a reasearch report on cement industry

7/31/2019 A Reasearch Report on Cement Industry

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SCF ASSIGNMENT

A REASEARCH REPORT

ON

CEMENT INDUSTRY

SUBMITTED BY: GROUP 2

MAYANK BARNWAL

MOHD KHURSHID GAURI

RUPANK PAL

SHRUTI GOSWAMI

VINAY KUMAR SINGH

VYOMA REENU


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TABLE OF CONTENT

Content Page number

1. Introduction 3-42. Research methodology 53. Analysis 6-214. Conclusion 22

Bibliography 23


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CHAPTER 1

INTRODUCTION

The cement industry presents one of the most energy-intensive sectors within the Indian

economy and is therefore of particular interest in the context of both local and global

environmental discussions. Increases in productivity through the adoption of more efficient

and cleaner technologies in the manufacturing sector will be effective in merging economic,

environmental, and social development objectives. A historical examination of productivity

growth in Indias industries embedded into a broader analysis of structural composition and

policy changes will help identify potential future development strategies that lead towards a

more sustainable development path.

The cement industry is one of the main beneficiaries of the infrastructure boom. With robust

demand and adequate supply, the industry has bright future. The Indian Cement Industry

with total capacity of 165 million tones is the second largest after China. Cement industry is

dominated by 20 companies who account for over 70% of the market. Individually no

company accounts for over 12% of the market. The major players like L&T and ACC have

been quiet successful in narrowing the gap between demand and supply. Private housing

sector is the major consumer of cement (53%) followed by the government infrastructure

sector. Similarly northern and southern region consume around 20%-30% cement while the

central and western region are consuming only 18%-16%.

India is the 2nd largest cement producer in world after china .Right from laying concrete

bricks of economy to waving fly overs cement industry has shown and shows a great future.

The overall outlook for the industry shows significant growth on the back of robust demand

from housing construction, Phase-II of NHDP (National Highway Development Project) and

other infrastructure development projects. Domestic demand for cement has been increasing

at a fast pace in India. Due to rising demand of cement the sales volume of cement companies

are also increasing & companies reporting higher production, higher sales and higher profits.

The net profit growth rate of cement firms was 85%. Cement industry has contributed around

8% to the economic development of India. Outsiders (foreign players) eyeing India as a

major market to invest in the form of either merger or FDI (Foreign Direct Investment).


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Cement industry has a long way to go as Indian economy is poised to grow because of being

on verge of development.

The company continues to emphasize on reduction of costs through enhanced productivity,

reduction in energy costs and logistics expenses. The cement sector is expected to witness

growth in line with the economic growth because of the strong co-relation with GDP. Future

drivers of cement demand growth in India would be the road and housing projects. As per the

Working Group report on Cement Industry for the formulation of the 11th Plan, the cement

demand is likely to grow at 11.5 per cent per annum during the 11th Plan and cement

production and capacity by the end of the 11th Plan are estimated to be 269 million tones and

298 million tones, respectively, with capacity utilization of 90 per cent.

Despite the growth of Indian cement industry India lags behind the per capita production.

Supply for cement is expected to remain tight which, in turn, will push up prices of cement

by more than 50%. The most important factor for better prices is consolidation of the

industry. It has just begun and we will see more consolidation in the coming years. Other

budget measures such as cut in import duty from 12.5 per cent to nil etc. are all intended to

cut costs and boost availability of cement.

Sadly the adverse effects of global slowdown have not speared this industry too. Demand is

sluggish, the government is keeping an eagle eye on prices, domestic coal and pet coke,

prices have increased sharply and utilizations rates are down. The numbers coming out are a

reflection of grim times.


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CHAPTER 2

RESEARCH METHODOLOGY

Research is completely based on secondary data.

Information source:

Information is mainly sourced from internet.

Sample size:

5 major cement companies has been selected and analyzed on various parameters

Analysis method:

Ratio analysis and historical data analysis


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CHAPTER 3

ANALYSIS

1. J K LAKSHMI CEMENT

1. DEBT-EQUITY

RATIO

J K

LAKSHMI

2007 173.43

2008 108.17

2009 82.62

2010 88.54

2011 95.28

Table 1.1

Figure 1.1

In 2007 J K Lakshmi cement was a highly levered company with debt-equity ratio of 1.73.In 2008 the debt-equity ratio substantially dropped as a consequence of reduction in debt

component marginally but major reason being increase in internal source of finance, the trend

continued in 2009 as well. In 2010 there was huge need of capital and thus both debt and

equity component were used to meet the capital needed.

173.43

108.1782.62 88.54

95.28

0.00

50.00

100.00

150.00

200.00

2007 2008 2009 2010 2011


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2. SHAREHOLDINGPATTERN

J K LAKSHMI:

Holder's Name No ofShares

% ShareHolding

Promoters 54072353 44.19%

General Public 30169951 24.66%

Financial Institutions 13332268 10.90%

Other Companies 10115575 8.27%

NBanksMutualFunds 5201159 4.25%

Foreign Institutions 4373105 3.57%

Foreign NRI 4045021 3.31%

Foreign Promoter 732554 0.60%

Central Govt 306230 0.25%

Others 10708 0.01%

Table 1.2

Figure 1.2

Shareholding pattern of this company shows its efficiency in raising capital through equity.44% of total shares belong to promoters and 24% being held by common man and the rest of

the shares belonging to financial institutions, other companies, mutual funds, foreign

institutions etc.

44.19%

24.66%

10.90%

8.27%

4.25%

3.57%3.31%

0.60% 0.25%0.01% Promoters

GeneralPublic

FinancialInstitutions

OtherCompanies

NBanksMutualFund

s

ForeignInstitutions


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3. GROSSBLOCK

J K LAKSHMI ( In Rs Crore)

2007 1340.522008 1474.15

2009 1760.48

2010 1903.64

2011 2318.63

Table 1.3 Figure 1.3

It has been able to sustain its increasing growth over the years with gross block increased by

around 10%, 20%, 8%, and 22%.

4. PAYOUTRATIO

J K LAKSHMI

Figure in Rs

Crore

2007 2008 2009 2010 2011

Reported PAT 178.11 223.67 178.59 241.13 59.13

Dividend 5.71 15.3 24.47 30.58 15.29

Dividend Payout % age 3.21 6.84 13.70 12.68 25.86

Table 1.4

Dividend payout ratio has increased over the year except 2010 where though the PAT

increased by substantial 35% the dividend payout percent decreased to 12.68% from 13.70%.

It shows the companys optimism of future return.

1340.521474.15

1760.481903.64

2318.63

0

5001000

1500

2000

2500

2007 2008 2009 2010 2011


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2. J K CEMENT

1. DEBT- EQUITY RATIOJ KCEMENT

S

2007 64.35

2008 45.35

2009 44.44

2010 75.56

2011 98.93

Table 2.1

Figure 2.1

Cement industry is a capital intensive industry and then having a debt equity ratio as low as

0.64, 0.44, 0.45, and 0.76 in respectively 2007, 2008, 2009, 2010; it shows company was not

able to raise finances effectively. Though the debt equity ratio improved in 2011 and now is

close 0.99.

2. SHAREHOLDING PATTERNJ K CEMENTS:

Holder's NameNo of

Shares

% Share

Holding

Promoters 46318149 66.24%






Others 172665 0.25%

Foreign Ocb 20195 0.03%

Figure 2.2

64.3545.35 44.44

75.56

98.93

0.00

50.00

100.00

150.00

2007 2008 2009 2010 2011


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Figure 2.2

Majority of its shares is owned by its promoters, i.e. around 2/3rd

, while general public holds

only 10%. Here foreign institutions hold 12% shares.

3. GROSS BLOCKJ K CEMENTS ( In Rs Crore)

2007 1029.422008 1249.77

2009 1441.15

2010 2376.70

2011 2296.48

Table 2.3

Figure 2.3

2010 and 2011 has seen almost 50% and 30% increases in debt component while equityincreased regularly which increased the gross block in 2010. In 2009 it was 1441.15 cr, it

jumped to 2376.70 Cr in 2010an increase of 65%.

66.24%

12.83%

10.11%

3.70%

3.48% 3.36% 0.25% 0.03%

Promoters

ForeignInstitutions

GeneralPublic

NBanksMutualFunds

OtherCompanies


Others

ForeignOcb

1029.421249.77

1441.15

2376.70 2296.48

0

500

1000

1500

2000

2500

2007 2008 2009 2010 2011


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4. PAYOUT RATIOJ K CEMENTS

Figure in Rs

Crore

2007 2008 2009 2010 2011

Reported PAT 178.62 265.17 142.34 226.00 64.04

Dividend 24.47 34.96 24.47 41.96 13.99


Table 2.4

Figure 2.4

Dividend payout has increased steadily over the years. 2009 was bad for JK cement and

reported PAT dropped by 46%. It was seen that in that year the dividend payout percentage

was very high (17.19%) as consequence of low PAT.

13.70 13.18

17.1918.57

21.85

0.00

5.00

10.00

15.00

20.00

25.00

2007 2008 2009 2010 2011


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3. BIRLA CORPORATION

1. DEBT- EQUITY RATIOBIRLACORP

2007 35.90

2008 22.64

2009 17.69

2010 36.32

2011 45.94

Table 3.1

Figure 3.1

For the first three years vis--vis 2007, 2008, 2009 the debt component being almost

constant. In 2010 and 2011 the debt portion increased to 650 Cr and 950 Cr respectively. The

debt equity ratio though remained on a lower side throughout. It has been able to meet its

capital requirements through internal finances.

2. SHAREHOLDING PATTERNBIRLA

CORPORATION:

Holder's NameNo of

Shares

% Share

Holding

Promoters 48434191 62.90%






Others 651906 0.85%


Table 3.2

35.90

22.6417.69

36.32

45.94

0.00

20.00

40.00

60.00

2007 2008 2009 2010 2011


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Figure 3.2

The shareholding pattern constitute of 62.9% to promoters, 11.72% belongs to other

companies, 7.79% NB mutual funds, 6.95% to foreign institutions, 5.54% to financial

institutions and only 4.12% shares for general public.

3. GROSS BLOCKBIRLA

CORPORATION

( In Rs

Crore)

2007 1154.35

2008 1173.44

2009 1354.20

2010 1430.02

2011 1751.32

Table 3.3

Figure

3.3

The gross block has

been increasing since

2007. Initially it has

increased with very

low margin. But after

2011 there has been a

tremendous increase in

the gross block

62.90%11.72%

7.79%

6.95%

5.54%4.12%

0.85%0.14%

Promoters

OtherCompanies

NBanksMutualFunds

ForeignInstitutions


GeneralPublic

Others

ForeignNRI

1154.35 1173.441354.20 1430.02

1751.32

0

500

1000

1500

2000

2007 2008 2009 2010 2011


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4. PAYOUTRATIO

BIRLA CORPORATION

Figure in Rs

Crore

2007 2008 2009 2010 2011

Reported PAT 326.23 393.57 323.51 557.18 319.88

Dividend 26.95 30.8 34.65 46.20 46.20


Table 3.4

Figure 3.4

Dividend payout percent seems to be very much related to PAT. As PAT increases the

dividend payout decreases and the company retained more to reinvest and vice-versa.

8.26 7.83

10.71

8.29

14.44

0.00

5.00

10.00

15.00

20.00

2007 2008 2009 2010 2011


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4. BINANI CEMENT

1. DEBT- EQUITY RATIOBINANICEMEN

T

2007 229.39

2008 184.48

2009 163.37

2010 145.61

2011 213.39

Table 4.1

Figure 4.1

Binani Cement had a debt equity ratio of 2.29; it was a highly levered or geared company. In

2008 its equity part increased by 38% while debt increased by 11.4%, thus reducing debt

equity ratio to 1.84%; and then it continued the same pattern over the coming 2 years. Its debt

to equity ratio being 1.63%, 1.46% in 2009 and 2010 respectively. In 2011 though the equity

dropped by 15% and debt component increased by 25% which resulted in debt equity ratio to

become 2.13% in 2011, this shows Binani cements good brand value that allows it to raise

capital through various sources.

2. SHAREHOLDING PATTERNBINANI CEMENTS:

Holder's NameNo of

Shares

% Share

Holding

Promoters 179184178 95.01%







Others 54053 0.03%

Table 4.2

229.39184.48

163.37 145.61

213.39

0.00

100.00

200.00

300.00

2007 2008 2009 2010 2011


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Figure 4.2

95% of its shares are held by its promoters. And only 2.26% is owned by general public. This

shows the managements belief of raising capital either through debt or through promoters.

3. GROSS BLOCKBINANI

CEMENT

( In Rs

Crore)

2007 839.992008 1445.39

2009 1588.68

2010 1800.51

2011 1897.03

Table 4.3

Figure

4.3

The gross block of Binani cement has increased every year and from 833.99 Cr in 2007 to

1897 Cr in 2011 is a big improvement.

95.01%

2.26%

1.88%

0.40%

0.27%0.10%0.05% 0.03%

Promoters

GeneralPublic


ForeignInstitutions

OtherCompanies

NBanksMutualFunds

ForeignNRI

Others

839.99

1445.391588.68

1800.51 1897.03

0

500

1000

1500

2000

2007 2008 2009 2010 2011


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4. PAYOUT RATIOBINANI CEMENT

Figure in Rs

Crore2007 2008 2009 2010 2011

Reported PAT 95.61 175.82 108.66 281.92 90.51

Dividend 0 50.78 42.65 71.09 47.15


Table 4.4

Figure 4.4

It had retained all the profit made in 2007, though from there on it has paid a substantial

portion to share holders. Its dividend payout percent has been substantial 29%, 39%, 25% and

52%; in coming four years. 2010 has seen an increase in profit by 260%.

0.00

28.88

39.25

25.22

52.09

0.00

20.00

40.00

60.00

2007 2008 2009 2010 2011


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5. ULTRATECH CEMENT

1. DEBT- EQUITY RATIOULTRATEC

H CEMENT

2007 89.50

2008 64.53

2009 59.46

2010 34.82

2011 38.86

Table 5.1Figure 5.1

Debt equity ratio of ultratech dropped every year. Although debt increased but the same time

corresponding equity increased at a much higher rate. From 0.9 it dropped to 0.39 in 5 years.

2. SHAREHOLDING PATTERNULTRATECHCEMENT

Holder's NameNo of

Shares

% Share

Holding

Promoters 173605057 63.35%





Foreign Promoter 5639515 2.06%


Foreign Ocb 1499356 0.55%


Foreign Industries 51776 0.02%

Table 5.2

89.50

64.53 59.46

34.82 38.86

0.00

50.00

100.00

2007 2008 2009 2010 2011


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Figure 5.2

63.35% of shares is held by promoters, 15% is held by foreign institutions, while only 7.26%

belongs to common public.

3. GROSS BLOCKULTRATECH

CEMENT ( In Rs Crore

2007 4784.70

2008 4972.60

2009 7401.02

2010 8078.14

2011 17942.27

Table 5.3

Figure 5.3

The gross block increased by 221.1% in 2011, and this is due to an increase in debt and

equity part by around 250%.

63.35%14.96%

7.26%

5.83%

4.33%2.06%

1.32% 0.55% 0.34%0.02%

Promoters

ForeignInstitutions

GeneralPublic


OtherCompanies

ForeignPromoter

NBanksMutualFunds

ForeignOcb

ForeignNRI

4784.70 4972.60

7401.02 8078.14

17942.27

0.00

5000.00

10000.00

15000.00

20000.00

2007 2008 2009 2010 2011


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4. PAYOUT RATIOULTRATECH

CEMENT

Figure in Rs

Crore

2007 2008 2009 2010 2011

Reported PAT 782.28 1007.61 977.02 1093.24 1404.23

Dividend 49.79 62.24 62.24 74.69 164.42


Table 5.4

Figure 5.4

Dividend payout percentage has been almost constant throughout irrespective of profit made,

except in 2011 when it was 11.71%.

6.366.18

6.37 6.83

11.71

0.00

5.00

10.00

15.00

2007 2008 2009 2010 2011


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CAPITAL STRUCTURE

CAPITAL STRUCTURE( Rs Cr)

JK Lakshmi JK Cements Birla Corp Binani Ultratech

2007

Debt 717.67 527.75 239.05 691.00 1578.63

Equity 413.8 820.11 665.81 301.23 1763.78

2008

Debt 694.88 477.65 227.50 770.47 1740.50

Equity 642.42 1053.34 1004.98 417.64 2696.99

2009

Debt 686.74 527.11 227.76 778.33 2141.63

Equity 831.25 1186.06 1287.71 476.41 3602.1

2010

Debt 903.68 1022.94 650.56 983.09 1604.52Equity 1020.7 1353.75 1791.23 675.16 4608.65

2011

Debt 996.99 1384.12 945.41 1235.57 4144.60

Equity 1046.33 1399.04 2057.92 579.02 10666.04

Table 6

The Table representing the capital structure of five major cement companies of India. Every

company has its unique capital structure. As most of the companies has a less debt

component while equity component is majorly supporting the capital structure. Binani cement

is the only company in 2011 which has higher debt component as compared to the equity.

Binani cement since 2007 has more external borrowing as compared to its rival companies.


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CHAPTER 4

CONCLUSION

In this research we have analysed the cement industry by taking the five major cement

companies. The analysis reveals that every company differ from each other on the basis of

their capital structure as well as dividend payout ratio. Cement is the fastest growing sector of

India. The research reveals that every cement company has their major shareholders either in

the form of the promoters or the general institution which states that cement industry in India

has been majorly controlled by the promoters. Even the foreign institutions are also the major

shareholder among the cement companies in India. Every company has its unique capital

structure. The capital structure plays a very important role in differentiating one company

from another. Some companies have more debt component while other have more equity

components. Debt -equity ratio, payout ratio and gross block are the other ratio used for

analysis purpose.


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Bibliography

References

1. www.capitalline.com2. www.economictimes.com
http://www.capitalline.com/http://www.capitalline.com/http://www.economictimes.com/http://www.economictimes.com/http://www.economictimes.com/http://www.capitalline.com/

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