Event Update | Cement

July 25, 2013

Ambuja Cement
Holicm makes Ambuja its flagship company in India
Holcim has announced an ownership restructuring of its India operations, which will increase its stake in Ambuja Cements (Ambuja) from 50.5% to 61.4% in a two-stage deal. Post the completion of this deal Ambuja will become the flagship company of Holcim in India. Further Ambuja will hold 50.01% stake in ACC. Ambuja would further increase its stake in ACC by 10% for an investment of up to `3,000cr through open-market purchases. The overall deal size stands at ~`11,740cr. The entire deal is expected to be completed by 3QCY2014. Two-stage deal In the first stage Ambuja will acquire a 24% stake in Holcim India Pvt Ltd (HIPL) a financial holding company ofully owned by Holcim for a cash consideration of `3,500cr. At present, HIPL directly holds a 9.76% stake in Ambuja (15cr shares) and a 50.01% stake in ACC. In the second stage Holcim India will be merged into Ambuja. Post the merger Ambuja will own 50.01% stake in ACC and Holcim Indias stake in Ambuja will stand cancelled. The swap ratio for the merger will be one Ambuja share for 7.4 Holcim India shares, translating into an implied swap ratio of 6.6 Ambuja shares for every ACC share. Ambuja will issue 58.4cr equity shares to Holcim, as consideration for the merger. Adjusted for the shares held by Holcim India in Ambuja, shares freshly issued will stand at 43.4cr (58.4cr-15cr) at a value of `8,240cr. Thus the deal size approximately stands at `11,740cr (`3,500cr in cash and `8,240cr in stock).

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 26,408 (3,770) 0.8 221/163 193,945 2 19,805 5,908 ABUJ.BO ACEM@IN

`171 -

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.6 10.2 32.0 7.3

Abs. (%) Sensex ACEM

3m 2.1 (10.3)

1yr 17.6 (1.7)

3yr 9.2 48.8

Impact of the deal Holcim expects the deal to bring synergistic benefits for both ACC and Ambuja combined by way of supply chain optimization, sharing of services and reduction in fixed cost. As per Management estimates the synergistic potential stands at `780cr- `900cr, which would be phased over a period of two years. Supply chain optimization by way of clinker and cement swaps is expected to bring benefits of `360-420cr, while sharing of services, and fixed cost reduction could result in overall cost savings of ~`420-480cr. However, we believe the quantum of synergistic benefits estimated by the company is quite optimistic as both the companies would continue to operate as independent entities. The consolidated capacity of ACC and Ambuja will be 58mtpa. Both the companies have a combined capacity addition pipeline of 10mtpa. The brands of both the company will continue to exist in the market.

Outlook and Valuation: The deal appears to be favouring Holcim (Promoter) over the minority shareholders of Ambuja Cement as ~90% of Ambujas cash balance of ~`3,800cr is getting repatriated to the promoter company. Further, we also expect Ambuja Cements to attract holding company discount on its holding in ACC. Ambuja Cements is fairly priced at current levels; we maintain a Neutral rating on the stock. We maintain Accumulate on ACC with a target price of `1,361.
Please refer to important disclosures at the end of this report

V Srinivasan
022-39357831 v.srinivasan@angelbroking.com

Event Update | Ambuja Cement

Profit and Loss statement (Standalone)

Y/E Dec. (` cr) Net Sales Other operating income Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E 7,077 105 7,181 16.4 5,210 1,014 1,423 273 2,501 1,971 15.5 27.9 297 1,674 15.7 23.7 22 151 8 1,803 8.5 1,803 585 32.4 1,218 1,218 3.0 17.2 8.0 8.0 2.9 7,390 127 7,518 4.7 5,567 542 1,697 344 2,984 1,951 (1.0) 26.4 387 1,564 (6.6) 21.2 49 120 7 1,635 (9.3) (27) 1,662 398 24.0 1,264 1,237 1.5 16.7 8.1 8.1 1.1 8,514 88 8,603 14.4 6,608 634 2,006 433 3,535 1,994 2.2 23.4 445 1,549 (0.9) 18.2 53 230 13 1,727 5.6 24 1,703 474 27.8 1,229 1,253 1.3 14.7 8.2 8.2 1.0 9,675 69 9,744 13.3 7,257 471 2,329 479 3,979 2,486 24.7 25.7 565 1,921 24.0 19.9 76 336 15 2,181 26.3 279 1,902 605 31.8 1,297 1,576 25.8 16.3 10.2 10.2 25.1 10,082 89 10,171 4.4 7,804 754 2,338 512 4,200 2,367 (4.8) 23.5 566 1,801 (6.3) 17.9 68 544 24 2,276 4.4 2,276 660 29.0 1,616 1,616 2.5 16.0 10.5 10.5 2.5 11,653 109 11,762 15.6 8,900 1,067 2,545 548 4,740 2,862 20.9 24.6 580 2,282 26.7 19.6 68 613 22 2,826 24.2 2,826 904 32.0 1,922 1,922 18.9 16.5 12.5 12.5 18.9

July 25, 2013

Event Update | Ambuja Cement

Balance Sheet (Standalone)

Y/E Dec. (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Other Long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Other non current assets Intangible assets Investments Long term loans and adv. Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 6,224 2,784 3,440 2,714 727 1,979 881 253 846 1,741 238 3 7,122 8,779 3,151 5,628 931 626 3,135 1,648 441 1,047 2,394 741 0 7,926 9,635 3,450 6,185 487 2 2 864 507 3,495 2,069 237 1,190 2,597 899 8,945 10,116 4,254 5,862 520 8 0 1,656 647 3,731 2,253 249 1,228 2,815 916 9,610 10,137 4,821 5,316 800 8 2,156 647 4,633 2,944 327 1,363 3,136 1,497 10,424 10,387 5,401 4,985 1,550 8 2,856 647 4,848 2,812 419 1,617 3,502 1,346 11,393 7,122 7,926 305 6,166 6,471 166 486 307 7,023 7,330 65 531 307 7,763 8,069 49 644 4 179 8,945 308 8,497 8,805 43 548 5 209 9,610 308 9,311 9,620 43 548 5 209 10,424 308 10,280 10,588 43 548 5 209 11,393 CY2009 CY2010 CY2011E CY2012E CY2013E CY2014E

July 25, 2013

Event Update | Ambuja Cement

Cash flow statement (Standalone)

Y/E Dec. (` cr) Profit before tax Depreciation (Inc)/Dec in Working Capital Add: Interest expenses Less: Other income Less: Direct taxes paid Cash Flow from Operations (Inc)/ Dec in Fixed Assets (Inc)/ Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E 1,803 297 698 22 151 585 2,085 (1,284) (395) 151 (1,528) 8 (123) 390 22 (528) 29 852 881 1,662 387 257 49 120 398 1,836 (771) 101 120 (550) 55 (101) 425 49 (519) 767 881 1,648 1,703 445 182 53 230 472 1,680 (623) (238) 230 (631) 30 (16) 570 73 (628) 421 1,648 2,069 1,902 565 167 76 336 640 1,735 (687) (792) 336 (1,143) 91 (7) 643 (152) (407) 184 2,069 2,254 2,276 566 109 68 544 660 1,816 (300) (500) 544 (256) 802 67 (869) 691 2,253 2,944 2,826 580 19 68 613 904 1,977 (1,000) (700) 613 (1,087) 953 68 (1,021) (132) 2,944 2,812

July 25, 2013

Event Update | Ambuja Cement

Key Ratios
Y/E Dec. Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) (0.1) (0.4) 74.7 (0.2) (0.8) 32.1 (0.3) (1.0) 29.4 (0.3) (0.9) 25.4 (0.3) (1.2) 26.4 (0.3) (1.0) 33.5 1.2 41 10 113 (16) 1.0 38 7 136 (38) 0.9 39 8 138 (44) 1.0 36 9 136 (47) 1.0 37 8 139 (50) 1.1 36 9 136 (45) 24.9 47.4 20.1 20.8 35.2 17.9 18.4 26.4 16.3 20.7 29.1 18.7 18.0 26.6 17.5 20.9 33.3 19.0 23.3 67.6 1.2 19.3 20.8 76.0 1.2 19.0 18.0 72.2 1.3 17.0 19.7 68.2 1.4 18.4 17.7 71.0 1.4 17.2 19.4 68.0 1.5 19.3 8.0 8.0 9.9 2.4 42.4 8.1 8.1 10.7 2.6 47.7 8.2 8.2 10.9 3.2 52.6 10.2 10.2 12.1 3.6 57.1 10.5 10.5 14.2 4.5 62.4 12.5 12.5 16.2 5.3 68.7 21.4 17.2 4.0 1.4 3.2 11.4 3.1 21.1 15.9 3.6 1.5 3.2 12.1 3.0 20.9 15.7 3.3 1.9 2.8 11.8 2.6 16.7 14.2 3.0 2.1 2.3 9.1 2.3 16.3 12.1 2.7 2.6 2.1 8.9 2.0 13.7 10.5 2.5 3.1 1.7 6.9 1.7 CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E

July 25, 2013

Event Update | Ambuja Cement

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Ambuja Cement No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

July 25, 2013

Event Update | Ambuja Cement

6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai- 400 093. Tel: (022) 39357800 Research Team
Fundamental: Sarabjit Kour Nangra Vaibhav Agrawal Bhavesh Chauhan Viral Shah Sharan Lillaney V Srinivasan Yaresh Kothari Ankita Somani Sourabh Taparia Bhupali Gursale Vinay Rachh Amit Patil Twinkle Gosar Tejashwini Kumari Akshay Narang Harshal Patkar Technicals: Shardul Kulkarni Sameet Chavan Sacchitanand Uttekar Derivatives: Siddarth Bhamre Institutional Sales Team: Mayuresh Joshi Meenakshi Chavan Gaurang Tisani Akshay Shah Production Team: Tejas Vahalia Dilip Patel Research Editor Production Incharge tejas.vahalia@angelbroking.com dilipm.patel@angelbroking.com VP - Institutional Sales Dealer Dealer Sr. Executive mayuresh.joshi@angelbroking.com meenakshis.chavan@angelbroking.com gaurangp.tisani@angelbroking.com akshayr.shah@angelbroking.com Head - Derivatives siddarth.bhamre@angelbroking.com Sr. Technical Analyst Technical Analyst Technical Analyst shardul.kulkarni@angelbroking.com sameet.chavan@angelbroking.com sacchitanand.uttekar@angelbroking.com VP-Research, Pharmaceutical VP-Research, Banking Sr. Analyst (Metals & Mining) Sr. Analyst (Infrastructure) Analyst (Mid-cap) Analyst (Cement, FMCG) Analyst (Automobile) Analyst (IT, Telecom) Analyst (Banking) Economist Research Associate Research Associate Research Associate Research Associate Research Associate Research Associate sarabjit@angelbroking.com vaibhav.agrawal@angelbroking.com bhaveshu.chauhan@angelbroking.com viralk.shah@angelbroking.com sharanb.lillaney@angelbroking.com v.srinivasan@angelbroking.com yareshb.kothari@angelbroking.com ankita.somani@angelbroking.com sourabh.taparia@angelbroking.com bhupali.gursale@angelbroking.com vinay.rachh@angelbroking.com amit.patil@angelbroking.com gosar.twinkle@angelbroking.com tejashwini.kumari@angelbroking.com akshay.narang@angelbroking.com harshal.patkar@angelbroking.com

CSO & Registered Office: G-1, Ackruti Trade Centre, Road No. 7, MIDC, Andheri (E), Mumbai - 93. Tel: (022) 3083 7700. Angel Broking Pvt. Ltd: BSE Cash: INB010996539 / BSE F&O: INF010996539, CDSL Regn. No.: IN - DP - CDSL - 234 2004, PMS Regn. Code: PM/INP000001546, NSE Cash: INB231279838 / NSE F&O: INF231279838 / NSE Currency: INE231279838, MCX Stock Exchange Ltd: INE261279838 / Member ID: 10500. Angel Commodities Broking (P) Ltd.: MCX Member ID: 12685 / FMC Regn. No.: MCX / TCM / CORP / 0037 NCDEX: Member ID 00220 / FMC Regn. No.: NCDEX / TCM / CORP / 0302.

July 25, 2013