ACC LIMITED RESEARCH

EQUITY RESEARCH June 19, 2008

RESULTS REVIEW
Share Data Market Cap Price BSE Sensex Reuters Bloomberg Avg. Volume (52 Week) 52-Week High/Low Shares Outstanding Valuation Ratios (Consolidated) Year to 31 December EPS (Rs.) +/- (%) PER (x) EV/ tonnes (Rs.) EV/ EBITDA (x) Shareholding Pattern (%) Promoters FIIs Institutions Public & Others Relative Performance
1,400 1,200 1,000 800 600 400

ACC Limited
Supply constraints restricting growth
Rs. 120.1 bn Rs. 640.45 15,100.01 ACC.BO ACC IN 0.2 mn Rs. 1,315/590.1 187.6 mn

Hold

ACC Limiteds EBITDA margin nosedived 409 bps in Q108 because of a surge in raw material and fuel costs. However, net sales increased 9% yoy on the back of a higher sales volume. We reiterate our Hold rating on the stock due to the following reasons: Capacity constraint to limit growth: Since the Companys major expansion plans are scheduled to be completed in 2009, we believe that it will face a capacity constraint in 2008. ACC is working at a 90% utilisation rate, and blended cement constitutes approximately 90% of the total

2008E 66.6 (2.1%) 9.6x 5,664 6.2x

2009E 66.8 0.4% 9.6x 5,221 6.2x

cement manufactured, which leave little scope for an increase in cement production without capacity expansion. Thus, we believe that top line will grow by approx. 3% in CY08E, however for CY09E it is expected to be 8%. Escalating costs and potentially lower realisation rate will likely pressurise margins: During Q108, raw material and power & fuel costs soared 31% yoy and 25% yoy, respectively, a trend that is likely to continue

43 15 21 20

due to persistent inflationary pressures. Also, during the quarter, average realisation rate witnessed a fall of 2% yoy. Going forward, factors such as government price control policies and a likely excess supply scenario will further keep realisations under pressure. Thus, we believe that EBITDA margin, which dropped 409 bps in the quarter, will reduce further. ACC is currently trading at a P/E of 9.6x CY08E. We have valued the Company using DCF analysis. Based on our analysis and valuation, we believe that the stock is fairly valued. Hence, we reiterate our Hold rating.
Key Figures (Standalone) Quarterly Data Q1'07 Q4'07 Q1'08 YoY% QoQ%

Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08

(Figures in Rs. mn, except per share data) Net Sales EBITDA Adj. Net Profit Margins(%) EBITDA NPM Per Share Data (Rs.) Adj. EPS 18.6 14.2 17.6 (5%) 24% 30% 21% 23% 15% 26% 18% 16,750 5,073 3,499 17,855 4,171 2,724 17,958 4,706 3,312 7% (7%) (5%) 1% 13% 22%

ACC

Rebased BSE Index

Please see the end of the report for disclaimer and disclosures.

-1-

ACC LIMITED RESEARCH

EQUITY RESEARCH Ongoing Expansion Projects
Ongoing/Proposed Expansion Plans Madukkarai grinding plant New Wadi grinding plant Bargarh expansion New Wadi expansion Chanda new line
Source: Company data

June 19, 2008

Capacity (mt) 0.22 0.60 1.18 3.00 3.00

Expected Completion 2008 2008 2009 2009 2010

Result Highlights Volumes leading to sales growth ACCs net revenue increased 9% yoy on the back of a higher sales volume, which improved 10% yoy from 4.9 million tonnes in Q107 to 5.4 million Sales volume increased by 10% yoy. tonnes in Q108. The Company has transferred its Ready-Mix Concrete (RMC) business to its wholly-owned subsidiary with effect from January 1, 2008. After adjusting the previous years revenue for the RMC business, net sales increased 12.6% yoy.

Falling realisations The average realisation rate fell 2% yoy during the quarter, in contrast to a 2% yoy increase in the previous quarter.

Contracting margins EBITDA margin dropped 409 bps to 26% in Q108, mainly due to an increase in raw material and power & fuel costs. Raw material costs rose 30.6% yoy, while power and fuel costs increased 25% yoy due to a considerable increase in coal prices. During the quarter, an exceptional profit of Rs.369 mn, resulting from the disposal of the investment in the Companys wholly-owned subsidiary ACC Machinery Company Ltd, resulted in a 1% increase in reported net profit. Adjusted net profit, however, fell 5% yoy.

Please see the end of the report for disclaimer and disclosures.

-2-

ACC LIMITED RESEARCH

EQUITY RESEARCH June 19, 2008

Quarterly data Sales Volume in mt Average Realisation Rate (Rs.) Cost per tonne (Rs.) Raw Material consumed Power and fuel cost Freight Charges Staff Cost Other Expenditure Total Expenditure EBITDA
Source: Company data

Q1'07 4.9 3,397

Q4'07 5.4 3,294

Q1'08 5.4 3,325

YoY% 10% (2%)

QoQ% (0%) 1%

381 534 510 149 795 2,368 1,029

401 588 412 162 962 2,525 770

454 609 451 147 793 2,454 871

19% 14% (12%) (1%) (0%) 4% (15%)

13% 4% 9% (9%) (18%) (3%) 13%

Key Events The Company has transferred the RMC business to its wholly owned subsidiary ACC Concrete Limited with effect from Jan 1, 2008. The Company has sold its investment in ACC Machinery Ltd., a whollyowned subsidiary. Key Risks The following factors can pose a threat to our rating: Any delay in expanding the capacity Reduced efficiency Any supply glut in the market .

Outlook Cement consumption growth is expected to remain stable in the medium term due to the expanding infrastructure, an increase in housing construction activity, and the various upcoming power projects. However, Rising operating costs are a major concern according to the Cement Manufacturers Association, the industry is likely to create an additional capacity of 32 million tonnes in FY09E, resulting in excess supply. This demand-supply mismatch is likely to moderate cement prices in FY09E. Moreover, the governments attempt to keep cement

Please see the end of the report for disclaimer and disclosures.

-3-

ACC LIMITED RESEARCH

EQUITY RESEARCH June 19, 2008 prices under check further reduces the possibility of an increase in the average realization rate. ACC is well positioned to capture a sizeable share of the rising demand as it is amongst the top players and has a strong and diversified market presence. However, the Company will be able to improve its top-line growth only next year as its expansion plans are scheduled to complete in the middle of CY09. We have estimated top - line growth of 3% and 8% for CY08E and CY09E, respectively.

Meanwhile, rising costs and a falling realisation rate are expected to keep margins under pressure.

Valuation At the current market price, the forward P/E of the Company stands at 9.6x for both CY08E and CY09E, and on the basis of EV/EBITDA, the Company is trading at 6.2x for both CY08E and CY09E. We have valued the Company using DCF analysis, assuming cost of equity at 14.4% and terminal growth rate of 5%. Our fair value estimate is Rs.716 relative to current market price of Rs. 641. This reflects a potential upside of 12% and therefore we reiterate our Hold rating.
Key Figures (Consolidated) Year to December CY05* CY06 CY07 CY08E CY09E CAGR (%) (CY07-09E) 20.0 70,674 19,371 12,792 20.7 72,601 18,824 12,479 22.5 78,764 18,972 12,524 6.2% 5.6% (1.0%) (1.1%) (Figures in Rs mn, except per share data) Sales Vol (mn tonnes) Net Sales EBITDA Net Profit Margins(%) EBITDA NPM Per Share Data (Rs.) Adj. EPS PER (x) 16.8 31.7x 60.1 18.1x 68.0 9.4x 66.6 9.6x 66.8 9.6x (0.9%) 16.6% 9.3% 28.7% 19.3% 27.4% 18.1% 25.9% 17.2% 24.1% 15.9% 17.5 33,808 5,602 3,153 18.9 58,512 16,781 11,298

* Calendar Year 2005 figures is for 9 months

Please see the end of the report for disclaimer and disclosures.

-4-

ACC LIMITED RESEARCH

EQUITY RESEARCH June 19, 2008

Disclaimer
This report is not for public distribution and is only for private circulation and use. The Report should not be reproduced or redistributed to any other person or person(s) in any form. No action is solicited on the basis of the contents of this report. This material is for the general information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be considered as an offer to sell or the solicitation of an offer to buy any stock or derivative in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Indiabulls Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. You are advised to independently evaluate the investments and strategies discussed herein and also seek the advice of your financial adviser. Past performance is not a guide for future performance. The value of, and income from investments may vary because of changes in the macro and micro economic conditions. Past performance is not necessarily a guide to future performance. This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Any opinions expressed here in reflect judgments at this date and are subject to change without notice. Indiabulls Securities Limited (ISL) and any/all of its group companies or directors or employees reserves its right to suspend the publication of this Report and are not under any obligation to tell you when opinions or information in this report change. In addition, ISL has no obligation to continue to publish reports on all the stocks currently under its coverage or to notify you in the event it terminates its coverage. Neither Indiabulls Securities Limited nor any of its affiliates, associates, directors or employees shall in any way be responsible for any loss or damage that may arise to any person from any error in the information contained in this report. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject stock and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. No part of this material may be duplicated in any form and/or redistributed without Indiabulls Securities Limited prior written consent. The information given herein should be treated as only factor, while making investment decision. The report does not provide individually tailor-made investment advice. Indiabulls Securities Limited recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. Indiabulls Securities Limited shall not be responsible for any transaction conducted based on the information given in this report, which is in violation of rules and regulations of National Stock Exchange or Bombay Stock Exchange.

Indiabulls (H.O.), Plot No- 448-451, Udyog Vihar, Phase - V, Gurgaon - 122 001, Haryana. Ph: (0124) 3989555, 3989666

-5-