Lalitha Document

A STUDY ON
CAPTIAL STRUCTURE
AT
ANJANI PORTLAND CEMENT LIMITED
A project report submitted to

JNTU,ANANTHAPUR
In Partial fulfillment for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
K.G.LALITHA
(14JFE0054)
Under the Guidance of
M.KULASHAKARA . mba
Department of Business management

ST MARK INSTITUTE OF ENGINEERING AND TECHNOLOGY
RACHANAPALLI (V), BALLARI ROAD, ANANTAPUR (Dist)
(AFFLIATED TO JNTU UNIVERSITY)
(2014-2016)
DECLARATION
I declare that this project titled CAPITAL STRUCTURE OF ANJANI

PORTLAND CEMENT PVT LTD, HYDERABAD is solely written & submitted
by me under the guidance of M KULASHAKAR is my original work and the
empirical findings in this report are based on the data collected by me.
DATE :
KG LALITHA
ACKNOWLEDGEMENT
It gives me pleasure to presents its report which is outcome of Capital Structure in
ANJANI PORTLAND CEMENT PVT LTD HYDERABAD.
2
I consider it as my cherished privilege to thank Mr.Amith Singh, Anjani Portland

Cement Pvt Ltd, HYDERABAD who given me the opportunity and cooperation in
during this study and he has guided me through out my project work and study was
carried out enabling me to submit it with in the stipulated time.
I express my Sincere thanks to Mr. S.Prabhakar Rao Garu, Chairman and Prof
(Dr).Y.C Venudhar, Principal.
I would like to extend my thanks to lecturers T.NAGALAKSHIMI (HOD),
A.PRATHIMAREDDY(DIRECTOR),DrG.SURYANARAYANAREDDY
(PRINCIPAL),Mr M.KULASHAKAR who extended their cooperation.
My thanks to all staff of MBA department and to the members of PCET library for
timely help.
Lastly, no words can express my debt of gratitude to my parents and thanks to all of
my friends for their cooperation.
KG LALITHA
CONTEXT OF THE STUDY

CHAPTERS
1. INTRODUCTION
A).NEED OF THE STUDY
P.NO
1-6
B).OBJECTIVE OF THE STUDY

C).METHODOLOGY
D).LIMITATIONS OF THE STUDY
E).SCOPE OF THE STUDY
2. LITERATURE REVIEW
A).A COMPRATIVE ANALYSIS BETWEN
ICT AND NON- ICT FIRMS
B).AN ANALYSIS OFASIAN CORPORATE
7-9
3. COMPANY PROFILE
A).OVERVIEW OF CEMENT INDUSTRY
B).ORGANISTION PROFILE
10-26
4. THEORITICAL FRAME WORK OF

CAPITAL STRUCTURE
A).DETERMINTS OFCAPITAL STRUCTURE
B).THEORIES OF CAPITAL STRUCTURE
C).THE TRADITIONAL APPROACH
27-44
5. ANALYSIS & INTERPRETATION

A).EBIT-EPS ANALYSIS
B).CAPITAL STRUCTURE ANALYSIS
45-64
6. CONCLUSIONS & SUGGESSTIONS
65-66
7. BIBILIOGRAPHY
CHAPTER-1
INTRODUTION:
Every organization
requires funds to run and maintain its business the
required funds may be raised from short term sources or long term sources or a
combination both the sources of funds, so as to equip it self with an appropriate
combination of fixed assets and current assets. Current assets to a considerable extent
are financed with the help of short term sources. Normally, firms are expected to
follow a prudent financial policy, as revealed in the maintenance of net current assets.
These net positive current assets must be financed by long term sources. Hence long
term sources of funds are required to finance for both.
Long term assets (fixed assets)
Net working capital (Positive Current assets).

A firm can easily estimate the required funds by a detailed study of the
investment decision. In other words, anticipation of the require funds may be
estimated analyzing the investments decision. Once anticipation of require funds is
completed then the next step is financial for the manager to make decisions related to
the finance or the selected investment decisions. Generally capital is raised from the
prime source are
Equity
Debt
Then the questions are what should be the proportion of equity and debt in the
capital structure of a company.
As the objective of a firm should be directed towards the maximization of the
valve of the firm, the capital structure decision should be examined from the point of
its impact on the firm. If the valve of the firm can be affected by capital structure, a
firm would like to have a capital structure, which maximizes the market valve of the
firm. There exist conflicting theories on the relationship between capital structure and
the valve of the firm.
Capital structure decisions are significant finance of the corporate firm in that
they influence the return as the risk of equity shareholders. That there exist close
Nexus between optimum judicious debt and the market valve/valuation of the firm is
well recognized in literature of finance. While the excessive use of debt may endanger
the every survival of the corporate firms, the conservative policy may deprive its
equity-holders the advantage of debt as a cheaper source of finance to magnify their
rate of return. Following such an over-conservative policy runs counter the basic
objective of financial decision making to maximize the wealth of equity holder.
Apart from financial risk return consideration, non-financial factors are also
likely to be very decisive in designing capital structure of the corporate famous for
instance use of debt, unlike equity doesnt dilute the controlling power of existing
owners in brief, debt is not an unmixed blessing and, hence a dilemma for the
corporate finance manager.
ASSUMPTIONS:
Firms employ only two types of capital, debt and equity.
The firm has a policy of paying 100% dividends.
The corporate and personal income taxes do not exist.
The operating profit (EBIT) is not accepted to grow.
The total assets are given and do not change.
Business
risk
is
constant
over
time
and
is
assumed
to
be
independent of its capital structure.
NEED OF THE STUDY:
The corporate and personal income taxes do not exist.
The business risk is constant over time and is assumed to be independent of its
capital structure.
The given the assumptions of perfect information and rationality.
The business risk is equal among all firms with in similar operating environment.
6
OBJECTIVE OF THE STUDY:
To know over all the cost capital (KO) and the valve of the firm (V) are
independent of the capital structure.
To know the capitalization rate of an equity and premium for financial risk.
To know cut off rate for investment purposes is completely independent of the
way in which an investment is financed.
To make the impact of (Capital) not work in financial performance.
METHODOLOGY:
Methodology is a systematic procedure of collecting information in order to
analyze and verify a phenomenon. The collection of data through two principle
sources viz.
(1) Primary data
(2) Secondary data
PRIMARY DATA:
It is the information collected directly without any reference. In the study it
was mainly interviews with concerned officers and staffs either individually or
collectively. Some of the information had verified or supplemented with personal
observation, the data collected through conducting the personal interview with the
officers of Anjani Portland Cements Limited.
SECONDARY DATA:
The secondary data was collected from already published sources such as
pamphlets annual reports, reports and internal records the data includes: Collection of
required data from annual reports of Anjani Portland Cements Limited. Reference
from text books and relating to financial management. Articles published in business
details like the economic times, business time etc.
SCOPE OF THE STUDY:

Since it will not be possible to conduct a micro level of all cement industries in
Andhra Pradesh, the study is restricted to Anjani Portland Cements Limited only.
LIMITATIONS OF THE STUDY:
The study of project collected of investor or capital structure may not
applicable in the situations.

The study of capital structure analysis of company financial position may be
affected or not.
The calculations and methods adopted in my study may be carried an
appropriately.
Due to time constant of 45 days, the data of the study may on way net present
overall view of the capital structure.

It is dipped to judge the results-valve due to the change market valves of the
firm.
CHAPTER-2
LITERATURE REVIEW
10
1. Dynamic capital Structure: Comparative Analysis Between ICT and NonICT Firms
DanyAoun
affiliation not provided to SSRN
JunseokHwang
Seoul National University - College of Engineering
Icfai Journal of Industrial Economics, Vol. 4, No. 2, pp. 7-26, May 2007
This paper develops a model of dynamic capital structure based on a sample of
NASDAQ listed firms and estimated the unobservable optimal capital structure using
a wide range of observable determinants. The authors separate the firms into two
categories - Information and Communication Technology (ICT) and non-ICT - in
order to test whether the uniqueness of the former has any different implications. For
a panel of ICT and non-ICT firms listed on the NASDAQ stock exchange, the results
reveal that the leverage ratio of an ICT firm is more affected by income variability,
uniqueness, and the dot-com crisis compared to non-ICT firms2.
2. Performance, capital structure and home country: An analysis of
Asian Corporations
R. Charles Moyer, Dean
Cameron University, School of Business, 2800 W. Gore Boulevard, Lawton, OK
73505 USA
Babcock Graduate School of Management, Wake Forest University, Winston-Salem,
NC 27109 USA
Available online 1 April 2002.
3. Capital structure analysis of the fertilizer industry: a case study

Of IFFCO and Indo Gulf Corporation Ltd., India
Authors: Khatik, S.K.1; Singh, P.K.2

11
Source: International Journal of Financial Services Management, Volume 1, Numbers

2-3, 3 May 2006, pp. 173-189(17)
Capital structure, or what is generally known as capital mix, is very important
to control the overall cost of capital in order to improve the earnings per share of
share holders. After globalization and liberalization, various financial sector reforms
were started by governments, such as reducing rates of interest etc., which directly
affected the capital structure planning of firms. Due to this situation, the fertilizer
industry also reorganized their capital structure. The financing of a capital structure
decision is a significant managerial decision. Initially, the company will have to plan
its capital structure at the time of its promotion. Subsequently, whenever funds have
to be raised for finance and investment, a capital structure decision is involved. In this
research article, researchers try to evaluate the concept of capital structure, capital
structure planning and patterns of capital structure in IFFCO and Indo Gulf
Corporation Ltd. We found that both companies are using the maximum possible
long-term debt in their capital structure planning. During the study period, both the
companies raised more and more long-term funds to meet their development and
expansion needs because debt is a cheaper source of finance, especially from 1994
1995 onwards when rates of interest decreased regularly in the Indian capital market.
Keywords: ECONOMICS AND FINANCE JOURNALS; Accounting and Finance
Document Type: Research article
CHAPTER-3
COMPANY PROFILE
Overview of Cement Industry
12
who account for over 70% of the market. Individually no company accounts for over
12% of the market. The major players like L&T and ACC have been quiet successful
in narrowing the gap between demand and supply. Private housing sector is the major
consumer
of
cement
(53%)
followed
by
the
government
infrastructure
sector. Similarly northern and southern region consume around 20%-30% cement
while the central and western region are consuming only 18%-16%.
India is the 2nd largest cement producer in world after china .Right from laying
concrete bricks of economy to waving fly overs cement industry has shown and
shows a great future. The overall outlook for the industry shows significant growth on
the back of robust demand from housing construction, Phase-II of NHDP (National
Highway Development Project) and other infrastructure development projects.
Domestic demand for cement has been increasing at a fast pace in India. Cement
consumption in India is forecasted to grow by over 22% by from 2007-08.Among the
states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar
Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total
production followed by Rajasthan. Cement production grew at the rate of 9.1 per cent
during 2006-07 over the previous fiscal's total production of 147.8 mt (million tons).
Due to rising demand of cement the sales volume of cement companies are also
increasing & companies reporting higher production, higher sales and higher profits.
The net profit growth rate of cement firms was 85%.Cement industry has contributed
around 8% to the economic development of India. Outsiders (foreign players) eyeing
India as a major market to invest in the form of either merger or FDI (Foreign Direct
Investment). Cement industry has a long way to go as Indian economy is poised to
grow because of being on verge of development.
The company continues to emphasize on reduction of costs through enhanced
productivity, reduction in energy costs and logistics expenses. The cement sector is
expected to witness growth in line with the economic growth because of the strong
co-relation with GDP. Future drivers of cement demand growth in India would be the
road and housing projects. As per the Working Group report on Cement Industry for
the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 percent
per annum during the 11th Plan and cement production and capacity by the end of the
13
11th Plan are estimated to be 269 million tones and 298 million tones, respectively,
with capacity utilization of 90 per cent.
Despite the growth of Indian cement industry India lags behind the per capita
production. Supply for cement is expected to remain tight which, in turn, will push up
prices of cement by more than 50%. The most important factor for better prices is
consolidation of the industry. It has just begun and we will see more consolidation in
the coming years. Other budget measures such as cut in import duty from 12.5 per
cent to nil etc. are all intended to cut costs and boost availability of cement.
Sadly the adverse effects of global slowdown have not speared this industry too.
Demand is sluggish, the government is keeping an eagle eye on prizes, domestic coal
and pet coke, prizes have increased sharply and utilizations rates are down. The
numbers coming out are a reflection of grim times. ACC the countrys largest cement
company thats controlled by Swiss giant HOLCIM, registered 2% fall in august sales.
It is the biggest fall since Feb 2007. Production fell by 5%.
To stand against the problematic situation, government as well as cement
industry has taken some steps. Companies are focusing on cost of transportation. One
of the strategy is to decrease dependence on road & opt for sea logistics as that can
cut transportation cost by 30- 50 %. Some plants are adopting futuristic plan such as
setting up captive power plant, moving closer to the customers by creating clicker,
crushing, and capacity in key markets, to be more customer centric to generate better
revenue. India should push for stricter regulations of market place as to control the
prices of big companies and prevent them from forming cartels and exchanging
information. To fight with the high inflation, government wants to import more
cement from Pakistan .However cement prizes are not very much high as other items
but still they are increasing. And the reason of high prize is surging cost of raw
material and transportation cost. Apart from this government also discussed with
cement industry not to have increase in prizes and keep consumer interest in mind.
Now the question arise in front of the government is whether the demand by
the government is possible to increase through expenditure on infrastructure or not
according to the current state of economy when so many crises are going on or how
14
the government allocation of US$ 3.23 billion for the National Highway
Development, Project will keep the demand for cement alive? And to what extent the
prizes of cement should be increase so that consumer cant affect. Cement industry in
India has also made tremendous strides in technological up gradation and assimilation
of latest technology. Presently, 93 per cent of the total capacity in the industry is based
on modern and environment-friendly dry process technology. The induction of
advanced technology has helped the industry immensely to conserve energy and fuel
and to save materials substantially. Indian cement industry has also acquired technical
capability to produce different types of cement like Ordinary Portland Cement (OPC),
Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil
Well Cement, Rapid Hardening.
Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. Some
of the major clusters of cement industry in India are: Satna (Madhya Pradesh),
Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh),
Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).
CURRENT SCENARIO
The Indian cement industry is the second largest producer of quality cement,
which meets global standards. The cement industry comprises 130 large cement plants
and more than 300 mini cement plants. The industry's capacity at the end of the year
reached 188.97 million tons which was 166.73 million tons at the end of the year
2006-07. Cement production during April to March 2007-08 was 168.31 million tons
as compared to 155.66 million tons during the same period for the year 200607.Despatches were 167.67 million tons during April to March 2007- 08 whereas
155.26 during the same period. During April-March 2007-08, 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 Ambuja taking a
stake of 14 per cent in ACC, and taking over DLF Cements and Modi Cement; ACC
taking 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 cement
15
division, and Sri Digvijay Cements. Foreign cement companies are also picking up
stakes in large Indian cement companies. Swiss cement major Holcim has picked up
14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's
acquisition has led to the emergence of two major groups in the Indian cement
industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla
group through Grasim Industries and Ultratech Cement. Lafarge, the French cement
major has acquired the cement plants of Raymond and Tisco. Italy based Italcementi
has acquired a stake in the K.K. Birla promoted Zuari Industries' cement plant in
Andhra Pradesh, and German cement company Heidelberg Cement has entered into
an equal joint-venture agreement with S P Lohia Group controlled Indo-Rama
Cement.
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 energyintensive 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: wet
or dry; 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 cent gypsum
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
16
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.
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
used in its production. It is used to enhance aesthetic value in tiles and flooring. White
cement is much more expensive than grey cement.
Portland Blast Furnace Slag Cement (PBFSC):
PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent
gypsum and accounts for 10 per cent of the total cement consumed. It has a heat of
hydration even lower than PPC and is generally used in the construction of dams and
similar massive constructions.
Specialized Cement:
Oil Well Cement is made from clinker with special additives to prevent any porosity.
Rapid Hardening Portland cement:
Rapid Hardening Portland Cement is similar to OPC, except that it is ground much
finer, so that on casting, the compressible strength increases rapidly.
Water Proof Cement:
Water Proof Cement is similar to OPC, with a small portion of calcium stearate or nonsaponifibale oil to impart waterproofing properties.
PROCEDURE
The main raw materials used in the cement manufacturing process are limestone,
sand, shale, clay, and iron ore. The main material, limestone, is usually mined on site
while the other minor materials may be mined either on site or in nearby quarries.
Another source of raw materials is industrial by-products. The use of by- product
materials to replace natural raw materials is a key element in achieving sustainable
development.
17
Raw Material Preparation

Mining of limestone requires the use of drilling and blasting techniques. The
blasting techniques use the latest technology to insure vibration, dust, and noise
emissions are kept at a minimum. Blasting produces materials in a wide range of sizes
from approximately 1.5 meters in diameter to small particles less than a few
millimeters in diameter.
Material is loaded at the blasting face into trucks for transportation to the crushing
plant. Through a series of crushers and screens, the limestone is reduced to a size less
than 100 mm and stored until required.
Depending on size, the minor materials (sand, shale, clay, and iron ore) may or may
not be crushed before being stored in separate areas until required.
Raw Grinding
In the wet process, each raw material is proportioned to meet a desired chemical
composition and fed to a rotating ball mill with water. The raw materials are ground to
a size where the majority of the materials are less than 75 microns. Materials exiting
the mill are called "slurry" and have flow ability characteristics. This slurry is pumped
to blending tanks and homogenized to insure the chemical composition of the slurry is
correct. Following the homogenization process, the slurry is stored in tanks until
required.
In the dry process, each raw material is proportioned to meet a desired chemical
composition and fed to either a rotating ball mill or vertical roller mill. The raw
materials are dried with waste process gases and ground to a size where the majority
of the materials are less than 75 microns. The dry materials exiting either type of mill
are called "kiln feed". The kiln feed is pneumatically blended to insure the chemical
composition of the kiln feed is well homogenized and then stored in silos until
required.
Pyroprocessing
Whether the process is wet or dry, the same chemical reactions take place. Basic
chemical reactions are: evaporating all moisture, calcining the limestone to produce
18
free calcium oxide, and reacting the calcium oxide with the minor materials (sand,
shale, clay, and iron). This results in a final black, nodular product known as "clinker"
which has the desired hydraulic properties.
In the wet process, the slurry is fed to a rotary kiln, which can be from 3.0 m to
5.0 m in diameter and from 120.0 m to 165.0 m in length. The rotary kiln is made of
steel and lined with special refractory materials to protect it from the high process
temperatures. Process temperatures can reach as high as 1450oC during the clinker
making process.
In the dry process, kiln feed is fed to a preheater tower, which can be as high as
150.0 meters. Material from the preheater tower is discharged to a rotary kiln with can
have the same diameter as a wet process kiln but the length is much shorter at
approximately 45.0 m. The preheater tower and rotary kiln are made of steel and lined
with special refractory materials to protect it from the high process temperatures.
Regardless of the process, the rotary kiln is fired with an intense flame,
produced by burning coal, coke, oil, gas or waste fuels. Preheater towers can be
equipped with firing as well.
The rotary kiln discharges the red-hot clinker under the intense flame into a
clinker cooler. The clinker cooler recovers heat from the clinker and returns the heat
to the Pyroprocessing system thus reducing fuel consumption and improving energy
efficiency. Clinker leaving the clinker cooler is at a temperature conducive to being
handled on standard conveying equipment.
Finish Grinding and Distribution
The black, nodular clinker is stored on site in silos or clinker domes until needed
for cement production. Clinker, gypsum, and other process additions are ground
together in ball mills to form the final cement products. Fineness of the final products,
amount of gypsum added, and the amount of process additions added are all varied to
develop a desired performance in each of the final cement products. Each cement
product is stored in an individual bulk silo until needed by the customer. Bulk cement
can be distributed in bulk by truck, rail, or water depending on the customer's needs.
19
Cement can also be packaged with or without color addition and distributed by truck
or rail.
DEMAND & SUPPLY
The demand drivers for the cement sector continue to be housing,
infrastructure and commercial construction, etc. We expect the proportion of
infrastructure in total demand to improve further in future, as the thrust on
infrastructure development is on the rise. During April-November 2007, cement
demand grew by 10 per cent year- on-year (y-o-y) propelled by the growth witnessed
in end user segments such as housing, infrastructure etc. CRISIL Research expects
demand to remain strong and grow by over 12 per cent in the next 2 years. Cement
demand is expected to outstrip supply for the next year and a half as no major
capacities are coming on- stream, thus providing enough flexibility to cement
manufacturers to further hike the prices.
Today, cement from Andhra is going all over India, including Assam, Meghalaya,
Jharkhand, Orissa, West Bengal, Chattisgarh, Gujarat and Maharashtra. More cement
is likely to flow into Tamil Nadu from the state in view of cut in sales tax. Any further
increase in demand in the South India will benefit the cement industry here. Cement
movement from Gujarat to Mumbai is also coming down due to exports while cement
movement from Orissa into Andhra has stopped and, in fact, cement is flowing into
Orissa as well.
Earlier in 2006-07, the housing sector alone consumed 65 per cent of the total
domestic consumption. With the launch of several infrastructure projects, the housing
consumption may come down to 55 per cent as the infrastructure and other sectors are
expected to move up to 45 per cent from the present 35 per cent. Still, the main sector
of consumption continues to be housing, including commercial space, occupying
more than 60 per cent. The current demand in the state for 2005- 06 is expected to
cross 15 million tons (11.5 million tons). We expect the demand here to go past the
17.5-million mark in 2006-07 in view of irrigation and infrastructure projects being
taken up in the state. Weaker sections housing, construction of public toilets, schools
in rural areas apart from several private and public infrastructure projects will also
20
give tremendous boost to the cement consumption in the state. Most importantly,
irrigation projects, worth nearly Rs 1 lakh crore, will trigger unprecedented demand
for the next 5-7 years. Cement consumptions are as follows:
COMPANY PROFILE
History
Anjani Portland Cement Limited (APCL) is a decade old company with a
proud Legacy of Cement to display. The genesis of Anjani was inspired and motivated
by the pioneer in cement industry Padma Bhushan Dr. BV Raju (former chairman of
Cement Corporation of India), who has been instrumental in the growth of cement
industry in India, especially Andhra Pradesh. Trained and sculpted by this cement
luminary, the architects of APCL have built its organizational structure on a very
strong pedestal of infrastructure, technology, experienced human resource and strong
social commitment.
A take over of an ailing company called M/S Shez Cement Pvt. Ltd. in 1999
set the beginning of the onerous journey to the top. The first batch of clinker produced
after the takeover stood up to all set quality norms. After the initial hitches and
subsequent advancement in infrastructure, Anjani tread the growth path.
21
Anjani Cement is a popular brand in south India for its quality and
commitment to service. The Company, which came to be Anjani Portland Cement Ltd.
in 1999, before the completion of a decade of production, has been awarded the
Fastest Growing Cement Company at Construction World Annual Awards in 2009.
Starting with initial production capacity of 0.3 million tonnes per annum in
1999, the Company has now achieved a quantum shift in its production capacity to 1.2
million tonnes per annum. The second plant powered with the latest and modern
technology and infrastructure has started operations in 2010 and has poised the
company on an energized growth path to achieve new performance levels and service
standards.
The professional teams of technical, financial, marketing, strategic planning
and human resources have served through prestigious capacities in the industry with
integrity and repute for more than 30 years. The responsibility and accountability of
these professionals is evident in their good management practices and shared
objectives. The present standing of Anjani Cement is credited to the commitment of
this notch team.
The cement is only as good as its raw materials and primarily depends on the
quality of the lime stone used. The limestone mines of Anjani are acclaimed as the
best mines amongst the cement brackets of Nalgonda district, thus confirming the
superior quality of the cement produced.
With its exemplary growth in production and services, Anjani Cement has
captured the market in Andhra Pradesh and competes with the national players in the
industry. Anjani has now extended its reach to Tamil Nadu, Orissa and Karnataka and
also made forays into the markets of Maharashtra. An excellent dealer network system
ensures successful spread and sales of the cement within and outside the state.
Sound R&D ensures continuous innovation in technology and realization of
best quality standards. Anjani Powder Research Centre conducts research and takes up
relentless testing procedures of cement of all available brands for improvement and
standardization of the products.
22
Anjani Cement also makes persistent effort to restore and maintain the eco balance
and greening process in and around the cement plants. The RABH technology ensures
minimum air pollution in and around the plant. Efforts are made towards greening the
environment by planting and nurturing trees and other flora in the cement plant
vicinity.
As a responsible corporate, Anjani cement has taken conscious and decisive
measures to develop knowledge based society by providing quality education for the
families of the employed and neighboring villages. An innovative venture BV Raju
Institute of Cement Technology was initiated by the company to train the rural youth
in cement technology and production for potential employment in cement industries.
Vision
To evolve as market leader in south India and stand for customer delight with
consistent quality and service standards.
Mission
To rise as a symbol of professionalism and transparent human resource management
practices to work an optimum balance between employee security and stake holder
satisfaction.
Directorial Board
Chairman & Managing Director
This thriving organization is escalating the growth path under the competent
leadership of the Chairman and Managing Director Mr. KV Vishnu Raju who
completed his B.Tech in Chemical Engineering from R.E.C., Trichy and M.S. from
the Michigan Technological University USA. He started his career with DuPont, USA
23
and later extended his knowledge and furthered his skills at indigenous cement
industry in India and elevated the company to unforeseen heights.
Anjani is making firm derivatives in the aegis of his able leadership.
Executive Director
Mr. P.V.R.L. Narasimha Raju is a commerce graduate from Osmania University and
has extensive experience in Marketing and Finance in Cement, Construction,
Ceramics and Agri- Business. He is actively involved in the marketing activities of
Anjani Portland Cement Limited and is also instrumental in execution of Vennar
Ceramics power plant.
Directors
Mr. R.A. Rama Raju is a Technical Director with over 34 years of experience in the
cement industry. He started his career in A.P. Scooters, later served Raasi Cement Ltd.
and Priyadarshini Cement Ltd.
Mr. P.S. Ranganath - Chartered Accountant in practice for more than 17 years is a
partner of JBRK & Co. which is a five partner firm having wide experience in
management consultancy services and audits of public sector, government and private
sector in areas including internal audit and special audits.
Mr. P.V. Subba Rao is an advocate in practice at present. He has retired as a Joint
Commissioner of Commercial Taxes, Andhra Pradesh government. His association
with commercial tax department has spanned for about four decades. He does not
currently hold directorships in any other company.
24
Mr. P. Ramachandra Raju is a graduate in commerce, FICWA and ACS (Inter) has 40
years rich experience in Finance, Cost and Management as well as in Company Law
matters holding senior positions both in private and public sector undertakings.
Mile Stones
1999-2000
Commenced commercial production after take-over of management and changed the

name to Anjani Portland Cement Limited.
2000-2001
Acquired M/s.Vennar Ceramics Limited, a gas based power generating company to

cater to 60% of power requirement.
2001-2002
Installation of secondary crusher at the plant.

2003-2004
Introduction of high efficiency cyclones, burners and introduction of screw

compressors in place of unit conpressors.
2004-2005
Calciner modification done to improve production.

2005-2006
Installed an additional cement mill to increase cement grinding capacity.

2006-2007
Installed high efficiency fans, acquired grinding unit (M/s.Pachava Cements Ltd.)
Declared Maiden Dividend.
2007-2008
Installation of R.A.B.H. and distribution control system.

Acquired Hi-Tech print Systems Ltd., a leading security printer in south India.
2009
Inauguration of Anjani Powder Research Centre.

2010
Inauguration of new corporate office Anjani Cement Centre.

Anjani Studio first of its kind to be launched in the industry.
Started production at the second plant and achieved rated capacity in July 10.
Anjani Portland Cement Limited has been certified as an ISO 9001:2008 company.
Inauguration of BV Raju Institute of Cement Technology.
25
CHAPTER-4
THEORITICAL FRAME WORK OF CAPITAL STRUCTURE
DEFINITION AND SYMBOLS:
BASIC SYSMBOLS:
S=Total market valve of money.
B= Total market valve of debt.
I= Total interest payments.
V= Total market valve of the firm. (VS+B).
NI=Net income available to equity holders.
BASIC DEFINITION:
1. Cost of debt=Interest/Market value DebtX100
Valve of debt (B) =I/K1
2. Cost of equity (Ke) = (DI/Po) +g (if there is income tax)
Where DI= net divided;
3. Overall cost of=EBIT/value of the companyX100
Po=current market price of shares
26
g=br(r=rate of return)
(If there is no IT) Ke= (E 1(X) N) = (EBIT-I orNI)/s
Per share basis (PO) = E1/K
Total basis(s) =PON= (EBIT-1)/Ke
Weighted average cost of capital:
K0=W1K1=W2K2 (w1, w2 are relative weight) or
K0= (I-NJ)/ (v=EBJT/V
Where V=EBIT/K0
27
Determinants of Capital Structure:

1. Cost of borrowings (CB): When the cost of borrowing increases, the dependence on
borrowed funds is likely to decline. As a result, the leverage ratio is expected to have a negative
relationship with the cost of borrowing. The cost of borrowing can be measured as total interest
payment as percentage of total borrowings of total borrowings of the firm.
2. Cost of Equity (CE): If the cost of equity increases, the firm is likely to depend more
on debt than equity capital. Therefore, the leverage ratio can be accepted to be an increasing
function of the cost of equity. This variable can be measured as the ratio of dividend payment to
share capital of the company.
3. Size of the Firm (SF): It has been suggested by a number of authors that the size of
the firm is likely to be positively related to the leverage ratio. The rational behind this view is
provided by Warner (1977), and Angchua and McConnell (1982). They have argued that the ratio
of direct bankruptcy costs to have firms valve decreases as the valve of firm is said to be
negligible is also argued that the larger firms are more diversified and they have easily access to
the Capital Markets, and borrow more favorable interest rates. Also Chung (1993) argued that the
larger firms have lower agency costs associated with the assets substitution and under investment
problems which mostly arise from the conflicting interests of shareholders? Further, the similar
firms are more likely to be liquidated when they are in financial distress. All, such considerations
suggest a positive relationship between the firm size is measured as the volume of total assets of
firm and the leverage ratio.
4. Probability (PR): Myers (1977) suggested that the firms prefer retained earnings as
their main source of financing. Their second preference is for debt financing followed by new
equity issues, which might be due to the significant transaction cost of issuing new equity. It is
suggested that the observed capital structure of the firm would reflect the cumulative
requirements for external financing. An unusually profitable firm with a slow growth rate will
end up with an unusually low leverage low ratio compared with the industry average in which it
operatives. On the other hand, an unprofitable firm in the same industry will end up with a
28
relatively high leverage ratio. The profitability of the firm enables it to use retained earnings over
external finance and therefore, one should accept a negative. Association between the
profitability of the firm and its debt ratio. Barton and Gordon (1988) have also argued that a firm
with high rates would maintain a relatively lower debt level because of its ability to finance itself
with internally generated funds. This is consistent with the proportion that the management of
firm desire flexible and freedom from the profitability of the firm. Which can be measured as the
ratio of operating income to total assets, will be negatively related to the debt level of the firm?
5. Growth Rate (GR): The growing firms need more funds. The greater the future need
for the funds, the more likely that the firm will retain earnings or issue debt. A firm is except to
rarely on debt financially to rely on debt financing to maintain its debt ratio as its equity
increases due to the large retention of earnings. Thus the firms debt level and growth rate are
expected to have a positive relationship. This variable can be measured as the annual growth
rates are expected to have a positive relationship. This variable can be measured as the annual
growth rate of total assets of the company.
6. Collateral Valve of Assets (CVA): Some capital structure theories have argued that
the type of assets owned by the firm affects its capital structure choice. Scott (1977) ahs
suggested that by selling the secured debt, the firms can increase the valve of their equity by
taking away the wealth without payment, from their existing unsecured debtors. By issuing debt
secured by assets, the firm can avoid higher interest costs and high issuing cost. For these
reasons the firms with assets that can be used as collateral may be expected to issue more debt.
Therefore, the collateral valve attribute can be one of the determinants of capital structure of the
firm. This variable can be measured as the ratio of accounts receivable plus net fixed assets to
total assets, and it can be expected to be positively related with the leverage ration.
7. Liquidity (LQ): Liquidity ratios are mostly used to judge a firms ability to meet its
short term obligations. The liquidity ratio may have conflicting affects on the capital structure
decisions of the firm. First, the firm with higher liquidity rations might have relatively higher
debt rations. This is due to greater ability to meet short-term obligations. Form this viewpoint
one should accept a positive relationship between the firm liquidity position and its debt ratio.
29
However, the firms with greater liquid assets may use these assets to finance their investments. If
this happens there will be a negative relationship between the firms liquidity ratio and debt ratio.
We include the liquidity as the argument in our capital structure determination model. It is
measured as the ratio of current assets to current liabilities and the direction of its effect on
capital structure is allowed to be empirically determined.
8. Non-Debt Tax Shields (NDTS): DeAndelo and Masulis (1980) presented a model of
optimal capital structure that incorporated the impact of corporate taxes personal taxes and nondebt related corporate tax shields such as deprecation, investment tax credits, etc. They argued
that to use less borrowed capital. NDTS [Operating Income-Interest Payments-(tax
payments/corporate tax rate)]/Total assets. The relationship between the non-debt tax shields and
leverage ratio can be expected to be negative.
30
THEORIES OF CAPITAL STRUCTURE:

Different kinds of theories are have been
1. Net Income Approach(NI)
2. Net Operating Income Approach(NOI)
3. The Traditional Approach
4. Modigliani and Millar Approach(MM)
1. Net Income Approach (NI): This approach introduced by Durand. A firm can minimize
weighted average cost of capital and increase the valve of the firm and share valve in the
market.
This approach is based upon the following assumptions:
(I) The cost of debt is less than the equity.
(ii) There are no taxes.
(iii) The risk percentages of inversion are not changed by
The use of the debt.
Degree of leverage:
The reasons for assuming cost of debt is less then cost of Equity
are that interest
rates are lower then divided rates due to element of risk and the benefit of tax as the interest is a
deductible expenses.
The total market valve of a firm on the basis of NI is:
V=S+D
V=Total market valve of firm.
S=Total market valve of equity shares
(or)
31
NI/Equity capitalization rate.

D=market valve of debt.
Weighted Average Cost of Capital can be calculated as:
KO=EBIT/V
0.1
Ke
Ko
Cost of Capital 0.05
Degree of leverage:
The reasons for assuming cost of debt is less than the cost of equity are the interest rates are
lower than dividend rates due to elements of risk and benefit of tax as the interest is a deductible
expenses.
The total market value of firm on the basis of NI is:
V = S+D
V = Total market value of firm
S= Total market value of equity share
(or)
NI/Equity capitalization
rate
D=Market value of debt.

Weighted average cost of capital can be calculated as
32
KO = EBIT/V
2. Net Operating Income Approach: This theory suggested byDurand. It is opposite to the NI
approach .Here Change in the capital structure of a company does not effect in the market valve
of the firm and the weighted cost of capital remains constant whether the debt-equity mix is
50:50 or 20:80 or 0:100. This theory presumes that:
(i)
The market capitalizes the valve of the firm as a whole
(ii)
The business risk remains constant.
(iii)
There are no corporate taxes.

The valve of the firm can be determined as:
V=EBIT/KO
KO=Overall cost of capital
Y
Ke(0/0)
Ko(0/0)
Ki(0/0)
OX
Leverage and cost of capital (NOI)
The market valve of equity is:

S=V-D
33
S=Market value of equity shares

V=Total market value of firm
D=Total market value of debt
3. The Traditional Approach:

The traditional approach also known, as Intermediate Approach is a compromise between
the two extremes of income approach and net operating Income approach. According to this
theory, the valve of the firm can increase initially or the cost of capital can be decreased by use
more debt is a cheaper sources of funds than equity. Thus, a proper debt-equity mix can reach the
capital structure When the increased cost of equity cant be offset by the advantage of low cost
debt. Thus the overall cost of capital according to this theory, decrease up to a certain point,
remains more are less unhinged for moderate increase in debt thereafter, and increase or rise be
yond a certain point.
Ke
Ko
Kd
Traditional Approach
34
4.Modigliani -Miller (MM) Approach:

The MM thesis relating to the relationship between capital structures, cost structures, cost
of capital and valuation is a kin to the NOT approach, in other words, does not provide
operational justification for the irrelevance of the Capital Structures. The MM proportion
supports the NOT approach relating to the independence of the independence of the capital of the
degree of leverage level of debt-equity ratio.
Basis Proportions:
In (Rs)
(0/0)Ko
Vo
Degree of Leverage (B/V)
1)
The over all cost of capital (KO) and the valve of the firm (V) are independent of the
capital structure.
2)
Ke is equal to the capitalization rate of a pure equity stream plus premium for financial
risk\to the difference to the pure equity capitalization (Ke) time the ratio of debt to equity.
3)
The cut off rate for investment purposes is completely independent of the way in which
an investment is financed
35
Assumption:
a) Perfect capital market the implication of a perfect capital market is that.
Securities are infinitely divisible.
Investors are free to busy/sell securities.
Investors can borrow without restrictions;
There is no transaction cost.
Investors are rational.
b) Given the assumption of perfect information and rationally.
c) Business risk is equal among all firms with in similar operating environments.
Capital Structure Planning and Policy:
Introduction: Capital structures refer to the mix of long-term of sources of the funds, such
as debentures, long-term debt and preference shares. Some companies do not plan there capital
structure they may face considerable difficulties in raising funds to finance there activities. May
also fail to economize the use of their funds.
Features of an appropriate capital structure: The capital should be planned generally
keeping in view the interest of the equity shareholders, being the owners of the owners of the
company. An appropriate capital structures should have the following features:
Return
Risk
Flexibility
Capacity
Control
36
Approach to establish capital structure:

There are 3 most common approaches to decide about a firms capital structures.
1. EBIT-EPS APPROACH:
For analyzing the impact of debt on EPS.
2. VALUATION APPROACH: To know value of the company.

3. CASH FLOW APPROACH: For analyzing the firms ability to
Serve debt.
Practical Considerations in determining capital structures:
Concern for dilution of control
Desire to maintain operating flexibility.
Ease of marketing capital inexpensively.
Capital for economics of scale.
Agency costs.
37
1. INVESTMENTS:
Total investments, as on 31st March, 2008 is Rs.4782.66 Lakhs as against Rs.2887.28 Lakhs as
on 31st March, 2007.
2. FINANCIAL:
TURN OVER AND PROFIT:
Anjani Portland Cements Limited recorded a turnover of Rs. 344032.16 Lakhs during as against
Rs.251645.89 Lakhs during 2008-09.Net profit after Tax is Rs. 38335.04 Lakhs as compared to
Rs.26568.32 Lakhs during the previous year i.e.2008-09
CAPITAL STRUCTURE:
The authorized share capital of Anjani Portland Cements Limited is
Rs.12000.00 Lakhs. The issued, subscribed and paid up capital 575435 shares of Rs.10/- each
allotted as fully paid up with out payments being received in cash pursuant to a scheme of
amalgamation and 5949480 shares of Rs.10/- each allotted as fully paid up bones shares by way
of capitalization of reserve, 400000 shares of Rs.10/- each Rs.3.75/- per share received in cash
and balance credited as bonus by way Capitalization of Reserve 45743318 ordinary Shares of
Rs.10/- each fully paid Rs.4574.16 Lakhs.
38
3. SECURED LOANS
1. TERM LOANS from
a) Rs.50833 Lakhs from State Bank of India.
b) Rs.4880 Lakhs from State Bank of Hyderabad.
c) Rs.1632 Lakhs from State Bank of Bikaner & Jaipur
d) Rs.3256 Lakhs from State Bank of Indore.
e) Rs1221 Lakhs from State Bank of Mysore.
2. FROM SCHEDULED Banks 12650.96 Lakhs
UNSECURED LOANS:
a)
By Fixed Deposits Rs.164.22 Lakhs
b)
By Security Deposits from selling agents and others Rs.12246.08 Lakhs
c)
Short term Loans Rs.11511.06 Lakhs
d)
Interest free loan from State Industrial & Investment Corporation of

Maharastra Ltd. Rs.16.05 Lakhs.
4. RESERVES AND SURPLES:
A) CAPITAL RESERVE:
During the year the company has not transferred
any capital.
B) GENERAL RESERVE:
Rs.4000 Lakhs have been transferred from profit & Loss
A/C during the year. The closing balance as on
31st march 2008 is Rs.31391.5 Lakhs
.
C)
FOREIGN PROJECT RESERVE:

During the year, the company did not make Foreign
Project Reserve.
CAPITALISATION STATEMENT
39
Rs. In Lakhs
SL.NO
Particulars
As on 31-03-2008
Debt:
a)Short term
b)Long term Debt
97106.02 24375.36
Total Debt
121481.38
a)Equity Share Capital

b)Results and Surplus
4574.16 93617
Total Equity
98191.16
Total Valve of the company Debt/Equity Ratio
1.23%
40
5. SHARE CAPITAL:
The company did not raise any Capital during the year under report. The authorized Capital
Company is 1,20,00,00,000 Equity Shares of Rs.10/- each. The ISSUED AND, SUBSCRIBED,
PAID-UP CAPITAL of the company is 4, 57, 43,318 Equity shares of Rs.10/- each fully paid.
YEAR
TOTAL DIVIDEND PAID

2943.45
TOTAL PAID
4574.16
2014-2015
2086.35
4574.16
2014-2013
1546.76
4574.16
2013-2012
1303.97
4574.16
2012-2011
1290.11
4574.16
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
UP CAPITAL
TOTAL DIVIDEND PAID

TOTAL PAID UP
CAPITAL
2015-09
2014-08
2013-07
2012-2011
6. DIVIDENDS:
Anjani Portland Cements Limited pays Interims dividend. The Company paid Interims dividend
of Rs.2086.35 Lakhs to the equity Share holders for the financial year of 2013-2014.
41
BOARD OF DIRECTORS MEETING

The Board of Directors annual General meeting of Anjani Portland Cements Limited held on
14th March, 2007. They declared interims dividend for the financial year2008-09. The interim
dividend paid on 4, 57, 43, 318 Ordinary Shares face valve of Rs.10/- each @ Rs.4/- per share.
FOR THE YEAR ENDED MARCH, 2007

DIVIDEND REPORT
(Rs. In Lakhs)
Particulars
2008
2007
2006
2005
2004
4574.16
4574.16
4574.16
4574.16
4574.16
10/-
10/-
10/-
10/-
4/-
4/-
4/-
4/-
1829.73
1372.29
1143.5
1143.5
Share Capital
Face valve(Rs)
Rate of Dividend
Final
Interim
Amount of dividend
Final
In term
4/-
7. PROFIT:
42
Profit before Depreciation & Tax Rs.64180.08 Lakhs during the current year against previous
year 2008-09 was Rs.40008.97 Lakhs. Provision for Income Tax for the year Rs.16500 Lakhs as
against previous year 2008-09 Rs.7500 Lakhs. Profit after Tax works out Rs. 26568.32 Lakhs in
against Rs.26568.32 Lakhs for the year of 2008-09.
8. EPS Calculation:
Particulars
Net Profit After Tax
(Rs.in Lakhs)
No. of Equity shares
EPS
Face Valve of Share
2008-09
4570.92
26568.32
38335
45743.318
9.99
10/-
45743.318
58.08
10/-
45743.318
83.8
10/-
9. WORKING RESULTS:
Particulars
Turnover in Lakhs
Interest
Depreciation
PBT
Provision for tax
PAT
Dividend & Tax
156572.15
3149.73
5359.18
8299.5
2000
6299.5
1143.5
2008-09
170901.53
2041.1
5349.2
4351.28
1000
3351.2
1143.5
187781.55
2278.97
5157.17
8092.92
3400
4570.92
1372.29
2008-09
251645.89
2991.29
5830.64
34178.32
7500
26568.3
1829.73
344032.16
5210.72
8926.89
55253.19
16500
38335
2558.5
43
ANALYSIS AND INTERPRETATION

FINANCIAL YEARS
CAPITAL STRUCTURE ANALYSIS
1. Capitalization Information
A.
Particulars
Rs. In lakhs
Debt:
a)Secured loans
b)Un secured loans
97106.02
24375.36
Total debt
B.
C.
D.
121481.38
Equity Capital:
a)Equity share capital
b)Reserves and surplus
4574.16
93617
Total Equity Capital
98191.16
Total Value:
a)Capital Employed
219672.54
Total Value of the

Company
219672.54
Debt/Equity Ratio
1.23
2. EBIT-EPS ANALYSIS
44
particulars
(Rs. In Lakhs)
EBIT
Less: Interest
60658.93
5405.74
Profit before Tax

Less: Provision for Tax
Less: Provision for Fringe
Benefit
Profit After Tax
55253.19
16500.00
418.19
Proposed/Interim Dividend &

Tax
6943
Earning Per Shares(EPS)

[(PAT/Share capital)X 10]
38335/4574.3318X10=83.80
38335
Overall cost of=EBIT/value of the companyX100

Ko=60658.93/219672.54X100=27.67%
Cost of debt=Interest/Market value DebtX100
KD= 5405.74/121481.38X100=4.45%
3. Ratios
Return on capital employed
48.12%
Return on Net worth
39.04%
Debt/Equity ratio
1.21
Interpretation:
i.
Total net value of Anjani Portland Cements Limited was increased in the year from
87280.00 to121481.
45
ii.
Equity capital of the Anjani Portland Cements Limited
iii.
iv.
v.
same as the previous year. The value is 4574.16 Lakhs.

Debt Equity ratio was recorded as1.23 in the year .
Net worth of the company 39.04 in the financial year .
Earning per share of the company was Rs.83.80.
SOURCE OF FINANCE
The total investment on 31st March, 2008 is Rs. 3026.02 Lakhs. The source of investments is
given below.
Anjani Portland Cements Limited S Sources of Finance as 31st March, 2008
Total Investment Rs. 3026.02 Lakhs
GOVERNMENT SECURITIES
0.13
BONDS
29.64
FULLY PAID SHARES
2899.02
PARTIALLY PAID SHARES
6.12
46
47
2008-09 FINANCIAL YEAR

1.
Capitalization Information
A.
B.
C.
Particulars
Rs. In lakhs
Debt:
a)Secured loans
b)Un secured loans
Total debt
64319.00
22960.00
87289.00
Equity Capital:
4574.16
60869.28
65443.44
Total Value:
a)Capital Employed
152732
Total Value of the Company 152732
D.
Debt/Equity Ratio
1.33
particulars
2008-09(Rs. In Lakhs)
48
EBIT
Less: Interest
37528.63
3350.30
Profit before Tax

Benefit
Profit After Tax
34178.32
7500.00
110.00

Tax
2086.35

[(26568.32/4574.3318)X10]=58.08
26568.32

KO=37528.63/152732X100
KO=24.57%
Kd=3350.30/87289.00X100
Kd=3.83%
3. Ratios 2008-09
40.85%
Return on Net worth
40.59%
1.33
Debt/Equity ratio
Interpretation:
i) Total net value of Anjani Portland Cements Limited was increased in the year 2008-09 from
62135.45 to 87280.00.
ii) Equity capital of the Anjani Portland Cements Limited was same as the previous year. The
value is 4574.16 Lakhs.
iii) Debt Equity ratio was recorded as 0.98 in the year 2008-09.
49
iv) Net worth of the company 40.59% in the financial year 2008-09.
v) Earning per share of the company was Rs.58.08.
SOURCE OF FINANCE
The total investment on 31st March, 2007 is Rs.2887.28 Lakhs. The source of investments is
given below.
Total Investment Rs.2887.28 Lakhs
0.13
BONDS
19.64
FULLY PAID SHARES
2591.64
5.72
50
51
2007-08 FINANCIAL YEAR

A.
B.
C.
Particulars
Rs. In lakhs
Debt:
a)Secured loans
b)Un secured loans
41336.83
20798.60
Total debt
62135.43
Equity Capital:
4574.16
37030.84
41605.00
Total Value:
a) Capital Employed
b) Value Added
103740.48
Total Value of the Company 103740.48

Debt/Equity Ratio
1.45
D.
52
particulars
EBIT
Less: Interest
Profit before Tax
Benefit
Profit After Tax
Tax
11368.29
3275.37
8092.92
3400.00
122.00
4570.92
1564.76
[(4570.92/4574.3318)X10]=9.99

Ko=11368.29/103740.48X100
Ko=10.95%
Kd= 3275.37/62135.43X100
Kd=5.27%
3. Ratios 2007-08
Return on Net worth
Current ratio
Debt/Equity ratio
17.04%
10.98%
2.8
1.45
53
Interpretation:
i.
Total debt value of Anjani Portland Cements Limited was increased in the year 2007-08
ii.
from 50455.24 to 62135.45.

Equity capital of the Anjani Portland Cements Limited was same as the previous year.
iii.
iv.
v.
The value is 4574.16 Lakhs.

Debt/Equity ratio was recorded as 0.99 in the year 2007-08.
Net worth of the company 10.98% in the financial year.2007-08.
Earnings per share of the company were Rs.9.99.
SOURCE OF FINANCE
given below.
17.17
BONDS
19.64
FULLY PAID SHARES
3008.70
2.86
54
55
2006-07 FINANCIAL YEARS

A.
B.
C.
Particulars
Rs. In lakhs
Debt:
a)Secured loans
b)Un secured loans
26051.36
24403.87
Total debt
50455.23
Equity Capital:
4574.16
33140.44
37714.59
Total Value:
a)Capital Employed
88169.82
Total Value of the Company
88169.82
Debt/Equity Ratio
1.33
D.
56
particulars
EBIT
Less: Interest
Profit before Tax
Benefit
Profit After Tax
Tax
7116.02
2764.74
4351.28
1000
3351.28
1303.97
[(3351.28/4574.3318)X10]=7.33

Ko=7116.02/88169.82 X 100
Ko=8.07%
Kd= 2764.74/50455.23X100
Kd=5.47%
3. Ratios 2006-07
Return on Net worth
Current ratio
Debt/Equity ratio
12.93%
8.88%
2.73
1.33
57
Interpretation:
i.
Total debt value of Anjani Portland Cements Limited was increased in the year 2006-07
ii.
from 44663.73 to 50455.24.

iii.
iv.
v.

Debt Equity ratio was recorded as 0.69 in the year 2006-07.
Net worth of the company 8.88% in the financial year 2006-07.
Earnings per share of the company was Rs.7.33.
SOURCE OF FINANCE
given below.
17.17
BONDS
19.64
FULLY PAID SHARES
2809.7
9.52
58
2005-06 FINANCIAL YEARS

59
A.
B.
C.
Particulars
Debt:
a)Secured loans
b)Un secured loans
Rs. In lakhs
Total debt
Equity Capital:
44663.73
4574.16
30274.12
34848.27
Total Value:
a)Capital Employed
79512.00
30768.09
13895.63
Total Value of the Company

79512.00
D.
Debt/Equity Ratio
1.28
60
Particulars
EBIT
Less: Interest
Profit before Tax
Benefit
Profit After Tax
Tax
8642.85
3432.28
8299.57
2000.00
6299.57
1290.11
[(6299.57/45743.31)X10]=13.77

Ko=8642.85/79512X100
Ko=10.86%
Kd= 3432.28/44663.73X100
Kd=7.86%
3. Ratios 2005-06
Return on Net worth
Current ratio
Debt/Equity ratio
17.55%
18.07%
2.51%
1.28%
61
Interpretation:
i)
Total debt value of Anjani Portland Cements Limited was increased in the year 200506 from 44090.21 to 44663.73.
ii)
iii)
Debt Equity ratio was recorded as 0.88 in the year 2005-06.
iv)
Net worth of the company 18.07% in financial year 2005-06.
V)
Earnings per share of the company was Rs.13.77.
SOURCE OF FINANCE
given below.
8.88
BONDS
19.64
FULLY PAID SHARES
2499.02
9.52
62
63
CONCLUSION:
After analyzing the financial position of Anjani Portland Cements Limited and evaluating
its Capital Structure Analysis in respect of Ratio Analysis and source and utilization of founds.
The following conclusions are drawn from the project preparation.
The progress of Anjani Portland Cements Limited shows that Equity Capital to
Rs.41605.00 Lakhs from during the year and the Net worth of the Company 39.04%.
Regarding Capital Structure Analysis Equity Capital was decreased from 2008-09 to and
t0otal Debt Valve increased from 87289.00 to 121481.00 Lakhs during the year.
Regarding Capital Structure Analysis Turn Over was increased and decreased in the year
2008-09 and profit after tax was increased during the year .
Regarding Capital Structure Analysis Equity Ratio was decreased from 1.23 to 1.33 and
current ratio decreased from 2.8to 2.39.
From the above study can be said that the Anjani Portland Cements Limited financial
position on Capital Structure Analysis is quite satisfactory.
64
SUGGESTIONS
The Anjani Portland Cements Limited is one of the private sector cement Company in
India. It is a profitable Company.
Now-a-days the cement industry playing a major and important role in the construction
field, these are for construct Homes, Flyovers, Industries etc. Now-a-days cement industry facing
of challenge like
Regional requirements
Regional cement demands
Lack of resources
With all the above problems cement industry has to produce the
Cement with profits.
I want to express my views with few points, they are
1) Anjani Portland Cements Limited has been maintaining Constant Equity Share Capital Since
2006, this has to improve.
2) Offer additional shares to investors from profits instead of giving Dividend. With this, there is
a chance to increase reserves and surplus.
65
3) Debt/Equity Ratio in Anjani Portland Cements Limited is 0.98% this is more than the idle
ratio of debt. But if the proportion of Debt! Equity (0.5 and not less than 0.5) will decrease from
0.98 to 0.5. It would decrease the responsibility. Investments through Equity from rural people
i.e. rural investments are important.
66
BIBLIOGRAPHY
Reference Books:
I.M.Pandey -Financial Management
M.Y.Khan & P.K.Jain - Financial Management
Journals:
Finance India Journals
Web Site:
www.anjanicement.com
67

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A STUDY ON

A project report submitted to

Department of Business management

I declare that this project titled CAPITAL STRUCTURE OF ANJANI

I consider it as my cherished privilege to thank Mr.Amith Singh, Anjani Portland

CONTEXT OF THE STUDY

B).OBJECTIVE OF THE STUDY

4. THEORITICAL FRAME WORK OF

5. ANALYSIS & INTERPRETATION

6. CONCLUSIONS & SUGGESSTIONS

requires funds to run and maintain its business the

Long term assets (fixed assets)

Net working capital (Positive Current assets).

Firms employ only two types of capital, debt and equity.

The firm has a policy of paying 100% dividends.

The corporate and personal income taxes do not exist.

The operating profit (EBIT) is not accepted to grow.

The total assets are given and do not change.

independent of its capital structure.

NEED OF THE STUDY:

The corporate and personal income taxes do not exist.

The given the assumptions of perfect information and rationality.

OBJECTIVE OF THE STUDY:

To make the impact of (Capital) not work in financial performance.

SCOPE OF THE STUDY:

applicable in the situations.

overall view of the capital structure.

3. Capital structure analysis of the fertilizer industry: a case study

Authors: Khatik, S.K.1; Singh, P.K.2

Source: International Journal of Financial Services Management, Volume 1, Numbers

Raw Material Preparation

Commenced commercial production after take-over of management and changed the

Acquired M/s.Vennar Ceramics Limited, a gas based power generating company to

Installation of secondary crusher at the plant.

Introduction of high efficiency cyclones, burners and introduction of screw

Calciner modification done to improve production.

Installed an additional cement mill to increase cement grinding capacity.

Installation of R.A.B.H. and distribution control system.

Inauguration of Anjani Powder Research Centre.

Inauguration of new corporate office Anjani Cement Centre.

Determinants of Capital Structure:

THEORIES OF CAPITAL STRUCTURE:

are that interest

NI/Equity capitalization rate.

D=Market value of debt.

The market capitalizes the valve of the firm as a whole

The business risk remains constant.

There are no corporate taxes.

The market valve of equity is:

S=Market value of equity shares

3. The Traditional Approach:

4.Modigliani -Miller (MM) Approach:

Approach to establish capital structure:

For analyzing the impact of debt on EPS.

2. VALUATION APPROACH: To know value of the company.

Concern for dilution of control

Desire to maintain operating flexibility.

Ease of marketing capital inexpensively.

Capital for economics of scale.

By Fixed Deposits Rs.164.22 Lakhs

By Security Deposits from selling agents and others Rs.12246.08 Lakhs

Short term Loans Rs.11511.06 Lakhs