Project Report

On

FIXED ASSETS MANAGEMENT FOR

ULTRA TECH CEMENT

By

M. SANDHYA RANI (228211672018)

Student of Kommuri Pratap Reddy Institute of Management, Hyderabad

Course: MBA (2011-13)

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Faculty guide: PROF. RAVI KUMAR

BONAFIDE CERTIFICATE

Certified that this project report title FIXED ASSETS MANAGEMENT is the BONAFIDE work of Ms. M.SANDHAY RANI who carried out the research under my supervision. Certified further that to the best of my knowledge the work reported here in does not form part of any other project report or research report on the basis of which a degree or an award was conferred on an earlier occasion on this or any other candidate.

-----------------PRINCIPAL

--------------------------FACULTY GUIDE

Viva voice held on:

----------------------INTERNAL GUIDE

----------------------EXTERNAL GUIDE

DECLARATION

I hereby declare that this work entitled on FIXED ASSETS MANAGEMENT carried out at (ULTRA TECH). Is my original work written and submitted by me in partial fulfillment of Master`s Degree in Business Administration of (OSMANIA UNIVERSITY) Hyderabad, is my own work and that matter of analysis and opinions are entirely my responsibility.

PLACE:

DATE:

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ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped and supported me during the writing of this project. My deep sense of gratitude to Mr.RAMKRISHNA for his support and guidance.

Prof. RAVI KUMAR my internal guide has taken pain to go through the project and make necessary correction as and when needed. I express my thanks to the PROF. Dr S MARKANDAYA principal of, KOMMURI PRATAPR RESSR INSTITUTE OF MANAGEMENT, HYDERABAD for extending his support. 5

I would also thank my Institution and my faculty members without whom this project would have been a distant reality.

M.SANDHYA RANI

Content:
Page No Chapter -1: Introduction Chapter-2: Review of literature Chapter-3: Research methodology Chapter-4: Industry profile Chapter-5: Company profile Chapter-6: Data analysis
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Chapter-7: Findings Chapter-8: Bibliography 64 60

Chapter -1 INTRODUCTION
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INTRODUCTION

Fixed Assets are the assets held with the intention of being used on continuous basis for the purpose of producing or providing goods or services and are not held for resale in the normal course of business. E.g.: Land and Buildings, Plant and Machinery, Motor Vehicles, Furniture and Fixtures. Valuation of fixed assets is important to have fair measure of profit or loss and financial position of the concern. Fixed assets are meant for use for many years. The value of these assets decreases with their use or with time or many other reasons. A portion of fixed assets are reduced by usage are converted into cash through charging depreciation. For correct measurement of income, proper measurement of depreciation is essential, as depreciation constitutes a Part of total cost of production.

Financial transactions are recorded in the books, keeping in view the going concern aspect of the business unit. In going concern aspect it is assumed that the business unit has reasonable expectation of continuing the business for a profit for an indefinite period of time. This assumption provides much of the justification for recording fixed assets at original cost and depreciating them in a systematic manner without reference to their current realizable value.

It is useless to record the fixed assets in the balance sheet at their estimated realizable values if there is no immediate expectation of selling them. So, they are shown at their book value (i.e., Cost Depreciation) and not at current realizable value. The market value of the fixed assets may change with the passage of time, but for accounting purpose it continues to be shown in the books in historical cost.

The cost concept of accounting states that depreciation calculated on the basis of historical cost of old assets is usually lower than the amount calculated at current value/ replacement value. These results in more profits, which if distributed in full will lead to reduction in capital.

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ACCOUNTING STANDARD FOR FIXED ASSETS (AS-10):

AS-10 on Accounting for Fixed Assets has been made mandatory with effect from 01.04.1991. According to the AS-10, Fixed Asset is an asset held with the intention of being used on continuous basis for the purpose of producing or providing goods or services and is not held for resale in the normal course of action. Gross book value of fixed asset is its historical cost or other amount substituted for historical costs in the books of accounts or financial statements. When the amount of depreciation is deducted from gross book value then it is Net Book Value.

Cost of Fixed Assets should consist of purchase price including import duties etc., and attribute cost of bringing the asset to its working condition for its intended use. Financing costs relating to borrowed funds attributable to construction or acquisition of fixed assets for the period up to the acquisition or completion. Expenditure incurred in start-up and commissioning of the project including test runs. Revaluation of assets: Fixed assets may be restated in the value with the help of appraisal under taken by the competent values .Such valuation of assets is called revaluation.

FIXED ASSETS MANAGEMENT CYCLE

The fixed assets management cycle is the cycle of activities from the acquisition of the asset to the final disposition of the assets at the end of their useful life. The cycle has 7 steps:

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Acquisition:

The cycle begins with the acquisition, purchase, gift or otherwise, of an asset and the

determination that the asset is to be capitalized. To be capitalized the asset has to meet the agencys capitalization limit and have a useful life of one year or more.

Receiving: The asset is formally received and accepted by the agency. Receipt may be verified by entry into an
automated purchasing system or by hard copy document. In the case of donated fixed assets, receipt can be verified by a letter to the donor.

Payment:

Payment is made for the asset according to the terms of the purchase order or recognition of

acceptance of a gift to the donor. The payment includes the acquisition cost, freight and all other costs to put the asset. Acquisition cost of donated fixed assets is determined by its fair market value.

Identification:

the asset is identified as an asset, tagged or otherwise identified and entered into the fixed

assets management inventory system. Assets are identified with a permanently attached identification tag, etching or by painting on the identification number.

Inventory:

The longest step in the cycle. The asset is used over its useful life. Assets are inventoried and

accounted for during this step until they are no longer needed. The agencys policies and procedures determine the inventory interval.

Excess: the asset is declared as excess to the users needs. The asset may be transferred to another user where it
will continue to be used, accounted for and inventoried. Assets may be declared as excess more than once until the asset is no longer needed.

Surplus:

the last step in the fixed assets management cycle. The asset is declared to be surplus property and to

have no further value to the agency. The asset is disposed of by sale or discarding depending on the residual value. Sale can be by auction, sealed bid, spot sale, or through a sales store.

FIXED ASSETS MANAGEMENT CYCLE

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IMPORTANCE OF THE STUDY:

As fixed assets play an important role in companys objectives. These fixed are not convertible or not liquidable over a period of time. The owners funds and long term liabilities are invested in fixed assets. Since, fixed assets play dominant role in the business and the firm has utilization of fixed assets. So, ratio contributes in analyzing and evaluating the performance of the business.

If firms fixed assets are idle and not utilized properly it affects the long-term sustainability of the firm, which may affect liquidity and solvency and profitability positions of the company. The idle of fixed assets leads to a

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tremendous loss in financial cost and intangible cost associate of it. So, this will lead to evaluation of fixed assets performance. Comparing with similar company and comparison with industry standards.

NEED FOR THE STUDY:

To know the importance of fixed assets for an organization To bring out the strategies of managing fixed assets. To know the organizations strength based on the fixed assets.

SCOPE OF THE STUDY:

The project is covered on fixed assets of ULTRATECH CEMENT ELECTRONICS. Drawn from annual reports of the company. The subject matter is limited to fixed assets, its analysis and its performance but not to any other areas of accounting corporate, marketing and financial matters.

OBJECTIVE OF THE STUDY:

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 To know the amount of capital expenditure made by the company during study period. To evaluate the method of depreciation adopted by ULTRATECH CEMENT ELECTRONICS. To know the amount of finance made by long-term liabilities and owners funds towards fixed assets. To evaluate whether fixed assets are giving adequate returns to the company or not.

LIMITATION OF THE STUDY:

The study is limited by the date and information provided by the ULTRATECH CEMENT ELECTRONICS and its annual reports. This report is not helpful in investing in ULTRATECH CEMENT. The accounting procedure and other accounting principles are limited by the changes made by the company, may vary fixed assets performance.

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Chapter-2 Review of Literature

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Fixed asset:
Fixed asset is also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed. Moreover, a fixed/non-current asset can also be defined as an asset not directly sold to a firm s consumers/endusers. As an example, a baking firms current assets would be its inventory (in this case, flour, yeast, etc.), the value of sales owed to the firm via credit (i.e. debtors or accounts receivable), cash held in the bank, etc. Its noncurrent assets would be the oven used to bake bread, motor vehicles used to transport deliveries, cash registers used to handle cash payments, etc. Each aforementioned non-current asset is not sold directly to consumers. These are items of value which the organization has bought and will use for an extended period of time; fixed assets normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term assets. According to International Accounting Standard (IAS) 16, Fixed Assets are assets whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably. It is pertinent to note that the cost of a fixed asset is its purchase price, including import duties and other deductible trade discounts and rebates. In addition, cost attributable to bringing and installing the asset in its needed location and the initial estimate of dismantling and removing the item if they are eventually no longer needed on the location. The primary objective of a business entity is to make profit and increase the wealth of its owners. In the attainment of this objective it is required that the management will exercise due care and diligence in applying the basic accounting concept of Matching Concept. Matching concept is simply matching the expenses of a period against the revenues of the same period. The use of assets in the generation of revenue is usually more than a year- that is long term. It is therefore obligatory that in order to accurately determine the net income or profit for a period depreciation is charged on the total value of asset that contributed to the revenue for the period in consideration and charge against the

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same revenue of the same period. This is essential in the prudent reporting of the net revenue for the entity in the period. Net book value of an asset is basically the difference between the historical cost of that asset and it associated depreciation. From the foregoing, it is apparent that in order to report a true and fair position of the financial jurisprudence of an entity it is relatable to record and report the value of fixed assets at its net book value. Apart from the fact that it is enshrined in Standard Accounting Statement (SAS) 3 and IAS 16 that value of asset should be carried at the net book value, it is the best way of consciously presenting the value of assets to the owners of the business and potential investor.

Depreciating a Fixed Asset:

Depreciation is, simply put, the expense generated by the use of an asset. It is the wear and tear of an asset or diminution in the historical value owing to usage. Further to this; it is the cost of the asset less any salvage value over its estimated useful life. It is an expense because it is matched against the revenue generated through the use of the same asset. Depreciation is usually spread over the economic useful life of an asset because it is regarded as the cost of an asset absorbed over its useful life. Invariably the depreciation expense is charged against the revenue generated through the use of the asset. The method of depreciation to be adopted is best left for the management to decide in consideration to the peculiarity of the business, prevailing economic condition of the assets and existing accounting guideline and principles as implied in the organizational policies. It is worth noting that not all fixed assets depreciate in value year-over-year. Land and buildings, for example, may often increase in value depending on local real-estate conditions. A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. Fixed assets are sometimes collectively referred to as "plant".

Balance sheet - accounting for fixed assets

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Introduction An important distinction is made in accounting between "current assets" and " "fixed assets". Current assets are those that form part of the circulating capital of a business. They are replaced frequently or converted into cash during the course of trading. The most common current assets are stocks, trade debtors, and cash. Compare current assets with fixed assets. A fixed asset is an asset of a business intended for continuing use, rather than a short-term, temporary asset such as stocks. Fixed assets must be classified in a company's balance sheet as intangible, tangible, or investments. Examples of intangible assets include goodwill, patents, and trademarks. Examples of tangible fixed assets include land and buildings, plant and machinery, fixtures and fittings, motor vehicles and IT equipment. How should the changing value of a fixed asset be reflected in a company's accounts? The benefits that a business obtains from a fixed asset extend over several years. For example, a company may use the same piece of production machinery for many years, whereas a company-owned motor car used by a salesman probably has a shorter useful life. By accepting that the life of a fixed asset is limited, the accounts of a business need to recognize the benefits of the fixed asset as it is "consumed" over several years. This consumption of a fixed asset is referred to as depreciation. Definition of Depreciation Financial Reporting Standard 15 (covering the accounting for tangible fixed assets) defines depreciation as follows: "the wearing out, using up, or other reduction in the useful economic life of a tangible fixed asset whether arising from use, effluxion of time or obsolescence through either changes in technology or demand for goods and services produced by the asset. A portion of the benefits of the fixed asset will be used up or consumed in each accounting period of its life in order to generate revenue. To calculate profit for a period, it is necessary to match expenses with the revenues they help earn.

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In determining the expenses for a period, it is therefore important to include an amount to represent the consumption of fixed assets during that period (that is, depreciation). In essence, depreciation involves allocating the cost of the fixed asset (less any residual value) over its useful life. To calculate the depreciation charge for an accounting period, the following factors are relevant: The cost of the fixed asset; The (estimated) useful life of the asset; The (estimated) residual value of the asset.

What is the relevant cost of a fixed asset? The cost of a fixed asset includes all amounts incurred to acquire the asset and any amounts that can be directly attributable to bringing the asset into working condition. Directly attributable costs may include: Delivery costs Costs associated with acquiring the asset such as stamp duty and import duties Costs of preparing the site for installation of the asset Professional fees, such as legal fees and architects' fees

Note that general overhead costs or administration costs would not be included as part of the total costs of a fixed asset (e.g. the costs of the factory building in which the asset is kept, or the cost of the maintenance team who keep the asset in good working condition) The cost of subsequent expenditure on a fixed asset will be added to the cost of the asset provided that this expenditure enhances the benefits of the fixed asset or restores any benefits consumed. This means that major improvements or a major overhaul may be capitalized and included as part of the cost of the asset in the accounts. However, the costs of repairs or overhauls that are carried out simply to maintain existing performance will be treated as expenses of the accounting period in which the work is done, and charged in full as an expense in that period. What is the Useful Life of a fixed asset?

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An asset may be seen as having a physical life and an economic life. Most fixed assets suffer physical deterioration through usage and the passage of time. Although care and maintenance may succeed in extending the physical life of an asset, typically it will, eventually, reach a condition where the benefits have been exhausted. However, a business may not wish to keep an asset until the end of its physical life. There may be a point when it becomes uneconomic to continue to use the asset even though there is still some physical life left. The economic life of the asset will be determined by such factors as technological progress and changes in demand. For purposes of calculating depreciation, it is the estimated economic life rather than the potential physical life of the fixed asset that is used. What about the Residual Value of a fixed asset? At the end of the useful life of a fixed asset the business will dispose of it and any amounts received from the disposal will represent its residual value. This, again, may be difficult to estimate in practice. However, an estimate has to be made. If it is unlikely to be a significant amount, a residual value of zero will be assumed. The cost of a fixed asset less its estimated residual value represents the total amount to be depreciated over its estimated useful life.

Fixed Asset Controls

This section contains two dozen controls that can be applied to the acquisition, valuation, and disposal of fixed assets. Of this group, 13 are considered primary controls and are included in the flowchart in figure System of Fixed Asset Controls. The remaining 11 controls either do not fit into the various fixed asset transaction flows or are considered secondary controls that can bolster the primary controls as needed.

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In essence, the system of controls for an asset acquisition requires that initial funding approval come from the annual budget, as well as additional approval through a formal capital investment form just prior to the actual acquisition. There should also be a post installation analysis of how actual project results compared to the estimates shown in the original capital investment form. The key controls used once an asset is installed are to tag it, assign specific responsibility for it, and ensure that any asset transfers are approved by the shipping and receiving managers. Finally, asset disposition controls call for regular disposition reviews to ensure that dispositions occur while assets still retain some resale value, a formal disposition approval process, and proper tracking of any resulting receipts.

MANAGEMENT OF FIXED ASSETS:

The selection of various fixed assets required for creating the desired production facilities and the decision regarding the determination of level of fixed assets in the capital structure is an important decision for the company to take for the smooth running of business. The decisions relating to fixed assets involve huge funds for long period of time and are generally of irreversible nature affecting the long profitability of the business. Thus, management of fixed asset is of vital importance to any organization.

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The process of Fixed Assets Management involves: 1. Selection of most worthy projects from the different alternatives of fixed assets. 2. Arranging the requisite funds/capital for the same. The first important consideration is to acquire only that amount of fixed assets, which will be just sufficient to ensure smooth and efficient running of the business. In some cases it may be economical to buy certain assets in a lot size. Another important consideration to be kept in mind is possible increase in the demand of the firms product needs the expansion of activities. Hence a firm should have that amount of fixed assets, which could adjust to increase demand.

Another aspect of fixed assets management is that a firm must ensure buffer stocks of certain essential equipments to ensure uninterrupted production in the events of emergencies. Sometimes, there may some breakdown in some equipments or services affecting the entire production. It is always better to have some alternative arrangements to deal with such situations but at the same time the cost of carrying such buffer stock should also be evaluated. Efforts should also be made to minimize the level of buffer stock of fixed assets so that there will be maximum utilization during that period.

Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting, preventive Maintenance, and theft deterrence.

Many organizations face a significant challenge to track the location, quantity, condition, maintenance & depreciation status of their fixed assets. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile Barcode reader and then produce a report.

Off-the-shelf software packages for fixed asset management are marketed to businesses small and large. Some Enterprise Resource Planning Systems are available with fixed assets modules.

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Investment management is the professional management of various securities (shares, bonds etc) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds).

The term asset management is often used to refer to the investment management of collective investments, whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called "private banking". The provision of 'investment management services' includes elements of financial analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments.

Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars, Euros, pounds and yen. Coming under the remit of financial services many of the world's largest companies are at least in part investment managers and employ millions of staff and create billions in revenue. Fund manager (or investment advisor in the U.S.) refers to both a firm that provides investment management services and an individual(s) who directs 'fund management' decisions.

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Chapter-3
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Research methodology

Research Methodology:

Type of research:
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Here I have chosen quantitative study because it deals with the facts and figures, in this study the results are based on the values (in Numbers) of the organization.

Research design:
I have chosen Historical research design because in this study I am going to take the past years data into consideration.

Data collection:
I have collected the data in the form of secondary data and primary data.

Secondary data:
Secondary data is the data which is previous history. And I have collected it from the different websites and articles.

Primary data:
Primary data is the data which is collected in person from the people related to ultra tech.

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Chapter-4 INDUSTRY PROFLIE

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INDUSTRIAL PROFILE

The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement Industry with total capacity of 165 million tones is the second largest after China. Cement industry is dominated by 20 companies who account for over 70% of the market. Individually no company accounts for over 12% of the market. The major players like L&T and ACC have been quiet successful in narrowing the gap between demand and supply. Private housing sector is the major consumer of cement (53%) followed by the government infrastructure sector. Similarly

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northern and southern region consume around 20%-30% cement while the central and western region are consuming only 18%-16%.

India is the 2nd largest cement producer in world after china .Right from laying concrete bricks of economy to waving fly overs cement industry has shown and shows a great future. The overall outlook for the industry shows significant growth on the back of robust demand from housing construction, Phase-II of NHDP (National Highway Development Project) and other infrastructure development projects. Domestic demand for cement has been increasing at a fast pace in India. Cement consumption in India is forecasted to grow by over 22% by 2009-10 from 2007-08.Among the states, Maharashtra has the highest share in consumption at12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement production grew at the rate of 9.1 per cent during 2006-07 over the previous fiscal's total production of 147.8 mt (million tons).

Due to rising demand of cement the sales volume of cement companies are also increasing & companies reporting higher production, higher sales and higher profits. The net profit growth rate of cement firms was 85%.Cement industry has contributed around 8% to the economic development of India. Outsiders (foreign players) eyeing India as a major market to invest in the form of either merger or FDI (Foreign Direct Investment). Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. The company continues to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. The cement sector is expected to witness growth in line with the economic growth because of the strong co-relation with GDP. Future drivers of cement demand growth in India would be the road and housing projects. As per the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 percent per annum during the 11th Plan and cement production and capacity by the end of the 11th Plan are estimated to be 269 million tones and 298 million tonnes, respectively, with capacity utilization of 90 per cent

Despite the growth of Indian cement industry India lags behind the per capita production. Supply for cement is expected to remain tight which, in turn, will push up prices of cement by more than 50%. The most important factor for better prices is consolidation of the industry. It has just begun and we will see more consolidation in the coming years. Other budget measures such as cut in import duty from 12.5percent to nil etc. are all intended to cut costs and boost availability of cement. Sadly the adverse effects of global slowdown have not speared this industry too. Demand is sluggish, the government is keeping an eagle eye on prizes, domestic coal and pet coke, prizes have increased sharply and utilizations rates are down. The numbers coming out are a reflection of grim times. ACC the countrys largest cement company thats

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controlled by Swiss giant HOLCIM, registered 2% fall in august sales. It is the biggest fall since Feb 2007. Production fell by 5%. To stand against the problematic situation, government as well as cement industry has taken some steps. Companies are focusing on cost of transportation. One of the strategy is to decrease dependence on road & opt for sea logistics as that can cut transportation cost by 30- 50 %. Some plants are adopting futuristic plan such as setting up captive power plant, moving closer to the customers by creating clicker, crushing, and capacity in key markets, to be more customer centric to generate better revenue. India should push for stricter regulations of market place as to control the prices of big companies and prevent them from forming cartels and exchanging information. To fight with the high inflation, government wants to import more cement from Pakistan .However cement prizes are not very much high as other items but still they are increasing. And the reason of high prize is surging cost of raw material and transportation cost. Apart from this government also discussed with cement industry not to have increase in prizes and keep consumer interest in mind. Now the question arise in front of the government is whether the demand by the government is possible to increase through expenditure on infrastructure or not according to the current state of economy when so many crises are going on or how the government allocation of US$ 3.23 billion for the National Highway Development, Project will keep the demand for cement alive? And to what extent the prizes of cement should be increase so that consumer cant affect. Cement industry in India has also made tremendous strides in technological Upgradation and assimilation of latest technology. Presently, 93 per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially. Indian cement industry has also acquired technical capability to produce different types of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening.

Portland cement, Sulphate Resisting Portland Cement, White Cement etc. Some of the major clusters of cement industry in India are: Satna (Madhya Pradesh), Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (Andhra Pradesh), Bilaspur (Chhattisgarh), and Chandoria (Rajasthan). New Investments Cement and gypsum products have received cumulative foreign direct investment (FDI) of US$ 1,971.79 million between April 2000 and September 2010, according to the Department of Industrial Policy and Promotion (DIPP).

Dalmia Bharat Enterprises plans to invest US$ 554.32 million to set up two greenfield cement plants in Karnataka and Meghalaya.

Bharathi Cement plans to double its production capacity by the end of the current financial year by expanding its plant in Andhra Pradesh, with an investment of US$ 149.97 million.

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Madras Cements Ltd is planning to invest US$ 178.4 million to increase the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT from 2 MT by April 2011.

My Home Industries Limited (MHI), a 50:50 joint venture (JV) between the Hyderabad-based My Home Group and Ireland's building material major CRH Plc, plans to scale up its cement production capacity from the existing 5 million tonne per annum (mtpa) to 15 mtpa by 2016. The company would undertake this capacity expansion at a cost of US$ 1 billion.

Shree Cement, plans to invest US$ 97.13 million this year to set up a 1.5 million MT clinker and grinding unit in Rajasthan. Moreover, in June 2010, Shree Cement signed a memorandum of understanding (MoU) with the Karnataka government to invest US$ 423.6 million for setting up a cement unit and a power plant. US$ 317.7 million will be used to set up a cement manufacturing unit with an annual capacity of 3 mtpa while the balance will be for the 100 mega watt power plant.

Jaiprakash Associates plans to invest US$ 640 million to increase its cement capacity. Swiss cement company Holcim plans to invest US$ 1 billion in setting up 2-3 greenfield manufacturing plants in the country in the next five years to serve the rising domestic demand. Holcim is present in the country through ACC and Ambuja Cements and holds around 46 per cent stake in each company. While ACC operates 16 cement plants, Ambuja Cements controls five plants in India. The Aditya Birla group is the largest cement-making group by capacity in the country and controls Grasim Industries and Ultratech Cement.

Government Initiatives The cement industry is pushing for increased use of cement in highway and road construction. The Ministry of Road Transport and Highways has planned to invest US$ 354 billion in road infrastructure by 2012. Housing, infrastructure projects and the nascent trend of concrete roads would continue to accelerate the consumption of cement. Increased infrastructure spending has been a key focus area. In the Union Budget 2010-11, US$ 37.4 billion has been provided for infrastructure development. The government has also increased budgetary allocation for roads by 13 per cent to US$ 4.3 billion. Gujarat plans to treble its cement production capacity in 3-5 years. Proposals have been invited from cement companies such as ACC, ABG, Ambuja Cement, Emami, India bulls, Adani group, Ultratech and L&T and the state hopes to raise its capacity from 20 million tonnes per annum to 70 million ton. The state will host the biennial

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Vibrant Gujarat Global Summit in January 2011 and expects to witness investment proposals worth US$ 13.2 billion in the cement sector. Exchange rate used: 1 USD = 45.42 INR (as of December 2010) The cement industry is one of the vital industries for economic development in a country. The total utilization of cement in a year is used as an indicator of economic growth. Cement is a necessary constituent of infrastructure development and a key raw material for the construction industry, especially in the governments infrastructure development plans in the context of the nations socioeconomic development.

Prior to 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 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.

Finally it was 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.

During the earlier years, production of cement exceeded the demand. Society had a biased opinion against the cement manufactured in India, which further led to reduction in demand. The government intervened by giving protection to the Industry and by encouraging cooperation among the manufacturers.

In 1927, the Concrete Association of India was formed with the twin goals of creating a positive awareness among

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the

public

of

the

utility

of

cement

and

to

propagate

cement

consumption.

After 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. But it had little impact on the industry.

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. Government intervened directly by exercising authority over production, capacity and distribution of cement and it intervened indirectly through price control. 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. However the price control did not have the desired effect. Rise in input cost, reduced profit margins meant the manufacturers could not allocate funds for increase in capacity. Partial Control (1982-1989) To give impetus to the cement industry, 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. After Liberalization

35

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.

This resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. Most of the major players invested heavily for capacity expansion. To maximize the opportunity available in the form of global markets, the industry laid greater focus on exports. The role of the government has been extremely crucial in the growth of the industry.

Future Trends

The cement industry is expected to grow steadily in 2009-2010 and increase capacity by another 50 million tons in spite of the recession and decrease in demand from the housing sector.

The industry experts project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%.

India ranks second in cement production after China. The major Indian cement companies are Associated Cement Company Ltd (ACC), Grasim Industries Ltd, Ambuja Cements Ltd, J.K Cement Ltd and Madras Cement Ltd.

The major players have all made investments to increase the production capacity in the past few months, heralding a positive outlook for the industry.

The housing sector accounts for 50% of the demand for cement and this trend is expected to continue in the near future.

An increased outflow in infrastructure sector, by the government as well as private builders, has raised a significant demand of cement in India. It is the key raw material in construction industry. Also, it has highly influenced those bigger companies to participate in the growing sector. At least 125 plants set up by the big companies in India with about 300 other small scale cement manufacturers, to fulfill the growing demand of cement. Being one of the vital industries, the cement industry contributes to the nation's socioeconomic development. The sum total utilization of cement in a year indicates the country's economic growth. Cement plant was first set up in Calcutta, in 1889. At that time, the cement used to manufacture from Argillaceous. In 1904, the first organized set up to manufacture cement was commenced in Madras, which was named South India Industries Limited. Again in 1914, another cement manufacturing unit was set up 36

in Porbandar, Gujarat, but this time it was licensed. In the early years of that era, the demand for the cement tremendously exceeded but only after few years, the industry faced a severe downfall. To overcome from this the worsening situation, the Concrete Association of India was founded in 1927. The organization has two prime goals, one was to create awareness about utility of cement and another was to encourage cement utilization. Even after the independence, the growth of the cement industry was too gradual. In the year 1956, a Distribution Control System was established with an objective to provide Indian manufacturers and consumers self sufficiency. Indian government then introduced a quota system to provide an impetus to this industry, in which 66% of the sales was imposed to government or small real estate developers. After the implementation of quota, the cement industry tasted a sudden growth and profitability in India. In 1991, the government de-licensed the cement industry. The growth of the industry accelerated forthwith and majority of the industrialists invested heavily in the industry with the awarded freedom. The industry started focusing on export also to double the opportunity available for it in global markets. Today, the cement manufacturers in India have transformed into leading Indian exporters of cement across the world. The demand of cement in year 2009-2010 is expected to increase by 50 million tons despite of the recession and decline in demand of housing sector. Against India's GDP growth of 7%, the experts have estimated the cement sector to grow by 9 to 10 % in the current financial year. Major Indian cement manufacturers and exporters have all made huge investments in the last few months to increase their production capability. This heralds an optimistic outlook for cement industry. The housing sector in India accounts for 50 % of the cement's demand. And the demand is expected to continue. With the constant effort made by cement manufacturers and exporters, India has become the second largest cement producer in the world. Madras Cement Ltd., Associated Cement Company Ltd (ACC), Ambuja Cements Ltd, Grasim Industries Ltd, and J.K Cement Ltd. are among few renowned names of the major Indian cement companies.

INDIAN CEMENT INDUSTRY AT A GLANCE IN 2011 - 2012 The demand for cement mainly depends on the level of development and the rate of growth of the economy of the country. There are no close substitutes for cement and hence the demand for cement is price is elastic as far as India is concerned. For the FY 2011 - 12 (Apr - Oct), MT 97.84 was consumed form the 98.91 MT produced.

37

During the first half of the year, there was marginally poor off take in cement demand due to passive construction activity, which led to excess supply, thus putting downward pressure on realizations. This has been coupled with rise in input costs, especially prices of coal and petroleum products. As a result, both the top line and bottom line have been affected. This demand supply mismatch scenario is expected to prevail for quite some time in the years to come. Good infrastructure development will support demand

38

Chapter-5 COMPANY PROFILE

39

ULTRATECH CEMENT:

UltraTech Cement Limited has an annual capacity of 52 million tonnes. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. It also manufactures ready mix concrete (RMC). UltraTech Cement Limited has five integrated plants, six grinding units and three terminals two in India and one in Sri Lanka. UltraTech Cement is the countrys largest exporter of cement clinker. The export markets span countries around the Indian Ocean, Africa, Europe and the Middle East. UltraTechs subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P) Limited. The roots of the Aditya Birla Group date back to the 19th century in the picturesque town of Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started trading in cotton, laying the foundation for the House of Birlas. Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the early part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up industries in critical sectors such as textiles and fibre, aluminum, cement and chemicals. As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom struggle. He represented India at the first and second round-table conference in London, along with Gandhiji. It was at "Birla House" in Delhi that the luminaries of the Indian freedom struggle often met to plot the downfall of the British Raj. Ghanshyamdas Birla found no contradiction in pursuing business goals with the dedication of a saint, emerging as one of the foremost industrialists of pre-independence India. The principles by which he lived were soaked up by his grandson, Aditya Vikram Birla, our Group's legendary leader.

40

Aditya Vikram Birla: putting India on the world map A formidable force in Indian industry, Mr. Aditya Birla dared to dream of setting up a global business empire at the age of 24. He was the first to put Indian business on the world map, as far back as 1969, long before globalisation became a buzzword in India. In the then vibrant and free market South East Asian countries, he ventured to set up world-class production bases. He had foreseen the winds of change and staked the future of his business on a competitive, free market driven economy order. He put Indian business on the globe, 22 years before economic liberalization was formally introduced by the former Prime Minister, Mr. Narasimha Rao and the former Union Finance Minister, Dr. Manmohan Singh. He set up 19 companies outside India, in Thailand, Malaysia, Indonesia, the Philippines and Egypt. Interestingly, for Mr. Aditya Birla, globalization meant more than just geographic reach. He believed that a business could be global even whilst being based in India. Therefore, back in his home-territory, he drove singlemindedly to put together the building blocks to make our Indian business a global force.

Under his stewardship, his companies rose to be the world's largest producer of viscose staple fibre, the largest refiner of palm oil, the third largest producer of insulators and the sixth largest producer of carbon black. In India, they attained the status of the largest single producer of viscose filament yarn, apart from being a producer of cement, grey cement and rayon grade pulp. The Group is also the largest producer of aluminium in the private sector, the lowest first cost producers in the world and the only producer of linen in the textile industry in India. At the time of his untimely demise, the Group's revenues crossed Rs.8,000 crore globally, with assets of over Rs.9,000 crore, comprising of 55 benchmark quality plants, an employee strength of 133,000 and a shareholder community of 344,000. Most importantly, his companies earned respect and admiration of the people, as one of India's finest business houses, and the first Indian International Group globally. Through this outstanding record of enterprise, he helped

41

create enormous wealth for the nation, and respect for Indian entrepreneurship in South East Asia. In his time, his success was unmatched by any other industrialist in India.

That India attains respectable rank among the developed nations, was a dream he forever cherished. He was proud of India and took equal pride in being an Indian. Under the leadership of our Chairman, Mr. Kumar Mangalam Birla, the Group has sustained and established a leadership position in its key businesses through continuous value-creation. Spearheaded by Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf Fertilizers and companies in Thailand, Malaysia, Indonesia, the Philippines and Egypt, the Aditya Birla Group is a leader in a swathe of products viscose staple fibre, aluminium, cement, copper, carbon black, palm oil, insulators, garments. And with successful forays into financial services, telecom, software and BPO, the Group is today one of Asia's most diversified business groups. Board of Directors

Mr. Kumar Mangalam Birla, Chairman Mrs. Rajashree Birla Mr. R. C. Bhargava Mr. G. M. Dave Mr. N. J. Jhaveri Mr. S. B. Mathur Mr. V. T. Moorthy Mr. O. P. Puranmalka Mr. S. Rajgopal Mr. D. D. Rathi Mr. S. Misra, Managing Director Mr. Adesh Gupta

Executive President & Chief Financial Officer Mr. K. C. Birla Chief Manufacturing Officer R.K. Shah Chief Marketing Officer Mr. O. P. Puranmalka Company Secretary Mr. S. K. Chatterjee 42

Our vision: "To actively contribute to the social and economic development of the communities in which we operate. In so doing, build a better, sustainable way of life for the weaker sections of society and raise the country's human development index." Mrs. Rajashree Birla, Chairperson, The Aditya Birla Centre for Community Initiatives and Rural Development

Awards won Year 2011 2010-2011 2010-2011 2010 2010 2010 2009-2010 2009-2010 2009-2010 Award ASSOCHAM CSR Excellence Award for its Truly outstanding CSR Activities Subh Karan Sarawagi Environment Award Business World FICCI-SEDF CSR Award Greentech Environment Excellence Gold Award IMC Ramkrishna Bajaj National Quality Award Asian CSR Award National Award for Prevention of Pollution Rajiv Gandhi Environment Award for Clean Technology State Level Environment Award (Plant)

Making a difference

43

Before Corporate Social Responsibility found a place in corporate lexion, it was already textured into our Group's value systems. As early as the 1940s, our founding father Shri G.D Birla espoused the trusteeship concept of management. Simply stated, this entails that the wealth that one generates and holds is to be held as in a trust for our multiple stakeholders. With regard to CSR, this means investing part of our profits beyond business, for the larger good of society. While carrying forward this philosophy, his grandson, Aditya Birla weaved in the concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his view, it was unwise to keep on giving endlessly. Instead, he felt that channelising resources to ensure that people have the wherewithal to make both ends meet would be more productive. He would say, "Give a hungry man fish for a day, he will eat it and the next day, he would be hungry again. Instead if you taught him how to fish, he would be able to feed himself and his family for a lifetime." Taking these practices forward, our chairman Mr. Kumar Mangalam Birla institutionalized the concept of triple bottom line accountability represented by economic success, environmental responsibility and social commitment. In a holistic way thus, the interests of all the stakeholders have been textured into our Group's fabric. The footprint of our social work today straddles over 3,700 villages, reaching out to more than 7 million people annually. Our community work is a way of telling the people among whom we operate that We Care. Our strategy Our projects are carried out under the aegis of the "Aditya Birla Centre for Community Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the strategic direction, and the thrust areas for our work ensuring performance management as well.

Our focus is on the all-round development of the communities around our plants located mostly in distant rural areas and tribal belts. All our Group companies - Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf and UltraTech have Rural Development Cells which are the implementation bodies. Projects are planned after a participatory need assessment of the communities around the plants. Each project has a one-year and a three-year rolling plan, with milestones and measurable targets. The objective is to phase out our presence over a period of time and hand over the reins of further development to the people. This also enables us to widen our reach. Along with internal performance assessment mechanisms, our projects are audited

44

by reputed external agencies, who measure it on qualitative and quantitative parameters, helping us gauge the effectiveness and providing excellent inputs. Our partners in development are government bodies, district authorities, village panchayats and the end beneficiaries -- the villagers. The Government has, in their 5-year plans, special funds earmarked for human development and we recourse to many of these. At the same time, we network and collaborate with like-minded bilateral and unilateral agencies to share ideas, draw from each other's experiences, and ensure that efforts are not duplicated. At another level, this provides a platform for advocacy. Some of the agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for Humanity International, Unicef and the World Bank. Our focus areas Our rural development activities span five key areas and our single-minded goal here is to help build model villages that can stand on their own feet. Our focus areas are healthcare, education, sustainable livelihood, infrastructure and espousing social causes. The name Aditya Birla evokes all that is positive in business and in life. It exemplifies integrity, quality, performance, perfection and above all character. Our logo is the symbolic reflection of these traits. It is the cornerstone of our corporate identity. It helps us leverage the unique Aditya Birla brand and endows us with a distinctive visual image.

Depicted in vibrant, earthy colors, it is very arresting and shows the sun rising over two circles. An inner circle symbolizing the internal universe of the Aditya Birla Group, an outer circle symbolizing the external universe, and a dynamic meeting of rays converging and diverging between the two.

Through its wide usage, we create a consistent, impact-oriented Group image. This undoubtedly enhances our profile among our internal and external stakeholders.

Our corporate logo thus serves as an umbrella for our Group. It signals the common values and beliefs that guide our behavior in all our entrepreneurial activities. It embeds a sense of pride, unity and belonging in all of our 130,000 colleagues spanning 36 countries and 42 nationalities across the globe. Our logo is our best calling card that opens the gateway to the world.

45

Group companies :: Grasim Industries Ltd. :: Hindalco Industries Ltd. :: Aditya Birla Nuvo Ltd. :: UltraTech Cement Ltd.

Indian companies :: Aditya Birla Minacs IT Services Ltd. :: Aditya Birla Minacs Worldwide Limited :: Essel Mining & Industries Ltd :: Idea Cellular Ltd. :: Aditya Birla Insulators :: Aditya Birla Retail Limited :: Aditya Birla Chemicals (India) Limited

International companies

46

Thailand :: Thai Rayon :: Indo Thai Synthetics :: Thai Acrylic Fibre :: Thai Carbon Black :: Aditya Birla Chemicals (Thailand) Ltd. :: Thai Peroxide Philippines :: Indo Phil Group of companies :: Pan Century Surfactants Inc. Indonesia :: PT Indo Bharat Rayon :: PT Elegant Textile Industry :: PT Sunrise Bumi Textiles :: PT Indo Liberty Textiles :: PT Indo Raya Kimia Egypt :: Alexandria Carbon Black Company S.A.E :: Alexandria Fiber Company S.A.E China

47

:: Liaoning Birla Carbon :: Birla Jingwei Fibres Company Limited :: Aditya Birla Grasun Chemicals (Fangchenggang) Ltd. Canada :: A.V. Group Australia :: Aditya Birla Minerals Ltd. Laos :: Birla Laos Pulp & Plantations Company Limited North and South America, Europe and Asia :: Novelis Inc. Singapore :: Swiss Singapore Overseas Enterprises Pte Ltd. (SSOE) Joint ventures :: Birla Sun Life Insurance Company :: Birla Sun Life Asset Management Company :: Aditya Birla Money Mart Limited :: Tanfac Industries Limited

48

UltraTech is India's largest exporter of cement clinker. The company's production facilities are spread across eleven integrated plants, one white cement plant, one clinkerisation plant in UAE, fifteen grinding units, and five terminals four in India and one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001 certification. In addition, two plants have received ISO 27001 certification and four have received SA 8000 certification. The process is currently underway for the remaining plants. The company exports over 2.5 million tonnes per annum, which is about 30 per cent of the country's total exports. The export market comprises of countries around the Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area in the company's strategy for growth. UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and Portland blast furnace slag cement.

Ordinary Portland cement Portland blast furnace slag cement Portland Pozzolana cement Cement to European and Sri Lankan norms

Ordinary Portland cement Ordinary portland cement is the most commonly used cement for a wide range of applications. These applications cover dry-lean mixes, general-purpose ready-mixes, and even high strength pre-cast and pre-stressed concrete. Portland blast furnace slag cement Portland blast-furnace slag cement contains up to 70 per cent of finely ground, granulated blast-furnace slag, a nonmetallic product consisting essentially of silicates and alumino-silicates of calcium. Slag brings with it the advantage of the energy invested in the slag making. Grinding slag for cement replacement takes only 25 per cent of the energy needed to manufacture portland cement. Using slag cement to replace a portion of portland cement in a concrete mixture is a useful method to make concrete better and more consistent. Portland blast-furnace slag cement has a lighter colour, better concrete workability, easier finishability, higher compressive and flexural strength, lower permeability, improved resistance to aggressive chemicals and more consistent plastic and hardened consistency.

Portland Pozzolana cement

49

Portland pozzolana cement is ordinary Portland cement blended with pozzolanic materials (power-station fly ash, burnt clays, ash from burnt plant material or silicious earths), either together or separately. Portland clinker is ground with gypsum and pozzolanic materials which, though they do not have cementing properties in themselves, combine chemically with Portland cement in the presence of water to form extra strong cementing material which resists wet cracking, thermal cracking and has a high degree of cohesion and workability in concrete and mortar. "As a Group we have always operated and continue to operate our businesses as Trustees with a deep rooted obligation to synergize growth with responsibility." Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group The cement industry relies heavily on natural resources to fuel its operations. As these dwindle, the imperative is clear alternative sources of energy have to be sought out and the use of existing resources has to be reduced, or eliminated altogether. Only then can sustainable business be carried out, and a corporate can truly say it is contributing to the preservation of the environment. UltraTech takes its responsibility to conserve the environment very seriously, and its eco-friendly approach is evident across all spheres of its operations. Its major thrust has been to identify alternatives to achieve set objectives and thereby reduce its carbon footprint. These are done through: :: Waste management :: Energy management :: Water conservation :: Biodiversity management :: Afforestation :: Reduction in emissions

50

Importantly, UltraTech has set a target of 2.96 per cent reduction in CO2 emission intensity, at a rate of 0.5 per cent annually, up to 2015-16, with 2009-10 as the baseline year. This will also include CO2 emissions from the recently acquired ETA Star Cement and upcoming projects.

Mrs. Rajashree Birla, Chairperson, The Aditya Birla Centre for Community Initiatives and Rural Development Making a difference Before Corporate Social Responsibility found a place in corporate lexicon, it was already textured into our Group's value systems. As early as the 1940s, our founding father Shri G.D Birla espoused the trusteeship concept of management. Simply stated, this entails that the wealth that one generates and holds is to be held as in a trust for our multiple stakeholders. With regard to CSR, this means investing part of our profits beyond business, for the larger good of society. While carrying forward this philosophy, our legendary leader, Mr. Aditya Birla, weaved in the concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his view, it was unwise to keep on giving endlessly. Instead, he felt that channelizing resources to ensure that people have the wherewithal to make both ends meet would be more productive. He would say, "Give a hungry man fish for a day, he will eat it and the next day, he would be hungry again. Instead if you taught him how to fish, he would be able to feed himself and his family for a lifetime." Taking these practices forward, our chairman Mr. Kumar Mangalam Birla institutionalized the concept of triple bottom line accountability represented by economic success, environmental responsibility and social commitment. In a holistic way thus, the interests of all the stakeholders have been textured into our Group's fabric. .

51

Chapter-6 Data analysis

52

COMPONENTIAL ANALYSIS: The componential analysis of the fixed assets of Ultratech cements includes net blocks, capital (work in progress) and construction stores and advances. The data relating to different components of fixed assets of the Ultratech cements for 4 years commencing from 2008-09 to 2011-12 are set out in the following table analysis:

Year 2008-09 2009-10 2010-11 2011-12

Net block 4635.69 4941.68 11400.25 11643.28

Capital 124.49 124.49 274.04 274.07

Total 4760.18 5066.17 11674.29 11917.35

53

14000 12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 Net block Capital Total

INTERPRETATION: By observing the above table it reveals that the investment in the net block is in increasing trend .It was over the total fixed assets during the year 2011 and it has increased to during the year 2012.

TREND ANALYSIS: In financial analysis the direction of change over a period of years is of initial importance. Time series and trend analysis of ratio indicates the direction of changes. This kind of analysis is particularly applicable to the profit and loss account. It is advisable that trends of sales and net income may be studied in the light of two factors. The general price level that might be found in practice is that a number of firms would be shown at persistent growth over period of years but to get a true trend of growth, the sales figure should be adjusted by a suitable index of general prices.

54

In other words, sales figures should be deflated for raising price level. Another method of securing trend of growth and the one which can be used instead of adjusted sales figure or as to check on them is to tabulate and lot the output of physical volume of the sales expressed in suitable units of measure. The general price level is not considered while analyzing trend in growth as it can mislead management. They may become unduly optimistic in period of prosperity and pessimistic in dual periods. For trend analysis the use of index numbers is generally advocated, the procedure followed is to assign the numbers to items of base years and at calculated percentage change in each item of other years in relation to base year. This procedure may be called as Fixed percentage method. This margin determines the direction of upward or downward and involves the implementation of the percentage relationship of each statement item means on the same in the base year. Generally the first year is taken as the base year. The figures of the base year are taken as 100 and trend ratio for the other years is calculated on the basis of first year. Here an attempt is made to know the growth rate in total investment and fixed assets of the ULTRATECH CEMENT Electronics for 4 years that is 2008-09 to 2011-12.

GROWTH IN TOTAL INVESTMENT: YEAR 2008-09 2009-10 2010-11 INVESTMENT 3696.99 3602.10 4608.65 TREND PERCENTAGE 100 100 100

55

2011-12

10666.04

100

GROWTH IN TOTAL INVESTMENT

12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 INVESTMENT TREND PERCENTAGE

INTERPRATATION: From the analysis of above table it can be observed that Total Investment of Ultra tech Cements had no change. It is constant from 2008-09 to 2011-12.

GROWTH RATE IN FIXED ASSETS:

56

YEAR 2008-09

FIXEDASSETS 4783.61

TREND PERCENTAGE 100

2009-10

5312.97

110.06

2010-11

5201.05

106.43

2011-12

12505.57

132.36

GROWTH RATE IN FIXED ASSETS

14000 12000 10000 8000 FIXEDASSETS 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 TREND PERCENTAGE

INTERPRETATION: The above table shows that the investments in fixed assets are increasing. So this is a good sign for the company. When compared to 2008-2012 it is been continuously increased in the ratio 100 percent to 132.36%

57

RATIO ANALYSIS: Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated Quotient of two mathematical expressions and Ratios look at the relationship between individual values and relate them to how a company has performed in the past, and might perform in the future. The absolute accounting figure reported in financial statement does not provide a meaningful understanding of the performance and financial position of the firm. Ratios help us to summarize large quantities of financial data and to make qualitative judgment about firms financial performance.

1.

FIXED ASSETS TO NET WORTH RATIO :

This ratio establishes the relationship between fixed assets and net worth . Net worth = share capital + reserves and surplus + retained earnings Fixed assets to net worth ratio = Fixed assets Net worth The ratio of Fixed assets to Net worth indicates the extent to which share holders funds are sunk into the fixed assets. Generally, share holders should finance for Purchasing fixed assets and equity including the reserves and surpluses and retained earnings. If the ratio is less than 100% it implies that owners funds are more than total fixed assets and the share holder provide a part of working capital.

58

When the ratio is more than 100% it implies that owners funds are not sufficient to finance the fixed assets and financier has to depend upon outsiders to finance the fixed assets. There is no Rule of Thumb to interpret but 60%-65% is considered to be satisfactory ratio in case of industrial undertaking.

2. FIXED ASSET RATIO: This ratio explains whether the firm has raised adequate long term fund to meet its fixed assets required and is calculated as under: = Fixed assets (after depreciation) Capital employed This ratio gives an idea as to what part of the capital employed has been used in purchasing the fixed assets for the concern. If the ratio is less than 1 it is good for the concern. 3. FIXED ASSETS AS A PERCENTAGE TO CURRENT LIABILITIES:

The ratio measures the relationship between fixed assets and the funded debts and is very useful to the long term erection. The ratio can be calculated as shown below Fixed assets as a percent of current liabilities= Fixed Assets Current liabilities

59

3. TOTAL ASSETS TURN OVER RATIO: The ratio is calculated by dividing the net sales by the value of total assets that is (net sales/total investment) or (sales/total investment).A high ratio is an indicator of over trading of total assets while a low ratio reveals idle capacity. The traditional standard for the ratio is two times. = Net sales Total Assets

4. FIXED ASSETS TURNOVER RATIO: The ratio expresses the no. of times fixed assets are being turned over in a stated period. It is calculated under. = _____________sales_____________ Net fixed assets (after depreciation)

This ratio shows how well the fixed assets are being used in business. The ratio is important in case of manufacturing concern because sales are produced not only by use of current assets but also by amount invested in fixed assets the higher ratio, the better is the performance. On the other hand, a low ratio indicates that fixed assets are not being effectively utilized.
5. RETURN ON TOTAL ASSETS: = Profit after tax Total assets This ratio is calculated to measure the profit after tax against invested in total assets to ascertain whether assets are being utilized properly or not. The higher the ratio the better it is for the concern.

60

Let us use ratios in the (Ultra tech Cement) information: FIXED ASSETS TO NET WORTH RATIO The ratio indicates the extent to where the shareholders funds are struck in the fixed assets. The formula to compute fixed assets to net worth is calculated as follows: Fixed assets (after depreciation) Net worth NET WORTH =share capital + reserves and surplus + retained earnings-net loss. If the ratio is less than 100% it implies that owners funds are more than the fixed assets and the shareholders and vice versa provide a part of working capital. Fixed assets to net worth ratio = Net fixed assets Net worth

YEAR
2008-09

NETFIXED ASSETS 4783.61

NET WORTH 2696.22

RATIO IN % 1.774191

2009-10

5312.97

3600.42

1.475653

2010-11

5201.05

4606.66

1.129028

2011-12

12505.57

10661.26

1.172992

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FIXED ASSETS TO NET WORTH RATIO

14000 12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 NET FIXED ASSETS NET WORTH RATIO IN %

INTERPRETATION: The above table shows a continuous increase in net worth and fixed assets. This shows the satisfactory position of the company. FIXED ASSET RATIO: Capital employed=shareholders fund + Long-Term borrowings Fixed assets (after depreciation) Capital Employed YEAR 2008-09 NETFIXED ASSETS 4783.61 CAPITAL EMPLOYED 4437.49 RATIO IN % 1.077999

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2009-10

5312.97

5743.73

0.925003

2010-11

5201.05

6213.17

0.837101

2011-12

12505.57

14810.64

0.844364

16000 14000 12000 10000 NETFIXED ASSETS 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 CAPITAL EMPLOYED RATIO IN %

INTERPRETATION The above table shows growth in fixed assets satisfactory position of fixed assets in the company. Long term funds show less fluctuation, there is no change the highest percent 1.07 recorded in the year 2008-09. That shows the position of the company is satisfactory. FIXED ASSETS AS A PERCENTAGE TO CURRENT LIABILITIES: Fixed assets as a percentage to current Liabilities = __fixed assets__ Current Liabilities

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YEAR 2008-09

NET FIXED ASSETS 4783.61

CURRENT LIABILITIES 1153.01

RATIO IN % 4.148802

2009-10

5312.97

1120.92

4.73983

2010-11

5201.05

1138.08

4.570021

2011-12

12505.57

2880.41

4.341594

14000 12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 NET FIXED ASSETS CURRENT LIABILITIES RATIO IN %

INTERPRETATION The above table shows the relationship between fixed and current Liabilities. The above table shows growth in fixed assets This shows the satisfactory position of fixed assets in the company. Even the current liabilities are increasing. The highest percentage recorded was in the year 2009-10 i.e., 4.73 and the lowest was in the year 2008-09 i.e., 4.14.

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TOTAL INVESTMENT TURN OVER RATIO: The total investment turnover ratio can be calculated by the formula as given under Total investment ratio = sales Total investment

YEAR 2008-09

SALES 5508.78

INVESTMENT 3696.99

RATIO IN % 1.490072

2009-10

6383.08

3602.10

1.772044

2010-11

7049.68

4608.65

1.529663

2011-12

13209.91

10666.04

1.238502

14000 12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 SALES INVESTMENT RATIO IN %

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INTERPRETATION
From the above table we can see that sales had an increase Investment is constant from 2009-2012 that signifies the company position is satisfactory. FIXED ASSETS TURN OVER RATIO: The fixed assets turnover ratio is a relation between the sales or cost of goods and fixed/capital assets employed in a business. Fixed assets turnover ratio = sales

Total fixed asset YEAR 2008-09 SALES 5508.78 NETFIXED ASSETS 4783.61 RATIO IN % 1.151595

2009-10

6383.08

5312.97

1.201415

2010-11

7049.68

5201.05

1.355434

2011-12

13209.91

12505.57

1.056322

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14000 12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 SALES NETFIXED ASSETS RATIO IN %

INTERPRETATION The above table shows increases in Net fixed assets. That can also be seen clearly in sales, that indicates a good sign. RETURN ON TOTAL ASSETS: The return on fixed assets can calculate as under: Return on fixed assets = profit after tax Total Assets

YEAR 2008-09

PROFIT AFTER TAX 1007.61

TOTAL ASSETS 6087.5

RATIO IN % 0.165521

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2009-10

977.02

6674.58

0.146379

2010-11

1404.23

6673.89

0.210407

2011-12

1093.24

16264.27

0.067217

18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2008-09 2009-10 2010-11 2011-12 PROFIT AFTER TAX TOTAL ASSETS RATIO IN %

INTERPRETATION The above table shows increase in profit 2009-2012 profit has gone up. This shows the favorable position of the company.

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VALUATION OF FIXED ASSETS:

Ultratech Cements Follows 1) Historical cost method in the valuation of fixed assets.
2) The fixed assets do not include assets acquired on sale-cum-lease basis from various Financial Institutions whereon the lease rent paid for the year is charged to revenue. 3) Plant and Machinery includes the value of Air Conditioning Plants at various units which were transferred and vested with the Corporation under the transfer scheme. The gross value and depreciation thereon are not segregated in the absence of break up details under the transfer scheme. The value thereof, however, is insignificant. 4) Investments are intended for long term and are carried at cost. Income on investment is accounted on accrual basis. 5) Capital expenditure on assets not owned by the company is reflected as a distinct items in capital WIP till the period of completion and therefore in the Fixed assets. 6) The Company evaluates the impairment of losses on the fixed assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such assets are considered to be impaired the impairment loss is then recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset's net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the smallest level for which, there are separately identifiable cash flows. 7) Fixed assets is adjusted in their carrying cost in respect of foreign currency transactions entered before 1-42008 and that related to current assets is recognized as revenue/expenditure during the year. 8) In case of commissioned assets, where final settlement of bills with contractors is yet to be effected, capitalization is done on provisional basis subject to necessary adjustment in the year of final settlement.

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CALCULATION OF DEPRECIATION: Depreciation methods followed by Ultratech Cements are as follows: 1) Depreciation is charged on straight-line method as per rates notified by the Government of India except where actual cost does not exceed Rs. 5000 in which case it is charged 100% in the same year. In respect of assets, where rate is not laid down, depreciation is provided on straight-line method under the schedule XIV of the Companies Act 1956. 2) Depreciation is provided on pro-rata basis in the year in which the asset becomes available for use. 3) Where the cost of depreciable assets has undergone a change during the year due to increase/decrease in long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is depreciated prospectively over residual life determined on the basis of the rate of depreciation. 4) Internal electrical wiring, fittings etc., are treated as part of buildings and as such depreciation applicable to buildings is charged thereon.

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Chapter-7 FINDINGS

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Findings :
Regarding to the fixed assets to net worth ratio shows a continuous increase in net worth and fixed assets. This shows the satisfactory position of the company. Regarding the long-term funds to fixed assets they show an increase. Regarding the total investment turnover ratio it is observed sales had an increase from 2009-12 Regarding the Fixed Asset turnover ratio, sales had an increased. Regarding the Return on total assets ratio it has been observed that there is profit. This shows the favorable position of the company. From the above study it can be said that the Ultratech Cements overall financial position on fixed assets is satisfactory.

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Conclusion:
After analyzing the financial position of Ultratech Cements and evaluating its fixed assets management or capital budgeting techniques in respect of component analysis, trend analysis and ratio analysis. The following conclusions are drawn from the project preparation.

Even though company is utilizing its own funds there is very need that company should improve its liquidity position, debtors collection period. Utilization of proper management of its current assets and current liabilities.

The progress of Ultratech Cements shows that there is an increase in Net block considerably over the year that the investment in the net block is in increase trend .It increased during the year 2009-12 and it has 69.80%.

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SUGGESTIONS:

It is suggested to improve the position of the company by effectives utilization of fixed assets. Growth rate in fixed assets can be increase by employing more investment. Total investment to sales can be improved.

Company may look into increasing various forms of currents assets and decreasing current liabilities to effective manage working capital requirement.

The company has to lookout new joint ventures and assignments. To meet the short term requirements the company has to raise short term as well as long term loans. To attract to the new customers the company has to adapt new procedures and new technology.

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Chapter-8 Bibliography
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Bibliography:
1) Khan, M Y and P K Jain, Financial Management, Tata McGraw-Hill Publishing Co., New Delhi, 2007.

2) I M Pandey, Essentials of Financial Management, Vikas Publishing House Pvt Ltd, New Delhi, 1995.

3) Ramesh, S and A Gupta, Venture Capital and the Indian Financial Sector, Oxford university press, New Delhi, 1995.

4) Anthony, R N and J S Reece, Management Accounting Pincipls, Taraporewala, Bombay.

5) Jain, P K , Josette peyrard and Surendra S Yadav, International Financial Management, Macmillan India Ltd, New Delhi, 1998.

6) Prasanna Chandra, financial Management, Tata McGraw-Hill Publishing Co., New Delhi, 2007.

www.ultratech.com www.indiancements.com

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www.fixedassectsmanagement.com www.googlefinance.com

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