Case

Study:
Gujarat
Ambuja
Cost Leader in the
Indian Cement Industry

Submitted By : Harsh, Milind, Karthik and Yash

Flow of PPT
● Present Scenario
● Ambuja lagging behind
● South India Growth Factors
● Missed Opportunity
● Profit and Loss Statement Analysis
● Recommendations
Demand and Supply
● Except the North, in all other regions, Supply exceeded Demand. This is
true for both years
● An excess would mean increase in warehousing or transportation costs
● Better forecasting or rethinking plant location is required

Present
Scenario
Why is Ambuja still behind the
LEADER?
● GACL is one of the market leaders with some of the most innovative
Operations and Supply Chains, yet they fall behind the best
The following are three likely reasons :

1. Aggressive Capacity Addition Plans: UltraTech Cement has been

adding capacities not just organically but also inorganically. The company,
acquired Jaypee Group’s assets and Century Textiles Ltd.’s cement business.
2. Capacity Utilization: UltraTech cement has better utilization
levels despite adding more new capacity
 3. Geographical Mix:
● UltraTech Cement has an edge over Ambuja Cements in terms of pan-India
presence. The acquisition of Century Textiles’ cement business further
strengthens its position in the central region and help it maintain leadership in
the east and the west. In addition Ambuja also lost out to UltraTech in the bid
war for Binani Cement.
● Reevaluating Geographical Footprint is essential for the company to make the
most of opportunities of development occurring in various regions and to
balance Demand and Supply
South India Growth factors
● High demand due to
infrastructure projects like:
○ Amravati in Andhra Pradesh
○ Irrigation projects in Telangana
○ New metro projects in cities and
○ Government low-cost housing
schemes
● RBI also cut repo rate in a bid to
boost consumption.
 ● The South India is dominated by
the local players such as Ramco
Missed Opportunity..
Cements, Orient Cement and
Mangalam Cements.
● Major players such as Ambuja
Cements didn’t provide too much
importance to the South Indian
market and were more focussed
on the rest of India.
● We can observe that post
formation of new state like
Telangana, the demand for
cement has risen exponentially,
due to new projects. Hence,
benefiting the local players
largely.
 P&L Analysis
● We can observe that the initially Raw
Material cost formed 11.11% of the
Sales in Jun-99 but over the years it
has gradually increased to 15.22% of
the Sales in Jun-03.
● Even the Net Profit ratio of the
company has decreased from 12.02
% in Jun-99 to 10.92% in Jun-03.
● The above observations provide us
with the insight that even after
increase in the revenue over the
years, the margin of the Gujarat
Ambuja Cement has constantly
reduced, raw material cost playing a
major factor in it.
Recommendations
● Gujarat Ambuja Cements need to come up with a plan to increase their
production capacity. Because even with ACC Cements as their subsidiary
they still lack behind Ultra Tech Cement.
○ This can be achieved either through Organic Growth, which means to further develop
their own plants, which is a time consuming process.
○ Or else they can go with the Inorganic Growth, which means to acquire another
competitor to increase production capacity drastically.
○ Hence, Gujarat Ambuja Cements needs to have enough liquid assets to be able to tap
such opportunities as and when they arrive in future.
● Adopt a strategic approach to Supply Chain
○ Align Supply Chain to Customer Segments
○ Re-evaluate Geographic Footprint
○ Implement data-driven decision-making
THANK YOU