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A Case Study On ACC Limited In India Finance Essay

ACC Limited is India’s foremost cement manufacturer with a countrywide network of factories and marketing offices. Established in 1936, ACC has been a pioneer and trend-setter in cement and concrete technology. Among the first companies in India to include commitment to environment protection as a corporate objective, ACC has won accolades for environment friendly measures taken at its plants and mines, and has also been felicitated for its acts of good corporate citizenship.

Products:

ACC's brand name is synonymous with cement and enjoys a high level of equity in the Indian market. Our range of cements and blended cements is marketed through a network of 19 Sales Units, 54 Area Offices, and 194 warehouses. This is backed by a countrywide network of over 9,000 dealer who, in turn, are assisted by their sub-dealers.

ACC’s marketing, sales and distribution processes are industry standards. Although they take immense pride in having supplied some of India’s most admired projects, ACC is essentially a people’s brand of cement with more than 80% of sales made through an extensive dealer network that covers every state in India. Its customer base represents the masses of India- individual homebuilders in small towns, rural and semi-urban India. ACC Cement enjoys an image of assuring consistency and of high quality backed by in-house research and expertise.

Complementing this is a unique customer services cell comprising qualified civil engineers, who assist and advise customers with prior and post sales service. This service begins with selection of type and grade of cement (where applicable) to troubleshooting and on-site assistance.

ACC manufactures the various kinds of Portland Cement for general construction and special applications. In addition to this, ACC offers two value added products namely, Bulk Cement and Ready Mix Concrete.

Milestones:

1936

Incorporation of The Associated Cement Companies Limited on August 1, 1936.

1936

First Board Meeting of The Associated Cement Companies Limited held at Esplanade House, Mumbai on November 10, 1936.

1937

With the transfer of the 10th company to ACC, viz. Dewarkhand Cement Company, the formation of ACC is complete on October 23, 1937.

1944

ACC’s first community development venture near Bombay

1947

India’s first entirely indigenous cement plant established at Chaibasa in Bihar

1952

Village Welfare Scheme launched

1955

Sindri cement works used the waste product calcium carbonate sludge from fertilizer factory at Sindri.

1956

Bulk Cement Depot established at Okhla, Delhi

1957

Technical training institute established at Kymore, Madhya Pradesh.

1957

Katni Refractories

1961

Blast furnace slag from TISCO used at the Chaibasa Unit to manufacture Portland Slag Cement for the first time in India.

1961

Manufacture of Accocid Cement, which resists the corrosive action of acids and chemicals.

1961

Oilwell Cement manufactured at ACC Shahabad Cement Works in Karnataka for cementation of oilwells upto a depth of 6,000 feet.

1961

Manufacture of Hydrophobic (waterproof) cement at ACC Khalari Cement Works in Bihar.

1962

Manufacture of Accoproof, a waterproofing additive.

1965

ACC’s Central Research Station (CRS) established at Thane

1965

Manufacture of Portland Pozzolana Cement.

1965

Manufacture of Calundum, a High Alumina Binder; Firecrete, Low Density Alumina Castables and High Alumina Refractory Cement.

1968

Advent of computers in ACC for data processing and designing management information and control systems.

1968

ACC supplied and commissioned one-million-tonne iron ore pelletising plant ordered by TISCO

1971

Manufacture of Whytheat Castables A, K, C and Cal-Al-75

1973

Take-over of The Cement Marketing Company of India (CMI)

1977

ACC receives ASSOCHAM first national award for the year 1976 instituted for outstanding performance in promoting rural and agricultural development activities.

1978

Introduction of the energy efficient precalcinator technology for the first time in India. Full scale commercial production based on MFC technology at Wadi in 1979.

1979

ACC wins international contract for operation and management of a new one million tonne cement plant at Yanbu-Ras Biridi in Saudi Arabia.

1982

Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka.

1984

ACC achieves a breakthrough in import substitution by developing and supplying a special G type of oil well cement to ONGC.

1987

ACC develops a new binder for use at sub-zero temperatures, which is successfully used in the Indian expedition to Antarctica.

1992

Incorporation of Bulk Cement Corporation of India, a joint venture with the Government of India.

1993

ACC starts the commercial manufacture of Ready Mixed Concrete at Mumbai.

1995

ACC selected as Most Respected Company in India by Business India.

1998

Commissioning of the 0.6 MTPA cement grinding unit at Tikaria, Uttar Pradesh.

1999

Commissioning of captive power plants at the Jamul and Kymore plants in Madhya Pradesh.

1999

Tata group sells 7.2% of its stake in ACC to Ambuja Cement Holdings Ltd, a subsidiary of Gujarat Ambuja Cements Ltd. (GACL)

2000

Tata Group sells their remaining stake in ACC to the GACL group, who with 14.45% now emerge as the single largest shareholder of ACC.

2001

Commissioning of the new plant of 2.6 MTPA capacity at Wadi, Karnataka plant, the largest in the country, and among the largest sized kilns in the world.

2002

ACC wins PHDCCI Good Corporate Citizen Award

2003

IDCOL Cement Ltd becomes a subsidiary of ACC

2004

IDCOL Cement Limited is renamed as Bargarh Cement Limited (BCL).

2004

ACC raises US $ 100 million abroad through Foreign Currency Convertible Bonds (FCCB’s) for US$ 60 million and Global Depository Shares (GDS’s) for US $ 40 million. Both offerings are listed on the London Stock Exchange.

2004

ACC named as a Consumer Superbrand by the Superbrands Council of India, becoming the only cement company to get this status.

2004

GreenTech Safety Gold and Silver Awards awarded to Madukkarai Cement Works and Katni Refractory Works by Greentech Foundation for outstanding performance in Safety Management System.

2005

ACC receives the CFBP Jamnalal Bajaj Uchit Vyavahar Puraskar Certificate of Merit – 2004 from Council For Fair Business Practices.

2005

Holcim group of Switzerland enters strategic alliance with Ambuja Group by acquiring a majority stake in Ambuja Cements India Ltd. (ACIL) which at the time held 13.8 % of the total equity shares in ACC. Holcim simultaneously makes an open offer to ACC shareholders, through Holdcem Cement Pvt. Limited and ACIL, to acquire a majority shareholding in ACC. Pursuant to the open offer, ACIL’s shareholding in ACC increases to 34.69 % of the Equity share capital of ACC.

2005

Commissioning of Modernisation and Expansion project at Chaibasa in Jharkhand, replacing old wet process technology with a new 1.2 MTPA clinkering unit, together with a captive power plant of 15 MW.

2005

Financial accounting year of the company changed to calendar year January-December

2006

Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement Limited and Tarmac (India) Limited merged with ACC

2006

ACC announces new Workplace policy for HIV/AIDS

2006

Change of name to ACC Limited with effect from September 1, 2006 from The Associated Cement Companies Limited.

2006

ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber of Commerce and Industry

2006

New corporate brand identity and logo adopted from October 15, 2006

2006

ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at Wadi in Karnataka– the first ever such project by a private sector company in India.

2007

ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu

2007

Sumant Moolgaokar Technical Institute completes 50 years and reopens with new curriculum

2008

Ready mixed concrete business hived off to a new subsidiary called ACC Concrete Limited.

2008

ACC Cement Technology Institute formally inaugurated at Jamul on July 7.

2008

First Sustainable Development Report released on June 5.

2008

ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate Citizen of the year 2008

2008

Project Orchid launched to transform our Corporate Office, Cement House into a green building.

2009

ACC received the Jamanalal Bajaj "Uchit Vyavahar Puraskar" of Council for Fair Business Practices

2009

ACC is allotted coal blocks in Madhya Pradesh and West Bengal.

2009

ACC's new Grinding plant of capacity 1.60 million tonnes inaugurated at Thondebhavi in Karnataka.

2010

Kudithini Cement Grinding Plant inaugurated in Karnataka on January 4, 2010 with a capacity of 1.1 MTPA of Portland Slag Cement.

2010

ACC acquires 100 percent of the financial equity of Encore Cements & Additives Private Limited which is a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh. This company became a wholly-owned subsidiary of ACC in January 2010.

Sales Volume and Growth:

Net Sales, Operating EBITDA & Operating EBITDA Margin:

Profits Before Tax and Profits After Tax:

Net worth and Return on Net Worth

Highlights of Performance/Events (2009)

Total Consolidated Income for the year 2009 was Rs. 8275 crore, an increase of 9% as compared to Rs.7974 crore in 2008.

Consolidated Profit before exceptional items and tax for the year 2009 was Rs. 2251 Crore against Rs. 1582 crore in the year 2008.

Consolidated Profit after Tax for the year 2009 was Rs. 1564 crore as against Rs. 1100 crore in 2008, an increase of 42%.

The expansion project of the Bargarh Plant was substantially completed during the year. The Satellite grinding units which were set up as a part of Wadi expansion programme at Thondebhavi in Chikballapur district and Kudithini in Bellary district in Karnataka were also partly commissioned during the last quarter of 2009.

There were substantial progress during the year under review in the Company’s on-going projects at Wadi and Chanda, which are slated for completion in the first half of 2010.

Work was started on a project to set up a 2.5 MW wind energy farm in Maharashtra.

Financial Results

Capital Market and Fund Raising:

ACC Limited which is a part of the Cement and Cement Products sector has a weightage of 0.64% in the Nifty50 as per the National Stock Exchange.

Financial Results

Consolidated

Stand Alone

All in Crores INR

2009

2008

2009

2008

Sale of products and services (net of excise duty) and other income

8725.41

7974.28

8268.31

7571.58

Profit after exceptional items and before tax

2250.70

1624.82

2294.39

1736.60

Provision for tax

(686.79)

(525.17)

(687.66)

(523.81)

Profit after tax

1563.91

1099.65

1606.73

1212.79

Balance brought forward from last year

2357.25

2057.37

2477.91

2064.89

Profit available for appropriations

3921.16

3157.02

4084.64

3277.68

Appropriations

Interim Dividend

187.70

187.65

187.70

187.65

Proposed Dividend

244.06

187.68

244.06

187.68

Dividend Distribution Tax

73.38

63.79

73.38

63.79

General Reserve

350

350

350

350

Debenture Redemption Reserve

25

10

25

10

Previous Year Dividend

-

0.02

-

0.02

Amortisation Reserves

0.65

0.63

0.65

0.63

Balance Carried forward to the next year’s account

3040.37

2357.25

3203.85

2477.91

Dividend

In August 2009, the Company had paid an interim dividend or Rs. 10 Crore per equity share, involving an outgo (Including the dividend distribution tax) of Rs.219.60 crore. The directors are now pleased to recommend a final dividend of Rs. 13 per equity share of Rs.10 each. The total dividend for the year 2009 would accordingly be Rs.23 per equity share as against Rs.20 per equity share for the year ended December 31, 2008.

The total dividend outgo for the current fiscal would amount to Rs. 505.14 crore, including dividend distribution tax of Rs. 73.38 crore, as against Rs. 439.12 crore, including dividend tax of Rs.63.79 in the previous year.

Economic scenario and Outlook

After the global financial slowdown witnessed in 2008, culminating in the expensive bailout for banks and insurance companies notably in USA, there has been a perceptible improvement in the outlook for the global economy. The expansion of output in emerging market economies, particularly Asia, was the principal driver of this development. Trade is recovering and financial market conditions are improving. Notwithstanding the confidence exuded by the financial sector, there are concerns that the recovery may as yet be fragile, as the economies of developed countries, particularly USA, continues to lag with high unemployment, low consumer spending and depressed housing markets.

The Indian economy fared better than most developed economies, although its growth was a bit muted. The performance of the industrial sector has markedly improved. Funding constraints eased with ample liquidity and a benign interest regime prevailed during a major part of the year. Capital inflows revived as India became a preferred destination for both portfolio and direct investment. The country is now exhibiting signs of resurgence despite contraction in exports and a subnormal monsoon in 2009. Government expects the GDP growth to be around 7% in the financial year 2009-2010 which is an improvement over the forecast of 6-6.5% growth made in the beginning of the fiscal year.

However, there are still areas that cause concern. Agricultural output may decline as a result of the weak monsoon and inflationary pressures, particularly of food prices, could hamper growth prospects in 2010. Bank credit growth continues to be sluggish. Government fiscal deficit is expected to reach record levels. Nevertheless, the overall economic outlook is generally favorable, though mixed, with some concern of an escalating inflationary pressure.

Acquisitions

With a view to enhance its limestone reserves in Rajasthan, ACC Limited acquired a 100% equity stake in National Limestone Company private limited (NLCPL) making it a wholly owned subsidiary of the Company. NLCPL has limestone leases and reserves in Sikar district in Rajasthan.

The Company also acquired 100% equity stake in Encore Cements and Additives Private limited (ECAPL). Consequently, ECAPL has become a wholly owned subsidiary of ACC limited with effect from Jan 28th, 2010. ECAPL has a slag grinding unit in Vishakapatinam which will help ACC strengthen its market presence in Coastal Andhra Pradesh.

ACC limited also entered into an agreement with the promoters of Asian concrete & Cement private limited. Asian Cement to acquire a 45% equity share in that company. This transaction was completed in the first quarter of 2010. Asian Cement has a 0.3 million tonne cement grinding plant in the Solan district of Himachal Pradesh and is in the process of setting up an additional 1 million tonne grinding facility adjacent to the existing plant.

Finance

The Company retained its “AAA” rating by CRISIL for its long term non convertible debenture and bank loan for working capital. In October 2009, the company borrowed Rs. 300 crore through non convertible debentures having a five-year maturity at an all inclusive cost of 8.45% per annum.

As on 31st December 2009, the company’s debit equity ratio stood at a comfortable level of 0.9:1

Share Capital

During the year, ACC limited allotted 58,473 equity shares of the face value of Rs.10 each, consequent to the exercising of Stock options by its employees. EBITDA losses of this business were considerably reduced by 65% from Rs.74 crore to Rs. 26 crore, through systematic management of overhead costs and productivity.

ACC concrete limited is well placed to grow and add value to the group, going forward as the market regains momentum as a result of Government’s infrastructure programme and renewed confidence in the real estate sector.

ACC Share Price vis a vis BSE Sensex January – December 2009

Month

BSE Sensex Close

ACC Share Price (on BSE) In rs.

No. of shares traded during the month(on BSE)

Turnover (Rs.crore) on BSE

 

 

High

Low

Close

 

 

Jan'09

9424.24

567.1

469.1

504.85

2,595,872

130.83

Feb'09

8891.61

584.7

486

539.8

3,650,496

198.78

Mar'09

9708.5

604.9

510.1

576.65

3,640,107

201.38

Apr'09

11403.25

689.9

561

653

2,899,562

181.31

May'09

14625.25

804

570

783

3,103,417

211.58

June'09

14493.84

907

709

768.9

3,107,911

253.06

Jul'09

15670.31

889.9

720

881.3

3,634,220

295.42

Aug'09

15666.64

928

750

808.7

3,846,941

319

Sep'09

17126.84

855.2

759

819.3

2,575,004

207.55

Oct'09

15896.28

841.8

726.25

747.65

1,751,198

136.94

Nov'09

16926.22

816.75

686.2

796.6

2,128,182

160.67

Dec'09

17464.81

883.5

790.55

871.5

2,186,225

183.67

ACC Share Price on NSE vis a vis S&P CNX Nifty January – December 2009

Month

S&P CNX Nifty Close

ACC Share Price (on BSE) In rs.

No. of shares traded during the month(on BSE)

Turnover (Rs.crore) on BSE

 

 

High

Low

Close

 

 

Jan'09

2874.8

559.9

450.2

506.4

9,245,966

464.3

Feb'09

2763.65

589

486.6

540.05

11,905,263

648.25

Mar'09

3020.95

605

511.05

574.4

14,931,598

823.09

Apr'09

3473.95

690

561.25

654.35

12,329,812

767.43

May'09

4448.95

804.85

568.6

782.5

15,357,150

1041.91

June'09

4291.1

903.6

708

765.75

14,707,841

1190.48

Jul'09

4636.45

888

715.1

880.8

14,509,074

1177.08

Aug'09

4662.1

928.8

752

807

14,676,072

1211.93

Sep'09

5083.95

855

756.65

820.25

10,870,040

875.11

Oct'09

4711.7

842.5

726.05

750.65

8,323,126

651.11

Nov'09

5032.7

817

680.5

797.65

9,979,858

752.21

Dec'09

5201.05

883.9

792.3

872.45

9,502,122

799.56

Share transfer system

Share transfers

The share transfers in physical form are presently processed and the share certificates

are generally returned within a period of 15 days from the date of receipt.

Nomination facility for shareholding

As per the provisions of the Companies Act, 1956, facility for making nomination is

available for shareholders in respect of shares held by them. Those shareholders who

hold shares in physical form may obtain nomination forms from the Share Department

of the Company.

Payment of dividend through Electronic Clearing Service

The Securities and Exchange Board of India (SEBI) has made it mandatory for all

companies to use the bank account details furnished by the depositories for depositing

dividends. As per the recent RBI guidelines, effective from September 30, 2009, ECS

credit will be moved completely on National Electronic Clearance System (NECS)

platform through core banking system. Accordingly, dividend will be credited to the

shareholders’ bank account through NECS where complete core banking details are

available with the Company. In the event any branch of a bank has not migrated to

core banking system, or where the core banking account number is not furnished by

the shareholder to the Depository/Company as the case may be, the Company will

print the details available in its records on the dividend warrants to be issued to the

shareholders. The Company is complying with SEBI’s directive in this regard.

Unclaimed Dividends

The Company is required to transfer dividends which have remained unpaid /unclaimed

for a period of seven years to the Investor Education & Protection Fund established by

the Government. The Company will accordingly be required to transfer in August

2010, the dividend for the year ended March 31, 2003 which have remained unclaimed

/ Unpaid.

As in the past, the Company will send intimation to shareholders whose dividend

warrants have not been encashed. Shareholders are requested to revert to the Company

if they have not received / encashed their dividend warrants.

Subdivision of shares

The Company had subdivided the face value of its shares from Rs. 100 each to Rs. 10

each in 1999. The old shares having face value of Rs. 100 are no longer tradable in the

Stock Exchanges. Despite reminders, many shareholders are yet to exchange their old

share certificates of face value Rs. 100 with the new share certificates having face

value of Rs. 10. Shareholders holding share certificates of the face value of Rs. 100

each are requested to send the certificates to the share department of the Company

for exchange.

Pending Investors’ Grievances

Any shareholder, whose grievance has not been resolved satisfactorily, may kindly

write to the Company Secretary at the Registered Office with a copy of the earlier

correspondence.

Dematerialisation of shares and Liquidity

Equity Shares of the Company dematerialized as on December 31, 2009 is 94.13%

The Company has entered into agreements with both National Securities Depository

Limited (NSDL) and Central Depository Services (India) Limited (CDSL) whereby shareholders have an option to dematerialize their shares with either of the depositories.

Global Depository Receipts (GDRs) or any Convertible instruments, Conversion Dates and likely impact on Equity

64, 62,000 Global Depository Receipts (GDRs) were issued in March / April 2004 at a

share price of U.S. $6.19 (equivalent to Rs. 280.05) per GDR at about 1% premium on

closing share price of Rs. 277.35 on March 8, 2004 on the Bombay Stock Exchange

Limited (BSE) representing 64, 62,000 Equity Shares. The Company has terminated the

Depository Agreement with effect from October 15, 2008 and the GDRs have been

delisted from the London Stock Exchange. The GDR holders were given time to

surrender their GDR’s in exchange for Equity Shares up to April 15, 2009. Citibank

who were the depository for the GDRs have recently sold the underlying shares and the GDR’s stand extinguished.

The Company has made high profits and holds high percentage of share in the market.

Awards & Accolades:

ACC was the first recipient of ASSOCHAM’s first ever National Award for outstanding performance in promoting rural and agricultural development activities in 1976. Decades later, PHD Chamber of Commerce and Industry selected ACC as winner of its Good Corporate Citizen Award for the year 2002. Over the years, there have been many awards and felicitations for achievements in Rural and community development, Safety, Health, Tree plantation, afforestation, clean mining, Environment awareness and protection.

Awards received in 2010

9th Annual Greentech Safety Platinum Award to ACC Tikaria, Gold Award to ACC Jamul and Sindri ; Silver Award 2010 to ACC Lakheri, Madukkarai and Wadi Expansion Project

Institute of Cost and Works Accountants of India (ICWAI) Good Performance Award by Institute of Cost and Works Accountants of India

Institute of Chartered Accountants of India (ICAI) award for Excellence in Financial Reporting for Annual Report 2008

Financial Express-Emergent Ventures India (EVI) Green Business Leadership award

9th Greentech Safety Gold Award in cement sector to ACC Jamul

Awards received in 2009

Indian Merchants’ Chamber Ramkrishna Bajaj National Quality Trophy – 2009 to ACC Gagal

Indian Merchants’ Chamber Ramkrishna Bajaj National Quality Commendation Certificate 2009 to ACC Sindri

8th Greentech Safety Award 2009 in Gold category in cement sector to ACC Tikaria

8th Greentech Safety Gold Award in cement sector Jamul

10th Greentech Environment Excellence award – Gold category – cement sector to Tikaria

Srishthi Good Green Governance Award by Srishthi Publications, Delhi to ACC Madukkarai

International Safety Award 2008 by British Safety Council to ACC Gagal Sindri and Tikaria

State Safety Award for 2007 from Government of Orissa to ACC Bargarh

Federation of Indian Mineral Industries (FIMI) National Environment Award to ACC Wadi Limestone Mines

Safety Innovation Award by Institution of Engineers to ACC Wadi (Expansion Project)

Energy Conservation Award by Rajasthan Renewable Energy Corporation to Lakheri

National Award for Excellence in Water Management from Confederation of Indian Industry (CII) to ACC Wadi

Other prominent awards won by us over the years comprise some coveted ones conferred by organisations of repute.

Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment and Forests for "extraordinary work" carried out in the area of afforestation.

FICCI Award --- for innovative measures for control of pollution, waste management & conservation of mineral resources in mines and plant.

Subh Karan Sarawagi Environment Award - by The Federation of Indian Mineral Industries for environment protection measures.

Drona Trophy - By Indian Bureau Of Mines for extra ordinary efforts in protection of Environment and mineral conservation in the large mechanized mines sector.

Indira Gandhi Memorial National Award - for excellent performance in prevention of pollution and ecological development

Excellence in Management of Health, Safety and Environment : Certificate of Merit by Indian Chemical Manufacturers Association

Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry

FIMI National Award - for valuable contribution in Mining activities from the Federation of Indian Mineral Industry under the Ministry of Coal.

Rajya Sthariya Paryavaran Puraskar - for outstanding work in Environmental Protection and Environment Performance by the Madhya Pradesh Pollution. Control Board.

National Award for Fly Ash Utilisation - by Ministry of Power, Ministry of Environment & Forests and Dept of Science & Technology, Govt of India - for manufacture of Portland Pozzolana Cement.

ACC in the news

http://www.acclimited.com/newsite/news.asp

Financial Results for the year 2009:

Resources

http://www.acclimited.com/newsite/annual_report_09/dir_report_md.pdf

http://www.acclimited.com/newsite/links.asp

http://in.reuters.com/finance/stocks/option?symbol=ACC.BO

http://www.indiainfoline.com/

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