MUMBAI: Swiss cement giant Holcim will create a new corporate structure to integrate key functions of Ambuja CementsBSE -3.49 %and its subsidiary ACCBSE -3.49 % close on the heels of restructuring the ownership composition of its two Indian arms.
The new management panel, which will initially drive joint efforts to derive synergies in the areas of supply chain management and shared services such as HR and finance, will come into force from next month. Ambuja Cements' MD Onne van der Weijde will head the panel which will comprise managing director of ACC Kuldip Kaura and Ambuja Cements CEO Ajay Kapur. Senior executive Samuel Poletti will come on board as the integration manager, spearheading plans to bring operations of two companies closer.
The members of the existing executive committees of the two companies including functioning directors, chief financial officers (CFOs), zonal heads, procurement, commercial, logistics and capex programme heads will also be key members. Interestingly, Weijde, also a former ACC CFO, will be in charge of all the key functions under this new corporate architecture. The respective board of directors will remain intact as they are.
"The mandate of the committee is to align both companies through the existing management to unlock synergy benefits and implement best practices. The committee will take up direct responsibilities for the area of supply chain optimisation and shared services which is expected to deliver Rs 900 crore benefits. It is not time-bound," an Ambuja Cements spokesperson told ET.
The joint strategies will kick off with the SWAP of clinker and cement in different parts of the country. For starters, two ACC plants will supply clinker to two Ambuja units and two Ambuja plants will supply to four ACC units. Similarly, 13 Ambuja plants will supply cement to parts of 21 states for ACC while 10 ACC plants will supply to parts of 16 states for Ambuja.
"Freight and logistics costs are significant expenses for any cement player. So, by bringing the two together, Holcim can complement the geographical footprint and reduce 25% of logistics costs," said a Mumbai-based cement sector analyst from a leading foreign brokerage. While Ambuja and ACC have been operating as independent entities, Holcim had earlier initiated efforts to consolidate the procurement of raw material under one roof, leading to cost savings to the tune of Rs 12,000 crore. But experts believe that joint operations are possible only through cultural integration.
"Coming together of two organisations is about the unison of cultures. It is only clinical and a folly to believe that merely because two organisations service a common client base or have a similar value chain, they can successfully integrate. The synergy for which organisations integrate can be realised only if the enabling environment and the cultures of different elements are integrated through planned migration initiatives," said Adil Malia, head, HR, Essar Group.
Holcim recently announced a complex reorganisation of its ownership structure in its two Indian arms which will see Ambuja Cements becoming its flagship company.