Gujarat Ambuja looking for acquisitions

Gujarat Ambuja looking for acquisitions
04 May 2004

Gujarat Ambuja Cements will be scouring its own territories in the North and West regions of India for acquisitions, according to local reports. "Our penetration is deep in Gujarat, Maharashtra, Punjab and Rajasthan.. These are some of the wealthiest states of India," said Mr Anil Singhvi, Executive Director, Gujarat Ambuja Cements. "The per capita income of an area plays a very big role in demand for cement. As it is, per capita consumption of cement in these regions is also higher than the national average. This is more reason to expand capacities in the North and the West. If we do not get any decent cement plant in these geographies, then we might look elsewhere. Of course, when speaking of the very long term, we cannot afford to serve only the North and the West," said Mr Singhvi.

Mr Singhvi, who projects a 15 per cent growth for Gujarat Ambuja in value terms for FY’04 (ending June 30 2004) and a 15 per cent growth for the next fiscal as well says the company has no more requirement for any substantial capital expenditure in the near future. This means that all its cash is for keeps.  "Our total focus will not be on the shape of our balance sheet and on good cash flows. Our Return on Capital Employed and Return on Equity should improve. Again, depreciation in the cement industry is not quite understood ‹ our total depreciation charges are equal to my equity. I do not need this money to be ploughed back into capex."

Consolidation in the industry will contribute further to shoring up market prices. Smaller and "less mature" players have been creating loose supplies even during a period of lower demand, and their coalescing into larger units would help stabilise prices, said Mr Singhvi.

Gujarat Ambuja’s area of concentration will continue to be the premium retail segment, which gives higher margins, he said. Infrastructure products, in any case, account for only 10 per cent of Ambuja sales. In fact, if domestic prices become very attractive, Ambuja would prefer to sell in the domestic rather than in the export markets, since realisation from exports is lower, even though it has doubled in the recent months.

Published under Cement News