ACC

It gives me immense pleasure to welcome you 
 to the 71 Annual General Meeting of your Company. 
 I start by introducing you to new members of the
 management team at ACC and explain certain important
 changes in the top management of your Company
 Mr. M L Narula is set to complete his st extended 
 term as Managing Director of your Company 
 on March 31 this year. He will be succeeded by
 Mr. Sumit Banerjee, CEO Designate and
 Director with effect from April 1, 2007.                                                                    
         
 As we stand at the brink of Mr. Narula's retirement, 
 I would like to share with you some highlights 
 of his illustrious career. His has been a long and
 meritorious stint in the service of your Company,
 a stay of more than fortyfour years. Mr. Narula 
 has held various positions including that of
 Wholetime Director since April 1996 and as Managing 
 Director from December 2002 onwards.
 
 Mr. Narula joined ACC in 1963 as a junior engineer. 
 His engineering skills, his keen eye for innovation 
 and impeccable common sense helped him on his
 way up the ladder. The career path of Mr. 
 M L Narula serves as an inspiration to his younger
 colleagues in ACC. With the ACC ship now in full
 sail, Mr. Narula is all set to make way for his
 worthy successor. Mr. Sumit Banerjee is appointed 
 as the CEO Designate st and a Director on the Board 
 from 1 January 2007 and will take over as Managing 
 Director on April 1, 2007.The track record of
 Mr. Sumit Banerjee is impressive. A B.Tech (Hons) in
 Mechanical Engineering from IIT Kharagpur, 
 he joined Larsen & Toubro Limited (L & T) where 
 he was engaged in sales and execution of projects 
 in steel and energy sectors. He moved to the Indal 
 and Hindalco group where he was Project Manager 
 for implementation of their power project at
 During his tenure as Managing Director, the performance
 of your Company has been consistently outstanding. 
 Many important milestones were crossed under his 
 stewardship – ACC's turnover crossed the US$ 
 1 billion mark, yearly production exceeded 
 18 million tonnes and profits grew
 beyond Rs. 1,400 crore in 2006.
 
 Hirakud. He was appointed Chief Executive of 
 Sheet Business one of Indal's
 Strategic Business Units. From 2004 as President
 Foils & Wheels,Mr. Banerjee headed the integrated 
 Foil/Packaging and Wheel Businesses
 of Hindalco and Indal. He then joined Tube 
 Investments of India Limited as
 Managing Director in April 2006. His strong 
 background in engineering will
 prove useful in managing your Company
 .
 I take this opportunity to formally welcome 
 the incumbent CEO of your Company Mr Sumit Banerjee, 
 on behalf of all of us. We wish him all success
 in his new assignment.
 
 Cement Industry
 
 The Cement Industry has played a pivotal role
 in revving up the Indian Economy by maintaining 
 an impressive rate of growth in the last three
 years. In the calendar year 2006, the industry 
 witnessed an imposing growth of 11.3 percent
 as compared to 9.4 percent in the preceding year,
 with capacity utilization well over 90 per cent.
 It could have been even higher, had infrastructure 
 growth been upto the expected level. Housing
 sector has remained the largest source for cement demand
 .
 The industry has sustained a growth of 8 percent 
 CAGR for the last one-anda- half decades. This growth 
 is both quantitative and qualitative, as our
 cement is at par with the best in the world. India
 maintained its position as the second largest cement
 producer in the world. Indian cement further
 enhanced its status in the global market, when the 
 export of cement and clinker crossed the 10 million-tonne mark
 last year.
 
 Though the outlook for the Indian Cement Industry 
 depicts a bright picture,there are some lingering 
 concerns. Containing the cost-push to maintain
 competitiveness and profitability of the industry in
 the long term will be abig challenge. Energy continues
 to worry us. I fear that the availability and
 price of coal will require close coordination with 
 Government.
 
 Capital investment in the industry is likely to 
 rise significantly. Currently the industry is able 
 to finance a substantial part of capital expenditure 
 through internal generation. Supply of machinery and 
 equipment on schedule has also not been reliable.
 Both these factors can affect capacity expansion
 projects.
 
 The production of blended cements, particularly
 fly ash based cement,continued to grow in 2006 as well. 
 The availability of good quality fly ash is 23
 Coal and Energy The Cement Industry receives coa
 through long term linkages. Currently
 due to the gap between the demand and supply of coal,
 Ministry of Coal is not sanctioning linkages to new 
 capacity which is adversely affecting the
 Cement Industry.
 
 The situation becomes all the more difficult,
 as the Ministry of Coal is supplying only 80 percent 
 of coal requirements of the Cement Industry
 through Fuel Supply Agreements (FSAs) while cement 
 plants may have to procure the rest through other channels.
 As cement is a continuous process,not uniform across
 the country. There are locations where fly ash is not
 adequately available or where its usage is not viable. 
 Last year I mentioned that many government departments 
 do not accept blended cements. Thatposition still 
 continues though some of the departments have accepted
 the use of blended cements.In sum, I expect that 
 the industry will perform well during 2007 with
 demand likely to grow at about 9 to 10 percent. 
 The demand supply scenario will be balanced in most regions,
 though some regions may experience seasonal tightness.
 I believe we should all be appreciative of the
 Government, as a target of 8 to 9 percent growth has 
 been aimed for in the XI Plan, and the cement industry 
 is an integral part of the core sector
 industries. Now, the onus is upon us to live up to the
 expectations and endure with our excellent performance
 to embark upon newer horizons and reach greater heights.
 
 Taxes and Duties
 
 Cement remains the highest taxed amongst all 
 the essential infrastructure inputs in India. Various 
 government taxes and duties put together
 constitute over 70 percent of the ex-factory price. 
 This is exorbitant when compared with the 17 countries
 in the Asia Pacific region where the average
 incidence of all taxes on cement is just 11.4 percent
 with the highest rate being in Sri Lanka at 20 percent.
 Yet it is an irony that cement is an essential
 commodity required by all sections of society, 
 including the common man. Cement Industry is a major
 contributor to the Exchequer with excise duty
 alone working out to be over Rs.5,500 crores annually. 
 As India takes decisive steps towards further 
 globalisation, it is hoped that the incidence
 of taxation on cement will also reflect the same 
 moderate rate that prevails in other countries.
 
 Coal and Energy
 
 the industry cannot depend for any part of its 
 supplies on uncertain procurement linkages.
 Cement Industry is largely dependant on captive power
 generation as the power availability situation is grim in most cement-producing states, both in terms of
quality
 and quantity. Most cement plants have been compelled 
 to make huge investments to install captive power plants. 
 To make matters worse, some state governments are also 
 imposing taxes and duties on these captive power plants.
 Though coal production is slated to grow, there are 
 indications that the demand supply mismatch will
 not be solved in the near future. Last year I
 had appealed for speeding up the process of 
 allotting coal blocks to cement producers for
 captive mining. There has been no positive development
 on this front.
 Customer Service Initiatives
 
 In the last few years, your Company took visible 
 steps to become more customer-focused and appreciably 
 increased the level of services to customers.
 A host of new customer services have been introduced 
 to assist customers in selected cities and towns 
 across the country. These include site visits for 
 inspection and guidance, testing and aides for
 customers. Most of these services targeted
 small individual home builders who constitute a large
 group of our end-users.Your Company has set up 
 ACC Help Centres in several cities to provide basic
 information and guidance to customers on various 
 home building-related procedures. An interactive 
 website was launched primarily for the benefit of
 small retail consumers and home builders.
 The site provides online inputs ona host of useful 
 topics related to home building.
 
 Your Company conducted exhaustive market surveys 
 to understand the perception of customers and assess 
 its brand image. You will be happy to note
 that a brand equity study carried out by a well-known 
 market research firm of global repute indicated
 that ACC is the most preferred and recommended
 brand of cement in India. The brand stood way 
 ahead of all other competitors
 in this comparative analysis.
 
 Modernization / Expansion Projects
 
 The total annual capacity of your Company stood at
 19.91million tonnes at the close of the year. 
 Last year we completed the project for augmentation of
 clinkering and cement grinding in Gagal Unit II 
 after which the capacity at Gagal increased to 
 4.4 million tonnes per annum (MTPA). The expansion and
 modernization of Lakheri Cement Works along with 
 the installation of a new 25 MW Captive Power 
 Plant is scheduled for commissioning in the first
 quarter of 2007. Other projects scheduled to be 
 completed in 2007 include grinding augmentation at 
 Tikaria, Kymore, and Wadi. After all these projects
 are completed, the total cement capacity of your 
 Company will increase to about 23.10 MTPA by 
 the end of 2007.
 
 In 2008 we expect to complete augmentation of
 cement grinding capacity at Madukkarai by 0.22 MTPA.
 The expansion project at Bargarh, together with
 the establishment of a 30 MW Captive Power Plant,
 will also go on stream next year raising the capacity 
 of the plant to 2.14 MTPA. 
 
 Recently the Board approved capital outlay of
 Rs. 1,487 crore to increase the clinkering capacity 
 at the New Wadi Plant with additional cement grinding
 facilities in Karnataka and a captive power plant 
 of 50 MW capacity. This project is likely to go on
 stream in 2009 and will enhance our cement capacity
 in the state by 3 MTPA. With this the capacity of 
 your Company will rise to
 27.50 MTPA by the end of 2009.
 
 These projects would enable your Company to cater
 to the varied requirements of the cement market 
 and also help in maintaining its distinct
 position across all parts of the country. 
 It will also enhance the efficiency and
 productivity of our plants in the country.
 
 Ready Mix Concrete
 
 The Ready Mix Concrete Business of your Company 
 picked up its growth momentum. Sales volume and
 turnover grew by 18 percent and 36 percent
 respectively. Ready Mix Concrete (RMX) is 
 recognized as being among the fastest growing
 industries in the country. This rapid growth is 
 fuelled by the construction of major institutional
 and infrastructure projects and the high
 demand for commercial and residential property in
 major metropolises as well as in tier-II cities.
 The potential and scope for future growth of this 
 industry is enormous. In the developed world,
 construction industry consumes as much as 70 percent of
 cement through the use of Ready Mix Concrete (RMX). 
 The overall usage of RMX in India is still quite 
 low at about 2.5 percent but it is increasing rapidly.
 In many of our large cities, more than 20 percent
 of cement consumption is already consumed
 in the form of RMX.
 
 Ready Mix Concrete will be an important focus 
 area for your Company in the years to come. 
 Your Company has drawn up an ambitious growth 
 plan for this business to avail the growing
 opportunities in this field and has taken steps to
 create the necessary organization structure required 
 to achieve this growth.
 
 Overseas Contracts
 
 Your Company has been in contract with Yanbu 
 Cement Company for the operations and management 
 of their large cement plant at Yanbu in the
 Kingdom of Saudi Arabia for the twenty-eighth year 
 of a successful relationship. The consultancy assignment 
 with Dangote Industries, a leading group in Nigeria,
 for their cement plants at Obajana and Benue has
 progressed satisfactorily. Your Company entered a 
 new agreement with Mugher Cement Enterprises of
 Ethiopia to provide consultancy for their
 proposed 3000 TPD Greenfield cement project. 
 Likewise, your Company extended its services to other
 clients in Africa and West Asia.
 
 Connect India
 
 Your Company implemented an ERP system called
 CONNECT India. Using SAP software, the project 
 has standardized the Cement and Ready Mix Concrete
 business with all operations, locations and transactions 
 being fully integrated in a manner that is on-line
 with updated data and information. This new
 system will greatly facilitate day-to-day operations 
 and decision-making. Project CONNECT India incorporates
 tighter controls through well-defined authorizations
 and rigid systems that in turn will help inculcate
 even better governance in business processes.
 This system enables an enhanced level of internal 
 control as envisaged under Clause 49 of Listing
 Agreement for Corporate Governance Compliances.
 In order to ensure the project's successful 
 implementation, training and induction into the new 
 system was undertaken on an unprecedented scale.
 
 Sustainable Development
 
 In the last year, your Company initiated several 
 new activities to emphasize its commitment to the
 economic, environmental  and social sustainability
 of all its stakeholders. The thrust on sustainable 
 development was strengthened with the formation of 
 dedicated teams at the corporate office and units to
 oversee and coordinate activities relating to Alternate
 Fuels and Raw Materials, corporate social responsibility 
 and occupational health and safety (OH&S). Salient
 among the measures taken by these new departments 
 were a detailed assessment of community needs, 
 a corporate policy and strategy to
 
 Alternate Fuels & Raw Materials
 
 Your Company has embarked wholeheartedly on a 
 new path to promote the use of Alternate Fuels
 and Raw Materials (AFR) and provide a total
 solution to the waste generators of the country
 through co-processing of all types of waste in 
 the cement process.This forms an essential 
 part of your Company's contribution to
 sustainable development and an effective means
 of providing service to the waste generators, 
 conserving the environment and our mineral resources
 The AFR programme includes a determined
 quest to offer practical and better ways of disposing 
 of industrial and support the national effort against 
 HIV/AIDS, the introduction of Waste management services 
 and the introduction of a new safety culture.
 Your Company is closely interacting with Government
 and expert bodies to promote co-processing of
 waste materials. Your Company has also demonstrated keen 
 interest in expressing its voice in Sustainability matters
 at a global level. Your Company is an active member
 of the Cement Task Force of the Asia Pacific six 
 nation partnership (APP6) for reducing Green 
 House Gases. Recently your Company co-sponsored 
 the Delhi Sustainable Development Summit which 
 was organized by The Energy Resources
 Institute (TERI) and the World Business Council 
 for Sustainable Development.The Cement
 Sustainability Initiative (CSI) of the World 
 Business Council for Sustainable Development 
 (WBCSD) organized a special CEO forum at this
 event to discuss how to make use of its international 
 practice and experience within the large and 
 growing Indian cement sector. Your Company 
 presented papers at this forum on Indian Cement 
 scenario on Clean Development Mechanisms and
 Opportunities for Co-processing of Waste in 
 Cement plants. As a corollary to this event, 
 it was decided that Cement Manufacturers'
 Association (CMA) and TERI could partner to
 formalize this initiative in India
 particularly with a view to explore ways to 
 improve the Cement Industry's climate and energy 
 impacts through increased usage of blended cement and
 alternate fuels. Your Company will participate 
 in this initiative with enthusiasm.
 Your Company has made notable strides in the 
 areas of Alternate Fuels and
 Raw Materials, Occupational Health and Safety, 
 Community Development and Support to the National
 Effort against HIV/AIDS, highlights of which I am
 pleased to share with you here.municipal wastes 
 through co-processing in cement kilns, dryers
 and Captive Power Plants. Your Company has drawn 
 from the global experience and expertise of the 
 Holcim Group in this field.Occupational Health 
 & Safety Your Company is deeply committed to 
 provide a safe and8
 and healthy work environment to all its employees
 and contractors. Occupational Health and Safety
 (OH&S) received renewed focus and the function 
 was enriched with several valuable inputs from
 Safety practices of the Holcim Group. During the 
 year, an Apex OH&S Committee was constituted 
 which is headed by the Managing Director and monitors 
 the proper implementation of the Company's OH&S 
 policies at each of the plants. Your Company
 redoubled its efforts to achieve excellence in 
 safety performance across all its operations 
 with special attention to improving safety
 related behaviour and actions of employees at 
 all levels and across all functions and units of 
 the organization.Your Company takes a “Zero tolerance” 
 stance on all health and safety related behaviour
 Mechanisms for monitoring activities related to health,
 hygiene and safety have been set up at every
 plant. These include strict rules and procedures 
 to prevent mishaps. Advanced medical facilities, 
 qualified doctors and effective monitoring devices 
 are available at every plant to ensure
 workplace hygiene and good occupational health 
 and emergency care.Safety awareness and Behaviourial
 Safety training programmes and workshops are organized
 regularly to educate and encourage
 employees to take adequate precautions to avoid
 unsafe practices and minimize risks.
 
 Community Development
 
 Your Company has demonstrated the practices 
 of being a Good Corporate Citizen from the 
 early years of its inception. In particular
 your Company has focused on the community that 
 lives near its factories and undertaken a wide 
 range of activities to improve the
 living conditions of the less privileged classes 
 mong them. These include education, healthcare,
 vocational guidance and building rural infrastructure
 Last year, your Company initiated research to
 assess the basic needs of these local communities 
 and their perceptions of the impact of various 
 community development schemes implemented in
 recent years. Two such studies were
 conducted during the year with the help of external
 agencies of repute. The research findings will 
 help enhance the effectiveness of
 development schemes in consultation with the 
 target community.
 
 Combating HIV/AIDS
 
 Your Company stepped forward to play a proactive 
 role in the nationwide effort against the spread of
 HIV/AIDS that is recognized as being one of the 
 country's most important public health issues. As
 a first step, your Company announced a Workplace
 policy for HIV/AIDS to guarantee and safeguard the
 fundamental human rights of employees affected by
 this virus while enunciating care for
 their treatment. The policy includes awareness 
 programmes for the benefit of employees and their 
 families as well as for the community around us.
 
 Another important initiative by your Company
 was the establishment of an Anti Retroviral Treatment 
 (ART) Centre for the treatment of persons affected 
 with HIV/AIDS. The center is located
 at Wadi in Karnataka and is now operational. The
 centre provides voluntary counseling and testing 
 and has state-of-the art equipment including a 
 CD4/CD8 cell counting machine that is critical in 
 HIV testing. Your Company aims to operate the centre 
 as a world-class facility catering to the general 
 public living in Wadi and surrounding areas. 
 It is a matter of pride that your Company became
 the first in the Indian corporate sector to establish 
 an ART centre of this kind.In another development,
 your Company signed a memorandum of understanding 
 with Christian Medical College (CMC) Vellore to
 cooperate with them in combating the HIV/AIDS virus. 
 This partnership will leverage the expertise of a
 distinguished medical institution like the CMC to
 help draw up similar programmes to
 create awareness, facilitate treatment and tackle 
 the spread of the virus in Tamil Nadu which has 
 the country's highest prevalence.
 
 Good Corporate Citizen Award
 
 The Bombay Chamber of Commerce and Industry (BCCI)
 selected ACC as the winner of its Good Corporate 
 Citizen Award for the year 2005 - 2006. The
 citation singled out your Company as being an 
 organization that “has always reached out beyond
 its business interests while pursuing the objective of
 creation of a better society”. According to the 
 Chamber's announcement, ACC's consistency in 
 terms of business performance, employee welfare,
 customer satisfaction and social investment were 
 the key differentiators,which made it the most 
 suited candidate for the award. Awards such as this
 one are cherished with special satisfaction because 
 they encourage us to become more involved with 
 the world around us.Reorganization
 Your Company adopted a new organization structure 
 that was drawn in consultation with The Boston
 Consulting Group. This was done to make your
 Company more customer-focused and responsive to 
 the external environment, and in addition to the 
 core business of cement, to facilitate
 sharper focus on certain new thrust areas for the
 organisation such as the growth of RMX business,
 pursuit of technical excellence and sustainable
 development.
 
 Synergies with Holcim
 
 The association with the Holcim Group continued 
 to be valuable. Close interactions between our
 employees enabled your Company to acquire
 knowledge in a host of new areas and create mutual 
 synergies. Of these the most critical initiative 
 has been in the area of Information Technology
 comprising ERP implementation of a SAP-based software
 package which Ihave already described. Other
 areas in which significant expertise was
 acquired included a better understanding of logistics
 and supply chain management, product portfolio management,
 project management
 training, management of capital expenditure projects
 and quarry scheduling and optimization.
 
 Macro-economic Outlook
 
 India's image continues to soar in the global
 scenario. In recent years, the world watched the
 economic awakening of India and  wondered if the
 slumbering giant could follow in the footsteps of China
 There are few doubts now. During 2006, the 
 Indian economy firmly moved centre stage with
 9.1 percent GDP growth in the first half of the 2006-07 
 fiscal.this was no flash in the pan. 
 The economy has grown at above 8 percent in six
 of the last seven quarters, and the so-called 'Hindu 
 rate of growth' may well become a distant memory. 
 In 2006 Indian companies raised  billion in
 domestic and overseas markets, about 66 percent higher
 than in 2005. Bank credit expanded by over 30 percent,
 for the third consecutive year.On the geopolitical front
 the country made important strides. Last year's
 nuclear cooperation agreement with the US will pave the 
 way to meet some of the energy shortfall that could
 hamper economic development in large
 parts of the country. Trade and investments instead of
 territorial disputes are increasingly defining our 
 relations with China.These headlines are encouraging,
 but there are worrying signs on the horizon.
 Our infrastructure is grossly inadequate and bursting 
 at the seams. Inflation has risen, and there is little
 to indicate that our burgeoning energy
 requirements will be met soon. Some analysts fear that 
 the booming housing market seems to have reached 
 what appear to be unsustainable levels in
 many regions. The current account has moved firmly 
 into deficit. The RBI recently acknowledged the risk 
 of overheating and has been steadily tightening the
 monetary policy.There are long-abiding constraints
 that need to be addressed if we are going
 to sustain this recent momentum. Three, in particular,
 bear mention, and are intimately connected - poverty,
 unemployment and education. Over a third of
 this country still lives on just  a day. 
 The sun is the only thing that shines in
 their India. Such numbing poverty can be alleviated
 by encouraging investments to rejuvenate the 
 agricultural sector, by investing in industrial
 activity that can provide employment and by investing 
 in the basic education that enables such employment.
 But if we continue to take the right path and the right
 decisions that meld social justice and economic reforms,
 the prospects for this great country are very bright. 
 I have no doubt that our leadership will not fail 
 us in steering the economy in its proper course. 
 Let us all pledge to support this task.Conclusion
 There are many visionaries, many dreamers, many
 aspirants, but at the end of the day it is your 
 accomplishments that matter. At ACC, we strive to 
 convert all our dreams and visions into practical 
 achievements. Yes, there is scope to grow, there is 
 scale to expand, but it is the resounding blend of 
 passion anddesire that sets ACC apart from the rest, 
 on the exigent road of sustained growth.
 
 I see a very bright future for ACC. Today as I 
 stand here and address you, I can see a gleam of optimism
 in each one of you. A gleam to outshine others, to
 succeed and excel. As always, I am confident that you 
 will give us your unstinting support to achieve this goal.