Risk Management Of Ambuja Cement Economics Essay

seek steering Of Ambuja Cement Economics EssayAmbuja Cements was quite a little up in 1986. In the last decade the company has gr causeup tenfold. The total cement electrical condenser of ACL as on CY07 is 18.5 million tonnes. Its plants ar some of the most expeditious in the world. Its environment protection measures atomic number 18 on par with the finest in the developed world. ACL follows a unique foundation grown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. This simple vision has created an environment where there ar no limits to excellence, no limits to efficiency. It has presence in the North, East and Western regions of India. Its municipal market share stands at 10.2% as on CY07. ACL has developed a unique homespun channel management model called Channel chastity Programme (CEP). Over 7,000 dealerships and 20,000 retailers crossways India are covered under this model. This curriculum emphasizes the relationship management approach to build strong business ties with the dealers and retailers. ACL mostly exportings to the Middle East. ACL was one of the first companies to be equipped with shipping transcend and make use of sea as a medium to impart cement across the globe. Sea transport monetary values one-third of roadway transport. It has a port terminal at Muldwarka, Gujarat that handles ships with 40,000 DWT. It is also equipped to export clear out and cement and import coal and furnace oil. ACL is the one of the most remunerative cement companies in India, and one of the lowest cost producers of cement in the world. GACL has bulk cement terminals at Muldwarka (Gujarat), Panvel, Navi Mumbai and Surat.Risks in Company-Demand-supply mismatch could take prison term to stabilise, thereby putting further pressures on margins- Recently due to subnormality of the cement demand a mismatch come into effect so due to excess drudgery and supply of the cement company is boo t on the front of lower margins.Cement price / literalisations to dip on account of demand slowdown- As mentioned above the demand slowdown force the prices to take it lower so company is having less profits which is adversily effecting the time to come growth projects lead out by GACL.Rise in commentary be affecting OPMs- GACLs OPMs were at its peak in Q1CY07 after which it has seen a constant fall due to the rising prices of commodities uniform fly ash, gypsum, coal, natural oil, etc, rise in power fuel costs and rise in other expenditure.Higher clinker purchase pulls down margin-Higher clinker purchase pulled down the margin of the company. Ambuja is trading at a imbibe premium to its peers despite the fact that it does not have the best come ratios and best margins in the industry. Thus, we are maintaining our UNDERPERFORMER rating on the stock.Demand-Supply gap, overcapacity The capacity additions distort the demand-supply equilibrium in the industrythereby affecting profitability.Risks in Industry-Increased cost of payoff due to increase in coal prices.High Interest place on housing The re-pricing of the interest rates in the last four years from 7% to 12% has resulted in the slowdown in residential property market.Imports from Pakistan affecting markets in Yankee India In 2007, 130000 tonnes in 2008, 173000 Metric tones ofcementwas exported to India. This was done to keep the price of cementunder check.Effect of global recession on actual estate The real estate prices are stabilizing and facing settle down slowdown especially in metros. There has been drastic reduction in property prices due to reduced demand and increased supply.Shifting supplies from export market to domestic marketACL is the large-scalest exporter among the Indian cement players. Its exports account for nigh one-third of the total exports from the country by listed players. ACL witnessed reduction in exports by 28% to 1.3 mn tonnes in CY07 vis--vis 1.8 mn tonnes in C Y06 due to cheer of exports to the domestic market on account of to a greater extent lucrative prices in the domestic markets. The recent lifting of the ban on export of cement in the backdrop of waning demand for this crucial construction input from the real estate sector will have marginal impact on exports from India as the government had allowed export of cement from ports in Gujarat (accounting for 85% of the exports from India) on May 27, 2008. The ban was imposed on April 11 this year to crop the rapidly rising inflation.CompetitorsThe Indian cement industry has a large number of fragmented firms. There is also a dearth of pertly players as incumbents have already procured key raw material sources, like limestone reserves on long-term leases. Further, large firms are continuously consolidating by acquiring smaller ones that find it difficult to attain minimum efficient scale of production.Product Cement is a bulk commodity and a low value product. It is sold in 50 kg packs as OPC grade 33, 43, and 53. It is used in all construction activities as a primary constituent of concrete. Due to similar raw material inputs and production processes, there is no significant differentiation in the cement produced across firms.Environmental IssuesGreenhouse gas arcs from cement manufacturing pose a estimable environmental threat. Currently, the cement industry generates 5% of Indias total carbon-dioxide emissions.2With stringent emission norms, the production process needs to be made environmentally sustainable. The cost of implementing new production processes that help reduce emissions can be outgrowth by trading certified emission reductions (CERs). CERs are a atom of national and international emissions trading schemes, implemented finished Clean phylogeny Mechanism (CDM) projects, in an attempt to mitigate global warming.3Credits obtained through implementation of such projects can be traded in international markets.Risk Techniques used by Company-Comp any is expanding its trading operations by purchasing more units and invreasing the production capacity to further lower down the overall production costs to remain competitive in the industry.It also is reducing costs by making to reach to the Big suppliers which can provide theatrical role materials in less prices.It is how company responded to the contends.Post Impact of Risk Management techniques-Company has come forward in the industry and increased the operations in many states, also enhanced its exports and has posed a challenge before other companies.