eq research on cement industry

Equity Research On Cement Industry

1 M. P. Birla Institute of Management

RESEARCH PROJECT

ON

“Equity Research On Cement Industry with

respect to Union Budget”

Submitted in partial fulfillment of the requirements of the MBA

Degree Course of Bangalore University

Submitted By

SANJAY S

06XQCM6074

Under the Guidance and Supervision

Of

Prof. Praveen Bhagawan

M.P.BIRLA INSTITUTE OF MANAGEMENT Associate Bharatiya Vidya Bhavan

# 43, Race Course Road Bangalore-560001

2006 – 08



DECLARATION I here by declare that the report entitled. “Equity Research on Cement

Industry with respect to Union Budget” is prepared under the guidance of

Prof. Praveen Bhagawan (Faculty, M.P.Birla Institute of Management).I also

declare that this project report has not been submitted to any other University /

Institute for the award of any other degree, diploma, fellowship or other similar

title or prizes.

Date: SANJAY S Place: Bangalore (O6XQCM6074)



PRINCIPAL’S CERTIFICATE

This is to certify that Mr. SANJAY S bearing the register number

06XQCM6074 has undertaken a research project and has prepared a

report titled “Equity Research on Cement Industry with Respect to

Union Budget the Firm” under the guidance and supervision of

Prof.Praveen Bhagawan. This has not formed a basis for the award

of any degree/ diploma for any university.

Place: Bangalore Date: Dr. Nagesh.S.Malavalli Principal



GUIDE’S CERTIFICATE

This is to certify that Mr.SANJAY S a student of M.P.BIRLA

INSTITUTE OF MANAGEMENT Associate Bharatiya Vidya Bhavan,

Bangalore, has successfully completed the research work entitled

“Equity Research on Cement Industry with respect to Union Budget” for the partial fulfillment of the requirements of MASTER OF

BUSINESS ADMINISTRATION degree of BANGALORE

UNIVERSITY, under my guidance and supervision. Date: Prof.Praveen Bhagawan Place: Bangalore (Internal guide)



ACKNOWLEDGEMENT

I am thankful to Dr. Nagesh malavalli, Principal M.P. Birla Institute of Management, Bangalore, who has given his valuable support during the

study.

I am extremely thankful to Prof.Praveen Bhagawan, M.P. Birla Institute of Management, Bangalore who has guided me to do this project by giving

valuable suggestions and advice.

My gratitude will not be complete without thanking God and I am most

grateful to my beloved parents who have been a constant source of aspiration

and blessings in my pursuit for studies. Finally, I express my sincere gratitude to

all my friends and well wishers who helped me to do this project.

Place: Bangalore

Date: (SANJAY S)



CONTENTS

1. Executive Summary 1-2 2. Introduction 3-6

2.1 Theoretical Background 2.2 Statement of the problem 2.3 Importance of the study 2.4 Scope of the study 2.5 Objectives of Research

3. Literature Review 7-8 3.1 Purpose

4. Research Methodology 9-11

4.1 Study Design 4.2 Data Gathering 4.3 Hypothesis Test

5. Data Analysis and Interpretation 12-49 5.1 Company Profile 5.2 Budget Review

6. Findings 50-52 7. Bibliography 8. Annexure



LIST OF GRAPHS AND TABLES

Sl no. PARTICULARS Page no.

01 Selected scripts 28

02 Trend Movement of Ultratech 06-07 36



05 Trend Movement of Prism 06-07 39



08 Trend Movement of India cement 06-07 42



11 Trend Movement of JK Lakshmi 07-08 45

12 Trend Movement of JK Lakshmi 08-09 46

13 Trend Movement of Mysore cements 06-07 47



16 Trend Movement of Ambuja cements 08-09 50



EXECUTIVE SUMMARY



EXECUTIVE SUMMARY

It is widely believed that stock market is related to macroeconomic fundamentals

of an economy, as companies that are listed for trading in stock exchanges are the ones

who contribute significantly to the economy's growth. The notion that macroeconomic

factors can drive the movement of stock prices is now widely accepted. However, it was

only in the past decade or so that attempts have been made to capture the effect of

economic forces in a theoretical framework and calibrate these effects empirically.

According to standard stock valuation model, the determinants of stock price are the

expected cash flows from the stock and the required rate of return. Chen, Roll and Ross

(1986) showed that economic variables have a systematic influence on stock return as a

result of their effect on future dividends and discount rate and they provided the

foundation for the belief in the existence of a long-term equilibrium relationship between

stock price and related macroeconomic variables.

A central issue in macroeconomics is the question of how financial markets are

connected to the real side of the economy.

The co-integration of macroeconomic variables and stock market has been and

extensive area of research in financial econometrics. In financial economics, there have

been a number of studies concerning developed markets like US, Japan, UK and

European markets.



INTRODUCTION



2.1 THEORETICAL FRAMEWORK

Volatility: Definition and Measurement

In pure financial terms, volatility is defined as, 'the degree to which the price of a

security, commodity, or market rises or falls within a short-term period’. As is evident

from the definition, volatility relates to the variability in the price of a security. In the

context of the stock market, volatility of the market refers to the volatility of the indices

of the securities within the market. In India, for instance, the Bombay Stock Exchange

(BSE) SENSEX (a 30 scrip weighted index of market capitalization) would be one of the

relevant indices to look into for examining stock market volatility. When examining the

issue of stock market volatility, it is relevant to measure percentage volatility of stock

return. This reflects the percentage change in the value of the amount invested in the

stock market. It reflects the change in the investor's wealth. Theorists use various

measures of volatility like standard deviation, variance, chi square test, to measure

volatility of stock market return.

Stock market volatility is often classified as historical (actual) volatility or

implied volatility. The most common measure of historical or actual stock market

volatility is the standard deviation. In simple terms, standard deviation measures the

deviation of the returns of equity from its mean return. It is a relative measure i.e.

standard deviation of stock returns in one period can be compared with standard

deviation of another period to understand which period has been more volatile.

This research is done in the field of Indian share markets taking into account three

years data from March 2006 to March 2008. The research includes how the share prices

of various selected companies vary w.r.t. to economic i.e., Union Budget. The research

work includes the collection of data regarding the share prices of the selected companies

during the past three years.

This research attempts to study the relationship of stock returns with respect to

Union Budget in Indian context. The data consists of 3 years from February 2006 to

March 2008 (pre and post 10 days data on announcement of Union Budget each year).



The Stock Market and the Economy

The stock market and the economy are deeply intertwined so that when something

happens in one it affects the other. It is said that stock market declines have a wide-

ranging effect on many sectors of the economy; therefore, the health of the stock market

is seen as an indicator of the general economic health.

2.2 STATEMENT OF THE PROBLEM:

Wide price fluctuations and heavy trading within a short span of time characterize

volatile markets. Volatility is a traditional worry of investors, and is associated with fast-

growing stocks.

Volatility of stock market is usually caused by company news, economic factors.

Share prices fluctuations affect the investor’s wealth creation. In this context, the study of

the impact of economic events on the movement of share prices in stock market is

undertaken. The problem could be characterized by the lack of information weather the

Union Budget is affecting the prices of cement company.

2.3 IMPORTANCE OF THE STUDY

• This study aids an investor to know the effect of Union Budget on share prices.

• Research on volatility will help investor to build and plan his investment portfolio

by considering the uncontrollable factors, which would lead to fluctuations in the

stock market by an individual investor.

• Since there are problems associated with volatile stock markets, the study can

help the investors to take informed decisions regarding buying or selling of stock.



• Study will also help the companies to know their share price variability.

2.4 SCOPE OF THE STUDY

The scope of the study is limited only for Cement Industry in India wherein the

fallowing companies are selected

COMPANIES

1. Ultratech Cement ltd.

2. Prism Cement ltd.

3. India Cement ltd.

4. JK Lakshmi Cement ltd.

5. Mysore Cement ltd.

6. Ambuja Cement ltd.

2.5 OBJECTIVES OF THE STUDY

• To study how share prices of Cement Companies fluctuate with respect to pre

budget and post budget.

• To predict the future prices of the shares.

• Fundamental Analysis of the major companies (both small and mid cap) in

the industry. .



Review of Literature



3.1 Purpose

The project undertaken (Equity Research in the cement industry) aimed at

doing the Analysis of major firms in the cement industry in India with respect to Union

Budget.

The analysis serves to answer questions, such as:

• Is there any relation between the share prices and union budget?

• Is it actually any chances of making profits with this relation?

• To study the extent to which Union Budget affect values of shares?

This analysis has been done by studying the economic factors of the country,

industry trends as well as qualitative and quantitative factors of the firms. Based on the

analysis of the financial statements of the firms, industry structure, economic conditions

etc., the relation of shareprices between pre budget and post budget been made have

been made. Also valuation of the firms undertaken for analysis has been done using

Regression analysis.



RESEARCH METHODOLOGY



4.1 Study Design

a) Study Type: The study type is analytical, quantitative. Analytical because facts and

existing information is used for the analysis, Quantitative as relationship is examined by

expressing variables in measurable terms and also Historical as the historical information

is used for analysis and interpretation.

b) Sampling technique: Simple Random sampling is used because only particular units

are selected from the sampling frame. Such a selection is undertaken as these units

represent the population in a better way and reflect better relationship with the other

variable.

c) Sample size: Sample chosen is 6 major companies from cement industries from NSE

for the period started from 14th February to 14th march for 3 years.

d) Sampling frame: Sampling Frame would be Indian stock market for cement sector.

4.2 Data Gathering Procedures and Instruments:

Data and Data Source: Historical share prices and Historical daily prices of

Shares like opening price, closing price have been taken from NSE.

SECONDARY DATA

As the data relating to share prices of companies and SENSEX are of previous

years, secondary data is collected. Data is collected for the period from March 2006 to

March2008. The data is also collected from websites, journals, dailies, Bangalore Stock

Exchange Library, etc.



4.3 Testing of hypothesis

Hypothesis

H0: There is no relation in share prices between pre budget and post budget.

H1: There is relation in share prices between pre budget and post budget.

Tools used for testing of hypothesis:

Tools used for testing of hypothesis linear regression tool, co-efficient of

Correlation, co-efficient of determination and t statistic.



PRESENTATION AND ANALYSIS OF

DATA AND INTERPRETATION



5.1 COMPANY PROFILE

Howden Insurance Brokers

Howden Insurance Brokers is the largest specialist Lloyd’s Broker of its kind in the

UK. The broking arm of the Hyperion Insurance Group, Howden Insurance Brokers has a

first-rate reputation worldwide as a market leader in its specialist areas. This reputation is

built on an uncompromising philosophy of focus, expertise and service.

Focus

Howden Insurance Brokers is a specialist, focused solely on providing liability and

crime products. We offer:

1. Investment industry

2. Professional Indemnity

3. Directors and Officers Liability

4. Crime Insurance

5. Computer Crime Insurance

6. Cyber Liability/Esurance

7. Medical Malpractice Liability

8. Expertise

The knowledge and expertise of our people is second to none. When engaged to

represent clients to the insurance markets we are able to produce outstanding results,

from initial negotiation through to claims settlement – an issue that many clients overlook

when selecting their advisors.

Service

Our service is outstanding. You will find us approachable and accessible at all

levels of our organization. We are not just interested in winning your business; we want

to make sure you stay with us.



Claims

We have the best specialist claims departments in the industry. It is an integral

part of the business and one in which we continue to make substantial investment. No one

wants to envisage a problem that could lead to a claim but, if it does happen, you will

benefit from having the very best people on your side, who will vigorously ensure the

right result. Our claims expertise is a major strength and one in which we take great

pride.

Relationships

Howden Insurance Brokers is a relationship-led business. Consequently, all our

directors are entirely hands-on when it comes to placing risks. This enables us to retain

influence at the most senior level with all the leading insurers. Our strong, established

relationships deliver very competitive premiums. This, combined with our preference to

use our own policy wordings, enables delivery of affordable and highly responsive

insurance policies.

Consistency

Consistency throughout the insurance market’s cycles is key. Although there can be

great volatility in terms of pricing, we seek to provide stability. We work with insurers

that are financially secure and which have high ratings.

Global reach

Howden Insurance Brokers’ head office is in the City of London, offering direct

access to Lloyd’s and many major international insurance companies. However, our

reach extends far further and we have relationships with a range of territories that are

crucial insurance centres, such as the US, Continental Europe and Bermuda.

The Risk

Howden Insurance Brokers provides insurance placement and claims settlement

services to brokers and intermediaries world-wide. We have a reputation for delivery of

the highest levels of service. We are totally committed to those with whom we work and



seek to build long-term partnerships, in order to enable the partner to develop sustained

growth.

Our expertise

We are experts in insurance and reinsurance broking with unrivalled knowledge

of Professional Liability, Directors and Officers Liability and crime products. As an

accredited Lloy

Services to retail/producing brokers include:

• Access to a range of innovative insurance and reinsurance products

• Connections to leading insurers in London, the Caribbean, US and Europe

• Access to a range of specialist facilities, schemes and binders to support the

smooth running of large accounts

• Specific wordings tailored to suit the needs of a particular country or jurisdiction

• Co-branding or white labelling arrangements

• Delivery of expertise to support non-specialist distributors

Tailored service in your location

When working with our wholesale broker partners, integrity is vital. We never

forget that the client is yours but if specialist support is required, senior staff from

Howden Insurance Brokers can travel at short notice from our offices in the City of

London to assist with pitches and presentations. We have local knowledge of worldwide

markets and provide service that is second to none.

Pricing that fits the risk

We have a range of competitive pricing structures that reflect local exposures. We

constantly monitor the rates available and use our leverage to obtain the best deal. We

only work with quality insurers that meet stringent rating requirements.



Rewarding those we work with

Our commission rates are highly attractive. We also offer performance

arrangements, when appropriate.

Access to the best claims professionals

Howden Insurance Brokers has the best specialist claims team in the London insurance market. In the event that your client has a claim, this expertise will be available to you. We have in-depth knowledge of the most complex covers. We never forget that your client comes first.

5.2 Union Budget

The budget of a country mainly covers the policies on various sectors of the

country’s economy. The world economy has grown by around 4.5 percent for the year

2005 and 2006. The impressive growth of the world economy is largely led by China,

India and Russia. Though the economic progress is satisfactory, still the world economy

suffers a lot from various social problems. The world economy has been largely suffering

from the problems of infant mortality rates, and various types of diseases. As in the year

2006, there were a total numbers of 48.87 deaths per 1,000 live births. This has been a

major global challenge. To meet these respective challenges, budget of a nation has larger

role to play.

Highlights of Union Budget 2006-2007.

The Indian cement industry with a total capacity of about 152 m tonnes (excluding mini

plants) in FY05, surpassed developed nations like the US and Japan and has emerged as

the second largest market after China. Although consolidation has taken place in the

Indian cement industry with the top five players controlling almost 50% of the capacity,

the remaining 50% of the capacity remains pretty fragmented. The per capita

consumption of 115 kgs compares poorly with the world average of over 250 kgs and

more than 450 kgs in China. This, more than anything, underlines the tremendous scope

for growth in the Indian cement industry in the long term.



Budget Measures

Customs duty on cement reduced from 15% to 12.5% in line with the reduction in peak

customs duty.

Budget Impact

The reduction in customs duty on cement would have no impact on the domestic cement

sector as strong international cement prices and lack of adequate port facilities would

continue to protect domestic cement players.

Sector Outlook

There was no major announcement for the cement sector in the Union Budget 2006-07.

Thus, we expect the industry to continue to grow at 8% to 9% in the medium to long

term. Government's initiatives on the infrastructure and housing sector fronts would

continue to remain the key drivers. With no major capacity expansion in the pipeline in

the country, the demand supply equation is expected to continue to remain favourable for

cement manufacturers and this will help in the improvement of prices. However, since

the level of demand supply mismatch is higher in the southern region, it will take longer

to achieve demand supply parity in that region. We expect average cement price to

increase by around 5% to 6% per annum at the national level in the medium-term owing

to fundamental reasons.

Industry Wish List

Cement Manufacturers Association of India (CMAI)

• Reduce excise duty on cement from the current Rs 408/tonne to Rs 250/tonne

• Lower royalty on cement grade limestone

• Fully meet coal requirements of the cement industry, reduce import duties on

coal/non-coking coal



• Provide incentives for construction of cement roads, continue the housing sector

sops, prioritise infrastructure projects such as ports, airports, etc.

Budget over the years

Budget 2004-05

.

• The Finance Minister has proposed to extend such a measure to other

infrastructure sectors. The IIG includes the like of IDBI, IDFC, ICICI Bank, SBI,

LIC, Bank of Baroda and Punjab National Bank. The consortium will pool their

resources to an extent of Rs 400 bn. Initially, airports, seaports and tourism will

be the target sectors of the IIG.

• The FM has also emphasized a great deal on completion of various irrigation

projects and the development of a multinational standard port in Kochi.

• Additional 2% education cess on all direct and indirect tax.

Budget 2005-06

• Customs duty on pet coke reduced from 20% to 10%

• Excise duty on clinker increased to Rs 350 per tonne from Rs 250 per tonne.

• Customs duty on cement reduced from 20% to 15% in line with the reduction in

peak customs duty rate.

• Deduction of upto Rs1 lakh on the repayment of principal amount of housing

loan.

Key Positives

Infrastructure spending - The ongoing road construction project, airport

privatization and river linking projects are fundamental long-term growth drivers for the

industry. The Golden Quadrilateral project is already in its final leg, albeit delayed.



Accelerated spending in infrastructure is likely to mute the cyclicality aspect of the

cement business.

Housing demand support - Cement demand has remained healthy also on

account of strong support from the housing sector. Considering the steep shortfall in

dwelling units in the country, prospects for the sector are promising.

Demand-supply dynamics - Unlike the last decade, the oversupply situation in

the cement sector is likely to reduce, thus bringing along with it some extent of pricing

power. So, the operating profit growth is likely to be faster than the topline growth in the

long-term.

Consolidation trigger - The industry is lot more consolidated now that it was

ever in the past. Top five players account for almost 50% of capacity. Fragmentation

reduces pricing power and consolidated operations improve efficiency apart from

providing pricing power.

Key Negatives

Slow progress of reforms - Infrastructure spending, in the recent past, has been

largely restricted to the government. The private sector has not been provided with

adequate impetus, which impacts the overall growth of the economy. Liberalizing FDI in

the public infrastructure sector could provide a big fillip. But this has been slow to come

by.

Susceptibility to coal and oil prices - Cement is a commodity business and any

company's ability to maintain margins is dependent on the pricing environment apart

from factors like access to coal and stable transportation cost. The rise in coal prices and

hike in petroleum product prices could pressurise margins.

Rise in interest rates - Interest rates are showing signs of hardening. The impact

of this on housing demand will play a crucial role on the future prospects of the sector.

The importance of the housing sector in cement demand can be gauged from the fact that



it consumes almost 75%-80% of the country's cement. If this support wanes, it could tilt

the odds against the cement manufacturers.

Highlights of Union Budget 2007-2008.

The Indian cement industry with a total capacity of about 157 m tonnes in FY06

is the second largest market after China. Although consolidation has taken place in the

Indian cement industry with the top five players controlling almost 50% of the capacity,

the balance capacity still remains pretty fragmented. Despite the fact that Indian cement

industry has clocked a production of more than 100 m tonnes for the last four consecutive

years, the per capita consumption of around 125 kgs compares poorly with the world

average of over 260 kgs and more than 450 kgs in China. This, more than anything,

underlines the tremendous scope for growth in the Indian cement industry in the long

term. Read more

Budget Measures

• Differential excise duties to be levied on cement. A retail price of less than Rs190

per bag will attract an excise duty of Rs350 per tonne while the same will be

jacked up to Rs600, if the retail price exceeds Rs190 per bag.

• Freight rates on cement remained unchanged but a discount of 40% on

incremental bag loading has been recommended.

• The customs duty on Portland cements has been reduced from 12.5% cent to nil.

• Dividend distribution tax to be hiked from 12.5% to 15%.

• A slew of incentives to be doled out for the housing sector



Budget Impact

• Lower manufacturing cost on account of reduction in freight rates will lead to

minimal increase in operating profits as approximately only 40% of cement is

transported by railways.

• The government has increased budgetary allocation for roads under NHDP.

Further, with still more incentives being spelled out for the infrastructure and

housing sector, good times continue to lie ahead for cement manufacturers.

Sector Outlook

The differential excise duty on price was a major announcement for the cement sector in

the Union Budget 2006-07. However, government's initiatives on the infrastructure and

housing sector fronts would continue to remain the key demand drivers. We believe that

the current good times will continue in the medium term. The demand for cement has

increased at the rate of 10% annually on account of buoyancy in the end user industries.

With capacity additions taking place at a slower pace, the demand supply equation is

expected to continue to remain favourable and this will lend support to current high

prices. Once new planned capacities become operational, the industry may face excess

supply situation, which in turn might impact margins.

Company Impact

The impact of hike in excise duty will not be so prominent in medium term on

account of pricing power lying with the producers. Once new capacities come onstream,

producers might be forced to absorb the impact themselves, thus negatively impacting

profitability.



Industry Wish List (Cement Manufacturers Association of India, CMAI)

• Reduce excise duty on cement from the current Rs 408/tonne to Rs 250/tonne

• Lower royalty on cement grade limestone

• In order to fully meet coal requirements of the cement industry, reduce import

duties on coal/non-coking coal

• Abolish import duty on pet coke from the current 5%

• To encourage cement utilization, provide incentives for construction of cement

roads, continue the housing sector sops, prioritise infrastructure projects such as

ports, airports, etc. 50% reduction in railway freight for cement/clinker meant for

export

• No levies /duties be charged on captive power generation as cement units have to

depend on captive power for continuous running of their plants

Key Positives

Infrastructure spending: The ongoing road construction project, airport

privatization and river linking projects are fundamental long-term growth drivers for the



cement business.

Housing demand support: Cement demand has also remained healthy on



Demand-supply dynamics: Unlike the last decade, the oversupply situation in

the cement sector has reduced, thus bringing along with it some degree of pricing power.

So, the operating profit growth has been faster than the topline growth and the scenario is

likely to continue in the near to medium term.



Consolidation trigger: The industry is a lot more consolidated now than it ever

was in the past. Top five players account for almost 50% of capacity. Fragmentation



Key Negatives

Slow progress of reforms: Infrastructure spending, in the recent past has been


adequate impetus, which impacts the overall growth of the economy. Liberalizing FDI in


by.

Spiralling input costs: Cement is a commodity business and any company's

ability to maintain margins is dependent on factors like access to coal and stable

transportation cost apart from favorable pricing environment. The rise in input costs like

coal prices and hike in petroleum product prices could pressurise margins.

Rise in interest rates: Interest rates are showing signs of hardening. The impact

of this on housing demand will play a crucial role on the future prospects of the sector.

The importance of the housing sector in cement demand can be gauged from the fact that

it consumes almost 70% of the country's cement. If this support wanes, it could tilt the

odds against the cement manufacturers.

Huge capex: Recently, demand has surpassed supply, resulting in healthy cement

prices across the country. On account of favorable pricing scenario and growing demand

for the commodity, almost all the players have lined up capacity expansion plans.

However, this scenario is likely to change once the planned capacities come onstream.

The announced capacities are expected to be operational by the end of calendar year 2008

leading to a situation of excess supply and in effect, driving down the current high

realizations



Highlights of Union Budget 2008-09

The Indian cement industry with a total capacity of about 165 m tonnes in FY07

is the second largest market after China. Although consolidation has taken place in the

industry with the top five players controlling almost 50% of the capacity, the balance

capacity still remains pretty fragmented. Despite the fact that the industry has clocked a

production of more than 100 m tonnes for the last four consecutive years, the per capita

consumption of around 125 kgs compares poorly with the world average of over 260 kgs

and more than 450 kgs in China. This, more than anything underlines the tremendous

scope for growth in the industry in the long term. Read more

Budget Measures

• From a differential excise duty levied last year, the budget this year proposed a

flat rate Rs400 per MT bulk cement or 14% ad valorem, whichever is higher and

cement clinkers excise duty at Rs450 per MT.

• A slew of incentives to be doled out for the housing sector particularly in the rural

areas. The interest rate on housing loan has been reduced.

• Allocation for NHDP enhanced to almost Rs13,000 crore in FY09. Special

attention being paid to SARDP-NE; programme devised for the North Eastern

region, apart from the ongoing completion work on Golden Quadrilateral and East

West Corridor.

• Coal regulator to be appointed.

• Parent company allowed to set-off the dividend received from its subsidiary

company against dividend distributed by itself.



Budget Impact

• The government has increased budgetary allocation for roads under NHDP. This

coupled with government's initiatives on the infrastructure and housing sector

fronts would continue to remain the key drivers.

• Increased infrastructure spending has been a key focus area over the last five

years. One would only expect the execution to be monitored closely. Thus from a

near to medium term perspective, till the time capacities come on stream, good

times continue to lie ahead for cement manufacturers.

• Appointing a coal regulator is looked upon as a positive move as it will facilitate

timely and proper allocation of coal (a key raw material) blocks to the core

sectors, cement being one of them.

Company Impact

• The excise duty on bulk cement is proposed at Rs 400 per MT bulk cement or

14% ad valorem, which ever is higher. The impact of hike in excise duty will not

be so prominent in medium term on account of pricing power lying with the

producers.

• With 14% ad valorem duty, incidence of tax increases. Further, once new

capacities come onstream, producers may not be able to pass on the hike and thus

might be forced to absorb the impact, which in turn would negatively impact

profitability. Cement major such as ACC, Ultratech and Grasim will have to bear

the brunt of change in excise duty structure.



• Excise duty on cement clinker has been raised by Rs 100 per MT to Rs 450 per

MT. The move will impact only those who purchase clinker. However, the major

cement manufacturers’, infact most of the cement manufacturers have set up a

grinding unit so they don’t have to source clinker. Hence the impact is neutral.

Key Positives

Infrastructure spending: The ongoing road construction project, airport

privatisation and river linking projects are fundamental long-term growth drivers for the



cement business.

Housing demand support: Cement demand has also remained healthy on



Demand-supply dynamics: Unlike the last decade, the oversupply situation in

the cement sector has reduced, thus bringing along with it some degree of pricing power.

So, the operating profit growth has been faster than the topline growth and the scenario is

likely to continue in till the announced capacities come on stream. The same is expected

to happen starting middle of the year 2008 onwards, the bulk of which will come

onstream from CY09 onwards.

Consolidation trigger: The industry is a lot more consolidated now than it ever

was in the past. Top five players account for almost 50% of capacity. Fragmentation





Key Negatives

Slow progress of reforms: Infrastructure spending, in the recent past has been


adequate impetus, which impacts the overall growth of the economy. Liberalising FDI in


by.

Spiralling input costs: Cement is a commodity business and any company's

ability to maintain margins is dependent on factors like access to coal and stable

transportation cost apart from favorable pricing environment. The rise in input costs like

coal prices and hike in petroleum product prices could pressurise margins.

Rise in interest rates: The impact of high interest rates on housing demand will

play a crucial role on the future prospects of the sector. The importance of the housing

sector in cement demand can be gauged from the fact that it consumes almost 70% of the

country's cement production. If this support wanes, it could tilt the odds against the

cement manufacturers.

Huge capex: Recently, cement demand has surpassed supply, resulting in higher

prices across the country. On account of favorable pricing scenario and growing demand

for the commodity, almost all the players have lined up capacity expansion plans.

However, this scenario is likely to change once the planned capacities come onstream.

The announced capacities are expected to be operational by the end of calendar year 2008

leading to a situation of excess supply and in effect, driving down the current high

realisations.



So for this analysis we have taken the fallowing scripts so that these may depict the

best result as they are the market leaders in india

Table No. 1: Selected scripts.

COMPANIES

Ultratech Cement

Prism Cement

India Cement

JK Lakshmi Cement

Mysore Cement.

Ambuja Cement



Ultratech Cement

UltraTech Cement Limited, a Grasim subsidiary has an annual capacity of 17 million

tonnes. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace

Slag Cement and Portland Pozzollana Cement.UltraTech has five integrated plants, five

grinding units and three terminals — two in India and one in Sri Lanka. These include an

integrated plant and two grinding units of the erstwhile Narmada Cement Company

Limited, a subsidiary, which has been amalgamated with the company in May

2006.UltraTech is the country's largest exporter of cement clinker.

The company exports over 2.5 million tonnes per annum, which is about 30 per cent of

the country's total exports. The export markets span countries around the Indian Ocean,

Africa, Europe and the Middle East. The cement division of L&T was demerged in 2004

after Grasim made the 30 per cent open offer for equity shares, gaining control over the

new company, christened

UltraTech. Besides the long term strategic value in the wake of rising demand for cement,

with the growth of housing and infrastructure sectors in the country, the acquisition

brings significant synergy gains to the parent company. Ready Mix Concrete is likely to

see substantial growth in the coming years. Recognising the opportunities that this

business will offer, UltraTech has commenced setting up of Ready Mix Concrete plants

at various places in the country. UltraTech's subsidiaries are: Dakshin Cements Limited

and UltraTech Ceylinco (Private) Limited.

PRODUCTS

Ultratech’s products include Ordinary Portland cement, Portland Pozzollana

cement and Portland blast furnace slag cement Management initiative with the objective

of creating complete understanding of customer problems and finding solutions jointly.

The company's Retail Value Management addresses the needs of distributors, retailers

and end consumers. The company has also launched India's first steel retail store - steel

junction - for making steel shopping a happy and memorable experience.



Prism Cement

Prism Cement Limited is an ISO 9001:2000 certified company promoted by the

Rajan Raheja Group. It operates one of the largest single kiln cement plants in the

country at Satna, Madhya Pradesh. Equipped with state-of-the-art machinery and

technical support from F.L Smidth & Co A.S Denmark, the world leaders in cement

technology, Prism Cement has successfully created a niche for itself in the Indian cement

industry.

The Company is managed by a focused Board comprising of eminent experts from

diverse fields ably supported by a professional management team. The Management team

ensures high levels of transparency, accountability and equity in all facets of the

company’s operations.

The main objective of Prism Cement is to continuously improve the quality of its

products and services in order to meet customer satisfaction.

Products

Prism Cement manufactures and markets Portland Pozzollana Cement (PPC) with the

brand name ‘Champion’ and the full range of Ordinary Portland Cement (OPC) of 33, 43

and 53 Grades.

‘Champion’ Prism’s largest selling product is a general-purpose cement popular for all

applications during house construction by individuals. Prism Cement’s OPC is in demand

for specialised cement concrete applications like high-rise buildings, bridges,

manufacturing AC sheets, pipes, poles etc.

Rich deposits of high quality limestone, highly automated and sophisticated controls

ensure that the cement manufactured by Prism meets the highest quality standards. All

the cement manufactured by Prism Cement carry the BIS Certification Mark. In fact, the

strength and other characteristics are much higher than the BIS requirements. Excellent

quality has placed Prism Cement in the premium price segment



India Cements Ltd

The India Cements Ltd was established in 1946 and the first plant was setup at

Sankarnagar in Tamilnadu in 1949. Since then it has grown in stature to seven plants

spread over Tamilnadu and Andhra Pradesh. The capacities as on March 2002 have

increased multifold to 9 million tons per annum.The Company is the largest producer of

cement in South India. The Company's plants are well spread with three in Tamilnadu

and four in Andhra Pradesh which cater to all major markets in South India and

Maharashtra.The Company is the market leader with a market share of 28% in the South.

It aims to achieve a 35% market share in the near future. The Company has access to

huge limestone resources and plans to expand capacity by de-bottlenecking and

optimisation of existing plants as well as by acquisitions. The Company has a strong

distribution network with over 10,000 stockists of whom 25% are dedicated.

The Company has well established brands- Sankar Super Power, Coromandel Super

Power and Raasi Super Power.Regional offices in all southern states and Maharasthra

offices/representative in every district

Products

Coromandel King, Sankar Sakthi and Raasi Gold are high strength cements to meet the

needs of the consumer for high strength concrete. As per BIS requirements the minimum

28 days compressive strength of 53 Grade OPC should not be less than 53 Mpa. For

certain specialised works such as prestressed concrete and certain items of precast

concrete requiring consistently high strength concrete, the use of 53 Grade OPC is found

very useful. 53 Grade OPC produces higher-Grade concrete at very economical cement

content. In concrete mix design, for concrete M-20 and above Grades a saving of 8 to

10% of cement may be achieved with the use of above mentioned 53 Grade OPC.



JK Lakshmi

In the year-1982 a remote area in the zero-industry district of Sirohi in Rajasthan.

the story of JK Lakshmi Cement Limited thus began. And today as it completes 25 years

of existence, it is a company that’s renowned for its strength, quality and performance.

One of the established names in the cement industry, JK Lakshmi Cement Ltd has state of

the art plants at Jaykaypuram, distt. Sirohi, Rajasthan having a capacity of more than 3.5

million tonnes. With use of the latest technology from M/s Blue Circle Industries and

Modern equipments from M/s Fuller International of USA, we are going from strength to

strength.

It is also the first grey cement producer of northern India to be awarded an ISO 9002

certificate and be accredited by NABL (Department of Science & Technology,

Government of India) for its Lab Quality Management systems.

Primarily a cement focused company, we have now diversified into a variety of products

including Cement (OPC & PPC), Power Mix (RMC) and Plaster of Paris to meet the

stated needs of our customers. We are also in the midst of finalising certain customer

centric services to provide a much better cement purchasing experience.

Products

Upholding the tradition of JK Organisation for maintaining the highest standards in

quality, JK Lakshmi Cement today is one of the most preferred brands in its marketing

area with a network of about 1500 dealers spread in the states of Rajasthan, Gujarat,

Delhi, Haryana, U.P., Uttaranchal, Punjab, J&K, H. P. and Mumbai. Our endeavor is

always to give our best and maintain the highest standards of customer satisfaction.

No wonder the discernible buyers prefer this cement over other brands owing to its

consistency, higher level of quality and impeccable customer service.



Mysore Cement Limited,

Mysore Cements Ltd. (MCL), a Heidelberg Cement Group Company, was promoted in

1958 by a Karnataka based industrialist in technical and financial collaboration with

Kaisers of USA as a Public Limited Company.

The first one lac ton per annum dry process cement plant with an investment of Rs.220

lacs at Ammasandra Dist. Tumkur, Karnataka was commissioned in 1962. Immediately

thereafter, an expansion was planned which doubled MCL's capacity to 2 lac TPA in

1966 at an investment of Rs.170 lacs Kaisers subsequently took control of the Company.

Late Shri.G.D. Birla became the Chairman of the Company in 1966 and under his

stewardship, the Company again doubled its capacity from 2 lac tpa to 4 lac tpa in 1968

at an investment of Rs.390 lacs MCL made steady progress and increased the capacity at

Ammasandra to 6 Lac tpa with an investment of another Rs.230 lacs in 1978.

MCL, to expand, looked for a location in the North which was then facing acute cement

shortage. Damoh in Madhya Pradesh was selected and a 5 lac tpa green-field cement

plant was set up at an investment of Rs.2950 lacs, which commenced production in 1983.

This was a state of art first 5 stage preheater based technology plant in the Country which

helped in maximising thermal efficiency. Encouraged with its success MCL also

modernised its Ammasandra unit at an investment of Rs.3600 lacs, which was

successfully completed in January, 1989, and helped not only in increasing the efficiency

but also reduced cost of production on account of savings in power and fuel consumption.

The Clinkerisation capacity at Damoh was further increased to 10 lac tpa by installing

another state of art 6 stage preheater Kiln at an investment of Rs.8000 lakhs, which was

commissioned in 1989, which helped not only in improving the operational efficiency but

also in reducing the coal consumption and enhanced productivity.

Pursuant to the Share Subscription and Share Purchase Agreement and Escrow

Agreement Cementrum I B.V.(subsidiary of Heidelberg Cement AG) acquired Equity

Shares from the S.K. Birla Group and its affiliates. In addition, further Equity Shares



were acquired under the Open Offer giving Cementrum I B.V. 54.89% shareholding in

Mysore Cements Limited.

Ambuja Cements

Ambuja Cements was set up in 1986. In the last decade the company has grown

tenfold. The total cement capacity of the company is 16 million tonnes.

Its plants are some of the most efficient in the world. With environment protection

measures that are on par with the finest in the developed world.

The company's most distinctive attribute, however, is its approach to the business.

Ambuja follows a unique homegrown philosophy of giving people the authority to set

their own targets, and the freedom to achieve their goals. This simple vision has created

an environment where there are no limits to excellence, no limits to efficiency. And has

proved to be a powerful engine of growth for the company.

As a result, Ambuja is the most profitable cement company in India, and the lowest cost

producer of cement in the world.

In essence, cement is a simple business. Unlike other industries it does not suffer

rapid technological obsolescence or shifting consumer trends. Therefore, it constantly

attracts new investments. Which results in surplus capacity. This means only the very

efficient players can prosper.

Our people recognize this. And their efforts to constantly raise efficiency has not

only raised the bar at Ambuja. But across the industry as well. Environment protection

measure that conform to the worlds best.The pollution levels at all our cement plants are

even lower than the rigorous Swiss standards of 100 mg/NM3. The air is so clean that a

rose garden flourishes right next to the main plant.

Benchmarking quality standards for the industry.

Ambuja has received the highest quality award - the National Quality Award. The only

cement company to do so. Its also the first to receive the ISO 9002 quality certification.



Reinventing cement transportation.

Almost 90% of cement in India travels by rail or road. And in bags. Our people

realized that the only way to speed up transportation was a completely different approach.

The result: a bulk transporting system via the sea. Making us the first company to

introduce the concept of bulk cement movement by sea in India.

When we started out, we approached the cement business with an open mind.

Some things struck us immediately. To compete with the older, established players who

had already written off their plant cost, it was important to have the lowest capital cost

per ton of cement. Our plants would have to be set up in record time. Our capacity

utilization would have to be above 100%. And our power consumption would have to set

a record low.

Given this line of thinking, empowerment was not just a fashionable term, it was the only

way to achieve our goals.

If costs had to be controlled, it seemed absurd for engineers to check back with their

seniors for every little decision. The time lost would be far more expensive than any

errors they would make. It was the same with controlling power consumption. Who better

than the engineers to suggest ways to cut costs. They knew the plants inside out. It made

sense to listen to them.



Ultratech Cement

Graph no. 2: Trend Movement of Ultratech before and after Budget Announcement

2006-2007.

Trend Movement of Ultratech before and after Budget Announcement 2006-2007.

450

500550

600

650

2/14/2

006

2/21/2

006

2/28/2

006

3/7/20

06

3/14/2

006

Date

Pric

e

Series1

Analysis:

The share price of Ultratech, which was Rs. 540-560 before the budget, and was

on the upward trend on the budget day, there after it started to rise steadily and showed an

upward trend. The standard deviation of 10 days coating, before budget was 8.85 but

after the announcement of budget the standard deviation was 17.80.

Interpretation:

This is due to the positive impact on the industry where in the Customs duty on

cement reduced from 15% to 12.5% in line with the reduction in peak customs duty. The

ongoing road construction project, airport privatization and river linking projects are

fundamental long-term growth drivers for the industry. Accelerated spending in

infrastructure is likely to mute the cyclicality aspect of the cement business. The Co-

efficient of correlation between pre budget and post budget is 0.039 and and a very less

of the variation in prices can be explained by the variability in pre budget and post budget

So Alternate hypothesis rejected as P value is more than 5%.



Graph no. 2: Trend Movement of Ultratech Before And After Budget Announcement

2007-2008

Trend Movement of Ultratech Before And After Budget Announcement 2007-2008

0200400600800

10001200

2/14/2

007

2/21/2

007

2/28/2

007

3/7/20

07

3/14/2

007

Date

Pric

e

Series1

Analysis The share price of Ultratech was around Rs965 before the day of budget

announcement, and it started decreasing after the budget. Later also it was in decreasing

trend where in it touched Rs760. The standard deviation of 10days pre budget was 26.10

but it is 47.98 after budget

Interpretation The share prices started declining because Differential excise duties to be levied

on cement. A retail price of less than Rs 190 per bag will attract an excise duty of Rs 350

per tonne while the same will be jacked up to Rs 600, if the retail price exceeds Rs 190

per bag. Dividend distribution tax to be hiked from 12.5% to 15%. The Co-efficient of

correlation between pre budget and post budget is 0.68 and a there is 47% variation in

prices can be explained by the variability in pre budget and post budget

So Alternate hypothesis accepted as P value is less than 5%.



]Graph no. 3: Trend Movement of Ultratech Before and After Budget Announcement

2008-2009.

Trend Movement of Ultratech Before And After Budget Announcement 2008-2009.

800820840860880900920

2/14/2

008

2/21/2

008

2/28/2

008

3/6/20

08

3/13/2

008

Date

Pric

e

Series1

Analysis

The share price of Ultratech has been very volatile before and after the budget

announced. After which there is a decreasing trend and reached to Rs840 on the 5th day of

post budget. The standard deviation was 14.22 for the 10 days before budget

interpretation and 23.91 10 days after budget.

Interpretation

The share price is very volatile and was in decreasing trend because of differential

excise duty levied last year, the budget this year proposed a flat rate Rs 400 per MT bulk

cement or 14% ad valorem, whichever is higher and cement clinkers excise duty at Rs

450 per MT. The Coal regulator to be appointed and Excise duty on cement clinker has

been raised by Rs 100 per MT to Rs 450 per MT. The Co-efficient of correlation between

pre budget and post budget is 0.45 and and a very less of the variation in prices can be

explained by the variability in pre budget and post budget

So Alternate hypothesis rejected as it is more than P value.



Prism Cement Ltd

Graph no. 4: Trend Movement of Prism Before And After Budget Announcement

2006-2007.

2006-2007 Trend Movement of Prism Before And After Budget Announcement

22232425262728

2/14/2

006

2/21/2

006

2/28/2

006

3/7/20

06

3/14/2

006

Date

Pric

e

Series1

Analysis The closing share price of Prism cement was on almost flat before the budget. The

share price started upward trend after the budget announced. The standard deviation of

Prism cement before the budget was 0.397 and after it was 0.865.

Interpretation

The rise in share price is due to the Customs duty on cement reduced from 15% to

12.5% in line with the reduction in peak customs duty. Unlike the last decade, the

oversupply situation in the cement sector is likely to reduce, thus bringing along with it

some extent of pricing power. So, the operating profit growth is likely to be faster than

the top line growth in the long-term.

The Co-efficient of correlation between pre budget and post budget is 0.27 and a

very less of the variation in prices can be explained by the variability in pre budget and

post budget




Graph no. 5: Trend Movement of Prism Cement Before And After Budget

Announcement 2007-2008.

Trend Movement of Prism Cement Before And After Budget Announcement 2007-2008.

01020304050

2/14/2

007

2/21/2

007

2/28/2

007

3/7/20

07

3/14/2

007

Date

Pric

e

Series1

Analysis

The share price before budget was almost flat wherein trading around the Rs40,

But after the budget it was slightly started going towards downward trend. There is

fluctuation in the prices each day but was on the downward trend. The standard deviation,

which was 1.78, has been increased to 1.18.

Interpretation

The prices started going to down because of the Differential excise duties to be

levied on cement. A retail price of less than Rs 190 per bag will attract an excise duty of

Rs 350 per tonne while the same will be jacked up to Rs 600, if the retail price exceeds

Rs 190 per bag and Dividend distribution tax to be hiked from 12.5% to 15%



post budget




Graph no. 6: Trend Movement of Prism Cement Before And After Budget


Trend Movement of Prism Cement Before And After Budget Announcement 2008-2009

0102030405060

2/14

/200

8

2/21

/200

8

2/28

/200

8

3/6/20

08

3/13

/200

8

Date

Price Series1

Analysis


but after the budget it was slightly started going towards downward trend. There is



.

Interpretation

This is due to negative impact an industry wherein from a differential excise duty

levied last year; the budget this year proposed a flat rate Rs 400 per MT bulk cement or

14% ad valorem, whichever is higher and cement clinkers excise duty at Rs 450 per

MT.And even with 14% ad valorem duty, incidence of tax increases. Further, once new

capacities come on stream, producers may not be able to pass on the hike and thus might

be forced to absorb the impact, which in turn would negatively impact profitability.

The Co-efficient of correlation between pre budget and post budget is 0.512 and

and a very less of the variation in prices can be explained by the variability in pre budget

and post budget




India Cement.

Graph no. 7: Trend Movement of India Cement Before And After Budget


Trend Movement of India Cement Before And After Budget Announcement 2006-2007.

0

50

100

150

200

2/14/2

006

2/21/2

006

2/28/2

006

3/7/20

06

3/14/2

006

Date

Pric

e

Series1

Analysis The price of India cement which was almost trading around Rs135 and after the

budget announcement has started increasing and went upto 165.65. After the budget

announcement latter it started showing increasing trend through out the standard

deviation was 2.78 before the budget but after the budget session the standard deviation

was increased to 6.84.

Interpretation This due to the reduction of Customs duty on cement reduced from 15% to 12.5%

in line with the reduction in peak customs duty. and even Cement demand has remained

healthy also on account of strong support from the housing sector. Considering the steep

shortfall in dwelling units in the country, prospects for the sector are promising.



post budget. So Alternate hypothesis rejected as it is more than P value.






050

100150200250

2/14/2

007

2/21/2

007

2/28/2

007

3/7/20

07

3/14/2

007

Date

Pric

e

Series1

Analysis

The price was Rs191.85 which was fallen to Rs178.7 on the day of budget

announcement there is a decrease in the prices of India Cement and later the situation

went much worser for India cement share price with few fluctuation The standard

deviation which was 6.05 before the budget has been raised to 7.44.

Interpretation The share prices came down due to Differential excise duties to be levied on

cement. A retail price of less than Rs 190 per bag will attract an excise duty of Rs 350 per

tonne while the same will be jacked up to Rs 600, if the retail price exceeds Rs 190 per

bag. And even Dividend distribution tax to be hiked from 12.5% to 15%



post budget

So Alternate hypothesis accepted as it is less than P value.






160170180190200210220230

2/14/2

008

2/21/2

008

2/28/2

008

3/6/20

08

3/13/2

008

Date

Pri

ce Series1

Analysis

The share price of India cements was on a steady price before the Budget but later

on started going on downward trend .The pre budget 10 days Standard deviation was 5.39

and there was a slight change to 8.18 in post budget session.

Interpretation

There is decline in the share price of India cement which is due to negative impact

of budget. From a differential excise duty levied last year, the budget this year proposed a

flat rate Rs 400 per MT bulk cement or 14% ad valorem, whichever is higher and cement

clinkers excise duty at Rs 450 per MT. With 14% ad valorem duty, incidence of tax

increases. Further, once new capacities come onstream, producers may not be able to pass

on the hike and thus might be forced to absorb the impact, which in turn would

negatively impact profitability

The Co-efficient of correlation between pre budget and post budget is 0.70

and and a very less of the variation in prices can be explained by the variability in pre

budget and post budget




JK Lakshmi Cements

2006-2007: Trading was stopped due to corporate Restructure.

2007-2008:

Graph no. 10: Trend Movement of JK Lakshmi Before and After Budget Announcement

2007-2008.

Trend Movement of JK Lakshmi Before and After Budget Announcement 2007-2008

020406080

100120140160

2/14/200

7

2/21/200

7

2/28/200

7

3/7/2007

3/14/200

7

Date

Price

Series1

Analysis:

The closing price of JK Lakshmi on the day before budget announced was 127.95

which is decreased on the day of budget announcement to Rs138.40 it has gradually

showed a decreased trend. The standard deviation before budget session was 5.76 and

after the announcement of Union Budget the standard deviation was 4.50.

Interpretation

The share prices of JK Lakshmi in the time of union budget announcement has

fallen mainly because of Lower manufacturing cost on account of reduction in freight

rates will lead to minimal increase in operating profits as approximately only 40% of

cement is transported by railways has an direct impact of rise in rate dividend distribution

tax from 12.5% to 15% and also rise in customs duty of iron ore export for Rs. 300 per

metric tonne. The scripts were slightly volatile compared to the pre session due to the

above mentioned factors.



post budget




Graph no. 10: Trend Movement of JK Lakshmi Before and After Budget Announcement

2008-2009.

Trend Movement of JK Lakshmi Before and After Budget Announcement 2008-2009.

020406080

100120140160

2/14

/200

8

2/21

/200

8

2/28

/200

8

3/6/20

08

3/13

/200

8

Date

Pric

e

Series1

Analysis:

The share prices of JK Lakshmi before budget announced were slightly on an

upward trend and after budget it has gradually showed a decreased trend. The standard

deviation before budget session was 1.71 and after the announcement of Union Budget

the standard deviation was 8.07.

Interpretation

The share prices of JK Lakshmi in the time of union budget announcement has

fallen mainly because of From a differential excise duty levied last year, the budget this

year proposed a flat rate Rs 400 per MT bulk cement or 14% ad valorem, whichever is

higher and cement clinkers excise duty at Rs 450 per MT and even Infrastructure

spending, in the recent past has been largely restricted to the government. The private

sector has not been provided with adequate impetus, which impacts the overall growth of

the economy. The scripts were slightly volatile compared to the pre session due to the

above mentioned factors.



post budget




Mysore Cements

Graph no. 11: Trend Movement of Mysore cements before and after Budget


Trend Movement of Mysore cements before and after Budget


01020304050

2/14

/200

6

2/21

/200

6

2/28

/200

6

3/7/20

06

3/14

/200

6

Date

Pric

e

Series1

Analysis

The price of Mysore Cements overall increased starting from the before budget

announcement and kept the same upward trend. The Standard Deviation of the pre budget

session i.e. for 10 days was 1.34 and there after it had increased to 4.13.

Interpretation

Beside few fluctuations there is an increase in the share price of Mysore Cements

which is because of the positive notions from the budget .The post budget session was

more volatile compared to pre session. The ongoing road construction project, strong

support from the housing sector making it to be profitable.



post budget






Trend Movement of Mysore cements before and after Budget

Announcement 2007-2008

0102030405060

2/14

/200

7

2/21

/200

7

2/28

/200

7

3/7/20

07

3/14

/200

7

Date

Pric

e

Series1

Analysis

The share price of Mysore Cements was trading at flat before budget but after it

started towards the downward trend. The standard deviation was 1.89 before the

announcement of the Union Budget, but after the announcement, the standard deviation

was 3.31.

Interpretation

This decrease in share price is due to the Differential excise duties to be levied on

cement. A retail price of less than Rs 190 per bag will attract an excise duty of Rs 350 per

tonne while the same will be jacked up to Rs 600, if the retail price exceeds Rs 190 per

bag and even the dividend distribution tax to be hiked from 12.5% to 15%.

The Co-efficient of correlation between pre budget and post budget is 0.67

and a very less of the variation in prices can be explained by the variability in pre budget

and post budget





Announcement 2008-2009

Trend Movement of Mysore cements before and after Budget Announcement 2008-2009

05

1015202530354045

2/14

/200

8

2/21

/200

8

2/28

/200

8

3/6/2

008

3/13

/200

8

Date

Pric

e

Series1

Analysis


But after the budget it was slightly started going towards downward trend. There is



Interpretation

This is due to negative impact an industry wherein from a differential excise duty

levied last year; the budget this year proposed a flat rate Rs 400 per MT bulk cement or

14% ad valorem, whichever is higher and cement clinkers excise duty at Rs 450 per

MT.And even with 14% ad valorem duty, incidence of tax increases. Further, once new

capacities come on stream, producers may not be able to pass on the hike and thus might

be forced to absorb the impact, which in turn would negatively impact profitability.



post budget




Ambuja Cements.

Graph no. 14: Trend Movement of Ambuja Cement Before and After Budget


Trend Movement of Ambuja Cement Before And After Budget Announcement 2008-2009.

110112114116118120122124126128

2/14/2

008

2/21/2

008

2/28/2

008

3/6/20

08

3/13/2

008

Date

Pric

e

Series1

Analysis

The price of Ambuja Cements was on rolling wherein it started to increase before

the budget and after the budget bit slipped from that run but able to be on a better

platform. The S.D. was 3.16 before budget but after the announcement of budget it had

rose to 2.08.

Interpretation

This movement in share price is due to Cement sales volumes up 11%, to 4.8

million tonnes for ambuja cement and Excise duty on cement clinker ahs been raised. The

move will impact only those who purchase clinker. However, the Ambuja cement has set

up a grinding unit so they don’t have to source clinker. Hence the impact is neutral and

all these helped it without any major weakening of its prices. The Co-efficient of

correlation between pre budget and post budget is 0.310 and 96.33 of the variation in

prices can be explained by the variability in pre budget and post budget.




FINDINGS

Ultratech Cements

06-07: It is found out that the price of Ultratech Cements was on the on steady growth

from pre budget itself and was on upward trend on the budget day, there after it started to

rise steadily and showed an upward trend in pre & post budget due to both favorable and

unfavorable factors in the budget.

07-08: The budget has had negative impact on price of Ultratech as The share prices

started declining because Differential excise duties to be levied on cement and the

dividend distribution tax also hiked

08-09: The budget has had a negative impact on price of Ultratech where in spite of

minor fluctuations there is a down ward trend. Mainly due to increase in dividend

distribution Tax.

Prism Cements

06-07 The budget has a favorable impact on price of Prism cements as pre budget it was

on a steady line and later went on upwards after the budget.

07-08: The budget of 07-08 was negative in nature has affected the price of Prism

Cements wherein the price before budget was on steady run later went on the downward

trend because of differential excise duty levied.

08-09.: The price of Prism cements has fallen down drastically mainly due to unfavorable

factors like increase in dividend distribution tax

India Cements

06-07: The budget had a very favorable impact on India cements due to the reduction of

Customs duty on cement reduced from 15% to 12.5% in line with the reduction in peak



customs duty. And even Cement demand has remained healthy also on account of strong

support from the housing sector

07-08: The unfavorable factor in the budget has led to the fall in price of India Cements

mainly due to the differential excise duties to be levied on cement distribution.

08-09: There is decline in the share price of India cement which is due to negative

impact of budget further, once new capacities come on-stream, producers may not be able

to pass on the hike and thus might be forced to absorb the impact, which in turn would

negatively impact profitability

JK Lakshmi

07-08: The share prices of JK Lakshmi has fallen mainly because of Lower

manufacturing cost on account of reduction in freight rates will lead to minimal increase

in operating profits as approximately only 40% of cement is transported by railways has

an direct impact and rise in rate dividend distribution tax from 12.5% to 15%

08-09: The share prices of JK Lakshmi before budget announced were slightly on an

upward trend and after budget it has gradually showed a decreased trend because of

differential excise duty levied last year and proposed 14% ad valorem.

Mysore Cements

06-07: The budget has had very favorable impact on price of Mysore Cements Beside

few fluctuations there is an increase in the share price of Mysore Cements which is

because of the positive notions from the budget .The post budget session was more

volatile compared to pre session. The ongoing road construction project, strong support

from the housing sector making steady run.



07-08: It is found that the budget has unfavorable factors which had led to decrease in

share price is due to the Differential excise duties to be levied on cement and hike in

dividend distribution tax

08-09: There is a decrease in share prices of Mysore cements due to negative impact an

industry wherein from a differential excise duty levied last year and ad-valorem 14%.

Ambuja Cements

08-09: The price of Ambuja Cements was on rolling wherein it started to increase before

the budget and after the budget bit slipped from that run but able to be on a better

platform. This movement in share price is due to Cement sales volumes up 11%, to 4.8

million tonnes for ambuja cement when compared to the previous year.



CONCLUSION

After analyzing the data in detail, it was found that the pre and post budget of

India is not having significant effect on the share prices so the investors should properly

analyze the various other factors that should affect the share prices and not only consider

the budget for investing decisions.

When T-test was applied, H0 was accepted for the companies in seven times and

H1 was accepted for seven times showing that there is difference in the pre budget and

post budget scenario but not that much significant

SUGGESTION

The most basic suggestion is that an investor in order to be in a safer side should

analyze the factors that affect the share prices and should take up the investing decisions

rather than depending whole on a single factor.

From the study it depicts there is a slight difference when comes to pre budget

and post budget scenario for the share prices but you cannot totally depend upon a single

factor which may in turn lead to you be in loss.



BIBLIOGRAPHY

BOOKS

- Prasanna Chandra, Security Analysis and Portfolio Management, Tata McGraw-Hill

- Charles P. Jones, Investments Analysis & Management, Wiley 3rd Edition

WEBSITES

• www.investopedia.com

• www.nseindia.com

• www.icfaipress.org

• www.google.co.in

• www.wikipedia.com

DATABASES

www.capitaline.com

www.jstor.com



ANNEXURE

Companies selected for the study 1 Ultratech cement Ltd

2 Prism cement ltd

3 India cement ltd

4 JK Lakshmi

5 Mysore cements ltd

6 Ambuja cement ltd



Ultratech Cement ltd

Date Close Price Date

Close Price Date

Close Price

14-Feb-06 551.85 14-Feb-07 962 14-Feb-08 866.6 15-Feb-06 551.05 15-Feb-07 966.65 15-Feb-08 901.65 16-Feb-06 544.95 19-Feb-07 964.35 18-Feb-08 891.05 17-Feb-06 541.75 20-Feb-07 955.5 19-Feb-08 900.05 20-Feb-06 535.15 21-Feb-07 957.7 20-Feb-08 880.85 21-Feb-06 534.6 22-Feb-07 960.8 21-Feb-08 890.2 22-Feb-06 538.75 23-Feb-07 896.4 22-Feb-08 892.05 23-Feb-06 531.15 26-Feb-07 906.95 25-Feb-08 901.65 24-Feb-06 549.4 27-Feb-07 946.9 26-Feb-08 912 27-Feb-06 558.2 28-Feb-07 888.05 27-Feb-08 914.05 28-Feb-06 561.45 1-Mar-07 869.85 28-Feb-08 891.05

1-Mar-06 585.2 2-Mar-07 882.25 29-Feb-08 904.5 2-Mar-06 575.3 5-Mar-07 810.55 3-Mar-08 868.25 3-Mar-06 579.55 6-Mar-07 819.65 4-Mar-08 886.6 6-Mar-06 592.85 7-Mar-07 793.15 5-Mar-08 875.55 7-Mar-06 603.05 8-Mar-07 816.7 7-Mar-08 846.15 8-Mar-06 583.1 9-Mar-07 779.65 10-Mar-08 850.8 9-Mar-06 602.3 12-Mar-07 736.65 11-Mar-08 902.55

10-Mar-06 619.65 13-Mar-07 759.95 12-Mar-08 893.25 13-Mar-06 624.65 14-Mar-07 752.4 13-Mar-08 843.05 14-Mar-06 617.05 14-Mar-08 849.45



Prism Cement ltd


Close Price Date

Close Price

14-Feb-06 24.2 14-Feb-07 40.8 14-Feb-08 47.4515-Feb-06 24.15 15-Feb-07 40.7 15-Feb-08 48.8516-Feb-06 25.15 19-Feb-07 40.5 18-Feb-08 49.4517-Feb-06 24.3 20-Feb-07 40.25 19-Feb-08 49.820-Feb-06 24.1 21-Feb-07 39.5 20-Feb-08 48.5521-Feb-06 24.1 22-Feb-07 37.9 21-Feb-08 48.3522-Feb-06 24.85 23-Feb-07 36.2 22-Feb-08 4823-Feb-06 24.2 26-Feb-07 37.5 25-Feb-08 49.424-Feb-06 24.75 27-Feb-07 37 26-Feb-08 49.927-Feb-06 24.9 28-Feb-07 34.9 27-Feb-08 49.7528-Feb-06 25.05 1-Mar-07 35.05 28-Feb-08 48.51-Mar-06 25.8 2-Mar-07 34.95 29-Feb-08 48.452-Mar-06 25.05 5-Mar-07 32.25 3-Mar-08 46.153-Mar-06 24.85 6-Mar-07 34.1 4-Mar-08 43.76-Mar-06 25.1 7-Mar-07 32.2 5-Mar-08 42.97-Mar-06 26.35 8-Mar-07 33 7-Mar-08 40.758-Mar-06 25.8 9-Mar-07 32.4 10-Mar-08 39.59-Mar-06 27.15 12-Mar-07 31.9 11-Mar-08 42.5

10-Mar-06 27.35 13-Mar-07 32.4 12-Mar-08 42.2513-Mar-06 26.6 14-Mar-07 32.35 13-Mar-08 38.6514-Mar-06 26 14-Mar-08 39.45



India cement ltd Date Closing price Date Closing price Date Closing price

9-Mar-06 132.2 14-Feb-07 191.15 14-Feb-08 205.3510-Mar-06 129.7 15-Feb-07 204.75 15-Feb-08 208.713-Mar-06 137.9 19-Feb-07 199.75 18-Feb-08 206.514-Mar-06 131.55 20-Feb-07 194.35 19-Feb-08 207.9514-Feb-06 134.15 21-Feb-07 196.25 20-Feb-08 203.0515-Feb-06 137.45 22-Feb-07 190.45 21-Feb-08 201.216-Feb-06 137.1 23-Feb-07 184.05 22-Feb-08 200.9517-Feb-06 135.3 26-Feb-07 189.95 25-Feb-08 209.720-Feb-06 136.35 27-Feb-07 191.85 26-Feb-08 219.1521-Feb-06 136.05 28-Feb-07 178.7 27-Feb-08 21122-Feb-06 141 1-Mar-07 173.8 28-Feb-08 214.0523-Feb-06 155.75 2-Mar-07 168.6 29-Feb-08 208.724-Feb-06 148.95 5-Mar-07 158.1 3-Mar-08 202.327-Feb-06 152.6 6-Mar-07 162.1 4-Mar-08 204.528-Feb-06 153.2 7-Mar-07 151.8 5-Mar-08 207.751-Mar-06 160.5 8-Mar-07 167.1 7-Mar-08 201.92-Mar-06 158.95 9-Mar-07 153.3 10-Mar-08 197.83-Mar-06 165.45 12-Mar-07 155.1 11-Mar-08 2076-Mar-06 168.55 13-Mar-07 153.65 12-Mar-08 202.17-Mar-06 165.6 14-Mar-07 159.3 13-Mar-08 183.558-Mar-06 166.8 14-Mar-08 189.4



JK Lakshmi

Date Close Price Date Close Price 14-Feb-07 144.9 14-Feb-08 133.815-Feb-07 151.35 15-Feb-08 136.219-Feb-07 152.1 18-Feb-08 137.420-Feb-07 147.75 19-Feb-08 138.421-Feb-07 146.9 20-Feb-08 135.0522-Feb-07 145.45 21-Feb-08 137.823-Feb-07 136.5 22-Feb-08 13626-Feb-07 138 25-Feb-08 136.3527-Feb-07 138.4 26-Feb-08 138.8528-Feb-07 127.95 27-Feb-08 139.11-Mar-07 121.25 28-Feb-08 138.92-Mar-07 118.25 29-Feb-08 136.45-Mar-07 109.5 3-Mar-08 130.76-Mar-07 112.95 4-Mar-08 125.357-Mar-07 106.55 5-Mar-08 126.48-Mar-07 115.4 7-Mar-08 117.99-Mar-07 111.05 10-Mar-08 115.85

12-Mar-07 108.3 11-Mar-08 116.613-Mar-07 113.2 12-Mar-08 116.414-Mar-07 111.7 13-Mar-08 112.1

14-Mar-08 113.8



Mysore cements ltd


Close Price Date

Close Price

14-Feb-06 26.3 14-Feb-07 52.2 14-Feb-08 39.8 15-Feb-06 25.95 15-Feb-07 53.75 15-Feb-08 40.75 16-Feb-06 27.3 19-Feb-07 51.85 18-Feb-08 41.35 17-Feb-06 27.35 20-Feb-07 50.7 19-Feb-08 41.15 20-Feb-06 27.2 21-Feb-07 52.95 20-Feb-08 40.05 21-Feb-06 26.95 22-Feb-07 52.85 21-Feb-08 40.6 22-Feb-06 29.65 23-Feb-07 49.15 22-Feb-08 39.7 23-Feb-06 28.9 26-Feb-07 51.1 25-Feb-08 40.6 24-Feb-06 28.95 27-Feb-07 51.7 26-Feb-08 41.25 27-Feb-06 29.55 28-Feb-07 47.1 27-Feb-08 41.05 28-Feb-06 30.95 1-Mar-07 47.45 28-Feb-08 40.6 1-Mar-06 31.5 2-Mar-07 49.2 29-Feb-08 39.7 2-Mar-06 29.8 5-Mar-07 45.1 3-Mar-08 38.75 3-Mar-06 29.9 6-Mar-07 45.2 4-Mar-08 37.35 6-Mar-06 30.55 7-Mar-07 43.1 5-Mar-08 35.95 7-Mar-06 33.65 8-Mar-07 43.9 7-Mar-08 33.55 8-Mar-06 35.15 9-Mar-07 39.6 10-Mar-08 32.6 9-Mar-06 38.45 12-Mar-07 40.05 11-Mar-08 34.55

10-Mar-06 40.4 13-Mar-07 41.8 12-Mar-08 33.65 13-Mar-06 38.4 14-Mar-07 39.65 13-Mar-08 31.95 14-Mar-06 38.2 14-Mar-08 32.4



Ambuja cement ltd

Date Close Price 14-Feb-08 116.4515-Feb-08 115.9518-Feb-08 115.4519-Feb-08 11620-Feb-08 116.0521-Feb-08 119.922-Feb-08 118.0525-Feb-08 122.726-Feb-08 12327-Feb-08 122.7528-Feb-08 121.229-Feb-08 120.953-Mar-08 119.14-Mar-08 119.95-Mar-08 121.057-Mar-08 118.5

10-Mar-08 120.9511-Mar-08 125.3512-Mar-08 123.813-Mar-08 120.7514-Mar-08 119.95

eq research on cement industry

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