swot of cement industry

OVERVIEW OF CEMENT INDUSTRY

Cement Industry has grown much in last ten years. This sector has recorded a

CAGR of 8%, against the world cement industry average of 3.5% and China’s

cement industry growth rate of 7.2%. Today cement industry has become the second

largest cement producer in the world after China.

Domestic cement demand growth has surpassed the economic growth rate for the

past three years. Cement demand in the country grows at roughly 1.5 times the GDP

growth rate. The industry had a turnover of around US$ 7.8 billion in 2003-04

The key drivers for cement demand are real estate sector, infrastructure and industry

expansion projects. Among these real estate sector is the key driver of cement

demand. The demand for cement is closely related to the growth in the construction

sector. Consequently, cement demand has been posting a healthy growth rate of

around 8 per cent since 1997-98,

Cement is bulky commodity and cannot be easily transported over long distances

making it a regional market place, with the nation being divided into five regions.

Each region is characterized by its own demand-supply dynamics. Over the past few

years the cost of cement production has grown at a CAGR of 8.4%.

The government has considered spending more than US $500 billion on

infrastructure in the 11th five year plan. Apart from this railways, urban infrastructure,

ports, airports, IT sector, organized retailing, malls and multiplexes will be the main

sectors driving the demand of cement in the country.

Pre Independence

The first endeavor to manufacture cement dates back to 1889 when a Calcutta

based company endeavored to manufacture cement from Argillaceous (kankar). But

the first endeavor to manufacture cement in an organized way commenced in

1

Madras. South India Industries Limited began manufacture of Portland cement in

1904.But the effort did not succeed and the company had to halt production.

In 1914 that the first licensed cement manufacturing unit was set up by India Cement

Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons and

production of 1000 installed. The First World War gave the impetus to the cement

industry still in its initial stages. The following decade saw tremendous progress in

terms of manufacturing units, installed capacity and production. This phase is also

referred to as the Nascent Stage of Indian Cement Industry.

Post-Independence

The growth rate of cement was slow around the period after independence due to

various factors like low prices, slow growth in additional capacity and rising cost. The

government intervened several times to boost the industry, by increasing prices and

providing financial incentives.

In 1956, the price and distribution control system was set up to ensure fair prices for

both the manufacturers and consumers across the country and to reduce regional

imbalances and reach self-sufficiency.

Period of Restriction (1969-1982)

The cement industry in India was severely restrained by the government during this

period. Government hold over the industry was through both direct and indirect

means.

In 1977 the government authorized higher prices for cement manufactured by new

units or through capacity increase in existing units. But still the growth rate was

below par.

In 1979 the government introduced a three tier price system. Prices were different for

cement produced in low, medium and high cost plants. Rise in input cost, reduced

2

profit margins meant the manufacturers could not allocate funds for increase in

capacity.

Partial Control (1982-1989)

The Government of India introduced a quota system in 1982. A quota of 66.60% was

imposed for sales to Government and small real estate developers. For new units

and sick units a lower quota at 50% was affected. The remaining 33.40% was

allowed to be sold in the open market.

These changes had a desired effect on the industry. Profitability of the

manufacturers increased substantially, but the rising input cost was a cause for

concern.

Post Liberalization

In 1989 the cement industry was given complete freedom, to gear it up to meet the

challenges of free market competition due to the impending policy of liberalization. In

1991 the industry was de licensed.

Cement is one of the core industries which plays a vital role in the growth and

expansion of a nation. It is basically a mixture of compounds, consisting mainly of

silicates and aluminates of calcium, formed out of calcium oxide, silica, aluminum

oxide and iron oxide. The demand for cement depends primarily on the pace of

activities in the business, financial, real estate and infrastructure sectors of the

economy. Indian cement industry is globally competitive because the industry has

witnessed healthy trends such as cost control and continuous technology up

gradation.

3

Key Drivers of Cement Industry

Buoyant real estate market

Increase in infrastructure spending

Various governmental programs like National Rural Employment Guarantee

Low-cost housing in urban and rural areas under schemes like Jawaharlal

Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana

Consumption Growth during 2008-09

Even during the economic slowdown in 2008-09, growth in cement demand

remained at a healthy 8.4%. In the current fiscal (2009-10) cement consumption has

shot up, reporting, on an average, 12.5% growth in consumption during the first eight

months with the growth being aided by strong infrastructure spending, especially

from the govt sector. The trends in all-India consumption and the growth in

consumption in the major cement-consuming States over the last five years are

presented in below table:

Growth in Cement Demand

Figures in Million Tones

2008-09 Apr-Nov 09

Domestic Consumption 178 100

Year-on-Year Growth (%) 8.4 12.5

PRODUCT PROFILE OF INDUSTRY

4

COMPOSITION OF CEMENT

Cement is a mixture of limestone, clay, silica and gypsum. It is a fine powder which

when mixed with water sets to a hard mass as a result of hydration of the constituent

compounds. It is the most commonly used construction material.

DIFFERENT TYPES OF CEMENT

There are different varieties of cement based on different compositions according to

specific end uses namely Ordinary Portland Cement, Portland Pozolona Cement,

Portland Blast Furnace Slag Cement, White Cement and Specialized Cement. The

basic difference lies in the percentage of clinker used.

Ordinary Portland Cement (OPC)

OPC, popularly known as grey cement, has 95% clinker and 5% of gypsum

and other materials. It accounts for 70% of the total consumption. White

cement is a variation of OPC and is used for decorative purposes like

rendering of walls, flooring etc. It contains a very low proportion of iron oxide.

Portland Pozolona Cement (PPC)

PPC has 80% clinker, 15% Pozolona and 5% gypsum and accounts for 18%

of the total cement consumption. Pozolona has siliceous and aluminous

materials that do not possess cementing properties but develop these

properties in the presence of water. It is cheaply manufactured because it

uses fly ash/burnt clay/coal waste as the main ingredient. It has a lower heat

of hydration, which helps in preventing cracks where large volumes are being

cast.

Portland Blast Furnace Slag Cement (PBFSC)

5

PBFSC consists of 45% clinker, 50% blast furnace slag and 5% gypsum and

accounts for 10% of the total cement consumed. It has a heat of hydration

even lower than PPC and is generally used in construction of dams and

similar massive constructions.

White Cement

OPC: clinker using fuel oil (instead of coal) and with iron oxide content below

0.4% to ensure whiteness. Special cooling technique is used. It is used to

enhance aesthetic value, in tiles and for flooring. White cement is much more

expensive than grey cement.

Specialized Cement

Oil Well Cement: is made from clinker with special additives to prevent any

porosity. Rapid Hardening Portland cement: It is similar to OPC, except that it

is ground much finer, so that on casting, the compressible strength increases

rapidly. Water Proof Cement: OPC, with small portion of calcium stearate or

non-saponifibale oil to impart waterproofing properties.

MANUFACTURING PROCESSES

There are two general processes for producing clinker and cement in India: a dry

process and a wet process. In general, the dry process is much more energy

efficient than the wet process, and the semi wet somewhat more energy efficient

than the semi-dry process. The semi-dry process has never played an important role

in Indian cement production and accounts for less than 0.2% of total production.

Over the last decade, increased preference is being given to the energy efficient dry

process technology so as to obtain a cost advantage in a competitive market. In

1960 around 94% of the cement plants in India used wet process kilns. These kilns

have been phased out over the past 46 years and at present 96.3% of the kilns are

dry process, 3% are wet and only 1% are semidry process. Dry process kilns are 6

typically larger with capacities in India ranging from 300- 8,000 tons per day or tpd

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

and capacities in wet process kilns range from 200-750 tpd (average 425 tpd).

DRY PROCESS

7

In dry process production, limestone is crushed to a uniform and usable size,

blended with certain additives (such as iron ore and bauxite) and discharged on to a

vertical roller mill where the raw materials are ground to fine powder. An electrostatic

precipitator deducts the raw mill gases and collects the raw meal for a series of

further stages of blending. The homogenized raw meal thus extracted is pumped to

the top of a preheater by air lift pumps. In the preheaters the material is heated to

750°C. Subsequently, the raw meal undergoes a process of 8 alcinations in a

precalcinator. The remaining 8 alcinations and clinkerization reactions are completed

in the kiln where the temperature is raised to 1,450-1,500°C. The clinker formed is

cooled and conveyed to the clinker silo from where it is extracted and transported to

the cement mills for producing cement. For producing OPC, clinker and gypsum are

used and for producing PPC, clinker, gypsum and fly ash are used.

WET PROCESS

The wet process differs mainly in the preparation of raw meal where water is added

to raw materials to produce slurry. The chemical composition is corrected and the

slurry is then pumped to the kiln where evaporation of moisture, preheating,

calcinations and sintering reaction takes place. The clinker is cooled and

transported, as in the case of other plants, with suitable conveyors to cement mills

for grinding. The wet process is more energy intensive, and thus becomes expensive

when power and energy prices are high.

DEMAND DETERMINATION OF CEMENT INDUSTRY

8

India has become the second largest cement producing country in the world, the gap

between the largest producers. China and the second largest producer are quite

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

million tonnes.

It is noted that there is an interlinking relation between cement consumption and the

growth of economy. The country is on a high growth track and the focus now is on

the development of the infrastructure facilities such as, highways, ports, canals,

bridges, power-houses etc. The Committee has been given to understand that the

performance of cement industry has been commendable even during the global

economic slowdown.

China besides being the largest producer of cement in the world is also the largest

consumer of cement in the world. It manufactures and consumes around 50% of

global output. The Commission also stated that the per capita consumption in China

is around 1040 Kg, whereas in India it is 178 Kg.

NCAER observed that in India, most of the infrastructure-related cement

consumption falls under the category of departmental and non-departmental

enterprises, which constituted about 21 per cent of total cement consumption during

2001-02. Government and defence account for another 18 per cent, and housing for

about 42 per cent. As against this, according to the study, about 42 per cent of

cement in Japan goes to make buildings and another 40 per cent towards

infrastructure-related activities. Cement for making roads and bridges in Japan

accounts for 10.5 per cent as compared to an almost minuscule share in India. This

means about seven million tonnes of cement is used for making roads in Japan on

an annual basis.

According to a study of the Tariff Commission, demand for cement can be

categorized into Housing-64%, industrial-6%, Commercial & Institutional-13% and

infrastructure-17%. 2.6 The annual domestic demand of cement, the annual

9

production of cement and the export of cement during the last five years is as given

below:-

(In Million Tonnes)

It would be seen from the above table that the demand for cement has been

constantly increasing and the demand projected by the Working Group is likely to

touch 290 million tonnes by 2012-13.

INDUSTRY STRUCTURE AND NATURE OF COMPETITION

INSTALLED CAPACITY

10

Year Demand ofCement

Productionof Cement

Export ofCement

2005-06 135.56 141.81 5.98

2006-07 149.34 155.64 5.89

2007-08 164.03 168.31 3.65

2008-09 177.98 168.61 3.20

2009-10 196.12 201.00 2.27

India is the world’s second largest cement producing country after China. The

industry is characterized by a high degree of fragmentation that has created intense

competitive pressure on price realizations. Spread across the length and breadth of

the country, there are approximately 130 large cement plants owned by around 52

companies and 365 mini-cement plants with an installed capacity of around

172.08mtpa as on June 2007. Large cement plants accounted for 94% of the total

installed capacity in India.

CAPACITY CLUSTERS

Cement and its raw materials namely coal and limestone, are all bulky items that

make transportation difficult and uneconomical. Given this, cement plants are

located close to both, sources of raw materials and markets. Most of limestone

deposits in India are located in Madhya Pradesh, Rajasthan, Andhra Pradesh,

Maharashtra and Gujarat, leading to concentration of cement units in these states.

This has resulted in ‘clusters’. There are eight such clusters in the country and

account for 81% of the cement capacity. There is a trade-off between proximity to

markets and proximity to raw materials due to which some cement plants have been

set up near big markets despite lack of raw materials.

PLAYERS IN CEMENT INDUSTRY

MAJOR PLAYERS IN THE NORTH

11

TOTAL SALES for the year 2009 = Rs. 33589.02 Cr

Name of the

Company

Net Sales in

Cr. (2009)

Percentage

(%)

ACC 7,942.66 23.64659642

Ambuja Cem. 7,040.70 20.96131414

Birla Corpn. 1,790.19 5.329688095

J K Cements 1,664.42 4.955250257

JK Lakshmi Cem. 1,223.90 3.643750249

Shree Cement 2,716.46 8.08734521

UltraTech Cem. 6,385.50 19.0106767

MAJOR PLAYERS IN SOUTH

TOTAL SALES for the year 2009 = Rs. 11266.01 Cr

Name of the Net Sales Percentage 12

company in

Cr.(2009)

(%)

Andhra Cements 369.36 3.278534281

Chettinad Cement 1,137.67 10.09825129

Dalmia Cement 1,758.68 15.61049564

India Cements 3,358.34 29.8094889

Madras Cement 2,530.90 22.46491881

Rain Commodities 1,111.01 9.861610277

zuari Cements 438.72 3.894191466

DISTRIBUTION CHANNELS OF THE SECTOR

Companies invariably hire agents or transport cements to own or government

warehouses either via roadway or railways. In case of exports, cement reaches the

13

nearest port via roadways or railways and is then transferred to the importing country.

Domestically, from agents or warehouses the cement is transported to the

dealers/distributors and in turn to sub dealers who finally sell it to the end users.

There may or may not be physical ownership of goods. In the second case, dealers

and sub-dealers take order from buyers and place it to the companies, co ordinate

and monitor the timely dispatch of said orders

KEY ISSUES AND CURRENT TRENDS IN CEMENT INDUSTRY

KEY ISSUES

14

Residential segment - The main application areas are repair works, white

cement based tiles and paints, white cement to bridge the gap between tiles and

make floorings.

Commercial segment – The main application areas in this segment are the

same as in the residential segment.

Industrial segment – The main application areas in this segment are white

cement based tiles, floorings and pavers in the office/ factory premises. White

cement based paints are also used extensively by this segment for the exteriors

of the buildings. White cement based flooring is getting increasingly popular in

industrial establishments as it gives the desired aesthetics while being less

expensive than most tiles.

Public buildings – Extensive use of white cement is yet to be seen in public

buildings. The main application areas are the same as those in the industrial

segment.

The Residential and Commercial segment is envisaged to consume around 70%

of the total white cement consumption in India, followed by the Industrial and

Public buildings segment. The main drivers for each of these segments are the

need for aesthetics and lower price. The usage of white cement in pre-fabrication

works and even architectural works is low. Thus, there are no RMC producers

who supply white concrete.

Cement Types

The IS standard only specifies that the compressive strength should not be less

than 90% of that of 33 grade of OPC and the whiteness should be a minimum of

70%.

15

Prices

White cement is priced at around 3-4 times that of grey cement. Prices are in the

range of Rs 350-425 per 50 kg bag.

One of the major reasons for the higher price is attributed to the fact that the 2

main white cement players are located in Rajasthan and the transport costs to

consuming centers located all over India, are quite high.

Packaging

White cement is sold in packed bags. These include packaging sizes of 1 kg, 2

kg, 5 kg, 10 kg, 25 kg and 50 kg bags.

Reasons for lower usage in India

The relatively low popularity of white cement in India is possibly due to the

following reasons:

• The Indian market is very price conscious. In India, white cement costs 3-4

times more than grey cement. In most developed countries the price differential is

around 2-2.5 times.

• The purchasing power of the end user is significantly lower as compared to the

purchasing power of the same segment say in France, Italy or Spain.

• India has cheaper labor. In France, Italy and Spain, labour is very expensive.

Thus pre-fabricated products are more popular there. In India, since labour is

used extensively, the labor/ mason/ contractor has a strong role to play in

deciding the material to be used.

CURRENT TRENDS

The Indian cement industry is the second largest in the world. It comprises of 140

large and more than 365 mini cement plants. The industry's capacity at the

beginning of the year 2009-10 was 217.80 million tonnes. During 2008-09, total

cement consumption in India stood at 178 million tonnes while exports of cement

16

and clinker amounted to around 3 million tonnes. The industry occupies an

important place in the national economy because of its strong linkages to other

sectors such as construction, transportation, coal and power. The cement

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

taxes.

Cement production during April to January 2009-10 was 130.67 million tonnes as

compared to 115.52 million tonnes during the same period for the year 2008-09.

Dispatches were estimated at 129.97 million tonnes during April to January 2009-

10 whereas during the same period for the year 2008-09, it stood at 115.07

million tonnes.

Over the last few years, the Indian cement industry witnessed strong growth, with

demand reporting a compounded annual growth rate (CAGR) of 9.3% and

capacity addition a CAGR of 5.6% between 2004-05 and 2008-09. The main

factors prompting this growth in demand include the real estate boom during

2004-08, increased investments in infrastructure by both the private sector and

Government, and higher Governmental spending under various social programs.

With demand growth being buoyant and capacity addition limited, the industry

posted capacity utilization levels of around 93% during the last five years.

Improved prices in conjunction with volume growth led to the domestic cement

industry reporting robust growth in turnover and profitability during the period

2005-09.

LITERATURE REVIEWS

17

Literature Review shows the past data or analysis of the comparative analysis on the

financial performance done by various other people or Institute or Government.

Literature review shows the past and current trends evolving in the industry.

GHOSH’S ARTICLE (1962)

In Ghosh’s Article an attempt has been made perhaps for the first time to

examine the relationship between employment, earning and productivity of

labor in the industry.

Chandak (2008)

He establishes a strong correlation between GDP and cement industry

growth, suggesting also that the Indian cement industry has contributed 8

percent to economic development in the country. He also underscore the

point that companies must continue to emphasize on reduction of costs

through enhanced productivity and cites the example of increased use of the

sea route for transportation. Moreover he forecasts consolidation across a

fragmented industry, as companies seek economies of scale and look to

expand their foot print across regions. He also questioned the ability of the

industry to weather the global economic recession and slowdown in the Indian

housing market solely through increased infrastructure spending by the

government.

Arora and Sarkar (2008)

The committee sought to analyze the good performance of the cement

industry over the past few years for collusive behaviour. The research

discussed characteristics of an ideal cartel detection policy and structural and

behavioural cartel detection methods. Parameters that were studied included

the firm concentration index, region-wise production & consumption, capacity

utilization and cost to sales ratio amongst a few. Their analysis on these

18

metrics appeared to demonstrate that the sudden surge in the price of the

cement over the past few years was neither due to a demand-supply

mismatch nor a sudden increment in the cost of producing cement. They

contended that the cement industry likely engaged in illegitimate collusion and

they suggested that the observed decline in cement price after the

Government announcement to import cement was more evidence of a cartel

in the industry.

Katja Schumacher and Jayant Sathaye (1999)

The committee contributes to the discussion on productivity growth and the

role of technological change within the context of global environmental

change. Furthermore, different economic and policy settings and efficiencies

within the sector have been discussed. They have examined the ongoing

changes in the cement industry structure. It compares world best technologies

to Indian technologies and identifies potentials and barriers to the

achievement of efficiency improvements. A scenario analysis highlights the

energy efficiency and productivity improvements that could be achieved by

employing more efficient technologies

OBJECTIVES OF THE STUDY

19

PRIMARY OBJECTIVE OF THE STUDY

The primary objective of the study is to make a comparative study for the

financial performance of the cement industry of India, taking two cement

companies:

AMBUJA CEMENT LTD.

BINANI CEMENT LTD.

SECONDARY OBJECTIVES OF THE STUDY

• To analyze the evolution of cement industry.

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

• To assess the profitability, liquidity and other financial ratios, efficiency ratios,

leverage analysis of the firms when compared to the industry.

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

PESTEL ANALYSIS OF CEMENT INDUSTRY

20

Pestel analysis is a useful tool for understanding the big picture of operating and

takes advantage of opportunities. Pest analysis includes political, environmental,

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

industry.

POLITICAL

The price of cement is primarily controlled by the coal rates, power tariffs, railway

tariffs, freight, royalty and cess on limestone. Interestingly, government controls all of

these prices. Government is also one of the biggest consumers of the cement in the

country. Most state governments, in order to attract investments in their respective

states, offer fiscal incentives in the form of sales tax exemptions/deferrals. States like

Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption

from electric duty.

ECONOMIC

The industry is on the boom, with a lot of government infrastructure and housing

projects under construction. The export segment of the industry is expected to grow

again on account of various infrastructure projects that are being taken up all over

the world and numerous outstanding cement plants coming up in near future in the

country.

SOCIAL

The cement industry in India consists of both the organized sector and the

unorganized sector. Organized sector comprises of the well-known cement

manufacturing companies while the main players of the unorganized sector are the

regional and local cement-producing units in various states across the country.

Indian consumers prefer buying branded cement like ULTRATECH, JAYPEE

CEMENT, LAFARGE CEMENT etc. A population of more than 100 billion people, it

is expected that cement industry will create another 25 lakhs jobs in the next 4-5

years.

TECHNOLOGY

21

The Government of India plans to study and possibly acquire new technologies from

the cement industry of world. The government is discussing technology transfer in

the field of energy conservation and environment protection to help improve

efficiency of the Indian cement industry. Cement industry has made tremendous

strides in technological up-gradation and assimilation of latest technology. At present

93% of the total capacity in the industry is based on modern and environment-

friendly dry process technology.

PORTER’S FIVE FORCES MODEL FOR CEMENT INDUSTRY

22

OVERVIEW OF THE COMPANIES

23

AMBUJA CEMENT LTD.

HISTORY

Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing

companies in India. The Company, initially called Gujarat Ambuja Cements

Ltd., was founded by Narotam Sekhsaria in 1983 with a partner, Suresh

Neotia. Sekhsaria’s business acumen and leadership skills put the company

on a fast track to growth. The Company commenced cement production in

1986. The global cement major Holcim acquired management control of ACL

in 2006. Holcim today holds little over 46% equity in ACL. The Company is

currently known as Ambuja Cements Ltd.

VISION AND MISSION

• VISION STATEMENT- To be the most admired and competitive

industry in our industry

• MISSION STATEMENT- Delighted Customers

Inspired Employees

Enlightened Partners

Enriched Society

Loyal Shareholders

Healthy Environment

Executive Management Team

Mr. Onne van der Weijde, Managing Director

24

Mr. B.L. Taparia, Company Secretary & Corporate Sustainability Officer

Mr. Sanjeev Churiwala, CFO

Mr. Ghassan Broummana, Head - Technical Support Services

Mr. S.N. Toshniwal - Business Head (East)

Mr. J.C. Toshniwal - Business Head (North)

Mr. Ajay Kapur - Business Head (West & South)

Ms. Meenakshi Narain - Joint President (HR)

Mr. Shakti Arora, Head - Central Purchase Officer

Registered Offices

• Corporate Office

• Elegant Business Park, MIDC Cross Road 'B', Off Andheri-Kurla

Road. Andheri (E), Mumbai 400059

• Tel: 022 – 40667000

• West and South

Po. Ambuja Nagar, Tal. Kodinar, Dist. Junagadh, Gujarat - 362715

Tel : 02795 - 237000 / 220214 / 221491

Behind Q1 Berth, Mattancherry Wharf, Willingdon Island, Cochin-

682003

Tel : 0484 - 2118510 / 6453237

• North

Malout Road, Near Guru Nanak Dev Thermal Plant, Bathinda -

151002, Punjab Tel : 0164 - 2273487 / 2273850 / 51

• East

PO: Rawan, Tehsil: Baloda Bazar, Dist. Raipur 493 331,

Chhattisgarh. Tel : 07727 - 220010 – 15

25

PRODUCTION AND MANUFACTURING

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

It quickly became clear to us that if we were to run an iconic company, we needed to

keep power costs to the minimum. So we focused our efforts on improving efficiency

at our kilns to get more output for less power.

Next we set up a captive power plant at a substantially lower cost than the national

grid. We sourced higher quality coal from South Africa and better furnace oil from the

Middle East.

At every step we found that new and innovative solutions could be found if we kept

an open mind.

Our sea-borne bulk cement transportation facilities have meanwhile brought many

coastal markets (domestic as well as export markets) within easy reach. This has

been a major factor in making Ambuja Cement India's largest exporter of cement -

consistently for the last fifteen years.

Cement Plants

Plant Capacity (MN tons)

26

Gujarat 6.70Himachal Pradesh/ Punjab 6.10Rajasthan 2.80Chhattisgarh/ West Bengal 4.30Maharashtra 3.60Uttar Pradesh 1.50

Port Terminal

Muldwarka, Gujarat: All weather port, 8 kms from our Ambujanagar plant.

Handles ships with 40,000 DWT. Is also equipped to export clinker and cement

and import coal and furnace oil.

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

packaging units.

Bulk Cement Terminal

Surat: Bulk Cement Terminal with a storage capacity of 15,000 tonnes has bulk

cement unloading facility. A Grinding unit has also become fully operational at this

location.

Panvel: Strategically located near India's biggest cement market, has a storage

capacity of 17,500 tonnes and a bulk cement unloading facility.

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

BINANI CEMENT LTD.

27

HISTORY

Binani Cement Limited is the flagship subsidiary of Binani Industries Limited

(BIL), representing the Braj Binani Group. The cement business started

operations in 1997, in Sirohi District, Rajasthan with a 1.65 MTPA integrated

cement facility and a 25 MW captive power plant with technological support

from F. L. Smidth, Denmark and Larsen & Toubro Ltd.

The capacity was raised to 2.25 MTPA in 2005 through advanced in-house

R&D and de-bottlenecking and the Company was also certified to ISO 9001,

ISO 14001 and OHSAS 18001 within a short span from commencement of

operation. This is an achievement that clearly illustrates the management's

commitment to quality, efficiency, environment, health and safety. In 2008, a

split-grinding unit at Neem Ka Thana was commissioned, boosting the

capacity in India to 6.25 MTPA.

VISION AND MISSION

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

• To employ frontline technologies to meet the highest global standards

in products and services.

• To set benchmarks in manufacturing and environmental performance.

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

entity.

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

• To ensure well-being of all our stake-holders; upholding such values as

integrity, trust, concern, empathy and commitment

EXECUTIVE MANAGEMENT TEAM

28

• Mr. Braj Binani -The Promoter and Chairman.

• Ms. Nidhi Singhania - Additional Director.

• Mr. S. Padmakumar – Board of Director.

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

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

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

• Mr. Sunil Sethy - Additional Director.

• Mr. Jitender Balakrishnan - Additional Director.

REGISTERED OFFICES

Mumbai Corporate Office

Mercantile Chambers,

12, J.N. Heredia Marg, Ballard Estate,

Mumbai - 400001.

• Tel: +91 - 22 - 22690506-10 / 22640040-44

• Fax: +91 - 22 - 22690003 / 22640045

• Email: [email protected]

Works (Factory)

P. O. Binanigram, Tehsil Pindwara - 307031.

Dist. Sirohi (Rajasthan).

• Tel: +91 - 2971 - 235005 / 12

• Fax: +91 - 2971 - 235020

• Email: [email protected]

Marketing Offices

Ahmedabad

705/706, Sakar-II, Ellis Bridge,

29

mailto:[email protected]


Ahmedabad - 380 006.

• Tel: +91 - 79 - 26579027 / 26589025 / 26

• Fax: +91 - 79 - 26576769

• Email: [email protected] / [email protected]

New Delhi

231-233-235, Ansal Chamber-II,

6-Bhikaji Cama Place, New Delhi-110066.

• Tel: +91 - 11 - 26761111 / 26161020

• Fax: +91 - 11 - 26761222

• Email: [email protected] /[email protected]

Jaipur

"Miracle",

22, Shubham Enclave,

Parivahan Marg, C-Scheme,

Jaipur – 302001

• Tel: +91 - 141 - 4134300 / 4124300

• Fax: +91 - 141 - 4134329

• Email: [email protected] / [email protected]

PRODUCTION AND MANUFACTURING

Production

Binani Cement Ltd. has been using carbon neutral 'bio-fuels' in its production

processes to reduce the impact on environment by way of substantial

reduction in CO2 emissions. Similarly, continuous increase in utilization of fly

ash also enables the Company to positively contribute its share in reversing

the effects of climate change.

30







The Company has a robust raw material consumption system in place

ensuring that its limestone reserves at Amli and Thandiberi lasts for decades.

Manufacturing Process

Major plant & machinery consists of One Cement Mill (180 TPH capacity),

One Electronic Packer (240 TPH capacity), Clinker, Fly Ash, Cement storage

silos etc.

The unit is licensed to manufacture Ordinary Portland Cement (OPC 43 and

53 Grades) and Portland Pozzolana Cement (PPC). Currently it is producing

100% PPC for which Clinker is supplied from the parent unit, i.e.; Binani

Cement Limited, Binanigram while Fly Ash is sourced from the Thermal

Power plants located at NTPC, Dadri (Haryana), Suratgarh (Rajasthan),

Bhatinda etc.

The unit, during the year 2009-10, produced 1.12 million tons of cement

(PPC).

Cement Plants

Sirohi Plant

The Binani Cement plant was set up in April 1997 with an initial production

capacity of 1.65 MTPA cement.

Installed capacity of the Plant was increased to 4.85 MTPA through

modifications and de-bottlenecking.

Clinker manufacturing capacity was further increased to 2.7 Million.

Clinker Grinding Unit, Neem Ka Thana

31

Clinker Grinding Unit, Neem Ka Thana is located at village Bhagega, Tehsil

Neem Ka Thana, District Sikar (Rajasthan). The unit commenced its

commercial production in March, 2008 with an installed capacity of 1.40

million TPA cement grinding.

PRODUCT PROFILE OF THE COMPANIES

32

AMBUJA CEMENT LTD.

P o r t l a n d P o z z o l a n a c e m e n t ( P P C )

O r d i n a r y P o r t l a n d c e m e n t ( O P C )

BINANI CEMENT LTD.

Grade 43

Grade 53

PPC (Portland Pozzolana Cement)

FINANCIAL ANALYSIS

33

RATIO ANALYSIS

Ratio Analysis includes various ratios like Profitability Ratio, Liquidity Ratio

and many more ratios.

1. PROFITABILITY RATIOS

Operating Profit Margin

The operating profit margin ratio is a measure of overall operating

efficiency, incorporating all of the expenses of ordinary, daily business

activity. The calculation is: EBIT/Net Sales= _____

Particulars 2006 2007 2008 2009 2010

Ambuja cement Ltd. 34.71 36.20 28.85 27.07 25.18

Binani cement Ltd 27.39 34.48 35.38 21.43 31.15

Interpretation

Thus, in the year 2008 Ambuja cement Ltd operating ratio was 28.85%. It

decreased by the 25.18% in the year 2010. Similarly, Binani cement Ltd

operating ratio also decreased from 35.58% in 2008 to 31.15% in 2010. This is

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

2010.

Gross Profit Margin

34

The ratio looks at how well a company controls the cost of its inventory and the

manufacturing of its products. The larger the gross profit margin, the better for the

company. The calculation is: Gross Profit/Net Sales = ____%.

Particulars 2006 2007 2008 2009 2010



Interpretation

The Gross Profit Margin for Ambuja cement Ltd in the year 2009 was 23%. It

decreased to 19.93% due to increasing cost of inventory by the company.

Similarly, Binani cement ltd gross profit margin increased from 16.06% in the year

2009 to 26.22% in the year 2010 due to reduction in inventory cost.

Net Profit Margin

The net profit margin measures profitability after consideration of all expenses

including taxes, interest, and depreciation. The calculation is: Net Income/Net

Sales = _____%.

Particulars 2006 2007 2008 2009 2010



Interpretation

The net profit margin of Ambuja cement in the year 2006 is 23.86% which

increased to 30.53% in 2007 due to heavy amount of accumulated depreciation.

While, the net profit margin of the Binani cement in continuously increasing.

2. LIQUIDITY RATIOS

35

Current Ratio

The current ratio show how many times over the firm can pay its current debt

obligations based on its assets. The formula is: Current Ratio = Current

Assets/Current Liabilities.

Particulars 2006 2007 2008 2009 2010



Interpretation

The current ratio of the Ambuja cement in the year 2010 is 1.07 times which

means company can pay its current obligations easily. While, Binani cement

current ratio in the year 2006 was 2.32% which heavily decreased in 2007 by

0.85%. the reason is that company has invested heavy amount of money in the

net current asset.

Quick Ratio or Acid Test Ratio

It looks at how well the company can meet its short-term debt obligations without

selling their inventories. The formula is the following: Quick Ratio = Current

Assets-Inventory/Current Liabilities.

Particulars 2006 2007 2008 2009 2010



Interpretation

36

The quick ratio of the Ambuja cement is high in the year 2010 as compared to the

year 2009 i.e. 0.57 times. This is because company had reduced the inventory

cost. While, Binani Cement quick ratio for the year 2006 was 2.61 times which

was drastically reduced to 0.62 in the year 2007 due to high amount of current

liabilities.

Debt Equity Ratio

The debt equity ratio shows the extent to which long-term debt, like bonds and

mortgages are used for the firm's permanent financing. The calculation for long-

term debt to total capitalization is as follows:

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

Particulars 2006 2007 2008 2009 2010



Interpretation

The above table shows that Ambuja Cement uses very little debt for financing

their firm. While, Binani cement decreased their debt ratio form the year 2006-10

because they reduced the debt financing in their portfolio.

37

3. MANAGEMENT EFFICIENCY RATIO

Inventory Turnover Ratio

It is the number of times inventory is sold and restocked each year. If the number is

high, you may be in danger of stockouts. If it is low, watch out for obsolete inventory.

Inventory turnover is calculated as follows:

Inventory turnover ratio = Net sales/Inventory = ____times.

Particulars 2006 2007 2008 2009 2010



Interpretation

The inventory turnover ratio for Ambuja cement in the year 2006 was 15.41 times

which decreased to 9.96 times in the year 2007 due to high investment of new

inventories. While, Binani cement inventory turnover ratio suddenly increased in

the year 2010 due to increase in the sales revenue of the company.

Debtors Turnover Ratio

Debtors turnover looks at how fast we collect on our sales revenue or on

average, how many times each year we clean up or totally collect our accounts

receivable. The calculation is as follows:

Debtors Turnover = Sales/Accounts Receivable = ____ times

Particulars 2006 2007 2008 2009 2010

Ambuja cement

Ltd.

91.70 48.14 33.39 37.60 52.58

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

Interpretation

38

The debtors’ turnover ratio of the Ambuja cement in the year 2006 was 91.70%

which drastically decreased to 48.14% due more amounts of debtors or credit

sales was done by the company. While, Binani cement debtors’ turnover ratio in

the year 2007 was 2,875.94 which very drastically increased to 564,730.454 due

to high sales revenue. But, after that in the year 2010 there is no amount of

debtors recorded which is good for the company.

Asset Turnover Ratio

The total asset turnover ratio shows how efficiently your assets generate sales.

The higher the total asset turnover ratio, the better and the more efficiently you

use your asset base to generate your sales. The calculation is:

Total Asset Turnover = Sales/Total Assets = _____ times

Particulars 2006 2007 2008 2009 2010



Interpretation

The asset turnover ratio of the Ambuja cement is gradually decreasing since last

five years because of continuous increase in the total assets of the company.

While, the asset turnover of the Binani cement is continuously increasing since

last five years due to constant increase in the net sales of the company.

AMBUJA CEMENT

PARTICULARS 2010 2009 2008 2007 2006

39

SALES 7371.52 7083.21 6182.09 5671.39 6226.28

EBIT 2074.70 2104.38 2252.32 3018.17 2272.23

NET ASEETS 6166.69 5684.52 4673.46 4149.45 3685.97

PAT 1263.61 1218.37 1402.27 1769.10 1503.25

NET WORTH 7330.10 6470.90 5672.87 4661.25 3491.72

DuPont Analysis (Ambuja cement)

By doing DuPont Analysis one can evaluate power of a firm. It shows the combined effect of three aspects – operating efficiency, financing

40

efficiency and retention. It is a product of the assets turnover, gross profit margin and operating leverage.

DuPont Analysis

Figure

BINANI

CEMENT

41

ROE=PAT/NETWORTH

(in%)

2006 43.05

2007 37.95

2008 24.72

2009 18.83

2010 16.87

FINANCIAL LEVERAGE

(BALANCE SHEET) =

NA/NW (IN TIMES)

2006 1.06

2007 0.82

2008 0.82

2009 0.88

2010 0.84

FINANCIAL LEVERAGE

(INCOME STATEMENT)

= PAT/EBIT (in %)

2006 66

2007 59

2008 62

2009 58

2010 60

RONA=EBIT/NET ASSET

2006 0.62

2007 0.73

2008 0.48

2009 0.37

2010 0.34

PROFIT MARGIN =

EBIT/SALES(in %)

2006 36.49

2007 53.22

2008 36.43

2009 29.71

2010 28.14

ASSETS TURNOVER

=SALES/NA (in times)

2006 1.69

2007 1.37

2008 1.32

2009 1.25

2010 1.20

PARTICULARS 2010 2009 2008 2007 2006

SALES 1728.50 1857.88 1496.54 963.04 678.44

EBIT 285.20 597.99 309.71 352.51 236.73

NET ASEETS 1515.47 1322.79 971.25 927.36 907.21

PAT 90.51 281.92 1086.67 175.82 95.61

NET WORTH 579.02 675.17 476.40 417.64 301.22

DuPont Analysis (Binani cement)

42

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

DuPont Analysis

Figure

SWOT ANALYSIS OF AMBUJA CEMENT

43

ROE=PAT/NETWORTH

(In %)

2006 31.74

2007 42.09

2008 22.81

2009 41.76

2010 15.63

FINANCIAL LEVERAGE

(BALANCE SHEET) =

NA/NW (IN TIMES)

2006 3.01

2007 2.22

2008 2.04

2009 1.96

2010 2.62

FINANCIAL LEVERAGE

(INCOME STATEMENT)

= PAT/EBIT (in %)

2006 40.39

2007 49.88

2008 35.09

2009 47.14

2010 31.74

RONA=EBIT/NET ASSET

2006 0.26

2007 0.38

2008 0.32

2009 0.45

2010 0.19

PROFIT MARGIN =

EBIT/SALES (in %)

2006 34.89

2007 36.60

2008 20.70

2009 32.18

2010 16.50

ASSETS TURNOVER

=SALES/NA (in times)

2006 0.74

2007 1.04

2008 1.54

2009 1.40

2010 1.14

Strength

• Growth at approx. CAGR of 9% in last 5 years

• Growing Domestic cement consumption at approx. CAGR of 8% in last 3

years

• Highly Capital Incentive so difficult for small entrant

• Not much restriction by govt.

• Market consolidation taking place

Weakness

• High Oil Prices, Cost of Power increase production cost

• Supply exceeds Production lead to competition in price

• Low Quality as compared to international standard but improving

Opportunity

• High Mortgage Penetration -Low Interest Rates

• Easy loan availability for housing finance

• Increased investments in Infrastructure

• Increased govt. outlay on BHARATNIRMAN, GOLDEN QUADRILATERAL, and

BRTS etc.

Threat

• Further Hike in Oil Prices

• Use of plastic engineering in construction

• Subprime market loss may affect

SWOT ANALYSIS OF BINANI CEMENT

44

Strengths

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

• Service is good.

• They have same price prevailing for wholesale at dealers/stockiest retailers

end.

Weakness

• The competitors are doing much promotional activity rather than Binani

cement limited that why it facing more problems in selling of product in the

market.

• Lack of awareness program for consumers.

Opportunity

• Rapid growth is taking place in Bihar and Madhya Pradesh.

• People are opting for more stable structures and intensive use of cement is

taking place, even government is spending heavily on infrastructure Projects.

As Indian core industry is also growing at rate of nearly 10% per annum, it is

having a good future.

• Foreign direct investment in infrastructure sector going to increase in coming

years, which will increase the demand of cement.

• Roads are undergoing through the transformation process through which the

traditional method of road building will be replaced by modern concrete roads.

45

Threats

• Large number of players in cement industry makes it more competitive for

ACC to carefully price its product and at the same time satisfy its dealers and

customers.

• Players such as Jaypee Cement, Prism Cement, and Birla Samrat are eating

up considerable market share.

• The emergence of small players in this market may increase the competition

and start the malpractices, and heavy discounts to retailers. They can also

influence many retailers by giving better profit margin, and other Benefits.

46

COMPARATIVE ANALYSIS

COMPARISION OF RETURN ON INVESTMENT

RETURN ON NET ASSETS

PARTICULARS AMBUJA CEMENT BINANI CEMENT

2006 0.62 0.26

2007 0.73 0.38

2008 0.48 0.32

2009 0.37 0.45

2010 0.34 0.19

Interpretation

ROI in Ambuja cement in 2006 is 62% whereas in Binani cement it was 26%, in

2007, 2008, 2009 ROI of both the companies are reduces due to decreasing in

the proportion of sales. But in the year 2010 the sales of the further decrease to a

nominal value which is 34% and 19% respectively for the companies.

47

COMPARISION OF RETURN ON DuPont

RETURN ON EQUITY


2006 43.05 31.74

2007 37.95 42.09

2008 24.72 22.81

2009 18.83 41.76

2010 16.87 15.63

Interpretation

The ROE of Ambuja cement in 2006 to 2008 is 43%, 38%, and 25% respectively

which is more than Binani cement which is 32%, 42% and 23% respectively.

Because the PAT of the Ambuja cement is Increases more as compare to Binani

cement. While in 2009 and 2010 the ROE of Ambuja cement is 19% and 17%

which is less than the Binani cement which is 42% and 16% because in this year

the PAT is not that much increase as compare to previous years.

48

RETURN ON PROFIT MARGIN


2006 36.49 34.89

2007 53.22 36.60

2008 36.43 20.70

2009 29.71 32.18

2010 28.14 16.50

Interpretation

The Profit Margin Ratio of Ambuja cement in 2006 to 2010 is 36%, 53%, 36%,

30%, and 28% respectively which is higher than the Binani cement is 35%, 36%,

21%, 32% and17%. The reason behind this that the operating Expenses of

Ambuja cement is higher as compare to Binani cement.

49

FINANCIAL LEVERAGE (INCOME STATEMENT)


2006 66 40

2007 59 50

2008 62 35

2009 58 47

2010 60 32

Interpretation

The Financial leverage of Ambuja cement in 2006 to 2008 is 66%, 59% and 62%

respectively which is more than the Binani cement which is 40%, 50%and 35%.

This is because in this year the PAT of Ambuja cement is higher than the Binani

50

cement. While in 2009 and 2010 the financial leverage of Ambuja is 58%, 70%

which is higher than the Binani cement which is 47% and 32%.

FINANCIAL LEVERAGE (BALANCE SHEET)


2006 1.06 3.01

2007 0.82 2.22

2008 0.82 2.04

2009 0.88 1.96

2010 0.84 2.62

Interpretation

The financial leverage of the Ambuja cement in the year 2006 to 2010 is 1.06%,

0.82%, 0.82%, 0.88%, and 0.84% which is much low then Binani cement i.e.

3.01%, 2.22%, 2.04%, 1.96%, and 2.62%. Thus, we can say that the Binani

cement is performing well than Ambuja cement.

51

1. COMPARISON OF PROFITABILITY RATIO

A. GROSS PROFIT MARGIN


2006 33.74 21.58

2007 36.26 30.31

2008 24.65 29.6

2009 22.87 16.06

2010 19.93 26.22

Interpretation

The Gross profit margin of the Ambuja cement in the year 2007 was highest i.e.

36.26%, but it started gradually decreasing upto 19.93% last year due continuous

52

decrease in the gross profit margin of the company. While, the Gross profit

margin of Binani Cement is slowly rising from 21.58% in 2006 upto 26.22 last

year. This indicates that Binani cement is working better than Ambuja cement.

B. OPERATING PROFIT MARGIN


2006 34.71 27.39

2007 36.20 34.48

2008 28.85 35.38

2009 27.07 21.43

2010 25.18 31.15

Interpretation

53

The Operating Profit Margin of the Ambuja cement in the year 2006 was 34.71%

and that of Binani cement was 27.39%. In 2007 both the companies operating

profit margin increased due to increase in profit before taxes. In last three years

the operating margin of Ambuja cement decreased to 28.85%, 27.07% and

25.18% respectively due continuous increase in operating profit. In the year 2010

Ambuja cement operating profit margin is 25.18% and Binani cement’s operating

margin is 31.15%, which shows that it is performing better than Ambuja Cement.

C. NET PROFIT MARGIN


2006 23.86 10.73

2007 30.53 14.03

2008 22.11 18.12

2009 16.78 7.22

2010 16.84 15.13

Interpretation

The Net Profit Margin of Ambuja cement limited in the year 2006 was 23.86%

which increased in the next year by 30.53% due to increase in net profit of the

company. While, Binani cement net profit margin for the year 2006 was 10.72% 54

which increased to 14.03% in next year due to increase in the sales of the

company. During 2008 and 2009 both the company’s net profit margin decreased

to a great extent due increase in the operating expenses of the companies. In

2010 the net profit margin of Ambuja cement is 16.84% which higher than that of

Binani cement i.e. 15.13%.

2. COMPARISON OF LIQUIDTY RATIOS

A. CURRENT RATIO


2006 1.08 2.32

2007 1.03 0.85

2008 1.26 0.78

2009 0.89 0.62

2010 1.07 0.92

Interpretation

The Current Ratio of Ambuja cement and Binani cement for the year 2006 was

1.08 and 2.32 times. The Current ratio of the Binani cement decreased to much 55

greater extent upto 0.85 times because the current liabilities of the company

increased to a great level. In the year 2008 and 2009 there was a nominal

reduction in the current ratio of both the companies. In the year 2010 the current

ratio of the Ambuja cement is 1.07 times which is greater than that of Binani

cement. So, we can say that Ambuja cement is performing well.

B. QUICK RATIO


2006 0.70 2.61

2007 0.64 0.62

2008 0.74 0.49

2009 0.57 0.36

2010 0.75 0.68

Interpretation

The Quick Ratio of the Binani cement is 2.61 times in the year 2006 which is very

high as compared to Ambuja cement which is 0.7 times. In the year 2007 the

ratio of Binani cement reduced to a great level by 0.62 times because company

56

had invested high amount of inventories and borrowed heavy loans and

advances from the market. In the year 2010 the Ambuja cement ratio is 0.75

times which is greater than that of the Binani cement i.e. 0.68 times. So we can

say that Ambuja cement is performing better than Binani cement.

C. DEBT EQUITY RATIO


2006 0.25 2.06

2007 0.07 2.24

2008 0.05 1.77

2009 0.03 1.62

2010 0.01 1.46

Interpretation

The Debt Equity Ratio of the Ambuja cement in the year 2006 was 0.25 and that

of Binani cement was 2.06 times. Both the companies constantly reduced the

57

debt financing option from their portfolio from the year 2007. The debt ratio in the

year 2010 for Ambuja cement is 0.01 times against the Binani cement i.e. 1.46

times. This clearly shows that Ambuja cement more efficiently uses their internal

sources of funds for their operational activities.

3. COMPARISON OF MANAGEMENT EFFICIENCY RATIO

A. INVENTORY TURN OVER RATIO


2006 15.41 14.71

2007 9.96 11.90

2008 7.54 15.86

2009 11.36 16.44

2010 9.19 34.25

Interpretation

58

The Inventory Turnover Ratio of Ambuja cement for the year 2006 was 15.41

times and that of Binani cement was 14.71 times. In the year 2007, 2008 and

2009 the turnover ratio for Ambuja cement is gradually decreasing which good for

the company. But Binani cement’s turnover ratio is constantly increasing due to

continuous investment in inventories. In the 2010 the Binani cement turnover

ratio increased to 34.25 times due to sudden decrease in inventories against the

sales. It is clearly identified that Ambuja cement can handle their inventories

more effectively than Binani cement.

B. DEBTORS TURNOVER RATIO


2006 91.70 1483.90

2007 48.14 2875.94

2008 33.39 7766.43

2009 37.60 564730.45

2010 52.58 --------

Interpretation

59

The Debtors Turnover Ratio for the Ambuja cement in the year 2006 was 91.60

times which gradually decreased in the next three years by 37.60 times. This is

because the credit sales of the company increased during the year. While, Binani

cement’s debtors turnover ratio is constantly increasing during the year 2006,

2007, 2008 and 2009 which is 1483.90, 2875.94, 7766.43, 564730.45

respectively because they provide goods on cash basis. In the year 2010 the

debtors’ turnover ratio of Ambuja cement is 52.28 times. While, Binani cement’s

turnover ratio is nil as they provide goods on cash basis. Hence, Binani cement

recovers their debt easily as compared to Ambuja cement.

C. ASSETS TURNOVER RATIO


2006 1.37 0.61

2007 1.09 0.81

2008 1.10 0.67

2009 1.15 0.94

2010 0.85 1.03

Interpretation60

The Assets Turnover Ratio for Ambuja cement for the year 2006 was 1.37 times

which decreased to 1.09 times because the sales of the company were reduced.

But, in the year 2007, 2008 and 2009 the turnover ratio were more or less similar.

Binani cement’s assets turnover ratio are constantly increasing from the year

2006 i.e. 0.61 times to the year 2009 i.e. 0.94 times due constant increase in

sales of the company. In the year 2010 the turnover ratio of Ambuja cement is

0.85 which is much lower than that of Binani cement i.e. 1.03 times. This

indicates that the company can effectively use their assets to generate sales.

FINDINGS AND CONCLUSION

FINDINGS

The Gross Profit Margin of the Ambuja cement is decreasing in last as compared

to the Binani cement i.e. 26.22% against 19.93 of Ambuja cement.

The Operating Profit Margin of Ambuja cement is decreasing as compared to the

Binani cement i.e. 31.15 against 25.18% of Ambuja cement.

The Net Profit Margin of Ambuja cement is higher than the Binani cement i.e.

16.84 of Ambuja cement against 15.13% of Binani cement.

The Liquidity Ratios of the Ambuja cement is higher than the Binani cement

except the Debt Equity ratio i.e. 1.46% of the Binani cement against Ambuja

cement i.e. 0.01.

The Inventory Turnover Ratio of Ambuja cement is lower than the Binani cement

i.e. 9.19 for Ambuja cement against the Binani cement i.e. 34.25%.

The Debtors Turnover Ratio of the Ambuja cement is much higher than

compared to that of Binani cement.

The Asset Turnover Ratio of Ambuja cement is lower than that of Binani cement

i.e. 0.85% for Ambuja cement against 1.03 times of Binani cement.

61

The Return on Net Assets for Ambuja cement is higher than the Binani cement in

the year 2010.

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

The Return on Profit Margin for Ambuja cement is 28.14% which is much higher

than that of Binani cement i.e.16.50%.

The Financial Leverage of the Ambuja cement for the year 2010 is 0.84 times

which is much lower than that of Binani cement is 2.62 times.

CONCLUSION

The Returns on Assets of the Ambuja cement has decreased from the year 2006

upto the year 2010. But it is better than the Binani cement.

The Returns on Equity of the Ambuja cement for the year 2010 is good as

compared to the Binani cement because of increase in the sales of the company.

The Net Profit Margin of Ambuja cement is higher than that of Binani cement.

Ambuja cement is more leveraged than Binani cement. This is good for the

company.

The Profitability Ratios shows that Binani cement is performing well than that of

Ambuja cement from since last 3 years.

Ambuja cement is more liquid than that of Binani cement and uses very less

amount of debt funds in their portfolio.

Ambuja cement uses their inventory more efficiently than Binani cement for the

purpose of production.

Ambuja cement’s management is efficient in maintaining their debts and equity in

comparison of Binani cement.

62

Thus, from the above data provided we can conclude that Ambuja cement Ltd. is

working and performing better than the Binani cement Ltd. and their market share in

the economy has also increased which is very beneficial to the Cement Industry.

Cement Industry has progressed in India since last decade and the demand for the

cement has increased due to infrastructure development, housing and commercial

needs of the economy. In the analysis it has been seen that the Ambuja cement is

over shadowing in terms of performance. During Financial year 2007 inflationary

conditions enabled all to perform well and generate profits resulting in boom in share

prices. In 2008 all companies underperformed comparatively due to economic

downturn.

63

Documents

swot of cement industry