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The Aditya Birla Group is the 11th largest cement producer inthe world and the seventh largest in Asia.
Incorporated on 24 August 2000 as L&T Cement Limited.
Cement business of Larsen & Toubro Limited demerged and
vested in company in 2004. Grasim acquired management control in July 2004.
Together with Grasim, one of the largest cement producers inIndia.
Name changed to UltraTech Cement Limited with effect from14 October 2004.
Narmada Cement Company Limited amalgamated withUltraTech in May 2006.
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To deliver superior value to ourcustomers, shareholders,
employees andsociety at large.
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Ordinary Portland cement Clinker 90.50% Gypsum 4.00% Fly ash 5.50%
Portland blast furnace slag cement Clinker 70%
Gypsum 6% Slag (Blast Furnace) 24%
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Portland Pozzolana cement Clinker 66% Gypsum 4% Fly ash 30%
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To be a premium global conglomerate witha clear focus on each business.
CustomerizationQuality consistencyProduct rangeCost competitiveness
Employee empowerment
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STRATEGIES
Cost efficiency Customer retention Business redefinition Innovation strategies Financial strategy
ORGANISATIONAL
STRUCTURE
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Finance DepartmentMarketing DepartmentHuman Resource Department Research & Development DepartmentSupply Chain Department
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2009 2010 Change (%)
Profit After Tax 977.02 1093.24 11.90
Gross Profit1361.49 1588.16 16.65
Net Sales 6383.08 7049.68 10.44
EPS 78.48 87.82 11.90
Current Assets
1400.35 1513.43 8.08
Current Liability 1120.92 1138.08 1.53
Equity 124.49 124.49 0.00
Debt 2142.87 1607.07 -25.00
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1] To identify aspects of a businesses performance to aid
decision making 2] Quantitative process may need to be supplemented by
qualitative Factors to get a complete picture. 5 main areas:-
Liquidity the ability of the firm to pay its way Investment/shareholders information to enable decisions
to be made on the extent of the risk and the earningpotential of a business investment
Gearing
information on the relationship between theexposure of the business to loans as opposed to sharecapital
Profitability how effective the firm is at generating profitsgiven sales and or its capital assets
Financial
the rate at which the company sells its stockand the efficiency with which it uses its assets
Cl ifi ti f
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Classification ofRatio
Profitability
Gross Profit Rattio
Net Profit Ratio
Return on CapitalEmployed Ratio
Return on
Shareholders Fund
Return on EquityRatio
Operating Ratio
Expenses Ratio
Earning Per Share Ratio
Dividend Per Ratio
Prise Earning Ratio
Liqudity Ratio
Currentratio
LiquidRatio
Leverage Ratio
DebtEquity
Ratio
Profitability Ratio
Capital GearingRatio
Long Term Funds
to Fixed Assets
Activity Ratio
Stock Turn OverRatio
Total Assets TurnOver Ratio
Debtors Ratio
Creditors
Ratio
Book Value PerShare
Working CapitalTurn Over Ratio
Coverage Ratio
Debentures ServiceCoverage Ratio
InterestCoverage Ratio
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Current Ratio
Ultratech Cement JK Cement Binani Cement
Current Assets 1472.00 684.79 721.35
Current Liab. 1299.00 357.69 569.89Ratio 1.13 1.91 1.27
Quick Ratio
Ultratech Cement JK Cement Binani Cement
Quick Assets 650.69 447.17 551.37
Current Liab. 1299.00 357.69 569.89
Ratio 0.50 1.25 0.97
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Ultratech has its current ratio to 1.13:1 to maintainadequate liquidity.
As compared to the ideal ratio (2:1), The current ratios
computed above are lower than the ideal ratio. Itshows that the company is not sufficient to meet itsshort term obligations / creditors. It shows that the firmis very risky for the creditors. One reason for lowerratio method of accounting inventories, but they areusing average costing method which give higher value
of inventory than LIFO. So they are really poor at theircurrent ratio. Though it may be because the industryaverage is such due to government interference in thisindustry.
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It is a very good sign to have liquid rationear to one in case of any emergency thecompany will have liquid funds to finance
the expenses. Though Ultratech cements have quick
ratio of 0.50:1 which is less than ideal ratiowhich proves Ultratech is in not so betterposition to fund any contingency expenseas they dont have enough liquidity.
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INVENTORY TURNOVER RATIO
Ultratech Cement JK Cement Binani Cement
COGS (Crs. Rs.) 5199 1432 1359
AVG INVENTORY (Crs. Rs.) 253 42 73RATIO (Times) 20.54 34.09 18.61
DEBTORS TURNOVER RATIO
Ultratech Cement JK Cement Binani cement
NET SALES (Crs. Rs.) 7175 1827 1872
DEBTORS + B/R'S (Crs. Rs.) 215.83 81.87 104.76
RATIO (Times) 33.24 22.31 17.86
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TOTAL ASSETS TURNOVER RATIO
Ultratech Cement JK Cement Binani cement
NET SALES (Crs. Rs.) 7175 1827 1872
TOTAL ASSETS (Crs. Rs.) 7044 2970.96 1873.73
RATIO (Times) 1.01 0.61 0.99
FIXED ASSET TURNOVER RATIO
Ultratech Cement JK Cement Binani cement
NET SALES (Crs. Rs.) 7175 1827 1872
FIXED ASSETS (Crs. Rs.) 4942 2044.88 1347.69
RATIO (Times) 1.45 0.89 1.38
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All the Companies are showing more or less stable performance withalmost a subtle change in the figures of ultratech cement andbinani(20.5& 18 respectively). But the turnover ratio of JK cement isalmost 2 times that of Binani Cements making it a better performer.
The Fixed Asset Turnover ratio of all the companies is low with JKhaving very low figures showing that the investments in fixed assets ismore than that is actually required. However the performance for othertwo is quite constant with a marginal difference in the numbers.
The above ratios are desirable by any firm. Higher values of debtorsturnover indicate more efficient management of credit. But sometimeshigher ratio would result into higher working capital requirement andalso high risk of bad debts. In this ratio clearly Binani & JK cements hasamazing debtors turnover but they may be lagging behind in buildingstrong customer relations as they offer less credit period and henceinventory cycle is very quick. Ultratech has Debtors turnover of 33.24days which is not at all bad sign
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Gross Profit RatioUltratech Cement JK Cement Binani Cement
Gross profit 3963.96 1085.61 1738.28
Net Sales 7175.07 1826.78 2259.78
Ratio 0.55 0.59 0.77
Net Profit RatioUltratech Cement JK Cement Binani Cement
Net profit 1096.84 226.00 281.92
Net Sales 7175.07 1826.78 2259.78
Ratio 0.153 0.124 0.125
ROAUltratech Cement JK Cement Binani Cement
Profit after Tax 1096.84 226.00 281.92
Avg. Total Assets 6779.10 2232.16 2406.49
Ratio 0.162 0.101 0.117
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Earning Power
Ultratech Cement JK Cement Binani Cement
PBIT 1597.81 458.40 591.78
Avg. Total Assets 6779.10 2232.16 2406.49
Ratio 0.236 0.205 0.246
Return On Capital Employed
Ultratech Cement JK Cement Binani Cement
PBIT(1-Tax rate) 1118.467 320.88014 414.246
Avg. Total Assets 6779.10 2232.16 2406.49
Ratio 0.165 0.144 0.172
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As it can be seen from the otherprofitability ratios also Ultratech is bettereven in the Return on Capital employed
ratio with lower rate of decrease ascompared with the figures of JK and BinaniCements. Thus Ultratech is better in the
profitability.
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Price-Earning Ratio
Ultratech Cement JK Cement Binani Cement
Market Price 920.550 156.800 77.600
EPS 87.820 32.110 13.880Ratio 10.482 4.883 5.591
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The ratio computed above of Ultratech is which shows that the
EPS of the company is covered 10.48 times by the marketprice of the share of the company. The ratio in 2010 by all thecompanies which shows efficient work and good performance
of the company to generate profit. Investors look at the P/E ratio as future market expectations of
a companys growth prospects in terms of profitability. If theP/E of a company is on the higher side when compared to itsindustry averages, it means the market is expecting some
positive events from the company as far as earnings areconcerned. In both companies case is the same; it is attractingmore investors by increasing their P/E ratio.
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STRENGTHS: Double digit growth rate
Cement demand has grown in tandem with strongeconomic growth; derived from: -Growth in housing sector (over 30%) key demand driver; -Infrastructure projects like ports, airports, power
projects, dam and irrigation projects -National Highway Development Program -Bharat Nirman Yojana for rural infrastructure -Rise in industrial projects -Export potential also demand driver Capacity utilization over 90%
WEAKNESS: Low value commodity Cement Industry is highly fragmented Industry is also highly regionalized Low value commodity makes transportation over long
distances un-economical
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OPPORTUNITIES: Demandsupply gap
Substantially lower per capita cement consumption ascompared to developing countries (1/3 rd of worldaverage) Per capita cement consumption in India is 82 kgs
against a global average of 255 kgs and Asian average of 200kgs.
Additional capacity of 20 million tons per annum will berequired to match the demand
Limited green field capacity addition in pipeline for next twoyears, leading to favorable demand supply scenario
THREATS: Rising input costs
Government intervention to adjust cement prices
Possibility of over bunching of capacities in the long term as
some of the players have already announced new capacities Transportation cost is scaling high; bottleneck due to loading
restrictions
Coal prices climbing up; industry players say current shortageof coal in the country is estimated to be over 10 million tones.
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Ultratech Cements holds a larger market value in terms of sales,PBDIT, PAT and is clearly way ahead of India cements
Ultratech does not have very good debt equity ratio which provesthat the company is not using the ability to trade on debt
The overall financial position of Ultratech is very good and prospectsare seen for it to be improved in 2010.
In Ultratech cements the bifurcation of inventory is not given it isadded to current assets so it is studied from the management reportin order to calculate Debtors turnover Ratio
P/E ratio has increased in 2010 to 13.49 proving the efficient workand good performance of the company to generate profit. Investorslook at the P/E ratio as future market expectations of a companysgrowth prospects in terms of profitability. If the P/E of a company ison the higher side when compared to its industry averages, it meansthe market is expecting some positive events from the company asfar as earnings are concerned. In both companies case is the same;it is attracting more investors by increasing their P/E ratio.
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Sources of Information www.moneypore.com www.moneycontrol.com
wwwUltratech.com www.indiacements.com