Investor Presentation February 2016 Contents 1 Journey over last - - PowerPoint PPT Presentation

Investor Presentation

February 2016

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Contents

Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

1 2 3 5 6

What Next

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Contents

Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

1 2 3 5 6

What Next

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Dalmia Bharat: Snapshot

Corporate Overview

• Third largest cement player in India
• 25 Million Tons of installed cement capacity
• 180.5 MW of captive power capacity
• Strong presence in South, East and North East
• More than 75 years of presence
• Listed on BSE and NSE

Dalmia Bharat Ltd. (DBL) 25 MnT (Cement), 180.5 MW (CPP)

100% OCL India Ltd. “OCL” KKR 100% 8.5% 75% * Calcom Cement India Ltd. “Calcom” * Adhunik Cement Ltd. “Adhunik” 76% 100% Dalmia Power Ltd. DCBPVL (99 MW) 26% * Dalmia Cement East Limited “Bokaro” 100% Dalmia Cement Bharat Ltd “DCBL” Corporate Office Delhi

Listed entities * Acquired entities

Asset Overview

74% DCBL OCL Calcom Adhunik DCEL Head Office

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Capacity over last 10 Years

2005 2010 2015 Installed Capacity: 1.2 MnT Installed Capacity: 9 MnT Installed Capacity: 25 MnT #1 plants in #1 states #5 plants in #3 states #11 plants in #8 states

Dalmiapuram Dalmiapuram Ariyalur Kadapa Kapilas Rajgangpur Meghalaya Lanka Bokaro Medinipur Belgaum Dalmiapuram Ariyalur Kadapa

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Our Markets

2005 2010 2015 7%

% Represents our Market share

4% 11%

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Our Growth has been with a judicious mix of

• rganic and inorganic expansions

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Organic Expansions

Organic growth from 1.2 MnT in 2006 to more than 11 MnT in 2015 Serves the entire South region including Maharashtra

1 2 3

Enjoys regional leadership position Set up the state of art plants at replacement costs less than industry average

4 5

Grown organically in Southern Region from 1 state to 3 states

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Inorganic expansion

Strengthening market share in existing markets Strategic fit to business model Geographical diversification in growing markets

1 2 3

Replicating operational efficiencies initiatives Reduced lead distance

4 5

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Board with a thrust on Corporate Governance

An Independent Board to Ensure High Standards of Corporate Governance

Pradeep Kumar Khaitan, Chairman, DBL

• Over 46 years of experience; A partner in Khaitan & Co., Solicitors and Advocates

G.N. Bajpai : Chairman, DCBL

• Former Chairman of SEBI and LIC

Sanjay Nayar: Board Member, DCBL

• CEO - KKR India
• Ex-Head Citibank India

Paul Hugentobler: Board Member, DCBL

• Ex-Member, Holcim Executive Committee

Jai Hari Dalmia: Board Member

• Masters in Electrical Engineering from University of Illinios, Urbana, Champagne
• Over 40 years of experience across industries

Yadu Hari Dalmia: Board Member

• A qualified Chartered Accountant
• Over 39 years of experience in Cement industry

Professionals / Independent Promoters

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…And a Strong Management Team

Judicious mix of experience and youth

Puneet Dalmia : Managing Director & Board Member

• B.tech from IIT Delhi; P.G. from IIM, Bangalore
• Over 11 years of experience in the cement industry
• Conceptualized the growth strategy and governance architecture for the Group and is spearheading the growth plans for

the Group Gautam Dalmia: Managing Director & Board Member

• B.S. and M.S. degrees in electrical engineering from Columbia University
• 15 years of experience in the cement and sugar industries
• Responsible for leading the operations and execution of cement projects besides providing leadership to the

commercial functions of the group Mahendra Singhi: Whole time Director & Group CEO – Cement

• Chartered Accountant & Science, Law Graduate.
• 38 years of experience in Cement Industry including 19 years with Shree Cement Ltd.
• Passion for efficiency, people management & sustainability.
• Member of Board of Governors of the National Council for Cement & Building Materials.
• Served as a leader of Indian Cement Sector Task Force for Energy Conservation, Ministry of Power we well as President of the

Rajasthan Cement Manufacturers Association.

• T. Venkatesan: Dy. Managing Director
• Chartered Accountant
• Over 31 yrs of experience in various sectors
• Expertise lies in accelerating growth of large businesses
• Ex-CEO Sterlite Group Copper Segment

Jayesh Doshi: Whole Time Director & Group CFO

• Chartered Accountant and a Law graduate from Bombay University
• Over 28 yrs of experience with 19 yrs experience in cement industry and other industries being pharma, shipping
• ffshore oil services & real estate

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Contents

Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

1 2 3 5 6

What Next

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Current Scenario

Current Scenario

Third largest player in India with regional leadership position Diversified locational advantages Premium Brand Positioning Moving to Sustainable Business Model Efficient Deployment of Capital

    

66.0 61.4 25.0 24.0 22.8 22.2 15.9 14.7 14.2 13.3 AV Birla H+L Dalmia Shree B K Birla Jaypee India Cement Ramco Chettinad Birla Corp. 14

Leadership Position by Capacity

National

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Diversified Locational Advantages

We are located where it matters!

Proximity to Input Sources Logistics savings vis-a-vis competitors in key markets

Lanka

Meghalaya Kadapa Ariyalur Belgaum Dalmiapuram Rajgangpur Bokaro Kapilas Road BCW

MRPL Tata Steel Kalinganagar

Plant sites Input sources Potential Sources

Bongaigan TPP 2.5 MW

14% 5% 7% 8% 6% 4% 15% 38% 0% 10% 20% 30% 40% Tamil Nadu Karnataka Kerala Orissa West Bengal Jharkhand Assam Meghalaya North East East South Lead Distance – 300 kms

South 47% East 41% NE 12%

Sales Mix – FY15

Cement Demand Growth

6% 13% 2% 5% 0% 2% 4% 6% 8% 10% 12% 14% FY14 FY15

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Moving towards Sustainability…..

Best practices of sustainability introduced Lesser use of mineral resources Lesser use of Fossil Fuel Conserve water Reduce usage of energy

    

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…..Resultant Effect

Power Consumed/T (Kwh) Power & Fuel Cost (Rs/T) Variable Cost (Rs//T) Continuous improvement in

• perating efficiencies

Commissioning of new clinker unit in North East would result in further improving efficiencies in FY16

967 941 1027 908 781 869 740 726 666 FY14 Q1'15 Q2'15 Q3'15 Q4'15 FY15 Q1'16 Q2'16 Q3'16 74 75 75 72 69 71 69 70 68 FY14 Q1'15 Q2'15 Q3'15 Q4'15 FY15 Q1'16 Q2'16 Q3'16 1647 1618 1658 1565 1520 1549 1391 1410 1333 FY14 Q1'15 Q2'15 Q3'15 Q4'15 FY15 Q1'16 Q2'16 Q3'16

Uniform Branding

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Premium Brand Positioning

Market Leader in core serving markets. Serving 18 states.

Launched Dalmia Brand across markets Improved Market Share Enjoys premium pricing

North East South East South

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Efficient Deployment of Capital

2010 2012 2015 2012 2014 Comparative Costs ($/T)

140 110 100 20 40 60 80 100 120 140 160 Present Replacement Cost Acquisition Our New Greenfield

• Present Replacement Cost – For setting up 1 MnT cement plant
• Acquisition – Average Cost for acquired units

(Adhunik/Calcom/Bokaro/OCL)

• Greenfield – Belgaum Cost

Expansions

Organic Inorganic

Kadapa/Ariyalur USD 85 / T Calcom USD 126 / Ton OCL USD 74/ T Adhunik USD 112/ T Jaypee Bokaro USD 90/ T 2015 Belgaum USD 100 / T

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Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

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What Next

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Aggregated Financials

10.12 10.78 FY14 FY15 Sales in MnT Sales in MnT Particulars (Rs. Cr.) Q3 FY15 Q3 FY16 9M FY15 9M FY16 Total Income 1,343 1,474 3,799 4,525 Operating Expenses 1,124 1,126 3,223 3,448 EBITDA 219 348 576 1,077 EBITDA Margin % 16% 24% 15% 24% Other Income 44 20 93 67 Depreciation 96 116 279 333 EBIT 167 252 390 811 Finance Cost 122 171 331 518 Profit Before Tax 45 81 53 293

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Aggregated Balance Sheet

(Rs. Cr.)

Particulars As on 30-Sep-15 As on 31-Mar-15

Equity Funds 3,925 3,840 Debt 8,260 8,487 Term Loan 7,535 7,805 Working Capital 725 682 Deferred Tax 493 401 TOTAL 12,678 12,728 Fixed Assets 9,838 9,702 Non Current Investments 104 108 Cash & Equivalents 2,145 2,112 Net Working Capital 591 806 TOTAL 12,678 12,728

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Contents

Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

1 2 3 5 6

What Next

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Debt Structure….Facilitating Cash Accumulations

Cost below 9.6% & floating….Distinct advantage for any equity holder! Optimum leverage….Long maturity with >61% repayment in last 6 years….

Group Debt Repayment (Rs. Cr.)

365 334 448 875 1,368 1,250 997 497 448 367 1,711

4% 4% 5% 10% 16% 14% 12% 6% 5% 4% 20% 0% 5% 10% 15% 20% 25%

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 - FY33

Repayments (Rs.In Crores) Repayment (%)

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Setting Benchmarks

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Summarizing…..

Asset Sweating

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Contents

Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

1 2 3 5 6

What Next

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Other Large & Mid-Cap Players 37% Small Players 17% Holcim 13% Ultratech 15% Jaypee 7% B K Birla 5% Dalmia 6% Top 5 Players 47%

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Indian Cement Industry Overview

 Second largest cement market in the world  Sustained growth of 7% in last five years  Low per capita consumption of ~200 kgs compared to world average of ~400 kgs  Significant consolidation lead to 49% capacity under control of top 5 players  Regional play due to high freight costs  Primarily bagged retail sales driven (65 %)  Location and branding plays a critical role

FY2015 : All India Capacity Distribution FY2009 : All India Capacity Distribution

Small Players 46% Other Large & Mid-Cap Players 9% Dalmia 3% ACC 10% Ultratech 10% Grasim 9% Ambuja 8% India Cements 5% Top 5 Players 42%

• 80% capacity under control of top 20 players

 DCBL #3 Pan-India Player

North 40% East 23% North East, 4% South 20% West (inc. Maha & Goa), 14%

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Housing Sector Demand Drivers

Urbanisation: India vs. other developing nations (2011)

31% 34% 51% 51% 78% 85% 0% 20% 40% 60% 80% 100% India Thailand China Indonesia Mexico Brazil

• No. of million plus cities in India

5 9 23 35 53 87 20 40 60 80 100 1951 1971 1991 2001 2011 2030

India Population (in Crore)

68.8% 31.2% 61.8% 38.2%

2011 2026E 121.1 Crore 139.9 Crore Sharp rise in nuclear families; Households with size less than 5 persons has increased to 74% in 2011 from 66% in 2001 – Census of India

>45% shortage in South, East & NE

All India Housing Demand in 2022 All India Housing Shortage

32% 68% 52% 46%

Urban Rural

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Infrastructure – Expected to Fuel Growth

Roads 20,000 km 20 MnT Railways 5000 km 14 MnT Hydel Power 10,330 MW 28 MnT Ports 354 MnT Capacity 35 MnT Irrigation Projects 100 MnT

Incremental Demand of 200 MnT by 2020

Proposed Capital Expenditure of USD 1 Trillion by 2020

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Infrastructure Sector Demand Drivers

Dedicated Freight Corridor

Mumbai Chennai Kolkata Delhi 1483 Km 1839 Km 1000 Km 260 Km

• Connecting all

Metro cities

• Huge investment in

the periphery of the corridor such as Industrial Parks and Townships and SEZ’s

• The Largest

Infrastructure Project in India

Metro Rail

Delhi (Phase III) Kolkata (Phase II) Chennai (Phase II) Mumbai (Phase II) Advanced stage of completion Under construction Work yet to start Mono Rail Projects Thiruvananthapuram Bengaluru

Roads

• [Currently, 2000 km
• f roads laid

annually]

• Acceleration

expected to 3000- 4000 kms annually

• Greater Government

focus seen for Concrete roads, going forward

2500 3500 5000 6000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 FY15E FY16E FY17E FY18E

kms

Ports

• 100% FDI: Automatic

route for port development projects

• 87 new port projects

sanctioned in the last 4 years; Investment

• f INR 430 billion
• SEZs to be

developed in close proximity to ports

16.7 42 Current 2020E

Total Investment (US$ BN)

300 800 2,500 Current 2020E 2030E

Current Length (kms)

703 545 1,229 1,457 560 352 943 815 500 1,000 1,500 2,000 2,500 Capacity Traffic Capacity Traffic Major Ports Non Major Ports

FY12 FY17E

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Slower Capacity Addition to Increase Utilisations

Planning to Execution

• Environmental clearances
• Forest clearances
• Mining lease
• Land acquisition
• Financial closure
• Talent procurement
• Ordering
• Construction

Conception Inception Execution 4 years 2.5 years

• Brand visibility
• Volatile pricing scenario
• Raw material availability
• Logistics Management

The replacement costs are up ~15% (CAGR)-currently at ~$ 140/T

Cement Prices (Rs./Bag) 33

.... And Stabilization of Cement Prices Expected

333 322 153 317 FY05 06 07 08 09 10 11 12 13 14 FY15 East (incl North East) South All India

80 92 90 99 108 114 123 136 149 164 177 197 224 242 257 261 268 8% 15%

• 2%

10% 9% 6% 8% 10% 10% 10% 8% 11% 13% 8% 6% 1% 3%

• 4%

1% 6% 11% 16% 21%

• 50

100 150 200 250 300 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY11 FY12 FY13 FY 14 FY 15 Demand (MnT) Growth

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Demand Supply Gap Narrowing

414 429 444 459 474 489 68% 71% 74% 77% 80% 84% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 360 380 400 420 440 460 480 500 FY15 FY16 FY17 FY18 FY19 FY20 Supply (MnT) Capacity Utilization

Narrowing demand-supply gap

CAGR Consumption Capacity FY00 - FY15 (15 Yr) 7% 9% FY05 - FY15 (10 Yr) 8% 10% FY10 - FY15 (05 Yr) 6% 7% FY15 – FY20E (05 Yr) 8% 3%

15 Year demand CAGR 7% 10 Year demand CAGR 8%

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Our Regions

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First phase of Smart Cities

11 out of 20 are in our served markets

Vishakhapatnam Pune Kochi Sholapur Devangere Coimbatore Kakinada Belagavi Guwahati Chennai Bhubaneswar

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South – Narrowing Demand Supply Gap

• Smart Cities – 35 smart cities to be developed in

Tamilnadu (6), Karnataka (7), Kerala (7), Telangana (5), AP (4) and Maharashtra (6).

• Amaravathi i.e. New Capital for AP – Situated near

Vijayawada-Guntur region.

• About $ 75 bn will be spent.
• First phase to be completed by June 2018.
• JNPT fourth container terminal – Port of Singapore

authority (PSA) signed Rs.8000 Cr. Agreement for development of JNPT fourth container terminal at Navi Mumbai.

• Transharbour Link – Distance of 35.6-km costing $1.3 bn

Capital Investment in next 5 yrs. Particulars Capacity Cost ($ bn) Expected Cement Demand (in MnT) Ports 19 no. 5.0 21.7 Power 19160 MW 18.3 14.9 Metro Projects 6 no. 11.7 7.5 Airports 17(1) 5.0 4.2 Steel 6 Mnt 5.0 0.8 Hydel 460 MW 0.3 0.7 Total 45.3 49.8 Upcoming Projects

Tamil Nadu Karnataka Kerala Goa

Bidar

Seemandhra

Bellary - 6 MnT

Telangana

6 7 7 5 4

Amaravathi

(Proposed Capital)

Maharashtra Hyderabad Metro Kochi Metro Bangalore Metro Metro Line 3 Mumbai Pune Metro &

• Intl. Airport

Nagpur Metro & Intl. Airport

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Navi Mumbai Intl. Airport JNPT fourth container terminal Hasan Note 1) Airports – Low cost (13), International (3), Domestic (1).

Capacity – Steel Plant

• No. of Smart Cities in a state

Elections in 2016 Ruled by NDA Govt International Airports Metro Projects Domestic Airport

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East – Expected to Continue Growing

• Coal Allocations – Total funds to be realized from

auctioning of 204 coal mines will be around $ 167 bn

• ut of which around 85% will be in east region.
• Railway Budget – $ 419 mn for Orissa i.e. 77% higher

then last year.

• Centre to provide Rs.1 lacs crore for Bihar ahead of

polls.

• Smart Cities – 18 Smart cities to be developed in WB

(5), Bihar (5), Orissa (5) and Jharkhand (3).

• East Freight Corridor – Connectivity b/w Ludhiana

and Kolkata, spread over distance of 1839 Kms, out of which 631 kms is in east region.

• AIIMS in Bihar

Capital Investment in next 5 yrs. Particulars Capacity Cost ($ bn) Expected Cement Demand (in MnT) Power 32115 MW 31.7 24.9 Ports 7 no. 5.0 20.0 Steel 36 Mnt 30.0 5.1 Hydel 160 MW 0.3 0.5 Airports 9 no. 0.8 0.6 Total 67.8 51.1

Steel Plants - Capacity in million tons. Low Cost Airports

• No. of Smart Cities in a state

Elections in 2016

Upcoming Projects

Orissa Chhattisgarh West Bengal Bihar Jharkhand POSCO Paradip (8 Mnt) Jindal -Patratu (6 Mnt) Visa Steel – Raigarh (2.5 Mnt) Jindal Steel - Raipur (7 Mnt) Jindal Steel - Angul (12.5 Mnt) Muzzaffarpur Hazaribag Chapra Bokaro Dhanbad Brahmpur Shahdol Kendujhar

Kolkata Ludhiana

5 5 5 3

Dharma Port (10,000 Cr.) Sasaram

East Freight Corridor Ruled by NDA Govt

The above table excludes investment on metros, railways & East freight corridor)

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North East – Huge Potential

• Rs 3000 Cr and Rs 1000 Cr specifically allocated for roads

and railways respectively.

• Smart Cities - 10 Smart Cities to be developed in Assam

(5), Sikkim (3) and Manipur (2).

• Upcoming Guwahati Metro – Spread over distance of 196

Km, Estimated cost Rs.1800 Cr.

• Indian institute of Science Education and Research (IISER)

in Nagaland.

• Centre for Film Production, Animation and Gaming in

Arunachal Pradesh.

• AIIMS in Assam

Capacity, no. and cost – Hydel Projects

Capital Investment in next 5 yrs. Particulars Capacity Cost ($ bn) Expected Cement Demand (in MnT) Hydel 5626 MW 6.7 12.7 Railways 5.0 10.8 Roads 6418 Kms 5.0 7.00 Power 951 MW 1.0 0.7 Airports 6 no. 0.5 0.4 Total 18.2 31.6

Metro Project Low Cost Airports

• No. of Smart Cities in a state

Elections in 2015/16

Arunachal Pradesh

Arunachal Pradesh 2904 MW (5) , 18844 Cr

Nagaland Manipur Mizoram

60 MW (1), 914 Cr

Meghalaya

40 MW (1), 461 Cr

Assam

Sikkim 2622 MW (10), 20271 Cr

Along Tezu Bomdila Tezpur Silchar Guwahati Metro Jorhat.

2 5 3

Upcoming Projects

• Due to upcoming capital investment in North East

in next 5 yrs., there will be incremental cement demand of around 5 Mnt every year.

268 Kgs 142 Kgs 133 Kgs 198 kgs

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Lowest per capita cement consumption in East..

Average All India per capita consumption is 208 kgs 295 Kgs

70 297 525 391 234 138 283 295 183 280 283 296 208 191 234 133 153 95 133 296

High Consumption > 250 Medium Consumption (200 to 250) Average Consumption (150 to 200) Lower Consumption < 150

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Contents

Journey over last decade Current Scenario Cement Industry & Our Region Financial Performance Improving Macro Indicators

1 2 3 5 6

What Next

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Improving Macro Fundamentals Coupled with…

Index for Industrial Production

2.5% 5.6%

• 2.7%

5.0%

• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% Jan-13 Jul-13 Jan-14 Jul-14 Feb-15

Fiscal Deficit Current Account Deficit India’s GDP Growth CPI Inflation Interest Rates (Repo Rates) India GDP Growth Stable Government

• Stable government with large majority
• Focused on governance, development, investments
• 3.99% of GDP in FY15 (4.5% in FY14)
• Target to reach 3.0% of GDP in FY18
• Down to 0.2% of GDP (quarter ended March 2015) from the

highs of 1.6% of GDP (quarter ended December 2014).

• Estimate for FY16: 7.9%
• India will be the world’s fastest growing economy by IMF
• Down to 5.17% for March 2015 from 8.25% in March 2014
• Down ward trend since start of CY2015
• Reduced to 7.25% (June 2015) from 8.0% (January 2014)

6.9% 7.3% 7.6% 7.9% 8.0% FY14 FY15 FY16E FY17E FY18E

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Structural Reforms

S&P BSE Sensex Subsidies Taxation FDI Limits Impetus to Investments Make in India / Smart Cities Others

• Rationalised subsidy policies being worked out with direct transfer
• f benefits
• Diesel prices deregulated
• Reduction in corporate tax rate from 30% to 25% in 4 years
• Deferment of GAAR
• Implementation of GST by April 2016
• Increased limits in insurance, defence, railways and liberalisation
• f FDI conditions in real estate
• Merger of FDI and FII limits
• Faster clearances to projects
• Coal block auctions completed and gas price subsidy policy

announced for power sector

• Land acquisition ordinances promulgated
• Focus on employment generation through Make in India
• Encourage investments in manufacturing sector
• 100 smart cities planned to accommodate increasing urbanisation
• Ease of doing business with reduced approvals
• Visa on arrival country list increase to 150 from 43 to encourage

tourism

• Fiscal federalism with higher allocation to states

CNX Nifty 100

18,865 19,380 22,386 26,630 27,957 26,155 Mar'13 Sep'13 Mar'14 Sep'14 Mar'15 Sep'15 5,683 5,622 7,181 7,906 8,520 7,949 Mar'13 Sep'13 Mar'14 Sep'14 Mar'15 Sep'15

thankyou

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