Industry Defined Problem Ultratech Information

Published Date: 02 Nov 2017

INTRODUCTIONN OF ULTRATECH

Ultratech is the leading producer of white cement in India. Ultratech Cement Ltd was set up in 1996 for confined usage to meet household as well as overseas demands. It was set up at West Coast of India and in Gujarat at a distance of 140 kms of SouthWest of Bhavnagar. Ultratech Cement Ltd is related with the manufacturing of cement in India. The company produces and distributes Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. They also produces ready mix concrete. There are 11 integrated plants, one white cement plant, 12 grinding units and five terminals which of them 4 in India and 1 in Sri Lanka. The company is considered as the secondary of Grasim Industries Ltd. This company has the major contribution in export of cement clinker. Its export market extends in the countries approximately the Indian Ocean, Africa, Europe and the Middle East. The companies supplementary are Dakshin Cements Ltd, Ultratech Cement Lanka Pvt Ltd and Ultratech Cement Middle Investments Ltd.

Ultratech Cement was integrated on August 24, 2000 as a public limited company when the name was L&T Cement Ltd as a 100% ancillary of Larsen & Toubro Ltd. The name was altered as Ultratech ChemCo Ltd from L&T Cement in November 2003. The cement trade of L&T Ltd was de-merged and was altered to the company on April 1,2003. The company got 4 crore equity shares of L&T Cevlino(Pvt) Ltd on May 14,2004 from L&T Ltd at a total of Rs.23.03 crore. Grasim Industries Ltd got the management control of the company in July,2004 and in October,2004, the name was altered from Ultratech ChemCo Ltd to Ultratech Cement Ltd.

Narmada Cement Company Ltd was considered as the ancillary of the company by good worth of the scheme of array of de-merger of cement of L&T Ltd. The company enhanced the manufacturing capacity of cement from 155 lakhtones to 170 lakhtones throughout 2005-06. Narmada Cement Company Ltd was amalgamated with the company by this scheme of amalgamation.

The company enhanced the manufacturing capacity from 170 lakhtonnes to 182 lakhtonnes throughout 2007-08. They established 15 Ready Mix Concrete plants within the country. The Clinkerisation unit at Andhra Pradesh Cement Works was commissioned in March,2008. The company enhanced the manufacturing capacity from 182 lakhtonnes to 219 lakhtonnes throughout 2008-09 which was acquired by the Andhra Pradesh Cement Works.

The company enhanced the manufacturing capacity from 219 lakhtonnes to 231 lakhtonnes throughout 2009-10. The Cement trade of Grasim Industries Ltd was de-merged and it was Samruddhi Cement Ltd in May,2010.

Ultratech Cement Ltd having three companies in this sector in India they are Grasim Industries Ltd., Jaiprakash Associates Ltd., and ACC Ltd.

GROWTH OF ULTRATECH

A Grasim Industry was integrated on 24th August, 2000 as L&T Cement Ltd. which has yearly capacity of 17 million tones. It produces and delivers Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzolana Cement.

The plants having the ISO 9001 certification, and the one has ISO 14001 certification. The major export markets for this company are across Indian Ocean, African, Europe and Middle East.

The Ultratech Cement Ltd. is considered as an India’s leading Cement Company and the company’s major export is its strategy for development. Cement is considered as a recurring industry and it creates optimistic results for GDP.

Because of increasing demand of massive infrastructure projects the sector has a requirement of decrease in VAT to 4% from 12.5%. Ultratech cement is popular for its faultless quality is contributing for changing the facade of India.

The cement is not only used for construct projects as flyovers, bridges, dams, runways but also make perpetual faith in engineers, builders, contractors, and individual house builders.

Ultratech Cement is considered as an eighth largest cement manufacturers in the world.

Because of enhancing demands of cement from housing, the company is locate to reach at high level.

PRODUCT PROFILE OF ULTRATECH

Ultratech’s achievement is credited to its identified products. Diversified products are handled by diversified product groups, which are also recognized as product profiles. They work together for creativity and leading innovation. They manufactures as per the customer’s preference. The flexibility is the key competitive advantage of UItratech Cement Ltd.

PRODUCTS

Ultratech Cement:

Ultratech Cement is the biggest promoting single brand cement in India and the biggest cement clinker exporter. The products are Ordinary Portland Cement, Portland Pozzolana Cement and Portland Blast Furnace Slag Cement. It is used in construction of dams, flyovers, bridges, airports, metro railways.

Ultratech Concrete:

Ready Mix Concrete of Ultratech work under the mother brand of Ultratech Concrete. Ultratech Concrete sub-brands are christened ‘Plus’, ‘Lite’, ‘Duracon’, ‘Fibercon’, ‘Freeflow’, ‘Colourcon’, ‘Stainless’, ‘Thermocon’, ;Hypercon’, ‘Pervious’, and ‘Décor’. It is used for big infrastructural projects.

Ultratech Building Products:

it produces and sells technologically reengineered products with dry mix mortars and blocks for the erection and transportation industry. The sub brands of Ultratech Building Products are ‘Seal & Dry’, ‘Super Stucco’, ‘Readiplast’, ‘Fixoblock’, ‘Xtralite’, and ‘Powergrout’.

Ultratech Building Solutions:

Ultratech Building Solutions is a new idea in the Indian Construction Industry. It is a one stop shop considered on the "plan, build and support" philosophy, which gives house building solutions from starting to an end. It includes the popular brands of building materials separate from its own cement like paint, construction chemicals, steel, pipes and fittings.

Birla White:

The Ultratech brand has its own white cement products under the Birla White. Birla White includes Birla White Cement and other finishing products, mostly used for interiors and exteriors including flooring, walls and ceilings. The sub-brands of Birla White are ‘Wallcare’, ‘Textura’, ‘Levelplast’, etc.

Star Cement:

Star cement is top producer of cement in the Middle East. Its functions are extended within UAE, Bahrain and Bangladesh having the installed capacity of 3 million metric tons per annum.

Ordinary Portland Cement:

It is the normally used cement for different purposes. It covers dry-clean mixes, general-purpose ready-mixes and high strength pre-cast and pre-stressed concrete.

Portland Blast Furnace Slag Cement:

It has 70% of finely ground, granulated blast-furnace slag, a nonmetallic product basically inclusive of silicates and alumimino-silicates.

FUNCTIONAL DEPARTMENTS OF ULTRATECH

1. PRODUCTION DEPARTMENT

There are 11 integrated plants , 1 white cement plant, 12 grinding units and 5 terminals from which 4 in India and 1 in Sri Lanka.

Its production capacity enhances yearly and its yearly manufacturing capacity is of 23.10 million tones.

Portland Cement is composed by crushing a combination of limestone, clay and other corrective materials.

The method of manufacturing includes crushing of raw materials into fine powder, combining them thoroughly and flaming in a kiln at about 1400.

After the process the product is to be produced which is known Clinker,

Clinker is refrigerated, ground to fine powder with gypsum. And after this the product is Cement.

The production activities are undertaken according to the global standards and performance.

2. MARKETING DEPARTMENT

The customer programs are less attentive because of not having promotion mix, less attention marketing mix, and stoppage in supply.

Ultratech uses vast distribution network extends across the country having 5,500 dealers and 30,000 retailers which is having a muscular distribution channels at present.

The company’s export is of 2.5 million tones per annum.

All the plants of Ultratech have the ISO 14001 certification.

The company is 8th largest market player of cement industry.

3. FINANCE DEPARTMENT:-

The Gross Sales of Ultratech Cement enhances from 7160cr. to 7729cr. from 2009-10.

FINANCIAL ANALYSIS OF ULTRATECH COMPANY

RATIO ANALYSIS

Ratio analysis is a tool of financial analysis. A RATIO is defined as " the indicated quotient of two mathematical expressions" and as "the relationship between two or more things"

In financial analysis, a Ratio is used as a benchmark for evaluating the financial position and performance of a firm.

Ratios can be classified in four heads:

Liquidity Ratio

Solvency Ratio

Turnover Ratio

Profitability Ratio

Liquidity Ratio

It is essential for a firm to be able to meet its obligations as they become due.

Liquidity ratio measures the ability of the firm to meet its current obligations.

There are two Ratios under this head:

Current ratio

Quick Ratio

Current Ratio

The Current Ratio is a measure of the firm’s short term solvency. The Current Ratio measures the total rupees’ worth of current assets and total rupees’ worth of current liabilities.

Current Ratio = Current Assets/Current Liability

(Rs. In crore)

2010

2011

2012

Current assets

1121.26

2703.28

2978.38

Current liability

1992.60

4772.07

5599.74

Current ratio

0.56

0.57

0.53

INTERPRETATION:

The table shows that the Ultratech’s current liabilities are more than current assets. This indicates that it has a somehow problem to meet its current obligations. In last year Ratio declined so it does not good for a company. The firms’ short term solvency is threatened.

Quick Ratio

Quick Ratio establishes a relationship between quick, or liquid assets and current liabilities. A rupee of cash is more readily available to meet current obligations than a rupee of, say, inventory.

Quick Ratio = (Current assets – Inventory) / Current Liability

2010

2011

2012

Current assets

1121.26

2703.28

2978.38

Inventory

821.70

1956.52

2035.94

Current liability

1992.60

4772.07

5599.74

Quick ratio

0.15

0.16

0.17

INTERPRETATION:

The Ultratech’s inventories sell gradually so the company can pay its liabilities. But the Ratio is lower so it may find difficult to meet its obligations because its quick assets are lower than one times of current liabilities. The higher Ratio in 2012 shows the low block of inventory. The least Ratio in 2010 indicates that the current assets are tied up in slow moving and unsaleable inventories and slow paying debts.

Solvency Ratio:

Assets are any property owned by a person or business. Tangible assets include money, land, buildings, investments, inventory, cars, trucks, boats, or other valuables. Intangibles such as goodwill are also considered to be assets.

There are two ratios under this head:

Debt Equity Ratio

Debt Ratio

Debt Equity Ratio

It describes the lenders’ contribution for each rupee of the owners’ contribution is called Debt Equity Ratio. The Debt equity ratio appraise the financial structure of a firm.

Debt Equity Ratio = Debt / Equity or Net Worth

2010

2011

2012

Debt

1604.52

4144,60

3808.13

Equity

4608.65

10666.04

12859.82

Debt Equity Ratio

0.35

0.39

0.30

INTERPRETATION:

The above chart shows that there is a highest ratio in 2011. But the Ratio is lower than one which shows that the company has 1 Rs of owner’s capital against the outside liabilities. In 2012 the Ratio decreases it is beneficial for creditors because the company can pay its debt with available equity.

Debt Ratio

Debt Ratios may be used to analyze the long term solvency of a firm. It can know the interest bearing debt in the capital structure.

Debt Ratio = Debt / ( Debt + Equity)

2010

2011

2012

Debt

1604.52

4144,60

3808.13

Debt + Equity

6213.17

14810.64

16667.95

Debt Equity Ratio

0.26

0.28

0.23

INTERPRETATION:

The Debt Ratio of 0.23 means that lenders have financed 23 per cent of Ultratech’s net assets. There is a highest Debt Ratio in 2011 it shows that the debt is 0.28 against the 1 Rs of capital employed. But in the next year the Ratio decreases. It implies that owners have provided the remaining finances. A low Ratio in 2012 is desirable from the point of creditors, as there sufficient Margin Of Safety available to them.

Turnover Ratio

Turnover Ratios are employed to evaluate the efficiency with which the firm manages and utilize.

It indicates the speed with which assets are being converted or turned over into sales.

It shows the relationship between sales and assets.

There are three ratios under this head:

Current Assets Turnover Ratio

Fixed Assets Turnover Ratio

Net Assets Turnover Ratio

Current Assets Turnover Ratio

Current Assets are items such as cash, inventory, and accounts receivable that are currently cash or expected to be turned into cash within one year.

Current Assets Turnover = Net Sales / Current assets

2010

2011

2012

Net Sales

7042.82

13205.64

18270.69

Current Assets

1121.26

2703.28

2978.38

Current Assets Turnover

6.28

4.89

6.13

INTERPRETATION:

It shows that the Ultratech has more sales than current assets. It indicates that the Ultratech’s ability to produce a large volume of sales for a given amount of current assets is the most important aspect of its operating performance. The highest ratio in 2010 and lowest in 2011. It is increased from 2012.

Fixed Assets Turnover Ratio

The firm can know its efficiency utilizing fixed assets.

Fixed Assets Turnover = Net Sales / Net Fixed assets

2010

2011

2012

Net Sales

7042.82

13205.64

18270.69

Net Fixed assets

4941.68

11400.25

11634.82

Net Fixed Assets Turnover

1.43

1.16

1.57

INTERPRETATION:

The fixed assets turnover slightly changing in three years, there is a highest ratio in 2012 so it indicates that the Ultratech increases its sales by efficiently utilization of its fixed assets. The lowest ratio in 2011 indicates that its having sufficient fixed assets but there was somehow less sales in that year.

Net Assets Turnover Ratio

The net asset turnover ratio measures the ability of management to use the net assets of the business to generate sales revenue. A well-managed business will be making the assets work hard for the business by minimising idle time for machines and equipment.

Net Assets Turnover = Net Sales / Net assets

2010

2011

2012

Net Sales

7042.82

13205.64

18270.69

Net Current Assets

(657.43)

(1425.25)

(1918.66)

Net Fixed Assets

4941.68

11400.25

11634.82

Net Assets

4284.25

9975

9716.16

Net Assets Turnover

1.64

1.32

1.88

INTERPRETATION:

There is a highest Ratio in 2012 and lowest in 2011. The highest Ratio indicates that the net sales is increasing against the net assets and it is good for Ultratech. The lowest Ratio shows that net sales is increasing but not at a satisfactory so it makes effect on it.

Profitability Ratio

The Profitability Ratios are calculates the operating efficiency of the company.

Besides management of the company, creditors and owners are also interested in the profitability of the firm.

There are two ratios under this head:

Margin

Net Margin

Margin

It is the Gross Profit Margin which reflects the efficiency of the management produces each unit of product. It indicates the average spread between the cost of goods sold and the sales revenue.

Margin = PBIT / Net Sales

2010

2011

2012

PBIT

1712.27

2074.1

3575.22

Net Sales

7042.82

13205.64

18270.69

Margin

24.31

15.71

19.57

INTERPRETATION:

There was a highest profit margin in 2010 at 24.31% so it indicates that the cost of production is relatively low. Lowest Ratio in 2011 at 15.71% indicates that there was a high cost of a margin and inefficient use of current assets as well as fixed assets.In 2012 the profit margin increases after 2011 at 19.57% so it shows that it can cover the operating expenses.

Net Margin

This Ratio indicates the managements’ efficiency in manufacturing, administering and selling the products. It is the overall measure of the firms’ ability to turn each rupee sales into net profit.

Net Margin = PAT / Net Sales

2010

2011

2012

PAT

1093.24

1404.23

2446.19

Net Sales

7042.82

13205.64

18270.69

Net Margin

15.52

10.63

13.39

INTERPRETATION:

There is a lowest Ratio in 2011 shows that there was a little change in PAT and the operating expenses relative to sales have been increasing. In 2012 the Ratio is high because the interest payable is lower and the PAT is increased at a reasonable rate.

LEVERAGE ANALYSIS

The use of the fixed charges sources of funds, is described as financial leverage.

Operating leverage affects a firm’s operating profit while financial leverage affects profit after tax or the earning per share.

The DATA which are used for conducting Leverage analysis for ULTRATECH COMPANY are as follows:

Particulars

2010

2011

2012

Sales a

7729.13

14858.60

20538.32

Total Expenses

5069.77

10718.55

14144.45

50% Variable b

2534.89

5359.28

7072.23

Contribution [a-b]

5194.24

9499.32

13466.09

EBIT

1712.27

2074.1

3575.22

EBT

1588.16

1786.19

3351.36

[ Note : Variable Cost is assumed to be 50% ]

The formulas are as follows:

OPERATING LEVERAGE = Contribution / EBIT

(2010) = 5194.24 / 1712.27

= 3.03

(2011) = 9499.32 / 2074.1

= 4.58

(2012) = 13466.09 / 3575.22

= 3.77

FINANCIAL LEVERAGE = EBIT / EBT

(2010) = 1712.27 / 1588.16

= 1.08

(2011) = 2074.1 / 1784.19

= 1.16

(2012) = 3575.22 / 3351.36

= 1.07

COMBINED LEVERAGE = Contribution / EBT

(2010) = 5194.24 / 1588.16

= 3.27

(2011) = 9499.32 / 1784.19

= 5.32

(2012) = 13466.09 / 3351.36

= 4.02

LEVERAGES FOR ULTRATECH COMPANY

Particulars

2010

2011

2012

Operating Leverage

3.03

4.58

3.77

Financial Leverage

1.08

1.16

1.07

Combined Leverage

3.27

5.32

4.02

INTERPRETATION:

Operating Leverage: Operating Leverage increases from 3.03 percentage to 4.58 percentage during 2010 to 2011. There is a decrease in OL in 2012.

Financial Leverage: The financial leverage changes but it changes at slowly. The higher in the year 2011 and lowest in 2012 which indicates that the interest is lower in that year.

Combined Leverage: The contribution is above 3 in all the three years, it is highest in 2011. It is highest because of highest OL and FL in that year. The contribution and EBT both are increased but at a lower rate in 2011.

WORKING CAPITAL ANALYIS

The data which are used for calculating the Working Capital is as follows:

2010

2011

2012

Inventories

821.70

1956.52

2035.94

Sundry Debtors

215.83

602.29

765.96

Cash and Bank Balance

83.73

144.47

176.48

Current assets

1121.26

2703.28

2978.38

Current Liabilities

1992.60

4772.07

5599.74

Net Current Assets

(871.34)

(2068.79)

(2621.36)

4. HUMAN RESOURCE DEPARTMENT:-

There were 4,481 employees on 31st March, 2010 in the company.

The best employer award was awarded in 2007.

Company tries to encourage culture of high performance, management has instilled a lot of firmness and passion in its employees development skills.

The activities of continuing learning, stimulating HR systems in relation to performance, have facilitated company carry on its image.

They mostly strives to develop their employees by improving their performance and grow for further achievements.

SWOT ANALYSIS OF ULTRATECH

STREANGTH

The manufacturing capacity is of 23.10 million tones.

The demand of cement increases because of muscular economic growth originates from development in housing sector, infrastructure projects, National Highway Development Program, Bharat Nirman Yojana for countryside infrastructure and increase in industrial projects.

The production capacity related to overall standards of quality and performance.

There is no middlemen for getting limestone and it uses the confined transporters for less additional expenses make its more suitable for the confined consumers.

Aditya Birla Group stands at the eighth position for biggest cement competitor in worldwide.

Currently Ultratech is initial to obtain a sturdy position in the market by its distribution network.

By the proper use of distribution network it can maintain relationship with consumers.

The Ultratech Cement produces the greenbelt at Company’s units tremendous and is enclosed by trees all around.

Its CSR actions expands to 127 towns near to its plants throughout the country.

New technologies and procedures that joins the economic growth and sustainable environment are taken by the company for efficient performance.

WEAKNESSES

Cement industry is extremely uneven and it is also extremely zonal and less product value results in time consuming transportation.

Ultratech is not exist at everywhere because it is not produced at all the places so people cannot get it everywhere.

Ultratech has inadequate workforce because of its simple recruiting and selection methods.

Customers cannot know more about the products of Ultratech because of less awareness prgrammes.

The supply cannot be fulfilled adequately because the plants are set up outside the city.

At the discarding of cement, it results in extremely dirty environment which is dangerous for health.

So the effects of CSR of Ultratech is remained less because of health hazards.

The transportation cost is high so it affects the profit margin of the Ultratech.

The Ultratech plants damages the environment resulting in a lot of pollution and dangerous for health of mankind.

So it is suitable to locate the plants outside the city where the inhabitants rate is low or no inhabitants.

It is extremely difficult to balance between the environmental and health issues.

Because of improper marketing mix it results into the problems of products to provide to the consumers.

OPPORTUNITY

Ultratech has plenty of opportunities to contribute to development.

So it can generate new marketing areas.

It has a major contracts of Government by Memorandum Of Understandings.

It obtain competitive advantage by the good quality and proper management.

The construction of corporate offices and school society complexes increases the demand of cement.

It is expected to increase foreign investment in this industry because of rising demand of cement.

There is a possibility of Merger and Acquisitions in the future.

People are selecting for new constant structures and well future, so there is positive response for cement is to be taken.

Nowadays the Government expenditures are largely on infrastructure projects.

So there is a rapid growth in near future.

And this time is a positive response for investing in this sector.

THREATS

The giant cement industry generates more competitive environment so the company has to work carefully for increasing price, product and also concentrate on dealers and customers.

The customers who has a lower income prefers low priced brand and it is rapidly increasing.

It has to face competition because of market players like Jaypee Cement, Prism Cement, Birla Cement, and ACC cement because they are capturing significant market share.

Because of entry of international cement companies in coming years it will take a massive change and results in price confrontation.

For control on cement prices Government interferes and make such adjustments for it.

The overhead cost of cement increases due to loading limit and the cost is enhancing due to shortfall of coal industry.

Small industries enhances the rivalry among them so most of the retailers concentrates on good profit margin and extra benefits which results in offering intensive discount to customer and creates malpractices.

As the alternative of cement, Timber is to be used which is provide with low price and remained ineffective for long time.

Most of the countries use Timber because of continuous attack of earthquakes.

FINANCIAL ANALYSIS OF CEMENT INDUSTRY

RATIO ANALYSIS:

Ratios can be classified in four heads:

Liquidity Ratio

Solvency Ratio

Turnover Ratio

Profitability Ratio

Liquidity Ratio

It is essential for a firm to be able to meet its obligations as they become due.

Liquidity ratio measures the ability of the firm to meet its current obligations.

There are two Ratios under this head:

Current ratio

Quick Ratio

Current Ratio

The Current Ratio is a measure of the firm’s short term solvency. The Current Ratio measures the total rupees’ worth of current assets and total rupees’ worth of current liabilities.

Current Ratio = Current Assets/Current Liability

(Rs. In crore)

Particulars

2010

2011

2012

CA

CL

CA

CL

CA

CL

Ultratech

1121.26

1992.60

2703.28

4772.07

2978.38

5599.74

Ambuja

1228.44

1893.98

1341.25

2314.49

3451.02

2143.57

India Cement

956.07

1454.10

804.46

1335.08

738.51

1781.56

Total

3305.77

5340.68

4848.99

8421.64

7167.91

9524.87

Ratio

0.62

0.58

0.75

INTERPRETATION:

Mostly in these three companies current liabilities are more than current assets. In 2011, the Ratio declines which is not good for an industry. It cannot meet its current obligations. But the Ratio increase in 2012 it indicates the good performance of an industry. It can help in meeting current obligations and it shows the satisfactory Ratio.

Quick Ratio

Quick Ratio establishes a relationship between quick, or liquid assets and current liabilities. A rupee of cash is more readily available to meet current obligations than a rupee of, say, inventory.

Quick Ratio = (Current assets – Inventory) / Current Liability

Particulars

2010

2011

2012

CA

I

CL

CA

I

CL

CA

I

CL

Ultratech

1121.26

821.70

1992.60

2703.28

1956.52

4772.07

2978.38

2035.94

5599.74

Ambuja

1228.44

901.86

1893.98

1341.25

924.97

2314.49

3451.02

983.93

2143.57

India Cement

956.07

468.19

1454.10

804.46

517.73

1335.08

738.51

525.81

1781.56

Total

3305.77

2191.75

5340.68

4848.99

3399.22

8421.64

7167.91

3545.68

9524.87

Ratio

0.21

0.17

0.38

INTERPRETATION:

It indicates that the Ratio increases in 2012, but the Ratio is less than 1 so it is clear that there is a block of inventory. But the industry tries to decrease the block of inventory. But the Ratio is lower in 2011 so it may find difficult to meet its obligations because its quick assets are lower than one times of current liabilities.

Solvency Ratio

There are two ratios under this head:

Debt Equity Ratio

Debt Ratio