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Ambuja Cements Ltd - Annual Report 2023-24 Analysis

May 29, 2024 · 35 min read

#Ambuja Cements Ltd #2023-24

Overview #

Detailed Analysis #

This analysis examines Ambuja Cements Limited’s Integrated Annual Report for FY2023-24, covering financial performance, business segments, risk management, and ESG initiatives. The report highlights a strong year of performance, marked by significant capacity expansion and a commitment to sustainable practices, despite facing significant external headwinds.

I. Financial Performance:

The report showcases strong financial results for FY2023-24, demonstrating resilience amidst a challenging market environment. Key highlights (in Indian Rupees, ₹ crore unless otherwise specified):

Revenue from Operations: ₹33,160 crore (Consolidated), ₹17,919 crore (Standalone). This represents an 8.1% volume growth (Consolidated) compared to the previous year. The standalone revenue is impacted by the 15-month reporting period of the previous year (FY2022-23) which was not comparable.
Profit After Tax (PAT): ₹4,738 crore (Consolidated), ₹2,335 crore (Standalone). A significant increase compared to the previous year, although comparability is affected by the difference in reporting periods.
Operating EBITDA: ₹6,400 crore (Consolidated), ₹3,371 crore (Standalone). Consolidated Operating EBITDA per tonne of CLC grew by 60%.
Net Worth: ₹37,007 crore (Standalone). This is an all-time high, supported by robust profit generation.
Net Debt to EBITDA: 2.2x (Portfolio level for the Adani Group). Significantly improved from 3.3x in the previous year. Ambuja Cements itself reports zero gross debt.
Earnings Per Share (EPS): ₹10.88 (Standalone diluted). Note that the previous year’s data is for a 15-month period and not directly comparable.

The improvement in profitability is attributed to cost reduction measures, operational efficiency enhancements, and strategic acquisitions. The report highlights a ₹473 per tonne reduction in cost during FY2023-24, with a target of an additional ₹530 per tonne reduction by FY2027-28.

II. Business Segments:

Ambuja Cements operates primarily in the cement and building materials industry within India. The report indicates a significant national footprint, covering 25 states and 510+ districts. While the report doesn’t explicitly segment its operations, it can be inferred from the data that its business is largely focused on:

Cement Manufacturing and Sales: This forms the core of Ambuja Cements’ business, with a production capacity of 78.9 MTPA (Million Tonnes per Annum). The report details capacity expansions under way.
Ready-Mix Concrete (RMC): The report mentions 86+ RMC plants, highlighting the company’s involvement in value-added construction solutions.
Brand Management: Ambuja Cements invests significantly in building and maintaining its iconic brands, including Ambuja Plus, Ambuja Cool Walls, Ambuja Compocem, and Ambuja Kawach, all aimed at sustainable construction.

III. Risk Management:

The report details a detailed Enterprise Risk Management (ERM) framework that covers a wide range of risks, categorized as high, medium, and low based on their severity and probability:

Market Risks: Commodity price risk (especially for fuel and raw materials), foreign exchange risk, and interest rate risk are key concerns. The company employs hedging strategies to mitigate these risks.
Operational Risks: Supply chain disruptions, energy security issues (dependence on fuel and raw materials), cybersecurity threats, and project execution delays are highlighted.
Environmental and Social Risks: Climate change (both physical and transition risks), water management, biodiversity loss, and compliance with ESG standards are significant considerations.
Governance Risks: Regulatory changes and compliance, reputation risk, and ensuring ethical and responsible business conduct.

IV. Environmental, Social, and Governance (ESG) Initiatives:

Ambuja Cements demonstrates a strong commitment to ESG, highlighting many significant achievements:

Net Zero Commitment: The company aims to achieve Net Zero emissions by 2050, with validated near-term (2030) targets in line with the Science Based Targets initiative (SBTi).
Water Positivity: Ambuja Cements is 11x water-positive, signifying that it reuses and recycles far more water than it consumes.
Plastic Negativity: The company is 8x plastic negative, removing significantly more plastic waste from the environment than its operations generate.
Renewable Energy: The Company uses 19.1% renewable and green energy, with a target of 60% by FY2027-28 through investments in solar, wind, and waste heat recovery systems (WHRS).
Alternative Fuels and Raw Materials: Ambuja Cements utilizes 7.76% alternative fuels in FY2023-24, reducing its reliance on fossil fuels and its carbon footprint. A target of 27% thermal substitution rate (TSR) by 2030 is outlined.
Circular Economy: The Company used 8.6 million tonnes of waste-derived resources.
Community Engagement: Ambuja Cements has a robust CSR (Corporate Social Responsibility) program focused on community development, livelihood enhancement, education, health, and women’s empowerment. ₹51 crore was spent on CSR activities in FY2023-24.
Employee Well-being: The report emphasizes various initiatives to improve employee health, safety, and development, including training, employee engagement programs and diversity and inclusion measures.
Stakeholder Engagement: A transparent and proactive approach towards stakeholder engagement is outlined, involving regular dialogues and feedback mechanisms with shareholders, customers, suppliers, and communities.

V. Overall Assessment:

Ambuja Cements’ Integrated Annual Report 2023-24 presents a positive picture of a company navigating challenges and achieving significant growth while simultaneously committing to sustainable practices. The strong financial performance, coupled with ambitious ESG targets, reflects the company’s long-term vision and resilience. The report’s extensive disclosures and the inclusion of external assurance improve transparency and build stakeholder trust. However, the impact of the significant acquisitions needs to be monitored over time, and the company’s success will heavily depend on its ability to deliver on its ambitious capacity expansion and ESG targets in the coming years. Furthermore, the report’s reliance on the Adani Group’s overall performance and the context surrounding the short-seller report needs careful consideration. The report’s length and detail may make it challenging for a casual reader to quickly assess the key takeaways.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The provided annual report gives slightly different figures for Consolidated and Standalone statements. Here’s a breakdown of the requested values from both, all figures are in Indian Rupees (₹ crore):

Standalone Financial Statements:

Total Assets: ₹44,128.79 crore
Current Assets: ₹15,006.14 crore
Cash and Cash Equivalents: ₹1,136.33 crore (includes liquid mutual funds)
Accounts Receivable (Trade Receivables): ₹716.81 crore
Inventories: ₹1,590.34 crore

Consolidated Financial Statements:

The consolidated financial statements include the financials of subsidiaries, associates, and joint ventures, making a direct comparison with the standalone numbers less meaningful. The report does not explicitly state the consolidated values for each line item requested. To obtain those values, a detailed breakdown of each subsidiary’s financial information would be necessary. The report only provides aggregated data at the consolidated level which doesn’t allow for an exact calculation of the individual items you asked for.

Liability Analysis #

Similar to the assets, the liability figures differ between the Standalone and Consolidated financial statements. Here’s the breakdown, again in Indian Rupees (₹ crore):

Standalone Financial Statements:

Total Liabilities: ₹7,122.29 crore
Current Liabilities: ₹6,464.47 crore
Long-term Debt: ₹18.91 crore (This is specifically interest-free loans from the State Government; the report clarifies there is zero gross debt)
Accounts Payable (Trade Payables): ₹1,452.24 crore

Consolidated Financial Statements:

Again, the consolidated figures include the liabilities of subsidiaries, associates, and joint ventures. The report doesn’t provide a direct breakdown of each item requested at the consolidated level. Only an aggregated total liability is given. Therefore, precise figures for consolidated current liabilities, long-term debt, and accounts payable cannot be extracted from the provided report.

Total Liabilities: ₹14,451.91 crore (Note that this figure includes non-controlling interests as well, making a direct comparison with standalone figures difficult.)

It’s important to remember that the consolidated numbers represent the combined financial position of a larger entity than the standalone figures. To get a precise breakdown of each component for the consolidated statement, a more detailed analysis of each subsidiary’s financials would be required.

Equity Analysis #

Again, the values will differ between the standalone and consolidated financial statements. All figures are in Indian Rupees (₹ crore):

Standalone Financial Statements:

Shareholders’ Equity: ₹37,006.50 crore
Retained Earnings: ₹6,666.70 crore
Share Capital: ₹439.54 crore (This increased during the year due to the conversion of warrants into equity shares.)

Consolidated Financial Statements:

As with assets and liabilities, the consolidated shareholders’ equity includes the equity of subsidiaries, associates, and joint ventures. The report doesn’t provide a detailed breakdown for each of the items requested. Only an aggregate total shareholders’ equity is shown.

Shareholders’ Equity (Attributable to owners of the company): ₹41,455.06 crore
Non-controlling Interests: ₹9,390.84 crore (This represents the portion of equity not attributable to the parent company’s shareholders.)
Total Equity: ₹50,845.90 crore
Retained Earnings: The consolidated retained earnings are not explicitly stated as a separate line item. It’s embedded within the total other equity. Similarly, the consolidated share capital isn’t explicitly stated and would need further breakdown to calculate it.

To determine the precise values of retained earnings and share capital for the consolidated financial statements, a more detailed analysis of the individual subsidiaries’ and other entities’ financial statements would be necessary. The provided report doesn’t furnish that level of detail.

Income Statement #

Operating Performance #

The annual report provides these figures for both standalone and consolidated statements. Remember that the previous year’s (FY2022-23) data is for a 15-month period, making direct comparison with the 12-month FY2023-24 data problematic. All figures are in Indian Rupees (₹ crore):

Standalone Financial Statements:

Revenue: ₹17,919.34 crore
Cost of Revenue: ₹14,548.50 crore (This includes cost of materials consumed, changes in inventories, employee benefits, finance costs, depreciation, power and fuel, freight and forwarding expense, other expenses, and captive consumption of cement)
Gross Profit: ₹3,370.84 crore (Revenue - Cost of Revenue)
Operating Expenses: ₹3,123.27 crore (This is calculated by subtracting operating income from revenue. The report doesn’t provide a clear separate line item for “Operating Expenses,” rather the various expense categories are listed individually.)
Operating Income: ₹257.57 crore (Gross Profit - Operating Expenses)

Consolidated Financial Statements:

Revenue: ₹33,159.64 crore
Cost of Revenue: ₹26,760.13 crore (This comprises cost of materials, employee benefits, finance costs, depreciation, power and fuel, freight and forwarding expenses, other expenses, and captive cement consumption)
Gross Profit: ₹6,399.51 crore (Revenue - Cost of Revenue)
Operating Expenses: ₹6,400 crore (This is calculated by subtracting operating income from revenue, as the report does not offer a specific line item for operating expenses.)
Operating Income: ₹-0.49 crore (Gross Profit - Operating Expenses) (Note: A very small negative number)

The discrepancy between the standalone and consolidated figures, especially in operating income, is expected because of the inclusion of subsidiary financials in the consolidated figures. It also highlights the complexities of interpreting financial data from an integrated annual report that blends financial and non-financial information.

Bottom Line Metrics #

Here’s a summary of the Net Income, EBITDA, Basic EPS, and Diluted EPS from both the standalone and consolidated financial statements. Remember that FY2022-23 data is for a 15-month period, impacting comparability. All values are in Indian Rupees (₹ crore unless specified):

Standalone Financial Statements:

Net Income: ₹2,334.69 crore
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): ₹3,371 crore (calculated as Profit Before Tax + Depreciation & Amortization + Finance Cost)
Basic EPS (Earnings Per Share): ₹11.74
Diluted EPS: ₹10.88

Consolidated Financial Statements:

Net Income: ₹4,738.01 crore
EBITDA: ₹6,400 crore (This is directly reported in the Consolidated Statement of Profit and Loss.)
Basic EPS: ₹17.99
Diluted EPS: ₹16.67

The discrepancies between the standalone and consolidated figures reflect the inclusion of subsidiary financial data in the consolidated results. It’s essential to note that direct comparison between FY2022-23 and FY2023-24 figures needs caution due to the differing reporting periods.

Cash Flow #

Cash Flow Components #

The cash flow statement data is presented separately for standalone and consolidated figures. Again, be mindful that the FY2022-23 data is for a 15-month period. All figures are in Indian Rupees (₹ crore):

Standalone Statement of Cash Flows:

Cash flow from operating activities: ₹2,757.35 crore
Cash flow from investing activities: ₹(7,607.07) crore (Negative)
Cash flow from financing activities: ₹5,697.02 crore

Consolidated Statement of Cash Flows:

Cash flow from operating activities: ₹5,645.82 crore
Cash flow from investing activities: ₹(8,950.43) crore (Negative)
Cash flow from financing activities: ₹5,688.77 crore

The negative cash flow from investing activities in both statements reflects significant capital expenditures (capex) during the year, primarily related to capacity expansion projects and acquisitions. The positive cash flow from financing activities is largely due to the receipt of funds from the conversion of warrants into equity shares. The differences between the standalone and consolidated numbers result from including cash flows from subsidiaries, associates, and joint ventures in the consolidated statement. The 15-month reporting period for FY2022-23 further complicates direct year-over-year comparisons.

Cash Flow Metrics #

The Ambuja Cements annual report doesn’t explicitly present free cash flow (FCF) as a calculated line item. To calculate FCF, we need information not directly provided. Free cash flow is typically calculated as:

FCF = Operating Cash Flow - Capital Expenditure + Proceeds from sale of assets

Therefore, we need the operating cash flow, capital expenditure and proceeds from the sale of assets. We can obtain this from the standalone and consolidated Statements of Cash Flows. The standalone figures do not include information about subsidiaries and joint ventures while the consolidated figures do.

Standalone Statement of Cash Flows:

Operating Cash Flow: ₹2,757.35 crore
Capital Expenditure (Purchase of property, plant, and equipment etc.): ₹(2,235.64) crore (Note the negative sign indicates a cash outflow)
Proceeds from Sale of Assets: ₹242.41 crore + ₹109.53 crore (from subsidiary) = ₹351.94 crore
Dividends Paid: ₹(496.41) crore (Note the negative sign indicates a cash outflow)

Consolidated Statement of Cash Flows:

Operating Cash Flow: ₹5,645.82 crore
Capital Expenditure (Purchase of property, plant, and equipment etc.): ₹(4,482.46) crore (Note the negative sign indicates a cash outflow)
Proceeds from Sale of Assets: ₹521.32 crore + ₹46.05 crore (from subsidiary) = ₹567.37 crore
Dividends Paid: ₹(496.41) crore + ₹(88.40) crore (to non-controlling interest)= ₹584.81 crore (Note the negative sign indicates a cash outflow)

Calculation of Free Cash Flow (FCF):

Because the FCF is not explicitly provided in the financial statements, we will need to approximate it using the data provided. It’s critical to understand that this is an approximation and may not be perfectly precise due to potential omissions or differing definitions of FCF.

Standalone (Approximation):

FCF ≈ ₹2,757.35 crore − ₹(2,235.64) crore + ₹351.94 crore = ₹873.65 crore

Consolidated (Approximation):

FCF ≈ ₹5,645.82 crore − ₹(4,482.46) crore + ₹567.37 crore = ₹1,730.73 crore

These FCF figures are estimates. The actual FCF may vary depending on other cash inflows and outflows not explicitly categorized within these major line items.

Financial Ratios #

Profitability Ratios #

Profitability ratios can be calculated from the standalone and consolidated financial statement data. Remember that FY2022-23 data covers a 15-month period, affecting direct comparability. All percentages are rounded.

Standalone Financial Statements:

Gross Profit Margin: (Gross Profit / Revenue) (₹3,370.84 crore / ₹17,919.34 crore) ≈ 19%
Operating Profit Margin: (Operating Income / Revenue) (₹257.57 crore / ₹17,919.34 crore) ≈ 1%
Net Profit Margin: (Net Income / Revenue) (₹2,334.69 crore / ₹17,919.34 crore) ≈ 13%
Return on Equity (ROE): (Net Income / Average Shareholders’ Equity) (₹2,334.69 crore / [(₹28,505.54 crore + ₹37,007 crore)/2]) ≈ 8%
Return on Assets (ROA): (Net Income / Average Total Assets) (₹2,334.69 crore / [(₹35,904.13 crore + ₹44,128.79 crore)/2]) ≈ 5%

Consolidated Financial Statements:

Gross Profit Margin: (₹6,399.51 crore / ₹33,159.64 crore) ≈ 19%
Operating Profit Margin: (₹ -0.49 crore / ₹33,159.64 crore) ≈ 0% (Note: This is a very small negative number, indicating minimal operating income at the consolidated level)
Net Profit Margin: (₹4,738.01 crore / ₹33,159.64 crore) ≈ 14%
Return on Equity (ROE): (₹4,738.01 crore / [(₹38,756.55 crore + ₹50,845.90 crore)/2]) ≈ 10%
Return on Assets (ROA): (₹4,738.01 crore / [(₹51,721.46 crore + ₹65,297.81 crore)/2]) ≈ 7%

Important Considerations:

Comparability: Direct comparison between FY2023-24 and FY2022-23 standalone ratios is difficult due to the different reporting periods (12 months vs. 15 months). The 15-month figures have been annualized for comparative purposes by the company in the report itself, and this annualized data has been used for calculations in this response.
Definition of Operating Expenses: The report doesn’t clearly delineate operating expenses. The calculation of the operating profit margin utilizes the difference between revenue and operating income. The specific composition of these operating expenses would impact the accuracy of the operating profit margin calculation. The consolidated operating margin indicates a near-zero figure which is unusual and may warrant further investigation.
Consolidated vs. Standalone: The significant differences between standalone and consolidated ratios underscore the impact of subsidiaries and other entities on the overall Group’s performance.

These figures provide a general overview; however, for a thorough analysis, consulting the report’s detailed notes and financial statements is highly recommended.

Liquidity Ratios #

Liquidity ratios assess a company’s ability to meet its short-term obligations. Here’s a calculation of the current ratio, quick ratio, and cash ratio for Ambuja Cements based on the provided standalone and consolidated financial statements. Note that FY2022-23 figures are for a 15-month period, impacting direct comparability.

Standalone Financial Statements:

Current Ratio: (Current Assets / Current Liabilities) (₹15,006.14 crore / ₹6,464.47 crore) ≈ 2.3
Quick Ratio: (Current Assets - Inventories) / Current Liabilities) (₹15,006.14 crore - ₹1,590.34 crore) / ₹6,464.47 crore) ≈ 2.0
Cash Ratio: (Cash and Cash Equivalents / Current Liabilities) (₹1,136.33 crore / ₹6,464.47 crore) ≈ 0.2

Consolidated Financial Statements:

Current Ratio: (₹24,830.23 crore / ₹12,128.88 crore) ≈ 2.0
Quick Ratio: (₹24,830.23 crore - ₹3,608.55 crore) / ₹12,128.88 crore) ≈ 1.7
Cash Ratio: (₹3,007.10 crore / ₹12,128.88 crore) ≈ 0.2

Important Considerations:

Comparability: Direct comparison of FY2023-24 and FY2022-23 ratios is challenging due to the differing reporting periods (12 months vs. 15 months). The 15-month figures reported in the annual report are already annualized.
Definition of Cash and Cash Equivalents: The calculation of the cash ratio uses the value reported under “Cash and Cash Equivalents” which includes liquid mutual funds, which may not be the most conservative measure of readily available cash.
Consolidated vs. Standalone: The difference between standalone and consolidated ratios is expected due to the inclusion of subsidiaries’ data in the consolidated figures.

These calculations offer a preliminary assessment. A detailed liquidity analysis would require a deeper dive into the specifics of the balance sheet items and the company’s short-term obligations, considering factors such as the timing of cash inflows and outflows. Reviewing the notes to the financial statements, especially with regards to the composition of current assets and liabilities, would improve the accuracy and context of this analysis.

Efficiency Ratios #

Efficiency ratios measure how effectively a company utilizes its assets to generate sales. Calculating these ratios requires data from both the income statement and balance sheet. For Ambuja Cements, we need to consider that FY2022-23 data is for a 15-month period. All turnover ratios are expressed in times.

Standalone Financial Statements:

Asset Turnover: (Revenue / Average Total Assets) (₹17,919.34 crore / [(₹35,904.13 crore + ₹44,128.79 crore)/2]) ≈ 0.4 times
Inventory Turnover: (Cost of Revenue / Average Inventory) (₹14,548.50 crore / [(₹1,639.41 crore + ₹1,590.34 crore)/2]) ≈ 9 times
Receivables Turnover: (Revenue / Average Accounts Receivable) (₹17,919.34 crore / [(₹564.91 crore + ₹716.81 crore)/2]) ≈ 24 times

Consolidated Financial Statements:

Asset Turnover: (₹33,159.64 crore / [(₹51,721.46 crore + ₹65,297.81 crore)/2]) ≈ 0.5 times
Inventory Turnover: (₹26,760.13 crore / [(₹3,272.79 crore + ₹3,608.55 crore)/2]) ≈ 7 times
Receivables Turnover: (₹33,159.64 crore / [(₹1,154.36 crore + ₹1,213.14 crore)/2]) ≈ 26 times

Important Considerations:

Comparability: Direct year-over-year comparison between FY2023-24 and FY2022-23 is difficult due to the 15-month reporting period of the previous fiscal year. Direct comparison of the annualized 15-month figure and the 12-month figure in the turnover ratio analysis will lead to inaccurate results.
Average Values: These calculations use average asset, inventory, and receivable values (beginning and ending balances divided by 2). More precise calculations would use monthly averages if available, thus providing more accurate results.
Consolidated vs. Standalone: The differences in ratios between standalone and consolidated figures again highlight the impact of the subsidiaries’ performance on the overall Group’s efficiency.
Cost of Revenue: The inventory turnover ratio uses the “Cost of Revenue” figure which itself may include items other than the direct cost of goods sold.

The efficiency ratios provide a high-level assessment. For a deeper analysis, consult the detailed notes accompanying the financial statements in the annual report. Understanding the specific composition of each balance sheet account and its relation to the revenue and cost of goods sold will improve the reliability of the analysis.

Leverage Ratios #

Leverage ratios measure a company’s use of debt financing. Calculating these requires data from both the balance sheet and income statement. Ambuja Cements’ financial statements show that it has very little long-term debt, impacting the calculation of some use ratios. Remember that FY2022-23 data is for a 15-month period.

Standalone Financial Statements:

Debt-to-Equity Ratio: (Total Debt / Shareholders’ Equity) (₹36.78 crore / ₹37,006.50 crore) ≈ 0.001 (This is extremely low, indicating minimal reliance on debt.)
Debt-to-Assets Ratio: (Total Debt / Total Assets) (₹36.78 crore / ₹44,128.79 crore) ≈ 0.001 (Similar to debt-to-equity, this shows a very low debt burden.)
Interest Coverage Ratio: (Earnings Before Interest and Taxes (EBIT) / Interest Expense) (₹3,107.45 crore + ₹276.38 crore / ₹276.38 crore) ≈ 12 times (This demonstrates a substantial ability to cover interest payments.)

Consolidated Financial Statements:

The consolidated statements also show a minimal debt burden. However, the inclusion of non-controlling interests complicates a straightforward calculation of the Debt-to-Equity ratio. The debt-to-assets ratio can be calculated, but the interest coverage ratio requires further information.

Debt-to-Equity Ratio: A precise calculation is difficult because the consolidated statements don’t cleanly separate the equity attributable to the parent company’s shareholders from non-controlling interests.
Debt-to-Assets Ratio: (₹36.77 crore / ₹65,297.81 crore) ≈ 0.0006 (This is extremely low, indicating minimal reliance on debt financing.)
Interest Coverage Ratio: This cannot be reliably computed from the provided data alone. It would require a precise figure for consolidated EBIT, which is not directly reported in the consolidated statement of profit and loss.

Important Considerations:

Comparability: Again, direct year-over-year comparison is hampered by the difference in reporting periods (12 months vs. 15 months). The annualized 15-month figures from the annual report were used for the calculations.
Debt Definition: The very low debt levels reported by Ambuja Cements, especially the zero gross debt, are noteworthy and significantly impact the use ratios, indicating a conservative financing strategy. The ‘Debt’ figure specifically refers to interest-free loans from the government, which may not be considered debt in the traditional sense by all analysts.
Consolidated vs. Standalone: The consolidated and standalone use ratios will differ significantly due to the inclusion of the financial structures of subsidiaries in the consolidated statements. Interpretation of the consolidated use ratios is made complex by the inclusion of non-controlling interest.

These ratios, especially in light of the very low debt levels reported, suggest a very low financial risk profile for Ambuja Cements. However, a complete financial risk analysis should consider other factors not included in these key ratios, such as off-balance sheet financing and contingent liabilities. A thorough assessment would benefit from reviewing the detailed notes to the financial statements.

Market Analysis #

Market Metrics #

Several of these market-based ratios require information from the company’s financial statements and current market data, which isn’t fully provided in the annual report itself. We’ll proceed with what we can calculate and highlight the limitations. All values will be approximate.

Market Capitalization:

The report states a market capitalization of ₹1,34,575 crore as of March 31, 2024. This is based on the share price at that date. This figure can fluctuate significantly based on daily market movements.

Price-to-Earnings Ratio (PE Ratio):

The PE ratio is calculated as (Market Price per Share / Earnings Per Share). To calculate this, we need the current market price per share. This is not available in the provided annual report which only shows year-end figures for market cap. The closing price at March 31, 2024 is also not directly provided. Therefore, an accurate PE ratio cannot be determined here.

Price-to-Book Ratio (PB Ratio):

The PB ratio is (Market Price per Share / Book Value per Share). Similar to the PE ratio, we need the current market price per share, which isn’t available in this report. The book value per share can be approximated from the standalone financial statements:

Standalone Book Value per share (approx): ₹37,007 crore/2,197,675,987 shares = ~₹16.84. However, this will likely be subject to changes based on the latest accounting practices. Therefore, the PB ratio cannot be accurately calculated.

Dividend Yield:

The dividend yield is (Annual Dividend per Share / Market Price per Share). The annual report states a proposed dividend of ₹2 per share for FY2023-24. Without the current market price per share, the dividend yield cannot be calculated.

Dividend Payout Ratio:

This ratio is (Dividends Paid / Net Income). The standalone statement shows dividends paid of ₹496.41 crore for the 15-month previous year. Using the 12-month standalone net income (₹2,334.69 crore) gives an approximate standalone payout ratio for the previous year. There is no directly comparable figure for the current year in the standalone statements.

Standalone Payout Ratio (FY2022-23, approximated): (₹496.41 crore / ₹2,553.49 crore) ≈ 19%

For the current year, the company proposes a dividend of ₹2 per share. Using the reported 12-month Standalone net income will not result in a correct outcome. Calculating the payout ratio for the current fiscal year would require the actual dividend paid.

In Summary:

Only the Market Cap can be determined from the information in the report. Accurate calculation of the PE ratio, PB ratio, and dividend yield requires the current market price per share, which is not available. An approximation of the dividend payout ratio for the previous year can be computed from the information given, but this requires annualization of the 15-month reported figure of the previous year. More complete market data is needed to calculate all these ratios accurately.

Business Analysis #

Segment Analysis #

Ambuja Cements’ annual report doesn’t explicitly break down its business into distinct segments with separate financial metrics like revenue, growth rate, and market share for each segment. The report primarily focuses on its overall cement business and does not provide the level of detail requested, especially on market share. The integrated nature of the report makes segmenting the data for a thorough analysis challenging. The information provided below is based on inferences and interpretations of the available information.

Business Segment (Inferred):

The primary business segment is Cement Manufacturing and Sales. This encompasses the production and sale of cement and related products.

Data Limitations:

The report does not provide separate revenue figures for different product categories within the cement segment (e.g., OPC, blended cement, etc.). It does not provide a detailed geographical breakdown of revenue, growth, or operating margin by region. Precise market share data is not disclosed.

Available Data and Inferences:

Key Products: Ambuja Cements produces Ordinary Portland Cement (OPC) and various blended cements (Ambuja Plus, Ambuja Kawach, Ambuja Compocem, and Ambuja Cool Walls), which are emphasized for their superior quality and sustainability benefits. These blended cements constitute more than 85% of its production. Ready-mix concrete (RMC) is also a part of its offering.
Revenue: The total consolidated revenue from operations is ₹33,160 crore for FY2023-24, and the standalone revenue was ₹17,919 crore. It’s impossible to segment this revenue accurately among products or regions.
Growth Rate: Consolidated volume growth (cement and clinker) was 8.1% year-over-year. Again, this is an aggregate figure, and a breakdown by product or region is not available.
Operating Margin: The operating EBITDA margin was 19.3% (consolidated) and this margin is not separated by individual product category or region.
Market Share: The report doesn’t provide market share data. It does state that it’s the second-largest cement manufacturer in India, but that only provides a general market positioning, not a precise percentage market share.
Geographic Presence: The report highlights a pan-India presence, operating in 25 states and 510+ districts with significant capacity additions and a presence at multiple locations. However, it does not show sales breakdowns by region.

Conclusion:

While the integrated annual report provides an overview of Ambuja Cements’ performance and sustainability initiatives, it lacks the granular segment-level details needed to precisely quantify revenue, growth rates, operating margins, and market shares for each product and region. More detailed financial disclosures would allow for a more detailed segment analysis.

Strategic Overview #

Management Assessment #

Ambuja Cements’ management highlights many key strategies, competitive advantages, market conditions, challenges, and opportunities in its integrated annual report.

I. Key Strategies:

Capacity Expansion: Ambuja Cements is pursuing a significant capacity expansion plan, aiming to reach 140 MTPA (Million Tonnes Per Annum) by FY2027-28. This involves both organic growth (brownfield and greenfield expansions) and inorganic growth (acquisitions like Sanghi Industries).
Strengthening Iconic Brands: The company invests heavily in marketing and brand building to improve customer loyalty and market share for its key brands (Ambuja Plus, Ambuja Kawach, etc.). This includes strategic partnerships (e.g., with sports leagues).
Leadership in ESG Standards: Ambuja Cements prioritizes sustainability and environmental, social, and governance (ESG) performance. This includes commitments to net-zero emissions, water positivity, plastic negativity, and robust CSR initiatives.
Superior Performance Delivery: This entails focusing on operational efficiency, cost optimization, and premiumization to improve profitability and maximize returns. Digitalization is key to this strategy.

II. Competitive Advantages:

Iconic Brands: Ambuja Cements possesses strong brand recognition and customer loyalty, giving it a competitive edge.
Cost Leadership: Through efficiency improvements, strategic sourcing, and the use of alternative fuels and raw materials, Ambuja Cements aims to maintain a cost leadership position.
Sustainable Practices: The company’s commitment to sustainability and ESG is presented as a differentiator, attracting environmentally conscious customers and investors.
Extensive Distribution Network: A broad network of channel partners ensures widespread product reach and market penetration.
Technical Expertise: A large team of engineers provides technical support to customers and contractors, promoting superior customer service and building brand loyalty.
Digitalization and Innovation: Ambuja Cements’ investments in digital technologies and R&D (including state-of-the-art R&D facility) are positioning the company to adapt and thrive in a tech-driven environment.

III. Market Conditions:

Resilient Indian Economy: Despite global economic uncertainties, the Indian economy remains relatively strong, driven by government investment in infrastructure and increased consumer spending.
Growth in Housing and Infrastructure: The demand for cement is driven by the growth of the housing sector and major government initiatives on infrastructure development. This creates significant growth opportunities for the cement industry.
Inflationary Pressures: The report acknowledges the impact of inflationary pressures on input costs, necessitating cost-cutting measures and effective pricing strategies.

IV. Challenges:

Intense Competition: The cement industry is competitive, with companies continuously expanding capacity.
Input Cost Volatility: Fluctuations in the prices of raw materials (limestone, coal) and energy pose a major challenge to maintaining profitability.
Regulatory Compliance: Meeting stringent environmental and social regulations is essential but can also increase operational costs.
Climate Change: The impact of climate change on operations (e.g., extreme weather events) and the transition to a low-carbon economy create operational challenges and necessitate adaptation.
Fuel and Raw Material Security: Securing reliable and cost-effective supplies of raw materials and fuels is crucial. The report highlights steps taken to address this, such as securing access to new mines.
Technology Disruption: The rapid advancements in technology present both opportunities and challenges for the cement industry.

V. Opportunities:

Government Investment in Infrastructure: Major government spending in infrastructure projects creates significant demand for cement.
Continued Growth in Housing: The persistent demand for housing, especially in urban and semi-urban areas, fuels cement consumption.
Rising Urbanization: Increasing urbanization in India presents growth opportunities for cement consumption.
Growing Consumer Spending: As disposable incomes increase, consumer spending on construction and housing is expected to rise.
Digital Transformation: Ambuja Cements believes that leveraging technology throughout its value chain will improve efficiency and profitability.
Sustainable Construction Materials: The increasing demand for sustainable building materials is creating opportunities for companies with green products and a strong commitment to environmental sustainability.

In summary, Ambuja Cements’ strategy centers on capacity expansion, brand building, ESG leadership, and operational efficiency. The company recognizes the risks posed by intense competition, volatile input costs, regulatory compliance challenges, and climate change, while simultaneously highlighting opportunities presented by economic growth in India, infrastructure development and the transition to more sustainable building practices. The company is actively taking steps to mitigate the risks and use the opportunities outlined in the report.

ESG Ratings #

The Ambuja Cements Integrated Annual Report provides the following ESG (Environmental, Social, and Governance) ratings from various agencies for FY2023-24:

DJSI (Dow Jones Sustainability Index): 60 (Ambuja’s score) - The report doesn’t specify the ranking or percentile, only the score.
CDP (Carbon Disclosure Project):
- Climate Change (CC): A-
- Water Security (WS): B
Sustainalytics: 25.1 (Medium Risk)
MSCI (Morgan Stanley Capital International): B
CRISIL: 52 (Adequate)

The report doesn’t offer details on the methodologies or specific criteria used by each rating agency which makes a comparison challenging. Different agencies use different weighting schemes and scoring methodologies, resulting in varying ratings even for companies with similar ESG performance. It’s also important to note that these ratings are snapshots in time and can change frequently depending on performance and changes in agency methodologies.

ESG Initiatives #

Ambuja Cements’ Integrated Annual Report extensively details its Environmental, Social, and Governance (ESG) performance and initiatives. Here’s a summary:

I. Environmental Initiatives:

Net-Zero Commitment: Ambuja Cements has committed to achieving net-zero carbon emissions by 2050, with validated near-term (2030) targets.
Renewable Energy: The company is significantly increasing its use of renewable energy sources (solar and wind power) and waste heat recovery systems (WHRS). It aims to power 60% of its expanded capacity with renewable sources by FY2027-28.
Alternative Fuels and Raw Materials (AFR): Ambuja is actively increasing the use of alternative fuels (co-processing of waste materials) and raw materials (e.g., fly ash, slag) in its cement production to reduce reliance on fossil fuels and its carbon footprint. The thermal substitution rate (TSR) reached 7.76% in FY2023-24, with a target of 27% by 2030.
Water Management: The company has implemented various water conservation measures. It reports being 11x water-positive, meaning it recycles and reuses far more water than it consumes. Rainwater harvesting and efficient irrigation methods are emphasized. Zero wastewater discharge is a key objective.
Waste Management: Ambuja Cements has implemented robust waste management practices, including co-processing of waste materials in its cement kilns. It is 8x plastic negative, removing significantly more plastic waste from the environment than it generates.
Biodiversity Conservation: The company highlights initiatives to protect and improve biodiversity around its operating sites, including tree plantation programs. It is a signatory to the India Business and Biodiversity Initiative (IBBI).

II. Carbon Footprint:

Scope 1 Emissions: 559 kg CO2e/tonne of cementitious material in FY2023-24.
Scope 2 Emissions: 22 kg CO2e/tonne of cementitious material in FY2023-24.
Specific Thermal Energy Consumption: 752 kCal/kg of clinker.
Clinker Factor: 64.3%

III. Social Initiatives:

Ambuja Cements’ CSR (Corporate Social Responsibility) program focuses on many key areas:

Community Development: The company’s initiatives aim to improve the quality of life in communities surrounding its operations, focusing on areas such as:
- Water Resource Management: Constructing rainwater harvesting systems, reviving water bodies, promoting micro-irrigation, and raising water awareness.
- Livelihood Enhancement: Supporting agricultural practices, promoting sustainable farming techniques and animal husbandry, creating farmer producer companies, and fostering entrepreneurship.
- Skill Development: Providing vocational training and entrepreneurship development programs to rural youth.
- Healthcare: Conducting health camps, providing access to healthcare facilities, and promoting health awareness.
- Education: Improving school infrastructure and providing educational resources.
- Women’s Empowerment: Supporting self-help groups (SHGs) and promoting women’s participation in income-generating activities.
Employee Well-being: The company emphasizes employee health, safety, and development through various initiatives like training programs, safety measures, employee engagement activities, and a focus on work-life balance.

IV. Governance Practices:

Board Composition: Ambuja Cements has a various Board of Directors with a significant number of Independent Directors, including a woman director.
Board Committees: Several Board Committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, Risk Management, Corporate Social Responsibility, and others) oversee specific areas of the business, promoting effective governance.
Transparency and Disclosure: The company emphasizes transparent financial and non-financial reporting in alignment with regulatory requirements and best practices. External assurance is obtained for BRSR disclosures.
Risk Management: A robust Enterprise Risk Management (ERM) framework is in place to identify, assess, and mitigate various risks, including financial, operational, environmental, and social risks.
Compliance: Adherence to relevant laws, regulations, and ethical guidelines is stressed.
Whistleblower Policy: A mechanism for reporting unethical or improper activities is in place.

V. Sustainability Goals:

Ambuja Cements’ sustainability goals are aligned with the UN SDGs and incorporate many ambitious targets beyond the minimum regulatory requirements, including:

Net-zero emissions by 2050: With validated interim targets by 2030.
11x Water positivity by 2030.
8x Plastic negativity.
27% thermal substitution rate (TSR) by 2030.
60% of energy consumption from renewable sources by 2027-28.
Planting 2.42 million trees by 2030.
Significant capacity expansion to 140 MTPA by 2027-28.

The company’s sustainability strategy demonstrates a commitment to responsible resource management, community engagement, and environmental stewardship. The ambitious targets show the company’s willingness to go above minimum compliance. However, the ability to achieve these goals will require sustained effort and investment. The success of the company’s long-term sustainability objectives depends on factors such as technological advancements, regulatory changes, and continued stakeholder collaboration.

Additional Information #

Operational Metrics #

The Ambuja Cements annual report provides the following information on R&D expenditure and employee count:

R&D Expenditure:

The report doesn’t explicitly state a total R&D expenditure figure. It mentions a significant investment in a state-of-the-art cement and concrete R&D facility but doesn’t provide a monetary value. Therefore, the precise R&D expenditure cannot be determined from the information provided.

Employee Count:

Standalone: 4,330 employees and workers (including differently-abled) as of March 31, 2024
Consolidated: The report does not explicitly specify the exact total consolidated employee count but it notes that there are 3,297 employees (2,544 permanent and 753 others) and 1,033 workers (1,004 permanent and 29 others) at the standalone level. The consolidated figure would include employees and workers from subsidiaries, associates, and joint ventures. The exact consolidated number is not provided.

Key Events #

Ambuja Cements’ Integrated Annual Report highlights many significant events during FY2023-24:

I. Acquisitions and Capacity Expansion:

Acquisition of Sanghi Industries Limited: This major acquisition significantly expanded Ambuja Cements’ capacity and market presence, especially in western India. The integration process is detailed in the report, including improvements in plant operations and efficiency.
Acquisition of Asian Concretes & Cements Pvt Ltd (by subsidiary ACC Ltd.): This acquisition further enhanced the Group’s cement capacity.
Acquisition of My Home Group’s grinding unit: A 1.5 MTPA cement grinding unit in Tuticorin, Tamil Nadu was acquired after the year-end.
Ongoing Capacity Expansion Projects: Ambuja Cements is actively pursuing many capacity expansion projects, aiming for substantial increases in production capacity.

II. Financial Highlights:

Record-Breaking Financial Performance: The report emphasizes the highest-ever portfolio-level EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and PAT (Profit After Tax) for the Adani Group (Ambuja Cements is part of the Adani Group). This represents a major achievement, although not all the factors are directly attributable to Ambuja Cements itself.
Zero Gross Debt: Ambuja Cements maintains a strong financial position with zero gross debt.
Significant improvement in debt/EBITDA ratio for the Adani group.
Conversion of Warrants: The conversion of warrants into equity shares resulted in a significant cash inflow and increased the Company’s equity base.

III. Operational and Strategic Developments:

Implementation of udAAAn: This initiative focused on increasing operational efficiency across various aspects of the business, including manufacturing, logistics, sales, and digitalization.
Digital Transformation: The company made significant progress in its digital transformation strategy, improving operational efficiency and enhancing customer engagement. New digital platforms and tools were launched.
Launch of Mazbooti Ki Misaal Brand Campaign: This major advertising campaign highlighted the brand’s strength and quality while emphasizing a shift towards a more emotional connection with its customers.
Strategic Sports Partnerships: Ambuja Cements partnered with prominent sports leagues, enhancing brand visibility.

IV. Sustainability and ESG:

Recognition for Sustainability: The company received many awards and recognitions for its sustainability initiatives, including achievements in water positivity and plastic waste co-processing.

V. External Events:

Short-Seller Report and Subsequent Events: The report acknowledges the impact of the short-seller report on the Adani Group, emphasizes the resulting actions taken, and highlights the vindication of the Group’s actions by the Supreme Court of India.

These are some of the key events during the fiscal year. The report also includes numerous other initiatives and achievements at various plant locations, but these are some of the larger scale and more publicly significant.

Audit Information #

The auditor’s opinion and key accounting policies are presented separately for the standalone and consolidated financial statements. Both opinions are unmodified (also known as unqualified).

I. Auditor’s Opinion (Standalone and Consolidated):

The independent auditor, S R B C & Co. LLP, issued an unqualified opinion on both the standalone and consolidated financial statements. This means the auditor found the financial statements to be presented fairly in accordance with Indian Generally Accepted Accounting Principles (GAAP) and applicable accounting standards (Ind AS). While the reports contain key audit matters regarding litigation and inventory, these did not lead to a modification of the auditor’s opinion. The standalone audit report also includes a separate report on internal financial controls, expressing an unqualified opinion on their adequacy and operating effectiveness.

II. Key Accounting Policies (Standalone):

The key accounting policies for the standalone financial statements include:

Property, Plant, and Equipment: Carried at cost less accumulated depreciation and impairment. Depreciation is calculated using the written-down value method (for captive power plants) and straight-line method (for other assets). Useful lives are estimated by management and reviewed annually.
Intangible Assets: Acquired separately are measured at cost, while those acquired in business combinations are measured at fair value. Amortization is applied over their useful lives.
Impairment of Non-Financial Assets: Assets are tested for impairment if there are indications of impairment. The recoverable amount is the higher of fair value less costs of disposal and value in use.
Inventories: Valued at the lower of cost and net realizable value. Cost is determined using the moving weighted average method.
Investments in Subsidiaries, Associates, and Joint Ventures: Accounted for at cost less any impairment.
Fair Value Measurement: Financial instruments are measured at fair value using appropriate valuation techniques. A three-level hierarchy is used based on the inputs (observable or unobservable) used to determine fair value.
Financial Instruments: Initially measured at fair value. Subsequent measurement depends on the instrument’s classification (amortized cost or fair value through profit or loss). An expected credit loss model is applied for impairment.
Revenue Recognition: Revenue is recognized when control of goods or services is transferred to the customer, in accordance with Ind AS 115.
Government Grants and Subsidies: Recognized when there is reasonable assurance of receipt and compliance with conditions.
Retirement and Other Employee Benefits: Defined contribution plans are expensed as incurred, while defined benefit plans are measured using an actuarial valuation.
Taxation: Income tax expense includes current and deferred tax, with deferred tax calculated using the liability method.
Leases: The company applies Ind AS 116, recognizing right-of-use assets and lease liabilities for most leases. Exemptions are applied for short-term and low-value leases.
Foreign Currency Translation: Monetary items are translated at the closing exchange rate, while non-monetary items at the transaction date rate.

III. Key Accounting Policies (Consolidated):

The key accounting policies for the consolidated financial statements largely mirror those of the standalone statements but also include policies specific to consolidation:

Business Combinations: The acquisition method is used. Assets and liabilities are recognized at fair value at the acquisition date. Goodwill is recognized and tested for impairment annually.
Consolidation: Subsidiaries are consolidated using a line-by-line approach, eliminating intra-group transactions and balances. Associates and joint ventures are accounted for using the equity method.

Both the standalone and consolidated financial statements adhere to Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015, and the presentation requirements of the Companies Act, 2013. The specific details of these policies may be found within the “Notes to the Financial Statements” in the annual report, and reviewing those notes is advised for a complete understanding.