A PROJECT REPORT

ON
STUDY OF FINANCIAL ANALYSIS OF J K
LAKSHMI CEMENT

SUBJECT ( FINANCIAL ANALYSIS )

AT
J K LAKSHMI CEMENT LTD.

BATCH 2016 -2018

INSTITUTE OF BANKING & FINANACE

SHANKAR ROAD,

NEW DELHI-110060

YEAR - 2016 – 2018

 ACKNOWLEDGEMENT

Project development is not an easy task. It requires corporation and help of various
people. It always happens that word run out when we are really thankful and
sincerely want to inspire my feeling of gratitude towards the one when helped in the
completion of the project. First my grateful thank to ___________ (Assistant
Professor) Institute of Banking & Finanace for the golden opportunity. Today after
completing my project work, I am immensely satisfied. There were many times
during the span of making the project when the clock beats you to learn out of
energy and you just want to finish at forever.
 DECLARATION

I __________________________- Student of “Finanacial Analysis of J K Lakshmi Cement” ___

semester of INSTITUTE OF BANKING & FINANCE , New Delhi hereby declare that
the project Report entitled “ Recruitment and selection process with special
reference to a team “ J K LAKSHMI CEMENT“ undertaken by me . I Also declare
that this report has not been submitted to any university / Institute for the
award of any degree or any professional diploma .

DATE: 20.10.2017 NAME

PLACE: NEW DELHI SEM,

( FINANACIAL ANALYSIS OF

J K LAKSHMI CEMENT)
 CONTENT

SR. NO. PARTICULARS PAGE NO.

CHAPTER.1 INTRODUCTION 1-23

o Current Scenarios 1-2

o History of Cement 3-8
o Process Technology 9
o Development of The 10-14
Cement Industry
o Historical Synthetic 15-16
Cement Production
o Production Scenario 17-20
o The Manufacturing Process 21
o Environmental Regulation 22-23

CHAPTER.2 INTRODUCTION OF COMPANY 24-29

o HISTORY
o TYPES OF PRODUCT
o PRODUCT CAPACITY
o SEGMENT

CHAPTER.3 ANALYSIS OF J K LAKSHMI CEMENT 30-68

o Industry Life Cycle 30-35

o Porters Five Force Model 36-44
o Opportunities and Threats 45
o Driving Forces 46-49
o PEST Analysis 50-57
o SWOT Analysis 58
o Economic Future of Indian Cement 59-61
 o Key Success factor in the 61-62
Cement Industry
o Industry Dominant 62-68
Economic Factors
o FINANACIAL ANALYSIS 69
o Filtrations 69
o Ratio Analysis 70-78
o Trade Analysis 79-87
o Balance Sheet 88

CHAPTER.4 VALUATION PHILOSOPHY 89-92

CHAPTER.5 VISION & MISSION 93

CHAPTER.6 RESEARCH METHODOLOGY 94

CHAPTER.7 OBJECTIVE OF STUDY 95

CHAPTER.8 SCOPE OF STUDY 96

CHAPTER.9 LIMITATIONS 97

CHAPTER.10 FINDINGS & SUGGESTIONS 98-100

CHAPTER.11 SUMMARY & CONCLUSION 101

CHAPTER.12 BIBLIOGRAPHY 102

CHAPTER.13 ANNEXURE 103-104

 CHAPTER.1

INTRODUCTION

INDUSTRY ANALYSIS

The Indian cement industry is the second largest producer of quality cement, which meets
global standards. The cement industry comprises 245 large cement plant sand more than
300 mini cement plants. The industry's capacity at the end of the year reached 288.97
million tons which was 266.73 million tons at the end of the year 2015-16. Cement
production during April to March 2016-17 was 268.31 milliontons as compared to 255.66
million tons during the same period for the year 2015-16.Despatches were 267.67 million
tons during April to March 2016- 17 whereas 255.26 during the same period. During April-
March 2016-17, cement export was 3.65 million tons as compared to 5.89 during the same
period. Cement industry in India is currently going through a consolidation phase. Some
examples of consolidation in the Indian cement industry are: Gujarat Ambujatakinga stake
of 14 per cent in ACC, and taking over DLF Cements and Modi Cement; ACCtaking over
IDCOL; India Cement taking over Raasi Cement and Sri Vishnu Cement; and Grasim's
acquisition of the cement business of L&T, Indian Rayon's cementdivision, and Sri Digvijay
Cements. Foreign cement companies are also picking upstakes in large Indian cement
companies. Swiss cement major Holcim has picked up14.8 per cent of the promoters' stake
in Gujarat Ambuja Cements (GACL).

The cement industry is one of the main beneficiaries of the infrastructure boom. With
robust demand and 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. 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

1
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.

Economic Trends

India is among the fastest-growing economies in the world, with close to 7% annual growth
since 2012, and expected to be sustained for the next 5 years as well. Inflation rate
remained below 5% between 2012 to 2016, but has since increased, touching 8% in May
2017. The business regulatory environment is fairly open, and follows free-market
competition principles. All quantitative restrictions on trade were removed in 2012, except
for a few highly sensitive goods. Trade as a % of GDP has risen from 15% in 2001 to nearly
30.2% in 2015-16. The total cumulative foreign direct investment (FDI) received into India
up to March 2017 was US$ 64.63 billion, of which Italy‘s share is about 1.2%. The monetary
unit of India is Indian Rupee (1 Indian Rupee = 100 paise). The exchange rate of Indian
Rupee is Euro 1 = Rs. 76.71 and US$ 1 = Rs. 65.08 (October 2017 - Reserve Bank of India).

Demographics

India is a unique market on account of its diversity in age, income, and urban-rural
demographics. Nearly 58 million households, comprising 32.3% of India‘s dwelling units, live
in urban areas. Nearly 38% of urban households are in middle and higher income strata, and
only 14% of rural households have similar income levels.

Income Classification

 Though the population is more than 1.1 billion, the real consuming class of 300
million people outnumbers several of the world‘s large markets in terms of market
potential. Of these, around 150 million people (2 million very rich and 30 million rich

2
 households) represent the consuming potential, particularly for lifestyle goods and
services.

• There are close to 80,000 high net worth Individuals in India, with saving and Assets
exceeding US$1 million.

• At least 50,000 households buy premium cars every year (priced at US$ 30,000 and above)

• The market for luxury goods is estimated to be Rs 100 billion, with over 2 million Indians
estimated to be engaging in some luxury purchase or the other each year.

THE HISTORY OF CEMENT

The history of the cement industry in India dates back to the 1889 when a Kolkata-based
company started manufacturing cement from Argillaceous. But the industry started getting
the organized shape in the early 1900s. In 1914, India Cement Company Ltd was established
in Porbandar with a capacity of 10,000 tons and production of 1000 installed. The World
War I gave the first initial thrust to the cement industry in India and the industry started
growing at a fast rate in terms of production, manufacturing units, and installed capacity.
This stage was referred to as the Nascent Stage of Indian Cement Company. In 1927,
Concrete Association of India was set up to create public awareness on the utility of cement
as well as to propagate cement consumption.

The cement industry in India saw the price and distribution control system in the year 1956,
established to ensure fair price model for consumers as well as manufacturers. Later in
1977, government authorized new manufacturing units (as well as existing units going for
capacity enhancement) to put a higher price tag for their products. A couple of years later,
government introduced a three-tier pricing system with different pricing on cement
produced in high, medium and low cost plants.

Cement Company, in any country, plays a major role in the growth of the nation. Cement
industry in India was under full control and supervision of the government. However, it got
relief at a large extent after the economic reform. But government interference, especially
in the pricing, is still evident in India. In spite of being the second largest cement producer in
the world, India falls in the list of lowest per capita consumption of cement with 125 kg. The
reason behind this is the poor rural people who mostly live in mud huts and cannot afford to
have the commodity. Despite the fact, the demand and supply of cement in India has grown

3
up. In a fast developing economy like India, there is always large possibility of expansion of
cement industry.

Cement Production and Growth

Domestic demand plays a major role in the fast growth of cement industry in India. In fact
the domestic demand of cement has surpassed the economic growth rate of India. The
cement consumption is expected to rise more than 22% by 2009-10 from 2007-08. In
cement consumption, the state of Maharashtra leads the table with 12.18% consumption,
followed by Uttar Pradesh. In terms of cement production, Andhra Pradesh leads the list
with 14.72% of production, while Rajasthan remains at second position.

The production of cement in India grew at a rate of 9.1% during 2006-07 against the total
production of 147.8 MT in the previous fiscal year. During April to October 2008-09, the
production of cement in India was 101.04 MT comparing to 95.05 MT during the same
period in the previous year. During October 2009, the total cement production in India was
12.37 MT compared to a production of 11.61 MT in the same month in the previous year.
The cement companies are also increasing their productions due to the high market
demand. The cement companies have seen a net profit growth rate of 85%. With this huge
success, the cement industry in India has contributed almost 8% to India's economic
development.

Technology Up-gradation

Cement industry in India is currently going through a technological change as a lot of up

gradation and assimilation is taking place. Currently, almost 93% of the total capacity is
based entirely on the modern dry process, which is considered as more environment-
friendly. Only the rest 7% uses old wet and semi-dry process technology. There is also a
huge scope of waste heat recovery in the cement plants, which lead to reduction in the
emission level and hence improves the environment.

Cement Dispatches

Cement industry in India has successfully maintained almost total capacity utilization levels,
which resulted in maintaining a 10% growth rate. In 2006-07, the total dispatch was 155 MT,

4
which rose up to 170 MT in 2007-08. The month of October 2009 saw a cement dispatch of
12.22 MT, which was almost 9% higher than the total cement dispatch of 11.21 MT in the
same month in the previous year.

Particular 2016-17 (Apr-Oct) (in MT) 2015-16 (Apr-Oct) in MT

Production 101.04 95.05
Despatches (Excluding 100.24 94.33
Export)
Export 1.46 2.16
Capacity Utilization (%) 85 93

Government Policies

Government policies have affected the growth of cement plants in India in various stages.
The control on cement for a long time and then partial decontrol and then total decontrol
has contributed to the gradual opening up of the market for cement producers. The stages
of growth of the cement industry can be best described in the following stages:

Price and Distribution Controls (1940-1981)

During the Second World War, cement was declared as an essential commodity under the
Defense of India Rules and was brought under price and distribution controls which resulted
in sluggish growth. The installed capacity reached only 27.9MT by the year 1980-81.

Partial Decontrol (1982-1988)

In February 1982, partial decontrol was announced. Under this scheme, levy cement quota
was fixed for the units and the balance could be sold in the open market. This resulted in
extensive modernization and expansion drive, which can be seen from the increase in the

5
installed capacity to 59MT in 1988-89 in comparison with the figure of a mere 27.9MT in
1980-81, an increase of almost 111%.

Total Decontrol (1989)

In the year 1989, total decontrol of the cement industry was announced. By decontrolling
the cement industry, the government relaxed the forces of demand and supply. In the next
two years, the industry enjoyed a boom in sales and profits. By 1992, the pace of overall
economic liberalization had peaked; ironically, however, the economy slipped into recession
taking the cement industry down with it. For 1992-93, the industry remained stagnant with
no addition to existing capacity.

Government Controls

The prices that primarily control the price of cement are coal, power tariffs, railway, freight,
royalty and cess on limestone. Interestingly, all of these prices are controlled by
government.

Opportunities and challenges

The glue that holds the infrastructure sector is cement and the growth of cement industry is
directly linked to the growth of infrastructure sector.

India today is the second fastest growing economy in the world with the cement and
construction sector being the prime movers. The Indian cement industry with a total
installed capacity of 219 million tonnes is the second largest producer in the world and has
been growing at a rate of 9 to 10 percent per annum. With a large percentage of Indian
population being below the age of 25, the construction activity is expected to make a
significant contribution in the context of growing housing needs, development of roads and
other infrastructure, urbanization, etc.

6
It is the construction sector which shares the blame of global economic slowdown leading to
slackening of demand for housing; but withstanding that hard time, our cement sector is still
growing at a 10 percent when compared to the global average of 5 percent. Indian industry
is fortunate in having an active support and services of the National Council for cement &
Building Materials with an excellent R&D Infrastructure and invaluable intellectual capital.

In a recent International Seminar on Cement & Building Materials in New Delhi,

ShriJyotiraditya M. Scindia, Minister of State for Commerce & industry, said: "In spite of
global slowdown and reduction in demand, cement industry needs to be complimented for
weathering the downturn and recording a commendable growth of around 8 percent in
200708 as well as in 2008-09. In the current year 2009-10 so far, the pace of growth of
cement industry has accelerated significantly above double digit."

The Indian cement industry has achieved an installed capacity of 242 million tonnes and is
targetted to reach 300 million tonnes by 2011-12 and 600 million by 2020. India has 97
percent of the installed capacity through dry process; the Indian cement industry has been
adopting latest technologies for energy conservation and pollution control as well as on-line
process of quality control based on expert systems and laboratory automation.

Despite having high demand in India, our per capita cement consumption is very low, where
the world average is 396 kg, in India the per capita consumption is only 156 kg. India being
the country of young population has a huge potential and its ushering social and economic
base will improve the domestic consumption.

Indian cement industry is efficient and eco-friendly, when it comes to energy conservation,
the best level is achieved by the industry as far as data goes of 687 kilo calories per kg of
clinker and 66 KWh per tonne cement are at par with the best achieved levels in the world.
The cement industry effort towards control of emissions, preservations of ecology and its
Corporate Social Responsibility for Environmental Protection are laudable. The sustainable
and long- standing efforts towards reduction of carbon footprint is commendable â€― CO2
emission of 0.82 tonnes per tonne of cement produced in 2006, a sustainable drop from the
level of 1.12 in 1996 and 0.94 in 2000.

On the technology front, the Indian cement industry has largely adopted state-of-art
manufacturing technologies, system for cogeneration of power and technologies for low
NOx and SO2 emission have yet to achieve many targets. The initiative taken by cement
industry for waste utilization are evident from the fact that production of blended cement in
the country in the year 2008-09 was as high as 74 percent as against only 36 percent in
2000-01. The Indian cement industry annually recycles more that 30 million tones of fly ash,
apart from consuming the entire quality of granulated blast furnace slag- another waste
generated by steel plants in our country.

7
The rising cost of energy transportation and persistent raw material pressures have been
playing a heavy strain on the cement and construction industry. As a result, Indian
Companies have to not only explore alternate sources of energy and materials but also
strive to enhance operational efficiency. But India’s potential for growth remains intact.
The need of the hour is to spend invest adequately in developing human resources capable
of addressing the professional needs of construction industry like application of advanced
technologies and construction practices, project management construction, litigation,
insurance and finance, etc. Indian cement industry is in search of competitive advantage,
therefore, it is continuously improving on the innovation and optimization front. While
embracing its commitment to grow and compete globally, it is however not neglecting the
ecological and environmental needs. Cement sector is adopting sustainable development
practices and conservation measures while harnessing energy for its use. The industry if fully
committed and partner global efforts to reduce Green House Gases impact and mitigating
the evil of climate change.

PROCESS TECHNOLOGY

While adding fresh capacities, the cement manufacturers are very conscious of the
technology used. In cement production, raw materials preparation involves primary and
secondary crushing of the quarried material, drying the material (for use in the dry process)
or undertaking a further raw grinding through either wet or dry processes, and blending the
materials. Clinker production is the most energy-intensive step, accounting for about 80% of
the energy used in cement Production. Produced by burning a mixture of materials, mainly
limestone, silicon oxides, aluminum, and iron oxides, clinker is made by one of two
production processes: we tordry; these terms refer to the grinding processes although other
configurations and mixed forms (semi-wet, semi-dry) exist for both types. In the dry process,
the raw materials are ground, mixed, and fed into the kiln in their dry state. In the wet
process, the crushed and proportioned materials are ground with water, mixed, and fed into
the kiln in the form of slurry. Different types of cement that are produced in India are:

• Ordinary Portland cement (OPC):OPC, popularly known as grey cement, has 95 per cent
clinker and 5 per centgypsum and other materials. It accounts for 70 per cent of the total
consumption.

• Portland Pozzolana Cement (PPC):PPC has 80 per cent clinker, 15 per cent pozzolana and
5 per cent gypsum and accounts for 18 per cent of the total cement consumption. It is
manufactured because it uses fly ash/burnt clay/coal waste as the main ingredient.

8
• White Cement: White cement is basically OPC - clinker using fuel oil (instead of coal) with
iron oxide content below 0.4 per cent to ensure whiteness. A special cooling technique is
use din its production. It is used to enhance aesthetic value in tiles and flooring. White
cement is much more expensive than grey cement.

DEVELOPMENT OF THE CEMENT INDUSTRY

Cement is an indispensable building material required for the construction of houses,

bridges, tunnels, dams etc.

The start of cement manufacturing in India goes back to 1904, when the first cement factory
was set up in Madras. Its production was as low as 30 tonnes a day, as such it failed.

The real beginning of this industry came up in 1913, when three units were set up at ICatni
(Madhya Pradesh) in 1915, Lekheri (Tamil Nadu) in 1916 and Porbander (Gujarat) in 1913.
The First World War gave incentive to the industry and a few more factories were set up at
Japla (Bihar), Dwarka (Gujarat) and Banmore (Madhya Pradesh). In 1934, ten out of eleven
cement manufacturing companies merged together and formed one Associated Cement
Company (A.C.C.).

The Dalmia Group entered in the field of cement manufacturing in 1937. This group set'up
its factories at Dalmianagar Bihar, Dadri (Haryana) and Dalmiapuram (Tamil Nadu). At the
time of partition, there were 18 cement factories with an annual installed capacity of 21-15
Lakh tons.

Three more factories were established just after independence at Talaiyuthu (Tamil Nadu),
Kottayam (Kerala) and Sikka (Gujarat).

The production of cement was boosted up after 1950. It is because of developmental work
in the country, like construction of multipurpose river valley projects, means of transport,
industries and housing activity.

Percentage production of cement

In order to meet the growing demand of cement, a number of factories were set up in the
country. Presently, there are 120 factories.

The industry depends upon the availability of limestone, clay or shale and gypsum. These
natural materials are mined in different regions; as such factories are set up close to the
sources of raw material.

9
Development of means of transport and availability of capital are other factors which
determine development of cement industry.

Although, in India, cement manufacturing has developed in different states except a few like
Punjab, yet 85% of the cement manufacturing is carried on in the states of Tamil Nadu,
Madhya Pradesh, Gujarat, Rajasthan, Andhra Pradesh and Bihar. Eleven types of cement is
manufactured in India like

Portland 71%

Pozollana 18%

Slag Cement 10%

Rest Others.

Tamil Nadu.

The state of Tamil Nadu has a very well developed cement industry.

Tamil Nadu.

The state of Tamil Nadu has a very well developed cement industry. There are eight
factories, ThsTalukapatli cement factory is one of the largest in the country. Its annual
capacity is about 10 lalchtonnes.

The industry is attributed to enormous reserves of raw material in the state, availability of
cheap labor and demand for cement.

Other cement factories are at Madhukarni, Dalmiapuram, Poliyur, Chhattisgarh, Alangulam,

Talaiyuthu, Sankaridurg and Aryalur.

Madhya Pradesh and Chhattisgarh.

These two states are the largest producer of cement in India. The centres are at Jamul,
Satna, Banmore, Katni, Gopalnagar, Durg, Kaymore, Tilda, Khor, Mandhar.

The Akaltara Cement Factory produces about 11 lakh tonnes of cement every year. New
plants are located at Rewa and Neemuch.

Gujarat.

Cement manufacturing is carried on at a number of centres in the state of Gujarat. The

Saurasthra Cement Company and Digvijay Company dominate cement production in the
state.

10
The Vadodra, Okha, Viraval, Bhavnagar factories are located at Ranavav, Sikka, Ahmedabad,
Dwarka, Porbander, Sevalia and Amiragarh. Gujarat state has rich resources of raw material
required for cement manufacturing.

Bihar.

Cement manufacturing in the Bihar state is done at Japla, Sindri, Dalmianagar, Kalyanpur,
Khalari and Chaibasa. Two new factories have been set up at Bhawanthpur. The rich coal
and lime-stone reserves are the major assets for the development of cement
manufacturing.

Rajasthan.

Rajasthan has rich potentials for cement manufacturing. Cement factories are located at
Lakheri, SawaiMadhopur, Udaipur, Chittorgarh, Bundi, Banas, Beawar, Nimbaheda and
Sirohi.

Cement is also produced in various other states of the country. These are :

Karnataka: Bangalore, Wadi, Hosdurga, Bagalkot, Shahabad, Krukunta. Dadri.

Himachal Pradesh: Bilaspur (Gaggal) Paonta Sahib.

Kerala: Kottayam

Andhra Praqdesh: Hyderabad and Vijaywada, Panyon, Tandur, Adilabad, Vishakhapatnam.

Uttar Pradesh: Allahabad Churk, Dalla Chun

Maharashtra: Chanda, Ratnagiri, Mumbai, Kohlapur.

West Bengal: Prulia, Durgapur, Asansol.

Assam: Guwahti.

Production of cement in this country is controlled mainly by private companies. The

Associated Cement Company Ltd. (A.C.C.) and the Dalmia Group control bulk of the cement
production.

The Cement Corporation of India, a public sector concern has set up a number of cement
factories, in die country, one each in Karnataka, Himachal Pradesh, Assam and Haryana, two
in Andhra Pardesh and three in Madhya Pradesh.

India also manufactures asbestos cement. Twelve units in the country manufacture asbestos
cement.

11
India has developed some export trade in cement. At times it exports cement and cement
products to the countries like Iraq, Iran, Afghanistan, Kuwait, Bangladesh, Mynmar, Sri
Lanka, E. African countries and South East Asian Countries.

However, at times the country has to import cement from Poland, Indonesia, Korea etc. to
meet the growing demand of cement in the country.

Cement industry of India faces problems like those of shortage of coal for running the
factories and at times shortage of railway wagons for the transportation of cement to the
markets.

Cement manufacturing is one of the most advanced industries in India. A decade back, the
country was having deficient production of cement and had to resort to import it from
different countries in order to meet country's demand of cement.

However, after March, 1989 due to changes in the policy, cement industry made rapid
strides both in capacity/production and process technology. At present there are

122 large cement plants with an installed capacity of 112-95 million tonnes per annum and
more than 300 mini cement plants with a combined estimated capacity of nine million
tonnes per annum. The production during 1999-2000 was 100-72 million tonnes
(provisional). The cement industry achieved a growth rate of 15 per cent in 1999-2000.

India is producing different varieties of cement like Ordinary Portland Cement (OPC),
Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well
Cement, White Cement, etc.

These different varieties of cement are produced strictly under BIS specifications and the
quality is comparable with the best in the world.

The cement industry has kept pace with technological advancement and modernization.
Export of cement was 3-14 million tonnes (provisional) in 1999- 2000. Improvement in the
quality of Indian Cement has found its ready market in a number of countries named earlier.

In order to meet the increasing trained manpower requirement of the Indian Cement
Industry, a Human Resource Development (HRD) Project has been implemented with
assistance from World Bank and DANIDA (Danish International Development Agency).

Under this Project, four Regional Training Centres have been set up at ACC -Jamul (M.P),
Dalmia Cement Dalmiapuram (T.N.), JK Cement Nimbahera (Rajasthan) and Gujarat Ambuja,
Ambuja Nagar (Gujarat).

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HISTORICAL SYNTHETIC CEMENT PRODUCTION

A cement is a binder, a substance that sets and hardens independently, and can bind other
materials together. The word "cement" traces to the Romans, who used the term opus
caementicium to describe masonry resembling modern concrete that was made from
crushed rock with burnt lime as binder. The volcanic ash and pulverized brick additives that
were added to the burnt lime to obtain a hydraulic binder were later referred to as
cementum, cimentum, cäment, and cement.

Cements used in construction can be characterized as being either hydraulic or

nonhydraulic. Hydraulic cements (e.g.,Portland cement) harden because of hydration, a
chemical reaction between the anhydrous cement powder and water. Thus, they can
harden underwater or when constantly exposed to wet weather. The chemical reaction
results in hydrates that are not very water-soluble and so are quite durable in water. Non-
hydraulic cements do not harden underwater; for example, slaked limes harden by reaction
with atmospheric carbon dioxide.

The most important uses of cement are as an ingredient in the production of mortar in
masonry, and of concrete, a combination of cement and an aggregate to form a strong
building material.

Non-hydraulic cement such as slaked limes (calcium hydroxide mixed with water), harden
due to the reaction of carbonation in presence of the carbon dioxide naturally present in the
air. Calcium oxide is produced by lime calcination at temperatures above 825 °C (1,517 °F)
for about 10 hours at atmospheric pressure:

CaCO3 → CaO + CO2

The calcium oxide is then spent mixing it to water to make slaked lime:

CaO + H2O → Ca(OH)2

Once the water in excess from the slaked lime is completely evaporated (this process is
technically called setting), the carbonation starts:

Ca(OH)2 + CO2 → CaCO3 + H2O

This reaction takes a significant amount of time because the partial pressure of carbon
dioxide in the air is small. The reaction of carbonation requires the air be in contact with the
dry cement, hence, for this reason the slaked lime is a non-hydraulic cement and cannot be
used under water.

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Conversely, the chemistry ruling the action of the hydraulic cement is the hydration.
Hydraulic cements (such as the Portland cement) are made of a mixture of silicates and
oxides, the four main components being:

Belite (2CaO·SiO2); Alite (3CaO·SiO2); Celite (3CaO·Al2O3); Brownmillerite

(4CaO·Al2O3·Fe2O3).

The reactions during the setting of the cement are:

(3CaO·Al2O3)2 + (x+8) H2O → 4 CaO·Al2O3·xH2O + 2 CaO·Al2O3·8H2O (3CaO·Al2O3) + 12

H2O + Ca(OH)2 → 4 CaO·Al2O3·13 H2O (4CaO·Al2O3·Fe2O3) + 7 H2O → 3 CaO·Al2O3·6H2O
+ CaO·Fe2O3·H2O

And during the hardening (the chemistry of the reaction of hydration is still not completely
clear):

(3CaO·SiO2)2 + (x+3) H2O → 3 CaO2·SiO2·xH2O + 3 Ca(OH)2 (2CaO·SiO2)2 + (x+1) H2O → 3

CaO2·SiO2·xH2O + Ca(OH)2

The silicates are responsible of the mechanical properties of the cement, the celite and the
browmillerite are essential to allow the formation of the liquid phase during the cooking.
The chemistry of the above listed reactions is not completely clear and is still the object of
research.

PRODUCTION SCENARIO

The cement industry worldwide is facing growing challenges in the context of saving
material and energy resources as well as reducing its CO2 emissions. The International
Energy Agency highlighted in its 'Road Map for the Cement Industry' that the main levers for
the cement producers are the use of alternative materials, be it as fuel or raw material and
in addition the reduction of the clinker/cement factor by utilisation of well tried and proven

14
materials like slag, fly ash, pozzolanas or limestone fines. This underlines that in the years to
come cement will depend on OPC clinker to a high degree. New cements will therefore most
certainly first take into account higher amounts of main constituents besides clinker which
show pozzolanic or latent hydraulic properties.

Artificial materials that originate from natural or industrial resources but require additional
thermal treatment and/or activation may also have a role to play. It is not clear at present to
what extent cements based on magnesia can play a role. On the other hand,
sulphoaluminate cements may have a significant role to play. Unfortunately, due to their
specific raw materials as well as their performance in concrete they will most probably not
be able to substitute relevant parts of today's cement markets.

Raw Material

The first step in the manufacture of Portland cement is to combine a variety of raw
ingredients so that the resulting cement will have the desired chemical composition. These
ingredients are ground into small particles to make them more reactive, blended together,
and then the resulting raw mix is fed into a cement kiln which heats them to extremely high
temperatures.

Since the final composition and properties of Portland cement are specified within rather
strict bounds, it might be supposed that the requirements for the raw mix would be similarly
strict. As it turns out, this is not the case. While it is important to have the correct
proportions of calcium, silicon, aluminum, and iron, the overall chemical composition and
structure of the individual raw ingredients can vary considerably. The reason for this is that
at the very high temperatures in the kiln, many chemical components in the raw ingredients
are burned off and replaced with oxygen from the air. Table 3.3 lists just some of the many
possible raw ingredients that can be used to provide each of the main cement elements.

15
Examples of raw materials for Portland cement manufacturing

The ingredients listed above include both naturally occurring materials such as limestone
and clay, and industrial byproduct materials such as slag and fly ash. From Table 3.3 it may
seem as if just about any material that contains one of the main cement elements can be
tossed into the kiln, but this is not quite true. Materials that contain more than minor (or in
some cases trace) amounts of metallic elements such as magnesium, sodium, potassium,
strontium, and various heavy metals cannot be used, as these will not burn off in the kiln
and will negatively affect the cement. Another consideration is the reactivity, which is a
function of both the chemical structure and the fineness. Clays are ideal because they are
made of fine particles already and thus need little processing prior to use, and are the most
common source of silica and alumina. Calcium is most often obtained from quarried rock,
particularly limestone (calcium carbonate) which must be crushed and ground before
entering the kiln. The most readily abundant source of silica is quartz, but pure quartz is
very unreactive even at the maximum kiln temperature and cannot be used.

Grinding and blending prior to entering the kiln can be performed with the raw ingredients
in the form of a slurry (the wet process) or in dry form (the dry process). The addition of
water facilitates grinding. However, the water must then be removed by evaporation as the
first step in the burning process, which requires additional energy. The wet process, which
was once standard, has now been rendered obsolete by the development of efficient dry
grinding equipment, and all modern cement plants use the dry process. When it is ready to
enter the kiln, the dry raw mix has 85% of the particles less than 90 £gm. in size.

16
The next step in the process is to heat the blended mixture of raw ingredients (the raw mix)
to convert it into a granular material called cement clinker. This requires maximum
temperatures that are high enough to partially melt the raw mix. Because the raw
ingredients are not completely melted, the mix must be agitated to ensure that the clinker
forms with a uniform composition.

This description refers to a standard dry-process kiln as illustrated in Figure 3-2. Such a kiln
is typically about 180 m long and 6 m in diameter, has a downward slope of 3-4%, and
rotates at 1-2 revolutions per minute.

Suspension preheaters and claimers

The chemical reactions that occur in the dehydration and calcination zones are
endothermic, meaning that a continuous input of energy to each of the particles of the raw
mix is required to complete the reaction. When the raw mix is piled up inside a standard
rotary kiln, the rate of reaction is limited by the rate at which heat can be transferred into a
large mass of particles. To make this process more efficient, suspension preheaters are
used in modern cement plants to replace the cooler upper end of the rotary kiln (see Figure
32). Raw mix is fed in at the top, while hot gas from the kiln heater enters at the bottom.
As the hot gas moves upward it creates circulating ―cyclones‖ that separate the mix
particles as they settle down from above. This greatly increases the rate of heating,
allowing individual particles of raw mix to be dehydrated and partially calcined within a
period of less than a minute.

Grinding and the addition of gypsum

Once the nodules of cement clinker have cooled, they are ground back into a fine powder in
a large grinding mill. At the same time, a small amount of calcium sulfate such as gypsum
(calcium sulfate dehydrate) is blended into the cement. The calcium sulfate is added to
control the rate of early reaction of the cement, as will be discussed in Section 5.3. At this
point the manufacturing process is complete and the cement is ready to be bagged or
transported in bulk away from the plant. However, the cement is normally stored in large
silos at the cement plant for a while so that various batches of cement can be blended
together to even out small variations in composition that occur over time. Cement
manufacturers go to considerable lengths to maintain consistent behavior in their cements
over time, with themost important parameters being the time to set, the early strength
development, and the workability at a given water content.

17
Cement kiln dust

As the hot kiln gas moves through the kiln, it carries with it the smallest particles of the raw
mix as well as volatilized inorganic substances such as alkalis (sodium and potassium) and
chlorides. As the gas cools, the volatiles condense back round the small particles, and the
resulting powder is called cement kiln dust (CKD). In the old days, the CKD was simply
vented out of the smokestack, after which it would continuously settle out of the air to
create a thin coating of grey dust on the surrounding countryside. This is no longer allowed.
In fact, environmental restrictions even prevent CKD from being buried in landfills because
of the tendency for the alkalis and chlorides to leach into groundwater. In modern cement
plants, the CKD is removed in the suspension preheater and by and electrostatic
precipitators located near the base of the smokestack.

Tricalcium Silicate (C3S)

C3S is the most abundant mineral in Portland cement, occupying 40–70 wt% of the
cement, and it is also the most important. The hydration of C3S gives cement paste most of
its strength, particularly at early times.

Dicalcium Silicate (C2S)

As with C3S, C2S can form with a variety of different structures. There is a high
temperature tructure in that is in equilibrium at intermediate An important aspect of C2 -
C2S has a very stable crystal structure that is completely unreactive in water. structure is
easil is never present in portland cement. 2S is irregular, but considerably less so than that

18
of C3S, and this accounts for the lower reactivity of C2S. The C2S in cement contains slightly
higher levels of impurities than C3S. According to Taylor [2 ], the overall substitution of
oxides is 4-6%, with significant amounts of Al2O3, Fe2O3, and K2O.

Tricalcium Aluminate (C3A)

Tricalcium aluminate (C3A) comprises anywhere from zero to 14% of a portland cement.
Like C3S, it is highly reactive, releasing a significant amount of exothermic heat during the
early hydration period. Unfortunately, the hydration products of formed from C3A
contribute little to the strength or other engineering properties of cement paste. In certain
environmental conditions (i.e., the presence of sulfate ions), C3A and its products can
actually harm the concrete by participating in expansive reactions that lead to stress and
cracking.

TetracalciumAluminoferrite (C4AF)

A stable compound with any composition between C2A and C2F can be formed, and the
cement mineral termed C4AF is an approximation that simply the represents the midpoint
of this compositional series. The crystal structure is complex, and is believed to be related
to that of the mineral perovskite. The actual composition of C4AF in cement clinker is
generally higher in aluminum than in iron, and there is considerable substitution of SiO2 and
MgO. Taylor reports a typical composition (in normal chemical notation) to be
Ca2AlFe0.6Mg0.2Si0.15Ti0.5O5. However, the composition will vary somewhat depending
on the overall composition of the cement clinker.

THE MANUFACTURING PROCESS

What is cement?

 Cement is a fine powder which sets after a few hours when mixed with water, and
then hardens in a few days into a solid, strong material. Cement is mainly used to

19
 bind fine sand and coarse aggregates together in concrete. Cement is a hydraulic
binder, i.e. it hardens when water is added.

 There are 27 types of common cement which can be grouped into 5 general
categories and 3 strength classes: ordinary, high and very high. In addition, some
special cements exist like sulphate resisting cement, low heat cement and calcium
aluminate cement.

The quarry is the starting point

 Cement plants are usually located closely either to hot spots in the market or to
areas with sufficient quantities of raw materials. The aim is to keep transportation
costs low. Basic constituents for cement (limestone and clay) are taken from quarries
in these areas.

A two-step process

 Basically, cement is produced in two steps: first, clinker is produced from raw
materials. In the second step cement is produced from cement clinker. The first step
can be a dry, wet, semi-dry or semi-wet process according to the state of the raw
material.

Making clinker

 The raw materials are delivered in bulk, crushed and homogenised into a mixture
which is fed into a rotary kiln. This is an enormous rotating pipe of 60 to 90 m long
and up to 6 m in diameter. This huge kiln is heated by a 2000°C flame inside of it. The
kiln is slightly inclined to allow for the materials to slowly reach the other end, where
it is quickly cooled to 100-200°C.

20
 Four basic oxides in the correct proportions make cement clinker: calcium oxide
(65%), silicon oxide (20%), alumina oxide (10%) and iron oxide (5%). These elements
mixed homogeneously (called ―raw meal‖ or slurry) will combine when heated by
the flame at a temperature of approximately 1450°C. New compounds are formed:
silicates, aluminates and ferrites of calcium. Hydraulic hardening of cement is due to
the hydration of these compounds.
 The final product of this phase is called ―clinker‖. These solid grains are then stored
in huge silos. End of phase one.

From clinker to cement

 The second phase is handled in a cement grinding mill, which may be located in a
different place to the clinker plant. Gypsum (calcium sulphates) and possibly
additional cementitious (such as blastfurnace slag, coal fly ash, natural pozzolanas,
etc.) or inert materials (limestone) are added to the clinker. All constituents are
ground leading to a fine and homogenous powder. End of phase two. The cement is
then stored in silos before being dispatched either in bulk or bagged.

What is concrete?

 Concrete is a solid material made of cement, sand, water, aggregates and often with
admixtures. When fresh, it has a certain workability and takes the form of the mould
into which it is put. When set and hardened, it is as strong as natural stone and
resists time, water, frost, mechanical constraints and fire. Typically, concrete is the
essential material used in all types of construction [residential (housing), non-
residential (offices) and civil engineering (roads, bridges, etc.)].

21
ENVIRONMENTAL REGULATION

Republicans have made clear that they don‘t think President Obama‘s jobs plan,
including $50 billion for transportation infrastructure, will create jobs. They would
rather remove regulations that cost industry money. They say reducing this
―regulatory burden‖ will create jobs — and they want to start with the cement
industry.

During floor debate on the Cement Sector Regulatory Relief Act, Rep. Waxman
shows a picture of an elementary school located right next to a cement kiln.
The House is currently debating the Cement Sector Regulatory Relief Act, which
would eliminate EPA standards, passed last August, to reduce hazardous air
pollution. Industry hacks say regulations currently facing the cement industry could
force the closure of 18 of the nearly 100 U.S. cement plants and result in the loss of
4,000 manufacturing jobs. Democrats — and the Congressional Research Service —
refute those numbers. Republicans have been toiling away all year to gut EPA
regulations of all stripes — indeed, California Democrat Henry Waxman, ranking
member of the Energy and Commerce Committee, today called it ―the most anti-
environment Congress in history,‖ having voted 136 times this session to block
environmental measures.

22
But the GOP says this one in particular is a jobs-killer. ―The cement industry is in its
weakest economic condition since the 1930s,‖ said Jason Altmire (R-PA) on the floor
of the House. He says the bill would simply remove an unnecessary barrier to
industry. About 40 percent of the cement used in the U.S. in a given year is used to
surface highways. According to Earthjustice, cement plants are among the nation‘s
worst toxic polluters. Cement kilns are the second largest source of mercury
emissions in the United States, after coal-fired power plants. So essentially, this
Republican bill is another government subsidy to the road industry, only this time
we‘re paying with the air we breathe, the water we drink, and the food we eat.
It‘s true, 20 percent of construction workers are currently unemployed, and that
represents a significant economic and human problem. To address that problem,
Democrats and transportation advocates, including industry representatives,
continue to urge Congress to pass a multi-year transportation reauthorization — not
gut life-saving environmental standards. ―If these bills are enacted,‖ Waxman said
on the floor, ―there will be more cases of cancer, birth defects, and brain damage.
The ability of our children to think and learn will be impaired because of their
exposure to mercury and other dangerous air pollutants.‖
―Mercury is so toxic just one seventieth of a teaspoon of mercury — or .0024
ounces — can contaminate a 20-acre lake and render the fish in that lake poisonous
to eat,‖ said Rep. James Moran (D-VA). Waxman offered three amendments to the
bill. One uses the rhetoric Republicans have been using to block bills all year —
requiring that the money used to authorize the bill be offset elsewhere in the
budget. But instead of requiring that offset upfront, it would require that the cost
offset be examined after the bill passes, and render the bill ineffective if there is no
offset. The other amendment would continue government emissions enforcement if
those emissions ―are harming brain development or causing learning disabilities in
infants or children.‖
The NIH says exposure to even low levels of mercury can reduce a child‘s IQ. Moran
made an economic argument, saying that those children have a harder time getting
and keeping jobs. He quoted independent scientific studies saying the cost of
mercury pollution ―is as high as $22,300 per IQ point per child, which cumulatively
amounts to $8.7 billion in lost potential per year.‖ ―The majority constantly urges us
to balance the costs and benefits of environmental regulation,‖ Moran said. ―But
when the benefits of regulating hazardous pollution substantially outweigh the
costs, as they do with mercury, all of a sudden that doesn‘t become an issue for
debate.‖
―If we do not defeat this bill — if it were to be enacted — children will suffer,‖ he
went on. ―Our economy will become weaker. The fact is, we have both a moral and
an economic responsibility to defeat this bill.

23
 CHAPTER.2

INTRODUCTION OF THE COMPANY

JK LAKSHMI CEMENT LTD

INTRODUCTION

Chronicle of the company thus began in the state of Rajasthan during the year 1938. One of
the established names in the cement industry, JK Lakshmi Cement (JKLC) Ltd has state-
ofthe-art plant at Jaykaypuram, district of Sirohi, Rajasthan having an annual capacity of
3.65 million tonnes. With the use of the latest technology from M/s Blue Circle Industries
and modern equipment‘s from M/s Fuller International of USA, the company going from
strength to strength and produce JK Lakshmi Cement, JK Lakshmi plats and JK Lakshmi
Power Mix. It is also the first cement producer of Northern India to be awarded an ISO 9002
certificate and be accredited by NABL (Department of Science & Technology, Government of
India) for its Lab Quality Management systems.

HISTORY

There is hardly any other product that has so greatly contributed to the growth of modern
human civilization as Cement. The massive urban infrastructure that we see today across
the world would have been unthinkable without cement. Cement is the root substance that
has given the essential element of strength and durability to our houses, schools, offices and
other buildings so that we can occupy them with peace of mind.

The word Cement literally means a substance that can bind material together and can
acquire strength on hardening. The cement as we know today is a specialised building

24
material which is a result of various innovations over the past and is made in sophisticated
manufacturing facilities.

The oldest use of cement dates back to the thousands of years old Egyptian civilisation. The
Egyptians used natural cement made by combining limestone and gypsum for the
construction of their massive and highly impressive pyramids. The fact that the Egyptian
Pyramids have proudly stood the test of time over such a long period of human history is a
testimony to the phenomenal strength of cement. However it must be stated that the
ancient Egyptian cement was very different from the cement in use today.

Later in the Roman era, the concept of cement advanced further. Romans used a
combination of slaked lime with Pozzolana, a volcanic ash from Mount Vesuvius. The
Romans made many impressive structures using this cement. The Basilica of Constantine is
one popular example of Roman construction in which they used such cement mortar.

In eighteenth century England, John Smeaton, a British engineer, was assigned the task of
reconstructing the Eddystone Lighthouse, a structure that had witnessed repeated
structural failure. In 1756, Smeaton conducted a number of experiments that led to the
discovery that cement made from limestone containing a considerable proportion of clay
would harden under water. Based on this discovery, Smeaton rebuilt this lighthouse in 1759
and this time, it stood strong for 126 years.

Subsequently, until the early part of the nineteenth century, large quantities of natural
cement was used, that was made with a combination of naturally occurring lime and clay.

In 1824, Joseph Aspdin, a British mason obtained a patent on his hydraulic cement formula
that closely resembled the modern cement as we know today. He called this cement
Portland Cement, and it was made through the proportionate mixing, burning and the
subsequent grinding of a combination of clay and limestone. Cement went through many
more improvements and developments in the nineteenth and twentieth centuries. The
industrial revolution and the subsequent development of the rotary kiln paved the way for
huge and sophisticated cement manufacturing plants. These plants possess the capability of
a homogenous mixing and intense heating of the raw material thus vastly improving the
quality of the cement produced. The sophisticated quality-testing equipment employed by
modern cement plants further helps in ensuring the quality of the cement produced.

25
TYPES OF PRODUCT

Upholding the tradition of JK Organisation for maintaining the highest standards in quality,
JK Lakshmi Cement today is one of the most preferred brands in its marketing area with a
network of about 2200 dealers spread in the states of Rajasthan, Gujarat, Delhi, Haryana,
U.P., Punjab, J&K, MP and Mumbai. Our endeavour is always to give our best and maintain
the highest standards of customer satisfaction. No wonder the discernible buyers prefer this
cement over other brands owing to its consistency, higher level of quality and impeccable
customer service.

Also not surprising is the fact that the decision makers of the nation's important projects like
IGNP, SardarSarvorar Dam and major corporations like L&T, Reliance, Essar and Airport
Authority of India chose JK Lakshmi Cement over other brands.

JK Lakshmi Cement Ltd is also the first Cement Manufacturer in North India to use coloured
bags to help the customer in segregating different products. It also has a regular contact
program with masons, dealers and architects to keep in tune with their needs and
requirements. One of the many innovative initiatives the company took was to have a
mason's club that now has over 45,000 members. Under this program the masons are given
an insurance cover against accidents absolutely free of cost, besides educating them on the
latest in construction activities.

The high standard of advertising has been another feather in the cap of JK Lakshmi Cement
Ltd. This has not only helped it to reach out to its customers but also in connecting with
them at an emotional level. No wonder then that "Mazbooti Guaranteed" is now a term that
is synonymous with JK Lakshmi Cement.

PRODUCTION CAPACITY

JK Lakshmi Cement Limited's manufacturing facility at Sirohi, Rajasthan is equipped with

state-of-the-art equipment acquired from leading vendors from across the world. Rated
among the topmost Cement Plants in India, our manufacturing facility is well positioned to
deliver an extremely superior quality of product that adheres to the highest quality
standards.

The JK Lakshmi cement manufacturing facility is spread across an area of 8 square

kilometres among the lush green Arravali ranges at Jaykaypuram in Sirohi district of

26
Rajasthan. The plant uses ultra modern equipment acquired from M/s Fuller International of
USA and M/s Ventomatic of Italy. The right combination of quality assurance, equipment
and methodology form the base for the Mazbootiadvantage offered by our Cement. With an
annual production capacity of 3.5 million tonnes, our manufacturing plant has the following
highlights:

 JK Lakshmi's manufacturing facility in Sirohi, Rajasthan has been rated among the
top Greenest Cement Plants of India.

 The variety of limestone used in the manufacturing of JK Lakshmi Cement is known

to be of a highly superior quality resulting in cement that is well recognised for
strength and durability.

 JK Lakshmi's manufacturing plant uses ultra-modern technology and imported

machinery.

 Use of high-end equipment such as the Gamma Metrics Machine and the X-ray
Analyser ensures that each product passing out of JK Lakshmi's manufacturing
facility adheres to global standards of quality and performance.

 Electronic packing machines obtained from M/s Ventomatic of Italy ensure that the
customers obtain accurate quantities of JK Lakshmi's products.

 The plant is fully computerised and centrally controlled by programmable logic

controller with colour VDU Control Stations.

SEGMENT

JK Lakshmi Cement, a renowned and well-established name in the Indian cement industry,
now in its 31st year, has a formidable presence in North & Western India‘s cement markets.
Its current capacity stands at 5.3 million MT per annum. Modern and fully computerized
integrated plant at Jaykaypuram, in Sirohi district of Rajasthan. It also has two split location
grinding units – at Kalol, Gujarat, and at Jhamri ,Distt. Jhajjhar, Haryana.

27
Established a Waste Heat Recovery Power project to generate 12 MW of power from waste
heat gases, which does not use any fossil fuel, taking the company‘s total captive power
generation capacity to 66 MW

The operating parameters at par with international standards and trendsetter in various
initiatives, including usage of alternative fuels such as petcoke

Recognition for its outstanding efforts in various fields, by way of numerous awards such as
―India‘s Best Companies to Work for‖ Award, Gold Award - National Institute of Personal
Management, Star Brands 2011, Green Manufacturing Excellence Award by Frost & Sullivan,
Greentech Safety Gold Award by Greentech Foundation, Golden Peacock HR Excellence
Award, Safety Innovation Award, Leading Businesswoman of the Year Award, Greentech HR
Excellence Award by Greentech Foundation, Leading CEO of the Year

Award, Best Professionally Managed Company Award and Golden Peacock Award for CSR
initiatives.

It forayed into the Ready Mix concrete business, an emerging segment in construction
sector, with the brand name ―JK Lakshmi Power Mix‖. It operates 11 RMC plants. It also
markets Plaster of Paris under the brand name ―JK Lakshmiplast‖ – a market leader in its
product category Work is on at the 2.7 million MT-Greenfield-site plant at Durg in
Chattisgarh.

SWOT ANALYSIS

JK Lakshmi Cement Ltd. is engaged in manufacturing and distribution of construction

materials. It is engaged in the production of cement that include cement 53 blended, 53
grade ordinary portland cement and 43 grade ordinary portland cement. The company
caters its product to civil and industrial works and operates in India. It is headquartered at
New Delhi, India.

This comprehensive SWOT profile of JK Lakshmi Cement Ltd. provides you an in-depth
strategic analysis of the company‘s businesses and operations. The profile has been
compiled by Global Data to bring to you a clear and an unbiased view of the company‘s key
strengths and weaknesses and the potential opportunities and threats. The profile helps you
formulate strategies that augment your business by enabling you to understand your

28
partners, customers and competitors better. This company report forms part of Global
Data‘s ‗Profile on Demand‘ service, covering over 50,000 of the world‘s leading companies.
Once purchased, Global Data‘s highly qualified team of company analysts will
comprehensively research and author a full financial and strategic analysis of JK Lakshmi
Cement Ltd. including a detailed SWOT analysis, and deliver this direct to you in pdf format
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Upon ordering, this SWOT profile will be updated and delivered direct to your inbox within
two working days.

The company‘s core strengths and weaknesses and areas of development or decline are
analyzed and presented in the profile objectively. Recent developments in the company
covered in the profile help you track important events.

Equip yourself with information that enables you to sharpen your strategies and transform
your operations profitably.

Opportunities that the company can explore and exploit are sized up and its growth
potential assessed in the profile. Competitive and/or technological threats are highlighted.

Scout for potential investments and acquisition targets, with detailed insight into the
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Financial ratio presented for major public companies in the profile include the revenue
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and efficiency ratios.

Gain key insights into the company for academic or business research.

Key elements such as SWOT analysis, corporate strategy and financial ratios and charts are
incorporated in the profile to assist your academic or business research needs.

29
 CHAPTER.3

ANALYSIS OF J K LAKSHMI CEMENT INDUSTRY

The life of an industry can be separate into the pioneering stage , the expansion stage, the
stagnation stage, and the decay stage.

Pioneering stage

The entry and exit barriers for the cement industry are high due to very high cost of cement
production plants, be it cost of setting up new plants or operational costs of existing plants.
To exit a losing position in the cement industry would incur huge losses for the firm.

Price increase in driven by high demand growth and high capacity utilization, but contrast to
this, during the period (2008-2011), the capacity utilization has decreased considerably for
India cements Ltd., madras cement Ltd, kesoram industries Ltd, Dalmia Bharat sugar &
Indus. Ltd Ultratech Cement Ltd., Chettinad Cement Corpn.Ltd. and Penna Cement

30
Inds.Ltd.Only ACCLtd. and Grasim Industries Ltd. seem tohave appropriate capacity
utilization levels along with their financial numbers.

Capacity utilization levels remained high for Ultratech Cement Ltd., Grasim Industries Ltd.,
and Century Textiles &Inds. Ltd. and Lafarge India Pvt. Ltd. over the period.Ultratech
Cement Ltd.‘s capacity utilization has never been above 85% with the March-11 figure at
80% even after increasing their cement production consistently over the last six to seven
years. This may indicate a huge capacity build up by Ultratech Cement.

Expansion stage

The production of cement has seen a healthy increase by all the major companies in the
east zone.

During 2005-06 to 2010-11, the operating profit margin all the companies has soared to
reach new highs during 2007-2008, but has come back to 2005-06 levels or even below
those levels for all the companies. It may indicate that the cost of production and operation
are higher from 2009-10 onwards and though the slight decrease in selling price of cement
must also contribute to the low operating profit margin levels, this much amount of
fluctuation in operating profit margins (around 15-20% for almost all.

contrast to this, during the period (2008-2011), the capacity utilization has decreased for
ACC Ltd., Shree Cement Ltd., Grasim Industries Ltd., and JK Lakshmi Cement Ltd., when retail
prices have been steady (decreased ever so slightly in 2008-09 due to economic crisis) if not
increased in the same period. Capacity utilization levels for Ultratech Cement Ltd. remain
high and low for Binani Cement Ltd. due to late entrance in the north zone market (2008-
09).

Stabilization stage

Price increase is driven by high demand growth and high capacity utilization, but in contrast
to this, during the period (2008-2011), the capacity utilization has decreased for Sanghi
Industries Ltd. to be around 70% for the last two years from a high of 97% in Mar-08. The
production level for Sanghi Industries Ltd. have decreased considerable over the last three
years to be at a production index of 150 in Mar-11 from an index of over 200 in Mar-08,
thus signalling possible supply/production control of cement to maintain the price level.

31
Company Analysis

Increase in infra spends by government to drive growth The company sells majority of its
cement production (~70%) in the north and east, which witnessed robust volume growth led
by an increase in infrastructure spend by the government (especially in the road sector and
low cost housing) thereby helping the company maintain healthy utilisation. Going forward,
we expect utilisation to remain healthy backed by the government’s thrust on infrastructure
development. Considering this we expect sales volume to grow at a CAGR of 14.2% over
FY16-18E. Cost effective operational efficiency JK Lakshmi has been one of the most cost
effective players in the industry. The company has gradually shifted from coal usage to low
cost pet-coke, which also avoids uncertainty about coal availability. As a result, fuel
consumption has reduced gradually. The company has 100% captive power capacity with 54
MW of thermal power plant and 12 MW of waste heat recovery. Other than this, the
company has an external arrangement with VS Lignite for sourcing 21 MW. Effectively, the
company has 87 MW of captive power available against current requirement of ~65 MW.
The available surplus power can be sold in the open market by the company.

GRADUAL REDUCTION IN POWER & FUEL CONSUMPTION

32
LOWER P&F COSTS THAN INDUSTRY

Operates at healthy utilisation in industry

Due to the company’s strong focus on the northern and western regions where demand is
continuously rising, the company has been able to maintain higher utilisation even in a
difficult business environment. During FY13 and FY14, the company reported over 90%
capacity utilisation while in FY16 JK Lakshmi managed to maintain effective capacity
utilisation of 84% despite a slowdown in the economy .

33
Cement Industry life cycle

YEARS Total sales Average Sales in Core

2013 35971 6194.2

2014 34370 5874

2015 38577 6715.4

2016 52569 9513.4

2017 57314 10462.8

It is one of the main industries that plays a pivotal role in the growth and expansion of a
nation. This industry is one of the main beneficiaries of the infrastructure boom in the
country. The Indian cement industry is huge, and it has great production capacity. Currently,

34
the total capacity of cement industry is about 165 million tones, which is the second largest
in the world.

Today, the cement industry in India is one of the most advanced and pioneering sectors in
the country, and the cement industry has a huge potential for growth and attracting new
investments. The cement industry in India uses the most modern and world-class
technology. Also, because India has a high quantity and quality of limestone deposits
throughout the country, the cement industry promises huge potential for growth.

In India, the cement industry in the initial stages grew very slowly and the supply struggled
to meet the demands. However, the scenario changed drastically after the liberalization
period. The cement industry began to grow and since then the supply of cement has always
managed to keep pace with its demand

During the financial year 2011-12 (FY12), India‘s cement production grew by 6.2% year-
onyear. The muted growth was mainly attributable to slowdown in construction activities,
extended monsoon, delay in infrastructural projects and the overall downturn in the
economy. As such, the capacity utilization levels stood lower at 73.7%.

The industry witnessed high operating costs, particularly those of energy and freight. The
price of imported coal went up sharply. The steep depreciation of the rupee and hike in
diesel prices further aggravated the concerns. However, the industry witnessed some
recovery in demand from November 2011 onwards.

Thegrowth of the Indian economy has slowed down in recent times on account of the rising
inflation, high interest rates, high prices of commodities and fuels. The growth prospects of
the cement industry are closely linked to the growth of the overall economy in general and
the real estate and construction sectors in particular. The importance of the housing sector
in cement demand can be gauged from the fact that it consumes nearly two-thirds of the
country‘s total cement. If the slowdown in real estate persists for an extended period, it
would impact the growth in consumption of cement.

However, the long term drivers for cement demand remain intact. Higher infrastructure
spending, robust growth in rural housing and peaking interest rates are likely to augur well
for the cement industry. The government plans to spend US$ 1 trillion on infrastructure in
the 12th five year plan period (2012-17). The same during the 11th plan period was US$ 514
bn. The focus on infrastructure development is expected to boost cement demand.

35
 PORTERS FIVE FORCE MODEL

The Five Forces Model of Competition

36
Threat of Substitutes – (Low)

Only bitumen in road, and engineering plastics in building offer some element of
competition, otherwise no close substitutes are popular in India.

Bargaining Power of Suppliers-(Low)

Monopolistic control of external cost element (coal, power, transportation and taxes)
results in high bargaining power with the government

Inter Firm Rivalry- (High)

Large number of players, intermittent over capacity; marginal product differentiation; high
storage costs, and high exit barrier in form of significant capital investment has led to stiff
competition in the industry.

Threat of New Entrants- (High)

High capital investment, broad distribution network and oversupplied market deter new
entrants. However, technology and manpower are easily available.

Bargaining Power of Buyers- (Low)

Rising share of retail purchase, declining share of bulk purchase by Government has taken
away the bargaining power of customers.

37
THREAT OF NEW ENTRANTS (High)

The existing companies are pushing hard to expand their production capacity to face the
rising competition. With the announcement of the Indian government in the budget for the
FY2013-2014 to pump in more than Rs.1.85 trillion in infrastructure the cement industry
becomes a very attractive market to enter thus increasing the threat of new entrants.
Although the investment to set up a cement plant is huge, still looking at the future
opportunity Indian steel and infrastructure giants like Jindal steel works and reliance group
are also gaining a share in this huge market.

 Brand equity : high in organized sector

 Switching costs or sunk costs : low

 Capital requirements : high in organized sector

 Access to distribution : strong distribution channel is required

 Customer loyalty to established brands : high in organized sector

 Government policies : moderate

Large Investments:

One of the factors is Large Investments needed for set-up of cement manufacturing unit.
Costs related to manufacturing or production, In the 11th Five Year Plan (2007-12), the
industry added 120 MT of new capacities and is expected to reach close to 470 MT by 2017.
units per month on an average needs a hung initial investment. Costs related to research
and development, marketing of product like advertising and promotion cost, sales and
distribution the cost is total investments. Thus, large investment is big barrier to the new
entrant, but government give liberalization to small cement plants that‘s why anybody will
start business, that‘s why threat of new entrants. Investment is large but we will start small
sector, or small business.

38
Economies of Scale

There are a number of players prevailing in the cement industry in India. However, there are
around 20 big names that account for more than 70% of the total cement production in
India. The total installed capacity is distributed over around 129 plants, owned by 54 major
companies. Because of after china India is word largest cement pint . and also after
agriculture economic segment construction is second, like road, increasing or changing life
style, that‘s why more impact on economic second economic factor more contribute in
India.

Distribution Channel

Established players have high market penetration in terms of distribution system. They have
their dealers appointed in almost all the possible cities or towns of India. More deep and
good is the distribution channel system more good is the service provided and in turn
increases the image of a particular company. Now days, companies are increasing their
efforts to enhance and upgrade their distribution channel system to provide good customer
product in a time. So, the new entrants have to establish a good and an efficient distribution
channel to serve its customers in time, which will again require a high amount of investment
in distribution channel. When and profit margin exciting sellers have, well-functioning
distributer and retailer net-works a new comers has an uphill struggle in squeezing its way
in. and also old company give high markup and profit margin.

Industry Growth Rate

Cement demand has continued to remain weak in Apr-May 2013 mainly due to lackluster
demand from end user industries. The domestic cement production grew by 8.2% Y or in
Apr 2013 as compared to 12.5% Y or in Apr 2012. The growth slowed down further to 3.0% Y
or in May 2013 pulling down the overall growth rate to 5.6%Y or in Apr-May 2013. Although
the demand picked up temporarily from the end of May 2013, it does not reflect any
fundamental recovery in prospects. The cement demand in May end and June 2013 has
been supported by pre-monsoon increase in construction activities and is not likely to be
sustained going forward. With the onset of monsoons and consequent lull in construction
activities, the demand is likely to come under pressure in Q2 FY14 as well. Cement prices

39
which weakened during Mar and Apr 2013 due to weak demand saw some recovery from
mid May 2013.

Government Policies

Government police is liberalization toward new enters, but some restriction on emission,
price, quality, etc. it is required high amount of investment but we will start small unit, and
also give support for stating business central as well as stats governments.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES (Low)

Relative price performance of substitutes : no substitute in India Buyer switching costs : low
and high Perceived level of product differentiation : low level of differentiation Now a day
timber is also being considered as one of the substitutes, therefore cement it one of
cement. In many countries like japan, Indonesia, Singapore etc., are a now using timber in
construction since those areas are high earthquake affected. They now prefer timber which
is cheap and long lasting for years. But timber cannot be considered as one of the major
substitutes of cement, therefore cement is one of the main components of any
construction, without cement, construction work is next to impossible as it provides
strength to the building.

Product for product Substitution

This means a substitute of the original product that is having same basic function. In cement
product not any substitute product in the Indian market, but in the word available
substitute product like timber.

Relative Price Substitute

In this type of substitute price is compared. Substitute products, which have the same
function but not the same good quality like that of the original product but very near to it,
are available at cheaper prices than that of the original product. Than in this case the

40
substitute becomes threats to the original products or company and if substitutes like
timber send is substitute product and cheaper than cement product so that it is relative
price product. And send is free than other substitute product, but in old house build by send
and chuna but new hose build by cement.

Substitution of Need

Substitution of need by a new product or service, rendering as existing product or service

redundant. In this the customer wants more reliable, cheaper and maintenance free
products to use. His/her need to use user friendly products which are cheaper in rates and
have good quality.Example:- before freedom Indian people use sand and chuna rater than
cement but after that people aware and changing life style and increasing income that‘s why
people use cement.

BARGANING POWER OF BUYER (Low)

The boom in the in the infrastructure industry of India has benefitted the cement industry
immensely. In the present day context, cement producers have become more powerful than
buyers, in the current situation, most of the companies are moving into direct marketing,
thus removing middlemen. Despite enough competition, due to high institutional demand of
cement, small time buyers are usually targeted as a secondly market by the cement
companies, thus buyers are not left with much bargaining power.

 Degree of dependency upon existing channels of distribution : high

 Buyer volume : based on customer demand.

 Buyer information availability : high( through advertisement and word of mouth)

 Availability of existing substitute products : high

 Buyer price sensitivity : moderate

41
  Differential advantage (uniqueness) of industry products : low ( because cement
product are almost same but Birla white cement use in different purpose).

Bargaining Power of the buyer is increasing as now days

 Many choices cement brand are available now.

 Easy availability of finance and cement.

 Information is easily available now days through advertisement and word of mouth.

Buyers are a competitive force. They can bargain for price cut, ask for superior quality and
better Product, and also demanding more credit period from dealer, retailers, etc.
customers bargaining with price and more credit limit from retailers, dealer, its mean
compete with retailers and dealer.

BARGAGAINING POWER OF SUPPLIERS (Low)

The basic raw materials used in the cement manufacturing process are limestone, sand,
shale, clay and iron one. The main material, limestone, is usually mined on site which the
other minor materials may or may not be mined there. Since all the raw materials are
natural resources, they are under the governments control, companies have to buy rights
from the government to setup the cement plant. So there are no such suppliers in the
cement industry.

 Degree of differentiation of inputs in term of raw materials : Low

 Same raw materials provider is high

 Presence of substitute inputs : low

 Employee solidarity (e.g. labor unions) : high in organized sector, but those company
use technology do not solidarity of employee, its low.

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  Raw materials supplier is high available in market that way company is stronger for
bargaining power.

 That‘s way attractive price for company and end user have low price getting
products.

 Whether supplier increasing price of raw materials price due to company switch off
and use other supplier those who give low price provide raw materials.

There were fewer suppliers who dominated the market and the switching cost for the
buyers were high. There were no substitutes present. But this scenario is changing now as
the suppliers have increased that‘s why increasing bargaining power for company.

RIVALRY AMONG EXISTING PLAYERS (High)

The Indian cement industry has large number of cement production thus making it low
concentration market. The four biggest cement players in the Indian cement industries.The
market share of the above mentioned four companies account to 39.80% currently. It is
believed that it these four companies do not increase their market share in the coming
years. Then their combine share could drop to 34%. The share of mid large players will
remain about 36%, small players will hold about 24%, and new players will account for 6% of
the market with focus on capacity addition, many small/medium players have been able to
capture more market share and consolidate their position in the industry in the fast last two
years. Market share of top five individual companies taken together show a decline to a
level of 44.3%in FY12 from 46.3% in FY13.

Exit Barriers

The India cement industries has got high exist barriers for investing huge amount of money.
But small industries exist barriers is low. One of the main reasons is the high initial capital
investment required for starting up a manufacturing unit. Shutting down and switching over
to other industry may cost fortunes.

43
Thus in this way, with the help of Porter Five Force Model the Competitive Analysis of
cement industry is done. In regard to this some important success factors are also
considered which are helpful for the development of two wheeler industry in India.

Number of Competitors in the Industry

If number of competitors in the industry are less than the competitive rivalry will be less and
conversely if there are more competitors in an industry, more will be the competitive rivalry
between them so as to acquire high market share. Where competitors are roughly of equal
size, there is danger of intense competition as one competitor attempts to gain dominance
over another. While the less competitive markets tend to be those with dominant
organizations within them and the smaller players have accommodated them to this
situation. Earlier market was dominated by Birla, Ambuja, Ultratech, etc.

 Number of competitors: The total installed capacity is distributed over around 129
plants, owned by 54 major companies.

 Rate of industry growth : high ( 15-17% p.a.)

 Exit barriers : low for small business and for large company exit barriers is high.

 Level of advertising expense : high

 Economies of scale : high

 Buyer demand is growing rapidly high

 Buyer costs to switch brand are high, if increasing price at that time, but customer
are brand loyal at that time switch is brand is mordent.

Factors affecting Cement Industry’ Competitiveness

¾ Cement is one of the highly taxed commodities in our country. Taxes and levies account
for around30% of sale price (and over 70% of ex-factory costs). Taxes and Levies as %age of

44
sale price ¾ High rail/road transportation costs add up to selling price. ¾ In view of the
uncertainty of Grid Power, being erratic and poor quality, most of the cement units
installed captive power to the extent of 60% and in some cases 100%. The new greenfield
units install 100% captive power facility as part of the machinery and equipment. Some
States impose levies on captive power generation as also some minimum demand charges
adding to cost of cement. ¾ Procedural delays in obtaining clearances for limestone mining
land acquisition, environment etc. which takes more than 2 years causing time and cost
over runs. ¾ Laws are rigid towards exit of an industry.

OPPORTUNITIES AND THREATS

The cement industry is going through its boom period with full capacity utilization. Powered
by the GDP growth of 8-9%, the annual demand for cement in the country continues to
grow at 8- 10%. As per NCAER study, under high growth scenario, the demand for cement
(including exports) is expected to increase to 244.82 million tones by 2010-11. As per the
study, the demand is expected to be much higher at 311.37 million tones, if the optimistic
projections of the road and the housing sectors are met. The industry has responded to this
with substantial new capacity announcements. The materialization of these capacities,
however, is likely to be delayed due to a number of factors including timely delivery of
equipment and construction of the plant due to the heavy order book position of the
suppliers. It is expected that demand growth will outstrip supply till the materialization of
such new capacities. However, the current high level of international crude prices and its
impact on the domestic prices of petroleum products is likely to make a dent in the
profitability but its impact will have to be seen depending upon the ability of the economy
to pass on such cost increase to the consumer. While the freight cost could be optimized on
the imported coal through usage of company‘s own ships for part of the quantity, the
international prices of imported coal and its volatility together with the strengthening of the
dollar against rupee could derail this. This could impact the delivery prices of imported coal
and also the cost of production. The Government has taken steps to increase the availability
of indigenous coal for its expanded capacity across various plants which can mitigate the
impact of such high cost of imported coal for the plants located near the coal fields in India.
The Government‘s continuing efforts to rein in cement prices by freeing imports and
banning exports could artificially disable the normal market price mechanisms for
determining the price. The rise in the price of cement is because of the gap of demand &
supply in the market. The demand for cement is much higher than its actual supply. But with
the production maximization, which can be encountered in next few year, this gap may
narrow down, that may ensure the market to be in equilibrium.Decreasing per capita

45
consumption doesn‘t affect the total consumption for the cement. It means the
infrastructure; contacted housing is using the bulk of the production. In spite of High price
of the product, the hick of demand because of the increasing rate of infrastructural
development.

Domestic price of cement is rising as well as the imported cement price is lowering. So
altogether the supply of the cement, which is affordable, will increase. This may in decrease
the gap between supply and demand. Major Demand was from the housing sector, which
may shift to infrastructure as lots of infrastructural development processes has already
being taken up & due to the increased price, housing segment started showing a slowdown.

Driving Forces

On the canvas of the Indian economy, cement industry occupies a prominent place. Due to
its deep forward and backward linkages with several key segments of the economy, cement
industry has a strong multiplier effect and is capable of being the driver of economic
growth. A sound changing life style and increasing road, infrastructure, so that plays a
pivotal role in the country‘s rapid economic and industrial development. The well-developed
Indian cement industry ably fulfills this catalytic role by producing cement.

Cement Industry one of the key drivers of the national economy as it provides large-scale
employment, having a strong multiplier effect. Being one of the largest industries in India,
this industry has been witnessing impressive growth during the last two decades. It has
been able to restructure itself, absorb newer technology, align itself to the global
developments and realize its potential. This has significantly increased cement industry‘s
contribution to overall industrial growth in the country.

The convergence of government policies, economy‘s growth, people‘s purchasing power

have all contributed to the phenomenal growth of Indian cement industry. Some of the
important growth drivers are explained below:

Key Drivers of Indian Cement Market

 Rising industrial and agricultural output

Rise in the industrial and agricultural output indirectly helps Indian cement
IndustryIndustrial and agricultural output increase has reflected in higher GDP and overall

46
growth of the economy which is about 9% in the last three years. Higher GDP means more
purchasing power. Sales of cement for domestic and commercial consumption have seen
high growth in these three years too.

 Rising per capital income

Rise in the per capita income increases cement sales. Industrial growth in the 70s, IT boom
in the 1980s and BPO boom in the 1990s have transformed the Indian middle class. The
present generation is able to earn the same levels of salary that their parents were earning
after years of work. This has pushed up the demand for home. A rise in per capita income is
also indirectly responsible for the retail boom and industrial boom for consumer
nondurables.

 Favorable demographic distribution with rising working population and

middle class Urbanization

Urbanization changes the face of Indian cement industry. Joint families in towns and
villages have given away to migration of the younger generation to cities in search of better
opportunities. The new-age educated migrants and nuclear families have a higher
purchasing power. Presently, the rate of spread of urbanization is 30% which is likely to
increase by 40% in 2030(UN).Urbanization has promoted infrastructural development and it
is estimated to spread at a rate of $500 billion in the next 5-6 years.

 Favorable government policies

Favorable Government Policies for the cement sector. Apart from a healthy growing
economy, Indian cement industry has a lot to thank the government for the amazing growth
rates. The Indian government has introduced several industry specific programs.

47
  Production

There are agriculture, infrastructure, energy& power, banking, & finance service sector.
Construction is the second largest economy activity after agriculture and is poised for
continuous growth due to industrialization, urbanization, and economic development with
expectation of improvement living standard of people in India. It account for nearly 65% of
the total investment in infrastructure, employee 33 million people approximately and
accounts for 6-8 percent of GDP. The construction industry is primarily drive by Government
of Indian investment on core infrastructure project and creation of urban infrastructure,
industries capital expenditure by corporate sector and development activities of real estates
or housing sector in urban as well as rural areas. the economic condition of Indian rural
population. the production of industrial machinery has also been on the rise and the
increasing flow of goods has spurred increases in rail, road and port traffic, necessitating
future infrastructure improvements.

Growth in the road infrastructure increases demand for vehicles. Indian highways and roads
have improved a lot in quality and connectivity in the last 20 years. Projects like the Golden
Quadrilateral aim to make even remote areas accessible by road. Some of the National
Highways are of international standards. This has made road transport a viable, cost
effective and speedy option both for goods and passenger traffic.

 Globalization impact on cement industry

The paper evaluates the effects of deregulation on the performance and structure of the
Indian Cement Industry. The implementation of the deregulation process is complex and
varied. Therefore the paper mainly focuses on the impact of liberalization on the growth
and the structure of the cement industry, where structure is primarily being captured by
concentration. In this paper, we contribute to the discussion on productivity growth and the
role of technological change within the context of global environment change.

The performance of the industry, under different policy regimes, truly establishes that
decontrol of the industry and liberalization of the economy has led to remarkable
improvement in the indicators such as installed capacity, capacity utilization

The Globalization of Indian Cement Industry has helped the industry to restructure itself to
coop up with the alterations in the global economic and trading system. The Indian cement
industry is one of the oldest industries. It has been catering to India's cement requirements

48
since its emergence during the British Raj in India. Though the majority of the players in the
Indian cement industry were private sector organizations, the industry was highly regulated.

With the rapid growth rate of the Indian economy after the 1990s, the infrastructural
developments within the country has been tremendous. The increase in the construction
activities has led to the increase in the demand for updated quality building materials and
other allied products. Cement being one of the major elements in the construction work,
there is a growth in the cement industry in India. The consumption of cement has increased
in India by nearly 7.5%. With the globalization of Indian cement industry many foreign
cement manufacturers are engaging themselves in agreements and deals with their India
counter parts

To have a share of the growth.

Globalization of Indian Cement Industry includes several foreign companies engaging in

mergers and acquisitions of Indian cement companies. For example,

Heidelberg cement Indorama cement Ltd. Heidelberg Cement Company entered into an
agreement for a 50% joint venture with the Indorama Cement Ltd., situated in Mumbai,
originally possessed by the Indorama S P Lohia Group. Heidelberg Cement company is the
leading German cement manufacturing company. The Heidelberg Cement was set up in
1873 and has a long and prosperous history. Being one of the best in the world the
Heidelberg Cement Company has its bases in different countries. The Heidelberg Cement
Company has two manufacturing units in India. A grinding plant in Mumbai and a cement
terminal near Mumbai harbor. A clinker plant is coming up in the state on Gujarat.

Holcim cement Gujarat Ambuja cements Holcim Cement signed an agreement of 14.8% take
over with the Gujarat Ambuja Cements (GACL). With new products, skilled personnel,
superb management, and a outstanding market strategy gives this tie up good edge over the
other competitors. Holcim Cement Company is among the leading cement manufacturing
and supplying companies in the world. It is one of the major employers in the world, having
a work force of 90,000.The Holcim Cement Company has units in excess of 70 countries all
over the world.

Italcementi cement Zuari cement Limited Italcementi Cement Company with the help of the
Ciments Français, a subsidiary for its global activities, has acquired shares of the famous
Indian cement manufacturer - Zuari Cement Limited. The acquisition was of
50%shareholding and the deal was of about 100 million Euros. Italcementi Cement is the 5th
largest cement manufacturing company in the world. The production capacity of the
Italcementi cement company is about 70 million tons in a year. With the construction boom
in India the company looks for a stable future. In 2001 the Italcementi cement entered the
Indian market scenario. It took over the plant of the Zuari Cement Limited in Andhra

49
Pradesh in southern India. The joint venture earned revenues of around 100 million Euros
and an operating profit of 4 million Euros.

Lafarge India is the subsidiary of the Lafarge Cement Company of France. It was established
in 1999 in India with the acquisition of the Tisco and the Raymond cement plants. Lafarge
Cement presently has three cement manufacturing units in India. One of them is in
Jharkhand which is used for the purpose of grinding and the other two are in Chhattisgarh
used for manufacturing. The Lafarge Cement Company was set up in the year 1833 by Leon
Pavin. Lafarge Cement Company situated in France is the leading cement producing
company in the world. It has plans for increasing the cement production through
technological innovations and maximization of the capacity of the plant. It has a large
network of distributors in the eastern part of India. The Lafarge Cement Company is
presently producing nearly 5.5 million tons of cement for the Indian cement market.

PEST ANALYSIS OF CEMENT INDUSTRY

Pest analysis is a useful tool for understanding the big picture of operating and takes
advantages of opportunities. Pest analysis includes political, environmental, social and
technological which affects both the companies as well as industry.

POLITICAL
The price of cement is primarily controlled by the coal rates, power tariffs, s railway tariff,
fright ,royalty and chess on limestone. Interestingly government control all of these prices.
Government is also one of the biggest consumers of the cement in the country. Most state
government in order to attract investment in their respective states. Offer fiscal incentive in
the form of sales tax exemptions/deferrals. States like Haryana offer a freeze on power tariff
5 years, while Gujarat offers exemption from electric duty.

Firstly, we will discuss the political impact of cement industry. The 212-million tonne cement
industry's demands seem to have no end. After a healthy quarter (January-March 2009) due
to robust demand from the infrastructure segment, good dispatches and growth in profit
the industry seems to be wanting for more. With election results being declared in favor of

50
the UPA and the country moving on its way to form the new government, the cement
industry is expecting excise benefits and ban on imports to boost the cement demand which
has taken a hit due to slowdown in the real estate sector.

Says Sumit Banerjee, MD of ACC Ltd, "We need directional steps to correct anomalies in
excise taxes, the manner in which these are levied on our industry. We would also want a
customs duty rationalization that would rectify the current imperfection, whereby the
inputs are taxed but not the direct import of cement.

According to Vinod Juneja, MD of Binani Cement, "We are looking at reduction in excise
duty to 4% and a complete ban on import of cement, from the new government.
Meanwhile, taking into consideration the crisis the cement industry is going through, the
government had, in its stimulus package, imposed a 4% cut in excise duty to 8% along with
cut in excise duty on bulk cement from 14% to 8%. HM Bangur, president of Cement
Manufacturers Association (CMA) and CMD of Shree Cement however, declined to
comment on the I ndustry expectations from the new government.

The election results are positive but it is too early for me to comment on the industry's
expectations before the new government is formed, he said. Meanwhile, Vinita Singhania,
MD of JK Lakshmi Cement Ltd and vice president of CMA, expects that the infrastructure
development would have to be pursued with much more vigor to take India closer to its aim
of being a super economic power. This would entail building of modern ports, new super
express highways, concretization of roads, emphasis on canal lining etc. We would also
expect the new government to have a re-look at the high incidence of taxation on the
cement industry so that cement becomes more affordable to all sections of the society and
fulfill the dream of common people to have a home of their own, Singhania adds.

Economic
The industry is on the boom, with a lot of government infrastructure and housing project
under construction. The export segment of the industry is expected to grow again on
account of various infrastructure project that are being taken up all over the world and
numerous cement plants coming up in near future in the country.

Inportance Cement Industry to indian:

 Basic ingredient in construction work.

 Generation of employment.

51
  Contribution to national exchequer.

 Contribution to Indian railway revenues

 Helpful in the development of other industries.

 Huge export potentialities and quick marketability

 Enhancement in the national income

Now we will discuss the economic impact of cement industry. India is the second largest
industry after china. A variety of studies on productivity growth and technological change in
Indian industries has been carried out so far. Originally these studies were driven by an
interest in understanding the capital vanishing phenomena in the Indian industry between
1950 and 1980. During that time, labor productivity as well as capital availability and use
increased considerably, while the overall growth rate of the economy stagnated at low
levels (see Ahluwalia, 1991). Concerned about the efficiency of resource use researchers
started investigating productivity growth and input factor substitutions for aggregate
manufacturing as well as various industries. The results of these analyses differed
substantially depending on the methodology, statistical specification employed as well as on
the underlying sources of data, levels of aggregation and time periods considered. Over time
more sophisticated and refined methodologies in connection with longer time series were
employed to study productivity change. The contribution of total factor productivity to
output growth was of primary interest to explain the continuously low economic
development.

Partial factor productivity was investigated to better understand the importance of each
factor of production and to evaluate substitution possibilities. In this context, the role of
energy within the production process received increasing attention and consequently,
besides the primary factors of production (capital and labor), energy and materials were
added as secondary input factors into the analyses. Total factor productivity growth (TFPG)
measures the growth in gross value added(GVA) in excess of the growth of a weighted
combination of the two inputs capital and labor. For measuring output in form of gross
value added all intermediate inputs are deducted. Thus, gross value added only provides the
value that is actually added in the production process by using the two primary inputs of
production: capital and labor. Total Productivity Growth, in contrast, relates gross value of
output (VO) to the four input factors capital, labor, energy and materials. Since it accounts
for intermediate inputs as well as primary inputs, value of output provides the more
appropriate output measure if interested in analyzing energy and material as well as capital

52
and labor. Commonly, three major growth accounting approaches are considered for
estimating total factor productivity as well as total productivity growth: the Translog Index,
the Solow Index and the Kendrick Index. The three indices differ in their complexity and the
13 underlying economic assumptions. A detailed derivation of the three indices is provided
in a survey report by Mongia and Sathaye (1998).

The Kendrick index is easy to understanding using an arithmetic aggregation scheme for the
inputs. It is restrictive in that it is based on the assumption of a linear production function
and in assigning constant (base year) shares in GVA (VO respectively) to the inputs. The
Solow index is slightly more general in assuming a neo-classical, Cobb-Douglas, specification
of the production function with constant returns to scale, perfect competition in the market
and factors being rewarded their marginal products. The translog measure is based on a
more complex production function associated with only a minimum numbers of
assumptions. It is therefore of more general nature and provides the preferably used
measure for productivity growth.Partial factor productivity (PP) indices are reported for all
input factors. They are obtained by simply dividing the value figure for each factor by the
gross value of output or by the gross value added respectively. Partial factor productivity
growth indicates how much output changes in relation to a fixed amount of each single
input. It measures how "productive‖ a factor is. The inverse means how much of a factor has
to be used to produce a specific amount of output - it measures the factor intensity of
production.

India's economy is the third largest by GDP in terms of purchasing power parity but, with a
very large population, it ranks only 165th in GDP/capita terms. Gradual de-centralization of
the economy since the early 1990s has allowed the development of a more diverse market
economy that is increasingly driven by an educated and business-minded middle class. This
is highlighted by India's now world-famous telecommunications and service sector, which
has grown extensively over the past decade.

Increased variation has resulted in a reduction in India's agriculture dependency, although

this sector still supplies around 50% of the country's income. Manufacturing remains strong,
representing more than a quarter of output.

However, despite economic expansion and development of its service sector, economic
disparity remains a severe problem for India. Almost a third of Indians lived in poverty in
2011 and constant population growth makes it hard to increase living standards. For
illustration, India welcomed its 1 billionth inhabitant in 2000. In just 12 years since then the
population has increased to over 1.2 billion!.

53
Role of cement industry in india GDP
The Role of Cement Industry in India GDP is significant in the economic development of the
country. The cement industry in India is one of the oldest sectors in India.

The industry is driven by the immense growth in the housing sector, the infrastructure
development, and construction of transportation systems.

Role of Cement Industry in India GDP-Facts

 The Indian cement industry is one of the booming sectors of the Indian economy

 The infrastructure development of the country in the recent years is the demand
driver for the cement industry

 The Indian Cement Industry is experiencing the entry of many foreign players in the
Indian market

 The average monthly capacity utilization during the year 2006-07 was 94%

 The cement dispatches in the year 2006-07 was 155 million tonnes

 The growth of the cement sector pertaining to the total output was 10% in 2006-07.

Role of Cement Industry in India GDP-Production

 India ranks second in the production of cement in the world

 The growth rate of the production of cement during the year 2006-07 was 9.1%

 The export of the cement in the year 2006-07 was 9.3 million tonnes

 The cement industry in India constitutes of 365 small cement manufacturing units
and 130 large cement manufacturing units

54
  The total installed capability of the cement manufacturing is 165 million tonnes per
year

 The large manufacturing units accounts for 94% of the total output of cement.

Role of Cement Industry in India GDP-Mergers and Acquisitions

 Heidelberg Cement-Indorama Cement Ltd

 Heidelberg Cement Company entered into an agreement for a 50% joint venture
with the Indorama Cement Ltd, situated in Mumbai, originally possessed by the
Indorama S P Lohia Group.

 Heidelberg Cement Company has two manufacturing units in India

 Italcementi cement-Zuari Cement Limited

 Italcementi cement company has acquired share of the famous Indian cement
manufacturer, the Zuari Cement Limited

 The acquisition was of 50% shareholding and the deal was of about 100 million

 It took over the plant of the Zuari Cement Limited in Andhra Pradesh

 Holcim Cement-Gujarat Ambuja Cements (GACL)

 Holcim Cement signed an agreement of 14.8% take over with the Gujarat Ambuja
Cements (GACL).

 Holcim Cement Company is among the leading cement manufacturing and supplying
companies in the world.

 Lafarge India

 Lafarge India is the subsidiary of the Lafarge Cement Company of France.

55
 It was established in 1999 with the acquisition of the Tisco and the Raymond cement
plants

 Lafarge Cement presently has three cement manufacturing units in India one of
them is in Jharkhand and two other in Chhattisgarh.

Social

The cement industry in India consist of both organization sector and the unorganized
sector. Organized sector comprises of the well know cement manufacturing
companies while the main players of the unorganized sector are the regional and
local cement producing branded cement like ULTRATECH, JAYPEE, etc. A population
of more than 100 billion people, it is expected that cement industry will create
another 25 lacks job in the next 4-5 years.
The cement industry has responded to the demands of infrastructure and
consequent increasing the production capacity enormously. This industry mainly rely
on mining operation for its product, impacting large number of people and the
environment around it. Hence, adequate responsibility has to move alongside its
growth.
India, historically has been a society that has had a tradition of showing concern to
others. As the country industrialized, business houses also kept with these traditions.
It is documented that the oldest business houses have been the most just and hence
respected companies in our society. Indian economy has grown leaps and bounds in
recent years and today India is recognized by the world as an emerging economy.
Consequently, companies of all sizes have emerged, grown and expanded in the last
few decades, at times very quickly, with impacts on the environment and the society.
However, their responsibilities often have not kept pace with their growth.
Governance is often compromised and probably because of the sheer numbers of
people available, the dignity and value for human beings and their rights often
ignored.
Many organizations have grown, often flouting norms, arriving at quick fix solutions
with sometimes with complete disregard for the environment or the impacts on its
work force and
Its neighborhood owing to its operations.
Any quick fix models with a complete lack of concern for the society and
environment can only work in the short term. To survive, organizations need to be
viewed as responsible companies, both by their internal as well as external
stakeholders. And this sentiment is being echoed by all - the government, business
forums, etc. and companies are encouraged to understand this for their owe good.
Different organizations have been using the terms CSR, corporate citizenship and
sustainability interchangeably. For example, Ambuja Cements sees CSR as the social

56
performance forming a significant aspect of the company's overall sustainability.
Sustainability is the broad umbrella and CSR is the company's performance towards
all its stakeholders - workforce , business partners, customer and the society which it
impact through its operations.
While there is no doubt that companies need to sprout and grow, especially to meet
the development demands of society, they also in turn directly or indirectly impact
the societies in which they exist. There is a need and a demand to monitor social
impacts and performance. Just projecting a strong financial bottom line is simply not
enough. Hence, CSR is about responsible management of business processes which
produce an overall positive impact on society.

Technology

The government of India plant to study and possibly acquire new technology from
the cement industry of world. The government is discussing technology transfer in
the field of energy conservation and environment protection to help improve
efficiency of the India cement industry. Cement industry has made tremendous
strides in technological up gradation and assimilation of latest technology. At
present 93% of the total capacity in the industry is based on modern and
environment friendly dry process technology.
Continuous technological upgrading and assimilation of latest technology has been
going on in the cement industry. Presently 93 per cent of the total capacity in the
industry is based on modern and environment-friendly dry process technology and
only 7 per cent of the capacity is based on old wet and semi-dry process technology.
There is tremendous scope for waste heat recovery in cement plants and thereby
reduction in emission level. One project for cogeneration of power utilizing waste
heat in an Indian cement plant is being implemented with Japanese assistance under
Green Aid Plan. The induction of advanced technology has helped the industry
immensely to conserve energy and fuel and to save materials substantially.
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
conform to the BIS Specifications. Also, some cement plants have set up dedicated
jetties for promoting bulk transportation and export.

57
SWOT ANALYSIS

A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified
as strengths (S) or weaknesses (W), and those external to the firm can be classified
as opportunities (O) or threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's
resources and capabilities to the competitive environment in which it operates. As
such, it is instrumental in strategy formulation and selection. The following diagram
shows how a SWOT analysis fits into an environmental scan
SWOT is an acronym for the internal strengths & weaknesses of a business &
environmental opportunities and threats facing that business. SWOT analysis is a
systemic identification of these factors and the strategy that reflects the best match
between them. It is based on the logic that an effective strategy maximizes a
business‘s strengths and opportunities but at the same time minimizes its
weaknesses & threats.

Strengths

The cement industry has many strengths to be considered. Cement is, literally, the
building block of the construction industry. Almost every building constructed relies
on cement for its foundation. The cement business is a $10 billion industry,
measured by annual cement shipments. There is also a strong reputation behind the
cement industry.
Cement is a solid material and consumers rarely have complaints about the product.
Regional distribution plants have also made cement widely available to any type of
buyer.

Weaknesses

The cement industry is not without its drawbacks. The cement industry relies on
construction jobs to create a profit. But the cement industry heavily relies on
weather. About two-thirds of cement production takes place between May and
October.
Cement producers often use the winter months to produce and stockpile cement, to
meet demand. Another weakness is the cost of transport; the cost of transporting

58
cement is high and this keeps cement from being profitable over long distances. In
other words, shipping cement costs more than the profit from selling it.

Opportunities

The cement industries has opportunities as well. One such opportunity is the cement
industry's efficiency. The cement industry has recently streamlined its production
efforts, using dry manufacturing instead of wet, which is heavier and more time-
consuming.
The cement industry has also invested about $6 billion in expansion efforts to meet
unmet cement needs. Projections show that by 2012, the cement industry will have
25 percent more production capabilities.
3.5.4 Threats
The nature of the economy have uncovered a number of threats to the cement
industry. The cement industry greatly relies on construction. The current economy
has lessened the number of construction jobs, which in turn hurts the cement
industry.
The cement industry controls the majority of the United States market, but not all of
it. About 11.5 metric tons of cement are imported annually to support the unmet
need. If other countries can produce and ship cement for a reduced price, the U.S.
cement industry is in danger.The U.S. government is also attempting to regulate the
cement industry's waste. The Environmental Protection Agency has introduced
regulations for the cement industry to cut down emissions.

Economic Future of Indian Cement industry

Given the rampant growth of the Indian cement industry, few are betting against
continued capacity additions in the short- to medium-term. The extent of capacity
addition, however, and whether or not demand will rise to match it more closely
than at present, is up for debate.In November 2012 the India Brand Equity
Foundation (IBEF) said that it expected double-digit growth in the cement industry
for the 2013 and 2014 fiscal years, which end on 31 March 2013 and 31 March 2014
respectively. It reported that the cement industry would increase production by
around 71Mt/yr over the same time-frame to reach over 300Mt/yr in

59
2014.Meanwhile, the Indian Government's 12th Five-Year Plan, which runs for 2013
to 2017, states that India will require a cement capacity in the region of 480Mt/yr by
the end of 2017.12 It states that a further 150Mt/yr of capacity will be required to
accomplish this. Separately, ACC expects India to have a capacity of 500Mt/yr by
2020.This represents more than twice the cement that India currently consumes in a
year and so it is worth asking, if this capacity is reached, what will the capacity
utilization rate be? The government promises significant investment in
infrastructure, although bureaucracy has hampered such investments in the
past."Land acquisition is a big issue," said H M Bangur, chairman and managing
director of north-based Shree Cement, in August 2012. "No state government is
providing land to set up units. Greenfield expansion is tough."
Sunil Singhania, equity head at Reliance Mutual Fund, said, "Capacity creation in
India is very difficult because there is no land (in some places) and no limestone
deposits at others. Several cement companies have written down assets. I believe
capacity additions going forward will not be as aggressive as in the past. Expansion
will be slower than demand growth. "With prices remaining low due to overcapacity
and low demand, the potential for future collusion between producers and the
difficulty of setting up new capacity, it is possible that producers, under pressure to
meet the expectations placed on them by the Five-Year Plan, will see increased
pressure on margins in the next few years, especially if fuel prices continue to rise .In
the midst of this, smaller companies are likely to suffer more than most, possibly
making them acquisition targets for better-equipped multinationals. Indeed, in
January 2013 Prism Cement, one of India's smaller cement producers, actually
reported a net loss for the quarter to 31 December 2012. It cited low demand, high
fuel costs and increased electricity prices. How long can such producers continue as
the Ultratechs, ACCs and Ambujas of this world keep adding new capacity?
An academic report carried out for the Competition Commission of India in 2012
hints at this possibility of future consolidation in the industry. The study found that,
despite capacity utilizations falling across all cement producers in India from 2006 to
2011, it was those with the smallest market share that experienced by far the worst
reduction. Binani Cement, for example, recorded utilizations rates of only around 55-
60%. Conversely mega-players like Ultratech have been more stable, with rates of
80-95%. In January 2013 India Ratings reported that smaller businesses were less
likely to benefit from the expected improvement in the industry.A major reason
behind this phenomenon is rising fuel costs, which have hit producers from two
directions in the past year. Firstly, demand for power in India is high and domestic
fuels are dedicated predominantly to electrical generation. Industrial companies are
forced, in many cases, to import costly foreign fuel, which must be shipped inland to
be used. A second effect of increased fuel prices is that cement is more costly to
transport once it has left the factory.Due to their size allowing greater economies of
scale, larger cement companies are better positioned to import fuel on a large scale

60
 and are more likely to have flexible vehicle fleets to respond as demand fluctuates in
different areas. Another crucial difference between the larger and smaller
companies is that larger players are more likely to have a pan-Indian presence. This
enables them to ride-out periods of difficulty in one area while maximizing margins
elsewhere. Local producers do not have this luxury.Smaller local producers are less
well equipped to deal with expansion and their relative size will gradually diminish
compared to the top 12 producers. As this happens, it is likely that they will become
the acquisition targets of the larger firms.

Key Success Fasters in the cement Industry

Cement industry players a crucial role in the development in the infrastructure country. Due
to the various construction activity undertaken by the central government state government
public sector and other organization to meet need of the massive population in the country
generate huge demand for cement and also provision for housing is the first and foremost
requirement of every household and there for market demand of cement for private
consumption is increasing consultable. According to the ministry the liberalization process
provide the much desired demand to the cement industry and the growth was quit visible
leading to noticeable growth in term of 100 million tonnes capacity aiding during the decade
1999-2012.

Key point

Cement industry is second largest industry in India after china.

183 large cement plant and more than 360 mini plants.

328 million tonnes a years installed capacity.

97% of the installed capacity is accounted for by large producer.

21 top companies control 90% of the market.

40% of the market is controlled by group, holcim and aditya birla group.

 Brand Equity

 Satisfies customer needs

 Satisfies customer needs

61
  Provides better value for money than other competing brands

 Distribution Network

 Availability near the consumer

 Economies of scale

 Appropriate pricing strategy

INDUSTRY DOMINANT ECONOMIC FACTORS

Market Size

A RNCOS report titled “Indian Cement Industry Outlook 2015‖ estimated that the total
installed capacity of cement in India will increase with a compound annual growth rate
(CAGR) of around 7 per cent during 2012-13 to 2014-15. The production of cement has
increased at 10 per cent CAGR over FY07-11. The market size of the industry is expected to
grow from 223.4 MTPA during FY12 to 550 MTPA by FY20. The cement companies in India
are receiving full attention from the private equity (PE) firms for funding their business
plans. India‘s cement sector is with an overall capacity of 350 MTPA. The compaies including
UltraTech, ACC, Ambuja Cements, Jaiprakash and Shree Cement control almost half the
country‘s cement market. In the 11th Five Year Plan (2007-12), the industry added 120 MT
of new capacities and is expected to reach close to 470 MT by 2017.

Growth Rate

Cement demand has continued to remain weak in Apr-May 2013 mainly due to lackluster
demand from end user industries. The domestic cement production grew by 8.2% Y or in
Apr 2013 as compared to 12.5% Y or in Apr 2012. The growth slowed down further to 3.0% Y
or in May 2013 pulling down the overall growth rate to 5.6%Y or in Apr-May 2013. Although
the demand picked up temporarily from the end of May 2013, it does not reflect any
fundamental recovery in prospects. The cement demand in May end and June 2013 has
been supported by pre-monsoon increase in construction activities and is not likely to be
sustained going forward. With the onset of monsoons and consequent lull in construction

62
activities, the demand is likely to come under pressure in Q2 FY14 as well. Cement prices
which weakened during Mar and Apr 2013 due to weak demand saw some recovery from
mid May 2013. The hike in cement prices was supported by pre-monsoon increase in
construction activities which provided an opportunity to cement companies to raise prices
before the lean season sets in. The industry also increased prices to pass on the increase
in coal prices by Coal India Limited (CIL). As a result, the average wholesale cement prices
increased by ~Rs. 10/bag in Delhi, Rs. 17/ bag in Chandigarh and Rs. 5/bag in Kolkata
between April-Jun 2013. Prices in some parts of South India such as Bangalore and Chennai
also saw hike of Rs. 10-15/bag in June 2013. However, in last week of June, prices have
come under pressure in North, West and East with cement prices declining by Rs. 5-20 per
bag in Delhi, Chandigarh and Ahmedabad markets. The Hyderabad market, which had seen
significant downward pressure in prices in the last one year with average wholesale cement
prices declining by 20% from Rs. 283/bag in July 2012 to Rs. 228 -232/bag in April 2013, also
saw a steep recovery in prices in the last week of May 2013. The cement prices in
Hyderabad increased by 30% to Rs. 296/bag in June 2013 driven by slowdown in capacity
addition in South, efforts by cement players to rationalize production as per market demand
and to pass on the rise in costs to the customers. This rise in prices augurs well for South-
based players with significant exposure to Andhra Pradesh market. However, the ability
of cement companies to maintain prices at these levels will be challenging given the
capacity overhang in the state and lean monsoon season ahead. Going forward, with the
busy season coming to an end, demand scenario continuing to look muted and a seasonally
weak monsoon season ahead, the pricing power is expected to remain weak for the
cement industry. On the cost side, the cement industry was affected by increase in coal
prices effected by CIL. In May 2013, CIL reduced the prices of premium varieties of coal (G3
and G4) with Gross Calorific Value in the range of 6100-6700 kcal/kg by 10% in line with
decline in international coal prices. To offset this, CIL increased the prices of low grade coal
(G6 G17)-varieties that are commonly used by Indian cement companies- by an average
10%. The increase in coal prices will affect the power and fuel cost for cement companies.
The impact of increase in coal prices will be more pronounced on companies which depend
more heavily on domestic coal.

Major Players in Indian Cement Industry

There are a number of players prevailing in the cement industry in India. However, there are
around 20 big names that account for more than 70% of the total cement production in
India. The total installed capacity is distributed over around 129 plants, owned by 54 major
companies.

63
COMPANY PRODUCTION INSTALLED CAPACITY
J K GROUP 6,174 6,680

Cement Production and Growth

Domestic demand plays a major role in the fast growth of cement industry in India. In fact
the domestic demand of cement has surpassed the economic growth rate of India. The
cement consumption is expected to rise more than 32% by 2016-17 from 2014-15. In
cement consumption, the state of Maharashtra leads the table with 12.18% consumption,
followed by Uttar Pradesh. In terms of cement production, Andhra Pradesh leads the list
with 14.72% of production while Rajasthan remains at second position.

The production of cement in India grew at a rate of 9.1% during 2006-07 against the total
production of 147.8 MT in the previous fiscal year. During April to October 2008-09, the
production of cement in India was 101.04 MT comparing to 95.05 MT during the same
period in the previous year. During October 2009, the total cement production in India was
12.37 MT compared to a production of 11.61 MT in the same month in the previous year.
The cement companies are also increasing their productions due to the high market
demand. The cement companies have seen a net profit growth rate of 85%. With this huge
success, the cement industry in India has contributed almost 8% to India's economic
development.

Scope

This report provides a comprehensive analysis of the Indian cement industry, It provides
historical values for the Indian cement industry for the report's 2007–2011 review period
and

Forecast figure for the 2012-2016 forecast period in offer a details analysis of production
capacity, It details the regulatory framework for the Indian cement industry It covers an
exhaustive summary on key trends, drivers and issues affecting the Indian cement in
industry, It details the competitive landscape in the Indian cement industry It contains an
analysis of market entry, growth and operational strategies of key players Make strategic
business decisions using historic and forecast market data related to the Indian cement
industry, Assess the growth opportunities and industry dynamics by viewing production

64
Capacity , demand, import and export figure identify the key market tread and opportunity

Assess industry structure and competitive landscape the competitive in the Indian cement
industry enabling the formulation of effective market entry strategies.

65
STRATEGIC GROUP MAPPING

Geographical Converge wise:

66
BASED ON BRAND & PRICE

67
Interpretation for Geographical Converge

Here in the above table of geographical coverage vice analysis of strategic group mapping,
we can analyse that ULTRATECH, J.K, contain higher availability on the local basis. and
mediums and low level available J.K LAXMI, ACC, SHREE

• But on the global level availability, ULTRATECH, J.K, J.K LAXMI, ACC, SHREE all brands are
at mediums and low level.

At the regional level, availability of all brands at high and medium position.

Interpretation for brand vs. price

Here in the above table of brand vs. price analysis of group mapping , we can analyse that
Ulltratech, high price and brad value is also high. Second J.K cement price and brand are
medium.

J.K laxmi cement price and brand are medium, and Acc cement price and brand are average,
and Shree cement price and brand are low in the market.

68
FINANCIAL ANALYSIS

we highlighted the content and importance of the statement of change in financial position.
Management, creditors, investors and other use the information contained in these
statements to form judgment about the operating performance and financial position of the
firm. User of financial statement can get future insight about financial strength and
weakness of the firm if they properly analyse information reported in these statement.
Management should be particularly interested in knowing financial strength of the firm to
make their best use and to be able to spot out financial weakness of the firm to take
suitable corrective action. The future plan of the free should be laid down in view of the
firm‘s financial strengths and weakness. Thus financial analysis is the starting point for
making plans, before using any sophisticated forecasting and planning procedures.
Understanding the past is a prerequisites for anticipating the future.

FILTARETION

Interpretation

Currently there are about 3000 dairie in Gujarat, but four major players in the premium
organized segment dominate the industry. That is the reason for selecting four companies
out of several companies.

We selected these four companie on the basis of Sales Net Profit and. From all companies
we select five company which gives higher selse net profit and earning per share as a
compare to others.

In a pie chart it shows thesalse, net profit and earning par share it of selected five
companies.

From four selected companies the first company is Ultatech Cement which highest in Sales
Net profit The last company is J K Lakshmi.

69
TABLE:

RATIO ANALISIS

Return on investment/ Return on capital employed

Meaning & Importance

It is an index of profitability of business & is obtained by comparing net profit with capital
employed. The ratio normally expressed in percentage. The term capital employed includes
share capital, reserves & surplus and long term loans such as debentures.

Formula:

Return on = Net profit before interest & tax (EBIT) X 100

Capital employed Total Capital employed

70
PARTICULAR 2017 2016 2015 2014 2013
J K LAKSHMI 8.84 6.13 9.60 7.96 14.44
CEMENT

16

14

12

10 Column1

8 Column2
Column3
6

0
2017 2016 2015 2014 2013

Return on capital employee that indicates the efficiency profitability of the industry capital
investment. Above graph show the industry return of capital employee continually
decrease. This is not a good sign for the industry having such a reputed name in the market.
It also affects industry capital investment.

Earning Par Share

The ratio measures the profit available to equity shareholder on per share basis. this ratio
show the profitability of the firm. It is not the actual amount paid to shareholders as
dividend but is the maximum that can be paid to them.

71
 Profit After tax

Earnings per Share = -------------------------------------------------------------

No. of Equity Shares

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 31.05 22.96 29.70 25.66 36.43

CEMENT

40

35

30

25 Column1

20 Column2
Column3
15

10

0
2017 2016 2015 2014 2013

Financial analyst considers the earning per share as an important measure of profitability.
EPS measures the profit available to the equity share holders on a per share basis. That is
the amount that they can get on every share held.

The earnings per share has increase rapidly from 2009-10 to 2012-13 This Higher Ratio will
attract investors. This ratio shows that company Successfully increase profitability.

72
Current Ratio

Meaning & Importance :-

This most widely used ratio shows the proportion of current assets to current liabilities. It is
also known as ― working capital ratio ― as it is a measure of working capital available of a
particular time.

Formula :-

Current Assets

Current ratio = ------------------------------

Current Liabilities

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 0.43 0.47 0.48 0.68 0.74
CEMENT

73
 0.8

0.7

0.6

0.5 Column3

0.4 Column2
Column1
0.3

0.2

0.1

0
2017 2016 2015 2014 2013

The current ratio is a financial ratio that measures whether or not a industry has enough
resources to pay its debts over the next 12 months. It compares a firm's current assets to its
current liabilities. Above graph show the current ratio Decrease rapidly from in the year of
2013-14. It means the industry next five year current assets and current liability was
decrease.

Debt- Equity Ratio

This ratio is only another from of proprietary ratio and establishes relationship between the
outside long- term liabilities and owners‘ funds. It showa the proportion of long-term
external equities and internal equities.

Long term Liabilities

Debt Equity Ratio = _____________________

Shareholders‘ Funds

74
PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 1.42 1.27 1.26 1.09 0.93

CEMENT

1.6

1.4

1.2

1 Column3

0.8 Column2
Column1
0.6

0.4

0.2

0
2017 2016 2015 2014 2013

A measure of an industry financial leverage calculated by dividing its total liabilities by

stockholders' equity. It indicates what proportion of equity and debt the industry is using to
finance its assets. Above graph show the industry debt equity ratio was decrease in the year
of the 2009-10 to 20012-13 it is good position in the market.

Interest Coverage Ratio

This ratio indicates as to how many times the profit covers the payment of interest on
debentures and other long- term loans. Hence, it is also known as ―times-interest earned
ratio‘‘ it measures the debt service capacity of the firm in respect of fixed interest on long-
term debts. This ratio is obtained by dividing profit of the firm before interest and taxes by
fixed interest charges.

75
 Profit before Interest & Taxes

Interest Coverage Ratio = ______________________________________

Interest

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 1.39 0.87 2.93 2.73 4.01
CEMENT

4.5

3.5

3
Column3
2.5
Column2
2
Column1
1.5

0.5

0
2017 2016 2015 2014 2013

This ratio indicates as to how many times the profit covers the payment of interest on
debentures and other long- term loans. Hence, it is also known as ―times-interest earned
ratio‘‘ it measures the debt service capacity of the firm in respect of fixed interest on long-
term debts. Above graph show the industry Interest Coverage Ratio was increase in the year
of the 2016-17 to 2015-16 it ,s means that industry cover interest form profit.

76
Stock Turnover
The number of times the average stock is turned over during the year is known as stock
turn over. It over during the year is known as stock turn over. It is computed by dividing the
cost of goods sold by the average stock of the business.

Formula :-

Cost of goods sold

Stock turnover ratio = _________________________

Average Inventory

Opening stock + Closing stock

Average inventory = ________________________________

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 11.74 12.22 11.49 20.08 17.89
CEMENT

77
 25

20

15 Column3
Column2

10 Column1

0
2017 2016 2015 2014 2013

A ratio showing how many times a inventory is sold and replaced over a period. Here the
graph show the higher inventory turnover ratio in the year of the 2015-16.it means the
industry inventory is more sold and replaced over a period.

Debtors turnover ratio

The debtors turnover ratio suggests the number of times the amount of credit sale is
collected during the year, while debtors ratio indicates the number of days during which the
dues for credit sales are collected.

Formula :-
Debtors turnover ratio = Debtors + B/R

________________________________

[in days] Average daily sales

Average Daily Sales = Credit sales

_____________________________

365

78
PARTICULAR 2017 2016 2015 2014 2013
J K LAKSHMI 31.30 31.38 36.62 48.94 46.52
CEMENT

50
45
40
35
Column1
30
Column2
25
Column3
20
Column4
15
10
5
0
2017 2016 2015 2014 2013

Debtor turnover ratio or accounts receivable turnover ratio indicates the velocity of debt
collection of an industry. In simple words it indicates the number of times average debtors
(receivable) are turned over during a year. The graph show debtor turnover ratio in the
year2015-16 higher and in the year of 2016-17 is lower as camper to past .It means the
debtor turnover ratio decrease. It is the benefit of the industry.

TREND ANALYSIS

Trend analysis is an aspect of technical analysis that tries to predict the future movement of
a stock based on past data. Trend analysis is based on the idea that what has happened in
the past gives traders an idea of what will happen in the future.

79
Method for calculating trend:

Trend percentage Method:

We have utilized trend percentage method for the calculation of trend. For the trend
analysis index number is advocated. The procedure followed is to assign the number 100 to
the item of the base year and to calculate percentage change in each item of other years in
the relation to the base year. this procedure is called trend percentage method.

Base year for the trend analysis:

For the trend analysis, year dec 2006 is taken as base for the calculation of the trend of
different of balance sheet and income statement.

Total Income

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 3,587.32 3,268.14 3,032.87 2,525.62 2,093.57
CEMENT

4000

3500

3000

2500
Series 3
2000
Series 2

1500 Series 1

1000

500

0
2017 2016 2015 2014 2013

80
The Industry has a fluctuating flow of income over the 5 years. The industry has not been
able to improve its sell much. The difference of income from 2011-2012 to 2012-2013 is just
7014.92 crores. Next 4 year the industry has not increase their total income. This is not a
good sign for the industry having such a reputed name in the market. Also it affects the
earnings of shareholders.

Total Expenses

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 3078.21 2545.74 2115.45 1820.52 1609.41

CEMENT

3500

3000

2500

2000 Series 3
Series 2
1500
Series 1

1000

500

0
2017 2016 2015 2014 2013

Above graph show the industry fluctuating of expenses over the 5 year. The industry has not
able to decrease their expenses. The different of expenses from 20010-11 and 2012-13 is
increase This is not good sign for industry. In 2012-13 the industry has not control
expenses. This is not a good sign for the company having such a reputed name in the
market. Also it affects the earnings of shareholders.

81
Operating Profit

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 432.98 550.12 660.25 565.13 484.16
CEMENT

700

600

500

400 Series 3
Series 2
300
Series 1

200

100

0
2017 2016 2015 2014 2013

Above graph show the industry different year operating profit over the 5 year. The graph
show the first 3 year profit continually increase. The industry show, they have achieved
good market share over the first 3 year. But the year of the 2015-16 the industry operating
profit was decrease.

82
 PBDT

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 220.14 225.32 350.45 410.25 384.29
CEMENT

450

400

350

300

250 Series 3
Series 2
200
Series 1
150

100

50

0
2017 2016 2015 2014 2013

Above graph show the industry fluctuating of PBDT over the 5 year. The industry has not
able to improve their PBDT. But industry PBDT was decrease . Because the J K Lakshmi
Cement Company has decrease their PBDT. in 2014-2015 . Hence it is not easy to predict
future of the industry.

83
Total Share Capital

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 62.19 62.19 62.19 62.19 58.85
CEMENT

63

62

61

Series 3
60
Series 2
Series 1
59

58

57
2017 2016 2015 2014 2013

Above graph show the industry fluctuating of Total share capital over the 5 year. The
industry has not able to improve their share capital in 2014-15. This is not a good sign for
the industry having such a reputed name in the market. Also it affects the industry volume
and profit.

84
Total Liability

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 3896.51 3542.58 3265.89 3035.25 2638.83
CEMENT

4500

4000

3500

3000

2500 Series 3
Series 2
2000
Series 1
1500

1000

500

0
2017 2016 2015 2014 2013

Above graph show that the industry total liability continually over the 5 year. Because all
three company has increase their liability.

85
Investment

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 610.25 590.25 528.74 378.25 406.46
CEMENT

700

600

500

400 Series 3
Series 2
300
Series 1

200

100

0
2017 2016 2015 2014 2013

At the initial level the industry is very poor in making investments at the year 2014-15
industry sold its investments but in 2015-16 and 2016-17 industry had done good business
And at 2016-17 industry had increase their investment compared past Year.

86
Total Assets

PARTICULAR 2017 2016 2015 2014 2013

J K LAKSHMI 3,678.93 3,322.43 3,138.47 2,865.25 2,638.83
CEMENT

4000

3500

3000

2500
Series 3
2000
Series 2

1500 Series 1

1000

500

0
2017 2016 2015 2014 2013

From the above trend of total assets of the company we can say that company has a good
growth rate. It has increased from 2014-15 to 2015-16 it is because of company overvalued
its fixed assets and investments. But in 2015-16 to 2016-17 is decrease Because company
undervalued its fixed assets.

BALANCE SHEET

87
 JK LAKSHMI CEMENT
PROJECTED BALANCE SHEET RATIO CALCULATION
AS OF END OF EACH YEAR 2018 -2022

Particulars 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Particulars 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS LIQUIDITY RATIOS
Equity Share Capital 59 59 59 59 59 59 59 59 59 59 1. Current Ratio 0.998684 0.97127 0.69011 0.6551 0.7748 0.8081134 0.836358 0.830658 0.818056 0.792363
Total Share Capital 59 59 59 59 59 59 59 59 59 59 2. Quick Ratio 0.816598 0.83109 0.49004 0.4638 0.58424 0.5974841 0.63459 0.637241 0.631037 0.612451
Revaluation Reserves 36 14 0 0 0 0 0 0 0 0 3. Cash Ratio 13.24562 35.6738 15.5174 11.946 9.32297 10.257093 11.22895 12.3005 13.48422 14.78619
Reserves and Surplus 1,165 1,230 1,272 1,275 1,323 1,598 1,905 2,250 2,637 3,071
Total Reserves and Surplus 1,201 1,244 1,272 1,275 1,323 1,598 1,905 2,250 2,637 3,071
Total Shareholders Funds 1,260 1,303 1,331 1,333 1,382 1,657 1,964 2,309 2,696 3,130
NON-CURRENT LIABILITIES
Long Term Borrowings 1,098 1,362 1,437 1,396 1,590 1,749 1,749 1,749 1,749 1,749
Deferred Tax Liabilities [Net] 113 123 128 87 140 118 119 119 117 123 SOLVENCY RATIOS
Other Long Term Liabilities 36 42 66 159 4 4 55 57 56 35 1. Debt-Equity Ratio 1.495356 1.62341 1.91932 1.9902 2.20531 1.9310627 1.738139 1.585046 1.455192 1.352747
Long Term Provisions 6 6 8 9 11 11 9 10 10 10 2.Debt Ratio 0.599256 0.63459 0.67442 0.6857 0.69855 0.6679009 0.646806 0.62482 0.603606 0.584422
Total Non-Current Liabilities 1,253 1,533 1,640 1,651 1,745 1,882 1,932 1,935 1,931 1,917 3.Proprietary Ratio 0.400744 0.3654 0.3256 0.3143 0.30145 0.3320998 0.353194 0.37518 0.396393 0.415578
CURRENT LIABILITIES 13% 15% 4% 8% 10% COGS 486.45 551.19 585.05 692.63 761.96 824.7706 907.6757 998.2535 1097.213 1205.33
Short Term Borrowings 41 42 233 298 376 475 601 759 959 1,211 TURNOVER RATIOS
Trade Payables 129 129 218 199 265 207 224 245 251 262 1. Inventory Turnover Ratio 0 5.07378 3.59037 2.9853 2.94085 2.8291882 2.830523 2.829985 2.827753 2.823994
Other Current Liabilities 422 524 626 749 809 739 813 882 942 987 2. Debtor Tunover Ratio 0 38.9264 36.5231 31.325 31.2537 34.848342 34.86478 34.85816 34.83067 34.78436
Short Term Provisions 38 35 39 12 7 29 27 25 22 25 3. Creditor Turnover Ratio 0 1.4478 1.31625 1.019 0.96774 1.1245671 1.354881 1.369359 1.424245 1.511994
Total Current Liabilities 631 731 1,117 1,258 1,457 1,450 1,665 1,911 2,174 2,485 4. Assets Turnover Ratio 65.30% 57.65% 56.30% 61.66% 63.41% 65.65% 64.81% 64.41% 64.07% 63.54%

Total Capital And Liabilities 3,144 3,566 4,087 4,242 4,583 4,988 5,561 6,154 6,800 7,532
5. Working Capital Turnover Ratio -2473.14 -97.947 -6.648 -6.0303 -8.8579 -11.77047 -13.2277 -12.2511 -11.0166 -9.27422

ASSETS
NON-CURRENT ASSETS Profitability Ratio
Tangible Assets 1,432 1,570 2,581 2,782 2,824 3,073 3,341 3,629 3,938 4,269 1. Net profit margin 10% 6% 9% -2% 2% 8% 9% 9% 9% 9%
Intangible Assets 3 2 2 1 2 2 2 2 2 2 2. Operating Profit Margin 12% 6% 7% -1% 2% 8% 8% 8% 8% 9%
Capital Work-In-Progress 688 908 361 283 205 205 205 205 205 205 3. Return on assets (ROA) 7% 4% 5% -1% 1% 6% 6% 6% 6% 6%
Other Assets 0 0 0 0 1 0 0 0 0 0 4. Return on equity (ROE) 16% 10% 16% -5% 5% 17% 16% 15% 14% 14%
Fixed Assets 2,123 2,480 2,944 3,067 3,031 3,280 3,547 3,835 4,145 4,476 5. Return on invested capital 11% 6% 8% -1% 2% 8% 9% 9% 9% 9%
Non-Current Investments 31 109 169 166 309 311 422 546 696 906 6. Interst Coverage Ratio 3.18 1.96 2.56 -0.10 0.37 1.73 1.76 1.78 1.82 1.85
Long Term Loans And Advances 359 267 204 185 54 214 185 168 161 156
Other Non-Current Assets 1 1 0 0 59 12 15 17 21 25
Total Non-Current Assets 2,514 2,857 3,316 3,418 3,455 3,817 4,169 4,567 5,022 5,563
CURRENT ASSETS
Current Investments 376 339 254 234 500 550 605 665 732 805
Inventories 115 102 223 241 278 305 336 370 406 447 % Increase in Turnover 0% 0% 12% 14% 11% 13% 10% 10% 10% 10%
Trade Receivables 50 56 70 96 90 98 108 119 131 144 %increase in Non-current Investment 253.16% 55.14% -1.52% 86.16% Average = 98%
Cash And Cash Equivalents 13 35 15 12 9 10 11 12 13 14 % Increase in Dep -9% -17% 46% 6% 15% 10% 10% 10% 10%
Short Term Loans And Advances 74 110 135 98 0 83 92 101 111 122 % Increase in tangible assets 10% 64% 8% 1% 9% Average = 18%
OtherCurrentAssets 2 68 72 143 253 125 241 320 385 437 % Increase in Short term borrowings 2% 453% 28% 26% 26% 26% 26% 26% 26%
Total Current Assets 630 710 771 824 1,129 1,172 1,393 1,587 1,778 1,969 % Increase in other current liabities 24% 20% 20% 8% Average = 18%

Total Assets 3,144 3,566 4,087 4,242 4,583 4,988 5,561 6,154 6,800 7,532
% Increase in Long term borrowings 24% 6% -3% 14% Average = 10%

OTHER ADDITIONAL INFORMATION 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
CONTINGENT LIABILITIES, COMMITMENTS
Contingent Liabilities 383 423 265 211 243 305 289 263 262 273
CIF VALUE OF IMPORTS
Raw Materials 0 3 15 10 8 8 9 10 11 12
Stores, Spares And Loose Tools 9 10 10 18 9 11 12 12 12 11
Trade/Other Goods 10 10 105 100 115 68 80 93 91 89
Capital Goods 76 38 2 9 26 28 31 34 38 42
EXPENDITURE IN FOREIGN EXCHANGE
Expenditure In Foreign Currency 3 4 2 2 3 3 2 2 2 2
REMITTANCES IN FOREIGN CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign Currency - - 0.15 0.15 - - - - - -
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods - - - - - - - - - -
Other Earnings - - - - - - - - - -
BONUS DETAILS
Bonus Equity Share Capital 2 2 2 2 2 2 2 2 2 2
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted Market Value 31 109 169 166 309 311 422 546 696 906
Non-Current Investments Unquoted Book Value - - - - - - - - - -
CURRENT INVESTMENTS
Current Investments Quoted Market Value 376 339 254 234 500 550 605 665 732 805
Current Investments Unquoted Book Value - - - - - - - - - -

Notes on Preparation and asumption taken for Balance sheet

88
 CHAPTER.4

VALUATION PHILOSOPHY

COMPANY’S PHILOSOPHY ON CODE OF GOVERNANCE

Corporate Governance is an integral part of values, ethics and best business practices
followed by the Company. The core values of the Company are :

• commitment to excellence and customer satisfaction.

• maximising long term shareholders’ value.

• socially valued enterprise and

• caring for people and environment.

In a nutshell, the philosophy can be described as observing of business practices with the
ultimate aim of enhancing long term shareholders’ value and commitment to high standard
of business ethics. The Company has in place a Code of Corporate Ethics and Conduct
reiterating its commitment to maintain the highest standards in its interface with
stakeholders and clearly laying down the core values and corporate ethics to be practised by
its entire Management Cadre.

BOARD OF DIRECTORS :

The Company’s Board presently consists of twelve Directors comprising of eight Non-
executive Directors (NED) of which six are independent (IND). The Chairman is Non-
executive. Five Board Meetings were held during 12 months period from 1st April 2005 to
31st March 2006, on 20.04.2005, 24.05.2005, 26.07.2005, 27.10.2005, and 30.01.2006. The
Board periodically reviews Compliance reports of all laws applicable to the Company and
has put in place procedure to review steps taken by the Company to rectify instances of
non-compliances, if any.

The Company already has been having for the last three years a Code of Conduct in position
for Management Cadre Staff (including Executive Directors). In terms of the new provision
of Clause 49 of the Listing Agreement and contemporary practices of good corporate
governance, the Board has laid down a Code of Conduct for all Board Members and Senior

89
Management of the Company and the same is available on the website
(www.jklakshmi.com). All the Board Members and Senior Management Personnel have
affirmed compliance with the Code.

AUDIT COMMITTEE :

The Company has an Audit Committee of Directors since 1987. The ‘Terms of Reference’ of
the Committee have been revised in conformity with the provisions of Section 292A of the
Companies Act 1956 and new/revised Clause 49 of the Listing Agreement. The Committee
consists of five non-executive Directors, namely, Shri B.V. Bhargava (Chairman), Shri Pradip
Roy (IDBI Nominee), Shri Nand Gopal Khaitan, Shri Pravinchandra V. Gandhi and Shri
Raghupati Singhania, of which first four are independent. Managing/Whole-time Directors
are Permanent Invitees to the Audit Committee. The Chief Finance Officer regularly attends
the meetings and the Company Secretary acts as the Secretary of the Committee.

REMUNERATION COMMITTEE :

The Company does not have any permanent Remuneration Committee. A Remuneration
Committee comprising of Independent Directors including nominee Directors of Financial
Institutions was constituted on 24.05.2005 to determine the remuneration of the Whole-
time Directors.

REMUNERATION PAID TO DIRECTORS :

(i) Executive Directors :

The aggregate value of salary, perquisites and contribution to Provident Fund and
Superannuation Funds for the financial year ended 31st March 2006 to the Vice
Chairman & Managing Director, Managing Director, Whole-time Directors is as
follows. Shri Bharat Hari Singhania: Rs. 80,34,363/-, Smt. Vinita Singhania: Rs.
75,92,323/-, Shri S.K. Wali: Rs. 35,14,529/- and Shri S. Chouksey: Rs. 35,08,129/-. No
Commission was paid to the said Directors during the year.

The Company does not have any stock option scheme. In the case of Whole-time Directors
notice period is six months. Severance fee for the Vice Chairman & Managing Director and

90
Managing Director is remuneration for the unexpired residue term or three years,
whichever is shorter.

(ii) Non-executive Directors :

The Company has paid sitting fees aggregating to Rs. 6,18,000/- to all Nonexecutive
Directors for attending the meetings of the Board and/or Committees thereof. The
sitting fees paid is within the limits prescribed under the Companies Act 1956. No
other payments were made to such Directors. Non-executive Directors did not have
any other material pecuniary relationship or transactions vis-a-vis the Company
during the year except as stated above.

The number of Equity Shares (shares) held by NonExecutive Directors are: Shri Hari
Shankar Singhania92,510 shares, Shri B.V. Bhargava 3,700 shares, Shri Nand Gopal Khaitan-
Nil shares, Shri P.V. Gandhi-Nil shares, Shri Pradip Roy-Nil shares, Shri Raghupati
Singhania-63,000 shares, Shri U.Mahesh Rao –Nil shares, Shri V.K. Guruswamy- Nil shares.
The Company does not have any outstanding convertible Instrument except convertible
portion of Optionally Convertible Bonds/Rupee Term Loan – IV aggregating to Rs. 4.35
Crores held by Financial Institutions/Banks, convertible into fully paid up Equity Shares of Rs.
10/each at par, option to be exercised by 8th July 2006.

SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE :

The Company has Shareholders/ Investor Grievance Committee at the Board level which
consists of three Directors, namely, Shri Raghupati Singhania (Chairman of the Committee),
Shri N.G. Khaitan and Shri Bharat Hari Singhania. Shri B.K. Daga, Vice President & Company
Secretary, is the Compliance Officer who oversees the investors grievances such as
Transfer/Transmission of shares/ Dematerialisation, non-receipt of dividend/interest and
redemption proceeds on Debentures, non - receipt of annual report, etc. During the 12
months period ended 31st March 2006, four meetings of the said Committee were held on
20.04.2005, 26.07.2005, 27.10.2005 and 30.01.2006. The Company received 29 complaints,
which were promptly attended/resolved to the satisfaction of the investors. In addition, the
Company also has a Committee of Directors (COD), which approves registration of transfer
of shares in physical mode etc. on fortnightly basis. During this period, 31 meetings of the
COD were held. All valid requests for transfers of shares in physical form were processed in
time and there are no pending transfer of shares.

91
GENERAL BODY MEETINGS :

Location and time for the last three Annual General Meetings (AGMs): The first two AGMs
of the Company were held at its erstwhile Regd.Office:Jaykaypur-765 017, Dist. Rayagada,
(Orissa) on 17.2.2003 (2.30 P.M.) and 16.7.2004 (3.30 P.M.) and the last AGM at its present
Regd. Office: Jaykaypuram, Dist. Sirohi, (Rajasthan) on 29.08.2005 (2.30 P.M.). Special
Resolutions regarding appointment of Statutory Auditors, reappointment/appointment of
Managing /Whole-time Directors, delisting of Equity Shares from the Bhubaneswar Stock
Exchange Limited, change of the name of the Company from JK Corp Limited to JK Lakshmi
Cement Limited, loans/investments and further issue of capital, were passed at the said
meetings.

No special resolutions were required to be put through postal ballot last year.

(a) Disclosures on materially significant related party transactions i.e., transactions of the
Company of material nature, with its promoters, the directors or the management, their
subsidiaries or relatives etc. that may have potential conflict with the interests of the
Company at large : None. Suitable disclosure as required by Accounting Standard (AS-18) on
Related Party Transactions has been made in the Annual Report.

(b) Details of non-compliance by the Company, penalties, strictures imposed on the

Company by Stock

Exchange or SEBI or any Statutory Authority, on any matter related to capital market, during
the last three years: There were no cases of non- compliance of any matter related to
capital markets during the last three years.

(c) The Company has strengthened its risk management system and has further laid down
procedures to inform Board members about risk assessment and minimization procedures.
These procedures are being periodically reviewed to ensure that executive management
controls risk through means of a properly defined framework.

92
 CHAPTER.5

VISION & MISSION

VISION

To be A Profitably growing Innovative and Caring Company, to become a significant player in

operating market and amongst the Top Ten in Indian cement market.

MISSION

 Double Sales and Profit (PBIDT) in 4 years

 Achieve Operational Excellence

 Create superior value for customer through Premium Products & Brand Positioning

 Be a workplace of choice-Attract, Retain and grow Talent Pool of change leaders

 Continuously enhance shareholders’ wealth and be a preferred portfolio among

investors

 Socially Responsible Corporate Citizen

93
 CHAPTER.6

RESEARCH METHODOLOGY

This part of the chapter reflects the methodology of the present study “Financial analysis of
J K Lakshmi cement industry of India : A statistical approach” In this part, methodology,
research statement, objectives of the study, importance of the study, scope of the study,
period of study, sample selection, nature of data required for the present study, sources of
data, various tools and techniques used for the analysis of data, limitations of the present
study and chapter planning have been discussed.

For the purpose of present study a representative stratified sample of cement companies of
appropriate size have been selected from the population i.e. the cement producing
companies listed on NSE/BSE, taking into account the paid up capital of a company as its
size. Representative ratios for the industry were found by appropriately combining such
ratios of the companies selected in the sample for selected years. Then on the basis of such
representative ratios of the industry, trend analysis and ANOVA were carried out.

94
 CHAPTER.7

OBJECTIVE OF STUDY

The present study “Financial analysis of J K Lakshmi cement industry of India : A statistical
approach” has been conducted to fulfill the various objectives as shown below. The purpose
of the current study is to analyze the financial viability of the cement industry as well as of
the selected cement companies. The basic objectives of the study is to examined financial
strength, weakness of the cement industry as well as selected cement companies. The main
objective of the present study is to have an insight into the financial performance of the
cement industry as well as selected cement companies. The main objectives of the present
study are enumerated below.

1. To identify the strengths and weaknesses in the financial performance of the cement
industry and of the selected cement companies for making appropriate suggestion on the
basis of trend analysis and ANOVA of various ratios of the companies selected and the
representative ratios computed using statistical technique for the industry.

2. To analyze the profitability and operating efficiency of the cement industry and the
cement companies under study.

3. To find out the liquidity and short term financial strength during the period of study of
the cement industry and selected cement companies.

4. To analyze the solvency ratios are to examine the long term financial strength of the
cement industry and selected cement companies under study.

5. To analyze activity ratios and some other aspects of financial performance of the
companies selected in the study as well as the industry as a whole.

95
 CHAPTER.8

SCOPE OF THE STUDY

The scope of the present study is very wide and broad. The present study is limited to the
analysis of profitability, analysis of liquidity, and short term financial strength through the
analysis of the management of working capital, analysis of long term financial strength
through the analysis of solvency ratios. The present study covers only monetary aspects.
Non monetary aspects which may have significant impact on the financial performance of
the cement industry and selected cement companies have not been covered under the
present study.

The present study excludes probing intoother financial problems like capital budgeting,
impact of social, economical and political environments on the cement industry, impact of
government policies regarding trade and industry, etc. It is also important to mention here
that it is not the intention of the present study to ascertain the acceptance or rejection of
the various theory of financial management. The present study covers only those cement
companies which are listed on Bombay Stock Exchange and National Stock Exchange. It does
not cover those cement companies which are not listed on Bombay Stock Exchange and
National Stock Exchange.

The present study is restricted to the analysis of the financial statement of the selected
cement companies from the point of view of the appraisal of profitability, liquidity, short
term and long term financial strength and overall financial performance of the cement
industry as well as of the selected cement companies. The study only disclose the
reasonableness and adequacy of working capital, reasonableness and adequacy of long term
capital and reasonableness of the profitability in cement industry and the selected cement
companies under study.

96
 CHAPTER.9

LIMITATIONS OF THE STUDY

The likely limitations of the present study are as follows:

1. The present study is entirely depend on the secondary data. Therefore the detail
information regarding the company’s financial management and working would be missing.

2. The study is totally depend on the financial data collected from the published annual
reports of the selected Cement companies. Certain financial data are also be collected
through the internet websites source. The data collected from the above sources may not
have all the details. Thus the present study will incorporate all the limitations that are
inherent in the secondary data of period from the financial reports.

3. The size of the sample selected of the current study is small. The sample is restricted to
only eighteen cement companies. Therefore the limitation of the small sample is also
applicable to the present study. Moreover the sample includes only those companies which
are listed on the Bombay Stock Exchange and National Stock Exchange hence the result
obtained from the analysis of the present study cannot be applied to all the cement
companies of the cement industry.

4. The study contains all the inherent limitations of the tools and techniques applied for
the study. For example ratio is used as a tools of financial analysis but it has its own
limitations. In the same way various statistical techniques used for the analytical purpose
also having their own limitations. In this way the limitations of tools and techniques applied
for the financial analysis, cannot be over emphasized.

5. Different companies use the different method of production. The process of

manufacturing may also be different. For the purpose of this study it is assumed that all the
companies engaged in cement production use the same method of production. But in
actual practice different companies adopt different method of production therefore the
conclusion derived from the present study cannot be applied to all the cement companies.

6. The sample represents the company of different age group. Some of the companies
selected for the study are very old, while some of them are new. The old companies and
new companies may have their different problems. But for the analytical purpose all the
selected companies are considered equal.

97
 CHAPTER.10

FINDINGS

After preparing a MRP-1 report on Bakery industry with special focus on cement products,
we have finally reached to the following findings;

 We found that Cement Industry is right now prevailing in Growth stage, it is grow at
the rate of 15 – 17% every year.

 We have also found that in order to sustain the current market share all current
market players have to struggle a lot, they have to keep strong distribution channel
to reach the product in each place of the country and Ulltratech become successful
to do this.

 Apart from strong distribution channel other factors like aggressive promotions and
advertisement, strong research and development, new innovations at regular
interval on continues basis etc. Also play a vital role in sustaining existing customers
and attracting new potential customers.

 After making Research on Customer Loyalty of five major brands of cements We

have also found that Customers of Ulltratech and J.K cement are more loyal compare
to other brands like J.K Laxmi, Acc, Shree Cement. But when we compare the loyalty
of Ulltratech and J.K, Ulltratech has upper hand.

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SUGGESTIONS

On the basis of the observation regarding this study there are some suggestion for the J K
Lakshmi cement industry of India.

SPECIFIC SUGGESTIONS

 The management of , JK Lakshmi Cement Ltd., have not efficient control over their
cost of goods sold which has badly affected the profitability. The management of the
above cement companies are here by suggested to reduce the cost of goods sold to
a considerable extent by exercising efficient control. To reduce the cost of goods sold
it is also suggested here to utilize the install capacity to its full extent. It is also
suggested to modernize their plants.

 There are no trend in the Gross Profit Margin Ratio During the Decade of the
Industry. This type of condition of the Cement Industry was very unsatisfactory, so
the industry should try to reduce the cost of production and try to increase Sales.

 All the Selected 18 companies out of only 8 companies Net profit Ratio was
Satisfactory and other 10 companies i. e. Sanghi Industry Ltd., The India Cement Ltd.,
Prism Cement Ltd., Binani Cement Ltd., J. K. Cement Ltd., Chettinad Cement Ltd., NCL
industry Ltd., Sagar Cement Ltd. and Bheema Cement Ltd. Net profit Ratio was
unsatisfactory, so these companies reduce the all type of expenses and try to
increase the net profit.

 Return on capital employed ratio for the industry remained positive and there is no
trend traceable, during the first half of the decade the ratio was rising trend and
then the ratio trend was declined, it clearly indicate inefficient use of the resources,
So the cement Industry of India must try to proper utilization of its resources in an
efficient way.

 The entire net worth ratio of the The India Cement Ltd., Prism Cement Ltd., JK
Lakshmi Cement Ltd., Chettinad Cement Ltd. and Sagar Cement Ltd in 2002-03 was
very unsatisfactory because in this year the ratio was negative due to heavy loss
incurred by the above companies, so the management of this company is suggested

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 to reorganize its capital structure by internal capital reduction. The ratio of the
industry was improved during the first half of the decade and the second half of the
study the industry ratio was declining trend this position of the cement industry was
not satisfactory, so the cement industry of India should try to improve it.

 The return on equity ratio trace a rising trend during the period of the study so the
advantage from the investor point of view. Cement industry of India should try to
maintain this ratio at higher level.

 The Liquidity point of view the quick ratio was shown no trend during the decade.
The cement industry Quick ratio was not satisfactory because this ratio was high
then ideal level. I suggested cement industry of India should try to maintain the ideal
level of the ratio.

 Current ratio of the cement industry of India during the decade was not satisfactory,
it shown the downward trend during the selected period of the study. I was
suggested to cement industry of india should maintain the desired level of this ratio.

 There are no trend traceable in the Inventory turnover ratio of the industry. it clearly
indicate it was stable during the decade, so the industry should try to improve it
through increase the sales volume.

 The debtors turnover ratio of the industry was stable during the period of the study,
the cement industry of india should try to reduce this ratio through the reduce the
average collection period from the debtors.

 The fixed assets ratio shown no trend during the decade, so the industry must try to
increase through the increase the sales volume and try to maximum utilized fixed
assets.

 The Industry should try to maintain the proper level of working capital turnover
ratio.

 In terms of debt equity ratio shown downward trend during the period of the study.
This performance is good for the industry and I suggested the industry maintain this
legal.

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 CHAPTER.11

SUMMARY & CONCLUSION

With the change in the economic condition and opening up of the economy and India being
a signatory to the WTO, it can be observed that the Indian cement industry is in for a heavy
shakeup in addition to this the industry being a capital intensive one and a squeeze of
profitability margins it may be right for the Indian cement industry to look for some
innovative ideas to improve their margins. In addition to this as seen from the various facts
put forward in the previous chapter the demand supply gap exists and in some regions it is
the supply which exceeds demand and in some regions it is the demand which exceed
supply, the company may have to think of new strategies to improve their market share and
with this also improve the profitability margins.

The order of the day is ‗innovate or perish‘ and thus Indian cement companies need to
innovate new methods or some value added products, which may give some fillip to the
industry to improve its margins.

Thus the J K Lakshmi cement company should try and manufacture a product at a lesser
cost, although it seems not feasible as the cost of cement depend on the power tariffs
existing ground the country. The company can look at the route of captive power
generation, which may be an answer to this problem of high power tariffs.

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 CHAPTER.12

BIBLIOGRAPHY

Books Referred:

 Finacial Management Marketing Management Crafting and Strategic Management

News Papers:

 Business Standard

 Economic Times

Magazine:

 Business Todays

Websites visited:

 www.infoline.com

 www.cementsonline.com

 www.cmaindia.com

 wwW.wikipedia.com

 www.money control.com

 www.economicctimes.com

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 CHAPTER.11

ANNEXURE

Conservation of Energy
The Company took following major initiatives with an intention to conserve energy and to
reduce fuel and power consumption :

 Enlargement of Pre-heater down corner duct of Kiln-3.

 Installation of Water spray system in Pre-heater down corner duct of Kiln-3.

 Modification of Kiln inlet segment plates in Kiln -2.

 Modification of Raw Mill Fan inlet cone in VRM-1.

 Installation of PD blower in place of Primary Air Fan in Kiln -3 to improve flame

momentum and effective heat transfer in Kiln.

 Optimization of air flow of cooler fans in Kiln-2 and Kiln-3.

 Reduction of Pre-heater outlet oxygen % in Kiln-2 and Kiln-3.

 Modification of logic control of PD blower at CF silo Top to avoid idle running.

 Increase PPC cement production from 33% to 45%.

 Modification of logic control of mill vent and separator bag house compressor with
close loop of DP in Cement Mill No-4.

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These modifications resulted in reduction of power consumption from 84 Kwh / MT to 82
Kwh / MT units and fuel consumption from 93 Kg / MT to 84 Kg / MT of cement.

Technology absorption, adaptation and innovation by technology adaptation

All the above improvements have been completed and the technologies have been fully
absorbed and the plant is performing at its optimum capacity.

Research and Development

During the year, the Company has spent Rs. 20.07 lacs. This is equivalent to 0.03% of the
turnover.

Exports, Foreign Exchange Earnings and Outgo Rs. in lacs

i) Foreign Exchange earned Nil

ii) Foreign Exchange used (CIF value of Imports of raw materials, stores and spares and
capital goods, loans, consultancy and know-how fee etc.) 659.34

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