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MANAC-1 GROUP ASSIGNMENT

COMPANY: ULTRATECH CEMENT



GROUP NO.

ROLL NO. NAME
B14128 Abhinav
B14130 Akshya Kattuputhur Murali (Ms)
B14132 Ankit Singh
B14133 Ankur Patel
B14134 Anshul Kr Agrawal
B14135 Ansuman Mishra
B14159 Nikhil Arora











STATEMENT OF PROFIT/ LOSS
(All amounts are in crores of )
For the year
ended 31.03.2014
For the year
ended 31.03.2013
Revenue
Sale of Products and Services (Gross)
22803 22705
Less: Excise Duty
(2725) (2682)
Sale of Products and Services (Net)
20078 20023
Other Operating Revenues
202 157
Revenue from Operations (Net)
20280 20180
Other Income
329 305
Total Revenue (I) 20609 20485
Expenses
Cost of Raw Materials Consumed 2911 2792
Purchases of Stock-in-Trade 309 236
Changes in Inventories of Finished Goods,
Work-in-Progress and Stock-in-Trade
107 (118)
Employee Benefits Expense 1015 968
Power and Fuel 4135 4299
Freight and Forwarding Expense 4581 4224
Other Expenses 3436 3149
16494 15549
Less: Captive Consumption of Cement
{Net of Excise Duty ` 28.89 Crores, (Previous
Year `39.80 Crores)}
(32) (45)
Total Expenses (II) 16462 15504
Profit before Interest, Depreciation and Tax
(PBIDT) (I)-(II)
4147 4980
Finance Costs 319 210
Depreciation and Amortisation Expense 1052 945
Profit before Tax 2776 3825
Income Tax Expenses:
Current Tax 559 1006
MAT Credit (222)
Excess tax provision reversal related to prior years (96) (4)
Deferred Tax Charge 390 168
Total 631 1170
Profit for the Year 2144 2655
Earnings Per Equity Share (Face
Value 10 each)

Basic (in `) 78.21 97
Diluted (in `) 78.18 97


BALANCE SHEET
(All amounts are in crores of )
As At
31.03.2014
As at
31.03.2013
EQUITY AND LIABILITIES
Shareholders
Funds
Share Capital 274 274
Reserves and Surplus 16823 14961
Total 17098 15235
Non-Current
Liabilities
Long-term Borrowings 4494 3894
Deferred Tax Liabilities
(Net)
2296 1906
Other Long-term
Liabilities
2 2
Long-term Provisions 138 134
Total 6930 5936
Current
Liabilities
Short-term Borrowings 379 569
Trade Payables 2424 2173
Other Current Liabilities 2088 2561
Short-term Provisions 835 935
Total 5727 6238
TOTAL EQUITY AND LIABILITIES 29754 27409
ASSETS
Non-Current
Assets
Fixed Assets
Tangible Assets 15781 13074
Intangible Assets 91 48
Capital Work-in-
Progress
2038 3505
Intangible Assets
under Development
3 0
TOTAL 17913 16628
Non-Current Investments 1662 1982
Long-Term Loans and
Advances
1181 983
TOTAL NON-CURRENT ASSETS (a) 20756 19593
Current Assets
Current Investments 3729 3127
Inventories 2368 2350
Trade Receivables 1281 1017
Cash and Bank Balances 278 143
Short-term Loans and
Advances
1326 1173
Other Current Assets 15 6
TOTAL CURRENT ASSETS (b) 8998 7816
TOTAL ASSETS (a + b) 29754 27409
CASH FLOW STATEMENT
(All amounts are in crores of )
For the year
ended
31.03.2014
For the year
ended
31.03.2013
(A) Cash Flow from Operating Activities:
Profit Before tax
2776 3825
Adjustments for:

Depreciation and Amortisation
1052 945
Compensation Expenses under Employees Stock Options Scheme
3 0
Provision for Doubtful Advances/ debts (net)
(0) -
Bad Debts Written-off
0 0
Excess Provision written back (net)
(17) (22)
Provision for Wealth Tax
2 2
Provision for Retirement Benefits
4 18
Provision for Mines Restoration
2 2
Interest and Dividend Income
(52) (57)
Finance Costs
319 210
Unrealised Foreign Exchange Loss
14 3
Profit on Sale of Fixed Assets (net)
(6) (0)
Profit on Sale of Current Investments (net)
(266) (245)
Operating Profit before Working Capital Changes
3831 4681
Movements in working capital:

Increase/(decrease) in Trade payable and other Liabilities
423 238
Decrease/(Increase) in Trade receivables
(264) (251)
Decrease/(Increase) in Inventories
(18) (315)
Decrease/(Increase) in Loans and Advances
(72) (81)
Cash Generated from Operations
3900 4272
Direct Taxes paid
(655) (717)
Expenditure for Mines Restoration
(3) (3)
Net Cash Generated from Operating Activities (A)
3242 3552
(B) Cash Flow from Investing Activities:

Purchase of Fixed Assets
(2228) (3249)
Sale of Fixed Assets
10 2
Expenditure for Cost on Assets transferred from Samruddhi
Cement Limited (SCL), pursuant to Scheme of Amalgamation (9.72) -
Proceeds / (Purchase) of Non-current Investments (net)
449 (675)
Advances to Subsidiaries and Joint Venture (net)
(15) (15)
Investment in Subsidiaries / Joint Venture
(130) (160)
(Purchase) / Proceeds of current Investments (net)
(337) (241)
Interest / Dividend Received
51 56
Net Cash used in Investing Activities (B)
(2210) (4282)
(C) Cash Flow from Financing Activities:

Proceeds from Issue of Share Capital
4 8
Repayment of Long Term Borrowings
(597) (220)
Proceeds from Long Term Borrowings
577 1069
Proceeds / (Repayment) of Short Term Borrowings
(190) 407
Interest paid
(405) (327)
Dividend Paid
(246) (218)
Corporate Dividend Tax
(42) (36)
Net Cash (Used) / Generated from Financing Activities (C)
(897) 683
Net Increase/(Decrease) in Cash and Cash Equivalents (A + B + C)
135 (47)
Cash and Cash Equivalents at the Beginning of the Year
143 190
Cash and Cash Equivalents at the End of the Year
278 143


IMPORTANT FINANCIAL INFORMATION EXTRACTED FROM THE REPORT


Dividend: UltraTech Cement has recommended a dividend of Rs. 9/- per equity share of Rs.
10/- each for the year ended March 31, 2014.


Other Income: Other income is up from 462 crores to 531 crores in FY14. This can be
attributed to financial incentives attributed due to investing in increasing capacity


Finance cost: It has risen from 210 crores to 319 crores mainly due to lower capitalization of
interest upon the commissioning of various projects.


Margins: EBITDA margin decreased to 21% from 25% mainly due to decrease in cement
prices



Capital Expenditure: The Company has earmarked around Rs. 10,000 Crore to be incurred
in setting up the grinding units, clinkerisation plants, cement terminals and other capex, and
these are likely to be commissioned in a phased manner by 2015. During the year the
Company has commissioned Clinkerisation plant of 3.30 mtpa, 25 MW TPP and 1.45 mtpa
cement plant at Rajashree Cement in Karnataka.


Inventories: Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-
Trade was Rs 107 Cr in FY14 compared to (Rs 118 cr) in FY13. However ending
inventory has remained at similar level at Rs 2368 cr in FY14.


Sales: Sales increased by 5% to Rs 22803 cr compared to FY13. However the capital
turnover ratio has declined from 1.05 to 0.93 from FY13 to FY14. The company needs to
endure that its capital is being used efficiently.


Depreciation charge: Depreciation expense has increased from Rs 388 cr in 2009-10 to Rs
1052 cr in current year due to high capital expenditure capitalization.


Penalty: Competition Commission of India has imposed a fine of Rs 1,175.49 cr with stay
permission on deposit of Rs 117.6 cr. However the company has not made any provisions in
the account believing that it has a good case.


Liabilities: The Company has decreased its current liabilities from Rs 6238 cr to Rs 5727 cr
while increasing its non-current liability to Rs 6930 cr from Rs 5936 cr. This is in line with
the companys long term investments in increasing cement production capacity.





Analysis of Profitability: Gross Profit ratio declined from 56.16% in FY13 to 51.51% in
FY14. However due to high depreciation and interest expenses Net profit ratio stands 9.1%.
Overall GPR, NPR, ROE, ROA have declined due to lower cement prices in the market. A
5% increase in sales has slightly negated this effect on the bottom line but the company needs
to respond to decreasing margins.


Liquidity Analysis: The Companys current ratio has increased from 1.25 in FY 2014 to 1.57
in FY 2013. The quick ratio also increased from 0.69 in FY13 to 0.93 in FY14. This shows
a healthy shift by the company towards long term liabilities. Its current assets also increased
by 15% owing to increase in current investments. The Cash and Bank balance has almost
doubled from Rs.143 cr in FY 2013 to Rs. 278 cr in FY 2014. Thus overall company has
improved its solvency position by increasing current assets and decreasing current liabilities
in accordance to the high amount of capex it is indulging towards. Only the Inventory
Holding Period has increased to 96 days in FY14 from 91 days in FY13 as a small risk
towards liquidity. This can be attributed to the mismatch between high capacity and lower
demand in the market.


Solvency Position Analysis: The Share Capital remained stable at Rs 274 cr in FY14
although 15440 stock options were vested to employees. The Debt/Equity ratio remained
stable at 0.43. This highlights that the company is currently able to manage its borrowings
well with equity. However its interest coverage ratio has decreased drastically from 19.24 in
FY13 to 9.59 in FY14. The company has good solvency condition currently but needs to
make sure that its revenues also increase correspondingly to the increasing interest charges.


Cash Flow from Operations: Although PBT declined to Rs 2775 cr from 3825 cr between
FY13 and 14, Cash flow from operation has remained relatively stable at Rs 3241 cr in
FY14 compared to Rs 3552 cr in FY13. This is mainly due to the change in Working
Capital.


















SPECIFIC AREAS OF STRENGTHS

1. The company managed to reduce Energy costs required for Cement productions by
5% during the financial year which reduced the overall cost of production.

2. The Company set up many new plants during the financial year, increasing its overall
capacity to 62 million tonnes which will boost sales and keep them in a state of
preparedness, with a favourable market condition likely in the coming financial year
due to a lot of infrastructure projects in the pipeline

3. The Company also acquired a plant with capacity of 4.8 million tonnes which will
further the cause of the company to increase its capacity to meet expected demands.

4. During the financial year the growth for the company was 6%, while the growth in the
segment was 3.5%, a good indicator of the good performance of the company.
Moreover it is expected to grow at a rate of 8% in the coming financial year.

5. They have good solvency and liquidity ratios, which is indicative of the good
performance if the company despite the year not being very good for the industry.

6. While the profit has come down as compared to last year, the cash generated from
Operations has not declined in the same ratio, again an indicator of good performance
in a tough year.

7. The Gross Profit Ratio of the company is very high (51.51%), an indication of
reduced cost of goods, which will help increase overall profitability.

8. The book value per share has increased from 556 in FY 2013 to 623 in FY 2014. This
shows a favorable condition for an investor in case the company is liquidated in the
future.

9. Proprietary Ratio: The proprietary ratio shows the contribution of stockholders in
total capital of the company. The increase of proprietary ratio from 0.55 to 0.57
despite the increase in total assets, therefore, indicates a strong financial position of
the company and greater security for creditors.











SPECIFIC AREAS OF WEAKNESS


1. All the key Profitability ratios have gone down considerably from the previous financial
year.

2. Inventory Holding Period: The inventory holding period has gone up to 101.59 days
(2013-14) from 95.98 days (2012-13), resulting in increased holding costs.

3. Debt Service Coverage Ratio: The debt service coverage ratio (DSCR) measures how
effectively a company's operations-generated income is able to cover outstanding debt
payments. The reduction in the value of DSCR from 6.49 to 2.72 indicates decreased
capability to cover outstanding debt payments.

4. The demand has been low in cement industry due to infrastructural slowdown resulting in
lower sales and weak pricing leading to poor realization on cement sold.

5. The Earning per share(EPS) has dropped from 96.87 to 78.21 while the number of shares
have remained same

6. The acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation has led to
increase in the interest expenses leading to slashing of interest coverage ratio by more
than 50% and also affected the profitability ratios.

7. The new acquisitions have drastically increased the depreciation for the company and
have risen finance cost from 210 crores to 319 crores.

8. Freight costs have risen by more than 5% year which has resulted in poor operating
performance.

9. As per the judgment of Supreme Court the company is to pay a sum of Rs.100 crores on
charges of cartelisation. Provisions for the same have not been created.

10. Clinker export volume declined to 0.11 million tonnes in FY13-14 from 0.33 million
tonnes in FY12-13 and the export of grey cement remained almost flat

11. Cement demand, as projected, has not materialised, while capacity has been created
leading to excess production capacity









SUGGESTIONS TO THE COMPANY

1. Competition

The competitive landscape in the cement industry is becoming more intense. The
Company needs to continue to focus on enhancing brand equity, value added services and
cost optimization measures to mitigate this risk.

2. Securing critical resources

Company should plan on entering into long term contracts, securing coal blocks and
linkages.

3. Fuel cost

Companys continued focus on controlling cost and optimisation of fuel mix helped in
curtailing cost to some extent and it should continue doing so

4. Export

Company should work to improve the export of clinkers and grey cement

5. Freight cost

Company must work on strengthening the logistics to counter rising freight costs as It
may eat into the profits of the company


















ANNEXURE (SUPPORTING CALCULATIONS)

Financial Ratios

Ratio Definition 2014 2013
Gross Profit Ratio Gross Profit/Sales
11376/22803*100=
51.51%
11683/22705*100=
56.16%
Net Profit Ratio PAT/Sales 2144/228.03=9.70% 2655/22705=11.69 %
Capital turnover
Ratio
Net Sales/Capital Employed 20078/21591=0.93 20023/19129=1.046
Return on
Investment (ROI)
(EBIT-Taxes)/Net Assets 2144/21184=10% 2655/18206=14.6%
Return on Equity
(ROE)
PAT/Equity 2144/17098=12.5% 2655/15235=17.43%
Return on Net
Worth (RONW)
PAT/Net Worth 2144/17098=12.6% 2655/15235=17.43%
Return on Total
Assets
PAT/Total Assets 2144/29754=7% 2655/27409=9%
Return on Capital
Employed (ROCE)
Net Profit/Capital Employed 2144/21591=10% 2655/19129=13.9%
Earnings per Share
(EPS)
PAT/Number of equity
shares
2144/27.424=78.17 2655/27.418=96.83
Earning Power EBIT/Total Assets 3095/29754=0.104 4035/27409=0.147
Quick Ratio
(Current Assets -
Inventory)/(Current
Liabilities)
(8998-2368-
1326)/5727=0.93
(7816.2-1173-2350.47)
/6238.38 =0.69
Current Ratio
Current Assets / Current
Liabilities
8998/5727 = 1.57 7816/6238=1.25
Debt Equity Ratio Debts/Equity 7309/17098 = 0.43 6504/15235 = 0.43
Proprietary Ratio
Stockholder's Equity/Total
Assets
17098/29754 = 0.57 15235/27409=0.56
Dividend Coverage
Ratio
(Profit after tax - Dividend
paid on Irredeemable
Preference
Shares)/Dividend paid to
Ordinary Shareholders
2144/246=8.72 2655/218= 12.18
Interest Coverage EBIT/Interest Expense 3095/319=9.70 4035/210=19.21
Debt Service
Coverage Ratio
(DSCR)
Net Operating Income/Total
Debt Service
3242/(405+786)=2.72 3552/(327+220)= 6.49
Total Asset
Turnover
Sales/Average Assets 22803/28581=0.80 22705/25177=0.90
Inventory Turnover COGS/Average Inventory 8702/2359.42=3.59 8777/2193.21=3.80
Ratio Definition 2014 2013
Net Working Capital
Current Assets-Current
Liabilities
8998-5727=3271 7816-6238=1578
Fixed asset turnover Net Sales/Fixed Assets 20078/ 17913= 1.12 20023/16628 = 1.20
Inventory Holding
Period
365*(Avg.Inventory/
COGS)
365/3.59 =101.59 days 365/3.80 = 95.98 days
Operating leverage Gross Profit / EBIT 11376/3095=3.67 11683/4.35=2.89
Financing leverage EBIT / PBT 3095/2776=1.11 4035/2655=1.52
Combined leverage Gross Profit / PBT (OL*FL) 3.675*1.11=4.1 2.89*1.52=4.40

COMMON SIZE STATEMENT SHOWING PROFIT & LOSS

Comparative Profit & Loss Year Ended
31st March 2014
% Year Ended
31st March
2013
%
Income
Net Sales 20078 97 20023 98
Other Income 531 3 462 2
Total Income 20609 100 20485 100
Expenses
Cost of Raw Materials Consumed 2911 14 2792 14
Purchases of Stock-in-Trade 309 2 236 1
Changes in Inventories of Finished
Goods, Work-in-Progress
and Stock-in-Trade
107 1 (118) (1)
Employee Benefits Expense 1015 5 968 5
Power and Fuel 4135 20 4299 21
Freight and Forwarding Expense 4581 22 4224 21
Other Expenses 3402 17 3104 15
Total Expenses 16462 80 15504 76
PBIDT 4147 20 4980 24
Finance Costs 319 2 210 1
Depreciation and Amortisation
Expense
1052 5 945 5
PBT 2776 13 3825 19
(Taxation) 631 3 1170 6
Profit After Tax 2144 10 2655 13

ALTMAN Z-SCORE ANALYSIS
The Altman Z Score was designed as a way to rank a manufacturing company's risk of going
bankrupt. A Z Score above 2.99 is safe; 1.81 to 2.99 means there is a chance the company
will declare bankruptcy in the next two years; and less than 1.81 means the company is
severely distressed. It is given by:




Z = 1.2 * [(Current Assets Current liabilities)/Total Assets] + 1.4 * [Retained Earnings/Total Assets] +
3.3 * [EBIT/Total Assets] + 0.6 * [Equity Value/Total Liabilities] + 1 * [Sales/Total Assets]
The Z score for Ultratech Cements for the FY 2013-14 is 3.10, indicating this is a healthy
firm.

DU-PONT CHART: Return on Equity (ROE)




WORKING
2014 2013
Current Assets 8998 Current Assets 7816
Non-current assets 20756 Non-current assets 19593
Assets 29754 Assets 27409
Share capital 274 Share capital 274
Reserves and
surpluses 16823
Reserves and
surpluses 14961
Equity 17098 Equity 15235
Sales 20078 Sales 20023
EBIT 3095 EBIT 4035
PBT 2776 PBT 3825
Net Income 2144 Net Income 2655
Assets/ Equity 1.74 Assets/ Equity 1.80
Sales/Assets 0.675 Sales/Assets 0.731
EBIT/Sales 0.154 EBIT/Sales 0.202
PBT/EBIT 0.897 PBT/EBIT 0.948
Net income/PBT 0.773 Net income/PBT 0.694
ROE 0.125 ROE 0.174

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