Guj Ambuja lays out investment plans worth Rs 20 bn
Gujarat Ambuja Cements Limited (GACL) has outlined investment plans worth Rs 20 bn. These include the investment in Associated Cement Companies and DLF Cements Limited. Apart from this, the company is planning to pursue an earlier plan to augment capacity by 7 million tonnes.
GACL is the largest manufacturer of cement in Gujarat and Punjab. The company recently bought a 14.4% stake in one of India's leading cement producers, Associated Cement Companies (ACC). It is India's most efficient cement manufacturer due to high degree of mechanisation in its production and mining activities. It has controlled freight costs by moving bulk of its production through the sea route.
The investments in ACC and DLF are expected to cost Rs 5.55 bn, while the rest is accounted for by greenfield and other expansion plans. Under this plan, the company plans to set up two greenfield projects with a capacity of two million tonnes each and a one million tonne cement terminal cum grinding unit in Sri Lanka.
GACL seems to be stepping on the gas as far as capacities are concerned. Infact, international cement giants including Holderbank, Lafarge and Cemex are all vying for a presence in the Indian market. The domestic market has been attracting the attention based on its growth prospects as the economy picks up and infrastructure projects take off.
The company has stated that approximately Rs 12 – 15 bn of the funding will be met from internal accruals. The remainder is being raised either through a GDR issue or long term debt. In other words there will be at worst a marginal increase in debt or dilution in equity. This will come as good news for the shareholders of the company.
The fact that GACL is India's most efficient producer of cement has led the analyst to rate the stock as a 'BUY'. The management quality of the company is considered to be another factor in favour of the company.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407