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8/12/2019 Capital Structure Decissions Project
1/103
A PROJECT REPORT ON CAPITAL
STRUCTURE DECISIONS OF BIRLA
CEMENT AT INDIA INFOLINE Ltd.,
Project su!"tted "# $%rt"%& 'u&'"&&!e#t 'or t(e %)%rd o' t(e De*ree
o'
MASTER OF BUSINESS ADMINISTRATION+--+-/
Su!"tted 0
NAME1 MB.NARES2
2T NO1 -/-3--45++3
DEPARTMENT OF BUSINESS ADMINISTRATION
PRINCETON POST 6RADUATE COLLE6E
7A''"&"%ted to Os!%#"% U#"8ers"t09
R%!%#t(%$ur, 20der%%d.
OSMANIA UNI:ERSIT;
2;DERABAD < =5
8/12/2019 Capital Structure Decissions Project
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DECLARATION
I hereby declare that this Project Report titled A Study on
CAPITAL STRUCTURE DECESIONS OF BIRLA CEMENT AT
submitted by me to the Department of Business Management is a
bonofide work undertaken by me and it is not submitted to any other
ni!ersity or Institution for the award of any degree or
diploma"certificate or published any time before#
Name: MB.NARESH
Signatue o! t"e Student
Date:
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AC>NO?LED6EMENT
It gives me immense pleasure in adding a few heartfelt words for the people
who were part of this project in numerous ways & people who gave unending support
right from the stage the project idea was generated.
Firstly I would like to express my gratitude to our beloved principal Dr.
S"st%&% Sur%!%#0%!, for generously granting me permission to use the reuired
resources of the college! which were inevitable for my projects.
"ith deep sense of gratitude I acknowledge Mrs. M. S)%t(0Redd0#ead of
the $epartment and guide.
I would like to thank Mrs. Mee#%@s(" Faculty member of %..'.! $epartment of
usiness 'dministration! under whose valuable guidance and painstaking supervision!
I able to successfully complete my project.
8/12/2019 Capital Structure Decissions Project
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INDEX
LIST OF TABLES
$#% CONTENTSPA#E
NO.
' LIST OF TABLES
B LIST OF FI#URES
( ABSTRACT
)
C2APTERIINTRODUTION TO TOPIC
NEED FOR THE STUD$
OB%ECTI&ES OF STUD$
METHODOLO#$
SCOPE OF THE STUD$
LIMITATIONS OF THE STUD$
'()
* C2APTER II
RE:IE? OF LITERATURE
*(+*
+ C2APTER < III
COMPAN; PROFILE
+,(-+
, C2APTER < I:
DATA ANAL;SIS AND INTERPRETATION
A. DATA ANAL;SIS
B. INTERPRETATION
-()/
- C2APTER
8/12/2019 Capital Structure Decissions Project
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S.No N%!e o' t(e T%&esP%*e.
No
1$ummary of estimated cost of the project
43
2%et cash accruals of ssi franchisee.in rupees/
45
3%et present !alue of cash in flows0)12.interst
rate/46
4Internal rate of return of ssi franchisee
47
5Internal rate of return of ssi franchisee
48
*I+, -F #'/,+
S&.
No.N%!e o' t(e C(%rts
P%*e
No.
1 3ross profit and net cash accruals 45
2Present !alue of cash inflows0)12 annuity
47
3# Present !alue of cash inflows0*-2 annuity
48
4 Present !alue of cash inflows0*12 annuity 49
ABSTRACT
8/12/2019 Capital Structure Decissions Project
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Investors have always been in search of new investment options! which can
give more rate of interest or seek for the value appreciation. In this era of high stock
market volatility! people are unable to read the market properly. +o a mutual fund is
an option to invest in stock market. eople are interested in government securities!
company bonds and money market instruments! which are less volatile and give
constant returns. eing a nave in instrument arena he can3t directly invest in these
areas. +o mutual funds provide an option.
's a whole! mutual funds cater to the most of financial needs of the investors
basing on his risk taking ability. ,his project mainly attempts to understand mutual
funds! its advantages and disadvantages. It is also aimed to measure the performance
of various euity schemes for the current year.
,o understand the %utual Funds! +chemes offered by I/*' +45 *IF6and also %utual
Fund +chemes of life insurance respectively 'dvantages and $isadvantages of
%utual Funds.
,o understand the benefits of investing in mutual Funds over other forms of
investments ortfolio of %utual Funds.
It can be concluded that mutual funds are better investments option. Investing in
portfolio of mutual funds can minimutual funds. ,his has to be overcome. It can also
be said that it is suitable to people from all backgrounds and all age groups.
8/12/2019 Capital Structure Decissions Project
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C2APTER < I
INTRODUCTION
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C2APTER < IIRE:IE? OF
LITERATURE
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C2APTER < III
COMPAN; PROFILE
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8/12/2019 Capital Structure Decissions Project
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C2APTER < :
FINDIN6S
SU66ETIONS
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CAPITAL STRUCTURE
INTRODUTION dividends.
,he corporate and personal income taxes do not exist.
,he operating profit ?6I,@ is not accepted to grow. ,he total assets are given and do not change.
usiness risk is constant over time and is assumed to be
independent of its capital structure.
NEED OF T2E STUD;1
,he corporate and personal income taxes do not exist.
,he business risk is constant over time and is assumed to be
independent of its capital structure.
,he given the assumptions of perfect information and rationality.
,he business risk is eual among all firms with in similar operating
environment.
8/12/2019 Capital Structure Decissions Project
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OBJECTI:E OF T2E STUD;
stake in India Infoline Investment +ervices. ,his will help
focused expansion and capital raising in the said subsidiaries for
various lending businesses like loans against securities! +%6
financing! distribution of retail loan products! consumer finance
business and housing finance business. India Infoline
Investment +ervices rivate *imited consists of the following
stepCdown subsidiaries.
?a@ India Infoline $istribution ompany *imited ?distribution of
retail loan products@?b@ %oney line redit *imited ?consumer finance@
?c@ India Infoline #ousing Finance *imited ?housing finance@
Port'o&"o M%#%*e!e#t Ser8"ces
Pou get recessions. Pou have stock market declines. If
you donHt understand thatHs going to happen! then youHre not
readyE you wonHt do well in the markets. 5o need to worry. "e
at India Infoline would take care of all issues related to
managing your hard earned money.
-ur ortfolio %anagement +ervice is a product wherein an
euity investment portfolio is created to suit the investment
8/12/2019 Capital Structure Decissions Project
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objectives of a client. "e at India Infoline invest your resources
into stocks from different sectors! depending on your riskCreturn
profile. ,his service is particularly advisable for investors who
cannot afford to give time or donHt have that expertise for dayC
toCday management of their euity portfolio.
It is all about your money! being managed by the experts! while
you continue with your routine life. IsnHt it simple and totally
hassle free.
"hatHs more! you can keep track of your dividends Q bonus Q
rights issues with paperless tracking. +o you always know how
fast your investment is growing. It basically means assigning the
right job to the right person.
+alient Features of India Infoline %+
stake in India Infoline Investment +ervices. ,his will help
focused expansion and capital raising in the said subsidiaries for
various lending businesses like loans against securities! +%6
financing! distribution of retail loan products! consumer finance
business and housing finance business. India Infoline
Investment +ervices rivate *imited consists of the following
stepCdown subsidiaries.
?a@ India Infoline $istribution ompany *imited ?distribution ofretail loan products@
?b@ %oney line redit *imited ?consumer finance@
?c@ India Infoline #ousing Finance *imited ?housing finance@
Port'o&"o M%#%*e!e#t Ser8"ces
Pou get recessions. Pou have stock market declines. If
you donHt understand thatHs going to happen! then youHre not
readyE you wonHt do well in the markets. 5o need to worry. "e
at India Infoline would take care of all issues related to
managing your hard earned money.
-ur ortfolio %anagement +ervice is a product wherein an
euity investment portfolio is created to suit the investment
8/12/2019 Capital Structure Decissions Project
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objectives of a client. "e at India Infoline invest your resources
into stocks from different sectors! depending on your riskCreturn
profile. ,his service is particularly advisable for investors who
cannot afford to give time or donHt have that expertise for dayC
toCday management of their euity portfolio.
It is all about your money! being managed by the experts! while
you continue with your routine life. IsnHt it simple and totally
hassle free.
"hatHs more! you can keep track of your dividends Q bonus Q
rights issues with paperless tracking. +o you always know how
fast your investment is growing. It basically means assigning the
right job to the right person.
+alient Features of India Infoline %+(%# P.>.J%"# Financial
%anagement
ournalsu!%r
M%#*%&%! B"r&%
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1'e%tures
%r. Aumar %angalam irla ?)0@ is the hairman
of the 4+L ); billion multinational 'ditya irla
Droup! which operates in (7 countries across six
continents. -ver 0; per cent of its revenues flow
from its operations outside India.
%r. irla chairs the oards of the major Droup companies in India and
globally. ,he global companies include 5ovelis! olumbian hemicals!
'ditya irla %inerals! 'ditya irla hemicals! ,hai arbon lack!
'lexandria arbon lack! $omsj[ Fabriker and ,errace ay ulp %ill!
among others. In India! %r. irla chairs the oards of #indalco! Drasim!
'ditya irla 5uvo! 4ltra,ech! Idea! 'ditya irla Financial +ervices and
'ditya irla /etail.
,he Droup3s businesses are spread across a swath of industries. ,hese
include aluminium! copper! cement! textiles ?pulp! fibre! yarn! fabric andbranded apparel@! carbon black! insulators! natural resources! power!
agribusiness! telecommunications! financial services! I,QI,e+! retail and
trading.
Bus"#ess record
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%r. irla took over as hairman of the Droup in 1::0! at the age of 29!
after the untimely demise of his father. 's hairman! %r. irla has
taken the 'ditya irla Droup to an altogether higher growth trajectory.
In the 18 years that he has been at the helm of the Droup! he has
accelerated growth! built a meritocracy and enhanced stakeholder value.
In the process he has raised the Droup3s turnover from 4+L 2 billion in
1::0! to 4+L ); billion today. %r. irla has restructured the businesses
to emerge as a globalQnational leader in the sectors in which the Droup
operates. #e has made 27 acuisitions in 18 years in India and globally!
the highest by an Indian multinational in India.
,he acuisition of 5ovelis! a global metals major! in 2;;8! the second
largest acuisition ever by an Indian company! led to a newfound respect
for Indian companies and stoked a higher level of interest in the country
as well. /ecently! the acuisition of olumbian hemicals! a 4+Cbased
company and the world3s third largest carbon black manufacturer
positioned the Droup as the 5o. 1 player in this sector! given its own
si=eable carbon black operations. *ikewise! the acuisition of $omsj[
Fabriker! a leading +wedish speciality pulp manufacturer enables the
Droup3s ulp and Fibre business to further consolidate its global
position.
esides these! over the years %r. irla has acuired manufacturing
plants in anada! hina! Indonesia! plantations in *aos! and mines in
'ustralia! set up new plants in 6gypt! ,hailand and hina. 'longside! he
has expanded capacities in all of the Droup3s manufacturing units.
In India as well! he has made major acuisitions! the most notable being
the ement division of *arsen & ,oubro! Indal from 'lcan! %adura
Darments from oats Biyella and the hlor 'lkali division of Aanoria
1
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hemicals.
4nder his stewardship! the 'ditya irla Droup enjoys a position of
leadership in all the major sectors in which it operates. -ver the years!
%r. irla has built a highly successful meritocratic organisation!
anchored by an extraordinary force of 1(7!;;; employees belonging to
)2 different nationalities.
I# @e0 res$o#s"&e $os"t"o#s o# 8%r"ous re*u&%tor0 od"es
%r. irla holds several key positions on various regulatory and
professional oards. #e is a $irector on the entral oard of $irectors
of the /eserve ank of India. 6arlier! he was hairman of the 'dvisory
ommittee constituted by the %inistry of ompany 'ffairs and also
served on ,he rime %inister of India3s 'dvisory ouncil on ,rade and
Industry.
's the hairman of +ecurities and 6xchange oard of India ?+6I@
ommittee on orporate Dovernance! he authored the First /eport on
orporate Dovernance titled J/eport of the Aumar %angalam irla
ommittee on orporate DovernanceK. Its recommendations were path
breaking and became the basis of corporate governance norms.
Furthermore! as the onvener of the rime %inister3s ,ask Force on
'dministrative and *egal +implifications! the extensive
recommendations made by him in his report! have been implemented in
totality. %r. irla also served as hairman of +6I3s committee on
Insider ,rading! which formulated orporate Dovernance principles for
Indian corporates.
#e is on the 5ational ouncil of the onfederation of Indian Industry
and the 'pex 'dvisory ouncil of the 'ssociated hambers of
ommerce and Industry of India.
7:
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O# t(e o%rd o' educ%t"o#%& "#st"tut"o#s
%r. irla is deeply engaged with educational institutions. #e is the
hancellor of the renowned irla Institute of ,echnology & +cience
?I,+@! with campuses in ilani! Doa! #yderabad and $ubai.
#e is a $irector of the D. $. irla %edical /esearch & 6ducation
Foundation.
#e serves on the *ondon usiness +chool3s 'sia acific 'dvisory
oard and is a #onorary Fellow of the *ondon usiness +chool.
Acco&%des co#'erred o# Mr. B"r&%
%r. irla has won recognition for his exemplary contribution to
leadership processes and institutionQsystems building. ' selective listu!%r
M%#*%&%! B"r&%,
C(%"r!%#, T(e
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Our Vision
To e a premi!m &loal )on&lomerate
+ith a )lear "o)!s on ea)h !siness#
Our Mission
80
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To deliver s!perior val!e to o!r )!stomers'
shareholders' employees and
so)iety at lar&e#
Our Values
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^2;;1^ 2;;;^ 1:::^1::9^ 1::7^1::0^ 1::)^ 1::2^1::1^ 1::;^
1:9:^1:99^ 1:98^ 1:97^1:90^ 1:9)^1:92^ 1:89^ 1:88^1:80^ 1:80
^1:8)^ 1:8(^ 1:7:^1:78^ 1:77^1:70^ 1:72^ 1:09^1:)8^ 1:1:^
1908
,he 'ditya irla Droup! IndiaHs first
multinational corporation! traces its origins
back to the tiny village of ilani in the
/ajasthan desert! where +eth +hiv 5arayan
irla started cotton trading operations in 1908.
,oday! the DroupHs footprint extends to (7
countries and its revenues are 4+L); billion.
"e retrace the highlights of this remarkable journey! starting from the
present@ 7; 7; 7; )0 );
ook Balue ?/s@ 2:;.() 277.2( 2(1.08 177.17 12:.)1
Co#so&"d%ted Pro'"t Loss %ccou#t o' B"r&% Cor$or%t"o#M%r -+ M%r -- M%r - M%r M%r 3
-+ !t(s -+ !t(s -+ !t(s -+ !t(s -+ !t(s
Income+ales ,urnover 2!0:7.92 2!)(0.(9 2!);1.89 2!;):.;9 2!;;2.89
6xcise $uty (;:.:2 29: 2(;.;) 2)7.2( 281.:7
5et +ales 2!297.:; 2!1)7.(9 2!181.8) 1!9;2.90 1!8(;.92
-ther Income 127.27 111.:( 1;9.7( 0;.79 29.11
+tock 'djustments C);.(8 (7.;( 28.12 C10.(8 2:.08
,otal Income 6xpenditure 2!(82.8: 2!2:).() 2!(;8.): 1!9(9.17 1!899.0;
/aw %aterials 000.97 7((.() 0;7.:9 )(:.17 ()(.8)
98
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/eserves 2!109.9; 1!:8(.12 1!8;7.21 1,202.48
:1:.0(
/evaluation /eserves 8.8: 8.8: 9 8.22 9.))
5etworth 2!2)(.7; 2!;08.:2 1!8:1.22 1,287.71
1!;;).:9
+ecured *oans :22.72 88;.7) 019.2 219.4 2;7.;14nsecured *oans 2;1.81 18).88 1(2.(7 8.36 21.):
,otal $ebt 1!12).(( :)0.)1 70;.07 227.76 228.0
,otal *iabilities (!(78.:( (!;;(.(( 2!))1.89 1,515.47
1!2(2.)9
M%r -+ M%r -- M%r - M%r M%r 3
-+ !t(s -+ !t(s -+ !t(s -+ !t(s -+ !t(s
'pplication -f Funds
Dross lock 2!2;1.11 1!801.(2 1!)(;.;2 1,354.20
1!18(.))
*ess< 'ccum. $epreciation 9)9.09 880.:1 8(1.(( 694.15 782.7)
5et lock 1!(02.0( :80.)1 7:9.7: 660.05 0;;.9apital "ork in rogress 0;:.72 )99.:) (28.88 141.86 1):.11
Investments 1!;)).91 1!17:.21 1!1)1.70 552.29 7()
Inventories )18.1 (0:.7 29(.81 192.88 2;;.)0
+undry $ebtors (8.20 )).27 22.10 20 (1.81
ash and ank alance 22.)( 28.(: 21.;: 38.73 29.:)
,otal urrent 'ssets )87.89 )(1.20 (27.:0 251.61 271.1
*oans and 'dvances (;7.2: (18.79 220.07 175.73 )8(.0)
Fixed $eposits )17.1) ()(.79 (19.1: 280.99 2.)2
,otal '! *oans &'dvances
1!1::.21 1!;:2.71 98;.8708.33
8(8.;7
$effered redit ; ; ; 0 ;
urrent *iabilities 78).2) 78;.28 0(2.;7 480.15 )(0.)(
rovisions 7) 02.08 7).:0 66.9 (0(.;8
,otal * & rovisions 8(9.2) 822.9) 0:8.;1 547.05 899.0
5et urrent 'ssets )7;.:8 (7:.88 28(.7: 161.28 C01.))
%iscellaneous 6xpenses ; ; ; 0 ;
,otal 'ssets (!(78.:( (!;;(.(( 2!))1.9; 1,515.48
1!2(2.)8
ontingent *iabilities 2)(.01 (:2.0 ((1.7 237.54 :2.)7
ook Balue ?/s@ 2:;.() 277.2( 2(1.08 166.16 12:.)1
9:
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ANAL;SIS AND INTERPRETATION
+- FINANCIAL ;EARS
CAPITAL STRUCTURE ANAL;SIS
-. C%$"t%&"%t"o# I#'or!%t"o#
P%rt"cu&%rs Rs. I# &%@(s
A.
$ebt
Cost o' detWInterestQ%arket value $ebtO1;;
A$W 0);0.8)Q121)91.(9O1;;W).)0>
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/. R%t"os +-
/eturn on capital employed )9.12>
/eturn on 5et worth (:.;)>
$ebtQ6uity ratio 1.21
I#ter$ret%t"o#1
i. ,otal net value of irla ortland ements *imited was increased in the year
2;;:C1; from 9829;.;; to121)91.
ii. 6uity capital of the irla ortland ements *imited
same as the previous year. ,he value is )08).17 *akhs.
iii. $ebt 6uity ratio was recorded as1.2( in the year 2;;:C1;.
iv. 5et worth of the company (:.;) in the financial year 2;;:C1;.
v. 6arning per share of the company was /s.9(.9;.
SOURCE OF FINANCE
,he total investment on (1st%arch! 2;;9 is /s. (;27.;2 *akhs. ,he source of
investments is given below.
BIRLA CEMENT Port&%#d Ce!e#ts L"!"tedS Sources o' F"#%#ce %s /-st
Dec, +-+
:2
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,otal Investment /s. (;27.;2 *akhs
D-B6/5%65, +64/I,I6+ ;.1(
-5$+ 2:.7)
F4**P 'I$ +#'/6+ 29::.;2
'/,I'**P 'I$ +#'/6+ 7.12
+---+ FINANCIAL ;EAR
CAPITAL STRUCTURE ANAL;SIS
-. C%$"t%&"%t"o# I#'or!%t"o#
P%rt"cu&%rs Rs. I#
&%@(s
A.
$ebt.
/egarding apital +tructure 'nalysis 6uity apital was decreased from
2;;9C;: to 2;;:C1; and t;otal $ebt Balve increased from 9829:.;; to 121)91.;;
*akhs during the year.
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/egarding apital +tructure 'nalysis ,urn -ver was increased and
decreased in the year 2;;9C;: and profit after tax was increased during the year
2;;:C1;.
/egarding apital +tructure 'nalysis 6uity /atio was decreased from 1.2(
to 1.(( and current ratio decreased from 2.9to 2.(:.
From the above study can be said that the irla ortland ements *imited
financial position on apital +tructure 'nalysis is uite satisfactory.
SU66ESTIONS
,he irla ortland ements *imited is one of the private sector cement
ompany in India. It is a profitable ompany.
5owCaCdays the cement industry playing a major and important role in the
construction field! these are for construct #omes! Flyovers! Industries etc. 5owCaC
days cement industry facing of challenge like
/egional reuirements
/egional cement demands
*ack of resources
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