Summer Training project Report

PROJECT REPORTFOR THE PARTIAL FULLFILLMENT OF THE

REQUIREMENT FOR

MASTER OF BUSINESS ADMINISTRATIONON

“Working Capital Management and its Appraisal”

IN

Birla Corporation Limited

Submitted to:- Submitted by:-Mr. Ajay Gangwal Umesh Soni(V.P., Finance) M.B.A-Part III

A.I.M.S.,Jaipur

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INDEX

S.N PARTICULARS PAGE NO.1 ACKNOWLEDGEMENT 12 EXECUTIVE SUMMARY 23 INDUSTRY PROFILE-CEMENT IONDUSTRY 34 PROCESS 65 TOP TEN CEMENT PLAYER 86 VARIOUS CHARTS ANALYSIS 097 GOVERNMENT ACTIOJNS & IMPACT ON INDUSTRY 118 PEER GROUPS COMPARISON 129 COMPANY PROFILE 1310 COMPANY LOGO 1411 EXPORT ACTIVITIES 1512 LOCATION AND CAPACITY OF CEMENT PLANTS 1513 MANAGEMENT 1714 MISSION & VISION 1815 OBJECTIVE & OBLIGATION 1916 SHAREHOLDING PATTERN 2017 CORPORATE SOCIAL RESPONSIBILITY 2118 AWARDS & ACHIEVEMENTS 2319 RAW MATERIAL FOR CEMENT 2520 PLANTS OF BIRLA & FINANCIAL PERFORMANCE 3021 SWOT ANALYSIS 3322 INTRODUCTION OF WORKING CAPITAL 3523 TYPES OF WORKING CAPITAL 3824 SIGNIFICANCE OF WORKING CAPITAL 3925 WORKING CAPITAL RATIO 4026 SATEMENT SHOWING CAHANGE IN W.C. 4127 CALCULATION OF WORKING CAPITAL 4228 VARIOUS COMPONENETS OF WORKING CAPITAL 4329 WORKING CAPITAL RATIOS & ANALYSIS 5030 FUND FLOW & CASH FLOW STATEMENTS 5731 CONCLUSIONS 5832 MAJOR FINDINGS 5932 BIBLIOGRAPHY & WEBLIOGRAPHY 60

ACKNOWLEDGEMENT

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Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped me in completing this summer project to the best of my ability. Being a part of this project has certainly been a unique and a very productive experience on my part.

I am really thankful to Mr. Ajay Gangwal, Vice President (Finance & Accounts) for making all kinds of arrangements to carry the project successfully and for guiding and helping me to solve all kinds of quarries regarding the project work. His systematic way of working and incomparable guidance has inspired the pace of the project to a great extent.

I would also like to thank my mentor and project – coordinator, Mr. Kamal Kishor Tosawar, Asstt. Manager, (Finance & Accounts) for assigning me a project of such a great learning experience and acquainting me with real life project financing and appraisal.

I am very grateful to Mr. Malhotra (Training & Placement Officer) of APEX INSTITUTE OF MANAGEMENT & SCIENCE, Jaipur. Who has given me the opportunity to do this project in the Birla Corporation Ltd. and very thankful to all lecturers of A.I.M.S. , Jaipur for their useful guidance and advise. This project would not have been successful without the help of Mr. B.R.Nahar (Executive Director & CEO) of BCL and Mr.S.L.Dugar (Chairman) of R.D.Industries.

Last but not least I would like to thank all the employees of Birla Corporation Ltd. who have directly or indirectly helped me with their moral support for the completion of my project.

(UMESH SONI)

EXECUTIVE SUMMARY

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Founded in 1919 by the visionary industrialist, Shri G.D. Birla, at the outskirts of the then Kolkata. Birla Manufacturing Company Ltd was the first company of Birla industrial conglomerate. Under the stewardship of his nephew, Shri M.P.Birla, the company diversified and expanded its business interest beyond cement, jute, PVC goods, steel casting and auto trims. Birla Corporation limited is the flagship company of M.P.Birla group. It has variety in its basket. The core business of Birla Corporation limited is cement, generating 93% of the revenue for the company, 6% jute and 1% from other sectors.

The project entitled “Working Capital Management and its Appraisal in BCL” deals in this segment. The term of study was kept limited to make the title true. The purpose of the report is to get the in depth understanding of the process of working capital management. With the growing Indian economy and the government policies for infrastructure the demand for cement is increasing and seeing this as an opportunity is under taking many new projects for expansion of the production which are under implementation for increasing the capacity of the plants. Working capital has been analyzed in two ways – overall study of the working capital of Birla Corporation Ltd and secondly, plant-wise working capital of Birla Corporation, since the company has seven plants in different region and each plant has its own working capital.

Borrowings are an important ingredient of funding a business entity. The lenders must feel comfortable with their clients and Birla Corporation enjoys this position among their lenders. Borrowing is done for working capital requirement i.e., to meet the day to day requirement for smooth functioning of the production, and term loans for projects of capacity expansion. Major portion of the borrowing is done from banks at better rate of interest.

The performance of the cement division of the company during the year was satisfactory. The production of cement during the year was 52.28 lack tones, compared to production of 5.26 million tones; the highest ever.The Satna unit produced 20.20 lacks tones of clinker during the year. The cement production at Satna and Raebareli was lower at 21.55 lacs tones as compared to 21.87 lack tones during the previous year. The cement dispatches of Satna and Raebareli units where 21.44 lack tones as compared to 21.89 lack tones during last year.

The production of Portland Pozzolana cement (PPC) at Satna, however, recorded on all time high level of 11.77 lack tones as against the previous best of 11.61 lack tones. Jute division of the company produced 37990MT of jute goods during the year as compared to 29289MT in the previous year. During the year the company has total 7 plants with annual capacity of 10 million tones.

The Company has posted yet another impressive for the 2007-08 results, which has surpassed all respective previous levels. It has shown substantial growth in turnover, cash profit, profit before tax and profit after tax. The total turnover of company has registered a growth of 11.27% whereas operating profits for the year where higher by 18.03% mainly on account of increase in the volume of blended cement in the overall cement sales, higher realisation and effective cost control measures taken by the company.

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The profit before tax was up by 19.37% at Rs.551.18 crores as against Rs.461.74 crores in the previous year. The profit after tax is 393.58 crores as against Rs. 326.23 crores in the previous year. EPS was 51.11 as against 47.51 in the previous year.

The cash earnings of the company improved substantially to Rs.501.39 crores as against Rs.178.25 crores in the last financial year. With increase in capacity on account of expansion projects being undertaken by the company, it is expected that the Company would be in a position to maintain the growth in future years. Company has recommended a dividend of Rs 4.00 per share (40%) on 7, 70, 05,347 ordinary share compared 3.50 per share (35%) last year.

The objective of this project work is to focus on the working capital of the Birla Corporation and exploring its potential in the company. The project contain the basic postulates of working capital, procedure of analysis of working capital, ratio being used to define the working capital and the impact of working capital in the company in case of excess or inadequacy. Also, the project contains analysis of estimation of working capital requirement and the procedure to estimate working capital requirement in manufacturing and trading concern. and from the data available it can be concluded that it holds a very strong position in the market.

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Cement Industry:-

Cement industry is one of the important industries to country development in the light of the main important basis for construction industry and also the important indicator showing domestic economic growth. In the past, the domestic demand of cement used to be up to 36 million tons. But, the severely negative effects from economic crisis in 1997 have caused real estate and construction industry subdued; the domestic demand of cement has shrunk and been in oversupply atmosphere.

Until 2001–2003, the government has launched many economic actuating policies. This has made real estate and construction industry recovered and the demand of cement has been increasing gradually from 21 million tons in 2001 to 25 million tons and 26.82 million tons in 2002 and 2003 respectively; and the price level is higher in line with increased production cost.

Cement Industry originated in India when the first plant commenced production in 1914 at Porbandar, Gujarat. The industry has since been growing at a steady pace, but in the initial stage, particularly during the period before Independence, the growth had been very slow. Since indigenous production was not sufficient to meet the entire domestic demand, the Government had to control its price and distribution statutorily. Large quantities of cement had to be imported for meeting the deficit. The industry was partially decontrolled in 1982 and this gave impetus to its pace of growth. Installed capacity increased to more than double from 27 million tones in 1980-81 to 62 million tones in 1989-90.

The cement industry responded positively to liberalization policy and the Government decontrolled the industry fully on 1st March 1989. From 1991 onwards cement industry got the status of a priority industry in schedule III of the industry policy statement, which made it eligible for automatic approval for foreign investment up to 51% and also for technical collaboration on normal terms of payment of royalty.

After the globalization and liberalization of Indian economy, the cement industry has been growing rapidly at an average rate of 9 per cent. The country is now the second largest producer of cement in the world next only to China with a total capacity of 188.97 million tones. Additionally, in the last two decades, the industry has undergone rapid technological up gradation and growth, and now, some of the cement plants in India are comparable to the world’s best operating plants in all respects.

Till a few years ago India was importing cement from other countries, as the production could not meet the demand for the whole country. Now the tables have turned as India has started exporting large quantities of cement and clinker to Bangladesh, Nepal, Sri Lanka, Maldives, Mauritius, Africa, Seychelles, Burma, UAE, and Singapore etc.

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India is today the second largest producer of cement in world with an installed capacity of close to 188.97 million tones per year. 95 % is consumed domestically and only 5% is exported. Demand is growing at more than 10 % per annum. More than 90 % of production comes from large cement plants. There are a total of 130 large and more than 350 small cement manufacturing units in the country. More than 80% of the cement-manufacturing units use modern environment friendly “dry” process.

Today total number of cement companies in Indian market are 47,having number of cement plants 139, the installed capacity of large plants is 188.97 million tones and cement production during 2007-2008 was 168.31 million tones

The forms of cement produced: -

Ordinary Portland Cement ( OPC )

Portland Pozzolana Cement ( PPC )

Portland Slag Cement ( PSC )

Major players in Indian cement sector:-

ACC Lafarge Gujarat Ambuja Cement Ultratech Cement India Cements Century Cements Jaypee Group Madras Cements Birla Corporation Limited

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How is Portland cement manufactured?

There are mainly two processes viz. “Wet process” & the “Dry process”. In “Wet process” the mixing & grinding of raw material is done in wet condition. In “Dry process” the mixing & grinding of raw material is done in dry condition. There is also a “Semi-dry process” in which raw materials are ground dry and then mixed with 10-14% of water and then further burnt to clinkering temperature.The processes of manufacture can also be categorized as   "Traditional Process of Manufacture"

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Cement Industry - INDIA

Overview

1. Indian cement industry dates back to 1914 - first unit was set-up at Porbandar with a capacity of 1000 tones 2. Currently India is ranked second in the world with an installed capacity of 188.97 million tones. 3. Current per capita consumption - 85 kgs. as against world standard of 256 kgs 4. 55 - 60% of the cost of production are government controlled 5. Continuous Growth approximately 1.3 times of the country’s GDP.6. Construction is the biggest industry after agriculture in India. It is a industry worth Rs.300 Thousand Crores.7. During 2007-2008 cement demand grew 8%,with a firmly country wide rise in prices.

Transportation :-

Transportation costs high - freight accounts for 17% of the production cost Road preferred mode for transportation for distances less than 250kms. 

However, industry is heavily dependant on roads as the railway infrastructure is not adequate - shortage of wagons.

Overview of the performance of the Cement Sector :- The Indian cement Industry not only ranks second in the production of cement in the world but also produces quality cement, which meets global standards. However, the industry faces a number of constraints in terms of high cost of power, high railway tariff; high incidence of state and central levies and duties; lack of private and public investment in infrastructure projects; poor quality coal and inadequate growth of related infrastructure like sea and rail transport, ports and bulk terminals. In order to utilize excess capacity available with the cement industry, the government has identified the following thrust areas for increasing demand for cement: 

Housing development programmes; Promotion of concrete highways and roads; Use of ready-mix concrete in large infrastructure projects; and Construction of concrete roads in rural areas under Prime Ministers Gram Sadak Yojana.

The types of cement in India have increased over the years with the advancement in research, development, and technology. The Indian cement industry is witnessing a boom as a result of which the production of different kinds of cement in India has also increased.

By a fair estimate, there are around 11 different types of cement that are being produced in India. The production of all these cement varieties is according to the specifications of the cement.

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Some of the various types of cement produced in India are:

Clinker Cement Ordinary Portland Cement Portland Blast Furnace Slag Cement Portland Pozzolana Cement Rapid Hardening Portland Cement Oil Well Cement White Cement Sulphate Resisting Portland Cement

In India, the different types of cement are manufactured using dry, semi-dry, and wet processes. In the production of Clinker Cement, a lot of energy is required. It is produced by using materials such as limestone, iron oxides, aluminum, and silicon oxides. Among the different kinds of cement produced in India, Portland Pozzolana Cement, Ordinary Portland Cement, and Portland Blast Furnace Slag Cement are the most important because they account for around 99% of the total cement production in India.

CAPACITYWISE TOP TEN PLAYERS FOR YEAR 2007-2008 ( figures in Mn.Tones)

COMAPNY CAPACITY

HOLCIM / ACC / AMBUJA 38.21

GRASIM / ULTRA TECH CEMENT 36.25

JAYPEE GROUP. 9.93

THE INDIAN CEMENTS LTD. 9.64

SHREE CEMENT 9.10

CENTURY TEXTILES & INDUSTRIES LTD. 7.80

BIRLA CORPORATION LTD. 5.78

MADRAS CEMENTS LTD. 5.47

LAFARGE INDIA PRIVATE LTD. 5.15

JK CEMENT 4.30

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Production & Consumption Trend in Cement:-

GDP versus cement demand growth:-

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All-India average cement price trend

Utilization versus cement prices:-

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Government intervention impacts sentiment

Calendar of events (since January ’07)

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The recent Government action to ban exports of cement and clinker is not likely to have any major impact on domestic prices as only 3.6% of total cement production is exported. However, pricing upside may be capped in coastal Gujarat and Maharashtra. Rising inflation had forced the Indian Government to play a proactive role in fixation of prices for the cement sector. As a result, the Government had announced a flurry of steps during recent months leading to the fury of the cement manufacturers around the country.

In January, the import duty was reduced to zero from 12.5%, and in April, the countervailing duty and additional customs duty on imported cement was reduced to nil. This posed threat of imports at prices lower than the local prices, but imported cement has certain entry barriers like high freight, infrastructure bottlenecks, plus cement industry is highly localised, bulky and have just 45 days shelf life.

Peer Group Comparison : 

Particulars (Rs.in crore)

Company Name SalesSalesGrowth% ROCE% APATM% Div Yld% P/E EPS Mkt Cap

1 ACC 6396.43 72.88 41.28 17.15 1.86 11.93 67.72 15156.75

2 UltraTech Cem. 5484.35 44.89 42.96 14.26 0.45 11.64 76.82 11126.92

3 Birla Corp. 1792.84 25.24 60.68 18.2 1.56 4.24 53.01 1732.73

4 Shree Cement 1613.14 95.74 19.62 10.97 0.48 16.12 77.75 4367.37

5 J K Cem Ltd 1529.67 37.97 32.36 11.68 2.07 4.43 38.15 1182.17

 

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Company Profile:-

History of the company

The company was founded by Late Shri G.D.Birla and was incorporated on 25 th August 1919, in the name and style of The Birla Jute Manufacturing Company Limited. A man of vision and enterprise, he set up the first Indian –Owned Jute Mill near Kolkata which marked not only the birth of the company but also the beginning of the Birla Industrial Group in India. The company grew steadily under his guidance in the earlier years. Thereafter Shri M.P.Birla took over the reins of the company and he helped transform it from a jute mill to a leading multi-product, multi-location corporate with widespread activities.

Today, the product range includes cement, jute goods, vinoleum floor covering, auto trims and steel castings. After the demise of Shri M.P.Birla in 1990, Smt.Priyamvada Birla took over as the Chairman of the company and under her Chairmanship; company crossed the Rs.1,000 cores plus turnover mark. After the demise of Smt.Priyamvada Birla on 3rd July 2004, Shri R.S.lodha took over as the chairman of the company and under his Chairmanship, company has attained new heights. The name of the company was changed to Birla Corporation Limited with effect from 27th October, 1988 to establish the size, image and conglomerate character of the company.

Credit Rating of the Company

Credit Analysis and Research Limited ( CARE ) has assigned “CARE AA” rating for the company long and medium term facilities of more than one year tenure and PR 1 + ( PR one plus ) rating for short term bank facilities , aggregating Rs.500 crores. Further , the rating Committee of CARE has re-affirmed PR 1 + rating and CARE AA rating for short term debt and the proposed long term borrowing programme of the company.

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Late Shri M.P.Birla Late Smt. Priyamvada Birla

Birla Corporation Limited is a multi- product conglomerate.

It plays significant roles in the Cement, Jute, PVC floor Covering, Auto Trim and Steel casting industries.

The concentric around the triangle represents this very multi-dimensional nature. The apex of the triangle is a visual representation of the force that drives the entire

corporation – the unifying force in search of excellence. The circle represents the inspiration to explore new frontiers of growth.

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Division Wise Export Turnover Rs in crore

Particular 2007- 08 % 2006- 07 %Cement 35.23 45.45 10.80 21.27

Jute 41.71 53.83 39.26 77.31Other 0.57 0.72 0.72 1.42Total 77.51 100.00 50.78 100.00

CEMENT DIVISION:-

Cement is the primary product of the company and accounts for around 90% of the turnover of the company. The company has seven cement plants at four locations, namely, Satna Cement Works ( SCW ) and Birla Vikas Cement ( BVC ) at Satna (Madhya Pradesh ), Chanderia Cement Works ( CCW ) and Birla Cement Works ( BCW ) at Chanderia ( Rajasthan ), Durgapur Cement Works ( DCW ) and Durga Hitech Cement ( DHC ) at Durgapur ( West Bengal ) and Cement Grinding Unit at Raebareli (Uttar Pradesh). The present installed capacity of cement is 58.80 lac metric tones per annum. Location wise details are given hereunder:-

Location Of Cement Plants in India:-

STATE TOWN UNITS

Madhya Pradesh Satna Satna Cement WorksBirla Vikas Cement

Rajasthan Chanderia Birla Cement WorksChanderia Cement Works

West Bengal Durgapur Durgapur Cement WorksDurga Hitech Cement

Uttar Pradesh Raebareli Raebareli Grinding unit

CAPACITY: 5.78 Mill. Ts.

STATE TOWN UNITS CAPACITY Mill. Ts

M.P. Satna 1.55

Rajasthan Chanderia 2.00

West Bengal Durgapur 1.60

Uttar Pradesh Raebareli 0.63

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JUTE DIVISION

The company’s jute division has two jute units, one at Birlapur, Budge Budge and the other at Narkeldanga, Kolkata. The combined installed capacity of jute unit is 14,000 spindles in the fine side and 2,160 spindles in the coarse side. The company has a wide market for its products both in local and international market. Almost 45% of its products are exported to various European countries, USA , Japan and middle East. Value added product such Lino Hessian, carpet backing, specialty fabrics, matting, continues to be in high demand. For hydrocarbon free bags, the foreign market popularly refers the company’s bags as “Birla Safe Bags “. The products are highly rated in the industry by way of quality and are classified as premium quality.

AUTO TRIM DIVISION

Auto Trim Division was established in the year 1995 . The production for the year was 139173 pcs.as compared to 233379 pcs .in the previous year. The unit are located at Birlapur ( West Bengal ), Gurgaon ( Haryana ), and Chakan near Pune ( Maharastra ). The division has also obtained One-Step Technology from Italy Utilizing energy efficient recyclable polypropylene wood material. The major customers are Maruti Udyog Ltd., Hindustan Motors and Mahindra & Mahindra Ltd.

VINOLEUM DIVISION

The Vinoleum division was established in the year 1989. The production for the year was 5.08 lac sq. mtrs..as compared to 5.26 lac sq. mtrs. in the previous year. The products are marked under the brand name “ Birla Vinoleum “ and PVC floor covering for institutional application is marked in the brand name of “ Super Corporate “.

STEEL CASTING

The company also has a facility for manufacture of steel castings at Satna with an installed capacity of 3,750 tones of iron and steel castings. The production for the year was 1235 tones as compared to 1301 tones in the previous year.

Subsidiary Company : Birla Jute Supply Company Limited: Talavadi Cements Limited: Lok Cements Limited: Budge Budge Floor Covering Limited

(Earlier DLW Limited)

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MANAGEMENT

The day- to- day management of the company is being looked after by the Chief Executive Officer, Shri B.R.Nahar who is assisted by a team of highly qualified professional persons.

Chairman

Shri R.S. Lodha

ED & CEO

Shri B.R.Nahar

Board of Directors

Shri N.K. Kejriwal Smt Nandini Nopany

Shri Harsh V. Lodha

Shri Pracheta Majumdar

Shri Vikram Swarup

Shri Anand Bordia

Shri B.B. Tandon

Shri D.N.Ghosh

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MISSION & VISION

Mission:

To achieve international standards of excellence in all aspect of division and diversified business with focus on customer delight through value of product, Services, cost and reduction.

To maximize creation for wealth and satisfaction for the stakeholder.

To foster a culture of participation and innovation of employee growth and contribution.

To cultivate high standards of business ethics and total Quality Management.

To provide technology and service through sustained research and development.

To attain leadership in developing, adopting and assimilating state-of-art technology for competitive advantage.

Offered full opportunities and challenges to develop individually enabling career growth.

Encouraged to acquire knowledge to meet the challenges of new technologies and business needs in the changing scenario.

Educated and guided to inculcate and practise right values as are nurtured by the organization.

Vision:

A major diversified, transnational, integrated company with leadership and a strong environment conscience playing a national role in cement, Jute, Auto trim, Venolium and public distribution.

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OBJECTIVES & OBLIGATIONS

Objectives:

To serve the national interests in the Product and related sectors in accordance and consistent with Government policies.

To earn a reasonable ate of on interest.

To maximize utilization of the existing facilities in order to improve efficiency and increase productivity.

To work towards the achievement of self-sufficiency in the field of cement market by setting up adequate capacity and to build up expertise in lying of crude.

To further enhance distribution network for providing assured service to customers throughout the country through expansion of reseller network as per Marketing Plan/ Government approval.

Obligations:

Towards Customers and Dealers: To provide prompt, courteous and efficient service and quality products at fair and reasonable prices.

Towards Suppliers: To ensue prompt dealings with integrity, impartiality and courtesy and promote ancillary industries.

Towards Employees: Develop their capability and advancement through appropriate training and carrier planning.

Towards Community: To develop techno-economically viable and environment friendly products for the benefit of the people.

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SHAREHOLDING PATTERN

The shareholding pattern of the company as on 31st March, 2007 is as under:

SI.NO DESCRIPTION %

I Promoters, Associates & Directors 62.90 II Mutual Funds & UTI 6.30

III Banks, Financial Institution & Insurance Companies 7.85

IV Foreign Institutional Investor 8.54

V Private Corporate Bodies 5.26

VI Indian Public 8.57

VII NRIs & OBCs 0.58

TOTAL

100.00

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Corporate Social Responsibilities:-

Educational Activities:-

South Point School, Kolkata, West Bengal

M.P. Birla Foundation Higher Secondary School, Kolkata, West Bengal

M.P. Birla Shiksha Bhawan, Allahabad, Uttar Pradesh

M.P. Birla Industrial Training Institute, Rewa, Madhya Pradesh

Birlapur Vidyalaya, West Bengal

Birla Vikas Vidyalaya, Satna, Madhya Pradesh

School at Chittorgarh, Rajasthan

Sarada Kanya Vidyapith, Barrackpore, West Bengal

M.P. Birla Foundation Veda Sanskrit Pathshala, Bangalore, Karnataka

Medical Activities :-

Bombay Hospital, Mumbai, Maharashtra

Belle Vue Clinic, Kolkata, West Bengal

M.P. Birla Medical Research Centre at Birlapur, West Bengal and Satna, Madhya Pradesh

Birla Vikas Hospital, Satna, Madhya Pradesh

Birlapur Hospital, Birlapur, West Bengal

Dispensary at Allahabad, Uttar Pradesh

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Hindustan Medical Institution at Barrackpore, West Bengal

Other Philanthropic Activities :-

M.P. Birla Planetarium, Kolkata, West Bengal

Express Dairy, Behala, Kolkata, West Bengal

Joka Agricultural & Horticultural Society, Joka, West Bengal

SOCIAL SERVICES:-

Water Facilities in Satna & Chanderia.

Roads in Chanderia.

Cleanness Campaign with Zilla Parishad in Chanderia.

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AWARDS & ACHIEVEMENTS:-Us to do more...

CAPEXIL “Special Export Award” every year, since 1990

ISO 9002 certification for Satna Cement Works, Birla Vikas Cement and Durgapur Cement Works.

ISO 9001 - 2000 (QMS) certification for Birla Cement Works, Chanderia Cement Works from BVQI, UK.

IS/ISO 14001 certification in 1999-2000 for Satna Cement Works and Birla Vikas Cement, in 2002-2003 for Birla Cement Works & Chanderia Cement Works for environment management systems.

"Best in Energy Performance" in 1986-87.

"Best in Energy Performance" for Satna Cement Works in 1993-94, 1994-95, 1995-96, 1997-98.

"Best improvement in Thermal Energy Performance" recognition from NCB for Birla Cement Works in 1992-93 and Chanderia Cement Works in 1993-94.

. "Bhama Shah Samman" from the Rajasthan Government for Educational Activities for Birla

Cement Works in 1996-97.

"Excellence in Improving Machinery Health Condition" in 1997.

Ministry of Labour, Government of India, for Birla Cement Works & Chanderia Cement Works in 1998-99 and again in 2001-02.

"Lal Bahadur Shastri Memorial National Award" for Excellent Pollution Control Implementation by Chanderia Cement Works in 2002-03.

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Contribution to National Exchequer for the year ended 2007-2008

DUTY STRUCTURE FOR THE YEAR 20007-08

PARTICULARSEXCISE DUTY( Rs/ tones ) 900

Custom duty (%)Special additional custom duty ( % )

Nill 4

Avg. sales tax / VAT ( % ) 12.5

Royalty & cess on Limestone (Rs / tones)

69

Royalty on coal ( Rs./ tones ) 22

Duties on power tariff ( Rs./ tones) 27

Source: BCL

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RAW MATERIAL FOR CEMENT

Limestone:- Limestone is the main raw material for manufacture of cement. For manufacturing one tone of cement, a quantity of 1.5 tone of limestone is required. India is endowed with large deposits of limestone. The estimated total reserves of cement-grade limestone are 95 billion tonnes. There is a concentration of about 73 per cent of the total reserves in five States, namely Andhra Pradesh, Karnataka, Gujarat, Rajasthan and Madhya Pradesh. Not surprisingly these 5 states account for more than 55% cement production in the whole country. There are other industries such as Iron & Steel, Fertilizers and Chemicals, which also use limestone as raw material, but the cement industry is the largest consumer accounting for about 75-80% of total limestone production.

Gypsum:- Gypsum is another raw materials used mainly as a retarding agent along with clinker during the manufacture of cement. It is used during the grinding stage of clinker. Consumption of gypsum varies from 2 to 6 per cent in different plants depending upon the quality of clinker. At the present level of production, the annual requirement of gypsum is estimated at about 5.0 million tonnes. India has good reserves of natural gypsum, which are mainly concentrated in three States, namely, Rajasthan, Gujarat and Tamil Nadu.

Coal:- Coal is an important input in the manufacture of cement both as a fuel and as a feed-stock. As a fuel its heal value provides thermal energy for the operation of cement kiln and as a feed-stock its mineral content (silica) acts as a constituent in clinker. For every tone of clinker, around 200-220 kg of coal is consumed, which accounts for 15-20% of total cement production cost. Cement accounts for around 4.5% of India’s coal demand. But in recent years due to deteriorating quality of Indian coal with increasing prices, cement industry has started importing coal and using alternative fuel such as lignite or pet coke.

Power:- Cement companies use power mainly for three purposes, which are raw meal grinding, Kiln rotation and clinker grinding. Each stage roughly accounts for one third of the total power Consumption. Cement industry requires an average of 110-120 units of power per tones of cement produced which accounts for 15-20% of the variable cost of cement manufacturing.

Due to increasing power costs and power cuts, many plants have started to setup their own captive thermal power plants which serve them dual purpose of reduce power cost with uninterrupted supply of power.

Granulated Blast Furnace Slag (GBFS):- The other raw materials that are also used in the manufacture of cement are blast furnace slag (a waste product obtained from iron-smelting furnaces) and fly ash (leftover ash from a thermal power station). Limestone contains about 52% of lime and about 80% of this lime is lost during ignition of the raw materials. Similarly, Clay contributes about 57% silica of which about 25% is lost during ignition. GBFS is obtained by granulation of slag obtained as a by-product during the manufacture of steel. It is a complex calcium aluminum silicate and has latent hydraulic properties. That is why it is used in the manufacture of Portland blast furnace slag cement.

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Portland Pozzolona Cement: -

It is known as strongest cement for strong and durable structures. In Durgapur Hi-tech plant at Durgapur produces Birla Cement Samrat, using high quality clinker, high-quality fly ash from modern power plants and gypsum. This Portland Pozzolana Cement (PPC) brand has all the advantages of 53-Grade Cement.

Portland cement:-

Portland cement is a blend of finely pulverized clinker, produced by burning at high temperature materials containing lime, alumina, iron and silica in pre-determined proportion to give the desired end properties. Normally, Gypsum or its derivatives are added during grinding stage for set control. When mixed with water alone or in combination with sand and stone, it has the property of combining slowly with water to form hard mass.

Raw Materials used in the manufacture of Portland cement:-

The two principal raw materials used in the manufacture of Portland Cement are calcareous material such as limestone, chalk, shells or marl and argillaceous materials such as clay and shale(rich in silica).

Portland Cement manufacturing process:-

The raw materials, i.e. calcareous and argillaceous with correctives are finely ground and intimately blended and fired in a rotary kiln at high temperature of 1450-15000C. The material which emerges from kiln is called Clinker. The clinker is cooled and ground to fine power along with small quantity of gypsum (4-5%) to give Portland cement.

Pozzolona:

Pozzolona are amorphous alliaceous and aluminous materials which by itself have no cementations properties but in presence of Calcium Hydroxide liberated by hydration of is cooled and ground to fine power along with small quantity of gypsum (4-5%) to give Portland Cement.OPC reacts chemically with it at ordinary temperatures to form compounds possessing cementations properties.

Portland Pozzolona Cement has two most trusted brands belong to this category:

Birla Cement SamratBirla Cement Samrat Premium

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Special features:

Higher finesse for improved workability Resistance to alkali-aggregate reaction Low heat of Hydration resulting in reduction in cracking Improved resistance to sulphate attack Higher long-term strength over OPC Segregation- free cohesive mix for excellent finish Lower chloride content to minimize corrosion

Slag:

Slag is a non-metallic product consisting essentially of gases containing silicates, aluminosilicaten of lime and other bases and is obtained as a byproduct with iron in blast furnace or electric pig iron furnace.Granulated slag is used in the manufacture of Portland Slag Cement.

Uses of Slag Cement:

Slag Cement can be used for all plain and reinforced concrete construction, mass concreting structures such as dams, reservoirs, swimming pools, river embankment, canal piers, etc. where low heat of hydration and resistance to alkali silica reaction are desired, structure in aggressive environments where chemical and mildly acidic water are encountered (where OPC cannot used), marine construction, dykes, wharves, etc. where sulphatic water is present.

Portland Slag Cement has three brands:

Birla Cement SamratBirla Premium CementBirla Cement

Special features:-Higher Compressive StrengthLow Water AbsorptionIncreased WorkabilityLow ShrinkageSulphate ResistanceDesired durability

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Ordinary Portland Cement:

Brands: 1. Birla Cement Khajurao, 2. Birla Cement Chetak

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Special properties of these brands:

Moderate sulphate resistance.Very low chloride content to avoid corrosion in steel.Quicker rate of strength development.Improved workability.Better surface finish.

Birla Cement Khajuraho/ Chetak-53 Grade Ordinary Portland Cement:

Pre-stressed grinders and electric poles.For ready-mix concrete.M 25 and above concrete.Roads, runways, industrial building, RCC bridges tunnels and high rise buildings.All types of general constructions.

Birla Cement Khajuraho/Chetak-43 Grade Ordinary Portland cement:-

Brick and stone masonry.Plastering and flooring.For ready- mix concrete.Plain and reinforced cement concrete.Pre-cast and pre-stressed concrete.RCC bridges, high-rise buildings and concrete roads.All types of general constructions.

Plants where it is manufactured:

Satna Cement Works and Birla Vikas Cement, Satna.Birla Cement Works and Chanderia Cement Works, Chanderia.

Special features of cement manufactured by BCL are :-

Ideal for mass concreting.Reduced thermal cracks.Increased water tightness of concrete.Ideal for plastering.Greater resistance to sulphate and other aggressive environments.Greater resistance to alkali- aggressive reaction.Increased durability.

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Plants Of Birla Corporation Limited For Cement Production:-

Satna Plants :

Total capacity: 15,50,000 tones.

Chanderia Plants:

Total capacity: 20, 00,000 tonnes.

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Durgapur Plant :

Capacity: 6, 00,000 tonnes

A new cement plant is established in Durgapur, which is Durgapur High-tech cement.This plant has the capacity of 10, 00,000 tones of cement production.Thus total production capacity at Durgapur is 16, 00,000 tones per year.

Raebareli Plant :

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HIGHILIGHTS OF FINANCIAL PERFORMANCE of BCL

( Rs. In crores )

PARTICULARS 2005-06 2006-07

2007-081.TOTAL INCOME 1228.61 1593.41 1763.052.TOTAL EXPENDITURE 1036.74 1073.49 1149.383.OPERATING PROFIT 191.87 519.92 613.674.INTREST 13.62 18.53 21.055.PROFIT AFTER INTREST BUT       BEFORE DEPRECATION & TAX 178.25 501.39 592.626.DEPRECATION 34.16 39.65 41.447.PFOFIT BEFORE TAX 144.09 461.74 551.188.PROFIT AFTER TAX 125.76 326.23 393.57

Future of the Cement Industry:

Government policies have affected the growth of cement plants in India in various stages. The control on cement for a long time and then partial decontrol and then total decontrol has contributed to the gradual opening up of the market for cement producers. The consumption of cement is determined by factors influencing the level of housing and industrial construction, irrigation projects, and roads and laying of water supply and drainage pipes etc. The level and growth of GDP and its sectoral composition, capital formation, development expenditure, growth in population, level of urbanization, etc, in turn, determine these factors. But the domestic demand for cement is mainly from the housing activities and infrastructure development.

The government paved the way for the entry of the private sector in road projects. It has amended the National Highway Act to allow private toll collection and identified projects, bridges, expressways and big passes for private construction. The budget gave substantial incentives to private sector construction companies. Ongoing liberalization will lead to an increase in industrial activities and infrastructure development. So it is hoped that Indian cement industry shall boom again in near future.

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SWOT ANALYSIS OF BIRLA CORPORATION LIMITED

Strengths:-

1. The industry is likely to maintain its growth momentum and continue growing at about 9 – 10% in the foreseeable future.

2. Government initiative in the infrastructure sector such as the commencement of the second phase of the National Highway Development project, freight carriers, rural roads and development of the housing sector, are likely to be the main drivers of growth.

3. Measures initiated by the Government towards public-private partnership for removing bottleneck in the development of infrastructure in the country, augurs well for the industry.

4. In the coming few years the demand for the cement will increase which will be booming news for cement manufactures.

5. For the purpose of the packing of essential item, jute products which are environment friendly and biodegradable characteristic are considered as best option.

Weaknesses

1. High capital cost and investment cost for each and every project.

2. The complex Excise Duty structure based on the category of buyer and end use of the cement has caused at lot of confusion in the industry.

3. The recent ban on export of cement clinker would increase the availability of cement in the domestic market, which in turn would put pressure on cement prices.

4. The major concern for the industry are :

Continuous increase in labour cost. Shortage of skilled labourers. Appreciation of rupees against foreign currencies. Procuring of limestone mines at economical price an entry barrier.

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Opportunities

1. Adequate support from the Government is very essential to promote business activities.

2. Increase in the production and sell of cement at different plants have increased the turnover of the company.

3. It would be in the interest of both the government and the industry to work together with aim to streamline the indirect tax regime and keep the prices of the inputs such as coal under control so that the cement price can be maintained at reasonable levels.

4. Despite slightly lower economic growth, the construction and infrastructure sector is expected to record healthy growth, which augurs well for cement industry.

5. The modernization, productivity improvement and cost control measures will improve the performance of the division in times to come.

Threats

The recent moves by the Central Government in making the import of the cement total duty free, is a cause of for the Indian cement industry.

Further recent changes in the Central Excise Duty structure by way of introduction of multiple slabs of Excise Duty is also a cause of worry for the industry.

Almost all the major players in the industry have announced substantial increase in the capacity and the possibility of over supply situation cannot be ruled out.

Increased railway freight, coal prices and dispatch bottlenecks on account of truck Loading restrictions imposed by various State Governments

Scarcity of good quality Coal are some other factors which are cause of concern for the industry.

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An Introduction To Working Capital Management

“Working capital means the part of the total assets of the business that change from one form to another form in the ordinary course of business operations.”

Concept of working capital:-

The word working capital is made of two words 1.Working and 2. CapitalThe word working means day to day operation of the business, whereas the word capital means monetary value of all assets of the business.

Working capital : -

Working capital may be regarded as the life blood of business. Working capital is of major importance to internal and external analysis because of its close relationship with the current day-to-day operations of a business. Every business needs funds for two purposes.

* Long term  funds are required  to create production facilities through purchase of fixed assets such as plants, machineries, lands, buildings & etc

* Short term funds are required for the purchase of raw materials, payment of wages, and other day-to-day expenses. . It is other wise known as revolving or circulating capital

It is nothing but the difference between current assets and current liabilities. i.e.

Working Capital = Current Asset – Current Liability. Businesses use capital for construction, renovation, furniture, software, equipment, or machinery. It is also commonly used to purchase inventory, or to make payroll. Capital is also used often by businesses to put a down payment down on a piece of commercial real estate. Working capital is essential for any business to succeed. It is becoming increasingly important to have access to more working capital when we need it.

Concept of working capital

Gross Working Capital = Total of Current Asset Net Working Capital = Excess of Current Asset over Current Liability

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Current Assets Current Liabilities

Cash in hand / at bank Bills Receivable Sundry Debtors Short term loans Investors/ stock Temporary investment Prepaid expenses

Accrued incomes

Bills Payable Sundry Creditors Outstanding expenses Accrued expenses

Bank Over draft

Working capital in terms of five components:

1. Cash and equivalents: - This most liquid form of working capital requires constant supervision. A good cash budgeting and forecasting system provides answers to key questions such as: Is the cash level adequate to meet current expenses as they come due? What is the timing relationship between cash inflow and outflow? When will peak cash needs occur? When and how much bank borrowing will be needed to meet any cash shortfalls? When will repayment be expected and will the cash flow cover it?

2. Accounts receivable: - Many businesses extend credit to their customers. If you do, is the amount of accounts receivable reasonable relative to sales? How rapidly are receivables being collected? Which customers are slow to pay and what should be done about them?

3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it requires continual scrutiny. Is the inventory level reasonable compared with sales and the nature of your business? What's the rate of inventory turnover compared with other companies in your type of business? 4. Accounts payable:- Financing by suppliers is common in small business; it is one of the major sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable relative to what you purchase? What is your firm's payment policy doing to enhance or detract from your credit rating?

5. Accrued expenses and taxes payable: - These are obligations of your company at any given time and represent a future outflow of cash.

Two different concepts of working capital are:-

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Balance sheet or Traditional concept Operating cycle concept.

Balance sheet or Traditional concept:- It shows the position of the firm at certain point of time. It is calculated in the basis of balance sheet prepared at a specific date. In this method there are two type of working capital:-

Gross working capital Net working capital

Gross working capital:- It refers to the firm’s investment in current assets. The sum of the current assets is the working capital of the business. The sum of the current assets is a quantitative aspect of working capital. Which emphasizes more on quantity than its quality, but it fails to reveal the true financial position of the firm because every increase in current liabilities will decrease the gross working capital.

Net working capital:- It is the difference between current assets and current liabilities or the excess of total current assets over total current liabilities.

Working capital= current assets - current liabilities.

Net working capital: - It is also can defined as that part of a firm’s current assets which is financed with long term funds. It may be either positive or negative. When the current assets exceed the current liability, the working capital is positive and vice versa.

Operating cycle concept:- The duration or time required to complete the sequence of events right from purchase of raw material for cash to the realization of sales in cash is called the operating cycle or working capital cycle.

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Types of Working Capital:-

RAW MATERIAL

WORK IN PROGRESS

FINISH GOODSSALES

DEBTORS & BILLS

RECEIVABLES

CASH

OPERATING CYCLE

TYPES OF WORKING CAPITAL

ON THE BASIS OF B/S CONCEPT

ON THE BASIS OF TIME

GROSS WORKING CAPITAL

NET WORKING CAPITAL

REGULAR WORKING CAPITAL

TEMPORARY WORKING CAPITAL

SEASONAL WORKING CAPITAL

SPECIFIC WORKING CAPITAL

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SIGNIFICANCE OF WORKING CAPITAL:-

Factors requiring consideration while estimating working capital.

The average credit period expected to be allowed by suppliers. Total costs incurred on material, wages. The length of time for which raw material are to remain in stores before they are issued for

production. The length of the production cycle (or) work in process. The length of sales cycle during which finished goods are to be kept waiting for sales. The average period of credit allowed to customers The amount of cash required to make adance payment

EASY LOAN FROM BANKS

INCREASE EFFECIENC-Y

INCREASE IN FIX ASSETS

INCREASE DEBT

CAPACITY

DIVIDEND DISTRIBUTI-

ON

PAYMENT TO SUPPLIERS

SIGNIFICAN--CE OF

WORKING CAPITAL

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Importance of Working Capital Ratios

Ratio analysis can be used by financial executives to check upon the efficiency with which working capital is being used in the enterprise. The following are the important ratios to measure the efficiency of working capital. The following, easily calculated, ratios are important measures of working capital utilization.

Ratio Formulae Result Interpretation

Stock Turnover(in days)

Average Stock * 365/Cost of Goods Sold

= x days On average, you turn over the value of your entire stock every x days. You may need to break this down into product groups for effective stock management.Obsolete stock, slow moving lines will extend overall stock turnover days. Faster production, fewer product lines, just in time ordering will reduce average days.

Receivables Ratio(in days)

Debtors * 365/Sales

= x days It takes you on average x days to collect monies due to you. If your official credit terms are 45 day and it takes you 65 days.One or more large or slow debts can drag out the average days. Effective debtor management will minimize the days.

Payables Ratio(in days)

Creditors * 365/Cost of Sales (or Purchases)

= x days On average, you pay your suppliers every x days. If you negotiate better credit terms this will increase. If you pay earlier, say, to get a discount this will decline. If you simply defer paying your suppliers (without agreement) this will also increase - but your reputation, the quality of service and any flexibility provided by your suppliers may suffer.

Current Ratio Total Current Assets/Total Current Liabilities

= x times Current Assets are assets that you can readily turn in to cash or will do so within 12 months in the course of business. Current Liabilities are amount you are due to pay within the coming 12 months. For example, 1.5 times means that you should be able to lay your hands on $1.50 for every $1.00 you owe. Less than 1 times e.g. 0.75 means that you could have liquidity problems and be under pressure to generate sufficient cash to meet oncoming demands.

Quick Ratio (Total Current Assets - Inventory)/Total Current Liabilities

= x times Similar to the Current Ratio but takes account of the fact that it may take time to convert inventory into cash.

Working Capital Ratio

(Inventory + Receivables - Payables)/Sales

As % Sales

A high percentage means that working capital needs are high relative to your sales.

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Statement showing change in working capital for BCL:-

( Rs.in lacs)Particulars 07-08 06-07 Increase ( + ) Decrease (- )Current AssetsInventories 20044.82 14258.83 5785.99Sund. Debtors 3171.25 2722.47 448.78Cash & Bank 3135.65 3439.42 303.77Loan & Advances 47311.27 30525.34 16785.93Total ( A ) 73662.99 50946.06

Current Liabilities

C.L. 30109.32 24092.95 6016.37Provisions 35306.92 19215.28 16091.64Total ( B ) 65416.24 43308.23

( A-B ) 8246.75 7637.83 23020.70 22411.78↑ in working capital

608.92 608.92

Total 8246.75 8246.83 23020.70 23020.70

Statement showing change in working capital for BCL:

( Rs.in lacks)Particulars 06-07 05-06 Increase ( + ) Decrease ( - )Current AssetsInventories 14258.83 10572.33 3686.5Sund. Debtors 2722.47 2248.22 474.25Cash & Bank 3439.42 5922.59 2483.17Other C.A. ----------- 28.38 28.38Loan & Adv. 30525.34 12442.01 18083.33Total ( A ) 50946.06 31213.53

Current LiabilitiesC.L. 24092.95 25753.21 1660.26Provisions 19215.28 4489.21 14726.07Total ( B ) 43308.23 302242.42

( A-B ) 7637.83 971.11 23904.34 17237.62↑ in working capital

6666.72 6666.72

Total 7637.83 23904.34

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CALCULATION OF WORKING CAPITAL FOR BIRLA CORPORATION LIMITED (Rs.in lacks) YEAR 31.03.06 31.03.07 31.03.08

CURRENT ASSETS

INVENTORIES 10572.33 14258.83 20044.82SUNDRY DEBTORS 2248.22 2722.47 3171.25CASH AND BANK 5922.59 3439.42 3135.65OTHER CURRENT ASSETS 28.38 --- ---LOANS & ADVANCES 12442.01 30525.34 47311.27 -------------- -------------- --------------- TOTAL CURRENT ASSESTS 31213.53 50946.06 73662.99 -------------- -------------- ---------------

LESS:-

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES 25753.21 24092.95 30109.32 PROVISION 4489.21 19215.28 35306.92 -------------- -------------- --------------TOTAL CURRENT LIABILITIES 30242.42 43308.23 65416.24 ---------------- ---------------- ---------------

NET CURRENT ASSETS 971.11 7637.83 8246.75

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Sources of Additional Working Capital

Sources of additional working capital include the following:

* Existing cash reserves * Profits (when you secure it as cash !) * Payables (credit from suppliers) * New equity or loans from shareholders * Bank overdrafts or lines of credit * Long-term loans

ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials content in a store of factory at any given time. Inventory means stock of three things :-

1. Raw materials2. Semi finished goods.3. Finished goods.

Position of inventory in Birla Corporation Limited (Rs.in lacks)

YEAR 31.03.06 31.03.07 31.03.08

Stores, Spare Parts etc. 5054.16 6501.38 9921.49 Machinery Spares not in regular use 175.44 130.11 224.35 ------------ ----------- ------------ 5229.60 6631.49 10145.84 Stock In trade- Finished Goods 1994.58 2273.79 3511.93 Raw Materials 1214.65 3032.57 2346.94 Material under process 2133.50 2320.98 4040.11 --------------- ---------------- -----------------

10572.33 14258.83 20044.82 ------------------- ---------------- ----------------

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Analysis through chart:

INTERPRETATION:

By analyzing the 3 years data we see that the inventories are increased year by year. We are looking increasing pattern in inventories. We can see that inventories are grown by 34% and 40% in 06-07 and 07-08 respectively from previous year. By this growth we can say that the company is growing very rapidly in cement sector. A company uses inventory when they have demand in market and Birla Corporation is having a great demand in infrastructure sector. That is biggest reason for increase in inventories. From other point of view we can say that the liquidity of firm is blocked in inventories but to stock is very good due to uncertainty of availability of raw material in time.

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under current assets. Debtors will arise only when credit sales are made.

Position of Sundry Debtors in Birla Corporation Limited (Rs.in lacks)

YEAR 31.03.06 31.03.07 31.03.08

Debts outstanding more than 6 monthsSecured, Considered Good 117.90 96.04 138.31 Unsecured, Considered Good 312 .83 198.86 202.98 ------------ ------------ ------------ 430.73 294.90 341.29 Other Debts Secured, Considered Good 248.73 243.06 304.96 Unsecured, considered Good 1568.76 2184.51 2525.00 ------------- ------------- ----------- 2248.22 2722.47 3171.25 --------------- ---------------- --------------

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Analysis through chart:

INTERPRETATION In the table and figure we see that there is continuous rise in the debtors of Birla Corporation Limited in the successive years. A simple logic is that debtors increase only when sales increase and if sales increases it is good sign for growth. We can see 21% and 17% growth in 06-07 and 07-08 respectively from previous years.

We can say that it is a good sign as well as negative also. Company policy of debtors is very good but a risk of bad debts is always present in high debtors. when sales is increasing with a great speed the profit also increases. If company decreases the Debtors they can use the money in many investment plans.

CASH AND BANK BALANCE ANALYSIS

Cash is called the most liquid asset and vital current assets, it is an important component of working capital. In a narrow sense, cash includes notes, bank draft, cheque etc while in a broader sense it includes near cash assets such as marketable securities and time deposits with bank.

Position of Cash and Bank Balance in Birla Corporation Limited (Rs.in lacks)

YEAR 31.03.06 31.03.07 31.03.08

Cash Balance in hand 1476.25 1705.50 1616.98Bank Balance- With Scheduled Banks 4446.34 1733.92 1518.67 ------------- ------------- ------------ 5922.59 3439.42 3135.65 ------------- ------------- ------------

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Analysis through chart:

INTERPRETATION

If we analyze the above table and chart we find that it follows a decreasing trend. In the year 2006 it had maintained a huge amount of cash and bank balance which has fallen hugely in the year 2007 but there is slight fall between the year 2007 and 2008. Although company’s cash is decreasing but this is very good sign for company because they are not holding the cash in hand but using the cash for better projects. The analysis shows that the fix deposits of company are rapidly fallen in last three years as 72% and 74% in 06-07 and 07-08 respectively from previous year. Company is utilizing the fixed cash for exploding the projects that is good for growth,

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees for a specific period of time and in return they will be liable to make timely repayment of that amount in addition to interest on that loan.

Position of Other Loans & Advances in Birla Corporation Limited (Rs.in lacks)

YEAR 31.03.06 31.03.07 31.03.08

Advances to subsidiary companies 343.71 347.37 190.42Advances 9120.22 27144.83 44641.37Interest Receivable 41.48 11.40 44.66 Deposits 2936.60 3021.74 2434.82 --------------- --------------- --------------- 12442.01 30525.34 47311.27 -------------- ---------------- ---------------

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Analysis through chart:

INTERPRETATION

If we analyze the table and the chart we can see that it follows an increasing trend which is a good sign for the company. We can see that from the year 2006 to 2007 it increased more than double. We can see that the increase of 145% and 55% in 06-07 and 07-08 respectively from previous year.

The increasing pattern shows that company is giving advances for the expansion of plants and machinery which is good sign for better production of cement and other goods. Although company’s cash is blocked but this is good that company is doing modernization of plants In time to compete with other competitors in market.

CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current liabilities that has to be paid by the firm with in one year.

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Position of Other Current Liabilities in Birla Corporation Limited

(Rs.in lacks)

YEAR 31.03.06 31.03.07 31.03.08

Current Liabilities – Sundry Creditors 19195.75 17459.14 21345.32 Other Liabilities 6479.15 6559.84 8649.37 Investor Education and Protection fund 12.60 18.99 29.35Interest accrued but not due 65.71 54.98 85.28 ------------- --------------- --------------- 25753.21 24092.95 30109.32 ------------- ---------------- ----------------

Analysis through chart:

INTERPRETATION If we analyze the above table then we can see that it follow an uneven trend. The important component of current liabilities is sundry creditors and other liabilities. In 06-07 it decreased by 7% and in 07-08 it increased by 25%. In 07-08 it was increased because of growth in other liabilities by 32%.This is liability for company so this should be less. when company have minimum liabilities it creates a better goodwill in market. High current liabilities indicate that company is using credit facilities by creditors.

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PROVISIONS ANALYSIS

Position of Other Provisions in Birla Corporation Limited (Rs.in lacks)

YEAR 31.03.06 31.03.07 31.03.08

Proposed Dividend 1732.62 2695.19 3080.22Corporate Dividend Tax 243.00 458.05 523.48Income Tax 2281.25 15696.00 31558.00 Fringe Benefit Tax 230.22 364.00 141.00Wealth Tax 3.59 4.04 4.22Fringe Benefit Tax 0.53 ---- ---- --------------- --------------- ---------------- 4491.21 19215.28 35306.92 --------------- ---------------- -----------------

Analysis through chart:

INTERPRETATION

From the above table we can see that provision shows an increasing trend and the huge amount is being kept in these provisions. Though the profits of the company are increased income tax is also increased which is good that company is creating goodwill in market by paying income tax in time. The income tax is increased by 588% and 101% in 06-07 and 07-08 respectively from previous year. Although company is paying more income tax but also they are earning more. Other provisions are also for the benefit of employees and public. This is good sign for Company growth.

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WORKING CAPITAL RATIOS AND ITS INTERPRETATION

Position of RECEIVABLE RATIO in Birla Corporation Limited

FORMULA DEBTORS RECEIVABLE RATIO = ---------------- * 365 SALES

YEAR 31.03.06 31.03.07 31.03.08

RECEIVABLE RATIO (IN DAYS) 5.72 5.53 5.79

Analysis through chart:

INTERPRETATION

Generally a low debtors turnover ratio implies that it considered congenial for the business as it implies better cash flow. The ratio indicates the time at which the debts are collected on an average during the year. Needless to say that a high Debtors Turnover Ratio implies a shorter collection period which indicates prompt payment made by the customer. Now if we analyze the three year data we can say that it holds a good position while receiving its money from its debtors. The ratios are in an increasing trend, which implies that recovery position is good and company should maintain these positions.

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Position of PAYABLE RATIO in Birla Corporation Limited

FORMULA CREDITORS PAYABLE RATIO= ----------------------------- COST OF SALES

YEAR 31.03.06 31.03.07 31.03.08

PAYABLE RATIO (IN DAYS) 7.72 4.53 3.96

Analysis through chart:

INTERPRETATION

Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers throughout the year. Generally a low creditors turnover ratio implies favorable since the firm enjoys lengthy credit period Now if we analyze the three years data we find that in the year 2006 the ratio was very high which means that its position of creditors that year was not good, but in the next two years it is seen that it has followed a decreasing trend which is very good sign for the company. So we can say it enjoys a very good credit facility from the from the suppliers.

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Position of CURRENT RATIO in Birla Corporation Limited

FORMULA TOTAL CURRENT ASSETS CURRENT RATIO= -------------------------------------------- TOTAL CURRENT LIABILITIES

YEAR 31.03.06 31.03.07 31.03.08

CURRENT RATIO 1.03 1.18 1.13

Analysis through chart:

INTERPRETATION

This ratio reflects the financial stability of the enterprise. The standard of the normal ratio is 2:1 but in most of companies standard is taken according to Tandon Committee which is taken as 1.33:1. Now if we analyze the three years data it can be predicted that it holds a stable position all through out period but it is seen that it holds a low position than the standard one and the company is required to improve its position.

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Position of QUICK RATIO in Birla Corporation Limited

FORMULA

TOTAL CURRENT ASSETS - INVENTORIES QUICK RATIO= ----------------------------------------------------------------- TOTAL CURRENT LIABILITIES

YEAR 31.03.06 31.03.07 31.03.08

QUICK RATIO 0.68 0.85 0.82

Analysis through chart:

INTERPRETATION

It is the ratio between quick liquid assets and quick liabilities. The normal value for such ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity position of the firm. It indicates the relationship between strictly liquid assets whose realizable value is almost certain on one hand and strictly liquid liabilities on the other hand. Liquid assets comprise all current assets minus stock.

By analyzing the three years data it can be said that its position was weak in the year 2006 but it improved significantly in the next two years and was stable during that year. But it is to be said that it does not meet with the standard but in the year 2007 & 2008 it was very close to the standard and it can be said that its liquidity position on an average is stable.

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Position of WORKING CAPITAL RATIO in Birla Corporation Limited

FORMULA

INVENTORY + RECIVEABLE - PAYABLE WORKING CAOITAL RATIO= ------------------------------------------------------------- (AS % OF SALES) SALES

YEAR 31.03.06 31.03.07 31.03.08

WORKING CAPITAL RATIO 5.95 7.80 10.21

Analysis through chart:

INTERPRETATION

This ratio indicates whether the investments in current assets or net current assets ( i.e., working capital ) have been properly utilized. In order words it shows the relationship between sales and working capital. Higher the ratio lower is the investment in working capital and higher is the profitability. But too high ratio indicates over trading.

This ratio is an important indicator about the working capital position. Now if we analyze the three years data, we find that it follows an increasing trend which means that its investment in working capital is lower and the company is utilizing more of its profit. But we find that ratio is increasing at a very fast rate which is not a good sign for the company and the company is required to look into these matters closely.

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Position of INVENTORY TURNOVER RATIO in Birla Corporation Limited

FORMULA

AVERAGE STOCK STOCK TURN OVER RATIO ( IN DAYS )= --------------------------------------- * 365 COST OF GOODS SOLD

YEAR 31.03.06 31.03.07 31.03.08

STOCK TURNOVER RATIO 24.74 46.07 50.01

Analysis through chart:

INTERPRETATION

This ratio tells the story by which stock is converted into sales. A high stock turnover ratio reveals the liquidity of the inventory i.e., how many times on an average, inventory is turned over or sold during the year. If a firm maintains a minimum stock level in order to maximize sales by quick rotation of inventory and the holding cost of inventory will be minimum. A low stock turn over ratio reveals undesirable accumulation of obsolete stock.

By analyzing the three year data it seen that it follows an increasing trend. We see that from the year 2006 to 2007 it is more or less double which has been rectified in the year 2008. But it is need less to say that ratio the company maintains is very high and the company is required to take

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measures to lower down this ratio as it affects the working capital cycle of company and the flow of cash in the company.

Position of Debt-Equity RATIO in Birla Corporation Limited

Formula = Debt / Equity

Calculation of debt-equity ratio at BCL:-

Particulars 2005-06 2006-07 2007-08Long Term Debt 12159.08 8974 7176.98Net Worth 38423.56 66581.37 100497.53D/E Ratio 0.32:1 0.14:1 0.07:1

Analysis through chart:

Interpretation When a company has lower d/e ratio, it means that company is utilizing its own funds and reserves rather than taking loans from outsiders. BCL have a decreasing trend in d/e ratio so we can say that BCL is using its funds and not taking loans from banks. Equity is more than debt that shows a very strong position in whole market.

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Fund flow Statement of Birla Corporation Limited:-

S.N. Sources of Funds 07-08 06-07 05-06 04-05 03-04 02-031. Generation from

Operationsa. Surplus/(deficit) after taxes

39357 32623 12576 8687 4301 419

b. Depreciation 4144 3965 3416 2983 3367 3220c. .Deferred Tax 116 -------- ----- ----- ------ 245

43617 36588 15992 11670 7688 3884

2. Borrowings ( net ) (1039) 1087 3022 3445 (5774) (9)3. Reduction in Working

capital------- ------ 5707 ---- 661 832

4. Decrease in Capital Reserve

(4) ----- ---- ---- ----- ----

Total Sources Of Fund 42574 37675 24721 15115 2555 4707

Application of Funds

1. Fixed Assets 14289 3637 16234 10813 2569 30372. Investments 21393 24476 6511 1211 (883) 16703. Increase in Working

Capital3288 6409 ---- 1774 ----- ----

4. Dividend 3604 3153 1976 1317 869 -----Total Application of Funds

42574 31675 24721 15115 2555 4707

Cash Flow Statement –Birla Corporation Ltd.

Particulars Mar 08  Mar 07  Mar 06  Mar 05  Mar 04 

Profit Before Tax  551.18  461.74  144.09  93.70  41.58

Net Cash Flow-Operating Activity  394.09  295.91  213.54  107.07  114.04

Net Cash Used In Investing Activity  -334.41  -291.98  -181.43  -122.94  -7.09

Net Cash Used in Fin. Activity  -62.71  -28.75  -1.96  0.22  -81.63

Net Inc/Dec In Cash And Equivalent  -3.04  -24.83  30.15  -15.65  25.32

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Cash And Equivalent Begin of Year  34.39  59.23  29.07  44.72  19.40

Cash And Equivalent End Of Year  31.36  34.39  59.23  29.07  44.72

Conclusion:-

The overall performance of Birla Corporation Limited is getting on a good track.The total turnover of the company has registered a growth of 11.27% where as the operating profits for the year were higher by 18.03% mainly on the accounts of increase in the volume or blended cement in the overall cement sales, higher realization and effective cost control measures taken by the company. The profit before tax was up by 19.37% at Rs. 551.18 crores at against Rs. 461.74 crores in the previous year. The cash earning of the company improved substantially to Rs. 501.39 crores as against Rs.179.25 crores in the last financial year. With the increase in capacity on account of expansion projects being undertaken by the company, it is expected that the company would be in a position to maintain the growth in future years.

Company has parked its surplus fund in the various debt schemes of mutual fund. There is an increase of 140% in investment from the previous year. Company is cash rich but as there are expansion and diversification plans under the pipeline, company is not utilizing these funds. For meeting the working capital needs and capacity expansion needs it has borrowed from banks.

The recent boom in the housing, construction and retail sector in India coupled with continued thrust of the Government on infrastructure projects is expected to sustain healthy growth of cement demand. During the year 2007-08, Indian cement industry has registered a growth of 9.34% in terms of cement production. Almost all the major players in the industry including Birla Corporation Ltd have announced substantial increase in capacity and the possibility of oversupply situation cannot be ruled out.

During the year company has embarked upon expansion projects at Satna and Chanderia which would effectively enhance the cement capacity by 1.7 million tones. With the capacitive power plants already in operation and expansion projects under implementation, it is expected that the cement division of the company will do well in the foreseeable future.

The concern about the cement industry is that it is one of the most taxed industries in the country where the government levies and taxes, taken together, constitute over 70% of the ex-factory price. On the top of the above the increase in the cost of coal, railway freight and transportation charge have further added worries of cement manufactures.

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Major Findings

Statement Showing Difference from Previous Year (amt. in lacks)

Particulars 06-07 07-08

Investments 24476.15↑ by 140%

21392.64↑ by 51%

Inventories 3686.5↑ by 35%

5785.99↑ by 40%

Sundry Debtors 474.25↑ by 21%

448.78↑ by 16%

Cash & Bank -2483.17↓ by 42%

-303.77↓ by 9%

Current Liabilities -1660.26↓ by 6.44%

6016.37↑ by 25%

General reserve 17500↑ by 233%

10000↑ by 40%

1. BCL’s NPAT is increasing day by day from last three years and the growth is remarkable.

2. BCL has shown that it is very strong competitor in cement sector of India.

3. Cement can be said as true fruitful business for BCL from last many years.

4. Overall all ratios of the company are good and company need to work with more efficiency.

5. The additional capacity of cement production at Durgapur will create new milestones for the BCL.

6. Lack of advertisement can be said as weak point of the BCL.

7. BCL’s investment policies are very much reliable.

8. Position of the stock is increasing per year that is good sign to face the competition coming ahead.

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9. Highest ever net profit of Rs. 393.57 crores

10.Highest ever dividend pay out of Rs. 36.04 crores

Bibliography & Webliography

www.birlacorporation.com

Financial Management – I.M.Pandey

Financial Statement Analysis – Dr. Anjan Bhattacharya

Financial Management – S.N.Maheshwari

Annual Reports of BCL 06-07 & 07-08.

www.cma.com

www.16anna.com

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