Financial Research on Cement Industry

EQUITY RESEARCH ON INDIAN CEMENT INDUSTRY (By FUNDAMENTAL ANALYSIS METHOD)

SUMMER INTERNSHIP REPORT SUBMITTED

ToMADRAS CEMENTS LTD

SUBMITTED BY

S.BARATHAN Reg no 31509631011

SSN SCHOOL OF MANAGEMENT CHENNAI

MBA PROGRAM (SESSION: 2009-2011)

TABLE OF CONTENTS

CONTENTS PAGE NOACKNOWLEDGEMENT 4RESEARCH DESIGN 5EQUITY RESEARCH 6INTRODUCTION TO CEMENT INDUSTRY 7OVERVIEW OF CEMENT INDUSTRY AND BUDGET PROVISONS 8SWOT ANALYSIS 10PORTERS 5 FORCES MODEL 11TYPES OF CEMENT IN INDIA 11MANUFACTURING PROCESS 16INTRODUCTION TO FINANCIAL RATIOS 17MAJOR PLAYER’S OF THE INDUSTRY 211.AMBUJA CEMENTS LTD 221.1.FINANCIAL RATIOS 241.2.GRAPHS 252.ULTRATECH CEMENT LTD 29

2.1.FINANCIAL RATIOS 312.2.GRAPHS 323.INDIA CEMENTS LTD 363.1.FINANCIAL RATIOS 383.2.GRAPHS 394.JK CEMENT LTD 434.1.FINANCIAL RATIOS 454.2.GRAPHS 465.GRASIM LTD 505.1.FINANCIAL RATIOS 525.2.GRAPHS 536.MADRAS CEMENTS LTD 576.1.FINANCIAL RATIOS 596.2.GRAPHS 607.1.FINANCIAL RATIOS OF COMPANIES FOR YEAR 2008-2009 647.2. GRAPHS 65CEMENT INDUSTRY FUTURE TRENDS 71CEMENT INDUSTRY GROWTH DRIVERS 71CONCLUSION 73BIBLIOGRAPHY 74

LIST OF TABLES

CONTENTS TABLE NUMBER

PAGE NO

AMBUJA CEMENTS LTD-FINANCIAL RATIOS 1.1 24

ULTRATECH CEMENT LTD-FINANCIAL RATIOS 2.1 31

INDIA CEMENTS LTD-FINANCIAL RATIOS 3.1 38

JK CEMENT LTD-FINANCIAL RATIOS 4.1 45

GRASIM LTD-FINANCIAL RATIOS 5.1 52

MADRAS CEMENTS LTD-FINANCIAL RATIOS 6.1 59

FINANCIAL RATIOS OF COMPANIES FOR THE YEAR 2008-2009

7.1 64

LIST OF FIGURES

CONTENTS FIGURE NUMBER

PAGE NO

AMBUJA CEMENTS LTD-GRAPHS 1.1 25

ULTRATECH CEMENT LTD-GRAPHS 2.1 32

INDIA CEMENTS LTD-GRAPHS 3.1 39

JK CEMENT LTD-GRAPHS 4.1 46

GRASIM LTD-GRAPHS 5.1 53

MADRAS CEMENTS LTD-GRAPHS 6.1 60

FINANCIAL RATIOS OF COMPANIES FOR THE YEAR 2008-2009- GRAPHS

7.2 64

ACKNOWLEDGEMENT

I would like to express my profound gratitude and grateful thanks to Mr.G.BARTH (DGM-L&D) and Mr.SUBURAMAN (HRD) for giving me the opportunity undertake this research project in MADRAS CEMENTS LTD.

I am really thankful to Mr. D.SATISH KUMAR (AGM Corporate Finance and Accounts) for making all kinds of arrangements to carry the project successfully and for guiding and helping me to solve all kinds of problems regarding the project work. His systematic way of working and in comparable guidance has inspired the pace of the project to a great extent.

I would also like to Mr.GANESH for assigning me a project of such a great learning experience.

I would like to thank all the employees of MADRAS CEMENTS LTD who have directly or indirectly helped me with their moral support for the completion of my project.

RESEARCH DESIGN

OBJECTIVE OF THE STUDY

To provide an overview of Indian Cement Industry.To study about some of the major players in Indian Cement Industry.To compare the financial ratios of the major players and interpreting them.To identify the growth drivers of the Indian cement industry.

METHODOLOGY OF STUDY:

The whole study can be termed as a desk research. Hence there is no field work and collection of primary data for this research except for secondary information obtained by the medium of internet, journals and magazines.

DATA COLLECTION:

Only secondary data was collected from the internet, company websites, magazines and various articles. However the main source of information is Annual report provided by the companies.

LIMITATIONS OF THE STUDY:

The companies were chosen based on convenience and availability of secondary data.

EQUITY RESEARCH:

Equity Research refers to the study of the performance of the economy as a whole, the industry and various companies and analyzing the same. It enables to predict the future performance of a particular stock based on its past performance, the current status of the internal as well as the external environment.

EQUITY RESEARCH can be done by two methods:

FUNDAMENTAL ANALYSIS:

Here we look at balance sheet, income statement etc. to determine a company‘s value. In financial terms it is used to measure a company‘s intrinsic value. It takes a long term approach to analyze the market as compared to technical analysis. It often looks at data over a number of years.

TECHNICAL ANALYSIS:

Technical traders study the price movements of the particular company's stock in the market. Technical analysts strongly believe that the price movements follow a trend and by identifying the trend, one can accurately predict the price that might occur in future. Technical analysts use financial tools with software support.

STEPS IN FUNDAMENATAL ANALYSIS:

The various steps in fundamental analysis are listed below. Fundamental Analysis is a conservative and non-speculative approach based on the ―Fundamental analysis ofThe EconomyThe Industry

The Company

CEMENT INDUSTRYINTRODUCTION:

Cement Industry originated in India when the first plant commenced production in 1914 at Porbandar, Gujarat. The industry has since been growing at a steady pace, but in the initial stage, particularly during the period before Independence, the growth had been very slow. Since indigenous production was not sufficient to meet the entire domestic demand, the Government had to control its price and distribution statutorily. Large quantities of cement had to be imported for meeting the deficit. The industry was partially decontrolled in 1982 and this gave impetus to its pace of growth. Installed capacity increased to more than double from 27 million tons in 1980-81to 62 million tons in 1989-90.

The cement industry responded positively to liberalization policy and the Government decontrolled the industry fully on 1st March 1989. From 1991 onwards cement industry got the status of a priority industry in schedule III of the industry policy statement, which made it eligible for automatic approval for foreign investment up to 51% and also for technical collaboration on normal terms of payment of royalty.

After the globalization and liberalization of Indian economy, the cement industry has been growing rapidly at an average rate of 9 per cent. The country is now the second largest producer of cement in the world next only to China. Additionally, in the last two decades, the industry has undergone rapid technological up gradation and growth, and now, some of the cement plants in India are comparable to the world’s best operating plants in all respects.

Till a few years ago India was importing cement from other countries, as the production could not meet the demand for the whole country. Now the tables have turned as India has started exporting large quantities of cement and clinker to Bangladesh, Nepal, Sri Lanka, Maldives, Mauritius, Africa, Seychelles, Burma, UAE, and Singapore etc.

India is today the second largest producer of cement in world.95 % is consumed domestically and only 5% is exported. Demand is growing at more than 10 % per annum. More than 90 % of production comes from large cement plants. There are a total of 146 large and more than 350 small cement manufacturing units in the country. More than 80% of the cement manufacturing units use modern environment friendly “dry” process.

In the cement industry there are two sectors – one consisting of large plants and the other consisting of mini cement plants. A factory with an installed capacity exceeding 2,97,000 tones per annum (900 tons per day) is a large plant and with capacity up to and including 2, 97,000 tons is a mini cement plant.

Since mini cement plants are scattered all over the country with a number of associations representing different types of processes, sizes etc. and some of them are even tiny units, it has not been possible to obtain correct data of this sector.

OVERVIEW OF THE PERFORMANCE OF THE CEMENT SECTOR:

The Indian cement Industry not only ranks second in the production of cement in the world but also produces quality cement, which meets global standards. However, the industry faces a number of constraints in terms of high cost of power, high railway tariff; high incidence of state and central levies and duties; lack of private and public investment in infrastructure projects; poor quality coal and inadequate growth of related infrastructure like sea and rail transport, ports and bulk terminals. In order to utilize excess capacity available with the cement industry, the government has identified the following thrust areas for increasing demand for cement:

• Housing development programmers and Promotion of concrete highways and roads.

• Use of ready-mix concrete in large infrastructure projects.• Construction of concrete roads in rural areas under Prime Ministers Gram

Sadak Yojana.

BUDGET PROVISIONS:

Some of the provisions in the budget that could have a direct and indirect bearing on the cement sector are as follows

• In order to provide incremental lending to the infrastructure sector, Indian Infrastructure Finance Company (IIFCL) will evolve a takeout financing scheme in consultation with banks. IIFCL will refinance 60% of commercial bank loans for PPP projects in critical sectors over the next 15 to 18 months. IIFCL and Banks are now in a position to support projects involving total investment of Rs 100,000 crore.

• Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) was stepped up by 87% to Rs 12887 crore in 2009‐10 compared to 2008‐09.

• Allocation for housing and provision of basic amenities to urban poor enhanced to Rs 3,973 crore in 2009‐10. This includes provision for Rajiv Awas Yojana (RAY), a new scheme announced.

• Allocation for Bharat Nirman increased 45% in 2009‐10.• Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY) increased

59% over B.E. 2008‐09 to Rs 12,000 crore in B.E. 2009‐10.• Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), allocation

increased by 27% to Rs 7,000 crore.• Allocation under Indira Awaas Yojana (IAY) increased 63% to Rs 8,800

crore in 2009‐10. Allocation of Rs 2,000 crore made for Rural Housing Fund (RHF) in National Housing Bank (NHB) to boost the resource base of NHB for refinance operations in rural housing sector.

ADVANTAGE INDIA:

High growth in the real estate sector:The Indian cement industry has been on a high growth trajectory for more than a decade, led by buoyancy in sectors such as real estate and construction.Industry performance indicators on an inclineCement industry’s sales, installed capacity and production have witnessed a sustained growth between 2004 and 2009Modern technology

The industry has witnessed continuous modernization and adoption of new technologies in recent years.Second-largest cement producer in the worldIndia ranks second in cement production in the world, with an installed capacity of about 230 million tonnes in 2008–09.Easy availability of raw materialIn India, limestone is available in many states such as Rajasthan, Himachal Pradesh, Madhya Pradesh, Tamil Nadu, Andhra Pradesh and Jharkhand.

SWOT ANALYSIS:STRENGTHSHigh Entry BarriersCement being a capital-intensive industry creates high entry barriers for the new players. Moreover, the creation of distribution channel, acquisition of limestone reserves etc makes entry of new players extremely difficult.WEAKNESSDependence on GovernmentIndustry is highly dependent on government authorities for power supply. Cement industry has been suffering from frequent power cuts.Increasing dependence on imported coalOver the years, there has been deterioration in the quality of coal. In particular, the ash content has increased implying lower calorific values for coal, and improper and inefficient burning, etc.This has increased the dependence of cement industry on imported coal. Poor port infrastructure and high volatility in exchange rates creates concerns.OPPORTUNITIESGrowth from newer products - Ready to mix concreteRMC is a value-added semi-finished product that results in a superior quality concrete.Various advantages of RMC are quality control, eco friendly, greater speed of construction, correct proportion of ingredients, lower wastage, reduced manpower requirement etc. RMC is a high margin product as compared to site mixed concrete (SMC).In India, RMC accounting for meager 5% of cement production that is converted to RMC as against 70% in developed countries.Though India is the second largest cement manufacturer, it is among the lowest cement consuming countries. In India per capita cement consumption is 122 kg, which is far below the world average of approximately 320 kg. With the growth of economy, per capita cement consumption rises at brisk pace. It indicates there is a potential for growth in cement industry.THREATSRising input costRising interest rateRising interest rates may impact housing demand and thereby affecting cement demand and also capital expenditure.SubstitutesBitumen and Engineering plastic have emerged as substitute of cement in road and building construction.PORTERS 5 FORCES MODEL:Porter’s five forces model clearly provides the picture of industry attractiveness.

Bargaining power of Suppliers: - HighGovernment of India exercise excessive control on Coal and Power prices & supply. Government authorities also control the transportation sector.Bargaining power of Buyers: - LowIn the recent past the cement industry is witnessing major change in purchase quantity. Now the share of small purchases i.e. retail purchases have been rising whereas that of bulk purchase has declined.Rivalry among the Firms: - HighLarge number of players, Overcapacity, High degree of product homogeneity, High storage cost and high exist barriers, creates intense rivalry among the firms.Threat of Substitute: - LowUse of Bitumen in Road construction and Engineering plastic in Building creates some concern for the industry.Barriers to entry: - Medium to HighHigh Capital Investment, Distribution Network and Oversupplied market deters new entrants.

TYPES OF CEMENT IN INDIA:

The types of cement in India have increased over the years with the advancement in research, development, and technology. The Indian cement industry is witnessing a boom as a result of which the production of different kinds of cement in India has also increased. By a fair estimate, there are around 11 different types of cement that are being produced in India. The production of all these cement varieties is according to the specifications of the BIS.

Some of the various types of cement produced in India are:• Clinker Cement• Ordinary Portland Cement• Portland Pozzolana Cement(PPC)• Portland Blast Furnace Slag Cement• Oil Well Cement• Rapid Hardening Portland Cement(RHPC)• Sulphate Resisting Portland Cement(SRPC)• White Cement

In India, the different types of cement are manufactured using dry, semi-dry, and wet processes. In the production of Clinker Cement, a lot of energy is required. It is produced by using materials such as limestone, iron oxides, aluminum, and silicon oxides. Among the different kinds of Cement produced in India, PortlandPozzolana Cement, Ordinary Portland cement, and Portland Blast Furnace SlagCement is the most important because they account for around 99% of the total cement production in India.The Portland variety of cement is the most common among the types of cement in India and is produced from gypsum and clinker. The Ordinary Portland cement and Portland Blast Furnace Slag Cement are used mostly in the construction of airports and bridges. The production of white cement in the country is very less for it is very expensive in comparison to grey cement. In India, while cement is usually utilized for decorative purposes, marble foundation work, and to fill up the gaps between tiles of ceramic and marble.The different types of cement in India have registered an increase in production in the last few years. Efforts must be made by the cement industry in India and the government of India to ensure that the cement industry continues innovation and research to come up with more and more varieties in the near future.

1. Clinker CementClinker Cement has registered a growth over the last few years in India. The Indian cement industry is growing at a rapid pace and this has given a major boost to the production and sale of Clinker Cement in India.The cement industry in India is highly technologically intensive and as a result, the quality of clinker cement that is produced in India is of a very high grade and is often considered among the best in the world. The production of Clinker Cement requires a lot of energy because it needs to be manufactured at the temperature of around 1400-1450 degree Celsius.

If Clinker Cement is kept in a dry condition, it can be stored for a long period of time without any loss of its quality. It is for this reason that Clinker Cement is preferred in the construction of houses, bridges, and complexes.

2. Ordinary Portland CementOrdinary Portland Cement (OPC) is manufactured in the form of different grades, the most common in India being Grade-53, Grade-43, and Grade-33. OPC is manufactured by burning siliceous materials like limestone at 1400 degree Celsius and thereafter grinding it with gypsum.Grade 43 is in high demand in India and is largely used for residential, commercial and other building construction purposes. It has a compressive strength of 560 kg per square cm.Grade 53 is known for its rich quality and is highly durable. Hence it is used for constructing bigger structures like building foundations, bridges, tall buildings, and structures designed to with stand heavy pressure. As such, Ordinary Portland Cement is used for quite a wide range of applications.

3. Portland Pozzolana CementPortland Pozzolana Cement is manufactured by blending Pozzolanic materials, OPC clinker and gypsum either grinding them together or separately. Today Portland Pozzolana Cement is widely in demand for industrial and residential buildings, roads, dams, and machine foundations.PPC is resistant to harsh water attacks and prevents the formation of calcium hydroxide at the time of cement setting and hydration. It withstands aggressive gases, thermal cracks, wet cracking, etc. The BIS quality specifications for PPC is used in heavy load infrastructure and constructions such as marine structures, hydraulic structures, mass concreting works, plastering, masonry mortars, and all applications of ordinary Portland cement. Some of the other big names in the Portland Pozzolana manufacture are Ultratech, Ambuja, ACC cements, Star Cement, and Birla group.Portland Pozzolana Cement is highly popular in India and with many cement plants setting up jetties for transportation, initial costs would gradually decrease as well.

4. Portland Blast Furnace Slag CementIn recent years, there has been a significant growth in the production of PortlandBlast Furnace Slag Cement and its sales have also increased considerably over the last few years. This has given a major boost to the Indian cement industry. The Slag Cement of the Portland Blast Furnace is a type of cement that is hydraulic and is manufactured in a blast furnace where iron ore is reduced to iron. The molten slag which is tapped is quickly drenched with water, dried, and then grounded to a fine powder. This fine powder that is produced is commonly known as the Portland Blast Furnace Slag Cement.

The manufacture of Portland Blast Furnace Slag Cement requires 75% less energy than that needed for the production of the Portland cement. The low cost of production of Portland Blast Furnace Slag Cement makes it cheaper than Portland cement. It is for this reason that in recent years, the sales of Portland Blast Furnace Slag Cement have increased.Portland Blast Furnace Slag Cement has a typical light color and an easier 'finish’ ability. Its concrete workability is better and it has a higher flexural and compressive strength. It is resistant to chemicals and also has more hardened consistency. This is the reason that Portland Blast Furnace Slag Cement is used in the construction of dams, bridges, building complexes, and pipes.

5. Oil Well CementOil Well Cement as the name suggests, is used for the grouting of the oil wells, also known as the cementing of the oil wells. This is done for both, the off-shore and on-shore oil wells.As the number of oil wells in India is increasing steadily, the sales of Oil Well Cement have also increased. This has boosted the Indian cement industry to a large-extent.Oil Well Cement is manufactured from the clinker of Portland cement and also from cements that have been hydraulically blended. Oil Well Cement can resist high pressure as well as very high temperatures. Oil Well Cement sets very slowly because it has organic 'retarders' which prevent it from setting too fast. It is due to all these characteristics that it is used in the building of the oil wells where the pressure is around 20,000 PSI and the temperature is around 500 degrees-Fahrenheit.There are 3 grades of Oil Well Cements. Grades O is ordinary and is used commonly; HSR is high sulphate resistant; and MSR is moderate sulphate resistant. Each grade is used where it is applicable at a particular range of oil well sulphate environments, temperatures, pressures, and depths. Oil Well Cement has proved to be very beneficial for the petroleum industry due to its characteristics. For it is due to the Oil Well Cement that the oil wells function properly.

6. Rapid Hardening Portland cementRapid Hardening Portland Cement (RHPC) is a type of cement that is used for special purposes when a faster rate of early high strength is required. RHPC has a higher rate of strength development than the Normal Portland Cement (NPC).The Rapid Hardening Portland Cement's better strength performance is achieved by increasing the refinement of the product. This is the reason that its use is increasing-in-India.Rapid Hardening Portland Cement is manufactured by fusing together limestone and shale, at extremely high temperatures to produce cement clinker. To this cement clinker, gypsum is added in small quantities and then finely grounded to produce Rapid Hardening Portland Cement. It is usually manufactured using the dry process technology.Rapid Hardening Portland Cement is used in concrete masonry manufacture, repair work which is urgent, concreting in cold weather, and in pre-cast production of concrete. Rapid Hardening Portland Cement has proved to be a boon in the places where quick repairs are required such as airfield and highway pavements, marine structures, and bridge decks.The Rapid Hardening Portland Cement should be stored in a dry place, or else its quality deteriorates due to premature carbonation and hydration. As the Indian cement industry produces Rapid Hardening Portland Cement in large quantities, it is able to meet the domestic demand and also export to other countries.

7. Sulphate Resisting Portland CementSulphate Resisting Portland Cement (SRC) is a type of Portland cement in which the quantity of tricalcium alumiante is less than 5%. It can be used for purposes wherever Portland Pozzolana Cement, Slag Cement, and OrdinaryPortland cement is used. The use of Portland Sulphate Resisting Cement has proved beneficial, particularly in conditions where there is a risk of damage to the concrete from sulphate attack. The use of Sulphate Resisting Portland Cement is recommended in places where the concrete is in contact with the soil, ground water, exposed to seacoast, and sea water. In all these conditions, the concrete is exposed to attack from sulphates that are present in excessive amounts, which damage the structure. This is the reason that the use of the Sulphate Resisting Portland Cement have increased in India.The Sulphate Resisting Portland Cement should be kept in a place which is dry otherwise through premature hydration and carbonation the quality of cement deteriorates.

8. White CementWhite Cement has registered growth in production and sale in India in the last few years. The White Cement sector has been growing at the rate of 11% per year. This has given the Indian cement industry a major boost.White Cement is much like the ordinary grey cement except that it is white in color. In order to get this color of the White Cement, its method of production is different from that of the ordinary cement. However, this modification in its production method makes White Cement far more expensive then the ordinary cement.The production of White Cement requires exact standards and so it is a product which is used for specialized purposes. White Cement is produced at temperatures that hover around 1450-1500 degrees Celsius. This temperature is more than what is required by the ordinary grey cement. As more energy is required during the manufacture of White Cement, it goes to make it more expensive than the ordinary grey cement.White Cement is used in architectural projects the use of white cement has been specified. It is used in decorative works and also wherever vibrant colors are desired. White Cement is used to fill up the gaps between marble and ceramic tiles for a smoother and more beautiful finish.

MANUFACTURING PROCESS:

Mining - Limestone is extracted from own mines, which are situated approx. 4 km. away from plant. The mining of limestone is done in such a way so as to get 78% to 82% pure limestone.Crushing - The extracted limestone is then transported to Jai crusher by dumpers. The limestone is crushed into small pieces of approx. 16 to 25 mm. sizes.Grinding - The crushed limestone along with latrine is feed into the Raw Mill for grinding. The ground material is called Raw Meal. It is than sent to the CF Silo.Blending - In the Silo the Raw Material is blended to make the mixture uniform. From here the material is sent to the pre heaters.Burning - In pre heaters, the mixture is heated at various temperatures at various stages. This preheated material is now fed into the kiln where it is heated at the temperature of 1400- 1500 degree where calcinations take place. Coal is used in the kiln to maintain the temperature and finally clinker emerges out of it. This clinker is transported through a conveyor into a storage Silo from where it taken out through vibratory feeders and fed into the open circuit cement grinding mill

hoppers.Grinding - The grinding of clinker with gypsum is done in cement mill. It is basically have where the grade of cement is controlled gypsum is added to increase the setting time of the cement. Then cement is than stored for some time.Storage and packing - The cement is than conveyed to different cement storage silos according to their grades and from silos it is packed in pp bags by using electronic packaging machines.

INTRODUCTION TO FIANCIAL RATIOSLIQUIDITY RATIOS Liquidity implies a firm’s ability to pay its debts in the short run. If a firm has sufficient net working capital, it is assumed to have enough liquidity. The current ratio and the quick ratio and Absolute Liquid ratio are the three ratios, which directly measure liquidity.

Current Ratio: It measures the ability of the enterprise to meet its current obligations. It gives an idea about the short term liquidity position of the firm.

CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES

Quick Ratio or Liquid Ratio: In current ratio, the composition of current assets is not considered. A firm which has large amount of cash and accounts receivable is more liquid than a firm with high amount of inventories in its current asset. Thus we take quick ratio which shows the firm‘s ability to pay its liabilities without relying on sale and recovery of its inventory.

QUICK RATIO = CURRENT ASSETS – INVENTORY – PREPAID EXPENSES CURRENT LIABILITIES

Absolute Liquid Ratio: It is similar to liquid ratio; here absolute liquid assets are calculated by adding both cash and bank balance and investments.

ABSOLUTE LIQUID RATIO =ABSOLUTE LIQUID ASSETS CURRENT LIABILITIESPROFITABILITY RATIOS:

These ratios measure the efficiency of the firm’s activities and ability to generate profits.

Gross Profit Margin: This ratio is used as an indicator of the efficiency of the production operation and the relation between production costs and selling price.

Indicates of how much profit is earned on your products without consideration of selling and administration costs.

GROSS PROFIT MARGIN= GROSS PROFIT NET SALES

Net Profit Margin: It measures the overall efficiency of production, administration, selling, financing, pricing and tax management.

NET PROFIT MARGIN= NET PROFIT NET SALES

Operating Profit Margin: This ratio indicates how much of income is generated with respect to sales.

Operating Income =Profit before Interest, Depreciation and Tax (PBIDT)

OPERATING PROFIT MARGIN= OPERATING PROFIT NET SALES

Return on Equity (ROE): It measures the corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

ROE = PROFIT AFTER TAX (PAT) SHAREHOLDER‘S EQUITY

The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.

Return on Capital employed (ROCE): It measures the efficiency and profitability of firm’s capital investments.

ROCE = PBIDT CAPITAL EMPLOYED ROCE should be always greater than company borrows. Otherwise increase in borrowings will result in decrease in Earnings per Share.

TURNOVER RATIO: It gives the speed of conversion of current assets (liquidity) into cash.

Inventory Turnover Ratio: It measures Number of times that you turn over or sell inventory during the year. High inventory turnover is an indicator of good inventory management. But a high ratio can also mean there is a shortage of inventory. A low turnover may indicate overstocking, or obsolete inventory.

Inventory Turnover Ratio = SALES INVENTORYDays in Inventory: It measures the average number of days it will take to sell your inventory.

Days in Inventory = NUMBER OF DAYS INVENTORY TURNOVER RATIO

Debtors Turnover Ratio: It measures the how many times credit sales have been created and collected.

Debtors Turnover Ratio= NET SALES

DEBTORS Debtors Collection Period: It measures the length of time your trade payables are outstanding before they are paid.

Debtors Collection Period= NUMBER OF DAYS DEBTORS TURNOVER RATIO

Fixed Asset Turnover Ratio: It indicates the ability of the firm to use fixed assets to generate sales for the firm.

Fixed Asset Turnover Ratio = NET SALES FIXED ASSETS

LEVERAGE RATIO: These are of two types:

1. Capital Structure Ratio- these are based on proportions of debt and equity in the capital structure of the firm. 2. Coverage Ratio- these are derived from the relationships between debt servicing commitments and sources of funds for meeting this obligation.

Capital Structure Ratio: Debt Equity ratio: It indicates the relative contributions of creditors and owners. Debt equity ratio = DEBT EQUITY

Coverage Ratio:Interest Coverage Ratio: This ratio tells us how many times the firm can cover or meet the interest payments associated with debt.

Interest coverage ratio= EBIT INTEREST

EQUITY – RELATED RATIOS It measures the shareholders return and value. Earnings per Share (EPS): It gives the performance of the firm.

EPS = NET PROFIT NUMBER OF EQUITY SHARES

Price Earnings Ratio: It is the number of times the market price of a share is discounted vis-à-vis the EPS of the firm. It is the most popular financial ratio in the stock market for secondary market investors as it indicates whether the stock is undervalued or overvalued. This method is useful as long as the firm is a viable business entity and its real value is reflected in its profits.

P/E RATIO = MARKET PRICE OF SHARE EARNING PRICE OF SHARE (EPS)

Dividend per Share (DPS): Dividend paid for each Equity Share holder.

DPS= DIVIDEND PAID NUMBER OF EQUITY SHARES

Dividend payout ratio: It indicates ratio of amount of Divided paid from Net profit as Dividend to equity share holders. Dividend paid include the Dividend Tax

Dividend payout ratio= DIVIDEND PAID (INCLUDING DIVIDEND TAX) NET PROFIT

Net worth per Share: It indicates the Book Value of each Equity share of the company.

Net Worth per Share= NET WORTH NUMBER OF EQUITY SHARES

MAJOR PLAYER’S OF THE INDUSTRY

This section provides the overview and financial information on prominent players in the Indian cement sector like

• Associated Cement Company Ltd. (ACC),• Grasim Industries Ltd.• Ambuja Cements Ltd.• UltraTech Cement Ltd.• J.K. Cement Limited.• Madras Cements Ltd.• Jaypee Group Ltd.• Binani Cement Ltd.• Prism Cement Ltd.• India Cements Ltd.•

1. AMBUJA CEMENTS LTD

Ambuja Cements Ltd (ACL) started out as a joint sector co. with public sector Gujarat Industrial Investment Corporation (GIIC) and Narottam Sekhsaria & Associates in 1981. Later with private partners buying out GIIC's stake, the company became a private sector venture.The company is the most cost efficient cement manufacturer in the country. It has shown innovation in utilizing measures like sea transport, captive power plants, and imported coal and availing of govt. sops and subsidies to constantly check the costs. It has also been a major player in exports of cement.In the last decade the company has grown tenfold. It was the first company in India to introduce the concept of bulk cement movement by the sea transport. The company's most distinctive attribute, however, is its approach to the business. Ambuja follows a unique homegrown philosophy for successful survival. Ambuja is the most profitable cement company in India, and one of the lowest cost producers of cement in the world.The company was awarded for its credit, the National Award for commitment to quality by the Prime Minister of India, National Award for outstanding pollution control by the Prime Minister of India, Best Award for highest exports by CAPEXIL and Economic Times - Harvard Business School Association Award for corporate excellence in different years. The company was adjudged as the top

Indian company in the cement sector for the Dun and Bradstreet - American Express Corporate Awards 2007. The company developed a unique homespun channel management model called Channel Excellence Programmed (CEP) for marketing their product. Over 7000 dealerships and 20,000 retailers across India are covered under this model. The company name was changed from Gujarat Ambuja Cements Limited to Ambuja Cements Limited on April, 2007, the word Gujarat was dropped to reflect the true geographical presence of the company.

PLANTS:

It is having eight cement plants at Ambujanagar (Gujarat), Darlaghat (Himachal Pradesh), Upperwahi (Maharashtra), Rabriyawas (Rajasthan), Daburji (Punjab), Bhatinda district (Punjab) and Ropar (Punjab).

FINANCIAL HIGHLIGHTS:

The Company kept pace with the double digit demand growth, and maintained its strong position of approximately 18% market share in its main markets, and around 10% on an all India basis.Sales volumes increased by 6.5%, to 18.8 million tonnes in 2009 as against 17.6 million tonnes in 2008.The Company has built a large network of over 6,000 dealers and 20,000 retailers across 18 states in India.Cement production and sales volumes increased by 6% and 6.5% respectively, to reach 18.83 million tonnes and 18.79 million tonnes.Average sales realization increased by 7%, to Rs. 3,760 per tonne.Net sales were 14% higher, at Rs.7077 crores. EBITDA was 8% higher, at Rs.1972 crores.Consolidated net profit excluding exceptional items increased 12%, to Rs.1217 crores.Total cement production increased by 6%compared to 2008, from 17.8 to 18.8 million tonnes, despite the fact that clinker production was marginally lower at 11.4 million tonnes.

UPCOMING PROJECTS:

During 2009 a new bulk cement terminal started operation at Kochi, providing access to new markets in the South, and two new captive power units, each with 15 MW capacities, were commissioned at Bhatapara (Chhattisgarh) and Maratha (Maharashtra).The new clinker production line at Rauri (HP), also with 2.2 million tonnes capacity, has commenced production trials during January 2010. The associated cement grinding facilities at Dadri (UP) and Nalagarh (HP), each with 1.5 million tonnes capacity were commissioned.An additional 30 MW captive power unit at Ambujanagar (Gujarat) was commissioned on Jan 2010, taking total captive power capacity to more than 400 MW.Further investments to improve rail connectivity at several locations are also in progress, for increased efficiency of logistics operations. Additional cement grinding capacity is also under construction, at the Bhatapara

and Maratha units, and will be completed during 2010.By the end of the year, the Company's total installed cement capacity will be increased from 22 million tonnes to approximately 27 million tonnes.

1.1. FINANCIAL RATIOSYear 2008-

20092007-2008 2006-2007 2005-2006

Current Ratio1.14 1.59 1.36 1.68

Liquid Ratio0.74 0.95 0.86 1.10

Absolute Liquid Ratio0.92 0.80 1.66 2.15

Operating Profit %30 36 54 39

Gross Profit %30 36 53 37

Net Profit %17 23 31 24

Return on Equity (ROE) %19 25 38 43

Return on Capital employed (ROCE) % 30 36 58 52Net Working Capital(in Crores) 238.25 865.65 418.24 476.02Inventory Turnover Ratio

10.34 6.63 9.81 15.33Fixed Asset Turnover Ratio

2.05 1.95 1.93 2.52Debtors Turnover Ratio

46.44 27.69 39.16 69.69Debtors Collection Period

7.86 13.18 9.32 5.24Debt equity ratio

0.03 0.05 0.07 0.25Interest coverage ratio

81.33 62.08 39.26 20.35EPS(in Rs)

8.00 9.21 11.62 9.91P/E RATIO

4.96 17.81 12.47 -DPS(in Rs)

2.40 2.20 3.50 3.04Dividend payout %

35 28 35 35Net Worth per Share(in Rs)

42.46 37.26 30.62 23.02

1.2. GRAPHSThe various ratios calculated are represented in graphical form for better understanding.

2. ULTRATECH CEMENT LTD

UltraTech Cement Limited was incorporated as a public limited company on August 2000, as “L&T Cement Limited” a 100% Subsidiary of Larsen & Toubro Limited. The name of the Company was changed to UltraTech Cement Co. Limited with effect from 19th November 2003 after the Aditya Birla group owned Grasim Industries acquired it. The name of the company was again changed to UltraTech Cement Limited with effect from 11th October 2004.UltraTech Cement Limited, a Grasim subsidiary was incorporated in 24th August 2000 as L&T Cement Limited, has an annual capacity of 17 million tonnes.

PRODUCTS:

It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzolana Cement and Ready Mix Concrete.

PLANTS:

As part of the eighth biggest cement manufacturer in the world, UltraTech Cement

has five integrated plants, five grinding units as well as three terminals of its own (one overseas, in Colombo, Sri Lanka).UltraTech Cement is the country’s largest exporter of cement clinker. The export markets span countries around the Indian Ocean, Africa, Europe and the MiddleEast.Ultratech subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P) Limited.


Domestic sales volume rose by 13% over FY09, though total volume was up by 11%.Net Turnover rose by 10%, attributable to higher domestic sales volume. Exports and Ready Mix Concrete (RMC), each, contributed to around 7% of Company’s net turnover.Interest cost decreased from Rs. 126 crores in FY09 to Rs. 118 crores in FY10 due to repayment of long term debts to the tune of Rs. 300 crores.Net profit for FY10 stood at Rs. 1,093 crores as compared to Rs. 977 crores in FY09.

Installed capacity(Mn.TPA):Clinker Cement

17.8023.10

17.8021.90

Production (MMT):ClinkerCement

15.5517.64

15.0715.87

UPCOMING PROJETCS:

Company has earmarked around Rs. 2,600 crores towards capex to be spent over the next 3 years. This will be invested in augmenting the grinding capacity at its Unit in Gujarat, installing waste heat recovery systems at its Units in Maharashtra and Andhra Pradesh, setting-up packaging terminals at various locations and for other modernization projects


20102008-2009

2007-2008

2006-2007 2005-2006

Current Ratio1.13 1.09 1.02 1.27 1.39

Liquid Ratio0.50 0.54 0.54 0.70 0.71

Absolute Liquid Ratio1.35 0.91 0.21 0.76 0.42

Operating Profit %30 28 33 30 18

Gross Profit %28 26 32 28 15

Net Profit %16 15 18 16 7

Return on Equity (ROE) %24 27 37 44 22

Return on Capital employed (ROCE) % 37 31 36 41 19Net Working Capital(in Crores) 173.3 118.89 25.33 204.99 216.47Inventory Turnover Ratio

8.58 9.22 9.04 11.33 8.69Fixed Asset Turnover Ratio 1.43 1.38 2.20 1.95 1.30Debtors Turnover Ratio

32.66 32.91 25.43 26.76 19.12Debtors Collection Period

11.17 11.09 14.35 13.64 19.09Debt equity ratio

0.35 0.59 0.65 0.90 1.40Interest coverage ratio

14.52 14.41 24.14 17.03 6.59EPS(in Rs)

87.82 78.48 80.94 62.84 18.47P/E RATIO

13.14 7.01 9.65 12.29 36.98DPS(in Rs)

6.00 5.00 5.00 4.00 1.75

Dividend payout %8 7 7 7 11

Net Worth per Share(in Rs)370.21 289.36 216.65 141.69 83.46

2.2. GRAPHS

3. INDIA CEMENTS

India Cements was set up in 1946 and the company's first plant was established in 1949 at Sankarnagar, Tamil Nadu. Since the India Cements Ltd. has been established, it has risen in stature to become the biggest cement producer in south India.India Cements has 7 plants spread across Andhra Pradesh and Tamil Nadu. The total production capacity of the plants is around 9 million tons per year. In south India, India Cements Company has a 28% market share and it plans to achieve a market share of around 35% in the near future. Around 90% of India Cements Company's produce is sold in the Tamil Nadu and Kerala markets. India Cements Company has a distribution network which is very strong - it has over 10,000 stockists out of which around 25% is devoted to the company.

PRODUCTS:

The India Cements Ltd. owns famous brands such as Rassi Super Power, Sankar Super Power, and Coromondal Super Power, Sulphate Resisting Portland Cement (SRC).The India Cements Company has subsidiary companies which include ICL Financial Services, Industrial Chemicals & Monomers, ICL International, and ICL Securities. In 1997 India cements acquired Aruna Sugars Finance Ltd which was later renamed as India Cements Capital & Finance Ltd.

ACQUISITIONS:

It also acquired Cement Plant of Visaka Cement Industry, at Tandur, Ranga Reddy district of Andhra Pradesh with Installed capacity 900000 Tonnes. The cement division of Raasi Cement (RCL) was vested with the company from April.1998 under a scheme of arrangement India Cements has established itself as a leading cement manufacturing company and as it plans to expand its production capacity, the company's position in the market is sure to rise in the near future.


The clinker production from the company's cement plants during FY 09 was lower at 69.83 Lakh Tonnes compared to previous year 72.13 Lakh Tonnes and cement production was also marginally lower at 91.11 Lakh Tonnes compared to previous year 92.34 Lakh Tonnes.

UPCOMING PROJECTS:

Increasing the capacity of its plants at Vishnupuram and Malkapur besides setting up grinding units at Chennai, Tamil Nadu and Parli, Maharashtra, all of which are now functional. The company is in the process of finalizing additional capacity creation in North India through Greenfield projects acquisition. The proposed plant at Himachal Pradesh for which company holds the mining lease has been delayed due to infrastructure bottlenecks.

3.1. FINANCIAL RATIOSYear 2008-2009 2007-2008 2006-2007 2005-2006

Current Ratio1.86 2.19 3.96 4.05

Liquid Ratio1.54 1.86 3.45 3.55


Operating Profit %32 37 33 18

Gross Profit %28 33 27 8

Net Profit %13 21 21 3

Return on Equity (ROE) %15 25 36 6


4.08 9.18 9.79 7.83Fixed Asset Turnover Ratio 0.86 0.87 0.80 0.73Debtors Turnover Ratio




8.03 9.61 4.50 1.34EPS(in Rs)

15.30 22.62 21.73 2.38P/E RATIO

6.92 8.26 7.46 69.44DPS(in Rs)

2.00 1.00 1.00 0.00

Dividend payout %15 10 6 0

Net Worth per Share(in Rs) 102.96 89.62 60.97 41.49

3.2. GRAPHS

4. JK CEMENT LTD

J.K. Cement is an affiliate of the J.K. Organization, which was founded by Lala Kamlapat Singhania. The J.K. Organization is an association of industrial and commercial companies and has operations in a broad number of industries.Our cement operations commenced commercial production in May 1975 at our first plant at Nimbahera in the state of Rajasthan

It commissioned a second grey cement plant at our Mangrol plant in 2001, with a production capacity of .75 million ton. Today, J. K. Cement Ltd. is one of the largest cement manufacturers in Northern India. We are also the second largest white cement manufacturer in India by production capacity. While the grey cement is primarily sold in the northern India market, the white cement enjoys demand in the export market including countries like South Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka, Kenya, Tanzania, UAE and Nepal.

Our access to high quality limestone reserves that are suitable for production of white cement provides us with a competitive advantage. Backed by state-of-the-art technology and highly skilled manpower against the backdrop of India’s infrastructural growth in an overdrive, we are upbeat about the future. We are confident of contributing heavily in India’s journey of development. We see a world of concrete ideas on the horizon.

PRODUCTS:

We produce grey cement and white cement. Grey cement produced by us consists of Ordinary Portland Cement (“OPC”) and Portland Pozzolana Cement (“PPC”). OPC has three principal grades that are differentiated by their compressive strengths, and consist of 53-grade, 43-grade and 33-grade OPC.

The cement products are marketed under the brand names J.K. Cement and Sarvashaktiman for OPC products, J.K. Super for PPC products and J.K. White and Camel for white cement products, which we believe are well known brands.

PLANTS:

We manufacture grey cement in two facilities located at Nimbahera and Mangrol in the state of Rajasthan in Northern India. White cement is produced at our facility at Gotan in the state of Rajasthan.FINANCIAL HIGHLIGHTS:

EBITDA was 8% higher, at Rs.1972 crores.Consolidated net profit excluding exceptional items increased 12%, to Rs.1217 crores.

UPCOMING PROJECTS:

The clinkerisation expansion projects at Bhatapara and Rauri were commissioned in December 2009 and January 2010 respectively.The total cost of these two projects will be approximately Rs. 2,700 crores.Apart from the above two major projects, an additional 30 MW captive power unit at Ambujanagar(Gujarat) is currently undergoing production trials and will be commissioned during the first quarter 2010, taking total captive power capacity to more than 400 MW.In addition, three new ships for western coastal transportation are under construction, of which two are expected to be brought into service in 2010.Further investments to improve rail connectivity at several locations are also in progress, for increased efficiency of logistics operations. Additional cement grinding capacity is also under construction, at the Bhatapara and Maratha nits, and will be completed during 2010. By the end of the year, the Company's total installed cement capacity will be increased from 22 million tonnes to approximately 27 million tonnes. All the expansion projects have been financed through internal accruals

4.1. FINANCIAL RATIOSYear 2008-2009 2007-2008 2006-2007 2005-2006

Current Ratio2.65 2.48 2.31 2.65

Liquid Ratio2.46 1.92 1.97 2.22


Operating Profit %22.17 29.04 27.56 16.18

Gross Profit %19.13 26.58 24.74 9.53

Net Profit %10 18 14 4

Return on Equity (ROE) %12.00 25.17 21.78 4.83


11.00 12.73 11.21 10.40Fixed Asset Turnover Ratio

1.23 1.34 1.34 0.97Debtors Turnover Ratio




6.14 10.66 8.83 1.90EPS(in Rs)

20.36 37.92 25.54 4.66P/E RATIO

1.95 4.32 5.67 37.64

DPS(in Rs)3.50 5.00 3.50 1.50

Dividend payout %20 15 16 37

Net Worth per Share(in Rs)169.61 150.63 117.28 96.424.2. GRAPHS

5. GRASIM LTD

Grasim Industries Limited, a flagship company of the Aditya Birla Group.Starting as a textiles manufacturer in 1948, today Grasim's businesses comprise viscose staple fibre (VSF), cement, chemicals and textiles. Its core businesses are VSF and cement, which contribute to over 90 per cent of its revenues and operating profits. In July 2004, Grasim acquired a majority stake and management control in UltraTech Cement Limited. One of the largest of its kind in the cement sector, this acquisition catapulted the Aditya Birla Group to the top of the league in India. The cement business of the Group is being restructured in a phased manner. In the first phase, Grasim's cement business is being demerged into Samruddhi Cement Limited, a subsidiary of Grasim. In the second phase, Samruddhi Cement Limited will amalgamate with UltraTech. Upon completion of restructuring, the cement business will be consolidated in UltraTech, a pure play cement company.

Grasim ventured into cement production in the mid 1980s, setting up its first plant at Jawad in Madhya Pradesh and since then it has grown to become a major player in the cement industry.

All the plants are located close to sizeable limestone mines and are fully automated to ensure consistent quality. All units use state-of-the-art equipment and technology and are certified with ISO 9001 for quality systems and ISO 14001 for environment management systems

PRODUCTS:

Grasim is also nurturing some regional brands like Vikram Cement and Rajashree Cement. Grasim is a leading ready mix concrete (RMC) player in India. Grasim is also the largest producer of white cement in India. The white cement division manufactures world-class white cement in a variety of textures and finishes. It has applications in floorings and exterior wall finishes, apart from other innovative uses.

Grasim is a voluntary member of the Cement Sustainability Initiative (CSI), which is the apex for the cement industry globally to establish common measures, share best practices and exchange data relating to environmental impact.

PLANTS:

Composite plants: Jawad, Rawan, Shambhupura, Malkhed, Reddipalayam, KotputliReady-mix concrete (35 plants)Ready-mix concrete (34 plants)White cement: Kharia, Khanga


Net income from operations at Rs.20195 Crores increased by 9% driven by higher volumes in Cement business.PBIDT rose by 32% with higher volumes, lower input and energy prices.Interest cost increased from Rs.307 Crores to Rs.335 Crores. Loans aggregating Rs.650 Crores were raised during the year to fund capital expenditure.Net profit before extraordinary gain was Rs.2759 Crores in FY10, as against Rs.2187 Crores in FY09, an increase of 26 %.

UPCOMING PROJECTS:

Company spent Rs.705 Crores towards the completion of expansion projects in the cement business, and normal modernization in all the businesses.

5.1. FINACIAL RATIOSYear 2009-

20102008-2009

2007-2008

2006-2007 2005-2006

Current Ratio1.32 1.36 1.38 1.62 1.59

Liquid Ratio0.85 0.75 0.92 1.05 1.00



Gross Profit %35 25 32 29 23

Net Profit %21 15 20 18 13



19.59 7.84 10.44 10.44 8.82Fixed Asset Turnover Ratio

4.58 1.52 2.54 2.54 2.20Debtors Turnover Ratio


15.41 18.92 25.44 24.46 22.79Debt equity ratio

0.15 0.36 0.39 0.47 0.40Interest coverage ratio

20.00 16.81 28.71 20.57 13.35EPS(in Rs)

191.53 179.76 223.35 167.53 94.16

P/E RATIO14.70 8.80 11.80 12.80 22.00

DPS(in Rs)30.00 30.00 30.00 27.50 20.00

Dividend payout %18 19 15 19 24


5.2. GRAPHS

6. MADRAS CEMENTS LTDMadras Cements Ltd is the flag ship company of Ramco Group, a well known business group of South India. It is based at Chennai. The main product of the company is Portland cement manufactured through the five advanced production facilities spread over South India. The cement capacity is 10 million tons per annum. Madras Cements Ltd is a trend-setter in adopting state-of-the-art technology for the manufacture of Cement, Ready Mix Concrete and Dry Mortar Products. MCL is the first to bring the following technologies in South India's cement industry.

AWARDS:

• 4 Leaves Award from Centre for Science and Environment.

• National Award for Energy Conservation from Confederation of Indian Industries.

• Best Energy Efficient Unit from National Council for Cement and Building Materials.

• Corporate Performance Award from Economic Times.

• Best Improvement in Energy Performance from International Congress on Chemistry of Cement.

• Visvesvariah Industrial Award from All India Manufacturers Organisation.

• Business Excellence Award from Industrial Economist.

• Export Performance Award from CAPEXIL.

• State Safety Awards from Tamil Nadu & AP Governments.

PRODUCTS:

The company is the fifth largest cement producer in the country. Ramco Super grade is the most popular cement brand in South India. The company also produces Ready Mix Concrete and Dry Mortar products. In addition, the company also operates one of the largest wind farms in the country.

PLANTS:

MCL operates five plants with a total capacity of 10 MTPA.• R R Nagar, Tamil Nadu (1.2 MTPA)• Jayanthipuram, Andra Pradesh (3.6 MTPA)• Alathiyur, Tamil Nadu (3.0 MTPA)• Ariyalur, Tamil Nadu (2.0 MTPA)• Mathod, Karnataka (0.2 MTPA)

UPCOMING PROJECTS:

The company plans to establish grinding and packing plants near fly ash availability areas / major cement consumption areas to help the Company in economizing transportation costs and better servicing of marketsGrinding Plant with a capacity of 0.50 Million Tonnes Per Annum (MTPA) at Kattuputhur Village, Uthiramerur Taluk, and Kancheepuram District Tamil Nadu was commissioned in the month of June 2009.Grinding Plant with a capacity of 0.50 MTPA at Singhipuram Village, Valapady Taluk, Salem District, and Tamil Nadu was commissioned in the month of September 2009.

Grinding Plant with a capacity of 0.95 MTPA at Kolaghat, Purba Medinipur District, West Bengal, was commissioned in the month of January 2010.Packing Plant with a capacity of 120 Tonnes per Hour (TPH) at Malkapur, Nalgonda District.Andhra Pradesh was commissioned in the month of September 2009.Packing Plant with a capacity of 120 TPH at Aralvaimozhi, Kanyakumari District Tamil Nadu was commissioned in the month of December 2009.FINANCIAL HIGHLIGHTS:Operating profit before interest, depreciation and tax was higher at Rs.877.29 crores as against Rs.793.50 Crores of the previous year, showing 11% increase. The higher borrowings during the year for the various expansion projects had resulted in increase in interest cost.The commissioning of the new projects had also increased the depreciation charge


20102008-2009

2007-2008

2006-2007 2005-2006

Current Ratio2.08 2.08 1.94 1.56 1.43

Liquid Ratio1.32 1.32 1.33 1.23 0.98



Gross Profit %26 28 34 32 15

Net Profit %13 15 21 20 8



6.46 7.21 8.06 11.93 9.77Fixed Asset Turnover Ratio

0.72 0.79 1.03 1.42 1.00Debtors Turnover Ratio


21 14 12 16 18Debt equity ratio

1.65 1.95 1.71 1.02 1.53

Interest coverage ratio4.52 6.00 12.93 21.53 4.38

EPS(in Rs)14.86 15.28 343.02 255.03 65.43

P/E RATIO8.13 4.73 9.76 10.71 33.29

DPS(in Rs)2 2 40 25 15

Dividend payout %15.75 15.34 13.76 11.31 26.18


6.2. GRAPHS

7.1. FINANCIAL RATIOS OF COMPANIES FOR THE YEAR 2008-2009

COMPANY

AMBUJA CEMENT

S LTDULTRATECH

LTD

INDIA CEMENTS

LTD

JK CEMENTS

LTDGRASIM LTD

MADRAS CEMENTS

LTD

Current Ratio 1.14 1.09 1.86 2.65 1.36 2.08

Liquid Ratio 0.74 0.54 1.54 2.46 0.75 1.32

Absolute Liquid Ratio 0.92 0.91 0.21 0.44 2.07 0.29

Operating Profit % 30 27 32 22 26 33

Gross Profit % 30 26 28 19 25 28

Net Profit % 17 15 13 10 15 15

Return on Equity % 18 27 15 12 17 29

Return on Capital employed (ROCE) % 30 31 18 18 21 18

Net Working Capital 238.25 118.89 990.21 587.07 820.03 440.38

Inventory Turnover Ratio 10.34 9.22 4.08 11 7.84 7.21

Fixed Asset Turnover Ratio 2.05 1.38 0.86 1.23 1.52 0.79

Debtors Turnover Ratio 46.44 32.91 9.26 28.22 19.3 26.41

Debtors Collection Period 7.86 11.09 39.41 12.93 18.92 14

Debt equity ratio 0.03 0.59 0.55 0.48 0.36 1.95

Interest coverage ratio 81.33 14.41 8.03 6.14 16.81 6

EPS(in Rs) 8 78.48 15.3 20.36 179.76 15.28

P/E RATIO 4.96 7.01 6.92 1.95 8.8 4.73

DPS(in Rs) 2.4 5 2 3.5 30 2

Dividend payout % 35 7 15 20 19 15

Net Worth per Share(in Rs) 42.46 289.36 102.96 169.61 1033.83 52.96

7.2. GRAPHS

Optimum ratio to be maintained is 2:1.The Company should have twice the current assets to match its current obligations. Madras cements Ltd has most optimum value.

Liquid ratio includes only liquid asset which can be readily converted to meet

current obligations of the company. Ratio should be maintained optimum. It is more precise than current ratio it clearly indicates the solvency position if the company.

Operating profit % highlights the operational efficiency of the firm. Operating profit is Profit before Interest, Depreciation and Tax (PBIDT). Higher the value satisfies the shareholders of the company. Madras cements Ltd has highest Operating efficiency of all.

Net Profit indicates the equity earning of the company. Higher the value satisfies the shareholders of the company. Madras cements Ltd has Net Profit % of 15 though having high Operating Profit % is due to high Interest, Depreciation cost.

Return to Equity higher makes the share holders of the company happy and attracts more retail and institutional investors. Madras Cements Ltd has highest ROE.

Ambuja Cements Ltd has the lowest debt of all. Debt equity indicates the capital structure of company. Madras Cements Ltd has highest Debt Equity ratio. Debt Equity ratio must be maintained at optimum value.

Higher the ratio shows the better the financial position the firm. It clearly shows the interest paying ability of the firm. Ambuja cements Ltd have highest Interest ratio because it has lowest debt of all.

EPS is amount earned by one equity share. Higher EPS makes it highly attractive for shareholders. Grasim Ltd and Ultratech Ltd has highest EPS .Aditya Birla Group has high EPS.

Higher the P/E ratio indicate stock is valued richly this is could be due to market expectations. P/E ratio is a "fundamental" measure used by long-term investors. Industry average P/E ratio is around 9.

Dividend per Share is dividend earned by each share.DPS depends upon Dividend allocated for the year by management board. Grasim pays highest dividend per equity share.

Percentage of Net Profit to be distributed as dividend to Equity share holders while the rest of the net profit is added to reserves and surplus. Ambuja Cements Ltd has highest Dividend payout ratio

CEMENT INDUSTRY FUTURE TRENDS:

OPPORTUNITIES:

• Per capita consumption in India continues to be low at 143 kg, as compared to other countries such as China (1,014 kg) and Japan (524 kg), which indicates significant potential for growth.

• Housing, infrastructure and industrial and commercial construction are expected to be the key drivers for future growth. The Union Budget substantially stepped up allocation for many infrastructure sectors over the budget estimates for the previous year, especially for the National Highways Development Program (NHDP), Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Accelerated Power Development and Reform Program (APDRP).

• Demand for housing, which accounts for the largest share of the total domestic demand for cement in India, is set to grow rapidly due to increasing urbanization, rising number of households and growing employment. According to the Eleventh Plan, the demand for housing in India is estimated to increase from more than24 million units in 2007 to over 26 million units by the end of the Plan period.

• Infrastructure projects such as DFC as well as upgraded and Greenfield airports and ports are expected to step up construction activity, thereby leading to a surge in the demand for cement

CEMENT INDUSTRY GROWTH DRIVERS

HOUSING:

• The housing segment is expected to be a key demand generator for the cement industry, considering the intensive demand the segment is currently witnessing.

• According to the Eleventh Five Year Plan (2007–2012), housing demand is estimated to increase from more than 24 million units in 2007 to over 26 million units at the end of the Plan period.

• Growing urbanization, an increasing number of households and higher employment are primarily driving the demand for housing.

• The housing segment accounts for a major portion of the total domestic demand for cement in India.

INFRASTRUCTURE:

• The Government of India is strongly focusing infrastructure development to boost the economy’s growth.

• Infrastructure projects such as the Dedicated Freight Corridors (DFCs) and upgraded and Greenfield airports and ports are expected to drive construction activity.

• Further, upcoming industrial clusters and infrastructure development in emerging tier-II and tier-III cities are also expected to fuel growth in the sector

REAL ESTATE:

• The commercial real estate (CRE) segments, comprising retail space, office

space and hotels as well as civil facilities including hospitals, multiplexes and schools, have been on the rise with a growing economy.

• Service sectors such as telecom and financial services, as well as the IT/ITeS sector (which accounts for the maximum commercial office space in the country) are growing.

• Manufacturing sectors (pharmaceuticals, biotechnology, and automotives) and fast moving consumer goods (FMCG) are likely to drive the demand for office space

OTHER FACTORS:

• Government initiatives are expected to provide impetus to construction activity in rural and semi-urban areas through large infrastructure and housing development projects.

• According to the Eleventh Plan, the Government of India intends to substantially augment railway capacity and facilities for handling and storage to ease the transportation of cement and further reduce its transportation costs.

• The industry is also focusing on the modernization of trade through high-end technology adoption and low energy consumption, which is comparable with the best in the world.

• The demand for cement in India is expected to increase in the long run, since fundamental growth drivers of the economy, such as infrastructure, trade and per capita income, are intact.

CONCLUSION:

The cement industry is likely to record an annual growth of over 10% in the coming years on the back of higher domestic demand. Domestic cement demand is expected to remain strong, given the revival in the housing sector and continued Government spending on infrastructure. The cement industry in spite of facing many problems is utilizing the capacity of 80 % average to meet the demand.The cement industry is a cyclical commodity industry where the profit and return on capital is dependent on the demand cycle picture. From the mid 90’s to 2002-2003 periods, there was an excess of supply and hence prices were depressed. Most companies had poor to non-existent profits and accordingly the stock prices suffered. Since 2003, the demand has increased rapidly and so have the prices. Most of top players in the cement industry are able to give good consistent returns. With the Indian economy growing with strong positive signs. With increased demand projected for coming years Cement industry is expected to be in upswing. Thus prospective future outlook of cement industry makes attractive for investors.

The strong growth driver increase in cement demand due to this growth drivers, Government of India spending on infrastructure, Strong market trends and Economy in growing phase makes Cement industry very attractive in the market but with caution due to increase in raw material prices.

BIBLIOGRAPHY

www.capitalline.comwww.economywatch.comwww.ibef.orgwww.researchandmarkets.comwww.grasim.comwww.indiacementsltd.co.inwww.madrascements.comwww.gujuratambuja.comwww.ultratech.comwww.cmaindia.orgwww.jkcements.com

Financial Research on Cement Industry

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