Ambuja Cements - Annual Report - 2008-2009

AMBUJA CEMENTS LIMITED

ANNUAL REPORT 2008

DIRECTOR'S REPORT

Dear Members,

2008 - A CHALLENGING YEAR:

The economic landscape looks significantly different compared to the
situation twelve months ago. At that time GDP growth was at record levels
of 9% plus, and it was expected that 10% was within reach. In the meantime
the sub-prime issue in the US evolved into a full scale global financial
crisis and India, although having a relatively robust financial system,
could not remain insulated from the ensuing fall-out.

This had an increasingly severe impact on the Indian economy in the second
half of 2008. The rapid outflow of institutional funds caused a sudden
liquidity crisis, a slump in stock markets, and a precipitous fall in the
value of the rupee. Reserve Bank of India (RBI) policy bias shifted
markedly from controlling inflation to stimulating growth and boosting
liquidity, and a number of monetary measures have been implemented in order
to shore up financial markets and try to limit the spillover effect on the
real economy. Some further easing of monetary policy seems likely, but may
be limited by the continuing threat of inflationary pressures.

The government has also announced various fiscal stimulus measures,
including an across the board cut in cenvat rates, increased investment in
infrastructure projects, and targeted support for key sectors like
construction.

While it is not possible to fully escape the impact of the global financial
meltdown, the Indian economy is better placed than many to withstand the
shock, given that it is driven more by domestic consumption, has a sound
banking system, a young population, and a strong savings culture.
Therefore, although growth may be relatively muted in the range of 6% to
6.5% for the next couple of years, the future prospects for sustained
growth remain very bright.

The cement industry experienced a turbulent year in 2008. The year began on
a positive note, with the economy booming and year on year cement demand
growth in double digits, though spiraling input costs were already starting
to pose a threat.

In the June quarter, prices of oil, coal, and other inputs, were at all
time highs and the inflation rate moved into double digits, prompting the
imposition of informal price controls on certain key commodities, including
cement. A ban on cement exports was also implemented, and these measures
had an immediate impact on demand, with growth in the quarter reducing to
around 8%.

In the September quarter the combined impact of a number of external
factors caused a further deterioration in the position of the cement
industry.

There were some local or regional issues, such as civil disturbances and
unusual weather patterns, but the principal factor was the sudden financial
crisis, which erupted with the Lehmans downfall. Construction activity had
already slowed in most regions, as interest rate hikes earlier in the year
dampened demand, and with the liquidity crunch, real estate development
companies faced sudden difficulties in accessing funds for their projects.

Although the RBI has injected significant amounts of cash into the
financial system, there is increasing pressure on developers to lower
property prices, in order to stimulate demand and help ease their cash
flows.

In the final quarter, the government and RBI measures, together with a
sharp decline in global commodity prices, had restored some confidence, and
there was an immediate positive impact on cement demand, which registered
double digit year on year growth in November and December, as work resumed
on many construction projects.

However, this was largely due to the release of pentup demand from the
previous quarter, and may not be sustainable.

All-India cement demand growth for the full year was consequently 8%,
compared to more than 9% in 2007. Despite the pick-up in dispatches towards
the end of the year, and likely further interest rate cuts, the real estate
sector is only expected to make a gradual recovery, and cement demand
growth is unlikely to exceed 7% in 2009.

The industry demand-supply balance began to shift in 2008. Following three
years of minimal capacity additions, nearly 30 million tonnes of new cement
capacity were added during the year, whereas the 8% demand increase
translated into only 14 million tonnes of additional demand. As the new
capacity becomes fully effective, this could result in increased pricing
pressures in 2009, though the impact will vary across the quarters, and
regions.

OVERVIEW OF THE YEAR 2008 RESULTS

As a consequence of the lower overall cement demand growth, spiraling input
costs, especially for imported coal and freight, and restricted ability to
pass on higher costs into the market, the company's financial results from
operations for the year 2008 were impacted. Nevertheless, many initiatives
have been taken in order to partially mitigate external factors, by
focusing on sustainable improvements in operating efficiency and business
processes. These will stand the company in good stead for the next upturn.

The real strength of a company lies in its ability to generate cash,
therefore it was also felt important to maintain a strong balance sheet.
This is reflected in the fact that the company did not resort to any new
borrowings in 2008, and finished the year with a healthy cash balance.

FINANCIAL RESULTS

Rs. in Crore
Stand Alone Consolidated
Current Previous Current Previous
Year Year Year Year
31.12.2008 31.12.2007 31.12.2008 31.12.2007

Sales (net of excise duty) 6234.65 5631.36 6261.79 5718.60
Profit before Interest
and Depreciation 2261.66 3024.54 2250.34 3103.63
Less: Interest 32.06 75.85 32.60 77.09
Gross Profit 2229.60 2948.69 2217.74 3026.54
Less: Depreciation 259.76 236.34 260.10 237.18
Profit before Tax 1969.84 2712.35 1957.64 2789.36
Provision for Tax 567.57 943.25 567.93 943.25
Profit after Tax 1402.27 1769.10 1389.71 1846.11
Add: Balance brought
forward from previous year 348.20 272.06 683.74 530.59
Add: Credit Balance of Profit
& Loss Account as on 01.07.2005
of erstwhile INSCL - 0.21 - 0.21
Profit available for
appropriation 1750.47 2041.37 2073.45 2376.91
Appropriations:
Debenture Redemption
Reserve (Net) - (30.00) - (30.00)
Transfer from
Exchange Fluctuation
Reserve on cessation
of subsidiary - - 5.72 -
General Reserve 1000.00 1100.00 1000.00 1100.00
Dividend on Equity Shares
(including interim) 334.97 532.65 334.97 532.65
Corporate Dividend Tax 56.92 90.52 56.92 90.52
391.89 623.17 391.89 623.17
Balance carried forward 358.58 348.20 675.84 683.74
1750.47 2041.37 2073.45 2376.91
DIVIDEND

Your company has paid an interim dividend of 60% (Rs.1.20 per share) during
the year. We are pleased to recommend a final dividend of 50% (Re.1.00 per
share). Thus the aggregate dividend for the year 2008 works out to 110%
(Rs.2.20 per share), and the total payout including corporate tax thereon
will be Rs. 392 crore.

KEY NUMBERS (STANDALONE)

* Cement production up 5%, at 17.8 million tonnes.

* Domestic cement sales up 9%, at 16.8 million tonnes.

* Average Net Sales Realisation up 5%, at Rs. 3,544 per tonne.

* Net Sales up 11%, at Rs. 6,235 crore.

* EBITDA down 12%, at Rs. 1,833 crore.

* Profit before Tax down 27%, at Rs. 1,970 crore.

* Net Profit down 21%, at Rs. 1,402 crore.

* Exceptional Income Rs. 308 crore compared to Rs. 786 crore in 2007.

* Cash Position Rs. 852 crore at 31 December 2008.

PRODUCTION

Total cement production increased by 5%, from 16.9 to 17.8 million tonnes.
The increase was mainly as a result of a full years production at Farakka
and Roorkee facilities which started in mid 2007, and commencement of
grinding at Surat terminal in early 2008.

Clinker production was 1% lower than in 2007, at 11.5 million tonnes.
Higher production at Rabriyawas following the 2007 up-gradation was offset
by lower production as a result of unplanned stoppages at the Maratha and
Darlaghat plants.

MARKETING

While in the first half of 2008, the government introduced a ban on exports
and encouraged imports from Pakistan, in the second half the realty boom
suddenly turned to bust. With the global economy coming to a crunching
halt, funds for major housing, commercial and infrastructure projects
practically dried up.

To revive demand in the real estate sector, the government introduced a
slew of monetary and fiscal measures. In December, the excise duty on
cement was reduced by 4%, and on clinker by Rs.150 per tonne, and
countervailing duties were re-imposed on imported cement. The export ban
was also fully lifted. Interest rates were lowered in a bid to boost
residential housing demand.

Against this backdrop of financial market turbulence, domestic cement
demand grew by about 8%. But, at the end of the year, the pendulum has
swung, from the large residential and commercial projects in metros, mini
metros and big towns, towards the more informal housing sector in smaller
towns and rural areas. Ambuja Cement has built a strong position in this
segment over the last two decades. An FMCG approach was adopted, to create
a wide retail network of small 'mom and pop' shops, right down to the
taluka / village level. A large sales force works alongside these small
dealers to help them promote and sell the brand to the right consumer at
the right price. Meanwhile, a team of expert civil engineers works closely
with small contractors and masons, who undertake construction of single
unit houses in small residential centres.

Building a brand on the dusty rural map has its own excitements. Our people
have worked with local communities to demonstrate better construction
practices and materials, to build economical and durable structures - not
only housing but also rural infrastructure, like check dams, schools and
roads. They have also undertaken training of local people in masonry
skills. For example, Gujarat state government has launched an initiative to
train tribals in rural areas, and has teamed up with Ambuja Cement to start
a formal mason training school in Dahod, near Baroda. Also in Rajasthan,
our Customer Support Group has provided mason training as part of a Skill
and Entrepreneurship Development Institute initiative, in collaboration
with the Ambuja Cement Foundation. Creating an active distribution and
customer service network down to this level is certainly a big challenge,
but a worthwhile investment, as it has enabled the company to reap handsome
rewards in terms of premium brand recognition and loyalty of the end
consumer. Keeping abreast of the changing needs of our customers, we have
also developed some special products for key accounts in Mumbai and
Kolkata, for which we achieve improved realisations for added customer
value.

All this has resulted in the company consolidating its position in the 13
states / Union territories which form its core markets. We have built a
strong position by creating a hub and spoke network of clinkerisation
plants and grinding units, a strong distribution network, and innovative
logistics solutions like bulk cement movement by sea. In these core
markets, Ambuja sold 15.4 million tonnes, amounting to 91% of our total
domestic sales, and our volumes went up 9% as against demand growth of 7%.
We continue to maintain a healthy 18% share in these markets.

All India

Demand analysis for all India is given below:

Fig. in mil. tonnes

2007 2008 %
Domestic 159.7 173.9 9
Export 4.2 2.9 -31
Total - India 163.9 176.8 8

Domestic cement demand is growing at 7% CAGR (5 years). Total demand
(including exports) has grown by 8% as compared to last year, while
domestic demand has increased 9%. There was a sharp fall of 31% in exports,
partly as a result of the export ban imposed in the April / May period.

We managed to hold on to a 30% share of the cement export market.

Northern Region

Demand analysis for the Northern region is given below:

Fig. in mil. tonnes
North 2007 2008 %

Demand 32.3 34.4 7
Ambuja Volume 6.1 6.2 3
Share (%) 18.8 18.1

* Above figs. exclusive of UP

Demand grew by 7% as compared to last year. Ambuja Cement has a substantial
presence in Punjab, Himachal Pradesh and Jammu & Kashmir, and we maintained
our shares in these core markets.

During the year, heavy imports from Pakistan t substantially reduced prices
disturbed the market, articularly in Punjab. At the same time, the twomonth
ong Amarnath agitation in J&K affected upplies there, and the state saw
negative growth f 7% in demand for 2008. To take advantage of he time-bound
incentives introduced by the Himachal Pradesh government, a large number of
industrial projects came up in the state, boosting demand for cement till
last year. These projects have now been completed and as a result cement
demand dipped 9% in 2008.

In spite of these developments in the core markets, Ambuja managed to
increase volume by 3% and more or less hold its market share for the region
as a whole.

Eastern Region

Demand analysis for Eastern region is given below:

Fig. in mil. tonnes
East 2007 2008 %

Demand 19.2 21.1 10
Ambuja Volume 2.2 2.6 19
Share (%) 11.5 12.4

* Above figs. exclusive of North East, (except Assam) & Bihar

Industry has grown by 10% in 2008 on year on year basis. Our volume has
grown by 19% and we have therefore increased our market share.

Our recently established plant in Farakka, in northern West Bengal, has
given us a wider reach in our core market and we could strengthen our
footprint in this part of the state. Meanwhile in Kolkata we focused on the
key customers. A detailed study of their consumption revealed scope for a
special cement which will give higher strength and durability.

By introducing this cement in Kolkata, we have been able to add value for
our key customers and increase our volumes significantly.

Western Region

Demand analysis for Western region is given below:

Fig. in mil. tonnes
West 2007 2008 %

Demand 31.3 33.8 8
Ambuja Volume 6.2 6.9 11
Share (%) 19.9 20.3

Industry has grown by 8% compared to last year in western region. Ambuja
volume growth stood at 11% and consequently we could slightly increase our
market share.

Mumbai is the largest cement consuming centre in the country and perhaps,
one of the most prestigious with the presence of some of the most reputed
global names in the realty sector. It also became one of the worst affected
due to the global slowdown. However, we could increase our sales in this
market by 13% with some strategic steps, like introducing high strength
cement and increasing our service offering to key accounts. Market share in
Mumbai was maintained at 24% in 2008. This is despite the slowdown in real
estate, which is a major contributor to cement consumption.

Imports from Pakistan also reached parts of Mumbai and caused some market
disruption.

In the South we have a token presence in Telengana region and, though the
region has grown at 11%, we have strategically maintained our share at 2-
3%.

Major Costs

Major input costs displayed considerable volatility during 2008. The global
oil price reached nearly USD 150 per barrel in midyear, only to crash at
the end of the year back to below USD 50. Other commodities followed a
similar trend, nevertheless for the full year there was a substantial
increase in our cost base compared to 2007, which could be only partially
compensated by price increases or efficiency improvements.

Coal

The cost of imported coal, representing approximately 30% of the total
requirement, further increased in the first half of 2008, having already
gone up substantially in the second half of 2007.

The average landed cost in 2008 (for both kiln and captive power) was
consequently around Rs. 5,700 per tonne, 50% higher than in 2007.

The cost of domestic coal also increased, as linkage supplies became
unreliable, necessitating higher procurement of market / e-auction coal at
a substantial premium to the linkage prices. Deterioration in the quality
of domestic coal supplied continues to be an issue, and this has impacted
the fuel consumption figures at certain plants. A number of unplanned
stoppages also had an impact, and for the company as a whole, the
consumption increased slightly compared to 2007, from 742 to 744 kcal per
kg of clinker.

Power

The company already sources around 80% of its power requirements from
captive power generation, and during 2008 one new 18.7 MW power plant was
commissioned at the Rabriyawas plant. As a result of the increase in coal
cost during the year, the cost of captive generation increased by about
20%.

Power consumption was slightly higher in 2008, at 86.4 kwh per tonne of
cement, compared to 84.6 kwh in 2007. Requirements were higher mainly at
the Bhatapara and Ambujanagar plants, due to certain inefficiencies in the
grinding processes.

Purchased Clinker

Pending completion of the Bhatapara expansion, continued clinker purchases
were required for the grinding units at Farakka and Sankrail. In addition,
clinker purchases were necessary for Maratha in the second half, as the

kiln speed had to remain restricted following a breakdown in mid-year. In
total, 725 thousand tonnes were procured, compared to 500 thousand tonnes
in 2007. The impact on EBITDA margin of using purchased rather than own
produced clinker is approximately 200 basis points.

Freight

Freight and Forwarding costs increased by 12% in absolute terms, and 7% on
a per tonne sold basis. The major reasons were: a shift from export to
domestic sales partly due to the export ban in mid year, and a hike in fuel
prices earlier in the year when global oil prices were dramatically
increasing. These increases were rolled back towards the end of the year,
but too late to have any real impact in 2008.

PEOPLE POWER

Ambuja Cement has always prided itself on its world beating performance. In
order that we continue to deliver and improve upon performance on a
sustainable basis, a project aptly titled 'People Power' was launched at
the Ambujanagar plant, with the aim of ensuring 'healthy people and healthy
plants'.

To achieve 'healthy people', an organisational transformation was carried
out in the plant. The new organisation created a large number of leadership
positions at different levels, unlocking leadership potential and
unleashing creative energies among talented individuals.

To achieve 'healthy plants', an Engineering Support Group was created,
incorporating an Academy and a Development Cell. To boost operational
efficiency, standards were developed for improving productivity using tools
and processes developed at both Ambuja and Holcim, based on global best
practices. A detailed health check was carried out to ensure long term
health of the plant, based on which an action plan was developed for
implementation.

The resulting transformation has propelled the plant performance to
achieving the near impossible aspiration of 400 thousand tonnes of clinker
during December 2008, one of the highest ever in its history.

The principles and tools developed during this pilot implementation are in
the process of being rolled out to the other Ambuja plants, and further
initiatives are underway to achieve continuous improvement in cost
efficiencies in operations, and sustained health of the plants.

HUMAN RESOURCES

A process-driven approach to induction of fresh talent ensures a continuous
and consistent talent pipeline for future business growth.

Apart from enhancements in productivity, the 'People Power' project has
resulted in enhancing the managerial and innovation skills of our people.
Projects like SAP implementation have encouraged an inter-disciplinary
approach to business challenges. People working on these projects have been
gainfully redeployed in new roles requiring multi-functional competencies.

KRA (Key Result Area) based performance management provides an objective
basis for managing performance and rewards. Individual goals are derived
from organizational objectives, hence ensuring complete alignment and
commitment of the people.

Management Development is a well structured approach designed around
development of leadership competencies required for different levels.
Integrated Talent Management processes with global practices are aimed at
creating future leaders for succession. These are supported by advanced HR
Management Systems and are well integrated with other business processes.

EXPANSION PROJECTS

A new 1 million tonne grinding facility was commissioned at the beginning
of 2008 at Surat, where the company already operates a bulk cement
terminal. OPC is transported from Ambujanagar to Surat, where it is blended
with locally sourced fly ash.

The company has the long term objective of at least maintaining market
share and, to this end, the two major clinkerisation expansion projects, at
Bhatapara in Chattisgarh, and Rauri in Himachal Pradesh, remain on track
for completion in mid 2009 and end of 2009 respectively. Each comprises a
7000 tonne per day kiln line, therefore together they will add
approximately 4.4 million tonnes of clinker capacity. The total investment
in these projects has escalated by around 10%, mainly due to the steep cost
increases for steel and civil contracting during the year.

In alignment with the new clinker capacity, grinding capacity will also be
further increased, by 5.5 million tonnes, to be commissioned over the next
12-18 months. Grinding units at Dadri and Nalagarh in the North will come
on stream in mid 2009 and first half of 2010 respectively. The grinding
unit project at Barh has been suspended, owing to delays in setting up the
NTPC power plant from which fly ash would be sourced, and will be replaced
by further augmenting the grinding capacity at Bhatapara. And it has been
decided to proceed more slowly with the project at Sanand (Ahmedabad),
which will now be deferred till 2010.

Additional captive power projects are in progress at Ambujanagar,
Bhatapara, and Maratha.

These will add approximately another 90 MW, most of it being commissioned
in 2009 and taking total capacity to more than 400 MW. The bulk cement
terminal at Kochi is on course for commissioning in the first quarter 2009.
This will give the company access to the fast growing southern market via
cost effective sea transportation. Furthermore the fleet of ships which
plies the Ambujanagar - Mumbai - Surat routes is in process of being
expanded to cope with anticipated future demand growth. Three new vessels
are in the pipeline, for delivery in 2009-2010.

HOLCIM ALIGNMENT

The process of aligning with Holcim systems, methodologies and tools, is
making good progress. A major milestone was the implementation of Holcim's
SAP template, which went live in August 2008. We are now on-line with
nearly 200 locations, including dumps / yards, and are able to explore the
full potential of IT in continuously improving customer service, with real
time data. This not only brings the benefits of a fully integrated real
time ERP system, but helps facilitate benchmarking between Holcim group
companies and sharing of good practices.

Occupational Health and Safety is another area where the adoption of Holcim
guidelines and methodologies has assisted in dramatically increasing
awareness of the need for safe working practices, in order to achieve a
'zero harm' environment.

Our Talent Management efforts are also supported through access to the
Holcim Leadership Development programs, and possibilities for transfers
between group companies in order to gain experience of different business
and cultural environments.

There is a strong alignment on Corporate Social Responsibility issues.
These have been an integral part of the Ambuja mission since the beginning,
through the Ambuja Cement Foundation and are also at the heart of Holcim's
Sustainable Development initiatives.

RISKS AND AREAS OF CONCERN

Energy Costs

Coal remains the single most important input factor, both for the kilns and
captive power plants, and the volatility of prices in 2008 demonstrated its
impact on the company's profitability. At the end of the year,
international coal prices (as well as freight) have dropped even more
sharply than they had risen, and this degree of volatility creates
uncertainty in our business planning process. The company therefore focuses
continuously on the coal procurement process in order to manage this risk.
Quality and reliability of supply of domestic coal also continue to be a
source of concern. Materialisation of linkages has been unpredictable, and
quality has deteriorated, affecting plant productivity. The company
continues to work on mitigation measures, such as acquisition of coal
blocks for captive mining, and increased usage of AFR (Alternative Fuels
and Raw materials) to reduce dependence on coal.

Surplus Capacity

Despite likely delays, or even cancellations, of some cement expansion
projects, as financing has become very expensive and returns less
attractive in the short term, there will nevertheless be a period of
surplus capacity. This may be in the range of 40-50 million tonnes for All-
India by the end of 2010, which could have some impact on cement pricing in
affected markets.

Freight

Transportation is another key input, and continued volatility of global oil
prices may also impact diesel prices and hence freight cost. Fuel prices
are state-controlled, and changes may be driven by non-market
considerations.

Taxation

Taxes on cement, although slightly reduced towards the end of 2008,
continue to be higher in India than in most other countries, and the duty
structure is too complex. This has a significant impact on pricing of
cement for the end user.

INTERNAL CONTROL SYSTEM

The company has instituted a robust internal control system to support
smooth and efficient business operations and effective statutory
compliance. In order to improve the reliability and efficiency of business
processes having an impact on financial reporting, the company has
established an internal control systems project by standardizing and
documenting major processes and associated key controls. Responsibilities
have been assigned to specific individuals to correctly and timely perform
the controls.

The formalized systems of control help discharge the obligations as per
Clause 49 of the SEBI Listing Agreement, and article 728 (a) of the Swiss
Code of Obligations applicable to the HolcimGroup from 2008.

The company's Internal Audit department is responsible to independently
test the design and operating effectiveness of the internal control system
across the company. This facilitates an objective assurance to the Board
and Audit Committee regarding the adequacy and effectiveness of the system.

The Internal Audit function, established since company's inception, not
only monitors the effectiveness of controls but also provides an
independent and objective assessment of the overall governance processes in
the company, including the application of a systematic risk management
framework.

The scope and authority of the function are governed by the Internal Audit
Charter, approved by the Audit committee. Internal Audit plays a key role
by providing an assurance to the Board of Directors, and value adding
consultation service to the business operations.

OUTLOOK

Cautious Optimism

Though market conditions are likely to remain challenging for the next 1-2
years, depending on the depth of the global economic recession, the longer
term outlook for the Indian economy, and specifically the cement industry,
is very positive. Growth will be bolstered by the country's sound
macroeconomic fundamentals, and the pressing need for extensive development
of infrastructure and mass residential housing. Cement demand may however
remain relatively weak for some time, and the addition of significant new
capacity over the next two years will inevitably alter the pricing dynamics
in certain markets.

Ambuja Cement fully intends to remain at the forefront of these
developments, maintaining its market leadership and premium brand status,
by adapting to the changing conditions and positioning itself to emerge an
even stronger player from this period of weaker growth.

SUSTAINABILITY INITIATIVES

One of the founding pillars of your Company is its steadfast commitment to
Sustainability. The Company operations, from manufacturing to logistics to
community development, all these incorporate the basic tenets of
sustainability. Ambuja Cements Ltd. has always maintained that its
financial performance would be in tandem with its environmental and social
performance. Last year, the Company produced its first Corporate
Sustainable Development Report (CSDR) and also issued a Summary Report
along with the Annual Report of 2007. It also translated the Summary Report
in various local Indian languages to spread the message of its efforts to
different stakeholders. Based on the deliberations of the Board, a
Sustainable Development Steering Committee (SDSC) was set up chaired by the
Whole time Director & Company Secretary with members from across various
functions like accounts, marketing, human resources, corporate
communications and community relations, was formed. The steering committee
held three meetings during the year to discuss the issues of sustainability
along with the Company's Vision, Mission, Goals and Values.

The issue of materiality of concern to the local communities has been dealt
with routinely by the Ambuja Cement Foundation (ACF) at various
manufacturing locations. It was encouraging to learn that there existed a
100% match between the Company's concerns and community's needs on social
development at all locations. ACL is in process of initiating similar
consultations with its customers and employees.

Environment Management

We are committed to pollution control at our plants and mines and earn
Awards for the same

The Company has adopted the state of the art technology from glass bag
house (GBH) to surface miner, rock breaker to bulk cement terminals and
from CDM to GHG emission control. We plan to carry out conversion of ESP at
one of our acquired Units into GBH for efficient particulate control.

The proactive practice 'of beyond compliance' for sewage water through the
mechanism of 'sewage water recirculation plant' (SWRP) is practiced at all
our Unitseven in Ropar (Punjab) Unit which is flush with water from the
Sutlej canal.

Manufacturing of cement is a process that generates lot of noise. The
Company places great emphasis on noise control both in its cement plants
and mines and looks towards newer avenues of performing better in this
area. The excellent performance on environmental parameters at the Maratha
Cement Works has earned ACL the Greentech Award.

Along with ACF, water bodies have been created out of the mined out pits at
Ambujanagar. These act as large water reservoirs and have improved the
water table in the near by areas and have benefited the farmers. The
salinity mitigation projects undertaken in Ambujanagar by ACF have shown
encouraging results and have earned ACL an Award for Excellence in Water
Management by CII- GBC under 'beyond the fence' category.

Fly ash - a waste product that has helped the Company produce larger
volumes of cement and also reduce the GHG contribution

To tide over the power shortage in the country, large coal based thermal
plants are being set up by power companies, leading to generation of
thousands of tonnes of fly ash. The disposal of this fly ash, which is a
hazardous waste from power plants, is a major national concern.

Over the years, we researched on how we could use this waste in
manufacturing cement without compromising on its quality and strength.
Today, we use as much as 4444290 tonnes of fly ash at our various cement
plants. This has helped us to reduce the clinker factor and thereby reduce
GHG generation at our plants.

Use of alternate fuels and raw materials to help reduce emissions

The very process of manufacturing cement the world over leads to generation
of CO2. As a responsible corporate citizen, the Company makes conscious
efforts to reduce these CO2 emissions wherever possible. The use of
alternate fuels and raw materials (AFR) is one such significant initiative
which not only reduces over all CO2 emissions, but is also a need to
conserve precious natural resources for the forthcoming generations.

There is a nationwide consensus that the co-processing of hazardous/ non-
hazardous wastes in cement kilns provides an effective solution for
disposal of these wastes.

We have used hazardous waste products such as plastic waste, industrial
waste and sludge in the cement plant with no adverse impact on environment
or our cement quality.

Our captive power plant at Ropar runs on biomass/agro waste of different
varieties and animal waste. This has not only resulted in saving in costs
but has also helped us conserve on the usage of precious coal.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Our CSR activities are being carried out through Ambuja Cement Foundation
(ACF) which has a long tradition of proactively contributing to sustainable
and sound solutions on socio-economic and environmental issues in the
neighbouring communities wherever the Company operates. ACF has been set up
to specifically engage with community stakeholders and it works on two
fronts - stakeholder engagement and community development.

Stakeholder Engagement:

The Foundation believes it is critical to identify individuals and groups
in the local communities directly or indirectly affected by the Company
operations and to engage with them in a continuous dialogue. ACF have
commissioned a reputed external agency ERM to conduct Social Impact
Assessments (SIAs) at all new Company sites. The findings of this agency
have enabled ACF to be sensitive to the possible social impacts created by
the Company operations by addressing effectively the concerns and views of
those affected in the draft rehabilitation plans.

This extensive exercise has already been completed at two locations-
Marwar- Mundwa in Rajasthan and Nalagarh in Himachal Pradesh during 2008.
As a follow up of the SIA at Marwar-Mundwa, a detailed database of primary
stakeholders i.e. the project affected people has been generated. Going
ahead, this database will prove helpful in developing measures to mitigate
impact and restore livelihoods of the affected communities. An exercise of
risk scoping has been completed at Sanand in Gujarat.

Since the Foundation has been engaging with community stakeholders ever
since its inception, a need was felt to conduct a formal review of the work
carried out so far. Using a unique tool called the Social Engagement
Scorecard, developed by Holcim for its Group Companies, ACF involved the
communities in the process of gauging the effectiveness of its social
interventions simultaneously determining the location specific course of
action for the future. During 2008, ACF completed the review in Kodinar,
Chandrapur, Darlaghat, Ropar, Rabariyavas, Sankrail and Bhatapara. At all
the locations ACF engagement was found to be in line with the needs of the
area and the aspirations of the communities.

Community Development: ACL is committed to the development of the
communities where it operates. Through its varied community development
initiatives, the ACF reaches out to SES being conducted approximately 607
villages catering to a population of over 11 lakhs. The community
development activities include health care, improvements in quality of
education, infrastructure development, livelihood generation, women's
development, formation of self-help groups for women and the like.

In education, Basti schools- informal schools for out of school children in
Bhatinda, have arisen to prominence due to their commendable work in the
last year. The schools try to provide bridge education to out of school
children and attempt to bring them into the mainstream formal education
system. These initiatives have found appreciation by the local communities
as well as the Key Opinion Leaders. Educational activities conducted in the
government schools of Darlaghat and Chandrapur have also expanded and
diversified in the past year.

The Foundation has organised women Self- Help Groups with the objectives of
helping them cultivate the habit of making small monthly savings, giving
them a platform to meet and interact with one another and to determine the
means of improving their lives. As the groups have matured, these have
gradually began engaging in varied micro-enterprises. It is hoped that
these become alternate sources of income for the families. At present the
Foundation has initiated 571 SHGs. These have made a collective saving of
approximately Rs.87 lakhs.

In the health sector, the creation of an HIV Positive People's group has
been an achievement of the Ropar unit of the Foundation. This is the first
of its kind in the state and has been providing all the members' support
and strength to come to terms with their HIV positive status, to take
charge of their lives and to engage in gainful and productive activities.
With the help of the Foundation, 6 members of the group have established a
paper recycling unit. The used paper from ACL is taken for recycling and
sold back to the Company. Other agencies in the area like the PCACS have
shown an interest in purchasing the recycled paper.

ACF aims at developing societies by building skilled communities that are
capable of sustaining themselves. To achieve this goal, ACF helps
communities capitalize on its expertise, knowledge and competencies, rather
than merely providing them financial assistance. Since the Indian
construction industry has been growing at 8-10% for the past few years, ACF
identified in it an opportunity to develop skilled labourers who could find
employment in this particular sector. Most of the masons working in the
construction sector are unqualified and semi-skilled. They are often
required to assume the role of an architect, a structural engineer as well
as a purchaser of building materials. Keeping these spaces for improvement
in the sector, mason training programs were devised and organised by ACF in
collaboration with ACL at various locations. The customer support unit of
the Company provided the necessary training. In all, over a hundred masons
were trained by the programs.

Efficient vocational training is one of the means of restoring livelihoods
of those affected by industrialisation and unemployed rural youth that can
no longer be absorbed in agriculture because of its dwindling growth. ACF
thought that the manufacturing and services sectors would provide with
prospects of absorbing such skilled persons. With this thought, Skill
Training Institutes were established at Darlaghat, Himachal Pradesh;
Chandrapur, Maharashtra and Jaitaran, Rajasthan by the Foundation to
conduct continuous training programs on employable trades. The training
institutes established have had an encouraging placement rate of 75% for
their trainees. The training on operating heavy motor vehicles to land
losers in Darlaghat solicits a special mention here. These persons have
been trained in operating heavy vehicles such as cranes and dumpers by
theFoundation and are undergoing field apprenticeship at the Company's
Darlaghat plant.

While enhancing the lives of rural communities, sustainability can best be
achieved with proper management and conservation of natural resources such
as water and land. In this front the Foundation undertook scores of
interventions in accordance with local conditions and needs. In Gujarat we
continued addressing the need for responding to increasing water shortage
and salinity in groundwater that was showing a direct and adverse effect on
agriculture and potable water. ACF extended its project on interlinking
pond and water harvesting structures to 60 villages.

The cumulative effect of ACF interventions has harvested 1067FT of surface
storage water benefitting 7895 farmers and 23255 Ha. of land. In the last
year the average increase in the water level in wells arose by 15 feet.
With sweet water recharge, the salinity in groundwater has reduced
considerably.

This has resulted in a reduced requirement of seeds for sowing and better
yields due to timely availability of water for irrigation. In Rajasthan,
efforts were directed towards conserving maximum quantities of water and
providing drinking water along with improved cultivation. In Chhattisgarh,
a large check dam was constructed on Khosri Nala stream with a water
holding capacity of 80 TCM benefiting 125 hectares of arable land and
benefiting four villages.

Besides continuing to work on roof rainwater harvesting structures, ACF
partnered with the State Government on the Jalswarajya Project to make
potable water available to the villages of Chandrapur. SEDI, Darlaghat,
theory class in progress Lush green farms

To improve the quality of water in Fluoride affected villages of Rajasthan
the Rajasthan Integrated Fluorosis Mitigation Programme was implemented.
Under the programme awareness was generated on the impact of excess
fluoride and the methods to mitigate its effects and domestic de-
fluoridation units were distributed. In the last year, the Foundation
constructed a total of 393 RRWHS, renovated 54 drinking water wells and
repaired/installed 52 hand pumps in the program areas.

Due to the close relationship between water and agriculture, besides making
interventions to improve quality and availability of water, the Foundation
made efforts to incorporate requisite changes in agricultural and
irrigation practices. For each of the changes propagated by the Foundation,
training programs were held to generate awareness amongst the people,
project demos were organised at the village level and individual meetings.
A total of 195 trainings for farmers were organised that benefitted 1759
farmers along with 30 exposure visits. Micro-irrigation methods like drip
and sprinkler irrigation were explained, as was organic farming.

ACF has made conscious effort to explain and promote advantageous
agricultural practices such as multi cropping, vegetable cultivation and
horticulture across locations. The benefits of these have been seen in
terms of increased agricultural yields, higher profitability and incomes
and resultant better living standard. ACF believes that if agrobased
livelihoods are made profitable, over a periodof time, it would help in
avoiding large scale migrations besides making the communities prosper in
the own lands.

Appreciation for the Foundation's water management efforts, specifically on
salinity mitigation came in the form of The Excellent Water Management
Initiative Award - Beyond the Fence which was conferred by the CII - Godrej
Green Business Centre in December 2008.

In the coming year, the Foundation will continue to direct its efforts
towards productive stakeholder engagements with the community members and
will continue to work with renewed vigor towards social and economic
development through community participation.

OCCUPATIONAL HEALTH & SAFETY

Change in mindsets

OH&S is one of our core values. We have allocated significant resources to
strengthen the Occupational Health and Safety Management system. We have
set up Corporate Occupational Health and Safety function to lead these
efforts to facilitate design, and implementation of OH&S management system.
The efforts are to implement OH&S pyramid elements and Fatality Prevention
Elements to ensure that the 'zero harm' objective is achieved. We are using
procedures and programs to ensure safe working environment, and develop
positive safety culture through leadership.

We also have initiated implantation of Contractor Safety Management
Directive, which help to ensure processes are in place to ensure safety of
third party employees. We have also embarked on the journey of changing
behaviors across all functions through Safety Leadership training. We
continue to lead our efforts on enforcement of OH&S norms at all our
Project sites. We are committed to continually improve our OH&S performance
through implementation of formal OH&S management system.

EMPLOYEE STOCK OPTION SCHEME

The company has granted Stock Options to the Managing Director, Whole-time
Directors and employees, for the ninth year in succession. The particulars
required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock
Option Scheme) Guidelines 1999, are given in subsequent paragraphs.

a) ESOS 2008

During the year 2008, the company granted 73,84,300 stock options on 1st
July, 2008 (each option carrying entitlement for one share of the face
value of Rs.2/- each) to the Managing Director, Whole-time Directors and
the employees, at an exercise price of Rs.82.00 per share. The market price
of the shares on the date of grant was Rs.73/- per share. These stock
options shall vest on expiry of one year from the date of grant and can be
exercised during a period of four years from the date of vesting. The
exercise price was determined by averaging the daily closing price of the
company's equity shares during 7 days on the National Stock Exchange,
immediately preceding the grant.

The company has adopted intrinsic value method for the valuation and
accounting of the stock options as per SEBI guidelines. Since the market
price per share on the previous day of the date of grant was less than the
exercise price, no employee compensation cost has been accounted for the
year ended 31st December, 2008. The fair value of the options as per the
'Black Scholes' model comes to Rs.16.95 per option. Had the company valued
and accounted the options as per the 'Black Scholes' model, the net profit
for the year would have been lower by Rs.15.10 crore and the diluted
earning per share (with face value of Rs. 2 each) would have been Rs. 9.11
instead of Rs. 9.21 per share.

The 'Black Scholes' model captures all the variables with their respective
appropriateness, which influences the fair value of stock options. The
significant assumptions to estimate the fair value of options as per 'Black
Scholes' model are:

1. Risk-free interest rate - 7.02%.

2. Expected life of the option - 3 years.

3. Expected volatility - 35.94%.

4. Expected dividend yield - 2.58%.

None of the options granted during the year have vested till date. No
employee or Director has been granted options in excess of 1% of the issued
equity share capital of the company. None of the Directors has been granted
options of more than 5% of the total options granted during the year.

The options granted to the Managing Director, Whole-time Directors and
other senior management personnel are as follows:

Mr. A. L. Kapur 325000
Mr. P. B. Kulkarni 200000
Mr. N. P. Ghuwalewala 125000
Mr. B. L. Taparia 100000
Mr. David Atkinson 100000
Mr. J. C. Toshniwal 70000
Mr. S. N. Toshniwal 50000
Mr. R. R. Darak 41500
Mr. Anil Kaul 24900
Mr. H. S. Patel 41500
1077900

Other employees have been granted 63,06,400 options. The details of options
granted to other employees are:

Total number of employees 2922
Total number of options granted 6306400
Max. number of options granted 29000
Min. number of options granted 300
Avg. number of options granted 2158

1,15,700 stock options have been reserved to be granted to the SAP core
team later.

b) Cumulative disclosure

The particulars with regard to the stock options as on 31st December, 2008
as required to be disclosed under the SEBI's guidelines are as follows:

Cumulative position as on 31st December, 2008 :

Nature of disclosure Particulars

a. Options granted 20164450

b. The pricing formula 2008, The exercise price
SAP 2007 was determined by
& averaging the daily
2007 closing price of the
company's equity shares
during 7 (seven) days
on the National Stock
Exchange immediately
preceding the grant.

2004-05 & The exercise price
2005-06 was determined by
averaging the daily
closing price of the
company's equity shares
during 15 (fifteen)
days on the National
Stock Exchange
immediately
preceding the grant.

2003-2004 The exercise price
was determined by
averaging two weeks'
High and Low price of
the company's equity
shares on the National
Stock Exchange
immediately preceding
the grant.

1999-2000 The exercise price
to 2002-03 was the average of the
daily closing price
of equity shares of the
company on the Stock
Exchange, Mumbai
during the period
of 30 (thirty) days
immediately preceding
the date on which the
options were granted.

c. Options vested 11769175

d. Options exercised 4515475

e. The total number of shares Total number of shares arising as a
arising as a result of exercise result of exercise of options shall
of options be 3,22,76,170 shares of Rs. 2 each.

f. Options lapsed / surrendered 645700

g. Variation of terms of option -

h. Money realised by exercise Rs.113.51 crore
of options

i. Total number of options in 14358425
force

j. Details of options granted/ No. of options No. of options
exercised by the Managing granted exercised
Director and Whole-time Directors

1. Mr. A. L. Kapur 855000 240250
2. Mr. P. B. Kulkarni 745000 295000
3. Mr. N. P. Ghuwalewala 375000 75000
4. Mr. B. L. Taparia 410000 135000

Any other employee who received a
grant in any one year of option
amounting to 5% or more of

options granted during that year Nil Nil

k. Employees who were granted
options during any one year, equal
to or exceeding 1% of the issued
capital of the company at the
time of grant. NIL

l. Diluted earning per share (EPS)
pursuant to issue of shares on
exercise of options calculated in
accordance with Accounting
Standard AS-20.

2003-04 2004-05 2005-06 2007 2007 2008

m. Weighted average
exercise price
of options 310* 443* 69.60** 113** 82** 82**

Weighted average fair
value of options 67.44* 96.73* 19.23** 29.28** 16.95** 16.95**

* Options related to Equity Shares of the face value of Rs.10/-.

** Options related to equity shares of the face value of Rs. 2/-.

The information disclosed in respect of item No. (m) is for grants made
after June 30, 2003.

CORPORATE GOVERNANCE

The company has complied with the Corporate Governance as stipulated under
the listing agreement with the stock exchanges. A separate section on
corporate governance, along with a certificate from the auditors confirming
the compliance is annexed and forms part of the Annual Report.

DIRECTORS

Appointment

Mr. Naresh Chandra was appointed by the Board as Additional Non-Executive
(Independent) Director with effect from 26th July, 2008.

Mr. Naresh Chandra is a post graduate in mathematics from Allahabad
University. He was a distinguished member of the Indian Administrative
Service (IAS) & former Cabinet Secretary to the Government of India. He has
held various important positions including that of Governor of the State of
Gujarat and India's Ambassador to the United States of America. He was also
the Chairman of Corporate Governance Committee instituted by the Government
of India. In the year 2007, he was honoured with Padma Vibhushan by the
Government of India. He is a Director on the Board of ACC Ltd. and several
other reputed companies.

In accordance with the provisions of Section 260 of the Companies Act,
1956, Mr. Naresh Chandra shall hold office upto the date of ensuing Annual
General Meeting and have filed his consent to act as Director of the
Company, if appointed.

Board at its meeting held on 6th February, 2009 recommended for the
approval of the members, the appointment of Mr. Naresh Chandra as a Non-
Executive Director liable to retire by rotation

Mr. Onne van der Weijde was appointed by the Board as Non-Executive
Director and as a Holcim nominee with effect from 9th January, 2009 to fill
the causal vacancy caused by the resignation of Mr. Nirmalya Kumar.

Mr. Onne van der Weijde holds a Bachelors degree in Economics, Accounting
from Rotterdam, Netherlands and a Masters degree in Business Administration
from the University of Bradford, UK.

He joined Holcim in the year 1996. After holding various positions in the
Company, he was appointed Director and General Manager for Holcim (India)
Pvt. Ltd. in March 2005. He was appointed as the Chief Financial Officer of
ACC Ltd. in May 2006 and inducted on its Board in January 2009. He is also
a Director in Bulk Cement Corporation (India) Ltd., ACC Ltd. and ACC
Concrete Ltd.

In accordance with the provisions of Section 262 of the Companies Act,
1956, Mr. Onne van der Weijde shall hold office upto the date of ensuing
Annual General Meeting and have filed his consent to act as Director of the
Company, if appointed.

Board at its meeting held on 6th February, 2009 recommended for the
approval of the members the appointment of Mr. Onne van der Weijde as a
Non-Executive Director not liable to retire by rotation.

Notices have been received from Members of the Company under Section 257 of
the Companies Act, 1956 proposing the candidature of Mr. Naresh Chandra and
Mr. Onne van der Weijde for appointment as Directors. Appropriate
resolutions seeking your approval to their appointment are proposed in the
Notice conveying the 26th Annual General Meeting of the Company.

Cessation

Mr. Nirmalya Kumar, Non Executive Director and a Holcim nominee who joined
the Board on 03rd May, 2006 resigned w.e.f. 1st January, 2009.

Mr. P. B. Kulkarni who was associated with the company for more than 25
years and who joined the Board in the year 1999, ceased to be the Whole-
time Director and a Director on the Board of the Company upon expiry of his
term on 31st January, 2009.

During his long endearing association with the Company, he has been one of
the key architects in building this Company from initial capacity of 0.7
million tones to the present capacity of around 22 million tones. With his
continued dedication & direction, the Company has been able to achieve high
level of productivity & efficiency in its operations, which made Ambuja as
one of the most enviable Company to work for in the cement industry.

The Board placed on record its appreciation for the valuable services
rendered by Mr. Nirmalya Kumar and Mr. P. B. Kulkarni.

Retirement by rotation

In accordance with the provisions of Article 147 of the Articles of
Association of the Company, (i) Mr. Suresh Neotia, (ii) Mr. Narotam
Sekhsaria, (iii) Mr. M. L. Bhakta and (iv) Mr. A. L. Kapur Directors of the
company retire by rotation at the ensuing Annual General Meeting of your
Company and, being eligible, offer themselves for re-appointment. The Board
of Directors recommends their re-appointment.

Further details about Directors are given in the Corporate Governance
Report as well as in the Notice of the ensuing Annual General Meeting being
sent to the shareholders along with Annual Report.

DIRECTORS' RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended, the
Directors confirm that:

i) In the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanations relating to
material departures.

ii) Appropriate accounting policies have been selected and applied
consistently, and judgments and estimates made are reasonable and prudent,
so as to give a true and fair view of the state of affairs of the company
as on 31st December, 2008, and of the profit and cash flow of the company
for the period ended 31st December, 2008.

iii) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the company and for
preventing and detecting fraud and other irregularities.

iv) The annual accounts have been prepared on a going concern basis.

AUDITORS

M/s. S. R. Batliboi & Associates, auditors of the company will retire at
the ensuing Annual General Meeting and are eligible for re-appointment.
M/s. S. R. Batliboi & Associates have confirmed that their re-appointment,
if made, shall be within the limits of Section 224 (1B) of the Companies
Act, 1956.

The Board recommends their re-appointment as Auditors and to fix their
remuneration. M/s. P. M. Nanabhoy & Co., Cost Accountants, have been
appointed Cost Auditors of the company for the year 2009.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

The company has transferred a sum of Rs. 0.60 crore during the financial
year 2008 to the Investor

Education and Protection Fund established by the Central Government, in
compliance with Section 205C of the Companies Act, 1956. The said amount
represents unclaimed dividend and unclaimed interest on debentures and
bonds which have been with the company for a period exceeding 7 years from
their respective due dates of payment.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information on conservation of energy, technology absorption, foreign
exchange earnings and outgo is required to be given pursuant to Section
217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of
Particulars in the Report of the Board of Directors) Rules, 1988 is annexed
hereto marked Annexure - I and forms part of this report.

PARTICULARS OF EMPLOYEES

Information required to be given pursuant to the provisions of Section 217
(2A) of the Companies Act, 1956 read with Companies (Particulars of
Employees) Rules, 1975 is annexed hereto marked Annexure - II and forms
part of this report.

SUBSIDIARY COMPANIES

(a) Cessations

Ceylon Ambuja Cements Pvt. Ltd. and Midigama Cements Pvt. Ltd. have ceased
to be the subsidiary companies upon divestment of company's entire holding
in favour of Holcim during the year.

(b) Annual Reports

Ministry of Corporate Affairs, Government of India, vide its letter dated
4th December, 2008 has exempted the company from attaching the Annual
Reports and other particulars of its subsidiary companies along with the
Annual Report of the company required u/s 212 of the Companies Act, 1956.
Therefore, the said Reports of the subsidiary companies viz. (1) Kakinada
Cements Ltd.,

(2) Chemical Limes Mundwa Pvt. Ltd., and (3) M.G.T. Cements Pvt. Ltd. are
not attached herewith.

However, a statement giving certain information as required vide aforesaid
exemption letter dated 4th December, 2008 is placed along with the
Consolidated Accounts.

The company shall provide the copy of Annual Report and other documents of
its subsidiary companies as required u/s 212 of the Companies Act to the
shareholders upon their request, free of cost.

CONSOLIDATED FINANCIAL STATEMENTS

As stipulated by Clause 32 of the listing agreement with the stock
exchanges, the consolidated financial statements have been prepared by the
company in accordance with the applicable accounting standards issued by
The Institute of Chartered Accountants of India. The audited consolidated
financial statements together with Auditors' Report form part of the Annual
Report.

The consolidated net profit of the company, its subsidiaries and associates
amounted to Rs. 1389.7 crore for the corporate financial year ended on 31st
December, 2008 as compared to Rs. 1402.3 crore for the company on a
standalone basis.

EQUAL OPPORTUNITY EMPLOYER

The company has always provided a congenial atmosphere for work to all
sections of the society. It has provided equal opportunities of employment
to all without regard to their caste, religion, colour, marital status and
sex.

AWARDS AND RECOGNITION

* Company received the prestigious 'Business Superbrands' status in August,
2008.

* Ambuja received 'Greentech Environment Excellence Gold Award 2008' at Goa
on 5th September, 2008. This award was given to 'Maratha Cement Works' for
overall Best Environment management practices & performance.

* CII and Godrej Green Business Centre awarded National Award for
Excellence in Water Management 2008 - 'Excellent Water management
Initiative - Beyond the Fence'

* The Indian Bureau of Mines presented the following Awards to our MCW
Mines after carrying out detailed survey of the Mines located in Vidarbha
region and our company was given following prizes :

First Prize - Afforestation
Second Prize - a) Top Soil
Management
b) Air Quality
Management

Third Prize - a) Management of
Minerals
and Sub-Grade
Minerals

b) Water Quality
Management

c) Overall
Performance.

* The Directorate of Mines Safety during their overall assessment of entire
Mines of Vidarbha adjudged all the Mines and our Mines were presented
following prizes:

First Prize - a) Mine Lighting

Second Prize - a) Injury Rate
Performance

b) Explosives

* Director General mines safety (Ministry of Labour & Mines, Govt. of
India) Awarded the first prize to our Rabriyawas Mine (Ras Lime Stone Mine)
in the 22nd Mine Safety Week, Ajmer Region for its over all performances.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to express their deep sense of
gratitude to the banks, central and state governments and their departments
and the local authorities for their continued guidance and support.

We would also like to place on record our sincere appreciation for the
total commitment, dedication and hard work put in by every member of the
Ambuja family.

To them goes the credit for the company's achievements.

And to you our shareholders, we are deeply grateful for the confidence and
faith that you have always reposed in us.

For and on behalf of the Board,

Suresh Neotia
Chairman

Mumbai, 6th February, 2009

ANNEXURE - I

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY,
TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO AS REQUIRED
UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN REPORT OF BOARD OF DIRECTORS)
RULES, 1988.

A) CONSERVATION OF ENERGY

(a) Energy Conservation measures taken :

1. Optimized Air requirement for Boiler Operation, Instead of two blowers,
made a single blower operating for two Boilers (Ambujanagar).

2. In CPP, for steam condensing air cooled condenser is installed. Modified
profile blade was replaced in one out of six fans (Ambujanagar).

3. Optimized Compressor outlet air pressure from 8.0 kg/cm2 to 5.5 kg/cm2
as per the requirement of instrument (Ambujanagar).

4. Cooling tower fan blade angle was reduced from 10' to 6' based on
relative humidity and change in water temperature (Ambujanagar).

5. Optimization of Plant Lighting and installation of Energy efficient

devices for plant & colony lighting (Ambujanagar, Ropar, Sankrail,
Bhatinda).

6. Optimized the grinding chamber length of the cement mills (MCW,
Rabriyawas)

7. Trimming of coal mill fan impeller by approx. 140 mm (Suli)

8. Optimization of grinding media charge in Cement Mills (Suli, Ropar)

9. Optimization of Raw mill No. 2 (Rabriyawas).

10. Bag house fan inlet box modification (Rabriyawas).

11. Reduced Inline Calciner Tertiary Air duct diameter from 2650 to 1700 mm
(Rabriyawas).

12. Installations of water spray system in Preheater Fan ducts
(Rabriyawas).

13. Installation of GRR in place of Liquid resistance control in motor of
cooler Electro static precipitator (ESP) fan (Rabriyawas).

14. Reduced water recirculation pump size requirement to 3 X 75 KW from
earlier 2 X 160 KW for cooling tower (Rabriyawas).

15. Installation of Energy management system in utility compressors
(Rabriyawas).

16. Installation of speed control for Cement Mill-2 ESP fan (Bhatapara).

17. Installation of Solar water heating system in Guest house (Bhatapara).

18. Reduced Cement Mills ventilation fan power by optimizing the mill
outlet temperature (Ropar).

19. Replacement of screw conveyors by air slides (Ropar).

20. Increased usage of Biomass in power generation by improving covering
facilities to make them available in rainy season also (Ropar).

(b) Additional Investments and proposals, if any, being implemented for
reduction of Consumption of Energy :

1. Replacement of Gypsum Pre-grinder for Cement Mills (Ambujanagar).

2. Replacement of cooler fan with more efficient fans (Ambujanagar).

3. Modification / Installation of improved Fine coal feeding system
(Ambujanagar and Rabriyawas).

4. In CPP, following energy conservation measures are planned
(Ambujanagar);

(a) Further optimization of compressed air.

(b) Installation of a steam turbine as replacement of 825 kw HT motor.
Spare Low Pressure steam is available.

(c) Installation of vapour absorption machine as a replacement of air
condition package unit.

(d) Modified profile blade to be replaced in remaining fans.

5. Optimization of kiln & cooler by fuzzy control & various optimization
measures (MCW).

6. Replacement of triple gate with Rotary Air lock, and installation of
rubber seals of improved design in Raw Mills (Suli).

7. Conversion of low pressure compressors with high pressure compressors in
flyash dense phase system (Suli).

8. Pre-heater fan inlet duct modification to reduce gas velocity and thus
power consumption (Suli).

9. Installation of dip tubes in the ILC cyclones 4th, 5th of each string
(Rabriyawas).

10. Re-orientation of PH cyclones feed chute, flap & feed pipe
(Rabriyawas).

11. Installation of improved speed control devices in Preheater Fans in
both ILC PH fans (Rabriyawas).

12. Installation of AFR feeding system to reduce fuel cost & Co2 emission
(Rabriyawas).

13. Installation of automatic control system for improving cement mill
operation (Rabriyawas).

14. Installation of Belt Bucket Elevator for kiln feed system (Bhatapara).

15. Optimization of Compressed air (Bhatapara).

16. Installation of graphite sealing arrangement for kiln inlet & outlet
(Bhatapara).

17. Installation of improved speed control device in Raw Mill & Coal mill
exhaust fans (Bhatapara).

18. Installation of Solar water heating system in New Executive hostel
(Bhatapara).

19. Installation of Pressurization and ventilation system in Compressor
House which will help in stopping of one Air

Compressor (Ropar).

20. Installation of Better quality Mill Sound Level Sensor and fine tuning
of Mill Optimizer (Ropar).

21. Replacement of separator fans with high efficiency fans (Ropar).

22. Installation of speed control drive for a screw compressor (Sankrail).

23. Replacement of Aluminium make cooling tower Fan with FRP make Fan
(Bhatinda).

24. Installation of Speed control devices and replacement of few overrated
motors in bag filters (Bhatinda)

Total Investment and Savings (in Rs. Crore)

Year Investment Savings

2008 3.17 11.47
2009 18.60 (Proposed) 12.67 (Expected)

(c) Impact of the measures at (a) and (b) above for reduction of Energy
Consumption and consequent impact on the cost of production of goods :

Measures referred in (a) is expected to result in energy saving of Rs.
11.47 crores per annum. Measures referred in (b) is expected to result in
energy saving of Rs. 12.67 crores per annum.

(d) Total Energy Consumption and Energy Consumption per unit of production:

Information is given in the prescribed Form - A annexed.

B) TECHNOLOGY ABSORPTION

Efforts made in Technology Absorption are given in prescribed Form - B
annexed.

C) FOREIGN EXCHANGE EARNINGS AND OUTGO

(a) Activities relating to exports; initiatives taken to increase exports;
development of new export markets for products and services; and export
plans:

In view of good growth in domestic demand, the company has reduced its
focus on exports. This year the company has exported 8.32 lac tonnes of
cement (12 months) as against 13.22 lac tonnes in the previous year (12
months). In terms of value, the exports during this year amounted to
Rs.232.09 crores (12 months)(FOB) as against 275.44 crores (12 months)
(FOB) in the previous year.

(b) Total Foreign Exchange used and earned :

Current Year Previous Year
(12 months) (12 months)
(Rs. in crores) (Rs. in crores)

Used* 976.86 596.65
Earned** 229.80 265.65

* Excluding repayment of borrowings Rs. 117.09; Previous year Rs. Nil.

** Excluding receipt on Sale of investment in foreign subsidiary Rs. 0.42
crore; Previous year Rs. Nil.


FORM - A
(See Rule 2)

Form for Disclosure of Particulars with respect to Conservation of Energy

A. POWER & FUEL CONSUMPTION

Current Year Previous Year
31.12.2008 31.12.2007
1. Electricity :

(a) Purchased

Units (Crores kwh) 35.80 30.91
Total amount (Rs. in Crores)* 138.14 111.77
Rate / Unit-kwh (Rs.) 3.86 3.62

(b) Own Generation

(i) Through Liquid Fuel Generator
Net Units (Crore kwh) 21.19 40.33
Unit (kwh) / Ltr. of LDO / Furnace oil 4.06 4.21
LDO / Furnace oil-Cost /
Unit Generated (Rs./ kwh) 5.83 3.86

(ii) Through Steam Turbine / Generator

Units (Crore kwh) # 97.35 76.03
Unit (kwh)/Tonne of Fuel (Coal/Rice Husk) 979 881
Oil / Gas / Coal - Cost / Unit (Rs./kwh) 2.60 2.06

2. Coal & Other Fuels:

Quantity (Million K. Cal) 8560182 8618902
Total Cost (Rs. in Crores) 701 518
Average Rate (Rs. / Million K.Cal) 818.64 601.42

3. Light Diesel Oil/High
Speed Diesel/Furnace Oil:

Quantity (K.Ltrs.) 1703.09 1480.21
Total Cost (Rs. in Crores) 5.99 4.31
Average Rate (Rs. / K.Ltr.) 35152 29138

4. Others / Internal Generation:

Quantity NIL NIL
Total Cost NIL NIL
Rate / Unit NIL NIL

B. CONSUMPTION PER UNIT OF PRODUCTION

Industry Current Year Previous Year
Norms 31.12.2008 31.12.2007

Electricity (KWH/T. of Cement)** 100 86.3 84.6
LDO / HSD (Ltr. / T. of Clinker) N.A. 0.15 0.13
Coal & Other Fuels
(K.Cal/Kg. of Clinker) 800 744 742

* Minimum demand charges paid to Gujarat Urja Vikas Nigam Limited for
Ambujanagar Plant of Rs. 0.56 Crore have been included in above cost

** Does not include Electricity consumed in residential colony which is
0.57 kwh / tonne of cement. (previous year 0.62 kwh / tonne of cement)

# Includes 400.86 lac units of TG-power sold from Ropar to PSEB (previous
year 425.68 lac units)

FORM - B

(See Rule 2)

Form for disclosure of particulars with respect to Absorption

A. RESEARCH & DEVELOPMENT (R & D)

1. Specific areas in which R & D carried out by the Company :

(a) Promote usage of alternate fuels like industrial wastes in cement
manufacture to reduce the manufacturing cost, fuel consumption and reduce
Co2 emissions.

(b) Conservation of lube and industrial oil by regular quality monitoring
and extending the drain interval.

(c) Improving clinker quality and kiln burning condition by raw mix
optimization, adding mineralizers and optimizing raw meal and solid fuel
fineness.

(d) Using various chemical additives for improving Cement quality.

2. Benefits derived as a result of above R & D :

a) Conservation of energy from traditional sources.

b) Capacity enhancement and conservation of Resources.

c) Improved Clinker & Cement quality and reduction in cost of production.

3. Future Plan of action:

a) Evaluation and application of special Refractory suitable to use with
alternate fuel.

b) Beneficiation of phospho gypsum from fertilizer plant to make it usable
for cement manufacturing.

c) Evaluation of various alternate fuels for their suitability to clinker
manufacturing and power generation process. Installation of handling and
preparation systems for such fuels.

d) Installation of various process and quality monitoring instruments are
planned to optimize processes and improve product quality.

4. Expenditure on R & D :

Current Year Previous Year
31.12.2008 31.12.2007
(Rs. in lacs) (Rs. in lacs)

A. Capital expenditure 53.74 21.33

B. Recurring expenditure 24.49 24.49

C. Total expenditure 78.23 45.82

D. Total R & D expenditure as a
percentage of total turnover 0.01% 0.01%

B. TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION

1. Efforts, in brief, made towards Technology Absorption, Adaption and
Innovation :

a) Installation of Dalog system for Raw Mill gear box monitoring in plants.

b) Installation of online balancer for Preheater fan for productivity
improvement.

The Company has always been remained as one of the industry leaders for
implementation of state of the art equipments and for absorption of new
technologies. Company's personnel from operations, maintenance and
developmental activities were deputed worldwide for training through
seminars and visits.

2. Benefits derived as a result of the above efforts :

Improved quality, productivity, operational efficiencies and cost reduction
primarily due to conservation of energy, improvedequipment safety and
implementation of better operation and maintenance practices.

3. Information regarding Technology Imported during last 5 years :

a) The Dalog system for Raw Mill gear box monitoring imported in 2008.

b) The online balancer for PH fan in 2008.