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A PROJECT REPORT ON CAPITAL

STRUCTURE DECISIONS OF BIRLA

CEMENT AT INDIA INFOLINE Ltd.,

Project su!"tted "# $%rt"%& 'u&'"&&!e#t 'or t(e %)%rd o' t(e De*ree

o'

MASTER OF BUSINESS ADMINISTRATION+--+-/

Su!"tted 0

NAME1 MB.NARES2

2T NO1 -/-3--45++3

DEPARTMENT OF BUSINESS ADMINISTRATION

PRINCETON POST 6RADUATE COLLE6E

7A''"&"%ted to Os!%#"% U#"8ers"t09

R%!%#t(%$ur, 20der%%d.

OSMANIA UNI:ERSIT;

2;DERABAD < =5

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DECLARATION

I hereby declare that this Project Report titled A Study on

CAPITAL STRUCTURE DECESIONS OF BIRLA CEMENT AT

submitted by me to the Department of Business Management is a

bonofide work undertaken by me and it is not submitted to any other

ni!ersity or Institution for the award of any degree or

diploma"certificate or published any time before#

Name: MB.NARESH

Signatue o! t"e Student

Date:

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AC>NO?LED6EMENT

It gives me immense pleasure in adding a few heartfelt words for the people

who were part of this project in numerous ways & people who gave unending support

right from the stage the project idea was generated.

Firstly I would like to express my gratitude to our beloved principal Dr.

S"st%&% Sur%!%#0%!, for generously granting me permission to use the reuired

resources of the college! which were inevitable for my projects.

"ith deep sense of gratitude I acknowledge Mrs. M. S)%t(0Redd0#ead of

the $epartment and guide.

I would like to thank Mrs. Mee#%@s(" Faculty member of %..'.! $epartment of

usiness 'dministration! under whose valuable guidance and painstaking supervision!

I able to successfully complete my project.

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INDEX

LIST OF TABLES

$#% CONTENTSPA#E

NO.

' LIST OF TABLES

B LIST OF FI#URES

( ABSTRACT

)

C2APTERIINTRODUTION TO TOPIC

NEED FOR THE STUD$

OB%ECTI&ES OF STUD$

METHODOLO#$

SCOPE OF THE STUD$

LIMITATIONS OF THE STUD$

'()

* C2APTER II

RE:IE? OF LITERATURE

*(+*

+ C2APTER < III

COMPAN; PROFILE

+,(-+

, C2APTER < I:

DATA ANAL;SIS AND INTERPRETATION

A. DATA ANAL;SIS

B. INTERPRETATION

-()/

- C2APTER

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S.No N%!e o' t(e T%&esP%*e.

No

1$ummary of estimated cost of the project

43

2%et cash accruals of ssi franchisee.in rupees/

45

3%et present !alue of cash in flows0)12.interst

rate/46

4Internal rate of return of ssi franchisee

47

5Internal rate of return of ssi franchisee

48

*I+, -F #'/,+

S&.

No.N%!e o' t(e C(%rts

P%*e

No.

1 3ross profit and net cash accruals 45

2Present !alue of cash inflows0)12 annuity

47

3# Present !alue of cash inflows0*-2 annuity

48

4 Present !alue of cash inflows0*12 annuity 49

ABSTRACT

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Investors have always been in search of new investment options! which can

give more rate of interest or seek for the value appreciation. In this era of high stock

market volatility! people are unable to read the market properly. +o a mutual fund is

an option to invest in stock market. eople are interested in government securities!

company bonds and money market instruments! which are less volatile and give

constant returns. eing a nave in instrument arena he can3t directly invest in these

areas. +o mutual funds provide an option.

's a whole! mutual funds cater to the most of financial needs of the investors

basing on his risk taking ability. ,his project mainly attempts to understand mutual

funds! its advantages and disadvantages. It is also aimed to measure the performance

of various euity schemes for the current year.

,o understand the %utual Funds! +chemes offered by I/*' +45 *IF6and also %utual

Fund +chemes of life insurance respectively 'dvantages and $isadvantages of

%utual Funds.

,o understand the benefits of investing in mutual Funds over other forms of

investments ortfolio of %utual Funds.

It can be concluded that mutual funds are better investments option. Investing in

portfolio of mutual funds can minimutual funds. ,his has to be overcome. It can also

be said that it is suitable to people from all backgrounds and all age groups.

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C2APTER < I

INTRODUCTION

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C2APTER < IIRE:IE? OF

LITERATURE

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C2APTER < III

COMPAN; PROFILE

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C2APTER < :

FINDIN6S

SU66ETIONS

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CAPITAL STRUCTURE

INTRODUTION dividends.

,he corporate and personal income taxes do not exist.

,he operating profit ?6I,@ is not accepted to grow. ,he total assets are given and do not change.

usiness risk is constant over time and is assumed to be

independent of its capital structure.

NEED OF T2E STUD;1

,he corporate and personal income taxes do not exist.

,he business risk is constant over time and is assumed to be

independent of its capital structure.

,he given the assumptions of perfect information and rationality.

,he business risk is eual among all firms with in similar operating

environment.

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OBJECTI:E OF T2E STUD;

stake in India Infoline Investment +ervices. ,his will help

focused expansion and capital raising in the said subsidiaries for

various lending businesses like loans against securities! +%6

financing! distribution of retail loan products! consumer finance

business and housing finance business. India Infoline

Investment +ervices rivate *imited consists of the following

stepCdown subsidiaries.

?a@ India Infoline $istribution ompany *imited ?distribution of

retail loan products@?b@ %oney line redit *imited ?consumer finance@

?c@ India Infoline #ousing Finance *imited ?housing finance@

Port'o&"o M%#%*e!e#t Ser8"ces

Pou get recessions. Pou have stock market declines. If

you donHt understand thatHs going to happen! then youHre not

readyE you wonHt do well in the markets. 5o need to worry. "e

at India Infoline would take care of all issues related to

managing your hard earned money.

-ur ortfolio %anagement +ervice is a product wherein an

euity investment portfolio is created to suit the investment

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objectives of a client. "e at India Infoline invest your resources

into stocks from different sectors! depending on your riskCreturn

profile. ,his service is particularly advisable for investors who

cannot afford to give time or donHt have that expertise for dayC

toCday management of their euity portfolio.

It is all about your money! being managed by the experts! while

you continue with your routine life. IsnHt it simple and totally

hassle free.

"hatHs more! you can keep track of your dividends Q bonus Q

rights issues with paperless tracking. +o you always know how

fast your investment is growing. It basically means assigning the

right job to the right person.

+alient Features of India Infoline %+

stake in India Infoline Investment +ervices. ,his will help

focused expansion and capital raising in the said subsidiaries for

various lending businesses like loans against securities! +%6

financing! distribution of retail loan products! consumer finance

business and housing finance business. India Infoline

Investment +ervices rivate *imited consists of the following

stepCdown subsidiaries.

?a@ India Infoline $istribution ompany *imited ?distribution ofretail loan products@

?b@ %oney line redit *imited ?consumer finance@

?c@ India Infoline #ousing Finance *imited ?housing finance@

Port'o&"o M%#%*e!e#t Ser8"ces

Pou get recessions. Pou have stock market declines. If

you donHt understand thatHs going to happen! then youHre not

readyE you wonHt do well in the markets. 5o need to worry. "e

at India Infoline would take care of all issues related to

managing your hard earned money.

-ur ortfolio %anagement +ervice is a product wherein an

euity investment portfolio is created to suit the investment

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objectives of a client. "e at India Infoline invest your resources

into stocks from different sectors! depending on your riskCreturn

profile. ,his service is particularly advisable for investors who

cannot afford to give time or donHt have that expertise for dayC

toCday management of their euity portfolio.

It is all about your money! being managed by the experts! while

you continue with your routine life. IsnHt it simple and totally

hassle free.

"hatHs more! you can keep track of your dividends Q bonus Q

rights issues with paperless tracking. +o you always know how

fast your investment is growing. It basically means assigning the

right job to the right person.

+alient Features of India Infoline %+(%# P.>.J%"# Financial

%anagement

ournalsu!%r

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1'e%tures

%r. Aumar %angalam irla ?)0@ is the hairman

of the 4+L ); billion multinational 'ditya irla

Droup! which operates in (7 countries across six

continents. -ver 0; per cent of its revenues flow

from its operations outside India.

%r. irla chairs the oards of the major Droup companies in India and

globally. ,he global companies include 5ovelis! olumbian hemicals!

'ditya irla %inerals! 'ditya irla hemicals! ,hai arbon lack!

'lexandria arbon lack! $omsj[ Fabriker and ,errace ay ulp %ill!

among others. In India! %r. irla chairs the oards of #indalco! Drasim!

'ditya irla 5uvo! 4ltra,ech! Idea! 'ditya irla Financial +ervices and

'ditya irla /etail.

,he Droup3s businesses are spread across a swath of industries. ,hese

include aluminium! copper! cement! textiles ?pulp! fibre! yarn! fabric andbranded apparel@! carbon black! insulators! natural resources! power!

agribusiness! telecommunications! financial services! I,QI,e+! retail and

trading.

Bus"#ess record

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%r. irla took over as hairman of the Droup in 1::0! at the age of 29!

after the untimely demise of his father. 's hairman! %r. irla has

taken the 'ditya irla Droup to an altogether higher growth trajectory.

In the 18 years that he has been at the helm of the Droup! he has

accelerated growth! built a meritocracy and enhanced stakeholder value.

In the process he has raised the Droup3s turnover from 4+L 2 billion in

1::0! to 4+L ); billion today. %r. irla has restructured the businesses

to emerge as a globalQnational leader in the sectors in which the Droup

operates. #e has made 27 acuisitions in 18 years in India and globally!

the highest by an Indian multinational in India.

,he acuisition of 5ovelis! a global metals major! in 2;;8! the second

largest acuisition ever by an Indian company! led to a newfound respect

for Indian companies and stoked a higher level of interest in the country

as well. /ecently! the acuisition of olumbian hemicals! a 4+Cbased

company and the world3s third largest carbon black manufacturer

positioned the Droup as the 5o. 1 player in this sector! given its own

si=eable carbon black operations. *ikewise! the acuisition of $omsj[

Fabriker! a leading +wedish speciality pulp manufacturer enables the

Droup3s ulp and Fibre business to further consolidate its global

position.

esides these! over the years %r. irla has acuired manufacturing

plants in anada! hina! Indonesia! plantations in *aos! and mines in

'ustralia! set up new plants in 6gypt! ,hailand and hina. 'longside! he

has expanded capacities in all of the Droup3s manufacturing units.

In India as well! he has made major acuisitions! the most notable being

the ement division of *arsen & ,oubro! Indal from 'lcan! %adura

Darments from oats Biyella and the hlor 'lkali division of Aanoria

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hemicals.

4nder his stewardship! the 'ditya irla Droup enjoys a position of

leadership in all the major sectors in which it operates. -ver the years!

%r. irla has built a highly successful meritocratic organisation!

anchored by an extraordinary force of 1(7!;;; employees belonging to

)2 different nationalities.

I# @e0 res$o#s"&e $os"t"o#s o# 8%r"ous re*u&%tor0 od"es

%r. irla holds several key positions on various regulatory and

professional oards. #e is a $irector on the entral oard of $irectors

of the /eserve ank of India. 6arlier! he was hairman of the 'dvisory

ommittee constituted by the %inistry of ompany 'ffairs and also

served on ,he rime %inister of India3s 'dvisory ouncil on ,rade and

Industry.

's the hairman of +ecurities and 6xchange oard of India ?+6I@

ommittee on orporate Dovernance! he authored the First /eport on

orporate Dovernance titled J/eport of the Aumar %angalam irla

ommittee on orporate DovernanceK. Its recommendations were path

breaking and became the basis of corporate governance norms.

Furthermore! as the onvener of the rime %inister3s ,ask Force on

'dministrative and *egal +implifications! the extensive

recommendations made by him in his report! have been implemented in

totality. %r. irla also served as hairman of +6I3s committee on

Insider ,rading! which formulated orporate Dovernance principles for

Indian corporates.

#e is on the 5ational ouncil of the onfederation of Indian Industry

and the 'pex 'dvisory ouncil of the 'ssociated hambers of

ommerce and Industry of India.

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O# t(e o%rd o' educ%t"o#%& "#st"tut"o#s

%r. irla is deeply engaged with educational institutions. #e is the

hancellor of the renowned irla Institute of ,echnology & +cience

?I,+@! with campuses in ilani! Doa! #yderabad and $ubai.

#e is a $irector of the D. $. irla %edical /esearch & 6ducation

Foundation.

#e serves on the *ondon usiness +chool3s 'sia acific 'dvisory

oard and is a #onorary Fellow of the *ondon usiness +chool.

Acco&%des co#'erred o# Mr. B"r&%

%r. irla has won recognition for his exemplary contribution to

leadership processes and institutionQsystems building. ' selective listu!%r

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Our Vision

To e a premi!m &loal )on&lomerate

+ith a )lear "o)!s on ea)h !siness#

Our Mission

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To deliver s!perior val!e to o!r )!stomers'

shareholders' employees and

so)iety at lar&e#

Our Values

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2;12^2;11^ 2;1;^ 2;;:^2;;9^ 2;;8^2;;7^ 2;;0^ 2;;)^2;;(^ 2;;2

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1908

,he 'ditya irla Droup! IndiaHs first

multinational corporation! traces its origins

back to the tiny village of ilani in the

/ajasthan desert! where +eth +hiv 5arayan

irla started cotton trading operations in 1908.

,oday! the DroupHs footprint extends to (7

countries and its revenues are 4+L); billion.

"e retrace the highlights of this remarkable journey! starting from the

present@ 7; 7; 7; )0 );

ook Balue ?/s@ 2:;.() 277.2( 2(1.08 177.17 12:.)1

Co#so&"d%ted Pro'"t Loss %ccou#t o' B"r&% Cor$or%t"o#M%r -+ M%r -- M%r - M%r M%r 3

-+ !t(s -+ !t(s -+ !t(s -+ !t(s -+ !t(s

Income+ales ,urnover 2!0:7.92 2!)(0.(9 2!);1.89 2!;):.;9 2!;;2.89

6xcise $uty (;:.:2 29: 2(;.;) 2)7.2( 281.:7

5et +ales 2!297.:; 2!1)7.(9 2!181.8) 1!9;2.90 1!8(;.92

-ther Income 127.27 111.:( 1;9.7( 0;.79 29.11

+tock 'djustments C);.(8 (7.;( 28.12 C10.(8 2:.08

,otal Income 6xpenditure 2!(82.8: 2!2:).() 2!(;8.): 1!9(9.17 1!899.0;

/aw %aterials 000.97 7((.() 0;7.:9 )(:.17 ()(.8)

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/eserves 2!109.9; 1!:8(.12 1!8;7.21 1,202.48

:1:.0(

/evaluation /eserves 8.8: 8.8: 9 8.22 9.))

5etworth 2!2)(.7; 2!;08.:2 1!8:1.22 1,287.71

1!;;).:9

+ecured *oans :22.72 88;.7) 019.2 219.4 2;7.;14nsecured *oans 2;1.81 18).88 1(2.(7 8.36 21.):

,otal $ebt 1!12).(( :)0.)1 70;.07 227.76 228.0

,otal *iabilities (!(78.:( (!;;(.(( 2!))1.89 1,515.47

1!2(2.)9

M%r -+ M%r -- M%r - M%r M%r 3

-+ !t(s -+ !t(s -+ !t(s -+ !t(s -+ !t(s

'pplication -f Funds

Dross lock 2!2;1.11 1!801.(2 1!)(;.;2 1,354.20

1!18(.))

*ess< 'ccum. $epreciation 9)9.09 880.:1 8(1.(( 694.15 782.7)

5et lock 1!(02.0( :80.)1 7:9.7: 660.05 0;;.9apital "ork in rogress 0;:.72 )99.:) (28.88 141.86 1):.11

Investments 1!;)).91 1!17:.21 1!1)1.70 552.29 7()

Inventories )18.1 (0:.7 29(.81 192.88 2;;.)0

+undry $ebtors (8.20 )).27 22.10 20 (1.81

ash and ank alance 22.)( 28.(: 21.;: 38.73 29.:)

,otal urrent 'ssets )87.89 )(1.20 (27.:0 251.61 271.1

*oans and 'dvances (;7.2: (18.79 220.07 175.73 )8(.0)

Fixed $eposits )17.1) ()(.79 (19.1: 280.99 2.)2

,otal '! *oans &'dvances

1!1::.21 1!;:2.71 98;.8708.33

8(8.;7

$effered redit ; ; ; 0 ;

urrent *iabilities 78).2) 78;.28 0(2.;7 480.15 )(0.)(

rovisions 7) 02.08 7).:0 66.9 (0(.;8

,otal * & rovisions 8(9.2) 822.9) 0:8.;1 547.05 899.0

5et urrent 'ssets )7;.:8 (7:.88 28(.7: 161.28 C01.))

%iscellaneous 6xpenses ; ; ; 0 ;

,otal 'ssets (!(78.:( (!;;(.(( 2!))1.9; 1,515.48

1!2(2.)8

ontingent *iabilities 2)(.01 (:2.0 ((1.7 237.54 :2.)7

ook Balue ?/s@ 2:;.() 277.2( 2(1.08 166.16 12:.)1

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ANAL;SIS AND INTERPRETATION

+- FINANCIAL ;EARS

CAPITAL STRUCTURE ANAL;SIS

-. C%$"t%&"%t"o# I#'or!%t"o#

P%rt"cu&%rs Rs. I# &%@(s

A.

$ebt

Cost o' detWInterestQ%arket value $ebtO1;;

A$W 0);0.8)Q121)91.(9O1;;W).)0>

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/. R%t"os +-

/eturn on capital employed )9.12>

/eturn on 5et worth (:.;)>

$ebtQ6uity ratio 1.21

I#ter$ret%t"o#1

i. ,otal net value of irla ortland ements *imited was increased in the year

2;;:C1; from 9829;.;; to121)91.

ii. 6uity capital of the irla ortland ements *imited

same as the previous year. ,he value is )08).17 *akhs.

iii. $ebt 6uity ratio was recorded as1.2( in the year 2;;:C1;.

iv. 5et worth of the company (:.;) in the financial year 2;;:C1;.

v. 6arning per share of the company was /s.9(.9;.

SOURCE OF FINANCE

,he total investment on (1st%arch! 2;;9 is /s. (;27.;2 *akhs. ,he source of

investments is given below.

BIRLA CEMENT Port&%#d Ce!e#ts L"!"tedS Sources o' F"#%#ce %s /-st

Dec, +-+

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,otal Investment /s. (;27.;2 *akhs

D-B6/5%65, +64/I,I6+ ;.1(

-5$+ 2:.7)

F4**P 'I$ +#'/6+ 29::.;2

'/,I'**P 'I$ +#'/6+ 7.12

+---+ FINANCIAL ;EAR

CAPITAL STRUCTURE ANAL;SIS

-. C%$"t%&"%t"o# I#'or!%t"o#

P%rt"cu&%rs Rs. I#

&%@(s

A.

$ebt.

/egarding apital +tructure 'nalysis 6uity apital was decreased from

2;;9C;: to 2;;:C1; and t;otal $ebt Balve increased from 9829:.;; to 121)91.;;

*akhs during the year.

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/egarding apital +tructure 'nalysis ,urn -ver was increased and

decreased in the year 2;;9C;: and profit after tax was increased during the year

2;;:C1;.

/egarding apital +tructure 'nalysis 6uity /atio was decreased from 1.2(

to 1.(( and current ratio decreased from 2.9to 2.(:.

From the above study can be said that the irla ortland ements *imited

financial position on apital +tructure 'nalysis is uite satisfactory.

SU66ESTIONS

,he irla ortland ements *imited is one of the private sector cement

ompany in India. It is a profitable ompany.

5owCaCdays the cement industry playing a major and important role in the

construction field! these are for construct #omes! Flyovers! Industries etc. 5owCaC

days cement industry facing of challenge like

/egional reuirements

/egional cement demands

*ack of resources

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