Guj. Ambuja advises ACC on project cost cutting - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Guj. Ambuja advises ACC on project cost cutting

Feb 25, 2000

According to newspaper reports, Gujarat Ambuja Cements Limited (GACL) has suggested some critical changes in Associated Cement Companies' (ACC) brownfield expansion plan to cut down costs by atleast 10%. GACL is the largest manufacturer of cement in Gujarat and Punjab. It is India's most efficient cement manufacturer due to high degree of mechanisation in its products and mining activities. It has controlled freight costs by moving bulk of its production through the sea route. GACL holds a 7.2% stake in ACC, one of India's largest cement companies.

ACC is currently implementing a 2 MMT brown field expansion plan at Wadi (Andhra Pradesh). GACL has suggested some modifications that will bring down the cost to under Rs 5 bn as against the existing projection of over Rs 5.5 bn.

The expectation that GACL's excellent project management skills will benefit ACC is already evident. In a commodity business like cement, costs play a key role in determining profitability. While GACL is the most cost efficient producer in India, ACC is an industry laggard. This is further reflected in the large divergence in the operating margins of the two companies. A 10% reduction in capital costs can go a long way in making the company more competitive in the market in terms of cost efficiency.

However, GACL's interference in the management of the company (ACC) has already created concerns among financial institutions and the Sebi. The issue of change in management is once again likely to be raised in the coming days. In case this were to be held by the Sebi, GACL would have to make an open offer for a 20% stake in ACC that would approximately be worth Rs 6 bn at current market price. This could create cash flow concerns for GACL.

Market View:
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.

Equitymaster requests your view! Post a comment on "Guj. Ambuja advises ACC on project cost cutting". Click here!


More Views on News

What's Behind ACC's Highest-Ever Revenue in March Quarter? (Company Info)

Apr 20, 2021

Key takeaways from ACC's March quarter (Q1CY21) results.

ACC Announces Quarterly Results (2QFY21); Net Profit Up 21.3% (Quarterly Result Update)

Oct 22, 2020 | Updated on Oct 22, 2020

For the quarter ended September 2020, ACC has posted a net profit of Rs 4 bn (up 21.3% YoY). Sales on the other hand came in at Rs 35 bn (up 0.3% YoY). Read on for a complete analysis of ACC 's quarterly results.

ACC 2018-19 Annual Report Analysis (Annual Result Update)

Oct 20, 2020 | Updated on Oct 20, 2020

Here's an analysis of the annual report of ACC for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of ACC . Also includes updates on the valuation of ACC .

Ramco Cements Q4 Profit Up 51.1% on Higher Sales & Better Cost Control (Views On News)

May 25, 2021

Here's our view on Ramco Cements latest quarterly results.

A Close Look at the Stock of JK Lakshmi Cement (Views On News)

May 21, 2021

A key highlight of the company's Q4 results was its healthy operating performance.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 16, 2021 (Close)