y INTRODUCTION

A funds flow statement is a technical device designed to analyze, the changes in the financial condition of a business enterprise between two years. It is also called as a statement of sources and applications of funds. The funds flow statement is becoming popular with the management because it not only helps them in analyzing financial operations, providing basis for comparison with budgets, and serving as a tool of communication, but also explains the financial consequences of such operations such as the reason why the company is experiencing difficulty in making payments to creditors or why the bank balance is getting thinner. There is a general recognition in industry and business and among professional accounting bodies that financial statements should provide relevant information which sub serves the multiple objectives of shareholders, investors, creditors, customers and the public and which enable them to arrive at rational economic decisions. Normally what the shareholders look for in these statements is an account of the stewardship of the firm and the amount which may be expected as dividend. Potential investors look upon funds flow statements as the source of there realistic view of the value of a companys shares in terms of an expected futures stream of distribution and judge the efficiency of the management accordingly.

MEANING OF FUNDS Fund:

According to the dictionary meaning of the term Funds implies an accumulation or deposit of resources from which supplies are may be drawn a more or less permanent store or supply. It is also defined as available pecuniary resources but these two meanings are abroad in nature and apt to macro level planning and control. A number of definitions of the term fund have been given. Some people call fund as cash. But it is seen in practice that the current assets are constantly circulating through cash

Meaning of Flow of Funds :

The term flow means movement and includes both inflow and out flow. The term flow of funds means transfer of economic values from one asset of equality to another. Flow of funds is said top have taken place when any transaction makes changes in the amount of funds available before happening of the transaction.

NEED FOR THE STUDY

A project is an activity sufficiently self-contained to permit financial and commercial analysis. in most cases projects represent expenditure of funds by pre-existing which want to expand or improve their operation In general a project is an activity in which, we will spend money in expansion of returns in which logically seems to lead it self planning. Financing and implementations as a unit, is a specific activity with a specific point and a specific ending point intended to a accomplish a specific objective of the study. 1. For the purchases of Raw-materials, components and spares 2. To pay Wages and simplicity 3. To meet the selling costs as packing, advertising etc. 4. To provide credit facilities to the customers. 5. To maintain the inventories of Raw-Materials, Work-in-process, stores and spares and Finished stock.

SCOPE OF THE STUDY

The present study focuses as sources funds and application of funds for a period of time. The study is confirmed to find out the changes in the financial position of The Penna Cement Financial Services Limited between the beginning and ending financial Year.It is a technical device designed to analyze the changes in the financial condition of the business enterprises between two dates. This funds flow statement is a statement which indicates various means by which the funds have been obtained during a certain period and the ways to which these funds have been used during the period. The term funds used here means working capital that is the excess of current assets over current liabilities. It is an essential tool for the financial analysts and is of primary importance to the financial management. Now a days it is being widely used by the financial analyst credit granting institutions and financial managers. The basic purpose of the funds flow statement is to reveal the changes in the working capital on the two balance sheet dates. It helps in the analysis of financial operations. It helps in the formation of realistic dividend policy. It helps in the proper allocation

of resources. It helps in appraising the use of working capital and finally it acts as future guide.

OBJECTIVES OF THE STUDY

1. To study the financial statements of The Penna Cement Financial Services limited for the 4 years.

2. To analyze how The Penna Cement Financial Services is utilizing its resources.

3. To analyze the changes in assets and liabilities from the end of one period of the time to the end of another period of time

4. To find out the sources from which additional funds were derived and the use to which their sources were put. 5. To evaluate the elements consider by the penne cement industries limited expansion project. 6. To offer findings, suggestions & conclusion based on the study.

METHODOLOGY OF STUDY Research

Research is a process in which the researcher wishes to find out the end result for a given problem and thus the solution helps in the future course of action. Redman and Mory defines research as a systematized effort to gain new knowledge.

Research Design
A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with company in procedure. In fact, the research design is the

conceptual structure within which research is conducted; it constitutes the blue print for the collection, measurement and analysis of data.

Sources of Data:
The data was collected through primary and secondary sources.

Primary Data:

First hand information was collected using the direct personal interview.

Interaction with guide to understand the general & specific aspects regarding utilization of resources.

Secondary Data:
y Annual reports collected from the M/S Penna cement Ltd., Tadpatri.

Period of study:

The analyze presented in the study are Annual Reports of M/S PENNACEMENT, TADPATRI from 2004-2005 to 2007-2008

LIMITATIONS OF STUDY

It should remember that a funds flow statement is not a substitute of an income statement or a balance sheet. It provides only some additional information as regards changes in working capital

The study based on the available annual reports and internal information of Pennas cement Financial Services Ltd only.

It cannot reveal continuous changes.

INTRODUCTION
Cement Industry has been decontrolled from price and distribution on 1st March 1989 and de licensed on 25th July 1991. However, the performance of the industry and prices of cement are monitored regularly. Being a key infrastructure industry. The constraints faced by the industry are reviewed in the Infrastructure Coordination Committee meetings held in the Cabinet

Secretariat under the Chairmanship of Secretary (Coordination). The Committee on Infrastructure also reviews its performance. The industry is subject to quality control order issued on 17.2.2003 to ensure quality standards. CEMENT INDUSTRY IN INDIA In India it came to be established during the beginning of 20th century. In fact the cement era in India commenced with the establishment of a small cement factory at WASHERMANPET in 1904 by South India industry Ltd. a company that dates to 1879. The potential capacity of this plant was only 10,000 metric tones per annum. This was the first attempt of manufacturing

Portland cement with cat carious seashells as a principal raw material. There was sufficient demand for that product, but because of technological defects and inadequate supply of raw materials, the plant did not operate economically, a later on collapsed. India is ranked forth in the world after China, Japan, and USA in cement production. Yet the per-capital

consumption of cement in India however low at 70 to 80 kgs against the world average of around 220kgs.

CEMENT INDUSTRY IN ANDHRA PRADESH

Cement was first manufactured in America in the year 1875. In India, in 1914 the India Cements Company Limited was established a cement factory at Portland. Andhra Pradesh is the second largest cement production state in India, one third of the limestone (138crore tones) is available in A.P.I.A.P. the cement production was started in 1936 with two factories. Of these two factories one is Andhra Cement Company Limited and another in Krishna Cement Factory. One is on the side of Krishna Cement Factory.

One is on the side of Krishna River and another is in between Krishna and Guntur districts respectively. In 1995, one more factory was established at Panyam in Kurnool Dist., named as Panyam Cement and mineral industries. At the same time one more factory has been established at Maacherla in Guntur district. At the end of July 1985 the total capital invested on cement industry was

Rs.427.81 lakhs and provided employment for 1262 persons and 19 factories were functioning with a production of 85lakh tones.

Capacity, Production and Exports

India today boasts 129 large plants and over 300 mini cement plants with a capacity of 165 million tones and production of 134 million tones (2004-05). It ranks second in the world among cement producing countries, with per capita consumption at 118Kg compared to the world avg. Of

around 317. Per capita consumption is 366 Kg in Thailand, 626 Kg in China, 606 Kg in Malaysia and 1216 Kg in South Korea. potential for increase in consumption. The Cement Corporation of India, which is a central public sector undertaking, has 10 units. Besides, there are 10 large cement plants owned by various state Governments. Keeping in view the past trends, a This indicates a huge

production target of 133 million tons has been set for the year 2004 05.

During the Tenth Plan, the Industry is expected to grow at the rate of 10% per annum and is expected to add capacity of 40 52 million tons.

Mainly through expansion of existing plants and use of more fly ash inthe production of cement. A part from meeting the domestic demand, the cement Industry also contributes towards exports. and clinker during the last three years is as under:The export of cement

Export of Cement
(In million tons) Year 2005 06 2006 07 2007 08 Cement 3.47 3.36 3.31 Clinker 3.45 5.64 4.82 Total 6.92 9.00 8.13

Overview of the performance of the Cement Sector:

The Indian Cement Industry not only ranks second in the production of cement in the world but also produces quality cement, which meets global standards. However, the Industry faces a number of

constraints in terms of high cost of power. High railway tariff; high incidence of state and central levies and duties; lack of private and public investment in infrastructure projects; poor quality coal and inadequate growth of related infrastructure like sea and rail

transport, ports and bulk terminals.

In order to utilize excess capacity

available with the cement Industry, the Government has identified the following thrust areas for increasing demand for cement:

(i) (ii) (iii)

Housing development programs; Promotion of concrete highways and roads; Use of ready mix concrete in large infrastructure projects;

Technological advancements
Indian cement industry is modern and uses latest technology. Only a small segment of industry is using old technology based on wet and semi-dry process. Efforts are being made to recover waste heat and success in this area has been significant. India is also producing different varieties 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. Production of these varieties of cement conforms to the BIS Specifications. It is worth mentioning that some cement plants have set up dedicated jetties for promoting bulk transportation and export.

Infrastructure driven demand push

The bulk of cement demand is from housing and commercial development of which metros account for a significant amount. It is estimated that Mumbai, which consumes almost six million tones, along with Pune, accounts for 45 percent of Maharastras cement consumption, Bangalore consumes four million tones and Chennai around 3 million tones, these are really the growth clusters. Today bulk of the demand is driven by housing and commercial construction and as infrastructure picks up, for example, Bangalore international airport, Hyderabad airport and

modernization of Mumbai and Delhi airports. Another large consumer has been the roads sector. The off take was good when the NHDP programme was launched but there was a lull last year. Once again new orders have been placed and in 2006, the industry will pick up. The estimate is that from roads, sdemand is not more than 4-5 million tones but it makes a difference in the growth numbers.

Narrowing demand-supply gap:

The industry has a capacity of 165 million tons and in Jan 2006, dispatches were at almost 100%. On an overall basis, the industry does not do more than 90-92% because of constraints such as transport and raw material. The industry has been adding capacity of 6-7 million per annum by Brownfield expansion and de-bottlenecking which is expected to partly

cater to the requirement because it is growing by around 20 million tons per annum.

Challenges before the industry:

Energy costs account for half of the cost of production of cement. Last year saw a 15-16% increase in coal prices and then diesel prices went up pushing up transportation costs.

Freight problems
The importance of freight for the cement industry cannot be emphasized enough. While in the last few months railways have been steadily losing freight to road sector they have been confined cement to market-is around Rs.350-400 a ton or Rs.20 and bag that could go as high a Rs.800 for long leads. This would only easy the first level of sale and additional costs are involved to take it further.

Another issue, which will hit the industry hard, is that of logistics and a Supreme Court judgment on carrying capacity for trucks. Accordingly, a state govt. has been directed to enforce the discipline that trucks only carry a specified load. Many states and already implementing this and there is already an increase in freight rates and in some cases, it has gone up by 50%. Also, the requirement for trucks to carry the same freight has nearly doubled and in many places the industry is being forced to move to railways.

High taxes

While the railways have had capacity to meet the requirement, it is expected that in March the commencement of peak season for the procurement of food grains, the railways would be constrained to provide adequate number of wagons. So fright rates are up, railways cannot provide wagons and trucks are unlikely to be viable so there could be a serious dislocation of supplies going forward. According to the cement manufactures association total taxes and duties on cement come to around Rs.900 a ton or Rs. 45 a bag. So at a price of Rs.150 a bag in the market, taxes and duties account for one third. Which is high for such a basic product. This includes excise duty, sales tax and royalty on limestone. The importance of limestone can only be underscored as for every ton of cement produced. 1.5tons of limestone is required. For limestone, royalty is on a per ton basis at Rs. 40 whereas for most minerals it is a percentage of the pithead cost. Effectively we are paying Rs.70 a ton for limestone as royalty. VAT is at 12.5% without any justification and it should be in 4% category, excise is at Rs.408 per ton when it should be around Rs.200.

Export Advantages

From a modest beginning if 1.6 lacks tons in 1989-90, Indian exports of cement/clinker have grown rapidly at about 30-40% and this year exports will cross 10 million tons.

Major cement producers market shares:

y y y y y y y y Acc -12.8% Abuja -10.7% Grasim-10.4% Ultra tech-9.5% India cement-6.0% Jaypee-4.1% Lafarge-3.2% Madras-3.2%

Overall, the industry is in a better state today than 2 years ago. Cement prices even today are way below global levels. So setting up Greenfield capacities is not attractive, as prices will not give attractive returns on investment. That is a minor reason why there is no Greenfield capacity coming up. It has to be born in mind that one third of the prices is accounted for by taxes and duties and nearly 20-25% by the freight component. So what produces earn at the factory gate is among the lowest in the world.

This year 2008 has commenced on a good note and in fact, December was a very good month wit dispatches at 12.5 million tons and January dispatches were in excess of 13 million tons.

This means capacity utilization is in the nineties which is healthy and will actually lead to firming up of prices. It looks like sales could be 137 million a ton for 2007-08(125 million tons in 2006-07) and so far growth has been 10%. There are enough reasons to believe it will sustain.

INTRODUCTION

A Penna cements industry Ltd was incorporate on Oct 24th 1991, to set up a cement plant at Tadpatri in Anantapur District of Andhra Pradesh. The plant commenced commercial production on Aug 10th 1994 as mini cement plant with initial capacity of 0.30 million tones. The company short period getting profits. Later 1995 plant capacity was increased 0.4 million tones which upgrade its state major plant

Penna cement industries ltd establishing by Mr. Prathap Reddy aged 44 began his entrepreneur career with civil engineering contracts by lunching pioneer builders mr.prathp reddy has experiences of two decades in cement industry .he was the executive director of priyadrashini cement right from its inception in 1984 in 1991 Mr. Pratap Reddy incorporated his own cement company located in between Talaricheruvu and Urichintala village. At present about 2720 tones of various grades of cement is being manufactured daily at the factory.

Quarry:
Major raw material for cement industry. The quarry has a mining

lease of 235.52 acres in Talaricheruvu village. 440.47 acres in Urichintala village and 629.75 acres in Korumanipalli village of Kurnool district.

RAW MATERIALS : Limestone:

Limestone is the major raw material for the cement industry. Limestone constitutes 60 to 70 percent of the total raw material costs. Nearly 1.5 1.6 tons of limestone is required for producing one ton of cement clinker limestone (calcium carbonate) is a rock of either sedimentary

or metamorphic origin with calcium oxide as its main constituent. In India limestone occurs mainly as sedimentary rocks and constitutes 30 percent of the total sedimentary rocks in the country. Cement grade limestone is

available in 21 states in the country. About 65 percent of the cement plants in India uses sedimentary limestone and 20 percent use metamorphic crystalline limestone. India has 85,980 million tones of cement grade

limestone deposits, which is enough to produce 100 million tones of cement for the next 500 years.

Total reserve No. of years limestone reserve would last ----Avg., limestone Consumption = --------------------------------

It is quite clear that Indias limestone reserves are adequate for the next several years. More over new reserves would be discovered every year Limestone is mixed extensively in India and ranks second in production next to coal mining. Major portion of limestone mining portion of limestone mining is for cement industry (nearly 75% to 80%) therefore the demand supply situation is quite comfortable.

In India limestone deposits are abundantly found only in Siroly (Rajasthan), Santna, Belaspur (M.P., wadi (Karnataka), Tadpatri (A.P.) and some places in Gujarat. Units are generally located in close proximity of limestone deposits in Madhya Pradesh, Andhra Pradesh, Tamil Nadu, Karnataka, Rajasthan, and Gujarat. The quality of required for the cement production should have the following composition. Lime Silican Aluminium Iron oxide Magnesiam : : : : : 50% 3% 4% 0.50% 0.50% 42% 100%

Loss on Ignition : Total :

If Magnesia content exceeds 0.4-o.5 percent, the limestone is not suitable for cement. Similarly, lime content is directly proportional to the clinker and cement quality and quantity.

Gypsum:
Gypsum is another important required material for cement

manufacturing, constitutes about 5 percent of the weight of the cement. Gypsum is added in required quantity at the time of grinding of clinker. The

clinker and the required amount of the Gypsum is added to control the setting time of the cement. India possesses resources of gypsum. Hence its availability is not a concern for the cement manufacture.

Other Raw Materials:

A few other raw materials like Blast furnace slag and fly ash are also required for the manufacture of the cement. Blast furnace slag is a waste product obtained from iron smelting furnace whereas fly ash is the left over ash from thermal power station.

Inputs:
Although limestone is the major raw material for cement industry, the critical raw material is energy. How well the company uses coal and electricity and how much it costs will determine the success ratio for cement manufacturers. Major inputs in cement manufacturing include coal, power and freight.

Coal:
In India coal I am being used as the fuel for the manufacturing of cement. Else where in the world lignite, nature gas and oil are also used. They are not used in India as continuous supply of natural gas is not assured used by plants in southern plants ogf India, like Dalmia Cement, Chettinad cement etc., as a supplement to coal which compensates the storage for coal in this area. Non cooking coal of lower ash content is required by cement plants. It should be less than 30%. A useful heat of 4500 kilocalories

per kg of coal. Coal of lower ash enables comparatively lower quality of limestone. The coal should have volatile matter and high temperature. Transport of coal is another big issue as many of larger cement plants are located close to the limestone deposits, which may not have coal deposits nearby.

Power:
Power constitutes about 10% of the total cement production costs. About 3 percent of the total power generated in the country is used by cement industry. The average consumption of power in the dry process kilns is around 125 units per million tons of clinker.

Freight:
Freight constitutes a very significant part of the cost structure of cement units in India. On an average freight for transporting finished

product alone forms 13.85% of the cost of production of large cement plants.

The main areas of freight coast for the cement industries are

i. ii.

Transporting coal from the coal fields to the cement factories. Transporting cement from the plants to their markets.

Limestone transport would be even costlier than transporting coal or cement. Hence cement plants are located in cluster near limestone deposits. Indian railway is moving up to 60% of the total cement production.

SALIENT FEATURES OF PENNA CEMENT:

y y High strength and great durability A very perceptible saving in costs (up to 20% to 25%) due to low setting time y Superior quality of the cement resulting in a better overall finest

y Stronger bonding with aggregates. Growth and Performance:

The company has enhanced its capacity from 600 TPD to 8000 TPD over the period of 10 years. 5000 tones capacity per day. The Existing cement plant was upgraded to The profits for the year 2007-08 are Rs.

92.77 lakhs and sales of Rs. 946.20 lakhs. The company holds the assets of Rs. 601.92 lakhs. The annual capacity of the company 18,25000 tones.

Competitiveness of Cement Project:

companies Ultra tech, Andhra Cement, Grasim Cement, Gujarat Ambuja cement, Parasakthi, Larsen and Tubro,Coramandal cement,Priya Cement, Nagarjuna cement, Sagar cement ACC Suraksha cement, Zuari cement, and India cement Ltd

TECHNOLOGY ADOPTION AND INNOVATION:

The company has obtained the basic engineering designs and other technical know-how from M/s. ONADA ENGINEERING and consulting company limited Japan for the cement plant he technical collaborates are continuously guiding the company for achieving improved productivity and benefits such as conservation of energy etc., besides trouble shooting a specific.

Man power:
Based on requirement of individual departments, Head of that department is asked to give information to man power planning department regarding the number of persons required. The departmental heads assess their requirements based on the available departmental job description to ensure role clarity and to avoid role ambiguity. The Central Personnel Dept. carries out the recruitment process. The total employees in PENNA CEMENT are 345 covering all departments. There are nearly 500 contract labor working every day on casual basis.

Raw Materials & Requirement:

Limestone, Iron ore, Bauxite, Gypsum and Coal are the basic raw materials used in the manufacturing process of cement. consumption of various raw materials is shown in the table. REQUIREMENT OF RAW MATERIALS The average

S. No

Raw material

Tones per day

Consumption tones of Cement

per

1 2 3 4 5

Limestone Additives Bauxite iron ore Gypsum Product clinker

2282 375 155 85 500

1.4 to 1.5 0.06 to 0.75 1.16 to 0.20 0.04 to 0.05 ------

Source: Annual reports of Penna Cement Limited.,

Note: Due to change in the quality of lime stone and coal, the consumption of additives has been changed accordingly.

Material Balance:

Limestone + Additives

Raw material

Raw material (1.46%) +coal

Calcinations clinker

Clinker + Gypsum

Ordinary Portland cement

Clinker + Fly ash

Pozzoland Portland

PRODUCT PROFILE:

Penna Cement manufactures and distributes its own main product lines of cement. It aims to optimize production across all the marketers,

providing a completer solution for customers needs at the lowest possible cost, an approach known as strategic Integration of Activities. Cement is made from a mixture of 80 percent limestone and 20 percent clay. These are crushed and ground to provide the raw meal, a pale, flour like powder. Heated to around 1450o C (2642o F) rotating kilns, the meal

undergoes complex chemical changes and is transformed into clinker. Fine grinding the clinker together with a small quality of gypsum produces cement. Adding other constituents at this stage produces cements for

specialized uses. PRESENTLY THE PLANT PRODUCES THREE TYPES OF PRODUCTS:

Presently the company is manufacturing 43 grade, 53 grade. Ordinary portal cement port land slag cement, soleplate Resistant with brand name of PENNA

Penna Suraksha Penna Power Penna Super

53 Grade 53 Grade 43 Grade

ADVANTAGES:
Here are five of the many reasons why Penna 53 Grade and 43 Grade cement edges out its competitors. y y y y High compressive strength Low heat of hydration Better soundness Lesser consumption of cement for M-20 Concreate Grade and above y y Faster de shuttering of formed work Reduced construction time with a superior and wide range of cement catering to every conceivable building need, Penna Cement is a formidable player in the cement market.

Here are just a few reasons why Penna Cement chosen by millions of India.

y y

Ideal raw material Low lime and magnesia content and high proportion of silicates

Greater fineness

Slow initial and fast final setting

Wide range of applications

Quality customer services