The Development Of A Stake In India Baron Luc Bertrand Ac

Ackermans & van Haaren INVESTING IN INDIA

A Presentation By Ace Global

INDIA : Growth through economic liberalisation Source: RBI Statistics Current Period Post Reform Period Pre Reform Period In spite of the Global slowdown, the Economy is expected to grow at a modest 6.5 % & 6.7 % during FY 09 & FY 10 External debt mainly corporate commercial borrowings

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

How the meltdown affected India... Govt. Source: RBI Statistics ,Press Article Decline in exports resulted in layoffs in labour intensive sectors Export Growth % Soaring Oil Prices High inflation, Govt. subsidies Fiscal deficits rose to 6% (target 3%)

How the meltdown affected India … Pvt. sector. Source: RBI Statistics , Press Article 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. Govt. swiftly arrested debt flows into construction, real estate sectors based on subprime links and inflation effects.

US, EU and Japan Source: IMF, Respective countries official government sources Recovery not likely before 2010 New drivers of global growth? BRICs

The short term outlook on BRICs Source: IMF, Respective countries official government sources
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 .

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.

India to recover in Q3 2009 Source: IMF, Respective countries official government sources 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

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

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 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 Household income brackets 2005 E 2015 F 2025 F Number of Households, (in million) Aggregate disposable income–2000 (in INR trillion)

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.

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

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

Sagar Cements Limited Corporate Presentation May 2009

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.
Sagar Cements Limited

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
Source : Industry reports, May 2007
Phase III
(2006 onwards)
Infrastructure
Commercial
Malls
SEZ
Residential
Sagar Cements Limited Low per capita consumption points to significant potential for future growth Demand growth continuing unabated…

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 Source : Enam Research, CMA,NCAER Sagar Cements Limited Significant Capacity addition Required Capacity utilizations at a high

… Capacity creation lagging behind
Additional capacity of over 100 mt required by 2011 to meet incremental demand
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
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 Sagar Cements Limited Capacity additions lag demand growth Demand Supply mismatch leading to improved prices

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
Plant located in close proximity to Major Markets.
Average Lead Distance of only 450 kms
Very well connected to various Locations and Ports .
Sagar Cements Limited           Access to Raw Materials / Energy Sources Proximity to Major Markets Strategically located  Major Markets  Coal Mines  Plant Location  Fly Ash Source

Efficient Cement Producer Continuous improvement in operating efficiencies Sagar Cements Limited Sustenance of average production cost despite rising input costs Consumption per unit of Production

Strong Sales and Distribution Network Balanced Product Mix & Good Brand Equity
Dealers – 575
Sub Dealers – 1500
Wholesalers – 25
Distribution / Consignment Agents - 10
Sagar Cements Limited Sales & Distribution Network Good Brand Equity Bus Shelter Bus Paintings Shop Paintings Wall Paintings Cab Paintings

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.
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
Sagar Cements Limited Processes Experience & Technical Knowhow

Financials Profit set to more than Triple Sagar Cements Limited Sales Profit EBIDTA

Financials Net worth of the company to more than triple in 3 Years Sagar Cements Limited Net worth Capital Employed Debt

Financials Sagar Cements Limited Debt-Equity Ratio ROE % ROCE %

Financials #1 as on 31 st March 2009 Sagar Cements Limited Shareholding Pattern #1 Share price Movement in BSE Earnings per Share (EPS) 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

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
Continuing to implement measures to reduce costs
Sustaining high utilization levels
Maximizing price realizations
Sagar Cements Limited 
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
Tanzania Cement Company Key Success factors Karnataka Cement Plant Oman Cement Plant  

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
Sagar Cements Limited

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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