A

PROJECT REPORT

ON
PROFITABILITY ANALYSIS
AT
ULTRATECH CEMENT LIMITED

Submitted in partial fulfillment of the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

BY
VEMULA SUMANTH REDDY
H.T. NO: 2169-17-672-018

Under the guidance of

Md. ASMATUNNAISA

VIJAYA P.G. COLLEGE

(Approved by AICTE & Affiliated to Osmania University)
Munaganoor(v), Hayathnagar(M), R.R. Dist - 501511.
2017-2019
 DECLARATION

I hereby declare that this project report entitled PROFITABILITY ANALYSIS AT

ULTRATECH CEMENT LIMITED submitted by me to the DEPARMENT OF

MANAGEMENT STUDIES, VIJAYA P.G. COLLEGE, R.R.DIST, is a bonafide work

undertaken by me and it is not submitted to any other university or institution for the award of

any degree diploma/certificate or published any time before.

Date:

Place :

V. SUMANTH REDDY
 ABSTRACT
Profitability analysis refers to the techniques used to generate an overall performance
evaluation from the financial perspective. It is a broader level of analysis than the standard
cost variance analysis for manufacturing costs and includes those variances as well as several
others.

There are four factors that affect any type of multi-product profit measurement. These include:
Sales prices, Unit costs, Sales volume, and Sales mix. Remember the underlying assumptions
in the master budget and conventional linear cost-volume-profit analysis, i.e., constant sales
prices, constant unit variable costs, and constant sales mix. This chapter shows how to analyze
the differences between the static master budget and actual performance recognizing that
prices, costs and sales mix are not constant.

Profit measurements that can be analyzed include manufacturing margin, contribution margin,
gross profit, throughput and net income. Measurements based on the cost hierarchy could also
be used such the contributions at the unit, batch, product and facility levels. Each type of
analysis involves explaining the difference between the actual and budgeted (or some previous
period's) profit measurements in terms of sales price, unit cost, sales volume and, when
applicable, sales mix.

The profit analysis techniques applicable to both direct and full absorption costing are
illustrated in this chapter. The techniques are practically the same for both inventory valuation
methods. As a result, the total amount to be learned is considerably less than it may appear
when one first skims through the chapter. Profit analysis for direct costing is illustrated first.
This is referred to as contribution margin analysis and is divided into two sections:
contribution margin analysis when the data are in units, and contribution margin analysis
when the available data are only stated. Then profit analysis for full absorption costing is
illustrated in two sections including: gross profit analysis when the data are in units, and gross
profit analysis when the data are stated only. At the end of each section, an income statement
approach is presented that provides an alternative way to calculate the variances and a more
revealing picture of performance.
 ACKNOWLEDEMENT

I would like to express my heartfelt thanks to my supervisor MD. ASMATUNNAISA for her

guidance throughout my project work.

I am very thankful to the entire team of ULTRATECH CEMENT LIMITED for their co-

operation, and specially my thanks to Mr. RAMAKRISHNA (Branch Manager) without

whose cooperation this project would not have been possible.

I express my gratitude to Secretary and Correspondent of VIJAYA P.G. COLLEGE for

providing me opportunity to pursue MBA programme.

I am also grateful to Dr. K. PRATHAP, Principal of VIJAYA P.G. COLLEGE and all the

faculty members who have directly or indirectly helped me in preparation of this project

report.

I take this opportunity to thank all those who have been of helped to me in the completion of

this project. Finally I thank to my friends for their continuous support and help in the

completion of my project.

V. SUMANTH REDDY
 INDEX
CH. No CHAPTER NAMES Page No.s
CHAPTER - I INTRODUCTION 01-09
CHAPTER - II REVIEW OF LITERATURE 10-26
CHAPTER - III INDUSTRY & COMPANY PROFILE 27-39
CHAPTER - IV DATA ANALYSIS &INTERPRATATION 40-47
FINDINGS, CONCLUSION &
CHAPTER - V
SUGGESTIONS 48-50

BIBLIOGRAPHY 51
 CHAPTER- I

INTRODUCTION

INTRODUCTION
Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratios which are used to determine the company's
bottom line and its return to its investors. Profitability measures are important to company
managers and owners alike. If a small business has outside investors who have put their own
money into the company, the primary owner certainly has to show profitability to those equity
investors.

Profitability ratios show a company's overall efficiency and performance. We can divide
profitability ratios into two types: margins and returns. Ratios that show margins represent the
firm's ability to translate sales dollars into profits at various stages of measurement. Ratios
that show returns represent the firm's ability to measure the overall efficiency of the firm in
generating returns for its shareholders.

Profitability ratios measure a company’s ability to generate earnings relative to sales, assets
and equity. These ratios assess the ability of a company to generate earnings, profits and cash
flows relative to relative to some metric, often the amount of money invested. They highlight
how effectively the profitability of a company is being managed.

Common examples of profitability ratios include return on sales, return on investment, return
on equity, return on capital employed (ROCE), cash return on capital invested (CROCI), gross
profit margin and net profit margin. All of these ratios indicate how well a company is
performing at generating profits or revenues relative to a certain metric.

Different profitability ratios provide different useful insights into the financial health and
performance of a company. For example, gross profit and net profit ratios tell how well the
company is managing its expenses. Return on capital employed (ROCE) tells how well the
company is using capital employed to generate returns. Return on investment tells whether the
company is generating enough profits for its shareholders.

For most of these ratios, a higher value is desirable. A higher value means that the company is
doing well and it is good at generating profits, revenues and cash flows. Profitability ratios are
of little value in isolation. They give meaningful information only when they are analyzed in
comparison to competitors or compared to the ratios in previous periods. Therefore, trend
analysis and industry analysis is required to draw meaningful conclusions about the
profitability of a company.
Some background knowledge of the nature of business of a company is necessary when
analyzing profitability ratios. For example sales of some businesses are seasonal and they
experience seasonality in their operations. The retail industry is example of such businesses.
The revenues of retail industry are usually very high in the fourth quarter due to Christmas.
Therefore, it will not be useful to compare the profitability ratios of this quarter with the
profitability ratios of earlier quarters. For meaningful conclusions, the profitability ratios of
this quarter should be compared to the profitability ratios of similar quarters in the previous
years.

Financial statements are prepared primarily for decision-making. They play a prominent role
in setting the framework of managerial decisions. But the information provided in the
financial statements is not an end in itself as no meaningful conclusions can be drawn from
these statements alone. However, the information provided in financial statements is of
immense use in making decisions through analysis and interpretation of financial statements.

Ratio analysis is used to evaluate relationships among financial statement items. The ratios
are used to identify trends over time for one company or to compare two or more companies at
one point in time. Financial statement ratio analysis focuses on three key aspects of a
business: liquidity, profitability, and solvency.

Use and Significance of Profitability Analysis

The Profitability is one of the most powerful tools of financial analysis. It is used as a device
to analyze and interpret the financial health of enterprise. Thus ratios have wide applications
and are of immense use today.

MANAGERIAL USES OF RATIO ANALYSIS

Helps in decision making

 Financial statements are prepared primarily for decision-making. Profitability
analysis helps in making decision from the, information provided in these Financial
Statements.

a. Helps in financial forecasting and planning

Profitability analysis is of much help in financial forecasting and planning. Planning
is looking ahead and the ratios calculated for a number of years a work as a guide for the
future. Thus, ratio analysis helps in forecasting and planning.

b. Helps in communicating
The financial strength and weakness of a firm are communicated in a more easy and
understandable manner by the use of a ratio. Thus, ratios help in communication and enhance
the value of the financial statements.

c. Helps in co-ordination
Profitability even help in co-ordination, which is of at most importance in effective
business management. Better communication of efficiency and weakness of an enterprise
result in better co-ordination in the enterprise.

d. Helps in control
Ratio analysis even helps in making effective control of business. The weakness is
otherwise, if any, come to the knowledge of the managerial, which helps, in effective control
of the business

e. Utility to shareholders/investors
An investor in the company will like to assess the financial position of the concern
where he is going to invest. His first interest will be the security of his investment and then a
return in form of dividend or interest. Ratio analysis will be useful to the investor in making
up his mind whether present financial position of the concern warrants further investment or
not.

f. Utility of creditors
 The creditors or suppliers extent short-term credit to the concern. They are invested to
know whether financial position of the concern warrants their payments at a specified time or
not.

g. Utility to employees
The employees are also interested in the financial position of the concern especially
profitability. Their wage increases and amount of fringe benefits are related to the volume of
profits earned by the concern.

h. Utility to government
Government is interested to know overall strength of the industry. Various financial
statement published by industrial units are used to calculate ratios for determining short term,
long-term and overall financial position of the concerns.

i. Tax audit requirements

Sec44AB was inserted in the income tax act by financial act, 1984. Clause 32 of the
income tax act requires that the following accounting ratios should be given:
a. Gross profit/turnover.
b. Net profit/turnover.
c. Material consumed/finished goods produced.

Further, it is advisable to compare the accounting ratios for the year under consideration with
the accounting ratios for earlier two years so that the auditor can make necessary enquiries, if
there is any major variation in the accounting ratios.

Ratios are classified into following four important categories:

1. Profitability ratios - short-term financial strength

NEED OF THE STUDY

 The problems, which are common to most of the public sectors under taking, are
materials scarcity. Capacity utilization and mainly Profitability requirements and Ultratech
cements Limited is no exception. Thus the importance of the study reveals as to how
efficiently the working capital has been used so far in the organization.

Profitability Analysis is one of the key areas of financial decision-making. It is

significant because, the management must see that an excessive investment in current assets
should protect the company from the problems of stock-out. Current assets will also
determine the liquidity position of the firm.

The goal of Profitability Analysis is to manage the firm current assets and current
liabilities in such a way that a satisfactory level of working capital is maintained. If the firm
cannot maintain a satisfactory level of capital, it is likely to become insolvent and may be
even forced into bankruptcy.

SCOPE OF THE STUDY

 The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The analysis is done to suggest the possible solutions.
The study is carried out for 5 years (2013-18).

A study of the Profitability Analysis involves an examination of long term as well as

short term sources that a company taps in order to meet its requirements of finance. The scope
of the study is confined to the sources that Ultratech cements Limited tapped over the years
under study i.e. 2014-18.

OBJECTIVES OF THE STUDY

 To examine the Profitability Analysis of the Ultratech cements Limited for the period
of 2014 to 2018.
 To analyses interpret and to suggest the Profitability efficiency of the Ultratech
cements Limited by comparing the balance sheet & profit & loss A/c.
 To critically analyses the financial performance of the Ultratech cements limited. With
the help of ratios.
 To assess the capital employed by the Ultratech cements Limited.
 To examine feasibility of present system of managing capital.
 To understand how the company finances its Profitability.
 To analyze the financial performance of the company with reference to Profitability.
 To give some suggestions to the management based on the information studied.
RESEARCH METHODOLOGY
DATA SOURCES
The study is based on secondary data. However the primary data is also collected to
fill the gap in the information.
 Primary data will be through regular interaction with the officials of Ultratech
cements Limited.
 Secondary data collected from annual reports and also existing manuals and like
company records balance sheet and necessary records.
LIMITATIONS OF THE STUDY
 The study is based on only secondary data.
 The period of study was 2014-18 financial years only.
 Another limitation is that of standard ratio with which the actual ratios may be
compared generally there is no such ratio, which may be treated as standard for the
purpose of comparison because conditions of one concern differ significantly from
those of another concern.
 The accuracy and correctness of ratios are totally dependent upon the reliability of the
data contained in financial statements on the basis of which ratios are calculated.
 CHAPTER –II
REVIEW OF LITRETURE
Article on Profitability analysis
Dr. Monica Tulsian-2014-The main purpose of a business unit is to make profit. The
profitability analysis is done to throw light on the current operating performance and
efficiency of business firms. It should be duly noted that net income figure alone is not very
helpful in determining the efficiency and performance of the business firm unless it is related
to some other figures such as sales, cost of goods sold, operating expenses, capital invested
etc. Thus the profitability ratios are calculated to enlighten the end result and comparison of
business firms which is the sole criterion of overall efficiency of business concern.

Omar A. A. Jawabreh, Emran Al Momani-2017- The study aimed at indicating the most
important factors that control the takings and expenses of the hotel and classifying them
according to their ability to influence the profitability of the hotel by using the appropriate
analytical financial methods for the hotel activity which contribute in increasing the efficiency
of planning and monitoring the hotel activity. The study indicated that the average spending
power of the single guest and the numbers of guests are the basic factors that form the hotel’s
revenues, where the spending power of the single guest was the most powerful factor to
influence the profitability of the hotel activity. Accommodation represents the most important
factor in forming the spending power for the single guest and consequently influences
profitability. The study also showed that the changing and fixed costs elements directly affect
profitability and control the activity of the hotel sector and they, therefore, need planning,
monitoring and following up by those in charge.

Brierley, J.A. (2016) Although profitability analysis has been identified as a useful technique,
it is an under researched area. This paper extends the limited research into profitability
analysis by using research interviews to examine the circumstances when profitability analysis
is or is not prepared, why various types of profitability analysis are prepared and the how it is
used in decision making. Some notable results indicate that operating units prepare
profitability analysis when there is an interest in preparing it and the resources exist to prepare
it. Operating units prepare both product profitability analysis (PPA) and customer profitability
analysis (CPA) to assist with increasing profits through managing low profit or loss making
customers. The aim is to identify those products that contribute to the low profit or loss of a
customer. In those operating units preparing only PPA, its function is to identify low profit or
unprofitable products. This information is used to assist in determining what action should be
taken to increase the profits of those products. In contrast, customer focused operating units
produce only CPA.

B Kayathiri Bai, V Buvaneshwaran-2015- The hotel industry is a mature industry marked

by intense competition. Market share increases typically comes at a competitor’s expense.
Industry-wide, most growth occurs in the international, rather than the domestic area. Hotels
are a major employment generator in Hospitality industry. Work in the area of Hotel
Management involves ensuring that all operations, including accommodation, food and drink
and other hotel services run smoothly. It includes instructions in hospitality administration,
hotel/motel management, restaurant and food services management, facilities planning, leisure
studies, recreation administration, marketing, recreation equipment and grounds operations
and maintenance, business finance, insurance and taxation, event management and guest
services, personnel management, travel and logistics management, safety and health services,
professional standards and ethics, and applications to specific vacation types and locations.

T. VENKATESAN, DR. S. K. NAGARAJAN-2012- India is among the top producers of all

forms of steel in the world. Easy availability of low cost manpower and preference of
abundant referrers make India competitive in the global set up. Finance is needed for day to
day operation. I can be considered as a life blood for business. Profitability is the profit
earning capacity which is a crucial factor contributing for the survival of the firms. The
profitability level should maintain at increasing level in order to overcome this problem. The
data is purely based on secondary Profitability position is major determined by the direct and
indirect expenses and two away ANOVAs of ROI of selected steel company was, there is a
significant different on the selected steel company viz, they are maintaining different level of
returns on their investment and correlation of sail to tata of Net Profit and bhushan to jsw of
OP was positive it tells, they are maintaining similar level in the Net Profit a of sail to tata and
jsw to bhushan of OP. finally tata, sail has got better first better performer in the area of
earning power. Bhushan and jsw have got second better performer in the area of overall
earning power. Visa‟s financial position has a negative result of the study period. It is the
drawback to get lost position in their analysis.
N.Sivathaasan-2013- This paper aims to investigate whether factors such as capital structure,
working capital, firm size, non-debt tax shield and growth rate, determining profitability have
any impact on profitability of selected manufacturing companies listed on Colombo stock
exchange, Sri Lanka over a period of five years from 2008 to 2012. This study employs
multiple regression analysis to measure relationship among variables, individual and overall
impact on profitability and to test the operational hypotheses. The results revealed that
whereas all independent variables explain 76.6% and 84.7% of the variance on ROA and ROE
respectively where significant is at 5% levels, the overall model has a significant impact on
profitability at the rate of 80.5 % (Adjusted R2 = 80.5%, P< 0.05), the remaining working
capital (+), growth rate (-) and firm size (+) have no significant effect on the profitability (P >
0.05).

Dan Wang, Fengxia Zhou-2016- With the application of financial analysis in business
management with the development of economy, enterprises are facing increasingly complex
environment. Enterprise modern management is the trend. Financial management is an
important part of strengthening the capacity of corporate financial analysis. It has an
irreplaceable role to improve their core competitiveness, but this aspect currently in China is
still not taken seriously enough. In business management, through the analysis of accurate and
comprehensive financial indicators can be more systematic and comprehensive understanding
of the enterprise, it can provide a favorable support to make correct and reasonable judgments
and decisions, so as to formulate a more comprehensive fit enterprise systems and strategies, a
more reasonable and effective, targeted measure for enterprises’ sustainable development is
important. Its implementation enables businesses to sustainable development.

Georgeta Vintilă and Elena Alexandra Nenu-2016- In the context of the financial crisis
from the last years, liquidity has become an issue of great interest. Recent studies have been
generally focused on the relationship between market’s liquidity and the real economy, and
also on the effects that the banking system could generate, as the basis of the entire financial
system. This study started from the assumption that liquidity and profitability are issues of
significant impact on companies’ stability and development. The analysis was conducted on
companies listed on the Bucharest Stock Exchange. In order to observe the changes recorded
before the crisis and the subsequent evolution, data were collected for a period of 10 years,
from 2005 to 2014. In this paper, we did not focus on testing a certain model, but analyzed the
correlations between the studied variables. In the first part of the study, a graphical analysis
was contucted regarding the trend of current liquidity and leverage ratios. Also, the effective
tax rate was analyzed in order to monitor the impact of tax pressure and changes recorded
during the financial crisis. The empirical study was conducted by econometric analysis, using
multivariate regression models for unbalanced panel data. Financial performance was
approached through accounting measures using return on assets and return on equity. Factors
that could influence firm’s performance were focused on liquidity and solvency indicators.
The results confirmed the statistically significant relationship between the analyzed variables
and revealed a negative correlation between liquidity and corporate financial performance.

HABIMANA THEOGENE-2017- Financial ratio analysis is important to the management,

owners, customers, suppliers, competitors, regulatory agencies, tax payers and lenders each
having their views in applying financial statement analysis in their evaluations and making
judgments about the financial health of organization, while some authors found that financial
ratios analysis is not an adequate method by which to evaluate the overall performance of an
organization; also the balanced scorecard is more efficient than financial ratios analysis. The
general objective of this study was to analyze the contribution of financial ratio analysis on
decision making in commercial banks in Rwanda. Specific objectives were to analyze the
contribution of liquidity ratio analysis in effective decision making in BK; to determine the
effect of efficiency ratio analysis on the effective decision making in BK; to measure the
extent to which asset quality ratio analysis affects decision making in BK and to assess the
role of profitability ratio analysis on the effective decision making in BK. The findings should
enable management of banking institutions come out with realistic policies for ratio analysis
aimed at improving the quality of their decision. This research was descriptive and
correlational design and used both qualitative and quantitative methods. The population under
study was comprised of 139 employees of BK and then, the sample size of the study was 104
employees. This study employed the stratified random sampling technique. This research used
regression analysis to establish relationship between variables under study. The Statistical
Package for Social Sciences (SPSS) version 16 was used in this study. The data was presented
in forms of frequency and percentages. The study revealed that if efficiency ratio increased by
one per cent, the effective decision making also increased by 0.910. Hence, there is a positive
effect of efficiency ratio analysis on effective decision making and if asset quality ratios
analysis increased by one per cent, the effective decision making also increased by 16.935.
Hence, there is a positive effect of asset quality ratios analysis on effective decision making.
The study concluded that ratios analysis is a good way to evaluate the financial results of bank
in order to measure its performance. Ratios allow the bank to compare its business against
different standards using the figures on its financial statements. This research recommends
National Bank of Rwanda to speed up the sensitization campaign of the Rwandan commercial
Banks to focus on ratios analysis as among the best tool to the effective decision making in
commercial bank.

Rafiq Ahmad-2016-The purpose of this research paper is to know the relationship between
two ratios of the financial statements i.e. profitability and liquidity. The study is focused on
the banking sector. The relation is measured by current ratio, quick ratio, and net-working
capital. The bank under study is standard chartered bank Pakistan. From the findings of this
study we came to conclusion that there is weak positive relation between liquidity and
profitability. Quantitative research design is used as tool for the study. To find the relation and
strength of the relation correlation and regression are used. So companies need to focus on
liquidity management which has a positive relation with the company’s profitability.

Renáta Myšková-2017-Indicators of financial performance, especially financial ratio

analysis, have become important financial decision-support information used by firm
management and other stakeholders to assess financial stability and growth potential.
However, additional information may be hidden in management communication. The article
deals with the analysis of the annual reports of U.S. firms from both points of view, a financial
one based on a set of financial ratios, and a linguistic one based on the analysis of other
information presented by firms in their annual reports. Spearman correlation coefficient is
used to compare the values of financial and linguistic indicators. For the purpose of the
comprehensive assessment, novel word lists are proposed, specifically designed for each
category of financial analysis. The aim is to assess the information ability of annual reports
and whether successful firms present their results precisely or not. The results show that the
proposed topic dictionaries can be beneficial, especially for the assessment of cash flow and
leverage ratios.
Ľubica Lesáková-2007-The evaluation of profitability performance appears an important
lesson for our managers. Numerical measures of performance are valuable tools, but their use
must be kept in perspective. It is short-sighed to manage strictly by the numbers. Executives
need to take broader, more qualitative view of the evaluation process. Firms are too
complicated to allow the substitution of mechanical rules for creative thought. In my paper
will be presented the quantitative and qualitative approach to the profitability ratio analysis, as
well as the uses and limitations of profitability ratios in managerial practice.

Luis Javier Sánchez Barrios-2014-This paper proposes a novel approach which

complements the traditional creditworthiness assessment and aims at increasing profitability
and therefore, sustainability of credit programmes in emerging economies. Lenders rely on
previous credit history in credit granting decisions. In emerging economies with weak credit
bureaus a lot of credit applicants lack credit records, and therefore, are viewed as high risks
and excluded from formal credit. A program from a major lender in Colombia which provides
credit to such individuals is used as an example. A mixed methods approach is used to collect
and analyze data to explore profit and return at customer and portfolio levels. The qualitative
data gathered through interviews sets the context for the subsequent quantitative exploratory
analysis. The latter investigates the potential use of several alternative customer-level
profit/return measures in the credit acceptance decision-making process and compares the
resulting implications of adopting a particular measure on the portfolio performance. The
results demonstrate ways of increasing profitability of credit-granting to financially excluded
segments provided there is an on-going relationship between borrower and lender and a strong
collection process is in place. From regulatory point of view it is an important confirmation
that lending to those financially excluded can be a profitable business and a win-win situation
for both lenders and borrowers.

Asma Khan and Jyoti Singhal-2015-This paper focuses on the performance of selected IT
industries in terms of ratios. The study covers a period of five years and applies various
profitability ratios and found that the performance of HCL Technologies was satisfactory
except in Return on net worth and return on long term funds whereas in case of Tech
Mahindra return on net worth and return on long term funds is satisfactory. Wipro showed an
average performance during the study period. Authors have used ANOVA to find out the
significant difference between the companies and between the years. This paper also enhances
the knowledge of the investor about the growth of the IT companies.

THEORITICAL BACKGROUND

UNDERSTANDING PROFITABILITY

Profitability is the primary goal of all business ventures. Without profitability the
business will not survive in the long run. So measuring current and past profitability and
projecting future profitability is very important.

Profitability is measured with income and expenses. Income is money generated from
the activities of the business. For example, if crops and livestock are produced and sold,
income is generated. However, money coming into the business from activities like borrowing
money do not create income. This is simply a cash transaction between the business and the
lender to generate cash for operating the business or buying assets.

Expenses are the cost of resources used up or consumed by the activities of the
business. For example, seed corn is an expense of a farm business because it is used up in the
production process. Resources such as a machine whose useful life is more than one year is
used up over a period of years. Repayment of a loan is not an expense, it is merely a cash
transfer between the business and the lender.

Profitability is measured with an “income statement”. This is essentially a listing of

income and expenses during a period of time (usually a year) for the entire business. Decision
Tool Income Statement - Short Form, is used to do a simple income statement analysis. An
Income Statement is traditionally used to measure profitability of the business for the past
accounting period. However, a “pro forma income statement” measures projected profitability
of the business for the upcoming accounting period. A budget may be used when you want to
project profitability for a particular project or a portion of a business.
REASONS FOR COMPUTING PROFITABILITY
Whether you are recording profitability for the past period or projecting profitability
for the coming period, measuring profitability is the most important measure of the success of
the business. A business that is not profitable cannot survive. Conversely, a business that is
highly profitable has the ability to reward its owners with a large return on their investment.

Increasing profitability is one of the most important tasks of the business managers.
Managers constantly look for ways to change the business to improve profitability. These
potential changes can be analyzed with a pro forma income statement or a Partial Budget.
Partial budgeting allows you to assess the impact on profitability of a small or incremental
change in the business before it is implemented.

A variety of Profitability Ratios (Decision Tool) can be used to assess the financial
health of a business. These ratios, created from the income statement, can be compared with
industry benchmarks. Also, Income Statement Trends (Decision Tool) can be tracked over a
period of years to identify emerging problems.

ACCOUNTING METHODS
Cash Method of Accounting

Traditionally farmers have used the “cash method” of accounting where income and
expenses are reported on the income statement when products are sold or inputs are paid for.
The cash method of accounting, used by most farmers, counts an item as an expense when it is
purchased, not when it is used in the business. This has been used as a method of managing
tax liability from year to year. However, many non-farm business accounting systems count an
item as an expense only when it is actually used in the business activities.
 However, net income can be distorted with the cash method of accounting by selling
more than two years crops in one year, selling feeder livestock purchased in a previous year,
and purchasing production inputs in the year before they are needed.

Accrual Method of Accounting To provide a more accurate picture of profitability, the

accrual method of accounting can be used. With this method, income is reported when
products are produced (not when they are sold) and expenses are reported when inputs are
used (not when they are purchased). Accrual accounting uses the traditional cash method of
accounting during the year but adds or subtracts inventories of farm products and production
inputs on hand at the beginning and ending of the year.

A worksheet for computing Net Farm Income Statement (Decision Tool) with accrual
accounting is available that contains schedules for including beginning and ending
inventories. Information on creating and using a Net Farm Income Statement is also available.
 Although seldom used in farming, Double Entry Accounting (Information File
Understanding Double Entry Accounting) will provide results similar to accrual accounting.
Double entry accounting also updates the net worth statement every time an income or
expense occurs.

DEFINING PROFITABILITY
Profitability can be defined as either accounting profits or economic profits.

Accounting Profits (Net Income) Traditionally, farm profits have been computed by
using “accounting profits”. To understand accounting profits, think of your income tax return.
Your Schedule F provides a listing of your taxable income and deductible expenses. These are
the same items used in calculating accounting profits. However, your tax statement may not
give you an accurate picture of profitability due to IRS rapid depreciation and other factors. To
compute an accurate picture of profitability you may want to use a more accurate measure of
depreciation.

Accounting profits provide you with an intermediate view of the viability of your
business. Although one year of losses may not permanently harm your business, consecutive
years of losses (or net income insufficient to cover living expenditures) may jeopardize the
viability of your business.

ECONOMIC PROFITS
In addition to deducting business expenses, opportunity costs are also deducted when
computing “economic profits”. Opportunity costs relate to your money (net worth), your labor
and your management ability. If you were not farming, you would have your money invested
elsewhere and be employed in a different career. Opportunity cost is the investment returns
given up by not having your money invested elsewhere and wages given up by not working
elsewhere. These are deduced, along with ordinary business expenses, in calculating economic
profit.

Economic profits provide you with a long-term perspective of your business. If you
can consistently generate a higher level of personal income by using your money and labor
elsewhere, you may want to examine whether you want to continue farming.
PROFITABILITY IS NOT CASH FLOW
People often mistakenly believe that a profitable business will not encounter cash flow
problems. Although closely related, profitability and cash flow are different. An income
statement lists income and expenses while the cash flow statement lists cash inflows and cash
outflows. An income statement shows profitability while a cash flow statement shows
liquidity.

Many income items are also cash inflows. The sale of crops and livestock are usually
both income and cash inflows. The timing is also usually the same (cash method of
accounting) as long as a check is received and deposited in your account at the time of the
sale. Many expense items are also cash outflow items. The purchase of livestock feed is both
an expense and a cash outflow item. The timing is also the same (cash method of accounting)
if a check is written at the time of purchase.

However, there are many cash items that are not income and expense items, and vice
versa. For example, the purchase of a tractor is a cash outflow if you pay cash at the time of
purchase as shown in the example in Table 2. If money is borrowed for the purchase using a
term loan, the down payment is a cash outflow at the time of purchase and the annual
principal and interest payments are cash outflows each year as shown in Table 3.

The tractor is a capital asset and has a life of more than one year. It is included as an
expense item in an income statement by the amount it declines in value due to wear and
obsolescence. This is called “depreciation”. The depreciation expense is listed every year. In
the tables below a $70,000 tractor is depreciated over seven years at the rate of $10,000 per
year.

Depreciation calculated for income tax purposes can be used. However, to accurately
calculate net income, a more realistic depreciation amount should be used to approximate the
actual decline in the value of the machine during the year.

In Table 3, where the purchase is financed, the amount of interest paid on the loan is
included as an expense, along with depreciation, because interest is the cost of borrowing
money. However, the principal payments are not an expense but merely a cash transfer
between you and your lender.

OTHER FINANCIAL STATEMENTS

An income statement is only one of several financial statements that can be used to
measure the financial strength of a business. Other common statements include the balance
sheet or net worth statement and the cash flow statement, although there are several other
statements that may be included.

These statements fit together to form a comprehensive financial picture of the

business. The balance sheet or Net Worth Statement shows the solvency of the business at a
specific point in time. Statements are often prepared at the beginning and ending of the
accounting period (i.e. January 1). The statement records the assets of the business and their
value and the liabilities or financial claims against the business (i.e. debts). The amount by
which assets exceed liabilities is the net worth of the business. The net worth reflects the
amount of ownership of the business by the owners.

The Cash Flow Statement is a dynamic statement that records the flow of cash into and
out of the business during the accounting period. A positive (negative) cash flow will increase
(decrease) the working capital of the business. Working capital is defined as the amount of
money used to facilitate business operations. It is calculated as current assets (cash or near
cash assets) less current liabilities (liabilities due during the upcoming accounting period).
 A Complete set of Financial Statements (Decision Tool), including the beginning and
ending net worth statements, the income statement, the cash flow statement, the statement of
owner equity and the financial performance measures is available to do a comprehensive
financial analysis of your business.

To help you assess the financial health of your business, Financial Performance
Measures allows you to give your business a check-up. Interpreting Financial Performance
Measures helps you to understand what these performance measures mean for your business.

MARGIN RATIOS
GROSS PROFIT MARGIN
The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio
looks at how well a company controls the cost of its inventory and the manufacturing of its
products and subsequently pass on the costs to its customers. The larger the gross profit
margin, the better for the company. The calculation is: Gross Profit/Net Sales = ____%. Both
terms of the equation come from the company's income statement.

OPERATING PROFIT MARGIN

Operating profit is also known as EBIT and is found on the company's income
statement. EBIT is earnings before interest and taxes. The operating profit margin looks at
EBIT as a percentage of sales. The operating profit margin ratio is a measure of overall
operating efficiency, incorporating all of the expenses of ordinary, daily business activity. The
calculation is: EBIT/Net Sales = _____%. Both terms of the equation come from the
company's income statement.

NET PROFIT MARGIN

When doing a simple profitability ratio analysis, net profit margin is the most often
margin ratio used. The net profit margin shows how much of each sales dollar shows up as net
income after all expenses are paid. For example, if the net profit margin is 5%, that means that
5 cents of every dollar is profit.
 The net profit margin measures profitability after consideration of all expenses
including taxes, interest, and depreciation. The calculation is: Net Income/Net Sales = _____
%. Both terms of the equation come from the income statement.

CASH FLOW MARGIN

The Cash Flow Margin ratio is an important ratio as it expresses the relationship
between cash generated from operations and sales. The company needs cash to pay dividends,
suppliers, service debt, and invest in new capital assets, so cash is just as important as profit to
a business firm.

The Cash Flow Margin ratio measures the ability of a firm to translate sales into cash.
The calculation is: Cash flow from operating cash flows/Net sales = _____%. The
numerator of the equation comes from the firm's Statement of Cash Flows. The denominator
comes from the Income Statement. The larger the percentage, the better.

RETURNS RATIOS
RETURN ON ASSETS (ALSO CALLED RETURN ON INVESTMENT)
The Return on Assets ratio is an important profitability ratio because it measures the
efficiency with which the company is managing its investment in assets and using them to
generate profit. It measures the amount of profit earned relative to the firm's level of
investment in total assets. The return on assets ratio is related to the asset management
category of financial ratios.

The calculation for the return on assets ratio is: Net Income/Total Assets = _____%. Net
Income is taken from the income statement and total assets is taken from the balance sheet.
The higher the percentage, the better, because that means the company is doing a good job
using its assets to generate sales.

RETURN ON EQUITY
The Return on Equity ratio is perhaps the most important of all the financial ratios to investors
in the company. It measures the return on the money the investors have put into the company.
This is the ratio potential investors look at when deciding whether or not to invest in the
company. The calculation is: Net Income/Stockholder's Equity = _____%. Net income
comes from the income statement and stockholder's equity comes from the balance sheet. In
general, the higher the percentage, the better, with some exceptions, as it shows that the
company is doing a good job using the investors' money.

CASH RETURN ON ASSETS

The cash return on assets ratio is generally used only in more advanced profitability
ratio analysis. It is used as a comparison to return on assets since it is a cash comparison to
this ratio as return on assets is stated on an accrual basis. Cash is required for future
investments. The calculation is: Cash flow from operating activities/Total Assets = _____
%. The numerator is taken from the Statement of Cash Flows and the denominator from the
balance sheet. The higher the percentage, the better.

COMPARATIVE DATA
Financial ratio analysis is only a good method of financial analysis if there is
comparative data available. The ratios should be compared to both historical data for the
company and industry data.

TYING IT ALL TOGETHER - THE DUPONT MODEL

There are so many financial ratios - liquidity ratios, debt or financial leverage ratios,
efficiency or asset management ratios, and profitability ratios - that it is often hard to see the
big picture. You can get bogged down in the detail. One method that business owners can use
to summarize all of the ratios is to use the Dupont Model.

The Dupont Model is able to show a business owner where the component parts of the
Return of Assets (or Return on Investment ratio comes from as well as the Return on Equity
ratio. For example, did ROA come from net profit or asset turnover? Did return on equity
come from net profit, asset turnover, or the business' debt position? The DuPont model is very
helpful to business owners in determining in financial adjustments need to be made.

ADVANTAGES OF RATIO ANALYSIS

 Ratio analysis simplifies the comprehension of financial statement.
 Ratio analysis provides data for inter firm comparison
  Ratio analysis helps in planning forecasting trends in cost, sales, profit and other
related facts are revealed by the past ratios and future events can be forecast on the
basis of such trends.
 Ratio may be used as an instrument of management control particularly in the area of
sales cost.
 A ratio helps in investment decision to make profitable investment.
 Ratios also facilitate the function of communication. It can be easily conveyed
through the ratio as what as happened during the two intervening periods.
 Ratios may also be used as a measure of efficiency.

LIMITATIONS OF RATIO ANALYSIS

 The analyst or the user must have comprehensive knowledge and experience about the
concern whose statements have been used for calculating these ratios only the
dependable conclusions may drawn thus ratios are signified tools only in the hands of
experts in the hands of quacks for whom they may prove dangerous tools.
 Ratios are not an end in themselves but they are a means to achieve a particular end.
Hence it totally depends upon user or analyst as what conclusions is drawn on the basis
of ratios calculated.
 A single ratio in itself is not imported or as limited value because trends are more
significant in the analysis.
 Another limitation is that of standard ratio with which the actual ratios may be
compared generally there is no such ratio, which may be treated as standard for the
purpose of comparison because conditions of one concern differ significantly from
those of another concern.
 The accuracy and correctness of ratios are totally dependent upon the reliability of the
data contained in financial statements on the basis of which ratios are calculated.
 When ratios are used in the comparative study of two concerns there must be
uniformity in the accounting plan used both concerns. Similarly there must be
consistency in the preparation of financial statements and recording these transaction
from year to year with in that concern.
 analyst must be able to examine the nature of the data carefully. If accounting data
lack uniformity particularly definitional uniformity, then ratio calculated on the basis
of them will be misleading.
 Ratios become meaningless if detached from the details, which they are deriving and
in fact, they should be used as supplementary to, and not substitution of the original
absolute figures.
 The utility of ratios is largely dependent upon the method of presentation also.
 [
 Ratios make the comparatives study complicated and misleading on account of
changes in price level.
 CHAPTER - III
INDUSTRY & COMPANY PROFILE
INDUSTRY PROFILE
INTRODUCTION
India is the second largest producer of cement in the world. No wonder, India's cement
industry is a vital part of its economy, providing employment to more than a million people,
directly or indirectly. Ever since it was deregulated in 1982, the Indian cement industry has
attracted huge investments, both from Indian as well as foreign investors.

India has a lot of potential for development in the infrastructure and construction
sector and the cement sector is expected to largely benefit from it. Some of the recent major
initiatives such as development of 98 smart cities are expected to provide a major boost to the
sector.

Expecting such developments in the country and aided by suitable government foreign
policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat have
invested in the country in the recent past. A significant factor which aids the growth of this
sector is the ready availability of the raw materials for making cement, such as limestone and
coal.

Market Size
The housing and real estate sector is the biggest demand driver of cement, accounting
for about 65 per cent of the total consumption in India. The other major consumers of cement
include public infrastructure at 20 per cent and industrial development at 15 per cent.

India’s total cement production capacity is nearly 455 million tonnes, as of 2017-18.
Cement consumption is expected to grow by 4.5 per cent in FY19 supported by pick-up in the
housing segment and higher infrastructure spending. The industry is currently producing 280
MT for meetings its domestic demand and 5 MT for exports requirement.

The Indian cement industry is dominated by a few companies. The top 20 cement
companies account for almost 70 per cent of the total cement production of the country. A total
of 210 large cement plants account for a cumulative installed capacity of over 350 million
tonnes, with 350 small plants accounting for the rest. Of these 210 large cement plants, 77 are
located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.
INVESTMENTS
 On the back of growing demand, due to increased construction and infrastructural
activities, the cement sector in India has seen many investments and developments in
recent times.
 According to data released by the Department of Industrial Policy and Promotion
(DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth
US$ 5.26 billion between April 2000 and June 2018.

Some of the major investments in Indian cement industry are as follows:

 As of August 2018, Vicat Group is planning to invest Rs 1,735 crore (US$ 258.80
million) to expand its cement production capacity in India by 50 per cent to 13 million
tonnes by 2021. The expansion will strengthen its presence in the southern and western
markets of India.
 During 2017-18, Ultratech commissioned a greenfield clinker plant with a capacity of
2.5 MTPA and a cement grinding facility with 1.75 MTPA capacity in Dhar, Madhya
Pradesh. The company is expecting to complete a 1.75 MTPA cement grinding facility
and a 13 MW waste heat recovery system by September 2018 at the same location.
 In May 2018, Ultratech Cement decided to acquire the 13.4 MTPA capacity cement
business of Century Textiles and Industries.
 JK Cement is planning to invest Rs 1,500 crore (US$ 231.7 million) over the next 3 to
4 years to increase its production capacity at its Mangrol plant from 10.5 MTPA to 14
MTPA.

GOVERNMENT INITIATIVES
In order to help the private sector companies thrive in the industry, the government has
been approving their investment schemes. Some such initiatives by the government in the
recent past are as follows:

In Budget 2018-19, Government of India announced setting up of an Affordable

Housing Fund of Rs 25,000 crore (US$ 3.86 billion) under the National Housing Bank (NHB)
which will be utilised for easing credit to homebuyers. The move is expected to boost the
demand of cement from the housing segment.
ROAD AHEAD
The eastern states of India are likely to be the newer and virgin markets for cement
companies and could contribute to their bottom line in future. In the next 10 years, India could
become the main exporter of clinker and gray cement to the Middle East, Africa, and other
developing nations of the world. Cement plants near the ports, for instance the plants in
Gujarat and Visakhapatnam, will have an added advantage for exports and will logistically be
well armed to face stiff competition from cement plants in the interior of the country.

Due to the increasing demand in various sectors such as housing, commercial

construction and industrial construction, cement industry is expected to reach 550-600 Million
Tonnes Per Annum (MTPA) by the year 2025.

A large number of foreign players are also expected to enter the cement sector, owing
to the profit margins and steady demand. In future, domestic cement companies could go for
global listings either through the FCCB route or the GDR route.

With help from the government in terms of friendlier laws, lower taxation, and
increased infrastructure spending, the sector will grow and take India’s economy forward
along with it.
COMPANY PROFILE
UltraTech Cement Ltd. is the largest manufacturer of grey cement, Ready Mix
Concrete (RMC) and white cement in India. It is also one of the leading cement producers
globally. UltraTech as a brand embodies 'strength', 'reliability' and 'innovation'. Together, these
attributes inspire engineers to stretch the limits of their imagination to create homes, buildings
and structures that define the new India.

The company has an installed capacity of 93 Million Tonnes Per Annum (MTPA) of
grey cement. UltraTech Cement has 18 integrated plants, 1 clinkerisation plant, 25 grinding
units and 7 bulk terminals. Its operations span across India, UAE, Bahrain, Bangladesh and
Sri Lanka. UltraTech Cement is also India's largest exporter of cement reaching out to meet
the demand in countries around the Indian Ocean and the Middle East.

In the white cement segment, UltraTech goes to market under the brand name of Birla
White. It has a white cement plant with a capacity of 0.56 MTPA and 2 WallCare putty plants
with a combined capacity of 0.8 MTPA. With 100+ Ready Mix Concrete (RMC) plants in 35
cities, UltraTech is the largest manufacturer of concrete in India. It also has a slew of
speciality concretes that meet specific needs of discerning customers.

Our Building Products business is an innovation hub that offers an array of

scientifically engineered products to cater to new-age constructions. Aerated Autoclaved
Concrete (AAC) blocks are economical, light-weight blocks ideal for high-rise buildings,
while Dry Mix Products include waterproofing, grouting and plastering solutions designed for
faster completion of projects. The retail format of UltraTech Building Solutions offers a wide
range of construction products to the end customers under one roof.

With a significant presence in the grey and white cement, concrete and building
products segments as well as providing 360 degree building solutions, UltraTech is the one-
stop shop for every primary construction need. Its meteoric rise as India’s largest cement
brand reflects on the organisation's focus on cutting edge technology, research and technical
services.
UltraTech Cement provides a range of products that cater to the various aspects of
construction, from foundation to finish. These include:

 Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland
Pozzalana Cement under grey cement
 White cement, WallCare putty and white cement based products under Birla White
 Ready Mix Concrete and a range of specialty concretes with specific functional
properties under UltraTech Concrete
 AAC blocks, waterproofing solutions, grouting solutions and plastering solutions
under UltraTech Building Products

UltraTech’s subsidiaries are Dakshin Cements Limited, Harish Cement Limited, Gotan
Limestone Khauj Udyog Private Limited, Bhagwati Limestone Company Private Limited,
UltraTech Cement Lanka (Pvt.) Ltd., UltraTech Cement Middle East Investments Limited, PT
UltraTech Mining Indonesia and PT UltraTech Investments Indonesia.

UltraTech’s parent company, the Aditya Birla Group, is in the league of Fortune 500
companies. It employs a diverse workforce comprising of 120,000 employees, belonging to 42
different nationalities across 36 countries. The Group has been ranked number 4 in the global
'Top Companies for Leaders' survey and ranked number 1 in Asia Pacific for 2011. 'Top
Companies for Leaders' is the most comprehensive study of organisational leadership in the
world conducted by Aon Hewitt, Fortune Magazine and RBL (a strategic HR and Leadership
Advisory firm). The Group has topped the Nielsen's Corporate Image Monitor three years in a
row -- 2012-13, 2013-14 and 2014-15 as the number 1 corporate, the 'Best in Class'.
BOARD OF DIRECTORS
Mr. Kumar Mangalam Birla
Chairman, UltraTech Cement Limited.
Mr. Kumar Mangalam Birla is the Chairman of UltraTech Cement. He is at the helm of the
US$40 billion multinational Aditya Birla Group, which operates in 36
countries across six continents. Over 53 per cent of its revenues flow
from its operations outside India.
Mr. Birla chairs the Boards of the major Group companies in India and
globally. The global companies include Novelis, Columbian Chemicals,
Aditya Birla Minerals, Aditya Birla Chemicals, Thai Carbon Black, Alexandria Carbon Black,
Domsj Fabriker and Terrace Bay Pulp Mill, among others. In India, Mr. Birla chairs the
Boards of Hindalco, Grasim, Aditya Birla Nuvo, UltraTech, Idea, Aditya Birla Financial
Services and Aditya Birla Retail.
The Group's businesses are spread across a swath of industries. These include aluminium,
copper, cement, textiles (pulp, fibre, yarn, fabric and branded apparel), carbon black,
insulators, natural resources, power, agribusiness, telecommunications, financial services,
retail and trading.
Mrs. Rajashree Birla - Non-Executive Director
Mr. Arun Adhikari - Independent Director
Ms Alka Bharucha - Independent Director
Mr. G. M. Dave - Independent Director
Mrs. Sukanya Kripalu - Independent Director
Mr. S.B. Mathur - Independent Director
Mr. O. P. Puranmalka - Non-Executive Director
Mrs. Renuka Ramnath - Independent Director
Mr. D. D. Rathi - Non-Executive Director
Mr. K. K. Maheshwari - Managing Director
Mr Atul Daga - Whole-time Director &Chief Financial Officer
Milestones
UltraTech's journey began almost three decades ago and throughout this journey, the focus has
always been on providing customers with the best products and services. The resulting success
has only reaffirmed UltraTech's desire to be a complete end-to-end building solutions
provider. Each milestone in this journey is a cherished memory: becoming the largest cement
manufacturer in India, winning the 'SUPERBRAND' and 'POWERBRAND' accolades and
being recognised as a truly global organization, are a few that stand out.

UltraTech's inception can be traced back to the mid-1980s with the establishment of
Grasim's first cement plant at Jawad in Madhya Pradesh. In 2001, with the objective of
increasing its reach, Grasim acquired a stake in L&T Cement Ltd. The stake was further
increased to a majority stake in 2003 thereby giving Grasim a pan-India presence and an
increased market share. In 2004, the demerger of L&T's cement business was completed and
Grasim acquired a controlling stake in L&T Cement Ltd and the name was subsequently
changed to UltraTech Cement. The cement business of Grasim was demerged and vested in
Samruddhi Cement Limited in May 2010, with Samruddhi Cement Limited consequently
being amalgamated with UltraTech Cement Limited in July 2010. In September 2010,
UltraTech Cement Middle East Investments Limited, a wholly owned subsidiary of UltraTech
Cement acquired management control of ETA Star Cement Company, along with its
operations in the UAE, Bahrain and Bangladesh, thereby putting UltraTech on the global map.

The company has an installed capacity of 93 Million Tonnes Per Annum (MTPA) of
grey cement. UltraTech Cement has 18 integrated plants, 1 clinkerisation plant, 25 grinding
units and 7 bulk terminals. Its operations span across India, UAE, Bahrain, Bangladesh and
Sri Lanka. UltraTech Cement is also India's largest exporter of cement reaching out to meet
the demand in countries around the Indian Ocean and the Middle East.

In the white cement segment, UltraTech goes to market under the brand name of Birla
White. It has a white cement plant with a capacity of 0.56 MTPA and 2 WallCare putty plants
with a combined capacity of 0.8 MTPA. With 100+ Ready Mix Concrete (RMC) plants in 35
cities, UltraTech is the largest manufacturer of concrete in India. It also has a slew of
speciality concretes that meet specific needs of discerning customers.
GROWTH STORY

AWARDS
While 'Customer Satisfaction' is an important indicator used at UltraTech to enhance
the company's performance, its pursuit of excellence has been acknowledged across multiple
performance criteria by experts and contemporaries. The company has, over the years, won
numerous awards across categories such as export, quality, safety among others. While these
awards are a great source of pride, yet more importantly, they inspire us to continuously push
the very benchmarks of quality a little higher, everyday.

UltraTech Cement is easily amongst the most unique brand in its category. The
consumer perception of UltraTech is built around the attributes of 'modernity', 'quality' and
'technological superiority'. Based on these defining facts, the brand is positioned as the expert
for all construction needs. UltraTech has been recently bestowed with the title of consumer
validated 'Superbrand' by the Superbrands Council and consumer selected 'Powerbrand' by
Powerbrands India.

A majority of UltraTech's state-of-the-art manufacturing units are accredited with the

highest quality standards and certifications such as ISO 9001 for quality systems, ISO 14001
for environmental management systems and OHSAS 18001 for occupational hazard and
safety management systems.
 UltraTech has pursued excellence in all its areas of operations and has numerous
accolades to its credit. Clients in India and across the world have consistently endorsed
UltraTech's adherence to the highest quality standards. The lists of export awards won by
UltraTech provide ample proof of its uncompromising standards on product quality. UltraTech
has been on the roll call of top exporters of the Chemicals & Allied Export Promotion
Council, year after year. UltraTech has also won the Capexil Certificate of Export Recognition
- Top Exporter - Cement, Clinker, Asbestos and Cement Products for the years 2000, 2002 and
2003.

Exports
 2010 IMC Ramkrishna Bajaj National Quality Award
 2008 Golden Peacock National Quality Award
 2007 Chairman's WCM Silver Award
 2002 Manufacturing Excellence & Competitive Advantage Award
 2001-2002 National Award for Quality Excellence
 2001 Award for Excellence in Consistent TPM Commitment
 1998 IMC Ramkrishna Bajaj National Quality Award
 1997 IMC Ramkrishna Bajaj National Quality Award
 1997 Rajiv Gandhi National Quality Award
 1995 TPM Excellence Award from Japan Institute of Plant Maintenance
 1994-1995 Special Gold Award By The Council of Industry & Trade Development for
Quality
 1994 Delhi Comendation Certificate - Rajiv Gandhi National Quality Award

Businesses
UltraTech Cement Limited is the largest cement company in India and among the
leading producers of cement globally. It is also the country’s largest manufacturer of white
cement and Ready Mix Concrete.

UltraTech provides a range of products that cater to the various aspects of

construction, from foundation to finish. This includes Ordinary Portland Cement, Portland
Blast Furnace Slag Cement, Portland Pozzalana Cement, White Cement, Ready Mix Concrete,
building products and a host of other building solutions. Cement is sold under the brands
‘UltraTech, UltraTech Premium and Birla Super.’ White cement is manufactured under the
brand name of ‘Birla White’, ready mix concretes under the name of ‘UltraTech Concrete’ and
new age building products under the names of ‘Xtralite, Fixoblock, Seal & Dry and
Readiplast’. UltraTech Building Solutions is a retail format that caters to the end consumer
providing a variety of primary construction materials under one roof.

UltraTech Cement has 18 integrated plants, 1 clinkerisation unit, 25 grinding units, 7

bulk terminals, 1 white cement plant, 2 WallCare putty plants and more than 100 RMC plants
– spanning India, UAE, Bahrain, Bangladesh and Sri Lanka. UltraTech Cement is also India's
largest exporter of cement and clinker reaching out to meet demand in countries around the
Indian Ocean, Africa, Europe and the Middle East.

The company's subsidiaries are Dakshin Cements Limited, Harish Cements Limited,
UltraTech Cement Lanka (Pvt.) Ltd and UltraTech Cement Middle East Investments Limited.

UltraTech Cement

UltraTech Cement is the largest manufacturer of grey

cement in India, with a manufacturing capacity of 93
million tonnes per annum. It is the preferred cement
supplier to the most prestigious infrastructural, commercial
and residential projects in India.
UltraTech has a pan India presence with 18 integrated plants, 25 grinding units, 7 bulk
terminals and 4 captive jetties. It also has a significant presence in the Middle East with 2
grinding units and 1 clinkerisation plant the UAE and 1 grinding unit each in Bahrain &
Bangladesh.
UltraTech Concrete

UltraTech is the largest manufacturer of ready-mix-

concrete (RMC) in India, more than 100 RMC plants in 35
cities in the country.

UltraTech Building Products

With land space at a premium, the future of construction
lies in exploring the limitless opportunities in vertical
expansion.

UltraTech Building Solutions

UltraTech realizes that individual home buyers in rural and

semi-urban areas are actively involved in buying construction
material for their homes.

Birla White

Birla White is the largest manufacturer of white cement in

India, with a capacity to produce 0.56 MTPA of white
cement and 0.8 MTPA of WallCare Putty.

LOGISTICS
Over the years, UltraTech has achieved market leadership by providing benchmark
services to customers by adopting customer oriented processes at every stage, right from
planning to delivery.

Through a robust logistics network of 30 plants, 500 plus warehouses and 150 plus
railheads, UltraTech serves 14000 orders per day by using a mix of various logistics modes
including rail, road and sea. These orders originate from 50000 plus dealers, retailers and
institutional customers with lot size varying from of 1 MT to 40 MT. The key to managing
such scale and complexity is the use of robust processes for planning, distribution, network
design, order execution, visibility and optimal resource utilization.

UltraTech has been one of the leaders in the Indian Cement Industry in using
technology to provide real time visibility across all stake holders. From our channel partners
(dealers, institutional customers), service partners (handling and transporting agents, railways)
and even internal functional teams, this visibility enables optimal business decisions on a daily
basis.

With an eye on the future, UltraTech has implemented an RFID based Vehicle
Movement System at one of its plants to monitor real-time, in-plant movement of vehicles,
improve overall safety inside the plant and reduce the overall time taken within the plant for
road loading.

Some Of The Best-In-Class SCM Processes Adopted By Ultratech Include:

 Network optimization
 Computer based order management system with real
time visibility of order status
 Customer service level measurement on real time
basis
 GPS based vehicle tracking system for dedicated fleet
 Automation at secondary service points like railheads
and godowns
 RFID based vehicle movement system to reduce in-plant time of vehicles

Sea Logistics
Sea transport is the most economic mode of transport, especially where plants are situated
near ports. UltraTech is focused on sea mode as it is safe, environment friendly & pollution
free.
UltraTech has its operation on the Indian west coast with the loading terminals situated at
Pipavav and Jafarabad, Gujarat. The supplies goes to Magdalla, JNPT-Mumbai, Ratnagiri,
New Mangalore, Cochin and export to Sri Lanka, Persian Gulf, African continent and Far
Eastern regions.

The state of the art system includes the cargo conveying and handling system as a part of the
cement plant. This captive jetty handles about 5 million tonnes of captive cargoes of cement
and clinker, with more than 80% berth occupancy rate.
 CHAPTER-IV
DATA ANALYSIS
&
INTERPRITATION
PROFITABILITY RATIOS

Profitability ratios measure the company's use of its assets and control of its expenses to
generate an acceptable rate of return

Gross margin, Gross profit margin or Gross Profit Rate

::: OR :::

Operating margin, Operating Income Margin, Operating profit margin or Return

on sales (ROS)

Note: Operating income is the difference between operating revenues and operating
expenses, but it is also sometimes used as a synonym for EBIT and operating profit.
This is true if the firm has no non-operating income. (Earnings before interest and
taxes / Sales)

Profit margin, net margin or net profit margin

Return on equity (ROE)

Return on assets (ROA ratio or Du Pont Ratio)

Return on assets (ROA)

Return on net assets (RONA)

Return on capital (ROC)

Return on capital employed (ROCE)

Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's
Equity
NET PROFIT RATIO:
Net profit \net sales
Table-1
Year Net profit Net sales Net profit ratio
2017-2018 2014.73 22936.17 8.78407333
2016-2017 2144.47 20279.80 10.5744139
2015-2016 2655.43 20174.94 13.1620217
2014-2015 2446.19 18270.69 13.3886022
2013-2014 1404.23 13205.64 10.6335626

Chart-1

Interpretation:
The net profit of the company is in the decreasing position because of the expenses in the
industry are increased the net profit will be in decreasing position in the yare 2014-2018.

OPERATING RATIO:
Operating expenses\Net sales
 Table-2
Year Operating Expenses Net sales Operating ratio
2017-2018 18851.20 22936.17 82.18
2016-2017 16354.92 20279.80 80.64
2015-2016 15617.65 20174.94 77.42
2014-2015 14144.45 18270.69 77.41
2013-2014 10718.55 13205.64 81.16

Chart-2

Interpretation:
The operating ratio is a financial term defined as a company's operating expenses as a
percentage of revenue. This financial ratio is most commonly used for industries which
require a large percentage of revenues to maintain operations in the year 2014-2018.

Profitability = (100-Operating ratio %)

Table-3
Year Operating ratio Profitability(100-OR)
2017-2018 82.18 17.81
2016-2017 80.64 19.36
2015-2016 77.42 22.58
2014-2015 77.41 22.59
2013-2014 81.16 18.84

Chart-3

Interpretation:
Profitability is the primary goal of all business ventures. Without profitability the business will
not survive in the long run. So measuring current and past profitability and projecting future
profitability is very important and it is high in Ultratech cements limited.

RETURN ON INVESTMENT:
Net profit/Total investment
Table-4
Year Net profit Total investment ROI
2017-2018 2014.73 5208.75 0.38
2016-2017 2144.47 5391.67 0.39
2015-2016 2655.43 5108.72 0.51
2014-2015 2446.19 3788.77 0.46
2013-2014 1404.23 3730.32 0.37

Chart-4

Interpretation:
A performance measure used to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments. To calculate ROI, the benefit (return) of an
investment is divided by the cost of the investment has been increased to 2014-2018.

OPERATING MARGIN:

Operating income\Net sales

Table-5

Year Operating income Net sales Operating margin

2017-2018 4566.81 22936.17 19.91
2016-2017 3817.90 20279.80 18.82
2015-2016 4675.48 20174.94 23.17
2014-2015 4105.91 18270.69 22.47
2013-2014 2553.20 13205.64 19.33

Chart-5

Interpretation:

The two basic components for the calculation of operating ratio are operating cost (cost of
goods sold plus operating expenses) and net sales. Operating expenses normally include (a)
administrative and office expenses and (b) selling and distribution expenses. in the year 2016
the net sales has been increased.

RETURN ON ASSETS:
Net income\Average total Assets
Table-6
Year Net income total Assets ROA
2017-2018 2014.73 25369.51 7.94
2016-2017 2144.47 21970.29 9.76
2015-2016 2655.43 19697.50 13.48
2014-2015 2446.19 16667.95 14.67
2013-2014 1404.23 14810.64 9.42

Chart-6
Interpretation:

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as
to how efficient management is at using its assets to generate earnings. Calculated by dividing
a company's annual earnings by its total assets, ROA is displayed as a percentage and it was
not improved in the year 2018.
 CHAPTER-V
FINDINGS
CONCLUSION & SUGGESTIONS

FINDINGS
 The Ultratech cements limited net capital is satisfactory between the years 2017-18
since it shows increasing trend; but after that it is in declining position.
 The current ratio of Ultratech cements limited is satisfactory during the period of
study 2013-14 to 2017-18. It is increased but after that it is declining.
 The average quick ratio of Ultratech cements limited is not good though the quick
ratio is showing maximum value of 1.14 in the year 2017-18 and then it is inclining to
be deal.
 Assets turnover ratio of Ultratech cements limited increased. The company has to
maintain this.
 Turnover ratio of Ultratech cements limited is also increased gradually, without any
fit falls up to 2013-14. But in the year 2014-15 it is declined, and again it has increased
 in the year 2015-16. Good inventory management is good sign for efficient
management
 Total Assets turnover ratio of Ultratech cements limited is not satisfactory because it
is always below one, except in the year 2017-18 having a value of 79.41.
 Return on investment is not satisfactory. This indicates that the company’s funds are
not being utilized in a better way.

CONCLUSION
 The Ultratech cements limited Net Profit Ratio is showing positive profit in the year
2017-18. This event is an expected one because since from the previous two years it is
showing the incline stage in Net Profit Ratio.
 The Gross Profit Margin of Ultratech cements limited increases in decreases due to
the increase in sales
 Profit Margin of Ultratech cements limited is decreasing and showing negative profit
because there is increase in the price of copper
 The Ultratech cements limited Net Profitability Ratio is satisfactory.
 The Ultratech cements limited return on Total Assets ratio shows a negative sign in
the year 2017-18
 The Operating Ratio of Ultratech cements limited increase in the year 2013-14 and
reached in the year 2017-18 So the company has to reduce its operating costs.
  The Operating Ratio of Ultratech cements limited is satisfactory. Due to increase in
cost of production, this ratio is decreasing. So the has to reduce its office
administration expenses

SUGGESTIONS
 Improve position funds should be utilized properly.
 Better Awareness to increase the sales is suggested.
 Cost cut down mechanics can be employed.
 Better production technique can be employed.

 The investment on raw material should be made as per the requirement. Unnecessary
investment may block up the funds.
 Neither too high nor too low inventory turnover ratios may reduce profit and liquidity
position of the industry. So, proper balance should be made to increase profits and to
ensure liquidity.
 The raw material should be acquired from the right source at right quality and at right
cost.
 The process that was being used by Ultratech cements limited with the purchasing
department should undergo changes; so that, it seeks enhance the celerity of the
delivery of a product without compromising its quality by improving the utilization of
materials, labor and equipment.
 BIBLIOGRAPHY
BOOKS

1. Khan, M Y and P K Jain, Financial Management, Tata McGraw-Hill

Publishing Co., New Delhi, 2007.
2. I M Pandey, Essentials of Financial Management, Vikas Publishing House Pvt Ltd,
New Delhi, 1995.
3. Ramesh, S and A Gupta, Venture Capital and the Indian Financial Sector, Oxford
university press, New Delhi, 1995.
4. Anthony, R N and J S Reece, Management Accounting Pincipls, Taraporewala,
Bombay.
5. Jain, P K , Josette peyrard and Surendra S Yadav, International Financial Management,
Macmillan India Ltd, New Delhi, 1998.
6. Prasanna Chandra, financial Management, Tata McGraw-Hill Publishing Co., New
Delhi, 2007.

ANNUAL REPORTS OF ULTRATECH LTD :2014-2018

1. www.ultratech.com
 2. www.damodaram.com
3. www.cementindia.com
4. www.investopedia.com
5. www.valuebasedmanagement.net