Gujarat Ambuja group to ramp up capacity

Target - 40 million tonne in 3 years.

The Gujarat Ambuja group is set to increase its combined annual cement production by 5 million tonnes to 40 million tonnes in three years. The group comprises Gujarat Ambuja Cements Ltd (GACL), Associated Cement Companies (ACC) and Gujarat Ambuja Eastern Ltd (ACEL).

Unveiling growth plans, Anil Singhvi, newly appointed managing director of Gujarat Ambuja Cements, today told Business Standard that the proposed capacity increase would not require much capital expenditure as it would be done through "cost-effective and efficiency-increasing measures".

"Gujarat Ambuja Cements Ltd and ACC will also improvise on the production process and go for higher blending. We can do with more clinker optimisation," he said.

Singhvi became the managing director after Narotam Sekhsaria relinquished the position due to "personal reasons". Sekhsaria is now non-executive chairman of the company.

The reshuffle came after Gujarat Ambuja Cements Ltd promoters, the Sekhsaria and Neotia families, sold a 14.8 per cent stake in the company to Holcim for Rs 2,100 crore earlier this week.

Holcim offered to buy another 20 per cent from the retail shareholders through an open offer to raise its stake to 34.8 per cent. The total outgo will be Rs 4,570 crore in case the open offer is successful. Priced at Rs 90.64 a share, the offer will open on March 25 and close on April 13.

After the closure of the offer, Holcim will send three representatives to the Gujarat Ambuja Cements Ltd board. It is learnt that Markus Akermann, its CEO, and Paul Hugentobler, a member of the Swiss company's executive committee, will join the Gujarat Ambuja Cements Ltd board.

After the sale of stake, two non-executive directors, Vinod Kumar Neotia and Harshvardhan Neotia, and a whole-time director, Pulkit Sekhsaria, resigned from the board.

Holcim is unlikely to look for new acquisitions and will focus on consolidation instead. ACC's capacity will be increased to about 21 million tonnes and Gujarat Ambuja Cements Ltd will account for the rest of the capacity addition, which will be undertaken over three years. There will be expansion at one or two plants but capital expenditure will be low.

ACC has a cement capacity of around 19 million tonnes and Gujarat Ambuja Cements Ltd, 15 million tonnes. The rest, a little more than 1 million tonnes, belongs to Ambuja Cement Eastern, a subsidiary of Gujarat Ambuja Cements Ltd.

In a parallel development, rating agency Crisil reaffirmed its rating of Gujarat Ambuja Cements Ltd's debt instruments. The reaffirmation is based on Crisil's expectation that despite the change in shareholding, there will not be any material change in Gujarat Ambuja Cement Ltd's "highly competent operating management". In Crisil's assessment, Gujarat Ambuja's option to sell its stake in Ambuja Cement India Ltd to Holcim is unlikely to be exercised, given the change in Gujarat Ambuja Cement Ltd's ownership pattern.

Last year, Holcim bought two-thirds stake in Ambuja Cement India Ltd, an investment company of Gujarat Ambuja Cements Ltd. Holcim reserves the buy option in Ambuja Cement India Ltd.