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

MEMBER'S LOGINX

     
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

ACC Announces Quarterly Results (4QFY20); Net Profit Down 6.4% (Quarterly Result Update)

Apr 24, 2020 | Updated on Apr 24, 2020

For the quarter ended March 2020, ACC has posted a net profit of Rs 3 bn (down 6.4% YoY). Sales on the other hand came in at Rs 35 bn (down 10.7% YoY). Read on for a complete analysis of ACC 's quarterly results.

ACC Announces Quarterly Results (3QFY20); Net Profit Down 63.2% (Quarterly Result Update)

Feb 10, 2020 | Updated on Feb 10, 2020

For the quarter ended December 2019, ACC has posted a net profit of Rs 3 bn (down 63.2% YoY). Sales on the other hand came in at Rs 41 bn (up 4.2% YoY). Read on for a complete analysis of ACC 's quarterly results.

ACC LTD 2017-18 Annual Report Analysis (Annual Result Update)

Mar 5, 2019 | Updated on Mar 5, 2019

Here's an analysis of the annual report of ACC LTD for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of ACC LTD. Also includes updates on the valuation of ACC LTD.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

ACC SHARE PRICE


Sep 18, 2020 02:04 PM

TRACK ACC

ACC - HOLCIM COMPARISON

COMPARE ACC WITH

MARKET STATS