The Development Of A Stake In India Baron Luc Bertrand Ac

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Ackermans & van Haaren

INVESTING IN INDIA

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A Presentation By Ace Global

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INDIA: : Growth through economic liberalisation

In spite of the Global slowdown, the Economy is expected to grow at a modest 6.5 % & 6.7%during FY 09 & FY 10\

Source: RBI Statistics

Current Period Post Reform Period

Pre Reform Period

External debt mainly corporate commercial borrowings

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Global events and links with India

Overheating of financial markets: Commodities: high inflation in India; oil and food

subsidies Equities: Expansion of convertible debt/ pvt. equity Realty: quickly restrained by Reserve Bank, ECBs frozen

US, EU recession: softening of low tech exports Financial crisis:

mass withdrawal of FII funds, equity markets collapse costly debt redemption, liquidity freeze : Indian banks

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How the meltdown affected India... Govt.

Decline in exports

resulted in layoffs in labour intensive sectors

Export Growth %

Source: RBI Statistics ,Press Article

Soaring Oil Prices

High inflation, Govt. subsidiesFiscal deficits

rose to 6% (target 3%)

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How the meltdown affected India … Pvt. sector.

During the meltdown, FIIs pulled out $12.2 billion out of the Indian Stock

Market

Collapse of the Equity Market, devaluation, and reduced access to debt > Investment led Expansion dropped; warrants redemption became difficult.

Source: RBI Statistics , Press Article

Govt. swiftly arrested debt flows into construction, real estate sectors based on subprime links and inflation effects.

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US, EU and Japan

Recovery not likely before 2010

Source: IMF, Respective countries official government sources

New drivers of global growth?

BRICs

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The short term outlook on BRICs


China : Economic recovery linked critically to

exports to key markets. Slow down in Exports (37% of GDP in

2007-08) has hit China hard; resulted in labor unrest and unemployment. Limits the scope for consumption led growth.

Russia : Has been hit hard due to the bust cycle

in energy commodities. Investment led growth has declined. Fiscal Position has worsened limiting its

options for stimulus.

Brazil : Suffered most from its heavy

dependency on US economy (37% of trade).

Major bio fuel investments ($30-40 billion) at risk with fall in oil prices.

India : Less dependent on export recovery

and FDI, gains from oil price reduction, likely to recover first.

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For Liquidity …

Commodities boom over, Inflation under control

More room to cut lending rates

Increased Money Supply in the Domestic Economy

Govt. borrowing can crowd out private sector

Private sector banks would have enough liquidity for the Private

sector

RBI may expand its balance sheet to lend to Government

For Investment…

1.3

50 billion $ in

investments

Government fiscal packages totaled up to Rs 1.2 trillion during the last fiscal year (4% of GDP)

Fiscal deficit rose to 6% against the 3% target

Oil prices back to pre-boom levels, and govt. recovering the subsidies. Fiscal

deficit is narrowing.

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India to recover in Q3 2009


McKinsey Global Survey Results –

April 2009“ A Sizeable Majority (53%) expect India

will emerge from the crisis economically

stronger”“Low dependence on exports (15% of GDP)

has cushioned the impact of global slow

down”“Low oil prices and

domestic investment growth will help India recover in Q3 2009”

Election results and new budget may affect pace

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The long term argument

Advantage India

Small Batch Competitiveness

Knowledge sectors Intellectual property

regime English language Rule of law (but slow) Developed financial

markets

Highly liberal FDI regime

Entrepreneurial/ Managerial Talent

Western cultural affinity/aspiration

Favorable demographics

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101.1

91.3

10.9

2.4

1.2

74.1

106

55.1

5.5

3.3

49.9

93.1

94.9

33.1

9.5

11.4

3.8

14.6

15.2

3.8

6.3

2.6

13.7

30.6

20.9

21.7

Household income brackets

2005 E 2015 F 2025 F

Number of Households, (in million)

Aggregate disposable income–2000 (in INR trillion)

Definition of household income brackets based on annual household income: Globals (more than INR 1,000,000), Strivers (INR 500,000 to 1,000,000), Seekers (200,000 to 500,000), Aspirers (90,000 to 200,000), Deprived (less than 90,000)

Middle Class

India’s real GDP growth in %

Source: MGI

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Promising Domestic Sectors

Infrastructure: Energy, trade, transportation, telecoms Construction: Machinery, building materials, minerals and

metals; urban housing and commercial/industrial construction

Knowledge Sectors: ICT, Biotechnology, Healthcare, Education

Others: Food, Automotive, Media/Entertainment, Retail

In each of these, there is considerable FDI potential

Already, EU companies are leaders in some sectors.

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EU is the largest investor in India, with over 25% of all foreign investment to date.

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Indians are astute and tenacious negotiators. Inorganic routes can be expensive: valuations are

steep. Agreements are not cast in stone, intent more

important than content. Clauses get amended and re-negotiated.

Show cautious optimism; test the promises at times.

Partnerships need delicate handling, disagreements can get personal.

Seek guidance of compatriots and local advisors

Useful Business Advice- Negotiations

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Sagar Cements Limited

Corporate PresentationCorporate Presentation

May 2009

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Company Snapshot

Experienced cement player with over 25 Years in business Strong Sales and Distribution Network One of the most Efficient Cement Player in the Country Market Leader in South India for Sulphate Resistant Cement (SRC) Capacity increased nearly 10 times since inception 1985 primarily through debottlenecking

and up gradation.


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Indian Cement Industry Overview

Second Largest Cement market Globally• Industry Overview

• Second largest Cement Market after China with a capacity of 165 mtpa (CMA Mar’2007)• Sustained consumption Growth rate – CAGR of 8.7% over past 5 Years• Regional play due to high freight costs• Primarily a bagged retail driven market

Low per capita consumption points to significant potential for future growth

Demand growth continuing unabated…

Source : Industry reports, May 2007

Phase III(2006 onwards)

•Infrastructure•Commercial

•Malls•SEZ

•Residential


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Demand Drivers• Increased focus on Infrastructure development, together with increasing demand for Housing and

Commercial Construction expected to drive growth in Cement Industry

Demand to increase > 100 mt over next 5 Years Increased Government focus on Infrastructure Shift in consumption from Housing to Infrastructure All round growth in key consuming segments Domestic Cement consumption grew over 10 % in last 2 Years

(63%)

(19%)

(14%)

(52%)

(24%)

(21%)

141 mn Tons

222 mn Tons

Significant Capacity addition Required

Capacity utilizations at a high

Source : Enam Research, CMA,NCAER


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…Capacity creation lagging behindAdditional capacity of over 100 mt required by 2011 to meet incremental demandAdditional capacity of over 100 mt required by 2011 to meet incremental demand

Capacity additions lag demand growth

Industry operating at near full Capacity Significant capacity addition required to match demand 80 mtpa capacity creation announced Lead time for new capacity 24-36 months Additional delays expected in commissioning

Demand Supply mismatch leading to improved prices

Prices expected to remain firm backed by continuing demand growth and supply constraints

Prices continue to rise despite Government initiatives to ease supply position Excise duty structure modified to incentivize industry to reduce

prices Scrapping of import duties

Source : CMA

Source : CMA


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Efficient Cement Producer

Strategically Located in proximity to Major Markets and Raw Material Sources

Adequate Limestone reserves with over 750 million Tons of proven Reserves

Coal Mines (Major Fuel) are less than 150 kms from the Plant Other Additives are also available abundantly nearby . Majority of its Electrical Power is sourced from its Subsidiary

- Sagar Power Limited, 8.5 MW Hydro Based Power Plant & Captive Power Plant -30 MW (to be commissioned by 2011).

Packing Materials are sourced from its other Group Company – Panchavati Polyfibres Limited

Access to Raw Materials / Energy Sources

Proximity to Major Markets

Strategically located

Plant located in close proximity to Major Markets. Average Lead Distance of only 450 kms Very well connected to various Locations and Ports .


Major Markets Coal Mines

Plant Location Fly Ash Source

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Efficient Cement Producer

Continuous improvement in operating efficiencies

Sustenance of average production cost despite rising input costs

Consumption per unit of Production


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Strong Sales and Distribution Network

Balanced Product Mix & Good Brand Equity

Sales & Distribution Network

Dealers – 575 Sub Dealers – 1500 Wholesalers – 25 Distribution / Consignment Agents - 10

Good Brand Equity


Bus Shelter Bus Paintings

Shop Paintings

Wall Paintings Cab Paintings

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Strong Management with execution track Record

Continuous improvement in Operating Efficiency Constant focus on Debottlenecking and upgrading to

enhance capacity at minimal cost Company is about to get Certification in the

following shortly ISO 9001 : 2000 QMS ISO 14001 : 2004 EMS OHSAS 18001 : 2005 RMF & ICD for SOX Compliance

Company also has approved CDM Projects that are eligible for Carbon Credits.

ProcessesExperience & Technical Knowhow

Professional and Experienced Management Three Decades of Experience In-depth understanding and knowledge of Market

and Customer behavior Ability to acquire and integrate Plants and

Processes Proven track record of setting-up Greenfield plants

at Optimum cost/time. Most of the Senior Management have been with

the Company for more than 15 Years


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Financials

Profit set to more than Triple

Sales

1538 24

71

2746 36

85

8762

9219

759

1276

1503 25

31

6242

6602

FY06 FY07 FY08 FY09 EFY10 EFY11 E

In R

s. M

illio

n

Gross Sales Nett Sales

Profit

28

388 50

0

273

1513

1585

28 277

309

228

1075

1101


In R

s. M

illio

n

Profit before Taxes Profit after Taxes

EBIDTA

85

438 57

6

656

1993

2026


In R

s. M

illio

n


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Financials

Net worth of the company to more than triple in 3 Years

Net worth

249

737 10

53

1996

2986

4002


In R

s. M

illio

n

Capital EmployedDebt


12

141

1852 19

75

1533

1122


In R

s. M

illio

n

260

877

2905

3971 45

20 5125


In R

s. M

illio

n

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Financials

Debt-Equity Ratio

0.05

0.19

1.76

0.99

0.51

0.28

FY06 FY07 FY08 FY09 E FY10 E FY11 E

ROE %ROCE %


20.9

7

46.0

8

18.4

0

11.3

1

39.4

1

35.2

9


11.4

0

37.5

6

29.4

0

11.4

3

36.0

2

27.5

2


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Financials

Shareholding Pattern#1 Share price Movement in BSE

Promoters44%

FIIs & MFs16%

Bodies Corporate

27%

Public13%

Earnings per Share (EPS)

2.54

24.5

2

23.7

0

15.2

1

71.7

2

73.4

2

FY06 FY07 FY08 FY09 E FY10 E FY11 EIn

Rs.

#1 as on 31st March 2009

Few Key Investors

1 India Fund Inc (Blackstone Group) 5.39

2 AVH Resources India Private Limited 14.78

3 Paraficim S.A.S (Subsidiary of Vicat S.A) 6.67

4 Prinicipal Mutual Fund ~3.5

5 Twinvest Financial Services Limited 6.88

6 Savyasachi Constructions Private Limited 1.96

7 Passionate Investment Management P. Ltd 1.96


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Expansion Plans

Company plans to add 0.75 Million tons per Year Cement Plant with 10 MW Captive Power Plant (Gas Based)

It is in advanced stage of getting Mining

Capital Outlay USD 100 Million Likely commissioning FY13

Tanzania Cement Company

Key Success factors

Karnataka Cement Plant

Oman Cement Plant

Continuing to implement measures to reduce costs Sustaining high utilization levels Maximizing price realizations


Company plans to add 2.00 Million Tons per Year

Greenfield Cement Plant Environment Clearances underway Capital Outlay USD 250 Million

Company to add 5.5 Million Tons per year Greenfield Cement Plant with a 60 MW Captive Power Plant.

For this company entered in a Joint Venture with French Cement Major – Vicat, with 49% Equity stake

Procurement of Land and Mining Lease is under progress Capital Outlay is about USD 650 Million Likely Commissioning in FY12

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To sum it up…..

Strong and Experienced Management Team Continuous focus on cost control and improvement in Operating

Efficiency Well positioned to capitalize on growth with Volumes set to more

than triple.

Strong Sales and Distribution Network


New investments 2009: Oriental Quarries & Mines

Aggregates plants• Headquarter in Delhi (India)

• First two operational plants in Rajastan, Bharatpur District

• Partnership with Oriental Structural Engineers – OSE (Bakshi family)

• AvH share: 28% with gradual step up towards 50% by means of capital calls

• Current capacity: 1.2 MTPA, with the ambition to substantially increase this over the coming years

• Pan Indian pipeline of new crushing plants

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Entertainment & Humor

The Development Of A Stake In India Baron Luc Bertrand Ac