final report on india cements

INDIA CEMENTS LTD.

REPORT

COMPANY ANALYSISINDIA CEMENTS LTD.

DAUD AHMED BUKSH (6010020752859)

INDIA CEMENTS LTD.

TABLE OF CONTENTS

1. Preamble......................................................................................................................................................4

2. Background.................................................................................................................................................4

3. Product & Services...................................................................................................................................4

4. Business Model................................................................................................................................................5

4.1 Value Proposition:.............................................................................................................................5

4.2 Target Customer:..............................................................................................................................5

4.3 Distribution Channel:.......................................................................................................................5

4.4 Promotion: Hire Promotion...........................................................................................................5

4.5 Revenue Streams:.............................................................................................................................5

4.6 Core Capabilities:..............................................................................................................................5

4.7 Value Configuration:........................................................................................................................5

4.8 Partner Network:...............................................................................................................................5

4.9 Cost Structure....................................................................................................................................5

5. Business Analysis......................................................................................................................................5

5.1 Competition.........................................................................................................................................5

5.2 Issues & Challenges..................................................................................................................................5

6. Operational Performance...................................................................................................................5

6.1 Sales & sales Growth.......................................................................................................................5

6.2 PBDIT & OPM.....................................................................................................................................5

6.3 Cost Structure....................................................................................................................................5

7. Operational Metrics.................................................................................................................................5

7.1 Gross realization per ton CPLY....................................................................................................5

7.2 Energy cost per ton CPLY..............................................................................................................5

7.3 Capacity utilization CPLY...........................................................................................................................5

7.4 PBDIT per ton CPLY.........................................................................................................................5

6.5 Employee cor per ton.........................................................................................................................5

8. Financial Performance............................................................................................................................5

8.1 PAT vs NPM.........................................................................................................................................5

8.2 ROCE & ROE.......................................................................................................................................5

8.3 DEBT Equity Ratio............................................................................................................................5

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INDIA CEMENTS LTD. 8.4 Cash Flow Analysis...........................................................................................................................5

9. Capital Market Performance...............................................................................................................5

9.1 RSI..........................................................................................................................................................5

10. Recent Strategy.....................................................................................................................................5

10.1 Growth Drivers...................................................................................................................................5

10.2 Value Drivers......................................................................................................................................5

11. Outlook......................................................................................................................................................5

11.1 Economic point of view...................................................................................................................5

11.2 Industry point of view......................................................................................................................5

11.3 Company point of view....................................................................................................................5

12. Steps taken to defend crisis..............................................................................................................5

12.1 Steps taken to cut cost....................................................................................................................5

12.2 Steps taken to increase in revenue............................................................................................5

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INDIA CEMENTS LTD.

1. PreambleDue to the keen interest of the promoter, the Company under has been promoting different sports activities towards contribution to the society. Its cricket franchise “Chennai Super Kings” has won IPL III Trophy in April 2010.In the TNCA Championship, the Co. is one of the active participant. The Co’s wholly owned subsidy (ICLFSL), acquired 60.89% of equity share capital of Indo Zinc Limited (IZL). Its privately placed in March, 2010, 24594000 no. of equity shares at a price of Rs.120.20 per share (including premium of Rs.110.20 per share) to Qualified Institutional Buyers.

2. BackgroundThe India Cements Ltd was established in 1946 it is the largest producer cement in South India. S.N.N. Sankaralinga Iyer & T.S.Narayanaswami are the founding Pillars of the Co. Presently it have seven plants spread over Tamilnadu and Andhra Pradesh .Company As on March 2009 have increased multifold to 9.1 million tons per annum. It's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra.

3. Product & Services

PRODUCTS.

PRODUCT NAME

CATEGORY BRANDS

ORDINARY PORTLAND CEMENT

OPC 53,OPC-43 & OPC-33Grade

CementCoromandel king, Sankar

Sakthi & Rassi Gold

PORTLAND POZZOLONA CEMENT

IS 1489 (PART 1) 1991, Portland Pozzolona Cement- specification (fly

ash based).

IS 1489 (PART 2) 1991, Portland Pozzolona Cement- specification (clay

ash based).

Blended Cement

Coromandel Super Power,Sankar Super

PowerRassi Super Power.

SULPHATE

Sulphate Resisting Portland Cement(SRC)

Sankar SRC

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Promoter22%

Institution43%

Body Corporate12%

Others22%

Depositary1%

Shareholding Pattern

Promoter Institution Body Corporate Others Depositary

SOURCE: BSEINDIA.COM

SOURCE: COMPANY WEBSITE

INDIA CEMENTS LTD. RESISTAN

T CEMENT

4. Business Model

4.1 Value Proposition: The Company value proposition consist of manufacturing varieties of cement like Ordinary Portland Cement, Portland Pozzolona cement & Sulphate resistance cement.OPC is mainly used in RCC works, paving blocks ,tiles building block, runways ,concrete roads etc.Whereas PPC is used in Hydraulic structures, marine structures etc It produces good quality of Cement( brands like- Sankar Super Power, Coromandel Super Power and Raasi Super Power).

4.2 Target Customer:Customer is the pillar of any business. The company main revenue is from Housing, Infrastructure & Commercial Projects .

4.3 Distribution Channel: The Company distributes its product through different channels. The main distribution channel is through dealers. Also through C & F agents, own Government Warehouses. The cement is transported to the dealers/distributors and also to sub dealers who finally sell it to the customers.

4.4 Promotion: Hire PromotionThe Company is doing promotion through Advertisement, Corporate Social Responsibility (CSR),RMC(units),Workshops & Conferences. Besides this customer awareness programmes, mason workshop and educational programmes are also used by the company.

4.5 Revenue Streams: The revenue of the Company is mainly from South India and South Maharashtra up to Mumbai.

4.6 Core Capabilities: The Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra. The Company is the market leader with a market share of 28% in the South. The Company has access to huge limestone resources and plans to expand capacity by de-bottlenecking and optimization of existing plants as well as by acquisitions.

4.7 Value Configuration: The company using cutting edge technologies like cement manufacturing process, mining of limestone, drilling/blasting methods of mining, mining with surface miner, crushing of limestone,prehomogenisation,grinding of raw

materials,homogenization,pyroprocessing. These processes are carried out of its plant to speed up the production & manufacturing process.

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INDIA CEMENTS LTD. 4.8 Partner Network:

The Company in its partner network includes mainly dealers, retailers & renowned business associates. It has a strong distribution network with over 10,000 stockists of whom 25% are dedicated

4.9 Cost Structure

The major cost element of the total cost is energy (28% of the total cost).Followed by transportation & handling which represents (20% ),raw material (15%),staff cost(9% ).

5. Business Analysis

5.1 CompetitionMarket share comparison of different players

Market Structure seems to Oligopolistic Competition. In the industry ACC is the market leader, whereas the five major players like (ACC, Gujarat ambuja, Ultratech, Grasim & India Cements 65 % of total market share.

5.2 Issues & Challenges

Lack of Raw Material:

More limestone & coal is required, which is the main issue.

Lack of Equipment:

Good technology require for manufacturing of cement.

Lack of Skilled Labour:

6

17%

13%

15%12%

8%

35%

Installed Capacity

ACC Gujarat Ambuja Ultratech Grasim India Cements Others

MARCH 2010

Raw materials15%Staff

cost9%

Energy28%

Transportation & handling

20%stock in trade

16%

Interest4%

Depriciation7%

Tax1%

Other11%

Cost Structure as % Sales - March 2010


INDIA CEMENTS LTD. skilled & domain knowledge require for employees for smooth operation of heavy machines.

High Excise Duty:

High export duty is the main problem for exporting of cement.Fluctuation in oil prices: Oil prices effects the cement industry. Regional disequilibrium of demand and supply:

Fluctuation in prices effects demand & supply of cement.

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INDIA CEMENTS LTD.

6. Operational Performance

6.1 Sales & sales GrowthDip in Sales & sales growth

During the quarter ended JFM 2010, company’s sales witnessed dip of -1.64% to Rs 9743 mn compared to Rs 9905 mn in quarter ended JFM 2009. The dip rise was due to dip in realization, low capacity addition& decrease in shipping operations.

6.2 PBDIT & OPMDip in PBDIT & OPM

During the quarter ended JFM 2010, company’s operating witnessed dip of 13.96% to Rs 1360 mn compared to quarter ended JFM 2009. The dip rise was due to increase in fuel cost, increase in raw materials,increase in staff cost, increase in travelling & handling.

6.3 Cost StructureRise of cost components

During the quarter ended JFM 2010, company’s cost structurerise was due to increase in fuel cost, increase in raw materials,increase in staff cost, increase in travelling & handling.Raw Material materials increase of 15.75% to Rs 1380 Mn ,increase high transportation & logistic. Depreciation increase 7.02%(Rs 615 mn),tax increase 1.63% (Rs 142.60 mn) .

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-4.00

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OND 08 JFM 09 AMJ 09 JAS 09 OND 09 JFM 10

%

Rs

Mn

Sales and Sales Growth

Net Sales(LHS) Growth (RHS)


Source: bseindia.com

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Operating Profit & OPM

PBDIT OPM

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jfm09 jfm10

Cost Structure as % of Sales

Tax Depriciation Interest Other Tran & handling Energy Staff cost Raw materials

SOURCE : BSEINDIA.COM

INDIA CEMENTS LTD.

7. Operational Metrics

7.1 Gross realization per ton CPLYIncrease in realization per ton

During the quarter ended JFM 2009 realization per ton increase to Rs 4354 per ton compared to Rs 4252 per ton in JFM 2008,this is mainly due to recession in 2008-09 (high inflation & low GDP).And also company’s net sales increase from Rs 35954 mn in March 2009 to Rs 39545 mn .

7.2 Energy cost per ton CPLYEnergy cost rise due to production

During the quarter ended JFM 2009 energy per ton increase to Rs 3919.12 per ton compared to Rs 3003.22 per ton in JFM 2008,this is mainly due to consumption of raw material increased to Rs 3699mn in March 2010 compared to Rs 3129 mn in March 2009,alsonew power plants started ,so company’s efficiency increased

7.3 Capacity utilization CPLY

During the quarter ended JFM 2009 capacity utilization decrease to 70.35% from 104.81 % due to slowdown indemand, high opearating cost, for that company not able to expandit plant & also seasonal fluctuation of price.

7.4 PBDIT per ton CPLYPBDIT dip due high operating cost

During the quarter ended JFM 2009 PBDIT per ton decrease to Rs 597.46 per ton compared to Rs 999.56 per ton in

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0

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120

JFM 08 JFM 09

%

Capacity Utilization

SOURCE: COMPANY REPORTS

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JFM 08 JFM 09

Rs p

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Energy Cost per tonne


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JFM 08 JFM 09

Rs p

er to

n

Trend of PBDIT per ton


4200

4220

4240

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4320

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4360

4380

JFM 08 JFM 09

Rs

pe

r to

nn

e

Realization per ton


INDIA CEMENTS LTD. JFM 2008, mainly due to increase of operating expenses fromto RS 7606 mn to Rs 8383 mn & also co’s profit efficiency decreased.

6.5 Employee cost per tonEmployee productivity low due to dip in realization.

During the quarter ended JFM 2009 Employee productivity decrease to Rs 225 compared to Rs 269.56 per ton in JFM 2008, mainly due to increase of operating expenses & production from to RS 7606 mn to Rs 8383 mn & also co’s profit efficiency decreased.

8. Financial Performance

8.1 PAT & PAT GrowthGrowth rate of PAT is in downward trend

During the quarter ended JFM 2010, overall company’s PAT & NPM came to Rs 383.20 mn & 3.93 % compared to JFM 09. The low margins was on account of low operating profit margin, high operating expenses, low growth in other income, higher depreciation & taxes.

8.2 ROCE & ROEROE & ROCE both are falling

During the last three years ending March 2009-10, overall company’s ROE & ROCE dip to 11.98% & 10.65 %.This showed that companyare more depend on external financing & converting debts into FCCB .Due to dip in realization sales decrease and for that profit also decrease.

8.3 DEBT Equity RatioDebt Equity ratio is normal in last two years

During the last three years ending March 2009-10, overall company’s

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PAT and PAT growth rate

PAT NPM (RHS)


0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

2007-08 2008-09 2009-10

%

Trend of ROE & ROCE

ROE

ROCE

Source : COMPANY REPORTS

00.10.20.30.40.50.60.70.80.9

1

2007-08 2008-09 2009-10

Trend of D/E ratio


200

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280

JFM 08 JFM 09

Prod

uctio

n/Em

ploy

ees

Employee Production


INDIA CEMENTS LTD. debt equity ratio remain same to some extent for last two years which shows company issuing more FPO,converting debt into FCCB.

8.4 Cash Flow Analysis Cash is spent on Financing Activities

During the quarter ended JFM 10, in company’s cash flow statementCash from operating activities (mainly-depreciation & interest expense) holds 40% ,while cash from investing activities(purchase Fixed Assets)& cash from financing activities (took long term borrowings-mainly). Company is spending more on operating activities compared to last year JFM 09.

9. Capital Market Performance

9.1 RSINegatively correlated with sensex.

During the last year 2009-10 share price of the company not in constant trend with the sensex. This shoes company’s share is negatively correlated. The reduction in share price due to increase in cost, dip in capacity utilization, shipping & also due to Government Regulations.

10. Recent Strategy

10.1 Growth Drivers

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1-Jun

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10-Ju

n-0

919

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920

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0929

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097-

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927

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99-

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930

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910

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Apr

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19-A

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028

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018

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ay-1

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Relative Strenght Index of Stock Price & Sensex

Close Price sensex


-15000

-10000

-5000

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OPERATION INVESTMENT FINANCE

Rs m

n

Cash Flow Operation

JFM 09 JFM 08

Source: Company reports

INDIA CEMENTS LTD. The Company have a decent growth of 11.4 per cent in May 2010 Capacity addition is carried out at Parli facility in Maharashtra Due to the rise in demand from infrastructure projects ahead of the monsoon, and

a fall in prices have rise cement sales in May 2010

10.2 Value Drivers

Policies:-

The price of Cement have been fluctuating over the past year,and since price of not Uniform ,different prices are charged per bag around the country.

Prices of Raw Materials:

Limestone prices had risen because of royalty based pricing which will increase cement price in future.

Government Regulations:-

Due to government regulations the problem of increasing fuel costs as new units do not get coal linkages .

Capacity Addition:-

The expectation of a slow in pace of projects being done by some companies may also hold prices firm. Capacity addition over the last two years has fallen short of estimates as big names such as UltraTech, ACC, Grasim, JP Associates and JK Lakshmi Cement have seen delays in their projects.

The company continues to emphasize on cost cutting through enhanced productivity, reduction in energy costs and logistics expenses.

Importance is given for improving the efficiency in the operating parameters and for enhancement of blended cement production in the overall mix.

To operate with optimum man power, a fairly large reduction in man power through voluntary retirement scheme (VRS) and training of priority employees has been made by the company.

The up-gradation schemes taken on hand by the company to enhance the capacity referred to earlier, will also simultaneously result in savings in power and fuel cost with the completion of these projects in addition to protecting the market share of the company

The Company has somewhat taken care of volatile fuel cost by having acquisitions in shipping.

To restructure the financial position of the company various steps/measures have been taken through equity infusion and debt reduction.

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INDIA CEMENTS LTD.

11. Outlook

11.1 Economic point of viewThe GDP for the quarter ended March 2010 was Rs 5868331 crs,of which manufacturing industry contributes Rs 931101 crs.The performance of the Indian Economy in 2009-10 continued to be good with GDP growth at 7.4% despite rise in crude oil prices and financial turbulence. The reasons are, the flow of substantial capital investment, the fairly satisfactory performance of the industrial sector which recorded a growth of 8.5% and the rapid development of the services sector which grew at 10.8% during the year.

11.2 Industry point of view

The cement industry in India has been enjoying its best period with a healthy growth in demand in the past two years. The industry has been operating at its near full capacity during this period. The cement prices have been fluctuating throughout the year with this firm demand position.

11.3 Company point of viewThe company has achieved its best ever performance both in terms of operational and financial parameters in the 62 years history of the company. The Company for the year ended 31st March 2010 had not showed good result due to low demand in growth in South during the year. The company PAT is Rs 35.43 mn as against Rs 43.21 in the previous year.The gross turnover of the company for the year was at Rs 422.16 mn compared to last year Rs 395.45 mn which rose by 6.8%. The clinker production for the year 2009-10 of the company was at 8.68 mn tons growth of 24% & cement production was at 10.49 mn tone while the sale was at 10.50 mn tone compared to last year was 9.11 mn ton. The company’s sustained efforts towards cost reduction have mitigated the impact of the cost increases.

12. Steps taken to defend crisis

12.1 Steps taken to cut cost

12.2 Steps taken to increase in revenue____________________________________________THANK YOU______________________________________

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SOURCE : PRESS REALESE