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Investor Presentation

Investor Presentation. November 2010. Contents. Prism Cement – An Integrated Building Materials’ Player. Cement Division. RMC Division. TBK Division. Corporate Information. 1. Company Overview. Prism Cement Limited – A Snapshot.

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  1. Investor Presentation November 2010

  2. Contents Prism Cement – An Integrated Building Materials’ Player Cement Division RMC Division TBK Division Corporate Information 1

  3. Company Overview

  4. Prism Cement Limited – A Snapshot One of India’s leading integrated Building Materials’ company Wide product basket comprising cement, ready-mixed concrete, aggregates, tiles, tile adhesives, sanitaryware, and kitchens Organized into 3 Divisions: Prism Cement RMC Readymix (India) H & R Johnson (India) Robust business models generating Free Cash Flows 3

  5. Prism Cement Limited – A Snapshot Market Capitalization (as on 30th October 2010): Rs. 2,962 crores Rankings: 202—ET 500 2010 rankings 291—by Market Cap among companies listed on the National Stock Exchange (Source: Capitaline Database) Stand-alone financials (2009-10): 4

  6. Prism Cement Limited—in a Nutshell • Cement Division • Efficient operations • Expanding capacities • Rural housing and Infrastructure key growth drivers • RMC • Strategic route to market for Cement business • Higher growth: Growth of cement in India and, in addition, conversion to Ready-mixed concrete • Growth Drivers: Urbanization and industrial infrastructure • HRJ • Tile business: Growth drivers are affordable housing and consumption • Bath, Kitchen, and Adhesives: Complimentary business with operating leverage • Brand and distribution driven 5

  7. India—Growth Potential • Urbanization: > 3 mn people expected to migrate to urban areas every year from FY10-20 • Affordable housing (Rs. 2.5 mn to Rs. 4.5 mn) to grow from Rs. 432 bn in FY 09 to Rs. 1.7 trn in FY 20 • Infrastructure investment to grow from Rs. 21 trn in XI Plan (FY 08-12) to Rs. 62 trn between FY 10 and FY 20. Key sectors: • Power: From Rs. 6.7 bn to Rs. 13 trn • Roads: From Rs. 3.1 trn to Rs. 11 trn • Irrigation: From Rs. 2.5 trn to Rs. 10.4 trn (Source: Edelweiss India 2020 Report)

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  9. Cement Division - Introduction Prism Cement commenced production in 1997 Manufactures Portland Pozzollana Cement (PPC) under the brand name ‘Champion’ and Ordinary Portland Cement (OPC) Currently sells 3 million tonnes of cement and clinker from its Plant in Satna, Madhya Pradesh State-wise break-up of sales 8

  10. Cement Division—Strengths • Gross Sales (FY 2009-10): Rs. 1142 Crores • Among healthiest EBITDA margins in the industry (34% in 2009-10). Key reasons: • Distribution advantage • An intensive distribution network (~ 2,000 dealers and 46 stocking points) • Among lowest market lead distance (~ 340-370 KMs) • Power Consumption • Among lowest in the industry (69 KWH / T of Cement for 2009-10) • Product Mix • Higher quantities of PPC (~ 91% of the total cement sales)

  11. Cement Division—Power & Fuel • Coal • ~ 60% linkage Coal. Remaining purchased from the Open Market • Electricity • Purchased from Grid • Stable and good quality source of supply • Rate / Unit for 2009-10: Rs. 3.98 • 7 Power Plants with a capacity of 17,000 MW coming up in the belt over the next few years

  12. Cement Market in India India is the second largest cement producing country in the world Produces approx. 7% of the world’s total production Exceptionally stable demand growth for past 15 years Demand at an inflection point as per-capita GDP has passed US$ 1,000 Infrastructure and Housing key drivers Long-term demand growth of 10-12% per annum Capacity addition of approx. 100 MT between FY10 and FY12 Supply overhang for the next few quarters, lowering industry utilisation rates. Prices softening Stronger Balance Sheets and a more consolidated industry structure 11

  13. Cement Division - Plans Expanding capacity at Satna Plant: Cement and clinker capacity increased from 3 million tons per annum to 6.6 million tons per annum Commercial operations to resume by December, 2010 Total Project Cost: Rs. 965 Crores VAT Benefit on sales in Madhya Pradesh for 7 years A Coal Block allotted at Chindwara, Madhya Pradesh: Estimated reserves of 15 million tones Mining Plans approved Final clearances awaited Planned to be operational by 2013 12

  14. Cement Division - Plans • Second plant to come up in Kurnool District, Andhra Pradesh: • Capacity: 4.8 million tons per annum • Almost the entire land acquired. Awaiting certain State Government clearances • Project to be completed in 3 years from zero date

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  16. RMC Snapshot • Ready-mixed Concrete is concrete (Mixture of Cement, Sand, Aggregates, Admixtures, and Water) in ready-to-use form • Several benefits such as assured quality, speed, saving of site space, reduced labour, reduced wastage etc

  17. Ready-Mixed Concrete Industry • Industry commenced in early 1990s • Real growth commenced from second half of 1990s • At present: • Around 500 commercial RMC Plants • Industry volume: ~ 30 million m3 per annum • 5 key players in the Organized sector

  18. Ready-mixed Concrete Potential • Reasons for Growth: • Cement demand growth—1.25x GDP growth rate • Cement used for concrete grows from 50% to 55% due to infrastructure growth • Ready-mixed concrete grows from 10% of total concrete at present to 15% in 5 years (In developed countries, this is up to 70%)

  19. RMC Ready Mix (India) - Introduction Third-largest player in India with national footprint 65 Plants in 28 cities / towns High Growth: Last 10 years Sales growth: 48% CAGR H1 2010-11 Sales growth: 26% 18

  20. Ready-Mixed Concrete Dynamics • Return on Capital Employed (ROCE): • EBITDA / Sales: 6% (x) • Sales / Capital Employed: 4.5x (=) • 27% (-) • Depreciation / Capital Employed: 12% • ROCE = 15%

  21. RMC Ready Mix - Strategy Plants in cities for commercial sales Infrastructure Vertical—Ports, Highways, Power Plants etc. Backward integration—Quarries for aggregates 20

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  23. India’s Number 1 Tile Company since 1958 Ranked 16th in the study of “World’s top ceramic tile manufacturers” by Ceramic World Review—Only Indian entity to feature in the list Key Brands: HRJ – Introduction ***Sales 10-year CAGR: 15% H1 2010-11 Sales Growth: 21%*** 22

  24. Ceramic Tile Industry—Potential In absolute terms, India has become third largest consumer of ceramic tiles in the world—after China and Brazil However, still huge Potential for growth in India. Per Capita consumption of ceramic tiles per annum: Iran - 4.64 m2 Vietnam - 3.50 m2 China - 2.22 m2 Brazil - 2.96 m2 Spain - 7.55 m2 India - 0.4 m2 Industry Growth Rate: 12% per annum (Source: www.icctas.com) By 2015, India expected to become the second-largest consumer of ceramic tiles in the world Exponential growth due to high growth in construction due to urbanization and creation of commercial infrastructure

  25. Ceramic Tile Industry – An Overview Industry Characteristics: Capital Intensive Profits need to be ploughed back to maintain market share Working Capital Intensive Fuel and Power Intensive Freight Intensive Technology Intensive To upgrade designs / effects from time to time without increasing capacity Unattractive investment: Poor Return on Capital No Free Cash Flows HRJ’s business model addresses these issues in a positive way 24

  26. Indian Business Environment in the Last Decade Source of machinery Shift from Italy to China Capital Cost lower by 60% Handicap for the older plants Imports from China Significant competition in the past No longer a threat to the Domestic industry Gujarat region Hub for the industry with most new plants Almost 70% of the Industry’s capacity Unorganized Sector with poor tax compliance 25

  27. Business Environment in Future Goods & Services Tax (GST) to be implemented Would improve tax compliance Would spur consumption Importing from China has become unattractive 26

  28. HRJ - Manufacturing Strategy Manufacturing Strategy—A healthy-mix. FY 2009-10 split: Own Manufacturing: 35% of sales Joint Ventures: 55% of sales Outsourcing: 10% of sales Benefits of Joint Ventures: Efficient operations run by Local Promoters Most profitable plants in the Industry within respective categories Leverage efficient manufacturing with brand equity and distribution of HRJ Takes care of capital intensity Enables faster scale-up 27

  29. Focus on Capital efficiency Capital Cost Move towards lower capital cost New capacities using Chinese machinery Mix of Machinery: Working Capital—Substantially better than competitors. Working Capital Turnover: 11 times Debtors: 37 days 28

  30. Focus on Low Costs - Freight, Fuel and Power Regionalized manufacturing to address freight intensity. Average Selling radius of 1,000 KMs Using judicious mix of fuel for efficient manufacturing Generating own power for cost efficiency: Cogeneration Plant at Pen: Capacity 4.6 MW Cogeneration Plant at Morbi JV for Vitrified tiles: Capacity 5.6 MW 29

  31. HRJ – Key Strategies • Fundamentally, modified the Business model in the last 10 years, thereby generating Free Cash Flows • Taken a hit by proactively shutting some of own mfg. capacities, thereby addressing capital & fuel intensity: • Thane, Dewas Wall Tile • Build Complementary businesses: • Ardex Endura—Adhesives, Grouts, Industrial Flooring, Waterproofing • Pioneer and Leader in the Industry • Johnson Bath Division—Sanitaryware, Taps & faucets, Bath accessories • Gone through initial learning curve; Scale-up phase for increasing market share • Johnson Kitchen and Wooden Flooring Division • Modular Kitchen Industry at nascent stage • Sunrise industry • Going through learning curve 30

  32. HRJ – Growth Path Benefit of scale in tiles business: Sold ~ 1.1 million ft2 of tiles every day in 2009-10 Average gross realization of Rs. 27 per ft2 Potential of complimentary businesses: Operating Leverage Marginal investment needed when compared to tiles Healthy ROCE High Free Cash Flows Scalable 31

  33. Corporate Information

  34. Management Profile • Mr. Manoj Chhabra, 59 years, Managing Director • Chartered Accountant. • Joined the Company in 1993. Appointed as MD in 2003 • Past experience includes senior positions at Larsen and Toubro • Mr. Vijay Aggarwal, 42 years, Managing Director • B. Tech (Elec.) from IIT, Delhi and PGDM from IIM, Ahmedabad. • Joined Hathway Investments in 1993. Appointed MD of erstwhile H. & R. Johnson (India) Limited in 1998 • Past experience includes SBI Capital Markets. On the Board of various companies including Exide Industries, ING Vysya Life Insurance, Aptech, and Asianet Satellite Communications. • Mr. Ganesh Kaskar, 51 years, Executive Director • M. Tech (Civil) from IIT, Mumbai. • Joined erstwhile RMC Readymix (India) Pvt. Limited in 1996. Appointed ED of RMC Readymix (India) in 2001 • Past experience includes ACC and Tata Consulting Engineers

  35. Dividend History Note: An interim Dividend of Re. 1 per share (10%) has been declared in October 2010 for the year 2010-11

  36. Shareholding Pattern (As on 30.09.2010) Total Number of issued Shares: 503.36 million

  37. Disclaimer Disclaimer : Cautionary statement regarding forward – looking statements This presentation may contain certain forward – looking statements relating to the future business, development and economic performance. Such statements may be subject to a number of risks, uncertainties and other important factors, such as but not limited to (1) competitive pressures; (2) legislative and regulatory developments; (3) global, macroeconomic and political trends; (4) fluctuations in currency exchange rates and general financial market conditions; (5) delay or inability in obtaining approvals from authorities; (6) technical developments; (7) litigations; (8) adverse publicity and news coverage, which could cause actual development and results to differ materially from the statements made in this presentation. Prism Cement Limited assumes no obligation to update or alter forward – looking statements whether as a result of new information, future events or otherwise. 36

  38. THANK YOU

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