BIFR APPROVES THE MERGER OF AMBUJA CEMENT RAJASTHAN LIMITED WITH  GUJARAT AMBUJA CEMENTS LIMITED

The proposal of  Gujarat Ambuja Cements Limited (GACL) to merge Ambuja Cement Rajasthan Limited (ACRL) received the approval of the Board of Industrial and Financial Reconstruction (BIFR). As per
the said approval  1 new equity share of GACL will be issued for every 50 equity shares of ACRL.
The effective date for merger would be 1st June, 2004.

The Management control of ACRL was acquired by GACL in March 2000. ACRL enjoys a leadership position in the market of Rajasthan, Haryana, Delhi and fits well into GACL's market strategy of
having leadership in the most growing  cement markets of North and West. With this merger, the cement capacity of GACL would go upto 12.0 million tonnes.  

The merger will benefit GACL not only in terms of the marketing strategy but will also substantially reduce the selling and administrative overheads of both the companies. GACL has been sourcing the clinker for its plant at Bhatinda from ACRL.

The current share capital of ACRL is about Rs. 261.29 crores, out of which  Rs. 128.16 crores
(49.05%) is owned by GACL.

Based on the terms of the merger, shares of ACRL held by GACL representing 49.05% of ACRL's 
equity will be cancelled. GACL will issue about 26.62 Lac equity shares to the  other shareholders
of ACRL. This will increase GACLs equity capital from  Rs. 176.55 crores to Rs. 179.21 crores, an increase of 1.5%.

Over last 3 years, the company has taken numerous measures to cut production cost, improve productivity and be the market leader in Rajasthan and neighbouring States.  The company has
also set up a captive power plant to reduce the cost of power.  All these measures yielded very
good results for the company to turn around from a huge loss making company to a profit making
one.  It's Operating Profit Margin improved significantly from less than 10% to over 30% comparing
with the best in the Industry.  For the latest quarter ended March '04 , the company made a Net
Profit of Rs.14.32 crores on a turnover of  Rs.91.98 crores.

This Merger will be cash accretive for GACL and the full impact of the merger will be reflected in
2004 - 05.