ACC Ltd:Annual Report 2023-24 Analysis

ACC Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: ACC Limited, formerly known as The Associated Cement Companies Limited, was established in 1936 through the merger of ten existing cement companies by Tata, Killick Nixon and F.E. Dinshaw. This marked a significant consolidation in the Indian cement industry.

Headquarters Location and Global Presence: The company’s headquarters are located in Mumbai, India. While primarily focused on the Indian market, ACC is part of the Holcim Group, a global leader in innovative and sustainable building solutions, providing it with international reach and access to global best practices.

Company Vision and Mission:

• Vision: To be the most respected and trusted building materials company, delivering sustainable solutions for the future. (Note: This is a general interpretation, as the exact current vision statement might be proprietary).
• Mission: To provide customers with high-quality, innovative, and sustainable building materials and solutions that enhance their lives and create value for stakeholders. (Note: This is a general interpretation, as the exact current mission statement might be proprietary).

Key Milestones in Their Growth Journey:

• 1936: Formation of The Associated Cement Companies Limited.
• 1944: Established first captive power plant in India, signifying focus on operational efficiency.
• 1956: Establishment of the first cement research and training institute.
• 1965: Setting up of India’s first modern cement plant with a capacity of 0.4 million tonnes.
• 1999: Introduction of ready mix concrete business.
• 2006: Holcim acquires majority stake, leading to significant modernization and operational improvements.
• 2022: Ambuja Cements, also part of Holcim, acquires ACC.

Stock Exchange Listing Details and Market Capitalization: ACC Ltd. is listed on the Bombay Stock Exchange (BSE: 500410) and the National Stock Exchange (NSE: ACC). Market capitalization fluctuates based on market conditions. It’s recommended to consult financial websites for the most up-to-date information.

Recent Financial Performance Highlights: Recent financial performance data varies. Refer to ACC’s official website or financial news sources for the latest quarterly or annual reports. These reports typically detail revenue, profit margins, and key performance indicators.

Management Team and Leadership Structure: ACC is led by a Board of Directors and a team of experienced professionals in various functional areas. The parent company, Ambuja Cements, significantly influences the strategic direction. Refer to ACC’s corporate website for current details on key personnel.

Any Notable Awards or Recognitions: ACC has received awards and recognitions in areas such as sustainability, safety, and corporate social responsibility. Details can be found on the company’s website and press releases.

Their Products #

Complete Product Portfolio with Categories:

• Cement: Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC), Composite Cement, Special Cements.
• Ready Mix Concrete (RMC): A variety of RMC mixes for different applications.
• Building Products: Blocks, Adhesives.
• Aggregates: Various sizes and types of aggregates used in construction.

Flagship or Signature Product Lines: ACC Gold Water Shield Cement is a popular and distinctive brand, known for its water-repellent properties.

Key Technological Innovations or Patents: Focus on developing blended cements and low-carbon cement alternatives. Details on specific patents require database search.

Manufacturing Facilities and Production Capacity: ACC has a widespread network of manufacturing plants across India. Production capacity is significant, placing them among the leading cement producers in the country. Specific capacity figures can be found in the annual reports.

Quality Certifications and Standards: ACC adheres to stringent quality standards and holds certifications such as ISO 9001 (Quality Management), ISO 14001 (Environmental Management), and ISO 45001 (Occupational Health and Safety Management).

Any Unique Selling Propositions or Technological Advantages: ACC’s association with the Holcim group provides access to global research and development resources. Focus on sustainable cement production and blended cement formulations provide a competitive edge.

Recent Product Launches or R&D Initiatives: Focus on launching new blended cement options with lower carbon footprint.

Primary Customers #

Target Industries and Sectors:

• Infrastructure development
• Residential construction
• Commercial construction
• Industrial projects

Geographic Markets (Domestic vs. International): Primarily focused on the domestic Indian market.

Major Client Segments (agricultural, industrial, residential, etc.):

• Individual home builders (residential)
• Construction companies
• Infrastructure developers
• Government agencies

Distribution Network and Sales Channels: Wide distribution network across India, including a network of dealers and retailers, direct sales to large projects, and online sales platforms.

Major Competitors #

Direct Competitors in India and Globally: Key competitors in the Indian market include:

• UltraTech Cement
• Shree Cement
• Ambuja Cements (Now Parent Company)
• Dalmia Bharat
• JK Cement

Comparative Market Share Analysis: Market share fluctuates. Refer to industry reports from organizations like CRISIL or ICRA for the latest market share data.

Competitive Advantages and Disadvantages:

• Advantages: Strong brand reputation, part of Holcim group offering access to global technology and best practices, wide distribution network.
• Disadvantages: Susceptible to cyclical demand in the construction industry, faces stiff competition from other major players, increasing competition from smaller regional players.

How They Differentiate from Competitors: Focus on quality, sustainability, and technological innovation.

Industry Challenges and Opportunities: Challenges: Rising energy costs, environmental regulations, fluctuating raw material prices. Opportunities: Infrastructure development boom in India, increasing demand for affordable housing, adoption of green building practices.

Market Positioning Strategy: Positioned as a leading cement manufacturer, offering high-quality products and sustainable solutions.

Future Outlook #

Expansion Plans or Growth Strategy: Focus on organic growth, expanding production capacity to meet increasing demand, and investing in R&D for sustainable cement solutions.

Upcoming Products or Innovations: Continued focus on developing and launching low-carbon cement alternatives and innovative building solutions.

Sustainability Initiatives or ESG Commitments: Focus on reducing carbon emissions, promoting resource efficiency, and implementing sustainable manufacturing practices.

Industry Trends Affecting Their Business: Increased demand for sustainable building materials, adoption of digital technologies in construction, and focus on affordable housing are key trends.

Long-Term Vision and Strategic Goals: To be a leading provider of sustainable building materials in India, contributing to the country’s infrastructure development while minimizing environmental impact.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics (Standalone) #

• Revenue from Operations: Increasing trend, with FY 2023-24 at ₹19,959 crore, compared to ₹18,200 crore, and ₹21,039 crore in the previous two years.
• EBITDA Margin: Improved to 17.4% in FY 2023-24, compared to 10% and 17% in FY 2021 and 2022-23.
• Profit After Tax: Increased to ₹2,337 crore in FY 2023-24, showing stronger profitability compared to 1,197 Cr in FY 2022-2023.
• Earnings Per Share: The FY 2023-2024 EPS of 113.12 shows growth, indicating improved earnings performance.
• Total Assets: Increased to ₹23,386 crore in FY 2023-24, reflecting growth in the Company’s asset base.
• Market Capitalization: Increased to ₹41,609 crore in FY 2023-24, with a substantial increase in FY24.

Business Segment Performance #

• Cement Sales Volume: Increased from 28.89 MMT (2021) and 25.53 MMT (2020) to 35.26 MMT in FY 2023-24, indicating continuous growth in core business.
• Ready Mix Concrete (RMX): Showed improved EBITDA, EBITDA margin, and Operating EBITDA per tonne in FY 2023-24, while volume and revenue have decresed, suggesting a focus on profitability, cost rationalization, and a shift from opex to capex.
• Green Products: Represent 96% of the Company’s total product portfolio, contributing to sustainability.
• Cost Break-up: Power and fuel costs as a percentage of revenue decreased to 20% in FY 2023-24 from 26% in FY 2022-23, indicating better cost management. Freight and forwarding expenses also decreased, demonstrating improved logistics efficiency.

Major Strategic Initiatives and Their Progress #

• Capacity Expansion: ACC aims to increase cement capacity to 140 MTPA by FY 2027-28, with 2.25 MTPA added organically, 9.1 MTPA inorganically and 20 MTPA under execution in FY 23-24.
• Cost Reduction: Initiatives across energy, freight, and forwarding segments were implemented, with a targeted reduction of ₹797 per tonne in FY 2023-24, and an additional ₹530 per tonne reduction projected by FY 2027-28.
• Digital Transformation: ACC’s ‘udAAAn’ initiative is focused on digitalizing the entire value chain using Industry 4.0, AI, mobile platforms, and data analytics, impacting manufacturing, logistics, and sales processes.
• Sustainability: ACC is committed to Net Zero by 2050, with near-term targets validated by SBTi. Key initiatives include increasing the use of blended cements (85% of production), waste heat recovery systems (WHRS), and renewable energy.

Risk Landscape Changes #

• Market Competition: The Company faces increased competition due to ongoing capacity additions and industry consolidation.
• Regulatory Changes: Evolving climate and environmental regulations pose compliance and reputational risks.
• Energy and Raw Material Costs: Significant portions of operating costs are tied to energy and raw materials, making the Company susceptible to price volatility.
• Cybersecurity: With increased digitalization, the Company faces heightened cybersecurity risks, addressed through robust security systems and data protection measures.
• Health and Safety: Health and Safety is core to the sustainability of ACC’s business. It is complex and multidisciplinary and requires teamwork and a high degree of commitment from all stakeholders at all levels.

ESG Initiatives and Metrics #

• Net Zero Commitment: ACC aims for net-zero emissions by 2050, with 2030 targets validated by SBTi.
• Water Positivity: The Company is 1.0x water-positive.
• Plastic Negative: ACC is 7x plastic negative through co-processing of plastic waste.
• Circular Economy: Used 12.7 million tonnes of waste-derived resources in FY 2023-24.
• Renewable Energy: 13.1% of energy consumption from renewable sources; targeting 60% green power share by FY 2027-28.
• Training hours: 15.5 training hours per employee.

Management Outlook #

• India’s focus on infrastructure development and affordable housing is expected to drive strong cement demand.
• The Company is well-positioned to capitalize on emerging opportunities, with plans for capacity expansion, investment in sustainable initiatives, and a positive impact on the planet for future generations.
• ACC aims to double its market share in the next decade, leveraging its strengths and fostering innovation.

Detailed Analysis #

Financial Analysis of ACC Limited: A 3-Year Comparative Overview #

Balance Sheet Analysis #

Assets #

Liabilities #

| Particulars (’ in Crore) | March 31, 2024 | March 31, 2023 |Dec 31, 2022 * | | ———————————————— | ————– | ————– | | Lease Liabilities (Non-Current) | 223.76 | 125.68 | | Provisions (Non-Current) | 151.67 | 177.80 | | Deferred tax liabilities (Net) | 580.06 | 457.33 | | Total Non-Current Liabilities | 955.49 | 760.81 | | Lease Liabilities (Current) | 131.09 | 27.36 | | Trade Payables | 1,924.89 | 1,640.07 | | Other Current Financial Liabilities | 1,261.11 | 1,044.81 | | Other Current Liabilities | 1,846.84 | 2,380.15 | | Current Provisions | 12.13 | 10.08 | | Current Tax Liabilities (net) | 920.78 |538.54 | | Total Current Liabilities | 6,096.84 | 5,641.01 | | Total Liabilities | 7,052.33 | 6,401.82 |

*ACC Limited changed its financial year-end from December 31 to March 31 in FY 2022-23, hence previous year figures are for a period of 15 months, therefore, are not comparable.

Equity #

Significant Changes in Major Line Items (>10% YoY) #

• Property, Plant and Equipment: Increased by 24.14%, primarily due to capacity expansion projects.
• Right of Use Assets: Increased by 69.94%, attributed to new and remeasured leases.
• Capital Work-in-Progress: Decreased by 41.55%, potentially indicates completion and capitalization of projects.
• Other Intangible assets: Increased by 189.83%, significant addition during the year.
• Goodwill: Increased by 9,076.66%, from 3.77 Cr to 344.95 Cr, because of acquisitions.
• Investments in associates and Joint Ventures: Decreased by 76.92%, due to Asian concretes and cements Private Limited, a joint venture company, becoming 100% subsidiary.
• Other Non-Current Financial Assets: Decreased by 18.20%.
• Cash and Cash Equivalents: Increased significantly from ‘128.85 Crore to ‘1,603.95 Crore, indicating improved liquidity.
• Other Current Financial Assets: Decreased by 1.44%, mainly due to variation in bank deposits.
• Other Current Assets: Decrease by 39.66% , mainly due to decrease in advances to suppliers.
• Non-Current Assets Classified as Held for Sale: Increased from ’ 2.13 crore to ‘21.85 Crore, representing assets prepared for disposal.
• Current Lease Liabilities: Increased by 380.15%
• Other Current Financial Liabilities: Increase by 20.9%
• Other Current Liabilities:Decreased by 22.4%
• Current tax liabilities: Increase of 71.2%
• Other Equity: Increased due to profit for the year.

Working Capital Trends #

A definitive trend analysis is challenging due to the change in financial year-end in the previous period. However, the following observations can be made:

• Increase in Current Assets: Primarily driven by a significant rise in cash and cash equivalents, showing stronger liquidity.
• Increase in Current Liabilities: Driven by increase in Lease liabilites and Trade payables.

Asset Quality Metrics #

• Impairment Losses: The report mentions impairment losses on trade receivables, suggesting a need to monitor customer credit quality.
• Non-Current Assets Classified as Held for Sale: Indicates some assets are no longer contributing to operations and are being prepared for disposal.

Debt Structure and Maturity Profile #

• Debt-Free Status: The Company reports zero long-term debt, indicating a strong financial position with minimal leverage.
• Lease Liabilities: While the Company is debt-free in traditional terms, it has lease liabilities, which have increased from prior period.

Off-Balance Sheet Items #

• Contingent Liabilities: The Company discloses significant contingent liabilities related to legal proceedings and tax matters, especially concerning the Competition Commission of India (CCI) matters. These contingent liabilities are substantial (’ 3,437.61 Crore as of March 31, 2024).
• Guarantees: The Company has provided guarantees.
• Unrecognized Contractual Commitments: Capital commitments remaining to be executed are disclosed (’ 1,659.21 Crore).

Operating Performance #

Income Statement #

Revenue Breakdown by Segment/Geography #

• Cement: FY23-24 revenue was ₹ 19,574 crore, previous 15 months’ was ₹ 21,767 crore
• Ready Mix Concrete (RMX): FY23-24 revenue was ₹ 1,283.66 crore. Previous 15 months, revenue was ₹ 1,841.79 crore.
• Geographical Breakdown: All revenue is reported as originating within India.

Cost Structure Analysis #

• Cost of Materials Consumed: Constituted 32% of total costs for the cement business in FY23-24.
• Power and Fuel: Represented 20% of revenue from operations in FY23-24, decreasing from 26% in FY22-23.
• Freight and Forwarding: Accounted for 21% of revenue from operations in FY23-24, decreasing from 23% previous 15 months.
• Employee Cost: Represented 4% of revenue operations
• Other Manufacturing & cost: 24%

Margin Analysis #

• Operating EBITDA Margin: Increased to 17.4% in FY23-24 from 8.7% in the 15 months of FY22-23 (Consolidated). Standalone operating EBITDA margin was 15.3% vs the previous 15 months 8.6%.
• Pre-Tax Profit Margin: 13% of revenue from operations in FY23-24, compared to 6% in the 15 months of FY22-23(Consolidated). Standalone 14%
• Net Profit Margin: 12% for FY23-24, an increase from 6% in the 15 months of FY22-23(Consolidated). Standalone was 10.9% vs 3.9%.

Non-Recurring Items #

• Exceptional items include a gain of ₹ 229.56 crore from the remeasurement of previously held equity interest in Asian Concretes and Cements Pvt Ltd.

EPS Analysis #

• Basic EPS: Increased to ₹ 113.12 per share in FY23-24 from ₹ 46.32 per share in the 15 months of FY22-23 (Standalone).Consolidated Basic EPS of 124.42
• Diluted EPS: Increased to ₹ 112.82 per share in FY23-24 from ₹ 46.20 per share in the 15 months of FY22-23(Standalone).Consolidated Diluted EPS: 124.09

Cash Management Analysis of ACC Limited (FY 2023-24) #

Cash Flow and Liquidity Analysis #

This analysis focuses on key financial metrics extracted from the ACC Limited Integrated Annual Report for FY 2023-24.

Operating, Investing, and Free Cash Flow #

• Operating Cash Flow (OCF): Net cash flow from operating activities was ₹ 2,995.11 crore for the year ended March 31, 2024, a significant turnaround from a net cash outflow of ₹ (1,238.77) crore in the previous 15-month period. Operating profit before working capital changes was ₹ 3,039.94 crore.
• Investing Cash Flow (ICF): Net cash used in investing activities was ₹ (1,169.89) crore for the year, significantly less than the ₹ (4,641.98) crore used in the previous 15-month period. Major outflows included the purchase of property, plant, and equipment, intangible assets, and payments towards the acquisition of Subsidiary Companies.
• Free Cash Flow (FCF): FCF components cannot be fully derived from the provided report.

Working Capital Management Efficiency #

• Debtors Turnover: 22.8 times
• Inventory Turnover: 6.1 times

Capital Expenditure (CAPEX) #

• Total Capital expenditure (including organic and inorganic growth Capex/ Investment): ₹ 1,817 crore.
• A detailed segment-wise (Cement vs. Ready Mix Concrete) breakdown of capital expenditure is not provided.

Dividend and Share Buyback #

• A dividend of ₹ 7.50 per share was proposed for FY 2023-24, with a dividend payout ratio of 7%.
• Dividend payout during the year was ₹ 174 crore.
• No share buyback information is provided in the report.

Debt Service Coverage #

• Debt service coverage ratio: 19.4 times

Liquidity Position and Cash Conversion Cycle #

• Cash and cash equivalents at the end of FY 2023-24: ₹ 1,499.34 crore.
• Current assets represented 41.59% of total assets.
• The cash conversion cycle cannot be fully assessed without detailed information on all current asset and liability components.

ACC Limited Financial Analysis: Key Performance Indicators (KPIs) #

Profitability Ratios (3-Year Trends) #

Note: FY 2022-23 is a 15-month period, which affects comparability. Ratios are calculated on a consolidated basis.

Return on Equity (ROE) #

• FY 2023-24: 15.5%
• FY 2022-23: 4.9%
• FY 2021: 18%

ROE improved significantly in FY 2023-24, driven by increased profitability.

Operating EBITDA Margin #

• FY 2023-24: 17.4%
• FY 2022-23: 8.7%
• FY 2021: 18%

Operating EBITDA margin has increased, driven by cost rationalisation.

Profit Before Tax (PBT) Margin #

• FY 2023-24: 13%
• FY 2022-23: 6%

PBT Margin has improved substantially.

Net Profit Margin #

• FY 2023-24: 12%
• FY 2022-23: 3.9%

Net Profit Margin has improved substantially.

Liquidity Metrics #

Note: Calculated on a consolidated basis.

Cash Ratio #

• FY 2023-24: Total Cash and Bank/Total Current Liabilities. 1,603.95/6050.54 = 0.265
• FY 2022-23: Total Cash and Bank/Total Current Liabilities: 256.63/5630.54 = 0.045

Efficiency Ratios #

Note: Calculated on a consolidated basis.

Asset Turnover Ratio #

• FY 2023-24: Revenue from Operations / Average Total Assets = 19,958.92 / ((23,385.64 + 20,543.77)/2) = 0.91
• FY 2022-23: (22,210.18/1.25) / ((20,543.77 + 16,996.25) /2) = 0.95 adjusted for 15 months

Asset turnover has slightly decreased.

Inventory Turnover Ratio #

• FY 2023-24: (Cost of Materials Consumed + Purchase of Stock-in-Trade - Changes in inventories of finished goods, stock-in-trade and work-in-progress) / Average Inventory = (3,113.84 + 2,663.42-34.37 ) / ((1,868.55 + 1,624.20) / 2) = 3.26
• FY 2022-23: (3,345.96+ 2,300.95+193.19) /((1,624.20+ 1413.48)/2) = 3.77 adjusted for 15 months

Inventory turnover has slightly decreased.

Receivables Turnover Ratio #

• FY 2023-24: Revenue from Operations / Average Trade Receivables = 19,958.92 / ((827.50 + 869.24) / 2) = 23.48
• FY 2022-23: (22,210.18/1.25)/ ((869.24+555.22) /2)= 24.97 adjusted for 15 months

Receivables turnover is slightly decreased.

Leverage Metrics #

Note: Calculated on a consolidated basis.

Debt/Equity Ratio #

• FY 2023-24: The Company is debt-free in the long term. Ratio = Not Applicable (NA)
• FY 2022-23: The Company is debt-free in the long term. Ratio = Not Applicable (NA)

Interest Coverage Ratio #

• FY 2023-24: (Profit Before Tax + Finance Cost) / Interest Expense = (2,759.30 + 154.58) / 153.79= 19.4
• FY 2022-23: (1,202.60 + 77.28) / 77.18= 16.58

Interest coverage is high and has increased, reflecting very low financial risk.

Working Capital Ratios #

Note: Calculated on a consolidated basis.

Creditors Turnover #

• FY 2023-24: Cost of goods/Average creditors: (3,113.84+2,663.42-34.37)/((1638.84+1,924.89)/2) = 3.21
• FY 2022-23: Cost of goods/Average creditors:( 3,345.96+2,300.95-(-193.19))/(1315.87+1638.84)/2) = 3.90 adjusted for 15 months

Creditors Turnover has decreased.

Overall Assessment #

• Improved Profitability: The profitability ratios show significant improvement in FY 2023-24 compared to FY 2022-23, indicating enhanced operational performance and cost management.
• Efficient Asset Utilization: Asset turnover is efficient, meaning the company is generating a good level of sales from its assets.
• Conservative Leverage: Being debt-free and having a high-interest coverage ratio are significant strengths.
• Master Supply Agreement: The agreement with Ambuja Cements has contributed to both volume and profitability, indicating effective synergy.

ACC Limited Business Segment Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Cement: FY23-24 revenue was ₹19,574 crore. Blended cement constitutes 96% of ACC’s product offerings. Sales Volume is 35.26 MMT
• Ready Mix Concrete (RMX): FY23-24 revenue was ₹1,289 crore. EBITDA margin reached 12.5%

Market Share and Competitive Position #

• ACC, along with its parent company Ambuja Cements and Sanghi Industries, is the second-largest cement manufacturer in India.
• ACC’s market position is being strengthened through capacity expansion and brand enhancement initiatives.

Key Products/Services Performance #

• ACC Gold Water Shield: A premium product with specialized water-repellent qualities, showing strong performance with an average monthly sale of 1.7+ lakhs MT.
• Silver Range Cements: Targeted at value-conscious buyers, constitutes a significant part of ACC’s offerings.
• Blended Cement constitutes over 85% of production.
• Ready Mix Concrete (RMX): Value-added solutions constitute 34% of total RMX sales, driving growth in this segment. Innovative products like ACC ECOMaxX, ACC AEROMaxX, ACC Coolcrete, and ACC Bagcrete have been launched.
• Green Building Centre (GBC): This initiative has a strong presence with 75 entrepreneurs across India, contributing ₹1.30 crore in earnings.

Geographic Distribution and Market Penetration #

• ACC has a pan-India operational and marketing presence.
• Adani Cement has a presence across India, with 18 integrated cement plants, and 19 grinding and blending units.
• ACC is expanding its network and market presence, with a focus on deeper penetration.

Segment-wise Capex and ROIC #

• Capex projects focus on increasing cement production through new plant establishment, existing plant debottlenecking, and efficiency enhancement.
• Committed investment of ₹10,000 crore in green power to increase the Group’s green power share to 60% of the 140 MTPA planned capacity.
• Ongoing cement capacity expansion of 20 MTPA across the nation.

Operational Efficiency Metrics #

• Clinker Factor: 55.6% in FY23-24.
• Thermal Substitution Rate (TSR): 9.15% achieved in FY23-24, with a target of 28% by 2030.
• Specific Thermal Energy Consumption: 737 kCal/kg of clinker.
• Specific Electrical Energy Consumption: 76.1 KWh/tonne cement.
• Waste Heat Recovery System (WHRS): Capacity reached 46.3 MW, with ongoing projects to increase capacity.
• Green Power Consumed: 13.1 %
• Cost Reduction of Cost by ₹797 per tonne during FY 2023-24.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Ambitious capacity expansion plan to reach 140 MTPA by FY27-28.
  • Acquisition of Asian Concretes and Cements Pvt Ltd and Sanghi Industries.
  • Commissioning of the Ametha Integrated Unit.
  • Digital transformation initiatives across the value chain (Industry 4.0, AI, mobile platforms, GPS, data, and analytics).
  • Focus on sustainable construction solutions (e.g., ACC ECOMaxX).
  • Expansion of Driver Management Centres (DMCs) for improved logistics.
• Challenges:
  • Protecting market position in a competitive environment with rapid capacity addition and consolidation.
  • Managing risks associated with elevated global energy prices and supply chain disruptions.
  • Ensuring timely completion of projects, maintaining safety and quality standards, and staying within budget for large-scale projects.

Risk Assessment Framework #

Cement Segment #

Strategic Risks #

• Severity: High. Ambitious plans to achieve 140 MTPA cement capacity by FY 2027-28.
• Likelihood: Medium. Market position is at risk due to the aggregation of small and large players, capacity addition and consolidation.
• Trend: Increasing. Due to ambitious plans and the company’s dependence on external factors.
• Mitigation Strategies: 9.1 MTPA was added through the inorganic route. ongoing cement capacity expansions of 20 MTPA across the nation. Pan-India presence of the Company’s technical services with 1,000+ civil engineers.
• Control Effectiveness: Partially Effective. Capacity expansion and market presence strategies are in place.
• Potential Financial Impact: Delays in commissioning of projects.

Operational Risks #

• Severity: High. Energy and raw materials constitute a major portion of the operating cost.
• Likelihood: Medium. The MMDRA Act mandates lease renewals through auctions, leading to increased competition.
• Trend: Decreasing. Operating cost per tonne of CLC reduced by 14.8% in FY 2023-24.
• Mitigation Strategies: Implemented waste heat recovery systems. Increased the use of alternative fuels and green power. Modified mill internals and grinding media patterns for energy efficiency. Installed AFR preprocessing and feeding systems.
• Control Effectiveness: Effective. Demonstrated by cost reduction. Thermal Substitution Rate (TSR) reached 9.15%. WHRS capacity reached 46.3 MW.
• Potential Financial Impact: Fluctuations in raw material and energy prices are a concern.

Financial Risks #

• Severity: Medium, mitigated by current debt-free status.
• Likelihood: Low. The Company is debt-free with best-in-class working capital of 14 days.
• Trend: Stable. Robust cash flow from operations and strong cash and bank balances (’ 4,667 crore).
• Mitigation Strategies: Leveraging Group synergies for cost optimization. Master Supply Agreement (MSA) with Ambuja Cements.
• Control Effectiveness: High. Supported by debt-free status and efficient working capital management.
• Potential Financial Impact: Controlled operating costs through efficiency improvements and synergies.

Compliance/Regulatory Risks #

• Severity: High, given the potential for reputational and financial consequences.
• Likelihood: Medium. The cement industry faces rapidly evolving environmental regulations.
• Trend: Increasing, with ongoing changes in climate and environmental regulations.
• Mitigation Strategies: Implemented projects to comply with new emission standards (dust, SOx, NOx).
• Control Effectiveness: Partially Effective, evidenced by ongoing compliance projects.
• Potential Financial Impact: Non-compliance with new standards could lead to financial penalties and reputational damage.

Emerging Risks #

• Severity: Medium.
• Likelihood: Medium. Related to the quick and constant advancement in technology.
• Trend: Increasing, with rapid advancements in technology, particularly in AI and IoT.
• Mitigation Strategies: Cybersecurity policies and procedures are updated and monitored. Users are educated on adherence to policies.
• Control Effectiveness: Partially Effective. Cybersecurity measures and policies are in place.
• Potential Financial Impact: Data security breaches.

Ready Mix Concrete (RMX) Segment #

Strategic Risks #

• Severity: Medium. The Company focuses on RMX business growth and product innovation.
• Likelihood: Medium. Dependant on the market demand.
• Trend: Stable.
• Mitigation Strategies: Not specified, assumed to align with the overall Company strategy.
• Control Effectiveness: Partially Effective. Evidenced by the success in the RMX business.
• Potential Financial Impact: Failure to meet evolving customer needs or market shifts.

Operational Risks #

• Severity: Medium, tied to operational efficiencies.
• Likelihood: Medium.
• Trend: Stable.
• Mitigation Strategies: Focus on sustainable construction solutions and optimized processes.
• Control Effectiveness: Partially effective, demonstrated by the successful launch of new RMX products.
• Potential Financial Impact: Increased operational costs.

Financial Risks #

• Severity: Low.
• Likelihood: Low.
• Trend: Improving. EBITDA margin expanded to 12.5% in FY 2023-24, up from 5.4% in FY 2022-23.
• Mitigation Strategies: Focus on value-added solutions (34% of total RMX sales).
• Control Effectiveness: Positive. Financial performance indicates effective management of financial risks.
• Potential Financial Impact: EBITDA improvements.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Low.
• Trend: Stable.
• Mitigation Strategies: RMX business operates under the same regulatory framework as the Cement segment.
• Control Effectiveness: Assumed to be similar to the Cement segment.
• Potential Financial Impact: Same as the Cement segment.

Strategic Analysis of ACC Limited #

Long-Term Strategic Goals and Progress #

• ACC aims to reach 140 MTPA cement capacity by FY 2027-28, doubling capacity. Progress includes the commissioning of the Ametha integrated unit (3.3 MTPA clinker, 1 MTPA cement) and the acquisition of Asian Concretes and Cements Pvt Ltd (2.8 MTPA capacity).
• The Company is committed to achieving Net Zero emissions by 2050, with 2030 targets validated by SBTi.
• ACC is expanding green energy and WHRS projects; targeting 60% of its energy from renewable sources by FY 2027-28.
• Ongoing capacity is expanding by 20 MTPA, across all regions of the country.

Competitive Advantages and Market Positioning #

• ACC is positioned as the second-largest cement manufacturer in India, part of the larger Adani Group, contributing to a robust balance sheet and a market capitalization of 46,791 crores.
• ACC possesses a pan-India operational and marketing presence, with a wide range of green products, and holds a diversified geographical reach.
• The company has an Iconic cement brand with Gold and Silver ranges for specialized and general construction.
• Has “India’s Most Trusted Cement Brand” recognition.

Innovation Initiatives and R&D Effectiveness #

• ACC is focusing on R&D and digitalization to drive growth.
• Launched ACC ECOMaxX (low carbon concrete) and other innovative products.
• ACC is implementing digital initiatives, including “Plants of Future” program to increase efficiency of manufacturing.

M&A Strategy and Execution #

• ACC has completed its acquisition of Asian Concretes and Cements Pvt Ltd, adding 2.8 MTPA capacity.
• Successfully integrated acquired entities (Sanghi Industries and Asian Concretes and Cements) into its parent company operations, increasing capacity utilization.

Management’s Track Record in Execution #

• Operating EBITDA increased by ’ 1,772 Cr, with the EBITDA margin expanding by 8 percentage points, reaching 17.4%.
• The company is actively executing its growth plan.
• Cost reduction initiatives are in progress across energy, freight and forwarding, and other segments.
• The company has a strong presence of 100,000+ channel partners.

Capital Allocation Strategy #

• Capex/Investment of ’ 1,817 crores in FY 2023-24 for organic and inorganic growth.
• ACC maintains a debt-free status, with a strong balance sheet funding expansion through operational cash flows and internal accruals.
• Significant investments in green power projects, with a goal to increase green power share to 60% by FY 2027-28.

Organizational Changes and Their Impact #

• Transition to a business finance model emphasizing long-term value creation.
• Leveraging Adani Group synergies (e.g., with Adani Ports, Adani Green Energy, and Adani Energy Solutions) to optimize costs and operations.
• Implementation of the “udAAAn” initiative to enhance operational efficiency and quality across logistics, manufacturing, and sales.

ESG Framework #

Environmental Metrics and Targets #

• ACC is committed to achieving net-zero emissions by 2050, with near-term (2030) targets validated by the Science Based Targets initiative (SBTi).
• Scope 1 GHG emissions target is 465 kg/tonne of cementitious material by 2030, with FY 2023-24 performance at 513 kg/tonne.
• Scope 2 GHG emissions target is 10.4 kg/tonne of cementitious material by 2030. The FY 2023-24 is 21 kg/tonne of Cementitious material.
• The thermal substitution rate (TSR) target is 28% by 2030; FY 2023-24 performance was 9.15%.
• ACC aims for a water positivity index of 5x by 2030; FY 2023-24 performance was 1.0x water-positive.
• ACC aims to plant 5.93 million trees by 2030, with 4.9 million trees planted as of FY 2023-24.
• Waste-derived resources used in FY 2023-24 were 12.7 million tonnes, against a 2030 target of 30 million tonnes.
• Renewable and Green Energy use stood at 13.1%.

Social Responsibility Programs #

• CSR expenditure for FY 2023-24 was ’ 37.49 crore.
• CSR initiatives positively impacted 0.3 million beneficiaries in FY 2023-24 (1.4 million to date), focusing on education, community health, sustainable livelihoods, skill development, and community infrastructure.
• ACC, through the Adani Foundation, operates in 5,753 villages across 12 states,
• Key CSR initiatives include Project Kalika Siri for education, Health ATM machines for healthcare access, and livestock and dairy development programs.
• The Adani Skill Development Centre enrolled 2,869 youths, with 1,968 completing training and 1,254 placed in relevant industries.

Governance Structure and Effectiveness #

• The Board has 12 committees, including statutory and non-statutory ones, to oversee various governance aspects.
• 100% of Board committees are chaired by Independent Directors.
• The Board comprises 50% Independent Directors.
• The Risk Management Committee, with 50% Independent Directors, oversees the Enterprise Risk Management (ERM) process.
• Board attendance averaged 91.07% in FY 2023-24.
• Zero complaints were reported regarding ethics and integrity.
• Zero complaints were reported related to data security.
• Zero complaints relating to anti-bribery and anti-corruption were reported.

Sustainability Investments and ROI #

• ACC has committed an investment of over ’ 10,000 crore in green power to increase its green power share to 60% of the 140 MTPA planned capacity.
• Planned 1 GW of solar and wind energy implementation by FY 2025-26.
• Planned 376 MW WHRS capacity by FY 2027-28
• Environmental-related spending in FY 2023-24 was E 6.5 crore.
• Blended cements make up over 85% of ACC’s overall production.
• ACC is 7x plastic negative through co-processing of plastic waste.

ESG Ratings and Peer Comparison #

• DJSI (2023) rating: 61.
• CDP - Climate Change (2023) rating: A-.
• CDP - Water Security (2023) rating: B.
• Sustainalytics rating: 27.6 (Medium Risk).
• CRISIL rating: 52 (Adequate).
• ACC is recognized as one of ‘India’s Top 50 Most Sustainable Companies’ by BW Businessworld.

Regulatory Compliance and Future Preparations #

• The Company is compliant with SEBI Listing Regulations and the Companies Act, 2013.
• ACC adheres to the Task Force on Climate-Related Financial Disclosures (TCFD) framework and International Sustainability Standards Board (ISSB) S2 climate-related disclosures.
• All ACC plants have ISO 9001:2015, ISO 14001:2015, ISO 50001:2018, and ISO 45001:2018 certifications.
• ACC is compliant with air emission standards (dust, SOx, and NOx) issued by the Ministry of Environment and Forest and Climate Change (MoEF and CC).
• The company is preparing for future compliance with ESG standards and regulations.