2.

0 INDUSTRY AND COMPANY PROFILE

ACC (ACC Limited) is India's foremost manufacturer of cement and concrete.

ACC's operations are spread throughout the country with 14 modern cement
factories, 19 Ready mix concrete plants, 19 sales offices, and several zonal
offices. It has a workforce of about 9000 persons and a countrywide distribution
network of over 9,000 dealers. ACC's research and development facility has a
unique track record of innovative research, product development and specialized
consultancy services. Since its inception in 1936, the company has been a
trendsetter and important benchmark for the cement industry in respect of its
production, marketing and personnel management processes. Its commitment to
environment-friendliness, its high ethical standards in business dealings and its
on-going efforts in community welfare programs have won it acclaim as a
responsible corporate citizen. In the 70 years of its existence, ACC has been a
pioneer in the manufacture of cement and concrete and a trendsetter in many
areas of cement and concrete technology including improvements in raw material
utilization, process improvement, energy conservation and development of high
performance concretes.

ACC’s brand name is synonymous with cement and enjoys a high level of equity
in the Indian market. It is the only cement company that figures in the list of
Consumer Super Brands of India.

The company's various businesses are supported by a powerful, in-house

research and technology backup facility - the only one of its kind in the Indian
cement industry. This ensures not just consistency in product quality but also
continuous improvements in products, processes, and application areas.

ACC has rich experience in mining, being the largest user of limestone, and it is
also one of the principal users of coal. As the largest cement producer in India, it
is one of the biggest customers of the Indian Railways, and the foremost user of
the road transport network services for inward and outward movement of
materials and products.

ACC has also extended its services overseas to the Middle East, Africa, and
South America, where it has provided technical and managerial consultancy to a
variety of consumers, and also helps in the operation and maintenance of
cement plants abroad.

ACC is among the first companies in India to include commitment to

environmental protection as one of its corporate objectives, long before pollution
control laws came into existence. The company installed pollution control
equipment and high efficiency sophisticated electrostatic precipitators for cement

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kilns, raw mills, coal mills, power plants and coolers as far back as 1966. Every
factory has state-of-the art pollution control equipment and devices.

History & Profile of ACC Cement Works

ACC was formed in 1936 when ten existing cement companies came together
under one umbrella in a historic merger – the country’s first notable merger at a
time when the term mergers and acquisitions was not even coined. The history of
ACC spans a wide canvas beginning with the lonely struggle of its pioneer F E
Din Shaw and other Indian entrepreneurs like him who founded the Indian
cement industry. Their efforts to face competition for survival in a small but
aggressive market mingled with the stirring of a country’s nationalist pride that
touched all walks of life – including trade, commerce and business.

The first success came in a move towards cooperation in the country’s young
cement industry and culminated in the historic merger of ten companies to form a
cement giant. These companies belonged to four prominent business groups –
Tatas, Khataus, Killick Nixon and F E Din Shaw groups. ACC was formally
established on August 1, 1936. Sadly, F E Din Shaw, the man recognized as the
founder of ACC, died in January 1936. Just months before his dream could be
realized.

The ACC Board comprises of 13 persons. These include executive, non-

executive, and nominee directors. This group is responsible for determining the
objectives and broad policies of the Company - consistent with the primary
objective of enhancing long-term shareholder value.

The Board meets once a month. Two other small groups of directors - comprising
Shareholders'/Investors' Grievance Committee and Audit Committee of the Board
of Directors - also meet once a month on matters pertaining to the finance and
share disciplines. During the last decade, there has been a streamlining of the
senior management structure that is more responsive to the needs of the
Company's prime business. A Managing Committee - comprising, in addition to
the Managing Director and the two executive directors, the presidents
representing multifarious disciplines: finance, production, marketing, research
and consultancy, engineering and human resources – meets once a week.

A Strategic Alliance:
The house of Tata was intimately associated with the heritage and history of
ACC, right from its formation in 1936 up to 2000. The Tata group sold all 14.45%
of its shareholdings in ACC in three stages to subsidiary companies of Gujarat
Ambuja Cements Ltd. (GACL), who are now the largest single shareholder in
ACC.
This enabled ACC to enter into a strategic alliance with GACL; a company
reputed for its brand image and cost leadership in the cement industry.
Holcim – A New Partnership:

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A new association was formed between ACC and The Holcim group of
Switzerland in 2005. In January 2005, Holcim announced its plans to enter into
long – term alliances with Ambuja Group by acquiring a majority stake in Ambuja
Cements India Ltd. (ACIL), which at the time held 13.8% of total equity shares in
ACC. Holcim simultaneously announced its bid to make an open offer to ACC
shareholders, through Holdcem Cement Pvt. Ltd. and ACIL, to acquire a majority
shareholding in ACC. An open offer was made by Holdcem Cement Pvt. Ltd.
along with ACIL, following which the shareholding of ACIL increased to 34.69%
of Equity share capital of ACC. Consequently, ACIL has filed declarations
indicating their shareholding and declaring itself as a promoter of ACC.
Holcim is the world leader in cement as
well as being large supplier of concrete, aggregates and certain construction
related services. Holcim is also a respected name in information technology and
research and development. The group has its headquarters in Switzerland with
worldwide operations spread across more than 70 countries.

Plants & Their Capacity:

S.
Units State Capacity (MTPA)
No.
Bargarh Cement Works
1 Bargarh 0.96
Chaibasa Cement Works
2 Chaibasa 0.87
Chanda Cement Works
3 Chanda 1.00
Damodar Cement Works
4 Damodhar 0.53
Gagal Cement Works 4.40
5 Gagal
(Gagal I and II)
Jamul Cement Works
6 Jamul 1.58
Kymore Cement Works
7 Kymore 2.20
Lakheri Cement Works
8 Lakheri 1.50
Madukkarai Cement Works
9 Madukkarai 0.96
Sindri Cement Works
10 Sindri 0.91
Wadi Cement Works
11 Wadi 2.59
Wadi Cement Works
12 New Wadi Plant 2.60

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 Tikaria Cement Grinding and
13 Tikaria Packing Plant 2.31

Vision:
“To be one of the most respected companies in India; recognized for challenging
conventions and delivering on our promises”

Mission of ACC
Maintain our leadership of the Indian cement industry through the
Leadership continuous modernization and expansion of our manufacturing
facilities and activities, and through the establishment of a wide and
efficient marketing network.
Achieve a fair and reasonable return on capital by promoting
Profitability
productivity throughout the company.
Ensure a steady growth of business by strengthening our position
Growth in the cement sector.
Maintain the high quality of our products and services and ensure
Quality
their supply at fair prices.
Promote and maintain fair industrial relations and an environment
Equity for the effective involvement, welfare and development of staff at all
levels.
Promote research and development efforts in the areas of product
Pioneering development and energy, and fuel conservation, and to innovate
and optimize productivity.
Fulfill our obligations to society, specifically in the areas of
Responsibility integrated rural development and in safeguarding the environment
and natural ecological balance.

Few Achievement of ACC Limited:

YEAR Achievements

1936 The Associated Cement Companies Limited incorporated on August 1

1947 India's first entirely indigenous cement plant installed at Chaibasa.

ACC Sindri uses waste material - calcium carbonate sludge -from fertilizer factory at
1955
Sindri to make cement
1956 Bulk Cement Depot established at Okhla, Delhi

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 Blast furnace slag, (a waste by-product from steel) from TISCO used at ACC
1961
Chaibasa to manufacture Portland Slag Cement.

1961 Manufacture of Hydrophobic (waterproof) cement at ACC Khalari.

Manufacture of Portland Pozzolana Cement using naturally available materials. An

1965
Eco-friendly cements using an eco-friendly process.

ACC inducts use of pollution control equipment and high efficiency sophisticated
1966 electrostatic precipitators for its cement plants and captive power plants decades
before it becomes mandatory to do so.

Introduction of the energy efficient pre-calcinations technology for the first time in
1978
India.

1982 Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka.

ACC develops a new binder, working at sub-zero temperature, which is

1987
successfully used in the Indian expedition to Antarctica.
Incorporation of Bulk Cement Corporation of India, a JV with the Government of
1992
India.

1993 Commercial manufacture of ready-mixed concrete at Mumbai.

Commissioning of the new Wadi plant of 2.6 MTPA capacity in Karnataka, the
2001 largest in India, and among the largest sized kilns in the World.

Industry Overview:-
The cement industry is one of the vital industries for economic development in a
country. The total utilization of cement in a year is used as an indicator of
economic growth.

Cement is a necessary constituent of infrastructure development and a key raw

material for the construction industry, especially in the government’s
infrastructure development plans in the context of the nation’s socio-
Economic development.
India is the world's second largest producer of cement with total capacity of 219
million tones (MT) at the end of FY 2009, according to the Cement Manufacture’s
Association.

According to the Cement Manufacturer’s Association, cement dispatches during

2009-10 were 159.43 million tones (MT) increasing by 12 per cent over 142.23 in
2008-09. Cement production during 2009-10 was 160.31 MT an increase of
12.37 per cent over 142.65 MT in 2008-09.

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Moreover, the government’s continued thrust on infrastructure will help the key
building material to maintain an annual growth of 9-10 per cent in 2010,
according to India’s largest cement company, ACC.

In January 2010, rating agency Fitch predicted that the country will add about 50
million tone cement capacity in 2010, taking the total to around 300 million tones.

Government Initiatives

 Government initiatives in the infrastructure sector, coupled with the

housing sector boom and urban development, continue being the main
drivers of growth for the Indian cement industry.

 Increased infrastructure spending has been a key focus area. In the Union
Budget 2010-11, US$ 37.4 billion has been provided for infrastructure
development.
 The government has also increased budgetary allocation for roads by 13
per cent to US$ 4.3 billion.

Future Trends:-
 The cement industry is expected to grow steadily in 2009-2010 and
increase capacity by another 50 million tons in spite of the recession and
decrease in demand from the housing sector.
 The industry experts project the sector to grow by 9 to 10% for the current
financial year provided India's GDP grows at 7%.
 India ranks second in cement production after China.
 The major Indian cement companies are Associated Cement Company
Ltd (ACC), Grasim Industries Ltd, Ambuja Cements Ltd, J.K Cement Ltd
and Madras Cement Ltd.
 The major players have all made investments to increase the production
capacity in the past few months, heralding a positive outlook for the
industry.
 The housing sector accounts for 50% of the demand for cement and this
trend is expected to continue in the near future.

PORTER’S FIVE FORCE MODEL:- It is useful for analyzing the industry overall
and determining the level of competition among different existing players .It can
be understood under different topics .Along with the industry we will try to point
out the conditions for ACC too.
i) THREAT OF NEW ENTRANTS:-
ACC has threat from new entrants like TATA; Reliance etc can enter into this
industry.
But there are certain barriers to their entry. These are:-

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  Availability of raw material

 Restrictions on entry by government into cement industry

 Cement industry requires a huge investment

 Switching costs are high in cement industry

ii) BARGAINING POWER OF SUPPLIERS:-

Suppliers have very much impact on cement industry because of the following
reasons:-
 Raw materials used in cement are gypsum, fly ash and slag. There are
few suppliers of these materials.

 Quality of finished goods i.e. cement is very important for ACC ltd.

 As already said, there are high switching costs in cement industry.

 There is no substitute to the raw material used in cement.

iii) BARGAINING POWER OF BUYER:- ACC ltd plays the role of buyer. It has
following bargaining powers:
 There are only few buyers of raw material of cement.

 ACC has major stake in cement industry i.e. 11% of the world.

iv) THREAT OF SUBSTITUTES:- It has threat from its competitors like Ambuja
cements, Birla cements, Binani cements ,Grasim etc.

V) RIVALRY AMONG THE COMPETING FIRMS IN INDUSTRY:

In spite of huge stake in cement industry, it is difficult to be on the top because of
the other competing companies i.e. Ambuja, Birla, and Binani etc. The
competitors are using different promotional strategies to attract buyers. So, all
the leading players in the industry have to analyze the situation frequently & they
have to keep changing them too.

SWOT ANALYSIS
Strengths: -
1. The industry is likely to maintain its growth momentum and continue
growing at about 9 – 10% in the foreseeable future.
2. Government initiative in the infrastructure sector such as the
commencement of the second phase of the National Highway Development
project, freight carriers, rural roads and development of the housing sector
(Bharat Nirman Yojana) are likely to be the main drivers of growth.
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 3. In the coming few years the demand for the cement will increase which will
be booming news for cement manufactures. As capacity utilization is over
90% now.
4. Huge potential for export.

Weakness: -
1. Cement Industry is highly fragmented & regionalized.
2. Low – value commodity makes transportation over long distances un-
economical.
3. High capital cost and investment cost for each and every project.
4. The complex Excise Duty structure based on the category of buyer and
end use of the cement has caused at lot of confusion in the industry.
5. The recent ban on export of cement clinker would increase the
availability of cement in the domestic market, which in turn would put
pressure on cement prices.
Opportunities: Demand–supply gap
1. Substantially low per capita cement consumption as compared to
developing countries (1/3 rd of world average) Per capita cement
consumption in India is 82 kgs against a global average of 255 kgs and
Asian average of 200 kgs.
2. Despite slightly lower economic growth, the construction and
infrastructure sector is expected to record healthy growth, which augurs
well for cement industry.
3. Additional capacity of 20 million tons per annum will be required to
match the demand.

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Threats: -

1. The recent moves by the Central Government in making the import of

the cement total duty free, is a cause of worry for the Indian cement
industry.

2. Further recent changes in the Central Excise Duty structure by way of

introduction of multiple slabs of Excise Duty is also a cause of worry for
the industry.

3. Almost all the major players in the industry have announced substantial
increase in the capacity and the possibility of over supply situation
cannot be ruled out.

4. Increased railway freight, coal prices and dispatch bottlenecks on

account of truck Loading restrictions imposed by various State
Governments

5. Scarcity of good quality Coal is some other factors which are cause of
concern for the industry.

Competitor analysis (Overall industry):-

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ACC, with an installed capacity of 22.63 MTPA, enjoys an 11% market share in
India, which with its total installed capacity of 207 MTPA, India is the second
largest cement producing country in the world. ACC’s nation-wide presence and
brand image ensures a competitive edge and helps it to withstand regional
fluctuations in prices and also to adapt its distribution to market place needs. Its
key competitors are as follows:-

ACC Ltd is the market leader with the capacity of 22.63 MTPA .The top ten
companies are given below with the details:-
Name ACC Limited
Production 17,902
Installed Capacity 18,640
Net Profit (Quarter ended Sep 30, 2009) 41,550.89 lakhs
Name Gujarat Ambuja Cements Limited
Production 15,094
Installed Capacity 14,860
Net Profit (Quarter ended on Sep 30, 2009) 31,848 lakhs
Name Ultratech
Production 13,707
Installed Capacity 17,000
Net Profit (in 2008-09) 97,700 lakhs
Name Grasim
Production 14,649
Installed Capacity 14,115
Net Profit (in 2008-09) 1,64,800 lakhs
Name India Cements
Production 8,434
Installed Capacity 8,810
Net Profit (in 2008-09) 43,218 lakhs
Name JK Cement Ltd
Production 6,174
Installed Capacity 6,680

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Net Profit (in 2008-09) 14,234.40 lakhs
Name Jaypee Group
Production 6,316
Installed Capacity 6,531
Name Century Cement
Production 6,636
Installed Capacity 6,300
Name Madras Cement
Production 4,550
Installed Capacity 5,457
Net Profit (in 2008-09) 49,081 lakhs
Name Birla Corp.
Production 5,150
Installed Capacity 5,113
Net Profit (in 2008-09) 9,061 lakhs

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 Awards & Accolades

 IMC Ramkrishna Bajaj National Quality Award - – Gagal wins Commendation

Certificate and New Wadi Plant wins Special Award for Performance Excellence in the
Manufacturing Sector, 2007.

 National Award for outstanding performance in promoting rural and agricultural

development – by ASSOCHAM

 Sword of Honour - by British Safety Council, United Kingdom for excellence in safety
performance.

 Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment and

Forests for "extraordinary work" carried out in the area of afforestation.

 FICCI Award --- for innovative measures for control of pollution, waste management &
conservation of mineral resources in mines and plant.

 Subh Karan Sarawagi Environment Award - by The Federation of Indian Mineral

Industries for environment protection measures.

 Drona Trophy - By Indian Bureau Of Mines for extra ordinary efforts in protection of
Environment and mineral conservation in the large mechanized mines sector.

 Indo German Greentech Environment Excellence Award

 Golden Peacock Environment Management Special Award - for outstanding efforts

in Environment Management in the large manufacturing sector.

 Indira Gandhi Memorial National Award - for excellent performance in prevention of

pollution and ecological development

 Excellence in Management of Health, Safety and Environment : Certificate of Merit

by Indian Chemical Manufacturers Association

 Vishwakarma Rashtriya Puraskar trophy for outstanding performance in safety and

mine working

 Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry

 Jamnalal Bajaj Uchit Vyavahar Puraskar - Certificate of Merit by Council for Fair
Business Practices

 Greentech Safety Gold and Silver Awards - for outstanding performance in Safety
management systems by Greentech Foundation

 FIMI National Award - for valuable contribution in Mining activities from the Federation

17
 of Indian Mineral Industry under the Ministry of Coal.

 Rajya Sthariya Paryavaran Puraskar - for outstanding work in Environmental

Protection and Environment Performance by the Madhya Pradesh Pollution. Control
Board.

 National Award for Fly Ash Utilization - by Ministry of Power, Ministry of

Environment & Forests and Dept of Science & Technology, Govt of India - for
manufacture of Portland Pozzolana Cement.

 Good Corporate Citizen Award - by Bombay Chamber of Commerce and Industry for
working towards an environmentally sustainable industry while pursuing the objective of
creation of a better society.

 National Award for Excellence in Water Management - by the Confederation of

Indian Industry (CII)

ACC was the first recipient of ASSOCHAM’s first ever National Award for
outstanding performance in promoting rural and agricultural development
activities in 1976.

Decades later, PHD Chamber of Commerce and Industry selected ACC as

winner of its Good Corporate Citizen Award for the year 2002.

Over the years, there have been many awards and felicitations for achievements
in Rural and community development, Safety, Health, Tree plantation, A
forestation, Clean Mining, Environment Awareness and Protection.

Map of ACC Network

Corporate office:

Overseeing the company’s rang of business; the Corporate Office is the central
head quarters of all business and human resource function located in Mumbai.

ACC Subsidiaries:

1. Bulk Cement Corporation India Ltd (BCCI)

2. ACC Machinery Company Ltd (AMCL)
3. ACC Nihon Casting Ltd (ANCL)

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Regional marketing offices :-
Offices at all major cities in India i.e Bangaluru , Bhopal, Chandigarh ,
Coimbatore , Kanpur, Kolkata, Mumbai, Pune , Secunderabad ,New Delhi &
Patna.

MAP OF ACC PLANTS:-

HIGHILIGHTS OF FINANCIAL PERFORMANCE of ACC LTD

Rs. Crore
Particulars *2005 2006 2007 2008 2009

NET SALES 3,221 5,803 6,991 7,283 8,027

PBT 684 1,620 1,930 1,737 2,294
OPERATING 616 1,717 1,993 1,899 2,643
PROFIT
PAT 544 1,232 1,439 1,213 1,607
Capital 3,502 4,234 4,791 5,746 6,932
Employed
Basic Earnings 30.02 66.02 76.75 64.63 85.60
per Share (Rs.)

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 3.THEORETICAL FRAME WORK

An Introduction To Working Capital Management

“Working capital means the part of the total assets of the business that change
from one form to another form in the ordinary course of business operations.”

Concept of working capital:-

The word working capital is made of two words 1.Working and 2. Capital
The word working means day to day operation of the business, whereas the word
capital means monetary value of all assets of the business.

Working capital : -
Working capital may be regarded as the life blood of business. Working capital is
of major importance to internal and external analysis because of its close
relationship with the current day-to-day operations of a business. Every business
needs funds for two purposes.

* Long term funds are required to create production facilities through purchase
of fixed assets such as plants, machineries, lands, buildings & etc

* Short term funds are required for the purchase of raw materials, payment of
wages, and other day-to-day expenses.
. It is other wise known as revolving or circulating capital

It is nothing but the difference between current assets and current liabilities. i.e.

Working Capital = Current Asset – Current Liability.

Businesses use capital for construction, renovation, furniture, software,

equipment, or machinery. It is also commonly used to purchase inventory, or to
make payroll. Capital is also used often by businesses to put a down payment
down on a piece of commercial real estate. Working capital is essential for any
business to succeed. It is becoming increasingly important to have access to
more working capital when we need it.

Concept of working capital

 Gross Working Capital = Total of Current Asset

 Net Working Capital = Excess of Current Asset over Current
Liability.

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