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Hi Friends This is supa bouy I am a mentor, Friend for all Management Aspirants, Any query related to anything in Management, Do write me @ supabuoy@gmail.com. I will try to assist the best way I can. Cheers to lyf…!!! Supa Bouy
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1
A PROJECT REPORT
ON
ON CEMENT SECTOR FOR
WITH REFERENCE TO MARWADI SHARES AND FINANCE LTD.
SUBMITTED TO UNIVERSITY OF PUNE IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE
MASTERS IN BUSINESS ADMINISTRATION (M.B.A.)
Submitted By:-
MUSTAQ KADIVAR
(Batch 2006 – 08)
Guided by:- Prof. Mahesh Halale
BRACT’s VISHWAKARMA INSTITUTE OF MANAGEMENT
KODHAWA PUNE- 411014
FUNDAMENTAL ANALYSIS
2
ACKNOWLEDGEMENT
Who does not thanks for little, will not thanks for much
Talent and capabilities are of course necessary but opportunities and good guidance
are two very important things without which no person can climb those infant ladders
towards progress
At the time of making this report I express my sincere gratitude to all of the.
During the course of this project various person have rendered valuable help &
guidance to me. I am highly grateful to Mr. PRATIK TANNA (Officer Marwadi
Shares & Finance Pvt. Ltd.) who allowed me to do my summer training in their
prestigious organization.
I would like to extend my sincere thanks to Mr. RAVI TANDAN . My project guide
for his guidance and support throughout my training at MARWADI SHARES &
FINANCE Pvt. Ltd. At distribution senior manager. His clam demeanor and
willingness to teach has been a great help in successfully completing the project. My
learning has been immeasurable and working under him was a great experience. My
sincere thanks also extend to all the staffs of Marwadi Shares & Finance Pvt. Ltd. For
providing a helpful work environment and making our summer training an exciting
and memorable event.
I am very thankful to our director Dr. Sharad Joshi for giving me valuable
suggestion and to encourage me for bring out good project.
I am extremely thankful and obliged to Prof. Mahesh Halale (Internal Project Guide)
for providing streamed guidelines since inception, till the completion of the project.
I would also thank Marwadi Shares & Finance Pvt, Ltd, employees and customers
whom I met during the course of this project, for their support and for providing
valuable information which helped me, complete this project successfully.
MUSTAQ KADIVAR
3
CONTENTS
SR. NO. PARTICULAR PAGE.NO.
1. EXECUTIVE SUMMERY 4
2. OBJECTIVE AND SCOPE OF PROJECT 5
3. COMPANY PROFILE 6
4. THEORETICAL BACKGROUND 14
5. RESEARCH METHODOLOGY 24
6. DATA ANALYSIS 26
7. FINDING & RECOMMENDATIONS 45
8. CONCLUSION 47
9. BIBLIOGRAPHY 48
4
1. EXECUTIVE SUMMARY Project Title: Fundamental Analysis Company Name: Marwadi Shares & Finance limited
The training at Marwadi Shares & Finance Limited involved the day to day working
at corporate accounts departments with the senior & junior managers and research
department in the company. This project helped us to get the deeper understanding of
the process of portfolio management in Marwadi Shares & Finance Limited and how
decisions are taken to strengthen the financial position.
For this study three years’ comparisons Income Statement, Balance Sheet, Change
shares market price and taken for calculating ratio analysis. Main objective in
undertaking this project is to supplement academic knowledge with absolute practical
exposure to day to day functions of the sector.
COMPANY ANALYSIS IN CEMENTS SECTOR.
The reason behind choosing this project is that it provides hands on experience with
what goes on in the stock market on a day to day basis. The field of equity research is
very vast and one has to look into various aspects of the functioning of the company
to get to any conclusion about the possible performance of the company in the market.
Investors like warren buffet made a fortune out of investments in the stock market,
which is quiet impossible without proper research about the companies. The field of
equity research is full of challenges. It is your door to fame, fortune and, above all,
professional challenge. In a world that is shrinking in size due to information
technology and blurring boundaries between nations, the stock market (or the equities
market) is all set to grow in size. The project is done with Marwadi Shares & Finance
Ltd. a very well known company in the field of stock broking and capital market
services sector. This project gave me a chance to get valuable insights from a hoard of
vastly experienced people in this field and to get various approaches each one adopts
to evaluate various companies.
5
2. OBJECTIVE OF PROJECT:-
⇒ TO STUDY THE STOCK MARKET IN INDIA
⇒ TO UNDERSTAND THE CONCEPT AND TECHNIQUES OF
FUNDAMENTAL ANALYSIS.
⇒ TO STUDY CEMENT SECTOR AND KEY PLAYERS IN THE INDIA N
STOCK MARKET.
⇒ TO ESTIMATE PROSPECTS OF CEMENT SECTOR.
⇒ TO STUDY AND ANALYZE THE MOVEMENT OF SENSEX AND ITS
EFFECT ON CEMENT SECTOR
SCOPE:-
� THE SCOPE OF THIS PROJECT IS LIMITED TO THREE SE CTORS i.e.
CEMENT SECTOR THIS PROJECT IS CONCERNED WITH THREE
SECTORS OF COMPANIES IN THE STOCK MARKET. THE PROJE CT
DOES NOT EXTENTD ITS SCOPE TO ANY OTHER SECTOR OF
COMPANIES.
� SOURCE OF INFORMATION FOR THIS PROJECT IS ONLY
SECONDARY DATA.
THE DATA ABOUT THE CEMENT SECTORS, THE GOVERNMENT
POLIES, WITH RESPECT TO THE SECTOR, AND THE INFORMA TION
ABOUT THE COMPANIES ARE ALL GATHERED FROM SECONDARY
SOURCES AVAILABLE ON THE WEBSITE, ANNUAL REPORT, DA TA
BANK OF THE VARIOUS COMPANY, JOURNAL AND REFRENCE BO OK.
6
3. COMPANY PROFILE
2.1 MARWADI SHARES & FINANCE LIMITED
2.2 CORPORATE MISSION & VISION:
“To be a world class financial services provider by arranging all conceivable
financial services under one roof at affordable price through cost-effective delivery
systems and achieve organic growth in business by adding newer lines of business.”
HEAD OFFICE : Marwadi Financial Center
Nr. Kathiawad Gymkhana Dr. Radhakrishnana Road Rajkot – 360 001
C.E.O.: Mr. Jeyakumar A. S. DIRECTORS: Mr. Ketan Marwadi
Mr. Deven Marwadi Mr. Sandeep Marwadi
GENERAL MANAGER: Mr. Hareshbhai Maniar E-MAIL: smarwadi@hotmail.com WEB SITE: www.marwadionline.com
7
2.3 COMPANY PROVIDES FACILITIES:-
Marwadi Sales and Finance P. Ltd. started in the year 1994 when acquired
membership of National Stock Exchange of India Ltd. That was the time when Govt.
had just started liberalization. Capital market being at the base of every thing else was
among the first few sectors taken up for liberalization and alignment with global
benchmarks. NSE was therefore a result of Government’s policy to modernize stock
market and give our investors a cost - effective trading and settlement system.
Facilities and infrastructure, in all their operations, they use information technology,
which has facilitated seamless contact with customers and proactive resolution of
customer problems. This has been built up by their honest efforts. It was the first
private corporate broking house in Saurashtra-Kutch region to discern the potential of
this business by taking it retail to every doorstep in this region. Their core strength
lies in being able to network with customers who in turn provide them with vibrant
critical mass. They have built up expertise in leveraging technology for optimum
business results. It is also the first private corporate Depositary participant in this
region. This was primarily started for their broking customers. However the retail
response was so good that they had to offer it as separate service and recognize it as a
separate profit center. The company has always been driven by the desire to create
value for its customers. Their business activities include
Products & Services offers: Equity & Derivatives:
Can look for an easy and convenient way to invest in equity and take positions
in the futures and options market using their research and tools. To start trading in
Equity, all you need to do is open an online trading account. You can call them and
they will have their representative meet you. You can get help opening the account
and get guidance on how to trade in Equity.
Commodity:
You can enter the whole new world of commodity futures. Investors looking
for a fast-paced dynamic market with excellent liquidity can NOW trade in
8
Commodity Futures Market. The Commodity Exchange is a Public Market forum and
anyone can play in these vital Commodity Markets. Marwadi Commodity Broker (P)
Ltd can certainly be your point of entry to the Commodity Markets. Marwadi is a
registered trading-cum-clearing member of NCDEX and MCX.
Internet Trading:
Making the right trade at the right time! E-Broking service, which brings you
experience of online buying and selling of shares with just a click.
A detail resource like live quotes, charts, research and advice helps you take proper
decisions. Their robust risk management system and 128 bit encryption gives you a
complete security about money, shares, and transaction documents.
IPO: An active player in the primary market with waste customer base and reaching distribution network spread through out the lands. Then breathe Saurashtra peninsula. Marwadi offer bidding for all booked bills IPOs being floated through NSE network.
Marwadi offer services to customer such as advises on the minimum lot to
applied in case of refer and details and data to be furnished into IPO form.
Marwadi scripts even fill up the form for related clients.
Marwadi offer bidding services at all major location in Saurashtra and Kutch
there by enabled the interline investors to subscribes qualitative IPOs.
Mutual Funds:
Transact in a wide range of Mutual Funds. Mutual Funds are an attractive
means of saving taxes and diversifying your investment portfolio. So if you are
looking to invest in mutual funds, Marwadi offers you a host of mutual fund choices
under one roof; backed by in-depth information and research to help you invest
smartly.
PMS:
Can you analyze the prices of 1,500 shares every morning? Can you afford to
gamble only on the recommendations from your friends and the information overload
from magazines and financial dailies? And, of course, more importantly, if you
happen to be a High Net worth Individual, do you have the time to judge which
9
advice is reliable, authentic and has the least chance of failure? With Marwadi PMS,
you can be assured that your investments are in safe hands! Give your portfolio the
expert edge to smoothly steer towards wealth creation.
Cash Market Services: Marwadi also F & O market to all clients in to entire Saurashtra and Kutch
region, which they cover through, distributed cover.
Marwadi offer cash market trading services for the both retail and in station
clients at all the certain Saurashtra and Kutch where placed either a branch or
franchise or sub broker
2.4 COMPANY’S MILESTONE :
1992: Marwadi Shares And Finance Pvt. Ltd. was incorporated
1996: Became a corporate member of national Stock Exchange of India.
1998: Became a member of Saurashtra Kutch Stock Exchange.
1999: Launched Depository services of Depository Participant under National
Securities Depository Ltd.
2000: Commenced Derivative Trading after obtaining registration as a Clearing and
Trading Member in NSE
2003: (MCBPL) became a corporate member of The National Commodity and
Derivatives Exchange of India Ltd.
2004: Became a corporate member of The Stock Exchange, Mumbai.
2004: Launched Depository Services of Depository Participant under Central
Depository Services (India) Ltd.
2006: MSFPL converted to Public Limited (Marwadi Shares And Finance Limited)
10
2.5 MEMBERSHIP:- Capital Market:
National Stock Exchange of India Ltd.
Bombay Stock Exchange Ltd.
Saurashtra-Kutch Stock Exchange Ltd.
Over-the-Counter Exchange of India Ltd.
Commodities Derivatives:
National Commodity & Derivatives Exchange Ltd.
Multi Commodity Exchange of India Ltd.
Depository Operations: National Securities Depositories Ltd. (NSDL)
Central Depository Services (India) Ltd.
2.6 The Complete Investment Destination:
It provides comprehensive range of investment services. That’s advantage of
having all the services investor need under one roof.
Stock broking:
It offers complete range of pre-trade and post-trade services on the BSE and
the NSE. Whether an investor come into its conveniently environment, or issue
instruction over the phone, its highly trained team and sophisticated equipment ensure
smooth transactions and prompt services.
E-Broking and Web-Based Services: It is one of the offers online trading on site www.marwadionline.com, high
bandwidth leased lines, secure services and a customs-built user interface give you an
international standards trading experience. It also gives regular trading hours, and
access to information, analysis of information, and a range of monitoring tools.
Trading Terminals-Money pore Express:
It offer its sub-broker and approved/authorized user fully equipped trading
terminals-Money pore Express, at the location of investors choice. It is fully
functional terminal, with a variety of helpful features like market watch, order entry,
11
order confirmation, charts, and trading calls, all available in resizable windows. And
it can be operated through the keyboard using F1 for buy, F2 for sell.
Depository Participant Services: It offers DP services mean hassle-free, speedy settlements. It is depository
participants with NSDL and CDSL.
Premium Research Services: Its research team offers a package of fee-based services, including daily
technical analysis, research reports, and advice on clients existing investments. It is
research beyond desk and company-provider reports. If you have an equity portfolio,
you know that the pace of life in the world of stocks and shares is frantic. Managing
your portfolio means you have to take firm, informed decisions, and quickly!
Other Investment Products:
To help investor balance their portfolio, it offers a completer range of other
investment products, like Mutual Funds, IPO’s, SIP in mutual funds etc.
Commodity Exchange:
It is the member of MCX, a commodity exchange and has providing services
in the field of commodity trades to its clients. It deals in gold silver, and all other
commodities.
12
2.7 HIRARCHY STRUCTURE:
2.8 LIST OF COMPETITORS :
� SHERKHAN
� MOTILAL OSWAL
� ANGELS BROKING
� IL & FS
� KOTAK SECURITIES
� 5 PAISE
� SKSE(Saurashtra Kutch stock exchange in Rajkot)
2.9 SWOT ANALYSIS:
During this training at Marwadi Shares & Finance Limited we had come to know
the Strengths -Weaknesses -Opportunities -- Threats for the company and it is very
useful for a company to analyze them. Therefore, the SWOT analysis is presented
here and the suggestions for maintaining strengths and removing weaknesses are
explained.
Board of Director
General Manager
DP Front Trading Account Technology
DP Back Audit (Compliance) Software
13
SWOT ANALYSIS:
STRENGTHS:
� Well-maintained infrastructure.
� Dedicated, Intelligent and Loyal staff.
� On-line trading products.
� Lowest brokerage and other charges w.r.t. competitors.
� The best investment advice correct up to 70-90 % through dedicated research
and reports.
� Wide product range to enable the clients to choose the best alternative.
� One of the best DPs in India.
� A positive image in the existing clients.
WEAKNESSES:
� Less awareness in the market.
� Time consuming process for account opening, resolving the problems of the
customers, etc.
� Service quality is not maintained accordingly how they are promoted.
OPPORTUNITIES:
� Large primary market to sit as a book runner for the other companies just like
Kotak securities ltd. that runs the books of share holdings for many companies
� Slope of stock market towards delivery based transactions.
� Large potential market for delivery and intra-day transactions.
� Open interest of the people to enter in stock market for investing.
� Attract the customers who are dissatisfied with other brokers & DPs.
� An indirect opportunity generated by the market from its bullishness
THREATS:
� Decreasing rates of brokerage in the market.
� Increasing competition against other brokers & DPs.
� Poor marketing activities for making the company known among the customers.
� A threat of loosing clients for any kind of weakness of the company.
� Indirect threat from instable stock market, i.e., low/no profit of Religar security ltd
clients would lead them to go for other broker/DP.
14
4. THEORETICAL BACKGROUND
INTRODUCTION:
For instance, it’s been proved that a delayed monsoon in India will create the
problems of flooding in the European countries, effecting adversely economies of
both the regions.
The pulse of the market also depends upon timely exit and entry. For arriving at a
correct conclusion reasonable data is required to understand the mechanics of the
stock and the industry – vis-à-vis global and local in which the company operates.
While a practical long-term view will help reduce risks, marrying the stock on the
other hand may totally increase risks.
By going through the Industry the stock markets are the most volatile markets and are
difficult to understand as the weather. Though this does not mean that the markets
cannot be predicted but it only means that trends may change without warning, as
with weather.
The stock markets are characterized by almost all factors, again starting right from
weather and ending at the political environment. Effects of one market also causes a
spillover into the other and an external cause in one market can lead to the reaction in
another market. Reports, Financials the investor can arm himself with reasonable
information about the stocks, which are being tracked by the investor. However, for
consistent monitoring of stocks, it is imperative that the investor has limited exposure
to the stocks, which are being capable of being tracked by him – a too big a portfolio
will divert attention and ultimately harm investor interests.
In the present project an attempt is made to study the importance of fundamental
analysis for investors. For this purpose fundamental of CEMENT Sector is done.
15
CAPITAL MARKET: The term capital market indicates it is the market, which deals with capital. Capital
market is concern with the raising of money capital. It is the place where different
types of securities are bought and sold. Those who purchase or own security must be
assured of fast, fair, orderly and open system for purchases and sales at known prices,
which is provided by stock exchanges.
Organized Stock Exchange:
As per securities contract and Regulation Act, 1956
“Stock Exchange is an association, organization or Body of Individuals whether
incorporated or not and controlling the business in buying, selling and dealing in
securities.”
The stock Exchange serves as a trading center for stocks, shares and bond. The Stock
Exchange is considered to be most important constituent of capital market. They act
as ‘Weather cock’ of the economic climate of the country. The Stock Exchange serves
as a mirror of the investor’s confidence in the financial position of the economy. The
stock exchange is physical market place where the agent or broker of buyers and
sellers operate through auction process. Bombay and National stock Exchange of
India are important stock exchange in India among total 22 stock exchanges.
BSE – SENSEX: For the premier Stock Exchange that pioneered the stock broking activity in India,
125 years of experience seem to be a proud milestone. A lot has changed since 1875
when 318 persons became members of what today is called "Bombay Stock Exchange
Limited" by paying a princely amount of Re1.
Since then, the stock market in the country has passed through both good and bad
periods. The journey in the 20th century has not been an easy one. Till the decade of
eighties, there was no measure or scale that could precisely measure the various ups
and downs in the Indian stock market. Bombay Stock Exchange Limited (BSE) in
1986 came out with a Stock Index that subsequently became the barometer of the
Indian Stock Market.
16
BSE-SENSEX, first compiled in 1986 is a "Market Capitalization-Weighted" index
of 30 component stocks representing a sample of large, well established and
financially sounds companies. The base year of BSE-SENSEX is 1978-79. The index
is widely reported in both domestic and international markets through print as well as
electronic media. BSE-SENSEX is not only scientifically designed but also based on
globally accepted construction and review methodology. The "Market
Capitalization-Weighted" methodology is a widely followed index construction
methodology on which majority of global equity benchmarks are based.
The growth of equity markets in India has been phenomenal in the decade gone by.
Right from early nineties the stock market witnessed heightened activity in terms of
various bull and bear runs. More recently, the bourses in India witnessed a similar
frenzy in the 'TMT' sectors. The BSE-SENSEX captured all these happenings in the
most judicial manner. One can identify the booms and bust of the Indian equity
market through BSE-SENSEX.
The launch of BSE-SENSEX in 1986 was later followed up in January 1989 by
introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100
stocks listed at five major stock exchanges in India at Mumbai, Calcutta, Delhi,
Ahmedabad and Madras. The BSE National Index was renamed as BSE-100 Index
from October 14, 1996 and since then it is calculated taking into consideration only
the prices of stocks listed at BSE.
With a view to provide a better representation of the increased number of companies
listed, increased market capitalization and the new industry groups, the Exchange
constructed and launched on 27th May, 1994, two new index series viz., the 'BSE-
200' and the 'DOLLEX-200' indices. Since then, BSE has come a long way in attuning
itself to the varied needs of investors and market participants. In order to fulfill the
need of the market participants for still broader, segment-specific and sector-specific
indices, the Exchange has continuously been increasing the range of its indices. The
launch of BSE-200 Index in 1994 was followed by the launch of BSE-500 Index and
5 sectoral indices in 1999. In 2001, BSE launched the BSE-PSU Index, DOLLEX-30
and the country's first free-float based index - the BSE TECk Index taking the family
of BSE Indices to 13.
17
The Exchange also disseminates the Price-Earnings Ratio, the Price to Book Value
Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices.
The values of all BSE indices (except the Dollar version of indices) are updated every
15 seconds during the market hours and displayed through the BOLT system, BSE
website and news wire agencies.
The “Index Committee” of the Exchange reviews all BSE-Indices periodically. The
committee frames the broad policy guidelines for the development and maintenance
of all BSE indices. The Index Cell of the Exchange carries out the day-to-day
maintenance of all indices and conducts research on development of new indices.
FUNDAMENTALS ABOUT SHAREHOLDERS AND STOCK MARKET Investment v/s Speculation: - Investment and speculation both are next-door neighbors. Motive is determining
factor distinguish between Investment and Speculation.
Investment: - An investment is commitment of fund made in expectation of some positive rate of
return. Investments are distinguished from speculation by the time horizon of the
investor and often by risk return characteristics of investment. True investor is
interested in a good rate of return earned on a consistent basis for relatively longer
period of time. An investor generally prefers liquidity for his investment, safety of his
fund and a good return with minimum risk. An investment can be defined as the
commitment of funds to one or more assets that will be held over some future time
period. The field of investments, therefore, involves the study of the investment
process. Investment is concerned with the management of an investor’s wealth, which
is the sum of current income and the present value of all future income. Although the
field of investments encompasses many aspects, as the title of this text suggests, it can
be thought of in terms of two primary functions, analysis and management.
18
Speculation: - Speculator seeks opportunities promising very large returns rather quickly. Speculator
is less interested in consistent performance than investor and more interested in
abnormal or extremely high rate of return than moderate rate.
Speculation is increasing ingredient of the stock market all over world, to impart
liquidity and continuous trade and quotation. Presence of speculator in stock market
for securities, wider distribution of ownership and enhance capital market. In India 60
to 80% trading in stock market is of speculative nature.
Shares: - The companies Act 1956 defines Shares as “a share in the capital of a company and
includes stock except where distinction between stock and share is expressed or
implied. A share is regarded as property, which can be bought and sold like any other
property. It also consists other rights given by Articles of Association of company.
Equity or ordinary shares: - These are those shares, which do not enjoy any special rights in respect of payment of
dividend or repayment of capital. The return of capital to equity shareholders is not
guaranteed. Also when the company is wound up, capital of equity shareholders is
lastly paid, only after all other claims have been paid in full. That is why equity is also
called as “The Risk Bearing or Venture Capital.”
There are two sources of return on equity shares: -
1. Dividend: -When companies earn sufficient profit, then Board of Directors
declares for all shares.
2. Capital Gain: -Which arises from an increase in the market price of shares,
which is generally associated with growth in per share earning.
19
Benefits of Investments in Equity shares: -
1. You can earn good rate of dividend or can make better profit on market
fluctuation.
2. Bonus issue: - These are given as free gift to existing shareholders either fully
or partly paid up out of accumulated profits.
3. Existing shareholders can get “Right issue” in case of further issue of capital
by company.
4. Equity shareholders have “Right to vote” in annual general meeting and other
rights like call meeting, winding up of the company.
5. Shareholders get free copy of Annual Report in which details of all business
conducted in last year is mentioned.
6. A share is “Transferable Property”. It can be transferred or transmitted by
shareholder to any other person.
7. Tax Exemption: -As per Income Tax Act, Dividend is not taxable in the
hands of shareholders similarly Long Term Capital Gain on shares is
exempted up to March 2007.
8. Liquidity : -Because of large market for share investor can convert his
investments into liquid money easily.
FUNDAMENTAL ANALYSIS: STEP- BY –STEP:-
Step -1: politico -economic analysis:
1. Politico-economic factors affect an industry and a country.
2. Stable political environment necessary for steady, balanced growth.
3. International events impact industries and companies.
4. Countries need foreign exchange reserves to meet its commitments, pay for
imports and service foreign debts.
5. Low interest and taxation rates stimulate investment and industry.
6. Domestic savings can accelerate economic growth.
7. Development of a country is dependent on its infrastructure.
20
Economic Cycle:
1. Business or economic cycle has direct impact on industry and individual
companies. It affects investment decisions, employment, demand and
profitability.
2. Four stages of economic cycle are depression, recovery, boom, and recession.
3. Investors should determine the stage of the economic cycle before investing.
Investors should invest just before or during a boom.
Step-2: Industry Analysis:
1. Importance of industry can never be understated. State of industry will affect
company performance.
2. Investors should purchase in the first two stages and disinvest at the maturity
stage.
3. It is better to invest in evergreen industries. Results of cyclical industries are
volatile.
4. Investors should consider competition as the greater the competition
lower the profit.
5. It is safer to invest in industries not subject to government controls.
Export oriented industries currently favored by the government
Step-3: Company Analysis:
1. Final stage of fundamental analysis is company analysis.
2. Areas to be examined are the company, the results, ratios and cash flow.
Management:
1. Management is the single most important factor to consider in a company.
Upon its quality rests the future of the company.
2. In India two main types of the management - family and professional.
3. Investors must check on integrity of managers, proven competence, how high
is it rated by its peers, how did it performs at times of adversity, the
management’s depth of knowledge, its innovativeness and professionalism.
21
The Company: 1. It is important to check how company is perceived by its competition and
weather it is the market leader in its products or in its segments.
2. The investor must study the policy a company follows and its plans for
growth.
3. Labor relations are important.
Annual Report:
1. The annual report is the primary and most important source of information on
a company.
2. The investor must read between and beyond the lines of an annual report to
determine the state of the company being considered.
3. The annual report is broken into the director’s report, the auditor’s.
the financial statements and the schedules.
The Directors Report:
1. This report gives investors insights into the company.
2. It enunciates the opinions of the directors on the company, the industry and the
political situation.
3. It explains the performance of the company, its plans for diversification,
modernization and expansion. It discusses the profits earned and states the
dividend proposed.
4. The report, if read properly, can give the investor a good grasp of the working
of the company.
Auditors Report:
1. The auditor represents shareholders and reports to them on the stewardship of
the directors and whether the accounts presented do present a true and fair
view of the company.
2. Auditors will comment on any changes made in accounting principles and the
effect of the changes on the results.
3. Auditors will also comment on any action or method of accounting they do not
agree with.
22
4. Investor must read the auditor report in detail and in depth as the results can
materially change if adjustments are made based on the notes or the comments
in the auditor’s report.
Financial Statements:
1. Financial statements of a company in an annual report consist of the balance
sheet and profit and loss account. These detail the financial health and the
performance of the company.
2. The balance sheet details all the assets and liabilities a company has on a
particular date. Assets are those that the company owns such as fixed assets
(buildings, cars etc), investments and current assets (stock, debtors, and cash).
Liabilities are those that the company owes (trade creditors, loans etc) and the
shareholders investment in the company (share capital and reserves).
3. The profit and loss account details numerically the activities the company had
undertaken during the accounting period and the result of these activities
(profit or loss).
4. Contingent liabilities are also detailed. These are liabilities that may arise on
the happening of event that may never arise (guarantees, bill discounted). The
liability crystallizes on the happening of the event.
5. The profit and loss account also details the dividend given (interim) and
proposed.
Schedules and Notes to the Accounts:
1. Schedules and notes to the accounts are found after the financial statements in
an annual report
2. The schedules detail pertinent information about the items of the balance sheet
and profit and loss account.
3. The notes are even more important as they give very important as they give
very important information such as the accounting policies that the company
has, followed the contingent liabilities of the companies and the like.
4. It is imperative that the schedules notes to the accounts be read for a clearer
understanding of the company’s financial condition.
23
Ratios:
1. No investment should be made without analyzing the financial statements of
the company and comparing the company’s results with that of earlier years.
2. Ratios express mathematically the relationship between the performance
figures and / or assets / liabilities in a form that can be easily understood and
interpreted.
3. No single ratio tells the complete story.
4. Ratios can be broken into four broad categories: -
a) Profit and loss ratios
b) Balance sheet ratios
c) Balance sheet and profit and loss ratios, and
d) Financial statements to market ratios.
5. Ratios may also be grouped into categories that will enable investors
To easily determine the company’s strengths and weaknesses.
Cash Flow:
1. Cash flow statements will enable an investor to determine how are the
company’s cash earnings, how the company is being financed and how it uses
the finance received.
2. The statement begins with the cash in hand at the beginning of the period. It
then details the sources and the amount of the funds received and the manner
they were applied ending with the final cash in hand.
24
5. RESEARCH METHODOLOGY
Research is often described as an active, diligent and systematic process of inquiry
aimed at discovering, interpreting and revising facts. This intellectual investigation
produces a greater understanding of events, behaviors or theories and makes practical
applications through laws and theories. The term research is also used to describe a
collection of information about a particular subject, and is usually associated with
science and scientific method.
BASIC RESEARCH:
Basic research is also called as fundamental or pure research. Its primary objective is
the advancement of knowledge and the theoretical understanding of the relations
among the variables. It is exploratory and often driven by researcher s curiosity or
interest. It is conducted without any practical end in mind. Basic research often lays
down the foundation for further applied research.
APPLIED RESEARCH : Applied research is done to solve specific, practical questions. Its primary objective is
not to gain knowledge for its own sake. It is usually descriptive in nature. It is almost
always done on the basis of basic research.
The present study is the outcome of systematic procedures adopted by the researcher,
which includes primary data collection as well as secondary data collection. They are
explained below:
1. Primary data collection: Primary data is originally gathered specifically on project hand. One can obtain
information from dealers, salesmen, etc. It offers much greater accuracy and
reliability.
In this study, the facts and figures are raw material with which researcher works.
Thus, in primary data collection researcher come across many methods as follows:
� Observation method
� Interview method
25
2. Secondary Data Collection: Secondary data is the data already collected by someone else. This data is not
especially collected to solve present or specific problem. The information is relevant
and can be used for our purpose.
After doing the data collection in primary method, the researcher did the collection
through the secondary data. In this there are several types such as:
� General library
� Trade-Books
� Publisher survey of market
� Internet etc.
26
6. DATA ANALYSIS
CEMENT INDUSTRY-INDIA:
Cement is a key infrastructure industry. It has been decontrolled from price
and distribution on 1st March 1989 and deli censed on 25th July 1991. However, the
performance of the industry and prices of cement are monitored regularly. The
constraints faced by the industry are reviewed in the Infrastructure Coordination
Committee meetings held in the Cabinet Secretariat under the Chairmanship of
Secretary (Coordination). The Cabinet Committee on Infrastructure also reviews its
performance.
OVERVIEW :
1. Indian cement industry dates back to 1914 - first unit was set-up at Porbandar
with a capacity of 1000 tones
2. Currently India is ranked second in the world with an installed capacity of
114.2 million tones. Industry estimated at around Rs. 18,000 crores (US $
4185 mn)
3. Current per capita consumption - 85 kgs. As against world standard of 256 kgs
Cement grade limestone in the country reported to be 89 Bt. A large
proportion however is unexploitable.
4. 55 - 60% of the cost of production are government controlled
5. Cement sales primarily through a distribution channel. Bulk sales account for
< 1% of the total cement produced.
6. Ready mix concrete a relatively nascent market in India
27
CEMENT INDUSTRY STRUCTURE
Installed capacity 114.2 mn tones per annum (mntpa) Production around 87.8 mn tones
Major cement plants
• Companies: 59
• Plants: 116
• Typical installed capacity
• Per plant: Above 1.5 mntpa
• Total installed capacity: 105
mntpa
• Production 98-99: 81.6 mntpa
• Excise: Rs. 350/ tones
• All India reach through multiple
plants
• Export to Bangladesh, Nepal, Sri
Lanka, UAE and
• Mauritius
• Strong marketing network, tie-ups
with customers,
• Contractors
• Widespread distribution network.
• Sales primarily through the dealer
channel
Mini cement plants
• Nearly 300 plants
• Located in Gujarat, Rajasthan, MP
• Typical capacity < 200 tpd
• Installed capacity around 9 mn.
Tones
• Production around: 6.2 mn tones
• Excise: Rs. 200/ tones
• Mini plants were meant to tap
scattered
limestone reserves.
However most set up in AP
• Most use vertical kiln technology
• Production cost / tones – Rs. 1,000
to 1,400
• Presence of these plants limited to
the state
• Infrastructures facilities not the
best
28
USAGE:
Private housing sector is the major consumer of cement (65%) followed by the
government infrastructure sector at 15% down from 20%) < 1% of the cement
produced is sold in bulk form unlike US & Japan
CAPACITY AND PRODUCTION
1. Excess capacity exists, though some units are sick
2. 99 – 2000 production expected to reach 95 mn tunes]
3. Cement manufactured through the wet, semi-dry or dry process.
4. Dry process accounts for 90% of the installed capacity
5. Wet process popular in the past – better control over mixing of raw material
6. Dry process replacing wet process as it is space saving energy efficient and
economical
The cement industry comprises of 125 large cement plants with an installed capacity
of 148.28 million tones and more than 300 mini cement plants with an estimated
capacity of 11.10 million tones per annum. The Cement Corporation of India, which
is a Central Public Sector Undertaking, has 10 units. There are 10 large cement plants
owned by various State Governments. The total installed Capacity in the country as a
whole is 159.38 million tones. Actual cement production in 2002-03 was 116.35
million tones as against a production of 106.90 million tones in 2001-02, registering a
growth rate of 8.84%. Keeping in view the trend of growth of the industry in previous
years, a production target of 126 million tones has been fixed for the year 2003-04.
During the period April-June 2003, a production (provisional) was 31.30 million
29
tones. The industry has achieved a growth rate of 4.86 per cent during this period.
And in 2005-06 production was 135 mn tones.
PRICES:
� Price fluctuations high
� Essentially determined by demand
� Prices also vary with grades
PLAYERS:
Key Player in Market(Percentagewise)
Gujarat Ambuja, 7.60%
ACC, 11.80%
Shree Cem., 3.30%
India Cem., 6.90%
Ultra Tech Cem., 11.30%
Grasim Cem., 9.60%
Others, 49.50%
Gujarat Ambuja ACC Shree Cem. India Cem.
Ultra Tech Cem. Grasim Cem. Others
� Over 370 companies in the organized sector
� However, industry dominated by 20 companies who account for over 70%
of the market
� Individually no company accounts for over 12% of the market
Average Maximum Retail Price (Rs.Per 50 Kgs) Delhi Calcutta Chennai Bangalore Aug-06 137 146 175 170 Oct-06 139 139 175 160 Jan-07 145 150 175 170 Jun-07 145 155 180 175 Aug-07 150 165 185 180 Sep-07 160 170 185 185
30
INDUSTRY INPUTS:
� Highly capital intensive industry
� Nearly 55-60% of the inputs controlled by the government
� Facing problems due to power shortage
� Coal availability and quality affecting production
� Mini plants realization of revenue lower than large plants, survival difficult
KEY POINTS:
� Supply – There is a regional oversupply situation in the industry due to past
capacity additions by major players in the industry. The situation is likely to
improve, as there is no major Greenfield expansion in sight.
� Demand – Housing sector acts as the principal growth driver for cement.
However, in recent times, industrial and infrastructure sector have also
emerged as demand drivers.
� Barriers to Entry – High capital costs and long gestation periods. Access to
limestone reserves (principal raw material for the manufacture of cement)
also acts as a significant entry barrier.
� Bargaining Power of Suppliers – Licensing of coal and limestone reserves,
supply of power from the state grid and availability of railways for transport
are all controlled by a single entity, which is the government.
� Bargaining Power of Customers – Cement is a commodity business and
sales volumes mostly depend upon the distribution reach of the company.
However, things are changing and few brands have started commanding a
premium on account of better quality perception.
� Competition – Due to large number of players in the industry and very little
brand differentiation to speak of, the competition is intense with players
resorting to frequent price cuts in the past in order to gain market share.
However, this scenario has been absent since the last few quarters as the
demand-supply equation continues to improve.
31
FINANCIAL YEAR 06:
After a relatively dismal FY04 wherein the cement industry’s performance was
adversely affected owing to prolonged monsoons, FY05 witnessed the recovery in
demand and production, which grew by about 6.7% and 6.4% YoY respectively.
Exports during the fiscal were higher by 20% YoY. It must be noted that owing to its
locational advantage, India has Significant potential to cater to the cement
requirements of the Middle East and the South East Asian nations.
Although demand grew by only 6.4% YoY, average industry cement realisations were
higher by about 10% YoY owing to the fact that the demand-supply situation is
slowly improving. Had the demand grown at a faster rate, the improvement in price
realization would have been higher. In effect, we believe that FY05 was a positive
year for the industry.
� While cement prices, on a YoY basis, were higher by around 10% for the
industry, the rise in prices was higher in the western and the northern region
as compared to the southern market. The pricing scenario is relatively
unfavorable in the southern market given the fact that this region has an
excess capacity of close to 11 MT, the highest among all the regions in the
country.
� Although the government has reduced the import duty on cement, imports
do not pose a threat since prices of cement in India are lower than those
32
prevailing in the international markets. Besides, the Indian ports are not well
equipped for cement imports, which is a major deterrent. The government
continued to provide a fillip to the infrastructure sector in the budget. While
the budget emphasized a great deal on the completion of various irrigation
Projects, it raised the outlay for the national highway development
programmed.
PROSPECTS:
� The industry is likely to grow at around 8% in the medium to long term.
Government’s initiatives on the infrastructure and housing sector fronts are
likely to be the main drivers. With no major capacity expansion in the
pipeline, the demand supply equation is expected to continue to improve 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. We expect cement price to increase by
around 5% to 6% per annum in the medium-term owing to fundamental
reasons.
� The acquisition of Ultra Tech cement division by Grasim has changed the
landscape of the entire cement industry and in one fell swoop has catapulted
Grasim to the leadership position. This is a healthy sign for the industry, as
this would result in consolidation and would give
� Significant pricing power to the bigger players. With consolidation taking
place at the lower end also, the unviable units will be forced to shut down
thus benefiting the long-term interests of the industry.
� Despite these positives, the possibility of interest rates heading north and the
consequent impact on housing demand remains to be seen. 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 take much longer for demand-supply balance to reach parity. Also, the
hike in prices of coal and petroleum products could impact margins
33
ULTRATECH CEMENT LIMITED: BSE: 532538 NSE: ULTRACEMCO Market Price Change [28 Apr 06 to 14 Sep 07]
Bombay Stock Exchange Limited Open(Rs.) High(Rs.) Low(Rs.) Close(Rs.) Vol.(in Lacs)
28-Apr-06 838 855 752.3 776.45 2333.572 9-May-06 804 817.9 786 805.75 1221.613 30-Jun-06 701 749.45 701 747.7 1174.105 31-Jul-06 745 746.4 710 722.5 326.2646
18-Aug-06 777.6 781.4 762.05 776.65 252.9253 22-Sep-06 839 872 831.15 867.6 538.2761 10-Oct-06 871.05 894 871.05 887.5 437.5033 27-Nov-06 880 894.65 875 889.85 287.601 20-Dec-06 1058.7 1070 1005.25 1012.3 344.9227 10-Jan-07 1098.9 1098.9 1023.55 1035.25 559.0394 28-Feb-07 862.15 923 805 888.05 1139.363 20-Mar-07 790 811.45 782.1 798.05 964.8955 18-Apr-07 810 823 789.9 795.05 398.8119 9-May-07 816 825 806.1 819.7 157.3204 29-Jun-07 887.2 9916.9 880 900.4 1308.235 12-Jul-07 909 915 881.5 902.9 436.1539
21-Aug-07 870 876.95 846 854.85 1437.024 14-Sep-07 1009 1014.9 967.5 974.55 500.1613
Income Statement: Rs. In Cr. As On (Months) 31-Mar-05 31-Mar-06 31-Mar-07 Profit/Loss A/c (12 Mths) (12Mths) (12Mths) Net Sales 2681.06 3227.7 4910.83 Other Income 22.25 33.13 61.46 Total Income 2703.3 3260.83 4972.29 Expenditure -2331.4 -2711.34 -3493.02 Operating Profit 371.9 549.49 1479.27 Interest -106.88 -89.43 -86.83 Gross Profit 265.02 460.06 1392.44 Depreciation -221.78 -209.51 -226.25 Profit Before Tax 43.24 250.55 1166.19 Tax -36.45 -85.09 -383.91 Profit After Tax 2.85 165.46 782.28 Net Profit 2.85 165.46 782.28 Equity Capital 1244 1244 1244.9 Reserves 942.73 1108.19 1639.29
34
Balance Sheet: As On 31/3/05 31/3/06 31/3/07 Assets Rs. Cr. % BT Rs. Cr. % BT Rs. Cr. % BT Gross Block 4304.29 127.36 4605.38 136.85 4784.7 107.08 Net Block 2548.9 75.42 2537.21 75.39 2517.28 56.33 Capital WIP 48.18 1.43 141.03 4.19 576.95 12.91 Investment 184.79 5.47 172.39 5.12 483.45 10.82 Inventories 283.71 8.39 379.57 11.28 433.58 9.7 Receivables 0 0 0 0 0 0 Other Current Assets 314.1 9.29 135.13 4.02 457.13 10.23 Bal. Sheet Tot.(BT) 3379.68 100 3365.33 100 4468.39 100 Liabilities Rs. Cr. % BT Rs. Cr. % BT Rs. Cr. % BT Equity Share Capital 1244 36.81 1244 36.97 1244.9 27.86 Reserves 942.73 27.89 913.78 27.15 1639.29 36.69 Total Debt 171.95 5.09 172.55 5.13 183.5 4.11 Creditors 224.67 6.65 318.13 9.45 463.99 10.38 Other Current Liab./Prov. 796.33 23.56 716.87 21.3 936.71 20.96 Bal. Sheet Tot.(BT) 3379.68 100 3365.33 100 4468.39 100
Ratio Analysis: As On 31-Mar-05 31-Mar-06 31-Mar-07 Gross Profit 9.88 14.25 28.35 Operating Profit 13.87 17.02 30.12 Return On Capital Employed 2.74 11.98 34.47 Return On Net Worth 0.27 21.83 55.84 Debtor Turnover Ratio 17.5 21.98 30.81 Fixed Assets Turnover Ratio 1.05 1.27 1.95 Inventory Turnover Ratio 9.45 8.5 11.32 Total Assets Turnover Ratio 1.16 1.49 1.88 Current Ratio 0.39 0.19 0.49 Debt Equity Ratio 1.48 1.42 1.08 Interest Coverage Ratio 0.69 4.19 14.43 EPS Ratio 0.28 13.3 62.83
Share Statistics: As On 31-Mar-05 31-Mar-06 31-Mar-07 EPS (Rs) 0.28 13.30 62.83 DPS (Rs) 9.33 21.79 49.79 Book Value (Rs) 85.78 83.45 141.68
35
ULTRA TECH CEMENT LIMITED ANALYSIS:
2681.06
2.85
3227.7
165.46
4910.83
782.28
0100020003000400050006000
2005 2006 2007
Year
Sales Volume & Net Profit(Rs. in Cr.)
Net Sales Net Profi
⇒ Sales have increased in the year of 2005-06 by 20.39 % and 52.15% in 2006-
07. Continues increase in sales last three years.
⇒ Net Profits have increased in the year of 2005 – 06 by 5705.61% and
372.79% in 2006 – 07. Continues increase in net profit last two years.
36
Ratio Analysis
0%
20%
40%
60%
80%
100%
Per
cent
age
2005 2006 2007
2007 34.47 1.95 0.49 1.08 62.83
2006 11.98 1.27 0.19 1.48 13.3
2005 2.74 1.05 0.39 1.48 0.28
ROCE Fixed Current Debt EPS
⇒ Earning Per Share (EPS) – It was Rs.0.28 in 2005-04, Rs.13.30 in 2005-06
and Rs.62.83 in 2006-07. This shows increase in the value of company as the
value has of the shares have increased.
⇒ Debt ratio is reducing i.e. company may be aiming in the policy of zero debt.
⇒ Current ratio has increased in the year of 2006-07.
⇒ Fixed Assets Turnover Ratio increased in the year of 2004 – 05 by 1.05%,
In 2005 – 06 it was 1.27% and last year in 2006 – 07 was 1.95%
37
INDIA CEMENT LIMITED: BSE: 530005 NSE: INDIACEM Market Price Change [28 Apr 06 to 14 Sep 07]
Bombay Stock Exchange Limited Open(Rs.) High(Rs.) Low(Rs.) Close(Rs.) Vol.(in Lacs)
28-Apr-06 182 224.25 182 221.95 12152.62 9-May-06 210.9 225.4 205.65 220.8 24501.73 31-Jun-06 150 157.6 150 156.8 13703.16 31-Jul-06 190.5 193.5 183.55 184.05 12644.98 18-Aug-06 194 196.5 191.85 193.4 8103.591 22-Sep-06 215.6 224.9 215.6 222.9 5853.418 10-Oct-06 225 228.4 224.1 225.05 7393.17 27-Nov-06 230.5 235.8 228 234.65 7546.199 20-Dec-06 222 225.8 214 218.35 10261.82 10-Jan-07 227 232.4 225 226.2 2426.707 28-Feb-07 189.7 189.7 154.05 178.7 15401.32 20-Mar-07 164 173.8 163 172.85 12145.33 18-Apr-07 170.1 174.55 170.1 171.45 4905.716 9-May-07 182 186.1 179.5 184.9 5587.875 29-Jun-07 208 212.9 205.05 208.2 9200.159 12-Jul-07 222 225 219.1 220.25 2825.482 21-Aug-07 215 218 206.05 207.15 3074.179 14-Sep-07 273.55 280 270.3 275.45 10677.16
Income Statement
As On (Months) 31-Mar-05 31-Mar-06 31-Mar-07 Profit/Loss A/c (12 Mths) (12 Mths) (12 Mths) Gross Sales 1385.39 1829.44 2372.92 Excise Duty -223.25 -287.69 -317.86 Net Sales 1162.14 1541.75 2055.06 Other Income 16.91 7.25 10.26 Total Income 1179.05 1549 2065.32 Expenditure -1025.6 -1280.79 -1393.39 Operating Profit 153.45 268.21 671.93 Interest -133.5 -148.93 -143.03 Gross Profit 19.95 119.28 528.9 Depreciation -78.77 -78.87 -77.84 Profit Before Tax -58.82 40.41 451.06 Tax 0 -4.67 -1.78 Profit After Tax -58.82 35.74 449.28 Extra Ordinary Items 63.4 9.57 4.02 Net Profit 4.58 45.31 453.3 Equity Capital 138.59 190.77 220.37 Reserve 177.53 628.52 877.39
38
Balance Sheet:
As On 31/3/05 31/3/06 31/3/07
Assets Rs. Cr. % BT Rs. Cr. % BT Rs. Cr. % BT Gross Block 2985.27 90.6 3002.74 69.16 3856.04 80.58 Net Block 2201.85 66.83 2083.99 48 2795.83 58.43 Capital WIP 2.99 0.09 30.97 0.71 142.75 2.98 Investments 34.83 1.06 34.83 0.8 55.07 1.15 Inventories 179.9 5.46 192.97 4.44 228.07 4.77 Receivables 487.21 14.79 1500.77 34.57 824.58 17.23 Other Current Assets 387.9 11.77 498.03 11.47 738.89 15.44 Bal. Sheet Tot. (BT) 3294.68 4341.56 100 4785.19
Liabilities Rs. Cr. % BT Rs. Cr. % BT Rs. Cr. % BT Equity Share Capital 1385.9 42.06 1907.7 43.94 2203.7 46.05 Reserves 1419.55 43.09 1789.76 41.22 1948.16 40.71 Total Debt 183.38 5.57 240.58 5.54 260.21 5.44 Other Current Liabilities 305.85 9.28 403.52 9..29 373.12 7.8 Bal. Sheet Tot. (BT) 3294.68 100 4341.56 100 4785.19 100
Ratio Analysis:
As On 31-Mar-05 31-Mar-06 31-Mar-07 Gross Profit 1.72 7.74 25.74 Operating Profit 13.2 17.4 32.7 Return On Capital Employed 3.23 8.34 18.41 Return On Net Worth 12.55 4.1 36.59 Debtors Turnover Ratio 8.43 8.63 10.43 Fixed Assets Turnover Ratio 0.53 0.74 0.74 Inventory Turnover Ratio 6.46 7.99 9.01 Total Assets Turnover Ratio 0.42 0.57 0.7 Current Ratio 1.27 1.23 1.98 Debt Equity Ratio 5.39 2.81 1.55 Interest Coverage Ratio 0.53 1.27 4.28 EPS Ratio 0.33 2.37 19.68
Share Statistics: As On 31-Mar-05 31-Mar-06 31-Mar-07 EPS (Rs) 0.33 2.37 19.68 DPS (Rs) 0 0 26.04 Book Value (Rs) 24.39 45.13 62.92
39
INDIA CEMENT LIMITED ANALYSIS:
1162.14
4.58
1541.75
45.31
2055.06
453.3
0500
10001500200025003000
2005 2006 2007
Year
Sales Volume & Net Profit(Rs. in Cr.)
Net Sales Net Profit
⇒ Sales have increased in the year of 2005-06 by 32.66 % and 32.29 % in the
year of 2006-07. Continues increase in sales last three years
⇒ Net Profits have increased in the year of 2005-06 by 889.30 % and 900.44 %
in the year of 2005-06.
40
Ratio Analysis
0%
20%
40%
60%
80%
100%
Per
cent
age
2005 2006 2007
2007 18.41 0.74 1.98 1.55 19.68
2006 8.34 0.74 1.23 2.81 2.37
2005 3.23 0.53 1.27 5.39 0.33
ROCEFixed Assets
Current Ratio
Debt Equity
EPS
⇒ Earning Per Share (EPS) – It was Rs. 0.33 in 2004-05, Rs.2.37 in 2005-06 and
Rs. 19.68 in 2006-07 This shows increase in the value of company as the
value has of the shares have increased.
⇒ Debt ratio is reducing i.e. company may be aiming in the policy of zero debt
⇒ Current ratio has decreased in the year of 2005-06 as compared to the previous
year(2004-05) and next year (2007-06)
⇒ Fixed Assets Turnover Ratio increased in the year of 2004 – 05 by 0.53%,
In 2005 – 06 it was 0.74% and last year in 2006 – 07 was 0.74%
41
SHREE CEMENT LIMITED: BSE: 500387 NSE: SHREECEM Market Price Change [28 Apr 06 to 14 Sep 07]
Bombay Stock Exchange Limited Open(Rs.) High(Rs.) Low(Rs.) Close(Rs.) Vol.(in Lacs)
28-Apr-06 1043 1100 1042.3 1074.3 848.22549 9-May-06 1120 1150.2 1100 1155.2 739.3150235 30-Jun-06 770 782.35 770 777 152.145895 31-Jul-06 924 973.2 920 934.35 458.5410315
18-Aug-06 972.6 980 930 946.5 96.3303905 22-Sep-06 1035 1049.9 1015 1032.55 155.336339 10-Oct-06 1168.95 1186 1086 1097.45 1998.788831 27-Nov-06 1349.5 1349.5 1311.35 1322.3 106.9003935 20-Dec-06 1392.8 1399.9 1332 1358.85 194.1443355 10-Jan-07 1400 1489.9 1385.2 1461.4 200.2392305 28-Feb-07 1151.35 1210 1104.3 1177.4 1385.99845 20-Mar-07 990 1037 921 1023.85 282.7144726 18-Apr-07 998.8 1015 985.35 1011.55 232.9178315 9-May-07 1030 1046.5 1015 1041.1 44.6762765 29-Jun-07 1315 1315 1260.15 1279.25 123.184282 12-Jul-07 1287 1348.9 1285 1332.9 105.480628
21-Aug-07 1215 1225 1059.45 1125.4 230.4267195 14-Sep-07 1371 1379 1325 1338.85 52.706928
Income Statement:
As On (Months) 31-Mar-05 31-Mar-06 31-Mar-07 Profit/Loss A/c (12 Mths) (12 Mths) (12 Mths) Net Sales 582.07 667.69 1367.97 Other Income 4.09 3.47 21.16 Total Income 671.16 671.16 1389.14 Expenditure -412.24 -445.98 -756.26 Operating Profit 173.93 225.18 632.87 Interest -19.83 -12.83 -10.37 Gross Profit 155.09 212.35 622.5 Depreciation -122.96 -163.97 -433.05 Profit Before Tax 31.13 48.38 189.45 Tax -2.07 -8.74 -12.44 Profit After Tax 29.07 39.64 177 Extra Ordinary items 0 -21.24 0 Net Profit 29.07 18.4 177 Equity Capital 34.84 34.84 34.84 Reserves 254.65 261.46 419.71
42
Balance Sheet:
As On 31/3/05 31/3/06 31/3/07 Assets Rs. Cr. % BT Rs. Cr. % BT Rs. Cr. % BT Gross Block 924.04 127.7 1238.49 138.96 1657.34 137.55 Net Block 419.72 58 575.31 64.55 548.18 45.5 Capital WIP 152.16 21.03 97.75 10.97 328.55 27.27 Investments 0 0 0 0 50 4.15 Inventories 72.59 10.03 112.94 12.67 156.07 12.95 Receivable 23.95 3.31 18.26 2.05 15.2 1.26 Other Current Assets 55.16 7.62 86.98 9.76 106.86 8.87 Bal. Sheet Tot.(BT) 723.58 100 891.24 100 1204.86 100 Liabilities Rs. Cr. % BT Rs. Cr. % BT Rs. Cr. % BT Equity Share Capital 34.84 4.81 34.84 3.91 34.84 2.89 Reserves 254.65 35.19 261.46 29.34 468.94 38.92 Total Debt 297.12 41.06 372.73 41.82 226.27 18.78 Creditors 36.51 5.04 100.27 11.25 210.8 17.5 Other Current Assets/prov. 100.46 13.88 121.94 13.68 264.01 21.91 Bal. Sheet Tot.(BT) 723.58 100 891.24 100 1204.86 100
Ratio Analysis: As On 31-Mar-05 31-Mar-06 31-Mar-07 Gross Profit 26.64 31.80 45.50 Operating Profit 29.88 33.72 46.26 Return On Capital Employed 13.06 9.71 42.48 Return On Net Worth 18.52 9.65 19.77 Debtors Turnover Ratio 26.94 39.06 72.45 Fixed Assets Turnover Ratio 1.39 1.16 2.49 Inventory Turnover Ratio 8.02 5.91 8.76 Total Assets Turnover Ratio 1.08 1.2 1.49 Current Ratio 0.55 0.71 0.4 Debt Equity Ratio 1.2 1.14 1.74 Interest Coverage Ratio 2.46 2.92 16.66 EPS Ratio 8.34 5.28 50.81
Share Statistics: As On 31-Mar-05 31-Mar-06 31-Mar-07 EPS (Rs) 8.34 5.28 50.81 DPS (Rs) 13.93 17.42 20.9 Book Value (Rs) 83.09 85.05 130.47
43
SHREE CEMENT LIMITED ANALYSIS:
582.07
29.07
667.69
18.41367.97
177
0
500100015002000
2005 2006 2007
Year
Sales Volume & Net Profit(Rs. in Cr.)
Net Sales Net Profit
⇒ Sales have increased in the year of 2005-06 by 14.71 % and 104.88 % in the
year of 2006-07. Continues increase in sales last three years
⇒ Net Profits have decreased in the year of 2005-06 by -36.70 % and increase in
the year of 2006-07 by 861.96%.
44
Ratio Analysis
0%
20%
40%
60%
80%
100%
Per
cent
age
2005 2006 2007
2007 42.48 2.49 0.4 1.74 50.81
2006 9.17 1.16 0.71 1.14 5.28
2005 13.06 1.39 0.55 1.2 8.34
ROCEFixed Assets
Current Ratio
Debt Equity
EPS
⇒ Earning Per Share (EPS) – It was Rs. 8.34 in 2004-05, Rs.5.28 in 2005-06 and
Rs. 50.81 in 2006-07. This shows increase in the value of company as the
value has of the shares have increased.
⇒ Debt ratio is reducing i.e. company may be aiming in the policy of zero debt
⇒ Current ratio has increased continues two year in 2004-05 and 2005-06
Than next year in 2006-07 has decrease.
⇒ Fixed Assets Turnover Ratio increased in the year of 2004 – 05 by 1.39% next
year was decrease in 2005 – 06 it was 1.16% and last year in 2006 – 07 was
increase 2.49%.
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7. FINDING & RECOMMENDATIONS Based on the year of 2006 - 07
Company Name
Sales Change in%
Profit Change in %
Current Ratio EPS
Change in Share Price%
Ultra Tech Cement Ltd. 52.15 372.79 0.49 62.83 25.51
India Cement Ltd. 32.29 900.44 1.98 19.68 24.1
Shree Cement Ltd. 104.88 861.96 0.4 50.81 24.63 As from the above chart if we compare ultratech cement, India cement and shree
cement, it can be concluded that following should be priority of the company of
investor due to its various particulars discussed/shown above:
� ULTRA TECH CEMENT LTD.
� SHREE CEMENT LIMITED
� INDIA CEMENT LIMITED
Investors give their first preferance to Ultra Tech cement limited and shree cements
due their high EPS, Sales % and change in share price in% comparisons with India
cements. The companies of Ultra Tech cement and shree cement are fundamentally
strong so they are good for long term investment but India cements is good for short
term investments.
� The financial performance of the selected cement companies for the 3 years
reflected a good growth in sales and though all the market segments
sustained or bettered their performance over the previous years. Cost
overrun in a few long term projects impacted the profitability. However, the
company’s track record has always been oriented towards profitable growth
and with the strong fundamentals; the company is well placed to grow
continuously on major fronts.
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� On completion of the company analysis, I feel that Ultra Tech cement Ltd. Is
fundamentally a very strong company. I recommend Marwadi Shares &
Finance Ltd. and all its clientele to invest in this company’s shares, exit in a
medium term and derive maximum value from it.
� While carrying out the analysis, I felt that the Earning Per Share and P/E
Ratio of the company is given too much weight age of the company. What is
value of the company in market? Huge market capital etc…
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8. CONCLUSION Fundamental analysis holds that no investment decision should be without processing
and analyzing all relevant information. It strength lies in the fact the information
analyzed is real as opposed to hunches or assumptions. On the other hand, while
fundamental analysis deals with tangible fact, it does not tend to ignore the fact that
human beings do not always act rationally. Market prices do sometimes deviate from
fundamentals. Prices rise or fall due to insider trading, speculation, rumors, and a host
of other factors.
This is true to an extent but strength of fundamental analysis is that an investment
decision is arrived at after analyzing information and making logical assumptions and
deductions. Furthermore, fundamental analysis ensures that one does not recklessly
buy or sell shares- especially buy.
Study of fundamental analysis of cement sector companies, there income statements,
balance sheet and ratios. I conclude that Ultra Tech cement limited is fundamentally
very strong because of it’s paid high dividend, got more profit last three years and
sales increase continues last three years. So that It’s fundamentally strong in
comparison with Shree cement and India Cement. Hence fundamental analysis
supports and encourages safe investment.
Indian stock market is volatility (sensitive) we here compare with cement sector. Use
lot of chemical at time manufacture of cement one of them chemical is methanol.
When methanol price is increase so direct affect cements stock price, cement price
increase so it’s affect we can show in infrastructure stock price.
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8. BIBLIOGRAPHY WEBSITES: -
o www.bseindia.com o www.nseindia.com o www.moneycontrol.com o www.myiris.com o www.finance.sify.com o www.finance.yahoo.com o www.marwadionline.com
BOOKS, MAGZINES AND NEWSPAPERS: -
• Fundamental analysis for investors – Palat
• Security analysis and portfolio management-Prasanna Chandra.
• Economic times
• Business standard
• Indian capital market
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