Cement industry

OVERVIEW OF CEMENT INDUSTRY

Cement Industry has grown much in last ten years. This sector has recorded a
CAGR of 8%, against the world cement industry average of 3.5% and China’s
cement industry growth rate of 7.2%. Today cement industry has become the second
largest cement producer in the world after China.

Domestic cement demand growth has surpassed the economic growth rate for the
past three years. Cement demand in the country grows at roughly 1.5 times the GDP
growth rate. The industry had a turnover of around US$ 7.8 billion in 2003-04

The key drivers for cement demand are real estate sector, infrastructure and industry
expansion projects. Among these real estate sector is the key driver of cement
demand. The demand for cement is closely related to the growth in the construction
sector. Consequently, cement demand has been posting a healthy growth rate of
around 8 per cent since 1997-98,

Cement is bulky commodity and cannot be easily transported over long distances
making it a regional market place, with the nation being divided into five regions.
Each region is characterized by its own demand-supply dynamics. Over the past few
years the cost of cement production has grown at a CAGR of 8.4%.

The government has considered spending more than US $500 billion on
infrastructure in the 11th five year plan. Apart from this railways, urban infrastructure,
ports, airports, IT sector, organized retailing, malls and multiplexes will be the main
sectors driving the demand of cement in the country.

Pre Independence

The first endeavor to manufacture cement dates back to 1889 when a Calcutta
based company endeavored to manufacture cement from Argillaceous (kankar). But
the first endeavor to manufacture cement in an organized way commenced in

1

Madras. South India Industries Limited began manufacture of Portland cement in
1904.But the effort did not succeed and the company had to halt production.

In 1914 that the first licensed cement manufacturing unit was set up by India Cement
Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons and
production of 1000 installed. The First World War gave the impetus to the cement
industry still in its initial stages. The following decade saw tremendous progress in
terms of manufacturing units, installed capacity and production. This phase is also
referred to as the Nascent Stage of Indian Cement Industry.

Post-Independence

The growth rate of cement was slow around the period after independence due to
various factors like low prices, slow growth in additional capacity and rising cost. The
government intervened several times to boost the industry, by increasing prices and
providing financial incentives.

In 1956, the price and distribution control system was set up to ensure fair prices for
both the manufacturers and consumers across the country and to reduce regional
imbalances and reach self-sufficiency.

Period of Restriction (1969-1982)

The cement industry in India was severely restrained by the government during this
period. Government hold over the industry was through both direct and indirect
means.

In 1977 the government authorized higher prices for cement manufactured by new
units or through capacity increase in existing units. But still the growth rate was
below par.

In 1979 the government introduced a three tier price system. Prices were different for
cement produced in low, medium and high cost plants. Rise in input cost, reduced
profit margins meant the manufacturers could not allocate funds for increase in
capacity.
2

Partial Control (1982-1989)

The Government of India introduced a quota system in 1982. A quota of 66.60% was
imposed for sales to Government and small real estate developers. For new units
and sick units a lower quota at 50% was affected. The remaining 33.40% was
allowed to be sold in the open market.

These changes had a desired effect on the industry. Profitability of the
manufacturers increased substantially, but the rising input cost was a cause for
concern.

Post Liberalization

In 1989 the cement industry was given complete freedom, to gear it up to meet the
challenges of free market competition due to the impending policy of liberalization. In
1991 the industry was de licensed.

Cement is one of the core industries which plays a vital role in the growth and
expansion of a nation. It is basically a mixture of compounds, consisting mainly of
silicates and aluminates of calcium, formed out of calcium oxide, silica, aluminum
oxide and iron oxide. The demand for cement depends primarily on the pace of
activities in the business, financial, real estate and infrastructure sectors of the
economy. Indian cement industry is globally competitive because the industry has
witnessed healthy trends such as cost control and continuous technology up
gradation.

Key Drivers of Cement Industry

• Buoyant real estate market

3

• Increase in infrastructure spending

• Various governmental programs like National Rural Employment Guarantee

• Low-cost housing in urban and rural areas under schemes like Jawaharlal
Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana

Consumption Growth during 2008-09

Even during the economic slowdown in 2008-09, growth in cement demand
remained at a healthy 8.4%. In the current fiscal (2009-10) cement consumption has
shot up, reporting, on an average, 12.5% growth in consumption during the first eight
months with the growth being aided by strong infrastructure spending, especially
from the govt sector. The trends in all-India consumption and the growth in
consumption in the major cement-consuming States over the last five years are
presented in below table:

Growth in Cement Demand

Figures in Million Tones

2008-09 Apr-Nov 09

Domestic Consumption 178 100

Year-on-Year Growth (%) 8.4 12.5

PRODUCT PROFILE OF INDUSTRY

COMPOSITION OF CEMENT

4

Cement is a mixture of limestone, clay, silica and gypsum. It is a fine powder which
when mixed with water sets to a hard mass as a result of hydration of the constituent
compounds. It is the most commonly used construction material.

DIFFERENT TYPES OF CEMENT

There are different varieties of cement based on different compositions according to
specific end uses namely Ordinary Portland Cement, Portland Pozolona Cement,
Portland Blast Furnace Slag Cement, White Cement and Specialized Cement. The
basic difference lies in the percentage of clinker used.

• Ordinary Portland Cement (OPC)

OPC, popularly known as grey cement, has 95% clinker and 5% of gypsum
and other materials. It accounts for 70% of the total consumption. White
cement is a variation of OPC and is used for decorative purposes like
rendering of walls, flooring etc. It contains a very low proportion of iron oxide.

• Portland Pozolona Cement (PPC)

PPC has 80% clinker, 15% Pozolona and 5% gypsum and accounts for 18%
of the total cement consumption. Pozolona has siliceous and aluminous
materials that do not possess cementing properties but develop these
properties in the presence of water. It is cheaply manufactured because it
uses fly ash/burnt clay/coal waste as the main ingredient. It has a lower heat
of hydration, which helps in preventing cracks where large volumes are being
cast.

• Portland Blast Furnace Slag Cement (PBFSC)

PBFSC consists of 45% clinker, 50% blast furnace slag and 5% gypsum and
accounts for 10% of the total cement consumed. It has a heat of hydration

5

even lower than PPC and is generally used in construction of dams and
similar massive constructions.

• White Cement

OPC: clinker using fuel oil (instead of coal) and with iron oxide content below
0.4% to ensure whiteness. Special cooling technique is used. It is used to
enhance aesthetic value, in tiles and for flooring. White cement is much more
expensive than grey cement.

• Specialized Cement

Oil Well Cement: is made from clinker with special additives to prevent any
porosity. Rapid Hardening Portland cement: It is similar to OPC, except that it
is ground much finer, so that on casting, the compressible strength increases
rapidly. Water Proof Cement: OPC, with small portion of calcium stearate or
non-saponifibale oil to impart waterproofing properties.

MANUFACTURING PROCESSES

There are two general processes for producing clinker and cement in India: a dry
process and a wet process. In general, the dry process is much more energy
efficient than the wet process, and the semi wet somewhat more energy efficient
than the semi-dry process. The semi-dry process has never played an important role
in Indian cement production and accounts for less than 0.2% of total production.
Over the last decade, increased preference is being given to the energy efficient dry
process technology so as to obtain a cost advantage in a competitive market. In
1960 around 94% of the cement plants in India used wet process kilns. These kilns
have been phased out over the past 46 years and at present 96.3% of the kilns are
dry process, 3% are wet and only 1% are semidry process. Dry process kilns are
typically larger with capacities in India ranging from 300- 8,000 tons per day or tpd

6

(average of 2,880 tpd). While capacities in semi-dry kilns range from 600-1,200 tpd
and capacities in wet process kilns range from 200-750 tpd (average 425 tpd).

DRY PROCESS

In dry process production, limestone is crushed to a uniform and usable size,
blended with certain additives (such as iron ore and bauxite) and discharged on to a
vertical roller mill where the raw materials are ground to fine powder. An electrostatic
7

precipitator deducts the raw mill gases and collects the raw meal for a series of
further stages of blending. The homogenized raw meal thus extracted is pumped to
the top of a preheater by air lift pumps. In the preheaters the material is heated to
750°C. Subsequently, the raw meal undergoes a process of 8 alcinations in a
precalcinator. The remaining 8 alcinations and clinkerization reactions are completed
in the kiln where the temperature is raised to 1,450-1,500°C. The clinker formed is
cooled and conveyed to the clinker silo from where it is extracted and transported to
the cement mills for producing cement. For producing OPC, clinker and gypsum are
used and for producing PPC, clinker, gypsum and fly ash are used.

WET PROCESS

The wet process differs mainly in the preparation of raw meal where water is added
to raw materials to produce slurry. The chemical composition is corrected and the
slurry is then pumped to the kiln where evaporation of moisture, preheating,
calcinations and sintering reaction takes place. The clinker is cooled and
transported, as in the case of other plants, with suitable conveyors to cement mills
for grinding. The wet process is more energy intensive, and thus becomes expensive
when power and energy prices are high.

DEMAND DETERMINATION OF CEMENT INDUSTRY

India has become the second largest cement producing country in the world, the gap
between the largest producers. China and the second largest producer are quite

8

wide. China produces 1400 million tonnes per year and India produces a mere 183
million tonnes.

It is noted that there is an interlinking relation between cement consumption and the
growth of economy. The country is on a high growth track and the focus now is on
the development of the infrastructure facilities such as, highways, ports, canals,
bridges, power-houses etc. The Committee has been given to understand that the
performance of cement industry has been commendable even during the global
economic slowdown.

China besides being the largest producer of cement in the world is also the largest
consumer of cement in the world. It manufactures and consumes around 50% of
global output. The Commission also stated that the per capita consumption in China
is around 1040 Kg, whereas in India it is 178 Kg.

NCAER observed that in India, most of the infrastructure-related cement
consumption falls under the category of departmental and non-departmental
enterprises, which constituted about 21 per cent of total cement consumption during
2001-02. Government and defence account for another 18 per cent, and housing for
about 42 per cent. As against this, according to the study, about 42 per cent of
cement in Japan goes to make buildings and another 40 per cent towards
infrastructure-related activities. Cement for making roads and bridges in Japan
accounts for 10.5 per cent as compared to an almost minuscule share in India. This
means about seven million tonnes of cement is used for making roads in Japan on
an annual basis.

According to a study of the Tariff Commission, demand for cement can be
categorized into Housing-64%, industrial-6%, Commercial & Institutional-13% and
infrastructure-17%. 2.6 The annual domestic demand of cement, the annual
production of cement and the export of cement during the last five years is as given
below:-

9

(In Million Tonnes)
Year Demand of Production Export of
Cement of Cement Cement
2005-06 135.56 141.81 5.98
2006-07 149.34 155.64 5.89
2007-08 164.03 168.31 3.65
2008-09 177.98 168.61 3.20
2009-10 196.12 201.00 2.27

It would be seen from the above table that the demand for cement has been
constantly increasing and the demand projected by the Working Group is likely to
touch 290 million tonnes by 2012-13.

INDUSTRY STRUCTURE AND NATURE OF COMPETITION

10

INSTALLED CAPACITY
India is the world’s second largest cement producing country after China. The
industry is characterized by a high degree of fragmentation that has created intense
competitive pressure on price realizations. Spread across the length and breadth of
the country, there are approximately 130 large cement plants owned by around 52
companies and 365 mini-cement plants with an installed capacity of around
172.08mtpa as on June 2007. Large cement plants accounted for 94% of the total
installed capacity in India.

CAPACITY CLUSTERS

Cement and its raw materials namely coal and limestone, are all bulky items that
make transportation difficult and uneconomical. Given this, cement plants are
located close to both, sources of raw materials and markets. Most of limestone
deposits in India are located in Madhya Pradesh, Rajasthan, Andhra Pradesh,
Maharashtra and Gujarat, leading to concentration of cement units in these states.
This has resulted in ‘clusters’. There are eight such clusters in the country and
account for 81% of the cement capacity. There is a trade-off between proximity to
markets and proximity to raw materials due to which some cement plants have been
set up near big markets despite lack of raw materials.

PLAYERS IN CEMENT INDUSTRY

11

 MAJOR PLAYERS IN THE NORTH

TOTAL SALES for the year 2009 = Rs. 33589.02 Cr

Name of the Net Sales in Percentage
Cr. (2009) (%)
Company

ACC 7,942.66 23.64659642

Ambuja Cem. 7,040.70 20.96131414

Birla Corpn. 1,790.19 5.329688095

J K Cements 1,664.42 4.955250257

JK Lakshmi Cem. 1,223.90 3.643750249

Shree Cement 2,716.46 8.08734521

UltraTech Cem. 6,385.50 19.0106767

Market Share

ACC
others, 14.37 Ambuja Cem.
ACC, 23.65
UltraTech Cem., Birla Corpn.
19.01
Ambuja Cem., J K Cements
20.96 JK Lakshmi Cem.
Shree Cement
UltraTech Cem.
Shree
Cement, JK Lakshmi others
8.09 Cem., 3.64 J K Cements, 4.96 Birla Corpn., 5.33

 MAJOR PLAYERS IN SOUTH

TOTAL SALES for the year 2009 = Rs. 11266.01 Cr

Name of the Net Sales Percentage
in (%)

12

company Cr.(2009)

Andhra Cements 369.36 3.278534281

Chettinad Cement 1,137.67 10.09825129

Dalmia Cement 1,758.68 15.61049564

India Cements 3,358.34 29.8094889

Madras Cement 2,530.90 22.46491881

Rain Commodities 1,111.01 9.861610277

zuari Cements 438.72 3.894191466

Market Share
others, 4.98
Andhra Cements,
zuari Cements, 3.28 Chettinad
Rain
3.89 Cement, 10.09
Commodities,
Andhra Cements
9.86
Chettinad Cement
Dalmia Cement,
15.61 Dalmia Cement
Madras Cement,
India Cements
22.46
Madras Cement
India Cements,
29.81 Rain Commodities
zuari Cements
others

DISTRIBUTION CHANNELS OF THE SECTOR

Companies invariably hire agents or transport cements to own or government
warehouses either via roadway or railways. In case of exports, cement reaches the
nearest port via roadways or railways and is then transferred to the importing country.
Domestically, from agents or warehouses the cement is transported to the
dealers/distributors and in turn to sub dealers who finally sell it to the end users.
There may or may not be physical ownership of goods. In the second case, dealers

13

and sub-dealers take order from buyers and place it to the companies, co ordinate
and monitor the timely dispatch of said orders

KEY ISSUES AND CURRENT TRENDS IN CEMENT INDUSTRY

 KEY ISSUES

Residential segment - The main application areas are repair works, white
cement based tiles and paints, white cement to bridge the gap between tiles and
make floorings.

14

Commercial segment – The main application areas in this segment are the
same as in the residential segment.

Industrial segment – The main application areas in this segment are white
cement based tiles, floorings and pavers in the office/ factory premises. White
cement based paints are also used extensively by this segment for the exteriors
of the buildings. White cement based flooring is getting increasingly popular in
industrial establishments as it gives the desired aesthetics while being less
expensive than most tiles.

Public buildings – Extensive use of white cement is yet to be seen in public
buildings. The main application areas are the same as those in the industrial
segment.
The Residential and Commercial segment is envisaged to consume around 70%
of the total white cement consumption in India, followed by the Industrial and
Public buildings segment. The main drivers for each of these segments are the
need for aesthetics and lower price. The usage of white cement in pre-fabrication
works and even architectural works is low. Thus, there are no RMC producers
who supply white concrete.

Cement Types
The IS standard only specifies that the compressive strength should not be less
than 90% of that of 33 grade of OPC and the whiteness should be a minimum of
70%.

Prices
White cement is priced at around 3-4 times that of grey cement. Prices are in the
range of Rs 350-425 per 50 kg bag.

15

One of the major reasons for the higher price is attributed to the fact that the 2
main white cement players are located in Rajasthan and the transport costs to
consuming centers located all over India, are quite high.

Packaging
White cement is sold in packed bags. These include packaging sizes of 1 kg, 2
kg, 5 kg, 10 kg, 25 kg and 50 kg bags.

Reasons for lower usage in India
The relatively low popularity of white cement in India is possibly due to the
following reasons:
• The Indian market is very price conscious. In India, white cement costs 3-4
times more than grey cement. In most developed countries the price differential is
around 2-2.5 times.
• The purchasing power of the end user is significantly lower as compared to the
purchasing power of the same segment say in France, Italy or Spain.
• India has cheaper labor. In France, Italy and Spain, labour is very expensive.
Thus pre-fabricated products are more popular there. In India, since labour is
used extensively, the labor/ mason/ contractor has a strong role to play in
deciding the material to be used.

 CURRENT TRENDS

The Indian cement industry is the second largest in the world. It comprises of 140
large and more than 365 mini cement plants. The industry's capacity at the
beginning of the year 2009-10 was 217.80 million tonnes. During 2008-09, total
cement consumption in India stood at 178 million tonnes while exports of cement
and clinker amounted to around 3 million tonnes. The industry occupies an
important place in the national economy because of its strong linkages to other
sectors such as construction, transportation, coal and power. The cement

16

industry is also one of the major contributors to the exchequer by way of indirect
taxes.

Cement production during April to January 2009-10 was 130.67 million tonnes as
compared to 115.52 million tonnes during the same period for the year 2008-09.
Dispatches were estimated at 129.97 million tonnes during April to January
2009-10 whereas during the same period for the year 2008-09, it stood at 115.07
million tonnes.

Over the last few years, the Indian cement industry witnessed strong growth, with
demand reporting a compounded annual growth rate (CAGR) of 9.3% and
capacity addition a CAGR of 5.6% between 2004-05 and 2008-09. The main
factors prompting this growth in demand include the real estate boom during
2004-08, increased investments in infrastructure by both the private sector and
Government, and higher Governmental spending under various social programs.
With demand growth being buoyant and capacity addition limited, the industry
posted capacity utilization levels of around 93% during the last five years.
Improved prices in conjunction with volume growth led to the domestic cement
industry reporting robust growth in turnover and profitability during the period
2005-09.

LITERATURE REVIEWS

Literature Review shows the past data or analysis of the comparative analysis on the
financial performance done by various other people or Institute or Government.
Literature review shows the past and current trends evolving in the industry.

17

 GHOSH’S ARTICLE (1962)

In Ghosh’s Article an attempt has been made perhaps for the first time to
examine the relationship between employment, earning and productivity of
labor in the industry.

 Chandak (2008)

He establishes a strong correlation between GDP and cement industry
growth, suggesting also that the Indian cement industry has contributed 8
percent to economic development in the country. He also underscore the
point that companies must continue to emphasize on reduction of costs
through enhanced productivity and cites the example of increased use of the
sea route for transportation. Moreover he forecasts consolidation across a
fragmented industry, as companies seek economies of scale and look to
expand their foot print across regions. He also questioned the ability of the
industry to weather the global economic recession and slowdown in the Indian
housing market solely through increased infrastructure spending by the
government.

 Arora and Sarkar (2008)

The committee sought to analyze the good performance of the cement
industry over the past few years for collusive behaviour. The research
discussed characteristics of an ideal cartel detection policy and structural and
behavioural cartel detection methods. Parameters that were studied included
the firm concentration index, region-wise production & consumption, capacity
utilization and cost to sales ratio amongst a few. Their analysis on these
metrics appeared to demonstrate that the sudden surge in the price of the
cement over the past few years was neither due to a demand-supply
mismatch nor a sudden increment in the cost of producing cement. They
contended that the cement industry likely engaged in illegitimate collusion and
18

they suggested that the observed decline in cement price after the
Government announcement to import cement was more evidence of a cartel
in the industry.

 Katja Schumacher and Jayant Sathaye (1999)

The committee contributes to the discussion on productivity growth and the
role of technological change within the context of global environmental
change. Furthermore, different economic and policy settings and efficiencies
within the sector have been discussed. They have examined the ongoing
changes in the cement industry structure. It compares world best technologies
to Indian technologies and identifies potentials and barriers to the
achievement of efficiency improvements. A scenario analysis highlights the
energy efficiency and productivity improvements that could be achieved by
employing more efficient technologies

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE OF THE STUDY

 The primary objective of the study is to make a comparative study for the
financial performance of the cement industry of India, taking two cement
companies:
19

AMBUJA CEMENT LTD.

BINANI CEMENT LTD.

SECONDARY OBJECTIVES OF THE STUDY

• To analyze the evolution of cement industry.

• To estimate the level and analyze the trends in the cement industry.

• To assess the profitability, liquidity and other financial ratios, efficiency ratios,
leverage analysis of the firms when compared to the industry.

• To find out the efficiency and economic size of cement manufacturing firms.

PESTEL ANALYSIS OF CEMENT INDUSTRY

Pestel analysis is a useful tool for understanding the big picture of operating and
takes advantage of opportunities. Pest analysis includes political, environmental,

20

social and technological factors which affects both the companies as well as
industry.

 POLITICAL

The price of cement is primarily controlled by the coal rates, power tariffs, railway
tariffs, freight, royalty and cess on limestone. Interestingly, government controls all of
these prices. Government is also one of the biggest consumers of the cement in the
country. Most state governments, in order to attract investments in their respective
states, offer fiscal incentives in the form of sales tax exemptions/deferrals. States like
Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption
from electric duty.

 ECONOMIC

The industry is on the boom, with a lot of government infrastructure and housing
projects under construction. The export segment of the industry is expected to grow
again on account of various infrastructure projects that are being taken up all over
the world and numerous outstanding cement plants coming up in near future in the
country.

 SOCIAL

The cement industry in India consists of both the organized sector and the
unorganized sector. Organized sector comprises of the well-known cement
manufacturing companies while the main players of the unorganized sector are the
regional and local cement-producing units in various states across the country.
Indian consumers prefer buying branded cement like ULTRATECH, JAYPEE
CEMENT, LAFARGE CEMENT etc. A population of more than 100 billion people, it
is expected that cement industry will create another 25 lakhs jobs in the next 4-5
years.

 TECHNOLOGY

The Government of India plans to study and possibly acquire new technologies from
the cement industry of world. The government is discussing technology transfer in
the field of energy conservation and environment protection to help improve
efficiency of the Indian cement industry. Cement industry has made tremendous
21

strides in technological up-gradation and assimilation of latest technology. At present
93% of the total capacity in the industry is based on modern and environment-
friendly dry process technology.

PORTER’S FIVE FORCES MODEL FOR CEMENT INDUSTRY

22

OVERVIEW OF THE COMPANIES

AMBUJA CEMENT LTD.

23

 HISTORY

Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing
companies in India. The Company, initially called Gujarat Ambuja Cements
Ltd., was founded by Narotam Sekhsaria in 1983 with a partner, Suresh
Neotia. Sekhsaria’s business acumen and leadership skills put the company
on a fast track to growth. The Company commenced cement production in
1986. The global cement major Holcim acquired management control of ACL
in 2006. Holcim today holds little over 46% equity in ACL. The Company is
currently known as Ambuja Cements Ltd.

 VISION AND MISSION

• VISION STATEMENT- To be the most admired and competitive
industry in our industry

• MISSION STATEMENT- Delighted Customers

Inspired Employees

Enlightened Partners

Enriched Society

Loyal Shareholders

Healthy Environment

24

 Executive Management Team

 Mr. Onne van der Weijde, Managing Director
 Mr. B.L. Taparia, Company Secretary & Corporate Sustainability Officer
 Mr. Sanjeev Churiwala, CFO
 Mr. Ghassan Broummana, Head - Technical Support Services
 Mr. S.N. Toshniwal - Business Head (East)
 Mr. J.C. Toshniwal - Business Head (North)
 Mr. Ajay Kapur - Business Head (West & South)
 Ms. Meenakshi Narain - Joint President (HR)
 Mr. Shakti Arora, Head - Central Purchase Officer

 Registered Offices

• Corporate Office

• Elegant Business Park, MIDC Cross Road 'B', Off Andheri-Kurla
Road. Andheri (E), Mumbai 400059
• Tel: 022 – 40667000

• West and South

Po. Ambuja Nagar, Tal. Kodinar, Dist. Junagadh, Gujarat - 362715
Tel : 02795 - 237000 / 220214 / 221491
Behind Q1 Berth, Mattancherry Wharf, Willingdon Island,
Cochin-682003
Tel : 0484 - 2118510 / 6453237

• North

Malout Road, Near Guru Nanak Dev Thermal Plant, Bathinda -
151002, Punjab Tel : 0164 - 2273487 / 2273850 / 51

25

• East
PO: Rawan, Tehsil: Baloda Bazar, Dist. Raipur 493 331,
Chhattisgarh. Tel : 07727 - 220010 – 15

 PRODUCTION AND MANUFACTURING

Over 25-30% of the production cost of cement is power.

It quickly became clear to us that if we were to run an iconic company, we needed to
keep power costs to the minimum. So we focused our efforts on improving efficiency
at our kilns to get more output for less power.

Next we set up a captive power plant at a substantially lower cost than the national
grid. We sourced higher quality coal from South Africa and better furnace oil from the
Middle East.

At every step we found that new and innovative solutions could be found if we kept
an open mind.

Our sea-borne bulk cement transportation facilities have meanwhile brought many
coastal markets (domestic as well as export markets) within easy reach. This has
been a major factor in making Ambuja Cement India's largest exporter of cement -
consistently for the last fifteen years.

26

 Cement Plants

Plant Capacity (MN tons)
Gujarat 6.70
Himachal Pradesh/ Punjab 6.10
Rajasthan 2.80
Chhattisgarh/ West Bengal 4.30
Maharashtra 3.60
Uttar Pradesh 1.50

 Port Terminal

Muldwarka, Gujarat: All weather port, 8 kms from our Ambujanagar plant.
Handles ships with 40,000 DWT. Is also equipped to export clinker and cement
and import coal and furnace oil.

A fleet of seven ships with a capacity of 20500 DWT ferries bulk cement to the
packaging units.

 Bulk Cement Terminal

Surat: Bulk Cement Terminal with a storage capacity of 15,000 tonnes has bulk
cement unloading facility. A Grinding unit has also become fully operational at this
location.

Panvel: Strategically located near India's biggest cement market, has a storage
capacity of 17,500 tonnes and a bulk cement unloading facility.

Cochin: The latest addition to our configuration of Bulk Cement Terminal

27

BINANI CEMENT LTD.

 HISTORY

Binani Cement Limited is the flagship subsidiary of Binani Industries Limited
(BIL), representing the Braj Binani Group. The cement business started
operations in 1997, in Sirohi District, Rajasthan with a 1.65 MTPA integrated
cement facility and a 25 MW captive power plant with technological support
from F. L. Smidth, Denmark and Larsen & Toubro Ltd.

The capacity was raised to 2.25 MTPA in 2005 through advanced in-house
R&D and de-bottlenecking and the Company was also certified to ISO 9001,
ISO 14001 and OHSAS 18001 within a short span from commencement of
operation. This is an achievement that clearly illustrates the management's
commitment to quality, efficiency, environment, health and safety. In 2008, a
split-grinding unit at Neem Ka Thana was commissioned, boosting the
capacity in India to 6.25 MTPA.

 VISION AND MISSION

• To achieve leadership status in the core sector, across the world.

• To employ frontline technologies to meet the highest global standards
in products and services.

• To set benchmarks in manufacturing and environmental performance.

• To be a customer-first, quality-obsessed, socially sensitive corporate
entity.

• To achieve breakthroughs in manufacturing based on intensive R&D.

28

• To ensure well-being of all our stake-holders; upholding such values as
integrity, trust, concern, empathy and commitment

 EXECUTIVE MANAGEMENT TEAM

• Mr. Braj Binani -The Promoter and Chairman.

• Ms. Nidhi Singhania - Additional Director.

• Mr. S. Padmakumar – Board of Director.

• Dr. V.C.Shah - Independent Director.

• Mr. A. C. Chakrabortti - Independent Director.

• Mr. N. C. Singhal - Independent Director.

• Mr. Sunil Sethy - Additional Director.

• Mr. Jitender Balakrishnan - Additional Director.

 REGISTERED OFFICES

 Mumbai Corporate Office

Mercantile Chambers,
12, J.N. Heredia Marg, Ballard Estate,
Mumbai - 400001.
• Tel: +91 - 22 - 22690506-10 / 22640040-44
• Fax: +91 - 22 - 22690003 / 22640045
• Email: mumbai@binani.net

29

 Works (Factory)

P. O. Binanigram, Tehsil Pindwara - 307031.
Dist. Sirohi (Rajasthan).
• Tel: +91 - 2971 - 235005 / 12
• Fax: +91 - 2971 - 235020
• Email: bcl@binanicement.co.in

 Marketing Offices

Ahmedabad
705/706, Sakar-II, Ellis Bridge,
Ahmedabad - 380 006.
• Tel: +91 - 79 - 26579027 / 26589025 / 26
• Fax: +91 - 79 - 26576769
• Email: binaniad1@sancharnet.in / binaniahd@eth.net

New Delhi
231-233-235, Ansal Chamber-II,
6-Bhikaji Cama Place, New Delhi-110066.
• Tel: +91 - 11 - 26761111 / 26161020
• Fax: +91 - 11 - 26761222
• Email: bindelhi@vsnl.com /clnewdelhi@airtelmail.in

Jaipur
"Miracle",
22, Shubham Enclave,
Parivahan Marg, C-Scheme,
Jaipur – 302001
• Tel: +91 - 141 - 4134300 / 4124300
• Fax: +91 - 141 - 4134329
• Email: binjpur@sancharnet.in / binanijpr@yahoo.co.in

30

 PRODUCTION AND MANUFACTURING

• Production

Binani Cement Ltd. has been using carbon neutral 'bio-fuels' in its production
processes to reduce the impact on environment by way of substantial
reduction in CO2 emissions. Similarly, continuous increase in utilization of fly
ash also enables the Company to positively contribute its share in reversing
the effects of climate change.

The Company has a robust raw material consumption system in place
ensuring that its limestone reserves at Amli and Thandiberi lasts for decades.

• Manufacturing Process

Major plant & machinery consists of One Cement Mill (180 TPH capacity),
One Electronic Packer (240 TPH capacity), Clinker, Fly Ash, Cement storage
silos etc.

The unit is licensed to manufacture Ordinary Portland Cement (OPC 43 and
53 Grades) and Portland Pozzolana Cement (PPC). Currently it is producing
100% PPC for which Clinker is supplied from the parent unit, i.e.; Binani
Cement Limited, Binanigram while Fly Ash is sourced from the Thermal
Power plants located at NTPC, Dadri (Haryana), Suratgarh (Rajasthan),
Bhatinda etc.

The unit, during the year 2009-10, produced 1.12 million tons of cement
(PPC).

 Cement Plants

 Sirohi Plant

31

The Binani Cement plant was set up in April 1997 with an initial production
capacity of 1.65 MTPA cement.

Installed capacity of the Plant was increased to 4.85 MTPA through
modifications and de-bottlenecking.

Clinker manufacturing capacity was further increased to 2.7 Million.

 Clinker Grinding Unit, Neem Ka Thana

Clinker Grinding Unit, Neem Ka Thana is located at village Bhagega, Tehsil
Neem Ka Thana, District Sikar (Rajasthan). The unit commenced its
commercial production in March, 2008 with an installed capacity of 1.40
million TPA cement grinding.

32

PRODUCT PROFILE OF THE COMPANIES

 AMBUJA CEMENT LTD.

• Portland Pozzolana cement (PPC)
• Ordinary Portland cement (OPC)

 BINANI CEMENT LTD.

• Grade 43

• Grade 53

• PPC (Portland Pozzolana Cement)

33

FINANCIAL ANALYSIS

 RATIO ANALYSIS
Ratio Analysis includes various ratios like Profitability Ratio, Liquidity Ratio
and many more ratios.

1. PROFITABILITY RATIOS

 Operating Profit Margin

The operating profit margin ratio is a measure of overall operating efficiency,
incorporating all of the expenses of ordinary, daily business activity. The
calculation is: EBIT/Net Sales= _____

Particulars 2006 2007 2008 2009 2010

Ambuja cement Ltd. 34.71 36.20 28.85 27.07 25.18

Binani cement Ltd 27.39 34.48 35.38 21.43 31.15

⇒ Interpretation

Thus, in the year 2008 Ambuja cement Ltd operating ratio was 28.85%. It
decreased by the 25.18% in the year 2010. Similarly, Binani cement Ltd
operating ratio also decreased from 35.58% in 2008 to 31.15% in 2010. This is

34

because the demand for the cement has been gradually decreased by the year
2010.

 Gross Profit Margin

The ratio looks at how well a company controls the cost of its inventory and the
manufacturing of its products. The larger the gross profit margin, the better for the
company. The calculation is: Gross Profit/Net Sales = ____%.

Particulars 2006 2007 2008 2009 2010



⇒ Interpretation

The Gross Profit Margin for Ambuja cement Ltd in the year 2009 was 23%. It
decreased to 19.93% due to increasing cost of inventory by the company.
Similarly, Binani cement ltd gross profit margin increased from 16.06% in the year
2009 to 26.22% in the year 2010 due to reduction in inventory cost.

 Net Profit Margin

The net profit margin measures profitability after consideration of all expenses
including taxes, interest, and depreciation. The calculation is: Net Income/Net
Sales = _____%.

Particulars 2006 2007 2008 2009 2010



35

⇒ Interpretation

The net profit margin of Ambuja cement in the year 2006 is 23.86% which
increased to 30.53% in 2007 due to heavy amount of accumulated depreciation.
While, the net profit margin of the Binani cement in continuously increasing.

2. LIQUIDITY RATIOS

 Current Ratio

The current ratio show how many times over the firm can pay its current debt
obligations based on its assets. The formula is: Current Ratio = Current Assets/
Current Liabilities.

Particulars 2006 2007 2008 2009 2010



⇒ Interpretation

The current ratio of the Ambuja cement in the year 2010 is 1.07 times which
means company can pay its current obligations easily. While, Binani cement
current ratio in the year 2006 was 2.32% which heavily decreased in 2007 by
0.85%. the reason is that company has invested heavy amount of money in the
net current asset.

 Quick Ratio or Acid Test Ratio

It looks at how well the company can meet its short-term debt obligations without
selling their inventories. The formula is the following: Quick Ratio = Current
Assets-Inventory/Current Liabilities.

Particulars 2006 2007 2008 2009 2010



36

⇒ Interpretation

The quick ratio of the Ambuja cement is high in the year 2010 as compared to the
year 2009 i.e. 0.57 times. This is because company had reduced the inventory
cost. While, Binani Cement quick ratio for the year 2006 was 2.61 times which
was drastically reduced to 0.62 in the year 2007 due to high amount of current
liabilities.

 Debt Equity Ratio

The debt equity ratio shows the extent to which long-term debt, like bonds and
mortgages are used for the firm's permanent financing. The calculation for long-
term debt to total capitalization is as follows:

Long-term Debt/Long-term debt + Stockholder's Equity = ___%

Particulars 2006 2007 2008 2009 2010



⇒ Interpretation

The above table shows that Ambuja Cement uses very little debt for financing
their firm. While, Binani cement decreased their debt ratio form the year 2006-10
because they reduced the debt financing in their portfolio.

37

3. MANAGEMENT EFFICIENCY RATIO

 Inventory Turnover Ratio

It is the number of times inventory is sold and restocked each year. If the number is
high, you may be in danger of stockouts. If it is low, watch out for obsolete inventory.
Inventory turnover is calculated as follows:

Inventory turnover ratio = Net sales/Inventory = ____times.

Particulars 2006 2007 2008 2009 2010



⇒ Interpretation

The inventory turnover ratio for Ambuja cement in the year 2006 was 15.41 times
which decreased to 9.96 times in the year 2007 due to high investment of new
inventories. While, Binani cement inventory turnover ratio suddenly increased in
the year 2010 due to increase in the sales revenue of the company.

 Debtors Turnover Ratio

Debtors turnover looks at how fast we collect on our sales revenue or on
average, how many times each year we clean up or totally collect our accounts
receivable. The calculation is as follows:

Debtors Turnover = Sales/Accounts Receivable = ____ times

Particulars 2006 2007 2008 2009 2010

Ambuja cement 91.70 48.14 33.39 37.60 52.58
Ltd.

Binani cement Ltd 1,483.90 2,875.94 7,766.43 564,730.45 -----

38

⇒ Interpretation

The debtors’ turnover ratio of the Ambuja cement in the year 2006 was 91.70%
which drastically decreased to 48.14% due more amounts of debtors or credit
sales was done by the company. While, Binani cement debtors’ turnover ratio in
the year 2007 was 2,875.94 which very drastically increased to 564,730.454 due
to high sales revenue. But, after that in the year 2010 there is no amount of
debtors recorded which is good for the company.

 Asset Turnover Ratio

The total asset turnover ratio shows how efficiently your assets generate sales.
The higher the total asset turnover ratio, the better and the more efficiently you
use your asset base to generate your sales. The calculation is:

Total Asset Turnover = Sales/Total Assets = _____ times

Particulars 2006 2007 2008 2009 2010



⇒ Interpretation

The asset turnover ratio of the Ambuja cement is gradually decreasing since last
five years because of continuous increase in the total assets of the company.
While, the asset turnover of the Binani cement is continuously increasing since
last five years due to constant increase in the net sales of the company.

AMBUJA CEMENT

PARTICULAR 2010 2009 2008 2007 2006

39

S

SALES 7371.52 7083.21 6182.09 5671.39 6226.28

EBIT 2074.70 2104.38 2252.32 3018.17 2272.23

NET ASEETS 6166.69 5684.52 4673.46 4149.45 3685.97

PAT 1263.61 1218.37 1402.27 1769.10 1503.25

NET WORTH 7330.10 6470.90 5672.87 4661.25 3491.72

DuPont Analysis (Ambuja cement)

By doing DuPont Analysis one can evaluate power of a firm. It shows the
combined effect of three aspects – operating efficiency, financing
efficiency and retention. It is a product of the assets turnover, gross
profit margin and operating leverage.

40

DuPont Analysis

Figure

PROFIT MARGIN =
EBIT/SALES(in %)
2006 36.49
RONA=EBIT/NET ASSET
2007 53.22
2006 0.62
2008 36.43
2007 0.73
2009 29.71
2008 0.48
2010 28.14
2009 0.37
2010 0.34

ASSETS TURNOVER
=SALES/NA (in times)
FINANCIAL LEVERAGE
2006 1.69
(INCOME STATEMENT)
2007 1.37
= PAT/EBIT (in %)
2008 1.32
2006 66
2009 1.25
2007 59
2010 1.20
2008 62

ROE=PAT/NETWORTH 2009 58

(in%) 2010 60

2006 43.05
2007 37.95 FINANCIAL LEVERAGE
2008 24.72
BINANI CEMENT
(BALANCE SHEET) =
2009 18.83 NA/NW (IN TIMES)
PARTICULARS 2010 2009 2008 2007 2006
2010 16.87 2006 1.06
SALES 1728.50 1857.88 1496.54 963.04 678.44
2007 0.82
EBIT 285.20 597.99
2008 309.71
0.82 352.51 236.73

NET ASEETS 1515.47 2009
1322.79 0.88
971.25 927.36 907.21
2010 0.84
41

PAT 90.51 281.92 1086.67 175.82 95.61

NET WORTH 579.02 675.17 476.40 417.64 301.22

PROFIT MARGIN =
EBIT/SALES (in %)
2006 34.89
RONA=EBIT/NET ASSET
2007 36.60
2006 0.26
2008 20.70
2007 0.38
2009 32.18
2008 0.32
2010 16.50
2009 0.45
2010 0.19

DuPont Analysis (Binani cement)

By doing DuPont Analysis one can evaluate power of a firm. It shows the
combined effect of three aspects – operating efficiency, financing
efficiency and retention. It is a product of the assets turnover, gross
profit margin and operating leverage.

DuPont Analysis

Figure

42

ASSETS TURNOVER
=SALES/NA (in times)
FINANCIAL LEVERAGE
2006 0.74
(INCOME STATEMENT)
2007 1.04
= PAT/EBIT (in %)
2008 1.54
2006 40.39
2009 1.40
2007 49.88
2010 1.14
SWOT 2008 35.09
2009 47.14
ROE=PAT/NETWORTH ANALYSIS
(In %) 2010 31.74
OF AMBUJA
2006 31.74
CEMENT
2007 42.09 FINANCIAL LEVERAGE
2008 22.81 (BALANCE SHEET) =
2009 41.76 NA/NW (IN TIMES)
2010 15.63
Strength
2006 3.01
2007 2.22
• Growth at approx. CAGR 2008 2.04 of 9% in last 5
years 2009 1.96
2010 2.62
43

• Growing Domestic cement consumption at approx. CAGR of 8% in last 3
years
• Highly Capital Incentive so difficult for small entrant
• Not much restriction by govt.
• Market consolidation taking place

Weakness

• High Oil Prices, Cost of Power increase production cost
• Supply exceeds Production lead to competition in price
• Low Quality as compared to international standard but improving

Opportunity

• High Mortgage Penetration -Low Interest Rates
• Easy loan availability for housing finance
• Increased investments in Infrastructure
• Increased govt. outlay on BHARATNIRMAN, GOLDEN QUADRILATERAL, and
BRTS etc.

Threat

• Further Hike in Oil Prices
• Use of plastic engineering in construction
• Subprime market loss may affect

SWOT ANALYSIS OF BINANI CEMENT

Strengths

• It is having a good image and brand loyalty among consumers.

44

• Service is good.
• They have same price prevailing for wholesale at dealers/stockiest retailers
end.

Weakness

• The competitors are doing much promotional activity rather than Binani
cement limited that why it facing more problems in selling of product in the
market.
• Lack of awareness program for consumers.

Opportunity

• Rapid growth is taking place in Bihar and Madhya Pradesh.
• People are opting for more stable structures and intensive use of cement is
taking place, even government is spending heavily on infrastructure Projects.
As Indian core industry is also growing at rate of nearly 10% per annum, it is
having a good future.
• Foreign direct investment in infrastructure sector going to increase in coming
years, which will increase the demand of cement.
• Roads are undergoing through the transformation process through which the
traditional method of road building will be replaced by modern concrete roads.

Threats

• Large number of players in cement industry makes it more competitive for
ACC to carefully price its product and at the same time satisfy its dealers and
customers.
• Players such as Jaypee Cement, Prism Cement, and Birla Samrat are eating
up considerable market share.

45

• The emergence of small players in this market may increase the competition
and start the malpractices, and heavy discounts to retailers. They can also
influence many retailers by giving better profit margin, and other Benefits.

COMPARATIVE ANALYSIS

COMPARISION OF RETURN ON INVESTMENT

 RETURN ON NET ASSETS

PARTICULARS AMBUJA CEMENT BINANI CEMENT

2006 0.62 0.26

46

2007 0.73 0.38

2008 0.48 0.32

2009 0.37 0.45

2010 0.34 0.19

RETURN ON NET ASSETS
0.8
0.73
0.7

0.6 0.62

0.5 0.48
0.45
0.4 0.38 AMBUJA CEMENT
0.37
0.32 0.34
0.3 BINANI CEMENT
0.26
0.2 0.19
0.1

0
2006 2007 2008 2009 2010

⇒ Interpretation

ROI in Ambuja cement in 2006 is 62% whereas in Binani cement it was 26%, in
2007, 2008, 2009 ROI of both the companies are reduces due to decreasing in
the proportion of sales. But in the year 2010 the sales of the further decrease to a
nominal value which is 34% and 19% respectively for the companies.

COMPARISION OF RETURN ON DuPont

 RETURN ON EQUITY


2006 43.05 31.74

2007 37.95 42.09

47

2008 24.72 22.81

2009 18.83 41.76

2010 16.87 15.63

RETURN ON EQUITY
50
45
43.05 42.09 41.76
40
37.95
35
31.74
30
25 24.72 AMBUJA CEMENT
22.81
20 18.83 BINANI CEMENT
16.87
15.63
15
10
5
0
2006 2007 2008 2009 2010

⇒ Interpretation

The ROE of Ambuja cement in 2006 to 2008 is 43%, 38%, and 25% respectively
which is more than Binani cement which is 32%, 42% and 23% respectively.
Because the PAT of the Ambuja cement is Increases more as compare to Binani
cement. While in 2009 and 2010 the ROE of Ambuja cement is 19% and 17%
which is less than the Binani cement which is 42% and 16% because in this year
the PAT is not that much increase as compare to previous years.

 RETURN ON PROFIT MARGIN


2006 36.49 34.89

2007 53.22 36.60

2008 36.43 20.70

48

2009 29.71 32.18

2010 28.14 16.50

RETURN ON PROFIT MARGIN
60
53.22
50

40
36.49
34.89 36.6 36.43
32.18
30 29.71 AMBUJA CEMENT
28.14
BINANI CEMENT
20 20.7
16.5
10

0
2006 2007 2008 2009 2010

⇒ Interpretation

The Profit Margin Ratio of Ambuja cement in 2006 to 2010 is 36%, 53%, 36%,
30%, and 28% respectively which is higher than the Binani cement is 35%, 36%,
21%, 32% and17%. The reason behind this that the operating Expenses of
Ambuja cement is higher as compare to Binani cement.

 FINANCIAL LEVERAGE (INCOME STATEMENT)


2006 66 40

2007 59 50

2008 62 35

49

2009 58 47

2010 60 32

FINANCIAL LEVERAGE
(INCOME STATEMENT)
70
66
60 62 60
59 58
50 50
47
40 40 AMBUJA CEMENT
35
30 32 BINANI CEMENT

20

10

0
2006 2007 2008 2009 2010

⇒ Interpretation

The Financial leverage of Ambuja cement in 2006 to 2008 is 66%, 59% and 62%
respectively which is more than the Binani cement which is 40%, 50%and 35%.
This is because in this year the PAT of Ambuja cement is higher than the Binani
cement. While in 2009 and 2010 the financial leverage of Ambuja is 58%, 70%
which is higher than the Binani cement which is 47% and 32%.

 FINANCIAL LEVERAGE (BALANCE SHEET)


2006 1.06 3.01

2007 0.82 2.22

2008 0.82 2.04

2009 0.88 1.96

50

2010 0.84 2.62

FINANCIAL LEVERAGE
(BALANCE SHEET)
3.5

3 3.01

2.5 2.62
2.22
2 2.04 1.96 AMBUJA CEMENT

1.5 BINANI CEMENT

1 1.06
0.82 0.82 0.88 0.84
0.5

0
2006 2007 2008 2009 2010

⇒ Interpretation

The financial leverage of the Ambuja cement in the year 2006 to 2010 is 1.06%,
0.82%, 0.82%, 0.88%, and 0.84% which is much low then Binani cement i.e.
3.01%, 2.22%, 2.04%, 1.96%, and 2.62%. Thus, we can say that the Binani
cement is performing well than Ambuja cement.

1. COMPARISON OF PROFITABILITY RATIO

A. GROSS PROFIT MARGIN


2006 33.74 21.58

2007 36.26 30.31

2008 24.65 29.6

51

2009 22.87 16.06

2010 19.93 26.22

⇒ Interpretation

The Gross profit margin of the Ambuja cement in the year 2007 was highest i.e.
36.26%, but it started gradually decreasing upto 19.93% last year due continuous
decrease in the gross profit margin of the company. While, the Gross profit
margin of Binani Cement is slowly rising from 21.58% in 2006 upto 26.22 last
year. This indicates that Binani cement is working better than Ambuja cement.

B. OPERATING PROFIT MARGIN


2006 34.71 27.39

2007 36.20 34.48

2008 28.85 35.38

2009 27.07 21.43

2010 25.18 31.15

52

OPERATING PROFIT MARGIN
40
35 34.71 36.2 35.38
34.48
30 31.15
27.39 28.85
27.07
25 25.18
20 21.43
AMBUJA CEMENT
15
BINANI CEMENT
10
5
0
2006 2007 2008 2009 2010

 Interpretation

The Operating Profit Margin of the Ambuja cement in the year 2006 was 34.71%
and that of Binani cement was 27.39%. In 2007 both the companies operating
profit margin increased due to increase in profit before taxes. In last three years
the operating margin of Ambuja cement decreased to 28.85%, 27.07% and
25.18% respectively due continuous increase in operating profit. In the year 2010
Ambuja cement operating profit margin is 25.18% and Binani cement’s operating
margin is 31.15%, which shows that it is performing better than Ambuja Cement.

C. NET PROFIT MARGIN


2006 23.86 10.73

2007 30.53 14.03

2008 22.11 18.12

2009 16.78 7.22

2010 16.84 15.13

53

 Interpretation

The Net Profit Margin of Ambuja cement limited in the year 2006 was 23.86%
which increased in the next year by 30.53% due to increase in net profit of the
company. While, Binani cement net profit margin for the year 2006 was 10.72%
which increased to 14.03% in next year due to increase in the sales of the
company. During 2008 and 2009 both the company’s net profit margin decreased
to a great extent due increase in the operating expenses of the companies. In
2010 the net profit margin of Ambuja cement is 16.84% which higher than that of
Binani cement i.e. 15.13%.

2. COMPARISON OF LIQUIDTY RATIOS

A. CURRENT RATIO


2006 1.08 2.32

2007 1.03 0.85

2008 1.26 0.78

2009 0.89 0.62

2010 1.07 0.92

54

 Interpretation

The Current Ratio of Ambuja cement and Binani cement for the year 2006 was
1.08 and 2.32 times. The Current ratio of the Binani cement decreased to much
greater extent upto 0.85 times because the current liabilities of the company
increased to a great level. In the year 2008 and 2009 there was a nominal
reduction in the current ratio of both the companies. In the year 2010 the current
ratio of the Ambuja cement is 1.07 times which is greater than that of Binani
cement. So, we can say that Ambuja cement is performing well.

B. QUICK RATIO


2006 0.70 2.61

2007 0.64 0.62

2008 0.74 0.49

2009 0.57 0.36

2010 0.75 0.68

55

QUICK RATIO
3
2.5 2.61

2
1.5 AMBUJA CEMENT
1 BINANI CEMENT
0.7 0.64
0.62 0.74 0.75
0.68
0.5 0.49 0.57
0.36
0
2006 2007 2008 2009 2010

 Interpretation

The Quick Ratio of the Binani cement is 2.61 times in the year 2006 which is very
high as compared to Ambuja cement which is 0.7 times. In the year 2007 the
ratio of Binani cement reduced to a great level by 0.62 times because company
had invested high amount of inventories and borrowed heavy loans and
advances from the market. In the year 2010 the Ambuja cement ratio is 0.75
times which is greater than that of the Binani cement i.e. 0.68 times. So we can
say that Ambuja cement is performing better than Binani cement.

C. DEBT EQUITY RATIO


2006 0.25 2.06

2007 0.07 2.24

2008 0.05 1.77

2009 0.03 1.62

2010 0.01 1.46

56

 Interpretation

The Debt Equity Ratio of the Ambuja cement in the year 2006 was 0.25 and that
of Binani cement was 2.06 times. Both the companies constantly reduced the
debt financing option from their portfolio from the year 2007. The debt ratio in the
year 2010 for Ambuja cement is 0.01 times against the Binani cement i.e. 1.46
times. This clearly shows that Ambuja cement more efficiently uses their internal
sources of funds for their operational activities.

3. COMPARISON OF MANAGEMENT EFFICIENCY RATIO

A. INVENTORY TURN OVER RATIO


2006 15.41 14.71

2007 9.96 11.90

2008 7.54 15.86

2009 11.36 16.44

2010 9.19 34.25

57

 Interpretation

The Inventory Turnover Ratio of Ambuja cement for the year 2006 was 15.41
times and that of Binani cement was 14.71 times. In the year 2007, 2008 and
2009 the turnover ratio for Ambuja cement is gradually decreasing which good for
the company. But Binani cement’s turnover ratio is constantly increasing due to
continuous investment in inventories. In the 2010 the Binani cement turnover
ratio increased to 34.25 times due to sudden decrease in inventories against the
sales. It is clearly identified that Ambuja cement can handle their inventories
more effectively than Binani cement.

B. DEBTORS TURNOVER RATIO


2006 91.70 1483.90

2007 48.14 2875.94

2008 33.39 7766.43

2009 37.60 564730.45

2010 52.58 --------

58

 Interpretation

The Debtors Turnover Ratio for the Ambuja cement in the year 2006 was 91.60
times which gradually decreased in the next three years by 37.60 times. This is
because the credit sales of the company increased during the year. While, Binani
cement’s debtors turnover ratio is constantly increasing during the year 2006,
2007, 2008 and 2009 which is 1483.90, 2875.94, 7766.43, 564730.45
respectively because they provide goods on cash basis. In the year 2010 the
debtors’ turnover ratio of Ambuja cement is 52.28 times. While, Binani cement’s
turnover ratio is nil as they provide goods on cash basis. Hence, Binani cement
recovers their debt easily as compared to Ambuja cement.

C. ASSETS TURNOVER RATIO


2006 1.37 0.61

2007 1.09 0.81

2008 1.10 0.67

2009 1.15 0.94

2010 0.85 1.03

59

 Interpretation

The Assets Turnover Ratio for Ambuja cement for the year 2006 was 1.37 times
which decreased to 1.09 times because the sales of the company were reduced.
But, in the year 2007, 2008 and 2009 the turnover ratio were more or less similar.
Binani cement’s assets turnover ratio are constantly increasing from the year
2006 i.e. 0.61 times to the year 2009 i.e. 0.94 times due constant increase in
sales of the company. In the year 2010 the turnover ratio of Ambuja cement is
0.85 which is much lower than that of Binani cement i.e. 1.03 times. This
indicates that the company can effectively use their assets to generate sales.

FINDINGS AND CONCLUSION

 FINDINGS

 The Gross Profit Margin of the Ambuja cement is decreasing in last as compared
to the Binani cement i.e. 26.22% against 19.93 of Ambuja cement.

 The Operating Profit Margin of Ambuja cement is decreasing as compared to the
Binani cement i.e. 31.15 against 25.18% of Ambuja cement.

 The Net Profit Margin of Ambuja cement is higher than the Binani cement i.e.
16.84 of Ambuja cement against 15.13% of Binani cement.

60

 The Liquidity Ratios of the Ambuja cement is higher than the Binani cement
except the Debt Equity ratio i.e. 1.46% of the Binani cement against Ambuja
cement i.e. 0.01.

 The Inventory Turnover Ratio of Ambuja cement is lower than the Binani cement
i.e. 9.19 for Ambuja cement against the Binani cement i.e. 34.25%.

 The Debtors Turnover Ratio of the Ambuja cement is much higher than
compared to that of Binani cement.

 The Asset Turnover Ratio of Ambuja cement is lower than that of Binani cement
i.e. 0.85% for Ambuja cement against 1.03 times of Binani cement.

 The Return on Net Assets for Ambuja cement is higher than the Binani cement in
the year 2010.

 The Return on Equity for the Ambuja cement is higher than that of Binani cement.

 The Return on Profit Margin for Ambuja cement is 28.14% which is much higher
than that of Binani cement i.e.16.50%.

 The Financial Leverage of the Ambuja cement for the year 2010 is 0.84 times
which is much lower than that of Binani cement is 2.62 times.

 CONCLUSION

 The Returns on Assets of the Ambuja cement has decreased from the year 2006
upto the year 2010. But it is better than the Binani cement.

 The Returns on Equity of the Ambuja cement for the year 2010 is good as
compared to the Binani cement because of increase in the sales of the company.

 The Net Profit Margin of Ambuja cement is higher than that of Binani cement.
Ambuja cement is more leveraged than Binani cement. This is good for the
company.

61

 The Profitability Ratios shows that Binani cement is performing well than that of
Ambuja cement from since last 3 years.

 Ambuja cement is more liquid than that of Binani cement and uses very less
amount of debt funds in their portfolio.

 Ambuja cement uses their inventory more efficiently than Binani cement for the
purpose of production.

 Ambuja cement’s management is efficient in maintaining their debts and equity in
comparison of Binani cement.

Thus, from the above data provided we can conclude that Ambuja cement Ltd. is
working and performing better than the Binani cement Ltd. and their market share in
the economy has also increased which is very beneficial to the Cement Industry.

Cement Industry has progressed in India since last decade and the demand for the
cement has increased due to infrastructure development, housing and commercial
needs of the economy. In the analysis it has been seen that the Ambuja cement is
over shadowing in terms of performance. During Financial year 2007 inflationary
conditions enabled all to perform well and generate profits resulting in boom in share
prices. In 2008 all companies underperformed comparatively due to economic
downturn.

62

Cement industry

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

En vedette

En vedette (17)

Similaire à Cement industry

Similaire à Cement industry (20)

Dernier

Dernier (20)

Cement industry