisation rate 81.8%
Capacity growth 12.3%
Source: ABN AMRO and Cement Manufacturers’ Association

IN DIA CEMENT S 27 NOVE MBE R 20 07

4
 DISCLOSURES APPENDIX

Recommendation structure
Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside
of 5% or more. The trading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more
from the suggested entry price range, and a Trading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading
recommendation time horizon is 0-60 days.
Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price. A
Buy/Sell implies upside/downside of 10% or more and a Hold less than 10%. For listed property trusts (LPT) or real estate investment trusts (REIT) the
recommendation is based upon the target price plus the dividend yield, ie total return. This structure applies to research on Asian and European stocks published
from 1 November 2005; on Australian stocks from 7 November 2006; on continental European small and mid cap stocks from 23 November 2006; and on Brazilian
stocks from 18 June 2007.
Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance
parameters should be interpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months.
Sector relative to market: The sector view relative to the market is the responsibility of the strategy team. Overweight/Underweight implies upside/downside of
10% or more and Neutral implies less than 10% upside/downside.
Target price: The target price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary
catalysts were in place to effect this change in perception within the performance horizon. In this way, therefore, the target price abstracts from the need to take a
view on the market or sector. If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value, the target price will differ
from 'fair' value.
Asset allocation: The asset allocation is the responsibility of the economics team. The recommended weight (Over, Neutral and Under) for equities, cash and bonds
is based on a number of metrics and does not relate to a particular size change in one variable.
Stock borrowing rating: The stock borrowing rating is the subjective view and responsibility of the ABN AMRO equity finance team: Easy implies ready availability.
Moderate implies some availability. Hard implies availability is tight. Impossible implies no availability.

Distribution of recommendations
The tables below show the distribution of ABN AMRO's recommendations (both long term and trading). The first column displays the distribution of
recommendations globally and the second column shows the distribution for the region. Numbers in brackets show the percentage for each category where ABN
AMRO has an investment banking relationship.

Long Term recommendations (as at 27 Nov 2007) Trading recommendations (as at 27 Nov 2007)
Global total (IB%) Asia Pacific total Global total (IB%) Asia Pacific total
(IB%) (IB%)
Buy 596 (15) 392 (4) Trading Buy 6 (0) 6 (0)
Add 1 (0) 1 (0)
Hold 427 (19) 258 (4)
Reduce 0 (0) 0 (0)
Sell 76 (5) 52 (0) Trading Sell 0 (0) 0 (0)
Total (IB%) 1100 (16) 703 (3) Total (IB%) 6 (0) 6 (0)

Valuation and risks to target price

India Cements (RIC: ICMN.BO, Rec: Buy, CP: Rs285.00, TP: Rs350.65): Our target price is based on a 28% discount (20% previously) to ACC and Ambuja
Cement's 2009F EV/EBITDA. We have raised this discount as we see a premium in ACC and Ambuja Cement due to Holcim's pending open offer, and due to IC's
heavy dependence on the south. The key risk would be lower-than-expected incremental demand in South India, which would put our cement price assumptions at
risk. Also, any delay in expansion in the north would impact our FY08-09F volume, and hence our earnings estimates.

India Cements

Stock performance, recommendations and coverage (as at 26 Nov 2007) Trading recommendation
history (as at 27 Nov 2007)
Date Rec Analyst
n/a

Mohan Swamy started covering this stock on 12 Jan 06

Moved to new recommendation structure between 1 November 2005 and 31 January 2006

Regulatory disclosures
Subject companies: ICMN.BO
ABN AMRO beneficially own 1% or more of a class of common equity securities of this company: ICMN.BO

IN DIA CEMENT S 27 NOVE MBE R 20 07

5
 DISCLOSURES APPENDIX

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IN DIA CEMENT S 27 NOVE MBE R 20 07

6
INDIA CEMENTS: KEY FINANCIAL DATA

Income statement
Rsm FY06A FY07A FY08F FY09F FY10F
Revenue 15401.1 20498.6 31323.0 39466.5 43996.2
Cost of sales -12808 -13880 -19528 -24634 -29517
Operating costs n/a n/a n/a n/a n/a
EBITDA 2593.2 6618.5 11794.7 14832.9 14479.0
DDA & Impairment (ex gw) -788.7 -776.8 -1124.7 -1412.2 -1293.4
EBITA 1804.5 5841.7 10670.0 13420.7 13185.6
Goodwill (amort/impaired) n/a n/a n/a n/a n/a
EBIT 1804.5 5841.7 10670.0 13420.7 13185.6
Net interest -1489.3 -1430.3 -1007.6 -272.7 -144.6
Associates (pre-tax) n/a n/a n/a n/a n/a
Forex gain / (loss) n/a n/a n/a n/a n/a
Exceptionals (pre-tax) n/a n/a n/a n/a n/a
Other pre-tax items 72.5 101.6 333.9 155.0 155.0
Reported PTP 387.8 4513.0 9996.4 13303.0 13196.1
Taxation -46.7 -16.8 -2226.8 -4025.9 -4388.7
Minority interests n/a n/a n/a n/a n/a
Exceptionals (post-tax) 95.7 0.00 0.00 0.00 0.00
Other post-tax items 0.00 0.00 0.00 0.00 0.00
Reported net profit 436.8 4496.2 7769.6 9277.1 8807.4
Normalised Items Excl. GW 95.7 0.00 0.00 0.00 0.00
Normalised net profit 341.1 4496.2 7769.6 9277.1 8807.4
Source: Company data, ABN AMRO forecasts year to Mar

Balance sheet
Rsm FY06A FY07A FY08F FY09F FY10F
Cash & market secs (1) 436.2 3357.8 7157.8 300.0 350.0
Other current assets 14687.9 15406.8 18075.8 20083.8 21800.7
Tangible fixed assets 12269.7 12492.9 14868.2 18456.0 18162.6
Intang assets (incl gw) 417.0 417.0 417.0 417.0 417.0
Oth non-curr assets 658.2 658.2 1158.2 6658.2 17658.2
Total assets 28469.0 32332.5 41676.9 45914.9 58388.4
Short term debt (2) n/a n/a n/a n/a n/a
Trade & oth current liab 3731.3 2722.5 4280.2 4399.1 5469.5
Long term debt (3) 15252.3 14846.7 5306.0 148.0 2743.8
Oth non-current liab 486.4 486.4 486.4 486.4 486.4
Total liabilities 19470.0 18055.5 10072.6 5033.5 8699.6
Total equity (incl min) 8999.0 14277.0 31604.3 40881.4 49688.8
Total liab & sh equity 28469.0 32332.5 41676.9 45914.9 58388.4
Net debt (2+3-1) 14816.1 11488.9 -1851.7 -152.0 2393.8
Source: Company data, ABN AMRO forecasts year ended Mar

Cash flow statement

Rsm FY06A FY07A FY08F FY09F FY10F
EBITDA 2593.2 6618.5 11794.7 14832.9 14479.0
Change in working capital -374.1 -1727.6 -1111.3 -1889.0 -646.5
Net interest (pd) / rec -1489.3 -1430.3 -1007.6 -272.7 -144.6
Taxes paid 23.3 16.8 -2226.8 -4025.9 -4388.7
Other oper cash items n/a n/a n/a n/a n/a
Cash flow from ops (1) 706.5 3443.8 7449.0 8645.3 9299.2
Capex (2) -1007.2 -1000.0 -4000.0 -10500 -11000
Disposals/(acquisitions) -9.16 1090.6 876.3 -481.3 -1481.3
Other investing cash flow -1191.5 -714.1 3435.6 1361.0 1361.0
Cash flow from invest (3) -2207.9 -623.5 311.8 -9620.3 -11120
Incr / (decr) in equity 6360.3 625.6 0.00 0.00 0.00
Incr / (decr) in debt -4620.1 -405.6 -9540.6 -5158.1 2595.8
Ordinary dividend paid 0.00 -220.4 -814.1 -949.8 -949.8
Preferred dividends (4) 0.00 0.00 0.00 0.00 0.00
Other financing cash flow 168.2 101.6 333.9 155.0 155.0
Cash flow from fin (5) 1908.4 101.2 -10021 -5952.8 1801.0
Forex & disc ops (6) n/a n/a n/a n/a n/a
Inc/(decr) cash (1+3+5+6) 407.0 2921.5 -2260.0 -6927.8 -20.0
Equity FCF (1+2+4) -300.7 2443.8 3449.0 -1854.7 -1700.8
Lines in bold can be derived from the immediately preceding lines. year to Mar
Source: Company data, ABN AMRO forecasts

IN DIA CEMENT S 27 NOVE MBE R 20 07

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INDIA CEMENTS: PERFORMANCE AND VALUATION

Standard ratios India Cements Ambuja Cements Associated Cement

Performance FY06A FY07A FY08F FY09F FY10F FY07F FY08F FY09F FY07F FY08F FY09F
Sales growth (%) 32.9 33.3 53.1 26.1 11.5 -12.7 13.5 11.0 17.7 12.9 7.24
EBITDA growth (%) 89.9 155.2 78.2 25.8 -2.39 2.08 15.5 5.57 29.5 15.8 -2.83
EBIT growth (%) 212.4 223.7 82.7 25.8 -1.75 8.42 13.2 -1.54 29.1 13.8 -9.45
Normalised EPS growth (%) n/a 1218.3 39.7 19.4 -5.06 1.23 14.1 -2.25 22.0 16.4 -7.82
EBITDA margin (%) 17.0 32.5 37.8 37.7 33.0 39.8 40.5 38.5 30.8 31.6 28.6
EBIT margin (%) 11.8 28.7 34.2 34.1 30.0 35.8 35.7 31.7 25.9 26.1 22.0
Net profit margin (%) 2.23 22.1 24.9 23.6 20.1 27.8 28.0 24.6 19.1 19.7 16.9
Return on avg assets (%) 3.10 16.4 21.9 21.4 17.0 26.4 25.7 21.6 20.5 20.2 16.6
Return on avg equity (%) 5.56 39.1 33.9 25.6 19.4 34.7 31.7 25.8 35.8 32.2 24.2
ROIC (%) 2.62 8.41 14.2 15.5 11.2 29.2 27.2 21.5 30.6 26.2 19.5
ROIC - WACC (%) 0.00 0.00 0.00 0.00 0.00 18.2 16.2 10.5 20.1 15.8 9.09
year to Mar year to Dec year to Dec

Valuation
EV/sales (x) 5.44 3.92 2.13 1.73 1.61 3.66 3.26 2.92 3.09 2.73 2.46
EV/EBITDA (x) 32.1 12.1 5.64 4.60 4.89 9.20 8.04 7.59 10.1 8.65 8.61
EV/EBITDA @ tgt price (x) 38.2 14.5 6.98 5.66 5.98 9.72 8.49 8.02 9.57 8.23 8.18
EV/EBIT (x) 46.1 13.7 6.24 5.09 5.37 10.2 9.12 9.23 12.0 10.5 11.2
EV/invested capital (x) 3.42 3.04 2.20 1.66 1.35 3.78 3.07 2.68 4.24 3.47 3.18
Price/book value (x) 6.95 4.38 2.45 1.89 1.56 4.58 3.72 3.16 5.02 3.94 3.31
Equity FCF yield (%) -0.48 3.91 4.46 -2.40 -2.20 4.10 3.36 6.30 0.39 2.09 5.11
Normalised PE (x) 183.4 13.9 9.95 8.34 8.78 14.7 12.9 13.2 16.0 13.7 14.9
Norm PE @tgt price (x) 225.6 17.1 12.2 10.3 10.8 15.5 13.6 13.9 15.2 13.0 14.1
Dividend yield (%) 0.00 0.35 1.05 1.23 1.23 2.03 2.37 2.50 1.44 1.80 1.89
year to Mar year to Dec year to Dec

Per share data FY06A FY07A FY08F FY09F FY10F Solvency FY06A FY07A FY08F FY09F FY10F
Tot adj dil sh, ave (m) 219.4 219.4 271.4 271.4 271.4 Net debt to equity (%) 164.6 80.5 -5.86 -0.37 4.82
Reported EPS (INR) 1.99 20.5 28.6 34.2 32.5 Net debt to tot ass (%) 52.0 35.5 -4.44 -0.33 4.10
Normalised EPS (INR) 1.55 20.5 28.6 34.2 32.5 Net debt to EBITDA 5.71 1.74 -0.16 -0.01 0.17
Dividend per share (INR) 0.00 1.00 3.00 3.50 3.50 Current ratio (x) 4.05 6.89 5.90 4.63 4.05
Equity FCF per share (INR) -1.37 11.1 12.7 -6.83 -6.27 Operating CF int cov (x) 1.49 3.42 10.6 47.5 95.7
Book value per sh (INR) 41.0 65.1 116.5 150.7 183.1 Dividend cover (x) 0.00 20.4 9.54 9.77 9.27
year to Mar year to Mar
Priced as follows: ICMN.BO - Rs285.00; GACM.BO - Rs148.30; ACC.BO - Rs1129.05
Source: Company data, ABN AMRO forecasts

INDIA CEMENTS: VALUATION METHODOLOGY

Target price calculation of India cements FY09
Average EV/EBITDA valuation of ACC & Ambuja Cement at our target price (x) 8.1

EV/EBITDA valuation for India Cements at a 28% discount to ACC & Ambuja Cement (x) 6.3

EBITDA (Rs m) 14833

Enterprise value (Rs m) 93299

Less: net debt (Rs m) -1852

Value of equity (Rs m) 95151

Number of shares 271
Fair value per share of India Cements (Rs) 350.65
PER on the above estimated fair price (x) 10.2x
Source: ABN AMRO estimates

IN DIA CEMENT S 27 NOVE MBE R 20 07

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Strategic & competitive overview

India Cements
Company description Buy Price relative to country

India Cements is the largest cement company in south India with a market share of 20%. It 300

operates 7.69mmt of cement capacity across six plants throughout the region. Its subsidiary,
250
Visaka Cements, operates another 1.4mmt unit. India Cements was a two-plant company in 1990
with a capacity of 1.4mmt and has scaled up 6x through a mix of acquisitions and greenfield 200
capacity additions.
150

100

50
Nov Mar Jun Oct Feb May Sep Dec Apr Jul Nov
04 05 05 05 06 06 06 06 07 07 07

Strategic analysis Average SWOT company score: 3 State-wise sales FY07

Strengths 3 Karnataka Tamil

IC looks best positioned to service the south Indian market, with six plants across two states. The 18% Nadu
30%
company has a 20% market share and strong retail brand equity, which enables it to command a Andhra Kerela
15%
price premium in major southern markets. Pradesh
Exports
25% Maharash-
Others 1%
Weaknesses 3 tra
8%
3%

IC is dependent entirely on the south Indian market, hence any demand slowdown or price
weakness in the region affects its entire sales. Source:Company data

Opportunities 3 Market data

IC could increase cement capacity by de-bottlenecking and modernising its wet process unit at Headquarters
Sankari, Tamil Nadu, to a dry process unit. This would involve lower capital cost and, hence, "Dhun Building", 827 Anna Salai, Chennai
600 002, India
improve overall returns.
Website
Threats 2 www.indiacements.co.in
Major capacity creation by any of the large cement companies in south India could impact pricing in Shares in issue
the region. This would impact the outlook for IC. 240.0m
Freefloat
Scoring range is 1-5 (high score is good) 73%
Majority shareholders
Fis and Indian Banks (17%), FIIs (11%),
Indian Mutual Funds (4%)

India

Country view Neutral Country rel to Asia Pacific

The ABN AMRO Indian PMI suggests the economy is still powering ahead despite the global 230

headwinds, thanks to its domestically-oriented economic structure. Moreover inflationary pressure 210
has eased with the recent rate hikes by the RBI. At the sector level, we still like autos (commercial
190
vehicles), software and construction-related stocks as infrastructure spending should be a growth
170
driver in FY08.
150
The country view is set in consultation with the relevant company analyst but is the ultimate responsibility of the Strategy Team.
130

110

90
Nov Mar Jun Oct Feb Jun Sep Dec Apr Aug Nov
04 05 05 05 06 06 06 06 07 07 07

Competitive position Average competitive score: 3+ Broker recommendations

Supplier power 3+ 14
India Cements can leverage its reasonable scale to obtain better terms of trade from suppliers of 12
raw materials and freight operators. Its multi-location plants give it scale to negotiate. 10
8
Barriers to entry 3+
6
Cement is a commodity business, hence entry barriers are low. However, large limestone reserves
4
are not available in IC's key markets of Tamil Nadu and Kerala, hence there is an entry barrier. 2
Customer power 3+ 0
IC commands 20% market share in south India. Its brands have good retail equity, hence it has Buy Hold Sell
some pricing premium. It sells over 75% of its volumes in the retail market.
Source: Bloomberg
Substitute products 3+
There is no substitute product for cement in civil construction. As for imports being a threat to
domestic players, port infrastructure in India prevents large-scale imports.
Rivalry 3+
While the top end of the industry is well consolidated with top five players accounting for 60%
capacity, there are around 30 small players, at times leading to price competition in some markets.
Scoring range 1-5 (high score is good) Plus = getting better Minus = getting worse

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