Ultratech Cement_FAM_Rakesh Choudhary_2014220_D

Rakesh Kumar Choudhary Page 1
Financial Accounting for Managers
PGDM 2014-16
PGDM Trimester 1, 2014
End Term Project: UltraTech Cement
Submitted To: Submitted By:
Dr. Pawan Jain Rakesh Kumar Choudhary 2014220

Contents
Products ............................................................................................................ Error! Bookmark not defined.
Key People ..................................................................................................................................................... 3
Competitors .................................................................................................................................................... 4
Research Methodology .................................................................................................................................... 4
Revenue Generating Activity ............................................................................................................................ 4
Major Growth Drivers for the Products .............................................................................................................. 4
Accounting Policies of UltraTech ...................................................................................................................... 5
Depreciation and Amortization ...................................................................................................................... 5
Inventories Valuation.................................................................................................................................... 6
Basis for Preparation of Accounts ................................................................................................................. 6
Major Expense Head ....................................................................................................................................... 6
Cash Flow Analysis ......................................................................................................................................... 7
Management Discussion and Analysis .............................................................................................................. 7
Detail of Financial Components ........................................................................................................................ 8
Financial Ratio ................................................................................................................................................ 9
Financial Ratio Analysis................................................................................................................................... 9
Performance of UltraTech Cement.................................................................................................................. 11
Bibliography .................................................................................................................................................. 11

Company Profile
UltraTech Cement Limited is India's biggest cement
company and India’s largest exporter of cement clinker
based in Mumbai, India. The company is part of the
Aditya Birla Group and division of Grasim Industries.
It has an annual capacity of 62 million tonnes per
annum. UltraTech Cement is part of the US $40 billion
Aditya Birla Group.
UltraTech’s presence along with its subsidiaries is
recorded at 12 composite plants, one white cement
plant, two wall care putty plants, one clinkerisation
plant in UAE, 16 grinding units; 12 in India, 2 in UAE,
1 in Bahrain and Bangladesh each, 6 bulk terminals; 5
in India and 1 in Sri Lanka and 101 concrete plants.
Products
UltraTech Cement provides a range of products that
cater to all the needs from laying the foundation to
delivering the final touches. The range includes
Ordinary Portland Cement, Portland Blast Furnace Slag Cement, Portland Pozzalana Cement, White
Cement, Ready Mix Concrete, building products and a host of other building solutions. White cement is
manufactured under the brand name of ‘Birla White’, ready mix concretes under the name of ‘UltraTech
Concrete’ and new age building products under the name of ‘UltraTech Building Products Division’. The
retail outlets of UltraTech operate under the name of ‘UltraTech Building Solutions’.
Key People
Name Current Position Name Current Position
Kumar Birla
Non-Executive Chairman of the
Board
O. PuranMalka Whole-time Director
K Birla
Senior Executive President,
Chief Financial Officer
M. B. Agarwal Executive President
V. Swaminathan
President - Finance, IR Contact
Officer
Gautam Chainani Chief People Officer
R. Shah
Group Executive President &
CMO (Mfg. & Projects)
Rahul Mohnot
Unit Head – White
Cement
Type Public BSE: 532538
Industry Building materials
Founded 1983
Headquarters Mumbai, Maharashtra, India
Key people O P Puranmalka, Director
Products Cements
Revenue INR 20,077.88 Cr (2013–14)
Profit INR 2,144.47 Cr (2013–14)
Parent Grasim Industries
Website www.ultratechcement.com

Competitors
Name
ET Rank
Over all
Annual
Turnover
PAT(2010-11) MCRP CR Assets
UltraTech Cement Ltd. 52 13980.75 1367.35 30638.93 16253.12
Ambuja Cements Ltd. 93 7998.55 1165.19 23110.16 7395.28
ACC Ltd. 79 9339.64 1013.47 21303.84 6993.31
India Cements Ltd. 194 3667.16 65.3 2300.05 6727.45
All figures in INR crores
Research Methodology
 Objective: To carry out Financial Statement Analysis of UltraTech Cement
 Period Of Study
Year
2014-13 2013-12
 Type of Data: Secondary Data taken from companies annual report.
 Analysis of Data
I will be using Ratio Analysis as a tool to analyze financial statements of UltraTech cement. It will help
during the analysis of performance of the company over the previous year.
Revenue Generating Activity
Revenue is mainly generated by sales of products and services which are enlisted below:
 Ordinary Portland Cement
 Portland Blast Furnace Slag Cement
 Portland Pozzalana Cement
 White Cement
 Ready Mix Concrete
 Building products and a host of other building solutions such as pumping and conveying etc.
Major Growth Drivers for the Products
Domestic cement sales volume grew by 2% over the last year as compared to expected industry growth of
around 1%. Domestic clinker sales volume grew by 44% from .16 million metric tons (MMT) in 2013-12
to .23 MMT in 2013-14. White cement and putty sales volume grew by 12% from 10.18 MMT to 11.41
MMT.

But the impact of increase in sales volume has been negated by the decline in cement sales prices. During
the year overall cement prices remained under pressure in the absence of demand pick-up and the over-
capacity situation in the sector.
The growth drivers will be housing and infrastructure. The government of India is more focused towards
how to improve the growth rate of Indian economy. Government is emphasizing on the need to improve the
existing infrastructure to meet the potential that Indian economy possess. UltraTech has already expanded
its capacity to match the need of cement that is required to fulfill the demand.
Accounting Policies of UltraTech
Significant Accounting Policies
Basis for Preparation of Accounts Use of estimates Fixed Assets
Expenditure during construction period Borrowing Costs Income Taxes
Government Grants and Subsidies Derivatives Investments
Depreciation and Amortization Inventories Employee Benefits
Employee Share based payments Foreign Currency Transactions Income Taxes
Research and development expenditure Impairment of Assets Segment Reporting
Mines Restoration Expenditure Cash and Cash Equivalents Revenue Recognition
Provisions, Contingent Liabilities and Contingent Assets Earnings Per Share
Classification of Assets and Liabilities into Current / Non-current Operating lease
DepreciationandAmortization
Depreciation is calculated on tangible assets and is provided on straight-line basis at the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956 except for some assets which are at higher
rates consequent to management estimate of the useful life of the same, as stated under:
S. No. Fixed Asset Useful life of the assets
1 Roads, Culverts, Walls, etc., within factory premises 28 Years
2 Computers and Office Equipment 4 Years
3 Furniture and Fixtures 7 years
4 Mobile Phones 3 years
5 Company Vehicles 5 Years
6
Motor Cars given to the employees as per the
Company’s Scheme
Scheme Period
7 Leasehold Land and Mining Lease Period of the Lease
8 Assets not owned by the Company
As per period specified in the agreement,
else 5 years
9 Assets acquired up to September 30, 1987 Rates prevailing at the time of acquisition
10 Software 3 years
Depreciation on additions is provided on a pro-rata basis from the month of installation or acquisition and
in case of Projects from the date of commencement of commercial production. Depreciation on deductions/
disposals is provided on a pro-rata basis up to the month proceeding the month of deduction/disposal.

Amortization is calculated on intangible assets such as goodwill etc.
InventoriesValuation
Inventories are valued as follows:
 Raw material, fuel, stores & spare parts and packing materials: Valued at lower of cost and net
realizable value (NRV). However, these items are considered to be realizable at cost, if the finished
products, in which they will be used, are expected to be sold at or above cost. Cost is determined on
weighted average basis.
 Work-in- progress (WIP), finished goods, stock-in-trade and trial run inventories: Valued at lower of
cost and NRV. Finished goods and WIP cost includes cost of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost of inventories is computed on
weighted average basis.
 Waste / Scrap inventory is valued at NRV. Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and the estimated costs necessary to
make the sale.
BasisforPreparationofAccounts
The financial statements are prepared and presented under the historical cost convention on accrual basis of
accounting in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP).
These financial statements comply in all material aspects with the Accounting Standards (AS) notified
under Section 211(3C) of the Companies Act, 1956 (“the 1956 Act”) (which continues to be applicable in
respect of Section 133 of the Companies Act, 2013 (“the 2013 Act”) in terms of the General Circular
15/2013 dated September 13, 2013, issued by the Ministry of Corporate Affairs)
The accounting policies adopted in the preparation of these financial statements are consistent with those of
the previous year.
Major Expense Head
For both the years expense head is same. Below is the tabular form of major expense head of UltraTech
cement.
Expense Head for 2014-13 & 2013-12
Cost Raw Materials Consumed Repairs to Plant and Machinery
Salaries, Wages and Bonus Repairs to Buildings
Contribution to Provident and Other Funds Repairs Others
Expenses on Employees Stock Options Scheme Insurance
Staff Welfare Expenses Rent (including Lease Rent)
Power & Fuel Charge Rates and Taxes
FREIGHT AND FORWARDING EXPENSE Directors’ Fees
Consumption of Stores, Spare Parts and Components Directors’ Commission
Consumption of Packing Materials Advertisement
Excise Duty and Service Tax Interest Expense
Royalty on Limestone/ Marl Exchange Loss (net)
Discount, Sales Promotion and Other Selling Expenses

Cash Flow Analysis
Financial Activity (value in Rs Crores) 2014-13 2013-12 Change
NetCash GeneratedfromOperatingActivities 3,241.57 3,552.42 -310.85
NetCash usedinInvestingActivities -2,209.56 -4,282.25 -2072.69
NetCash GeneratedfromFinancingActivities -897.17 682.91 -1580.08
 Cash flow from operating activity has been decreased as compared to last year because of increase in
depreciation and amortization. As explain in in annual report, Company commissioned various on-
going projects in a phased manner and capitalized over Rs 3,800 crores. This has led to an increase in
depreciation.
 Finance cost has risen from Rs210 crores to Rs 319 crores mainly due to lower capitalization of interest
upon the commissioning of various projects.
 Cash out flow from investing activity has been decreased because of low utilization of fund in
purchasing of fixed assets from Rs 3249.46 crores in 2013-12 to Rs 2228.20 crores in 2014-13.
 Cash flow from financing activity had been decreased on the account of Repayment of Long Term
Borrowings, Repayment of Short Term Borrowings, Increase in interest paid etc.
Management Discussionand Analysis
 In the next 2 years, we expect it to touch 70 million tons when all of its ongoing projects will be fully
commissioned.
 Overall the demand remained sluggish on account of lack of government spending, prolonged
monsoon, and gloomy political environment including policy matters, shortage of sand in major cement
consuming states and low off-take from the infrastructure and housing sectors.
 More capacity addition in the recent past compared to incremental demand continued to plague the
industry. This resulted in sector capacity utilization declining to below 70%.
 Further, logistics and raw material costs continued to rise given the increase in railway freight and HSD
prices. Though prices of imported coal softened, the depreciation in rupee negated the benefit.
 Company has produced 40.79 million tonnes of cement, which is marginally up by 2% over the last
year, though capacity utilization declined to 79% due to the lag between the capacity expansion and
demand growth.
 External factors like the devaluation of the rupee and a regular hike in diesel prices have impacted
costs. Company’s continued focus on controlling cost and optimization of fuel mix helped in curtailing
cost to some extent.
 Company commissioned 80 MW Thermal Power Capacities and 6.5 MW Waste Heat Recovery
Systems (WHRS) - green power capacity. Post these commissioning, the total thermal power and
WHRS capacities of your Company is 620 MW.

 Company has further extended the wheeling of power to some of its cement grinding units. These
measures have resulted in your Company being able to meet over 80% of its power consumption
through captive sources.
 The mining cost of limestone and landed cost of all major input material have increased in the range of
10-15% compared to the previous year. Packaging material cost also witnessed a substantial increase of
around 15%.
 Freight and forwarding expenses was impacted the most during the year. In the last Railway Budget,
freight charges have been linked with the Fuel Adjustment Charges (FAC) and as a result rail freight
has amplified by more than 6% from the beginning of the year.
 Apart from this, regular hike in diesel prices (more than 20%) has impacted the road logistics cost
substantially
 However with the various cost saving measures undertaken, your Company could restrict the overall
cost increase to 6% from Rs925/t to Rs 976/t.
 Initiatives and reforms in areas such as land acquisition, allocation of natural resources, and taxation
would help greatly to boost investor confidence and accelerate investment activity.
 The acquisition of the 4.8 mtpa Gujarat Cement Unit of Jaypee Cement Corporation at a cost of US $
636 million (Rs 3,800 crores) represents a milestone in your Company’s growth strategy
 Human Resource as on 31st March, 2014 your Company’s employee strength is 13,117 employees
 Risk Management company take cares of the entire front that can impact the growth negatively such
as excess cement capacity, securing critical resources, competition, compliances, financial risk etc.
Detail of Financial Components
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
Total
Asset
Total
Liability
Equity Total
Revenue
Total
Expense
PAT Income
Tax Paid
Excide
Duty
2014-13 29,754.01 12,656.50 17,097.51 20,608.84 16,461.90 2,144.47 631.04 2,725.25
2013-12 27,408.87 12,174.05 15,234.82 20,484.96 15,504.48 2,655.43 1,169.97 2,682.02
RsinCrores
UltraTech Cement

Financial Ratio
Ratio Analysis
Ratios 2013-14 2012-13
A. Return on InvestmentRatio
Returnon InvestedCapital (%age) 8.93 21.81
Returnon NetWorth (%age) 12.54 17.43
B. Activity Turnover Ratio
Total AssetTurnoverRatio(Times) .766 .828
InvestedCapital TurnoverRatio(Times) .95 1.07
Average CollectionPeriod(Days) 20.5 16.35
InventoryTurnoverRatio (Times) 1.23 1.19
WorkingCapital TurnoverRatio(Times) 6.14 12.69
C. LiquidityRatio
CurrentRatio 1.57 1.25
D. Solvency Ratio
DebtEquityRatio .405 .39
Debtto Total InvestedCapital .29 .28
E. Capital Market Ratio
Earningsper Share (Rs) 78.20 96.85
DividendPayoutRatio .115 .08
Price EarningsRatio 34.1 ---
F. ProfitabilityRation (%)
PBITDA Ratio 20.65 24.87
NetProfitRatio 10.68 13.26
Financial Ratio Analysis
 Return on Invested Capital (ROIC): is a top level way to measure the historical & current
performance of a corporation across all the capital it has invested in its business. This capital comes
from shareholders (investors), creditors who supply loans, credit as well as shares owned by
management. A good Return on Invested Capital ratio indicates strong management, efficient business
operations & use of capital resources as well as value creation opportunities for the organization.
 Return on Net Worth (RONW) is useful for comparing the profitability of a company to that of other
firms in the same industry. In UltraTech’s case it has decreased significantly and so does the ability to
create wealth. It creates bad sentiment for existing and potential investors.

 Total Asset Turnover Ratio: The amount of sales or revenues generated per rupee of assets. The Asset
Turnover ratio is an indicator of the efficiency with which a company is deploying its assets. In this
case it has decreased and affects the value creation of the company.
 Average Collection Period: The approximate amount of time that it takes for a business to receive
payments owed, in terms of receivables, from its customers and clients. It has increased compared to
previous year. It is bad for the business and act as non-performing asset.
 Current Ratio: A liquidity ratio that measures a company's ability to pay short-term obligations. The
higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1
suggests that the company would be unable to pay off its obligations if they came due at that point.
While this shows the company is not in good financial health, it does not necessarily mean that it will
go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. Here in
this case the company is in good shape to pay of its short term obligation.
 Debt Equity Ratio: A measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using
to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in
financing its growth with debt. This can result in volatile earnings as a result of the additional interest
expense.
 Debt to Total Invested Capital: A measurement of a company's financial leverage, calculated as the
company's debt divided by its total capital. Debt includes all short-term and long-term obligations.
Companies can finance their operations through either debt or equity. The debt-to-capital ratio gives
users an idea of a company's financial structure, or how it is financing its operations, along with some
insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has
compared to its equity. This tells investors whether a company is more prone to using debt financing or
equity financing. A company with high debt-to-capital ratios, compared to a general or industry
average, may show weak financial strength because the cost of these debts may weigh on the company
and increase its default risk.
 Earnings per Share: The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share are generally considered to be the single most important variable in
determining a share's price. It is also a major component used to calculate the price-to-earnings
valuation ratio. In case of UltraTech cement EPS has been decreased considerably, it affect the
investment badly.
 Net Profit Ratio: A ratio of profitability calculated as net income divided by revenues, or net profits
divided by sales. It measures how much out of every dollar of sales a company actually keeps in
earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit
margin indicates a more profitable company that has better control over its costs compared to its
competitors. In case of UltrTech cement it has decreased as compare to last year.

Performance of UltraTech Cement
Here the graph is depicting the performance of UltraTech cements with respect to NSE and BSE in
percentage. UltraTech’s share has increased more than 915% as compare to NSE which increased only
394% and BSE increased only 417% over a decade.
Bibliography
Introduction: http://en.wikipedia.org/wiki/UltraTech_Cement
Products: http://www.ultratechcement.com/aboutus.php
Key People http://www.reuters.com/finance/stocks/companyOfficers?symbol=ULTC.NS
Financials: http://www.ultratechcement.com/financials.php
ROIC: http://www.accountingscholar.com/roic.html
Return on Equity: http://www.investopedia.com/terms/r/returnonequity.asp
Current Ratio: http://www.investopedia.com/terms/c/currentratio.asp
Debt to Equity: http://www.investopedia.com/terms/d/debtequityratio.asp
Debt to total Capital: http://www.investopedia.com/terms/d/debt-to-capitalratio.asp
Earnings per Share: http://www.investopedia.com/terms/e/eps.asp
Net Profit Ratio: http://www.investopedia.com/terms/p/profitmargin.asp

Ultratech Cement_FAM_Rakesh Choudhary_2014220_D

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (6)

Similar to Ultratech Cement_FAM_Rakesh Choudhary_2014220_D

Similar to Ultratech Cement_FAM_Rakesh Choudhary_2014220_D (20)

Ultratech Cement_FAM_Rakesh Choudhary_2014220_D