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Managing Turnaround Strategies Group: #

Business Turnaround
At
The India Cements Ltd.
Abhinaba Chatterjee A017 Arnav Bahadur F006
Mridul Sharma E059
Sujoy Kapoor C031 Mrityunjay Dhamar F016
Vaishak Anil F002
Sarthak Mahajan C037 Abhinav Mishra F038
Industry Overview
2nd Largest Cement producer after CHINA Domestic Cement Consumption on an up-trend
Production Capacity 431.4 Million Tons
Expected to reach 407 Million Tons by the end of 2017
Per-capita consumption - 190 kg (Global Average 350 kg)

Capacity & Production Scenario Attracting Investments


Capacity increased at CAGR 5.7% (FY11 FY16) FDI worth US$ 5.24 billion (2000 2017)
Production increased at CAGR 5.5% (FY11 FY16) Emami Ltd to ramp up production capacity (2.4 MT 15~20
MT)
Gujarat-based Nirma group has as bought Lafarge Indias
cement business (11 MT) for US$ 1.4 billion

Key Players in India

Dominated by Private Players Government Initiatives


Of the total capacity, 98% lies with the private sector and the National Housing Bank will refinance individual housing
rest with public sector loans of about Rs 20,000 crore (US$ 3 billion) in 2017-18
Top 20 companies accounting for around 70% of the total Increased allocation to rural low-cost housing under
production Pradhan Mantri Awaas Yojana - Gramin scheme to Rs 23,000
crore from Rs 16,000 crore
Source: Department of Industrial Policy & Promotion, Office of the Economic Advisor, TechSci Research | https://www.ibef.org/industry/cement-india.aspx
Situational Analysis

IN MID 90S WITH A CAPACITY OF 2.6 MN TONNES, INDIA CEMENTS WERE LOSING MARKET SHARE
EXPONENTIALLY

ACQUIRED VISAKA CEMENTS AND CEMENT CORP. OF INDIAS YERRAGUNTLA UNIT. ALSO, ACQUIRED
RAASI CEMENTS THROUGH HOSTILE ACQUISITIONS

SETUP A NEW PLANT IN DALAVOI, TAMIL NADU

CAPACITY INCREASED TO 9 MN TONNES IN A SPAN OF 2 YEARS


Situational Analysis

ALL THE ACQUISITION COST WHICH WAS AROUND RS. 1,600 CR WERE PREDOMINANTLY FUNDED BY
DEBT

WHEN THE GOVT. REDUCED TAXES IN THE CEMENT INDUSTRY, IT FURTHER INCREASED THE COMPETITION IN
THE INDUSTRY

AS ON MAR 2002, THE COMPOSITION OF THE DEBT OF 1793CR WAS


TL 447CR
DEBENTURES 759 CR
SHORT TERM UNSECURED LOANS 164 CR
WORKING CAPITAL (CC/OD) 363 CR (WHICH WAS 20% OF TOTAL DEBTS AND _ % OF REVENUE)
Emergency Action

CAPACITY OF THE INDUSTRY ROSE BY 40% OF DEMAND

THIS GAP BETWEEN SUPPLY AND DEMAND LEAD TO CRASHING OF CEMENT PRICES

THERE WAS A DEBT OF 1750 CR, BUT DUE ROCK BOTTOMED PRICES THEY WERE NOT ABLE TO SERVICE
THEIR DEBTS

KNEE-JERK REACTION: SELLING OF VISHNU CEMENTS PLANT FOR 385CR TO BRING LIQUIDITY BUT IT WAS
STILL INSUFFICIENT
Emergency Action

IN JANUARY, 2003 INDIA CEMENTS ENFORCED CORPORATE DEBT RESTRUCTURING SCHEME

REPERCUSSIONS:
INITIATED LAYOFFS, CUT PRODUCTION COSTS, SOLD OFF NON PERFORMING ASSETS(ESTIMATED AT 70CR) AND
SOLD LAND ASSETS AS WELL

INTRODUCED VRS AND RESTRUCTURED DEBT INCLUDING WORKING CAPITAL FACILITIES


IDBI WAS APPOINTED AS THE MONITORING AGENCY TO OVERSEE THE IMPLEMENTATION OF THE SCHEME
Emergency Action

STEPS TAKEN TO MITIGATE VISAKA CEMENTS DEBT CRISIS

AS ON MAR 2002, VISAKA HAD AN OUTSTANDING DEBT OF 186 CR


A CRUCIAL ASPECT OF THE CDR SCHEME WAS TO SELL THE STAKE IN VISAKA AND GET RID OF NON-CORE
ASSETS( TOTAL OUTSTANDING DEBT 410CR AND OUTSTANDING INTEREST 190CR)

SALE OF STAKE IN VISAKA CEMENTS WOULD FETCH ABOUT 530CR


LIKEWISE, SALE OF ICL SHIPPING AND NON-CORE ASSETS
Thank
You

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