A

PROJECT REPORT ON
INVENTORY MANAGEMENT
AT
ULTRATECH CEMENT
SUBMITTED BY

AYAAN KARIM SAYANI

H.T.NO: 121118684020

PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE

AWARD OF THE DEGREE

BACHELOR OF BUSINESS ADMINISTRATION

OSMANIA UNIVERSITY,

HYDERABAD.

ST.PAUL’S DEGREE& PG COLLEGE

(AFFILIATED TO OSMANIA UNIVERSITY)

HIMAYATNAGAR, HYDERABAD.

(2020-2021 )
 ST. PAUL’S DEGREE & PG COLLEGE
HIMAYATNAGAR, HYDERABAD. PH. NO: 27602533
WEBSITE: www.st-pauls.co.in, EMAIL ID: stpdge@yahoo.co.inph: 040-27602533

CERTIFICATE

This is to certify that AYAAN KARIM SAYANI is a bonafide student

of BBA III YEAR of this institution with Hall Ticket No: 1211-1868-4020 for
this Academic year 2020-2021 . He has submitted a project on INVENTORY
MANAGEMENT from the organization ULTRATECH CEMENT under the
supervision of Mrs. K. HARICHANDANA.

DATE: PRINCIPAL
 ST. PAUL’S DEGREE & PG COLLEGE
HIMAYATNAGAR, HYDERABAD. PH. NO: 27602533
WEBSITE: www.st-pauls.co.in, EMAIL ID: stpdge@yahoo.co.inph: 040-27602533

CERTIFICATE

This is to certify that AYAAN KARIM SAYANI of BBA III YEAR

with Hall Ticket NO: 1211-1868-4020 for the academic year 2020-2021 has
completed a project on INVENTORY MANAGEMENT from
ULTRATECH CEMENT under the supervision of Mrs. K.
HARICHANDANA.

DATE: SIGNATURE OF THE GUIDE

 ST. PAUL’S DEGREE & PG COLLEGE
HIMAYATNAGAR, HYDERABAD. PH. NO: 27602533
WEBSITE: www.st-pauls.co.in, EMAIL ID: stpdge@yahoo.co.inph: 040-27602533

CERTIFICATE

This is to certify that the project is submitted by AYAAN KARIM

SAYANI bearing Hall Ticket No: 1211-1868-4020 of BBA III YEAR on the
project INVENTORY MANAGEMENT from ULTRATECH CEMENT
during the academic year 2020-2021

External Examiner Internal Examiner

 CERTIFICATE

This is to certify that the project entitled “Inventory Management” submitted

by Mr. Ayaan Karim Sayani bearing H.T.No: 1211-1868-4020 in partial
fulfillment for the award of the degree of BBA from ST PAUL’S DEGREE &
P.G COLLEGE, is a bonafide work carried out by him in Ultratech Cement,
Hyderabad.

He has completed the assigned project as per requirement within the time frame,
his performance during the period of work was found to be excellent.

We wish all the best in his future endeavors.,

Thanking you,

For Ultratech Cements Limited

Mr. RAMAKRISHNA,

ASST. MANAGER

ADITYA BIRLA GROUP LIMITED

Brach Office: 503. Aditya Trade Centre, 5 th Floor, Aditya Enclave Road, Ameerpet, Hyderabad – 500038, Tel: 040-6643 0430
Registered Office: “B Wing, 2nd Floor, Ahura Centre, Mahakali Caves Road, Andheri (East), Mumbai – 400 093, India.
Tel: 91-22-66817800, Fax: 91-22-66928109. Website: ultratechcement.com
 DECLARATION

I here by state that the information related to my project on

INVENTORY MANAGEMENT from ULTRATECH CEMENT is the
primary data related to my subject and it is part of curriculum under the
Osmania university jurisdiction and it is not submitted to any organization or
institute.

Place: Hyderabad

Date: AYAAN KARIM SAYANI

 ACKNOWLEDGEMENT

As a student of St. Paul’s degree and P.G college is affiliated to Osmania

University. I express my heartfelt thanks to the ULTRATECH CEMENT
organization for providing the necessary information related to my project.

I also express my sincere thanks to the Sri. SIRAJUDDIN, Hon. Secretary &
correspondent of St. Paul’s Degree & Pg College and Sri. M.HAYA
GREEVA CHARY, Principal St. Paul’s Degree & PG College who provided
me the opportunity and complete cooperation facilities and all the necessary
infrastructure to complete my project.

Last but not the least it is my good fortune to have a dedicated faculty and guide
for my project, their whole-hearted co-operation helped in completing the
project in time and acquiring the knowledge.

AYAAN KARIM SAYANI

1211-1868-4020
 ABSTRACT

Inventory Management is helpful for the businesses operate hardware stores, where
storeowner keeps the records of sales and purchase. Mismanaged inventory means
disappointed customers, too much cash tied up in warehouses and slower sales. This project
eliminates the paper work, human faults, manual delay and speed up process. Inventory
Management System will have the ability to track sales and available inventory, tells a
storeowner when it's time to reorder and how much to purchase. Inventory Management
System is a windows application developed for Windows operating systems which focused in
the area of Inventory control and generates the various required reports.
 INDEX

CHAPTER NO PARTICULARS PAGE NO

CHAPTER 1 Introduction 1-10
Need of the Study
Objective of the Study
Scope of the Study
Research Methodology
Limitation of the Study

CHAPTER 2 Review of Literature 11-18

CHAPTER 3 Industry Profile 19-32

Company Profile
CHAPTER 4 Data Analysis and Interpretation 33-42

CHAPTER 5 Findings 43-49

Conclusion
Suggestion
Bibliography 50-51
 CHAPTER I

INTRODUCTION

1
 INTRODUCTION

The success of a venture depends on its ability to provide services to customers or users
and remain financially viable. For an organization which is supplying goods to its
customers, the major activity is to have suitable products available at an acceptable price
within a reasonable timescale. Many parts of a business are involved in setting up this
situation. Initially these are the marketing and design departments. Then purchasing, and
in some cases, manufacture is involved. For an item which is already in the marketplace,
the main activity is providing a continuity of supply for the customers.

Inventory enables a company to support the customer service, logistic or manufacturing

activities in situations where purchase or manufacture of the items is not able to satisfy
the demand. Lack of satisfaction could arise either because of the speed of purchasing or
manufacturing is too protracted, or because quantities cannot be provided without
stocks.

Stock control exists at a crossroads in the activities of a company. Many of the activities depend
on the correct level of stock being held, but the definition of the term 'correct level' varies
depending upon which activity is defining the stock. Stock control is definitely a balancing act
between the conflicting requirements of the company, and the prime reason for the development
of inventory management is to resolve this conflict in the best interest of the business. A
conventional supply organization will have many departments including sales, purchasing,
finance, quality assurance, contracts and general administration. In some cases there will also be
manufacturing, distribution or support services or a variety of industry.

Inventory management is the active control program, which allows the management, sales,
purchases and payments.

Inventory management software helps create invoices, purchase orders, receiving lists, payment
receipts and can print bar coded labels. An inventory management software system configured
to your warehouse, retail or product line will help to create revenue for your company. The
Inventory Management will control operating costs and provide better understanding.

2
OBJECTIVES OF INVENTORY CONTROL

Scientific control of inventories should serve the following purpose:

 To provide continuous flow of required materials, parts and components for

efficient and uninterrupted flow of production.
 To minimize investment in inventories keeping in view operating requirements.
 To provide for efficient store of materials so that inventories are protected from
loss by fire and theft and handling time and cost are kept at a minimum.
 To keep surplus and obsolete items to minimum.

PURPOSE OF INVENTORY
The only inventory that is required is that which is actually being processed in a
manufacturing environment or being delivered to a customer in a distribution
environment. Leading companies in all industries recognize that inventory usually
indicates a potential area of improvement; it is a symptom rather than an asset.

 Process buffer: Inventory should be used to buffer processes only at strategic

points. As viewed by a supply chain, a warehouse or distribution center is really
just a process buffer goods arrive in batches (pallets, truckloads, cartons, and so
on) and are “processed” (distributed to the customer) in smaller lots. In a
manufacturing company, processes frequently operate at different rates, thereby
requiring inventory buffers.

 Fluctuations in demand: This inventory allows a supplier to satisfy customer

demand that is higher than expected. However, inventory is an expensive
substitute for information. When you can see actual usage of your product by the
end customer as well as inventory levels in the supply chain, you can satisfy
your customers while carrying minimal inventories. This approach requires you
to reduce your lead times and those of your suppliers. You can use this same
approach to help your suppliers reduce their inventories, and therefore their
costs. As you will see in another way to reduce the need for this type of
inventory is to reduce the re supply time. If the supply lead time can be reduced
to one day or less, much less inventory is required.

3
 Unreliability of supply: In the short run, inventory can be used as a buffer
against unreliable suppliers (both internal and external). In the long run, you can
work with suppliers to insure their reliability, or you can replace them. The total
cost of supplier unreliability is usually far greater than any savings in purchase
price. The best suppliers deliver “perfect” materials directly to the desired
location inside your company on schedule. This is equally true for internal
suppliers in a manufacturing company. If varying quality is a root cause of
unpredictability, it should be addressed by an appropriate quality initiative (for
example, Six Sigma or Total Quality Management).
 Price protection: Buying large quantities at one time has been a traditional
hedge against price increases. You can negotiate pricing and long-term contracts
with key suppliers, but you should request multiple deliveries. As your suppliers
implement lean practices, they will strongly prefer to ship smaller quantities at
frequent intervals, rather than asking you to take delivery of the entire purchased
amount at once. Pricing agreements should also include the possibility of cost
reductions, automatically passing on the supplier’s cost reductions.

 Quantity discounts: Some suppliers offer discounts for buying large quantities.
Quantity discounts work just like price protection. Quantity discounts are being
replaced today by key supplier agreements, in which you agree to purchase your
entire year’s usage of various product families from one supplier in exchange for
highly favorable pricing, superb service, impeccable quality..

 Lower ordering costs: Traditionally companies looked at ordering costs as a

necessary cost that should be traded off against carrying costs. However, today’s
preferred way to lower ordering costs is to eliminate all non-value-added steps in
the ordering cycle. Value stream mapping is a technique of flow-charting all
steps in a process (such as placing an order), calculating the total cost and total
elapsed time, then identifying all those steps that don’t really add value in the
customer’s eyes and deciding how to eliminate them.

4
Types of Inventory

TYPES OF INVENTORY

RAW MATERIAL WORK-IN-PROGRESS FINISHED GOODS

IN-PROCESS
- REJECTED -REJECTED - REJECTED

- APPROVED -APPROVED - APPROVED

INTERMEDIARIES

-REJECTED

-APPROVED

Inventory can be falls under three basic categories:

5
 Raw materials
 Work –in- progress.
 Finished Goods

Raw Materials:

These are the Inputs to produce the products. It includes direct material used in
the manufacture of a product and it also includes the components, fuel etc. used in the
manufacture.

These raw materials can be again divided in to two categories. They are:
Approved raw material: Raw materials can be checked by the Quality Control
people by using certain Quality Control Methods. If they are approved after applying those
methods label can be pasted by the quality control people called ‘Approved Label’. It is in
green colour.

Ex: (Robin Singh) 4-AMINO-4-METGYL-3-N PROPLY PYRAZOLE-CARBOXAMIDE

SILDEN-AFILICATRATE AMINE, (Richa) PTHALIMIDOAMLODIPINE

Rejected raw material: Raw materials can be checked by the Quality Control people
by using certain Quality Control Methods. If they are rejected after applying those
methods label can be pasted by the quality control people called ‘Rejected Label’. It is
in red colour.

Work in progress (WIP):

It includes partly finished goods and materials, sub-assemblies etc.held between
manufacturing stages. WIP should be kept to a minimum.Work-in-progess again can be
divided in to three categories. They are:
 Intermediaries: The material which is in middle of the production process for
final product is called Intermediaries.
 Semi-finished goods: The material which is in the last stage of production
process is called Semi-finished goods. In this stage also the products can be
approved or rejected by the quality control people.

6
  In process: Every stage in the production process contains again certain
process. If the materials are in this stage then we may call it as under process.
In these stages also the products may be approved or rejected.

Finished product:
The goods ready for sale or distribution will come under this category. In this stage also
the products may be rejected due to certain reasons.
Ex: Sertraline HCL, Lisino Pril USP, Omeprazole etc.
The classification of inventory of a particular firm depends upon the nature of the
business it carries. For a spinning mill, cotton is the raw material and yarn is the
finished product. But in case of textile mill yarn is the raw material and fabric is the
finished product. A manufacturing concern’s inventory consists of all the above three
types of inventory but in case of trading concern, the first two categories will not appear
in their stocks. The efficiency shown in inventory will have direct impact on
profitability of a business enterprise.

PURCHASING PLAN

The purchasing plan details:

 When commitments should be placed;

 When the first delivery should be received;
 When the inventory should be peaked;
 When reorders should no longer be placed; an
 When the item should no longer be in stock.
Well planned purchases affect the price, delivery and availability of products for sale.

CONTROLLING YOUR INVENTORY

To maintain an in-stock position of wanted items and to dispose of unwanted items, it is
necessary to establish adequate controls over inventory on order and inventory in stock.
There are several proven methods for inventory control. They are listed below, from
simplest to most complex.

7
  Visual control enables the manager to examine the inventory visually to
determine if additional inventory is required. In very small businesses
where this method is used, records may not be needed at all or only for
slow moving or expensive items.
 Tickler control enables the manager to physically count a small portion
of the inventory each day so that each segment of the inventory is
counted every so many days on a regular basis.
 Click sheet control enables the manager to record the item as it is used
on a sheet of paper. Such information is then used for reorder purposes.
 Stub Control (used by retailers) enables the manager to retain a portion
of the price ticket when the item is sold. The manager can then use the
stub to record the item that was sold.
DEVELOPMENTS IN INVENTORY MANAGEMENT
In recent years, two approaches have had a major impact on inventory management:
 Material Requirements Planning (MRP) and
 Just-In-Time (JIT and Kanban).

Their application is primarily within manufacturing but suppliers might find new
requirements placed on them and sometimes buyers of manufactured items will
experience a difference in delivery.
Material Requirements Planning is basically an information system in which sales are
converted directly into loads on the facility by sub-unit and time period. Materials are
scheduled more closely, thereby reducing inventories, and delivery times become
shorter and more predictable. Its primary use is with products composed of many
components. MRP systems are practical for smaller firms. The computer system is only
one part of the total project which is usually long-term, taking one to three years to
develop.

Just-In-Time inventory management is an approach which works to

eliminate inventories rather than optimize them. The inventory of raw materials and
work-in-process falls to that needed in a single day. This is accomplished by reducing
set-up times and lead times so that small lots may be ordered. Suppliers may have to
make several deliveries a day or move close to the user plants to support this plan.

8
NEED FOR THE STUDY:

Materials are equivalent to cash and they make up an important part of the total cost. it is
essential that materials should be properly safeguarded and correctly accounted. proper control
of material can make a substantial contribution to the efficiency of a business. the success of a
business concern largely depends upon efficient purchasing, storage, consumption and
accounting.

OBJECTIVES OF THE STUDY :

 To study about the ordering levels for the important components of inventory.
 To understand and measure economic order quantity for the selected raw material
items.
 To analyze its inventory management methods with the help of EOQ analysis.
 To evaluate the inventory management practices of ULTRATECH PRODUCTS
LIMITED.
 To offer suitable suggestions for the improvement of inventory management
practices. ULTRATECH

SCOPE OF THE STUDY

The study is done on inventories held by ULTRATECH The scope of the study includes the
LIFO- FIFO Statements, Techniques of Inventory Management & Just in Time System.

Inventory control is the activity which organizes the availability of items to the
customers. It co-ordinates the purchasing, manufacturing and distribution functions to
meet the marketing needs. This role includes the supply of current sales items, new
products, consumables, spare parts, obsolescent items and all other supplies.

9
METHODOLOGY :

Information is collected through the Primary and Secondary data.

 Primary data is collected through the personnel interactions with the employees in the
organization.
 Secondary data is collected from Referred text books, Annual Reports & Websites

LIMITATIONS OF THE STUDY:

 Due to the limited time available the authenticity of conclusions drawn based on the
observations made cannot be ensured.
 The analysis of Inventory Management is based on information available and if any
mistake would be reflected in the study.
 The figures and facts claimed in the annual reports and other forms are assumed true.
 It is based on the data supplied by the factory personnel.

10
CHAPTER II

REVIEW OF
LITERATURE

11
 REVIEW OF LITERATURE
A number of National and International research studies have been carried out on
different aspects of financial performance by the researchers, economists and
academicians in India. Different authors have analyzed performance in different
aspects. Very few research work has been done on analysis of financial performance of
Indian cement industry. Therefore, the present chapter reviews the empirical studies
related with different aspects of financial performance. Literature review was divided in
two category National review and International review.
NATIONAL REVIEW
Kaura, M. N and Bala Subramanian (1979) analyzed ten cement units during the period
of study 1972 to 1977 shows that the financial performance of the selected cement
companies evidenced by Profitability, Liquidity and capital structure ratios has
declined. The non availability of funds has affected the modernization of plants and
periodic rehabilitation of the kilns. Besides, the bottlenecks in supply of raw materials
and power and non remunerative prices have reduced the capacity utilization, profits
and cash flows. The profitability and liquidity position in many cement companies have
been affected adversely because of the problems in supply of raw materials , transport
and power.

Nagarajrao B.S and Chandar K (1980) analyzed the financial efficiency of cement
companies for the selected period of the study 1970 -71 to 1977-78. It can be analyzed
profitability of selected cement companies has been found downward trend from 1970-
71 to 1974-75 because the reason of inflation, rising of manufacturing cost, continuous
fall in capacity utilization due to many reasons. Kumar B. Das (1987) has made an
analysis of the financial performance of the cement industry. it can be analyzed that the
net fixed assets as a percentage of total assets decreased for the period 1970-71 to 1977-
78 that was 553.5% to 44.04 % respectively. Current liabilities have increased than the
current assets. Liquidity 16 performance of the cement industry is not healthy during
period of the study. The Debt Asset ratio has downward During the period of the study
and Debt Equity ratio has slightly increased while net worth ratio has decreased over the
years.

Nair N.K. (1991) has focused the productivity aspect of Indian Cement Industry. This
study emphasised that cement, being a construction material, occupied a strategic place
12
in the Indian economy. This study has revealed that, in 1990-91, the industry had an
installed capacity of 60 million tonnes with a production of 48 million tonnes. In this
study, the cement industry was forecasted to have a capacity growth of about 100
million tonnes by the year 2000. This study has also analyzed the productivity and
financial performance ratios of the cement industry with a view to identifying the major
problem areas and the prospects for solving them.

Dr. Dinesh A. Patel (1992) have analyzed Financial Analysis - A Study of Cement
Industry of India for the period of 1979-80 to 1988-89. He can analyzed the profitability
of the cement industry, to examine the short term financial strength of the cement
industry through the analysis of working capital management and to analyzed the long
term financial strength through the analysis of capital structure.

SubirCokavn and RejendraVaidha (1993) have analyzed to evaluate the performance of

cement industry after decontrol. They found that the performance of the cement
industry after decontrol was characterized by outcomes that were generally competitive
and welfare enhancing. This study has revealed that the structure of the industry
changed significantly with large magnitude of relative technologically and superior
capacity being created by many new entrants into the industry. It was also noticed in
this study that there were significant real price increase and an associated increase in
profitability. The performance of firms across the strategic group was different with
firms operating relatively new and large plants appeared to have an advantage. Further,
the study has dealt with the nature and effect of inter-firm heterogeneities in the cement
industry.

Chandrasekaran N (1993) has made an attempt to examine determinants of profitability

in cement industry. He identified that profitability was determined by structural, as well
as, behavioural variables. He also identified that the other variables 17 which influenced
profitability were growth of the firm, capital turnover ratio, management of working
capital, inventory turnover ratio etc. Some of the main changes in the cement industry
environment during 1980's identified in this study were: from complete control to
decontrol, number of new entrants and substantial additions of capacity, changing
technology from inefficient wet process to efficient dry process and from conditions of
scarcity of cement to near gloat in the market.
13
Chandrasckaran N (1994) has studied about the market structure of the Indian Cement
industry like demand and supply. It was analyzed in that study that the demand and
supply gap has been considerably reduced and supply of cement during the period of
study has increased due to creation of additional capacity and capacity utilization.

Srinivasa Rao.G and IndrasenaReddy.P (1995), in their study, analyzed the financial
strength of paper industry had been improving from year to year. The company's
performance in relation to generating internal funds in the form of reserves and surplus
was excellent and also the company was doing well in mobilizing outsiders' funds. The
liquidity position of the company was sound as revealed by current ratio and quick ratio
which were above the standard. The solvency ratio showed that the company had been
following the policy of low capital gearing from the 1990-91 as these ratios had been
decreasing from this year. The performance of the company in relation to its
profitability was not up to the expected level. The company's ability to utilize assets for
generation of sales had not been improved much during the period of study period as
revealed by its turnover ratios.

Govind Rao and Rao (1999) studied the impact of working capital on profitability in
Indian cement industry. It can be analyzed both positive as well as negative correlations
between working capital related ratios and profitability.

Rajeswari. N (2000), in her study on liquidity management of Tamil Nadu Cement

Corporation Ltd., Alangulam, identified that the liquidity position of the Tamil Nadu
Cements Corporation Ltd. (TANCEM) was not satisfactory in terms of Quick ratio and
Current ratio. She concluded that necessary steps ought to be taken to improve the
liquidity position of the company.

Nand Kishore Sharma (2002), in his Study on financial appraisal of cement industry in
India, has found that the liquidity position was decreasing, current ratio and quick ratio
showed a decreasing trend and also these ratios varied from time to time. On comparing
the current ratio and quick ratio of cement industry, six companies were found higher
than the industry average and four companies lower than industry average. The
solvency position in term of debt-equity ratio has showed a decreasing trend in the first
4 years of study, after that, it registered an increasing trend. The ratio of fixed assets to
14
total debt always showed more than 100 percent which indicated that the claims of
outsiders were covered by the fixed assets of the cement companies.

Ghosh S.K., and Maji S.G. (2004), in their paper, to examine the efficiency of Working
capital management of the Indian cement companies from the year 1992- 1993 to 2001-
2002. They conclude from the study indicated that the Indian cement industry, as a
whole, did not perform good perform during the selected period of the study. Bardia
(2006), in his study on Liquidity Management of Steel Authority of India Limited, has
analyzed the overall performance of liquidity maintained by steel sector and the amount
tied-up in various components of working capital. This study has found that there was a
positive relationship between liquidity and profitability.

AmalenduBhunia (2007), studied on liquidity management, analyzed the theshort term

financial strength through the analysis of the working capital management of selected
iron and steel companies in India. The study revealed that actual values of working
capital have been found to be lower than the estimated values of working capital for the
companies, such as Steel Authority of India Limited (SAIL) and Indian Iron and Steel
Corporation (IISCO). There was a poor liquidity performance existed in case of both
SAIL and IISCO, inefficient inventory management in case of SAIL and inefficient
receivable management in case of both the enterprises. It suggested that increase in
additional investment in raw materials, reduction in the burden of current liabilities
were necessary in order to improve the inventory management and liquidity position of
these steel companies.

SudiptaGhosho (2008) has analyzed the liquidity performance of Tata Iron and Steel
Company (TISCO). During the selected period of the study, it was found that the
liquidity position of the company, on the basis of current ratio as well as quick ratio,
was not satisfactory. It indicated that the share of current assets in total assets of the
company, on an average, was 29.1 percent during the period of study. It was suggested
that to maintain overall control of liquidity position, the company should give special
attention to the management of current assets. He found that the degree of influence of
liquidity on its profitability was low and insignificant.

15
Rajamohan .S and Vijayaragavan T. (2008) have studied on production performance of
Madras Cement Limited. it can be analyzed the comparative production performance of
Madras cement and all other cement companies in India. Statistical method Mann-
Whitney U-test was applied. The results of analysis indicated that the production
performance of selected unit was equal to production performance of all other cement
units in India.

Dharmendra S (2011) analyzed that Liquidity is in closely relation with the profitability
of the Indian Cement Industry as compared to the solvency ratios like Total Assets
Ratio, Inventory Turnover Ratio, Debt-Equity Ratio and Operating Expenses Ratio.

Harshad R. Tandel (2013) Analyzed that the Financial Analysis of selected Plastic
Manufacturing Industrial Units of Gujarat for the period 2000-01 to 2009-10. The main
objective of this study was to analysis and evaluate the financial performance of
selected companies in particular and the plastic industry in general with the help of
composited such ratios like Profitability, Activity, Liquidity and solvency. He judge the
financial performance with the help of Trend Analysis and Analysis of Variance. He
can concluded that the liquidity and profitability performance was not good, but in
terms of activity and solvency performance of industry was satisfactory.

INTERNATIONAL REVIEW
AlovsatMuslumov (2005) analyzed that the privatization was associated with a
declining value added and shareholders’ profitability in Turkish cement industry. A
decline in the value added and shareholders’ profitability were mainly caused by the
decrease in return on assets. The decline in the return on asset was traced to declining
asset productivity. These results are not consistent with previous cross-sectional
privatization studies and number of country studies.

Adolphus J. Toby (2008) has conducted a study on liquidity performance relationship of

Nigerian manufacturing companies. The results of the study have revealed a significant
relationship between liquidity, .profitability, efficiency and leverage measures. The
study has also made an attempt to suggest that in order to target money supply,
monetary policy could be used to facilitate monetary transmission mechanism by
integrating a minimum liquidity requirement for the manufacturing industry. Rationale
16
for the present study. Haq and Sohail and Zaman and Alam (2011) analyzed The
relationship between Working Capital Management and Profitability: A Case Study of
Cement Industry in Pakistan. In this study to analyzed the relationship between working
capital management and profitability. Researcher selected 14 companies in cement
industry in the Khyber Pakhtonkhuwa Province (KPK) of Pakistan. The study is totally
depend on secondary data collected from the audited financial statements of these
companies which are listed in Karachi Stock Exchange for the period spaning 2004-
2009. The data was analyzed using the statistical techniques of correlation coefficient
and multiple regression analysis.

Hajihassani (2012) A Comparison of Financial Performance in Cement Sector in Iran.

This study exhibited comparison of financial performance for the period study 2006 to
2009. It can be analyzed comparison of financial performance of selected cement
companies by using various financial ratios and measures of cement companies working
in Iran. Financial ratios are divided into three categories In this concludes that the
performance of cement companies on the basis of profitability ratios different than on
the basis of liquidity ratio and leverage ratio.

Dr. Abdul Ghafoor Awan, Pervaiz Shahid, Jahanzeb Hassan, Waqas Ahmad (2014)
have analyzed the impact of Working Capital Management on performance of cement
sector in Pakistan. The period of the study spanning from 2009 to 2013. The study is
totally depend on secondary data collected from the audited financial statements of
these companies which are listed in Karachi Stock Exchange. Return on was used as the
dependent variable in order to test the impact of Working Capital Management on
firm’s profitability and independent variables were, Inventory Turnover in Days, Cash
Conversion Cycle, Current Ratio, Quick Ratio, Gross Working Capital, Average
Payment, size of firm, and Funds allocated by government in Public Sector
Development Program. Panel Data method is used to study the impact of Working
Capital Management on profitability of Cement sector of Pakistan. He can concluded
that cash conversion cycle, Inventory turnover in Days and Average Payment Period
have negative relation with firm performance and their probability is significant.
Current Ratio has proved statistically insignificant and has negative impact on Return
on Equity in this study. These Literature reviews were related to various industries such
as cement, steel and sugar in India and abroad. Of these reviews, there are the major
17
research conducted on the liquidity and profitability management through the
accounting tools. But no comprehensive study was carried out on Financial Analysis of
cement industry of India- A statistical Approach to analyze the financial performance of
cement industry.

18
 CHAPTER -III

INDUSTRY

&
COMPANY PROFILE

19
 INDUSTRY PROFILE

In the most general sense of the word, a cement is a binder, a substance which sets and hardens
independently, and can bind other materials together. The word "cement" traces to the Romans,
who used the term "opus caementicium" to describe masonry which resembled concrete and was
made from crushed rock with burnt lime as binder. The volcanic ash and pulverized brick
additives which were added to the burnt lime to obtain a hydraulic binder were later referred to
as cementum, cimentum, cäment and cement. Cements used in construction are characterized as
hydraulic or non-hydraulic.

The most important use of cement is the production of mortar and concrete—the bonding of
natural or artificial aggregates to form a strong building material which is durable in the face of
normal environmental effects.

Concrete should not be confused with cement because the term cement refers only to the dry
powder substance used to bind the aggregate materials of concrete. Upon the addition of water
and/or additives the cement mixture is referred to as concrete, especially if aggregates have been
added.

It is uncertain where it was first discovered that a combination of hydrated non-hydraulic lime
and a pozzolan produces a hydraulic mixture (see also: Pozzolanic reaction), but concrete made
from such mixtures was first used on a large scale by Roman engineers.They used both natural
pozzolans (trass or pumice) and artificial pozzolans (ground brick or pottery) in these concretes.
Many excellent examples of structures made from these concretes are still standing, notably the
huge monolithic dome of the Pantheon in Rome and the massive Baths of Caracalla. The vast
system of Roman aqueducts also made extensive use of hydraulic cement. The use of structural
concrete disappeared in medieval Europe, although weak pozzolanic concretes continued to be
used as a core fill in stone walls and columns.

Modern Cement

Modern hydraulic cements began to be developed from the start of the Industrial Revolution
(around 1800), driven by three main needs:

Hydraulic renders for finishing brick buildings in wet climates

Hydraulic mortars for masonry construction of harbor works etc, in contact with sea water.

20
Development of strong concretes.

In Britain particularly, good quality building stone became ever more expensive during a period
of rapid growth, and it became a common practice to construct prestige buildings from the new
industrial bricks, and to finish them with a stucco to imitate stone. Hydraulic limes were favored
for this, but the need for a fast set time encouraged the development of new cements. Most
famous was Parker's "Roman cement." This was developed by James Parker in the 1780s, and
finally patented in 1796. It was, in fact, nothing like any material used by the Romans, but was a
"Natural cement" made by burning septaria - nodules that are found in certain clay deposits, and
that contain both clay minerals and calcium carbonate. The burnt nodules were ground to a fine
powder. This product, made into a mortar with sand, set in 5–15 minutes. The success of
"Roman Cement" led other manufacturers to develop rival products by burning artificial
mixtures of clay and chalk.

John Smeaton made an important contribution to the development of cements when he was
planning the construction of the third Eddystone Lighthouse (1755-9) in the English Channel.
He needed a hydraulic mortar that would set and develop some strength in the twelve hour
period between successive high tides. He performed an exhaustive market research on the
available hydraulic limes, visiting their production sites, and noted that the "hydraulicity" of the
lime was directly related to the clay content of the limestone from which it was made. Smeaton
was a civil engineer by profession, and took the idea no further. Apparently unaware of
Smeaton's work, the same principle was identified by Louis Vicat in the first decade of the
nineteenth century. Vicat went on to devise a method of combining chalk and clay into an
intimate mixture, and, burning this, produced an "artificial cement" in 1817. James Frost,orking
in Britain, produced what he called "British cement" in a similar manner around the same time,
but did not obtain a patent until 1822. In 1824, Joseph Aspdin patented a similar material, which
he called Portland cement, because the render made from it was in color similar to the
prestigious Portland stone.

All the above products could not compete with lime/pozzolan concretes because of fast-
setting (giving insufficient time for placement) and low early strengths (requiring a delay of
many weeks before formwork could be removed). Hydraulic limes, "natural" cements and
"artificial" cements all rely upon their belite content for strength development. Belite develops
strength slowly. Because they were burned at temperatures below 1250 °C, they contained no
alite, which is responsible for early strength in modern cements. The first cement to William
Aspdin's innovation was counter-intuitive for manufacturers of "artificial cements", because
they required more lime in the mix (a problem for his father), because they required a much

21
higher kiln temperature (and therefore more fuel) and because the resulting clinker was very
hard and rapidly wore down the millstones which were the only available grinding technology
of the time. Manufacturing costs were therefore considerably higher, but the product set
reasonably slowly and developed strength quickly, thus opening up a market for use in concrete.
The use of concrete in construction grew rapidly from 1850 onwards, and was soon the
dominant use for cements. Thus Portland cement began its predominant role. it is made from
water and sand

22
 COMPANY PROFILE

ULTRATECH CEMENT:

UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It manufactures and
markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana
Cement. It also manufactures ready mix concrete (RMC).

UltraTech Cement Limited has five integrated plants, six grinding units and three terminals —
two in India and one in Sri Lanka.

UltraTech Cement is the country’s largest exporter of cement clinker. The export markets span
countries around the Indian Ocean, Africa, Europe and the Middle East.
UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P) Limited.

The roots of the Aditya Birla Group date back to the 19th century in the picturesque town of
Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started trading
in cotton, laying the foundation for the House of Birlas.

Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the early
part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up industries in
critical sectors such as textiles and fibre, aluminium, cement and chemicals. As a close
confidante of Mahatma Gandhi, he played an active role in the Indian freedom struggle. He
represented India at the first and second round-table conference in London, along with Gandhiji.
It was at "Birla House" in Delhi that the luminaries of the Indian freedom struggle often met to
plot the downfall of the British Raj.

Ghanshyamdas Birla found no contradiction in pursuing business goals with the dedication of a
saint, emerging as one of the foremost industrialists of pre-independence India. The principles
by which he lived were soaked up by his grandson, Aditya Vikram Birla, our Group's legendary
leader.

Aditya Vikram Birla: putting India on the world map A formidable force in Indian industry,
Mr. Aditya Birla dared to dream of setting up a global business empire at the age of 24. He was

23
the first to put Indian business on the world map, as far back as 1969, long before globalisation
became a buzzword in India.

In the then vibrant and free market South East Asian countries, he ventured to set up world-class
production bases. He had foreseen the winds of change and staked the future of his business on a
competitive, free market driven economy order. He put Indian business on the globe, 22 years
before economic liberalisation was formally introduced by the former Prime Minister, Mr.
Narasimha Rao and the former Union Finance Minister, Dr. Manmohan Singh. He set up 19
companies outside India, in Thailand, Malaysia, Indonesia, the Philippines and Egypt.

Interestingly, for Mr. Aditya Birla, globalisation meant more than just geographic reach. He
believed that a business could be global even whilst being based in India. Therefore, back in his
home-territory, he drove single-mindedly to put together the building blocks to make our Indian
business a global force. Under his stewardship, his companies rose to be the world's largest
producer of viscose staple fibre, the largest refiner of palm oil, the third largest producer of
insulators and the sixth largest producer of carbon black. In India, they attained the status of the
largest single producer of viscose filament yarn, apart from being a producer of cement, grey
cement and rayon grade pulp. The Group is also the largest producer of aluminium in the private
sector, the lowest first cost producers in the world and the only producer of linen in the textile
industry in India.

At the time of his untimely demise, the Group's revenues crossed Rs.8,000 crore globally, with
assets of over Rs.9,000 crore, comprising of 55 benchmark quality plants, an employee strength
of 75,000 and a shareholder community of 600,000.

Most importantly, his companies earned respect and admiration of the people, as one of India's
finest business houses, and the first Indian International Group globally. Through this
outstanding record of enterprise, he helped create enormous wealth for the nation, and respect
for Indian entrepreneurship in South East Asia. In his time, his success was unmatched by any
other industrialist in India.

That India attains respectable rank among the developed nations, was a dream he forever
cherished. He was proud of India and took equal pride in being an Indian.

Under the leadership of our Chairman, Mr. Kumar Mangalam Birla, the Group has sustained and
established a leadership position in its key businesses through continuous value-creation.
Spearheaded by Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf Fertilisers and companies in
Thailand, Malaysia, Indonesia, the Philippines and Egypt, the Aditya Birla Group is a leader in a

24
swathe of products — viscose staple fibre, aluminium, cement, copper, carbon black, palm oil,
insulators, garments. And with successful forays into financial services, telecom, software and
BPO, the Group is today one of Asia's most diversified business groups.

"To actively contribute to the social and economic development of the communities in
which we operate. In so doing, build a better, sustainable way of life for the weaker
sections of society and raise the country's human development index."

— Mrs. Rajashree Birla, Chairperson,

The Aditya Birla Centre for Community Initiatives and Rural Development

Awards won

Year Award

2014-2015 Subh Karan Sarawagi Environment Award

2014-2015 Business World FICCI-SEDF CSR Award

2014 Greentech Environment Excellence Gold Award

2014 IMC Ramkrishna Bajaj National Quality Award

2014 Asian CSR Award

2013-2014 National Award for Prevention of Pollution

2013-2014 Rajiv Gandhi Environment Award for Clean Technology

2013-2014 State Level Environment Award (Plant)

Making a difference
Before Corporate Social Responsibility found a place in corporate lexion, it was already
textured into our Group's value systems. As early as the 1940s, our founding father Shri G.D
Birla espoused the trusteeship concept of management. Simply stated, this entails that the wealth
that one generates and holds is to be held as in a trust for our multiple stakeholders. With regard
to CSR, this means investing part of our profits beyond business, for the larger good of society.

25
While carrying forward this philosophy, his grandson, Aditya Birla weaved in the concept of
'sustainable livelihood', which transcended cheque book philanthropy. In his view, it was unwise
to keep on giving endlessly. Instead, he felt that channelising resources to ensure that people
have the wherewithal to make both ends meet would be more productive. He would say, "Give a
hungry man fish for a day, he will eat it and the next day, he would be hungry again. Instead if
you taught him how to fish, he would be able to feed himself and his family for a lifetime."

Taking these practices forward, our chairman

Mr. Kumar Mangalam Birla institutionalised the concept of triple bottom line accountability
represented by economic success, environmental responsibility and social commitment. In a
holistic way thus, the interests of all the stakeholders have been textured into our Group's fabric.

The footprint of our social work today straddles over 3,700 villages, reaching out to more than 7
million people annually. Our community work is a way of telling the people among whom we
operate that We Care.

Their strategy

Our projects are carried out under the aegis of the "Aditya Birla Centre for Community
Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the
strategic direction, and the thrust areas for our work ensuring performance management as well.

Our focus is on the all-round development of the communities around our plants located mostly
in distant rural areas and tribal belts. All our Group companies —- Grasim, Hindalco, Aditya
Birla Nuvo, Indo Gulf and UltraTech have Rural Development Cells which are the
implementation bodies.

Projects are planned after a participatory need assessment of the communities around the plants.
Each project has a one-year and a three-year rolling plan, with milestones and measurable
targets. The objective is to phase out our presence over a period of time and hand over the reins
of further development to the people. This also enables us to widen our reach. Along with
internal performance assessment mechanisms, our projects are audited by reputed external
agencies, who measure it on qualitative and quantitative parameters, helping us gauge the
effectiveness and providing excellent inputs.

Our partners in development are government bodies, district authorities, village panchayats and
the end beneficiaries -- the villagers. The Government has, in their 5-year plans, special funds
earmarked for human development and we recourse to many of these. At the same time, we

26
network and collaborate with like-minded bilateral and unilateral agencies to share ideas, draw
from each other's experiences, and ensure that efforts are not duplicated. At another level, this
provides a platform for advocacy. Some of the agencies we have collaborated with are UNFPA,
SIFSA, CARE India, Habitat for Humanity International, Unicef and the World Bank.

Our focus areas

Our rural development activities span five key areas and our single-minded goal here is to help
build model villages that can stand on their own feet. Our focus areas are healthcare, education,
sustainable livelihood, infrastructure and espousing social causes.

The name “Aditya Birla” evokes all that is positive in business and in life. It exemplifies
integrity, quality, performance, perfection and above all character.

Our logo is the symbolic reflection of these traits. It is the

cornerstone of our corporate identity. It helps us leverage the unique
Aditya Birla brand and endows us with a distinctive visual image.

Depicted in vibrant, earthy colours, it is very arresting and shows the

sun rising over two circles. An inner circle symbolising the internal universe of the Aditya Birla
Group, an outer circle symbolising the external universe, and a dynamic meeting of rays
converging and diverging between the two.

Through its wide usage, we create a consistent, impact-oriented Group image. This undoubtedly
enhances our profile among our internal and external stakeholders.

Our corporate logo thus serves as an umbrella for our Group. It signals the common values and
beliefs that guide our behavior in all our entrepreneurial activities. It embeds a sense of pride,
unity and belonging in all of our 130,000 colleagues spanning 25 countries and 30 nationalities
across the globe. Our logo is our best calling card that opens the gateway to the world.

UltraTech is India's largest exporter of cement clinker. The company's production facilities are
spread across eleven integrated plants, one white cement plant, one clinkerisation plant in UAE,
fifteen grinding units, and five terminals — four in India and one in Sri Lanka. Most of the
plants have ISO 9001, ISO 14001 and OHSAS 18001 certification. In addition, two plants have
received ISO 27001 certification and four have received SA 8000 certification. The process is

27
currently underway for the remaining plants. The company exports over 2.5 million tonnes per
annum, which is about 30 per cent of the country's total exports. The export market comprises of
countries around the Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area
in the company's strategy for growth.

UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and
Portland blast furnace slag cement.

 Ordinary Portland cement

 Portland blast furnace slag cement
 Portland Pozzolana cement
 Cement to European and Sri Lankan norms

Ordinary Portland cement

Ordinary portland cement is the most commonly used cement for a wide range of applications.
These applications cover dry-lean mixes, general-purpose ready-mixes, and even high strength
pre-cast and pre-stressed concrete.

Portland blast furnace slag cement

Portland blast-furnace slag cement contains up to 70 per cent of finely ground, granulated blast-
furnace slag, a nonmetallic product consisting essentially of silicates and alumino-silicates of
calcium. Slag brings with it the advantage of the energy invested in the slag making. Grinding
slag for cement replacement takes only 25 per cent of the energy needed to manufacture
portland cement. Using slag cement to replace a portion of portland cement in a concrete
mixture is a useful method to make concrete better and more consistent. Portland blast-furnace
slag cement has a lighter colour, better concrete workability, easier finishability, higher
compressive and flexural strength, lower permeability, improved resistance to aggressive
chemicals and more consistent plastic and hardened consistency.

Portland Pozzolana cement

Portland pozzolana cement is ordinary portland cement blended with pozzolanic materials
(power-station fly ash, burnt clays, ash from burnt plant material or silicious earths), either
together or separately. Portland clinker is ground with gypsum and pozzolanic materials which,
though they do not have cementing properties in themselves, combine chemically with portland
cement in the presence of water to form extra strong cementing material which resists wet

28
cracking, thermal cracking and has a high degree of cohesion and workability in concrete and
mortar.

"As a Group we have always operated and continue to operate our businesses as Trustees with a
deep rooted obligation to synergise growth with responsibility."

— Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group

The cement industry relies heavily on natural resources to fuel its operations. As these dwindle,
the imperative is clear — alternative sources of energy have to be sought out and the use of
existing resources has to be reduced, or eliminated altogether. Only then can sustainable
business be carried out, and a corporate can truly say it is contributing to the preservation of the
environment.

UltraTech takes its responsibility to conserve the environment very seriously, and its eco-
friendly approach is evident across all spheres of its operations. Its major thrust has been to
identify alternatives to achieve set objectives and thereby reduce its carbon footprint.

These are done through:

:: Waste management

:: Energy management

:: Water conservation

:: Biodiversity management

:: Afforestation

:: Reduction in emissions

Importantly, UltraTech has set a target of 2.96 per cent reduction in CO 2 emission intensity, at a
rate of 0.5 per cent annually, up to 2015-16, with 2013-10 as the baseline year. This will also
include CO2 emissions from the recently acquired ETA Star Cement and upcoming projects.

29
Our strategy

Our projects are carried out under the aegis of the "Aditya Birla Centre for Community
Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the
strategic direction, and the thrust areas for our work ensuring performance managementas
well.

Our focus is on the all-round development of the communities around our plants located mostly
in distant rural areas and tribal belts. All our Group companies —- Grasim, Hindalco, Aditya
Birla Nuvo and UltraTech have Rural Development Cells which are the implementation bodies.

Projects are planned after a participatory need assessment of the communities around the plants.
Each project has a one-year and a three-year rolling plan, with milestones and measurable
targets. The objective is to phase out our presence over a period of time and hand over the reins
of further development to the people. This also enables us to widen our reach. Along with
internal performance assessment mechanisms, our projects are audited by reputed external
agencies, who measure it on qualitative and quantitative parameters, helping us gauge the
effectiveness and providing excellent inputs.

Our partners in development are government bodies, district authorities, village panchayats and
the end beneficiaries — the villagers. The Government has, in their 5-year plans, special funds
earmarked for human development and we recourse to many of these. At the same time, we
network and collaborate with like-minded bilateral and unilateral agencies to share ideas, draw
from each other's experiences, and ensure that efforts are not duplicated. At another level, this
provides a platform for advocacy. Some of the agencies we have collaborated with are UNFPA,
SIFSA, CARE India, Habitat for Humanity International, Unicef and the World Bank.

Our vision

"To actively contribute to the social and economic development of the communities in which we
operate. In so doing, build a better, sustainable way of life for the weaker sections of society and
raise the country's human development index."

— Mrs. Rajashree Birla, Chairperson,

The Aditya Birla Centre for Community Initiatives and Rural Development

30
Making a difference

Before Corporate Social Responsibility found a place in corporate lexicon, it was already
textured into our Group's value systems. As early as the 1940s, our founding father Shri G.D
Birla espoused the trusteeship concept of management. Simply stated, this entails that the wealth
that one generates and holds is to be held as in a trust for our multiple stakeholders. With regard
to CSR, this means investing part of our profits beyond business, for the larger good of society.

While carrying forward this philosophy, our legendary leader, Mr. Aditya Birla, weaved in the
concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his view, it
was unwise to keep on giving endlessly. Instead, he felt that channelising resources to ensure
that people have the wherewithal to make both ends meet would be more productive. He would
say, "Give a hungry man fish for a day, he will eat it and the next day, he would be hungry
again. Instead if you taught him how to fish, he would be able to feed himself and his family for
a lifetime."

Taking these practices forward, our chairman Mr. Kumar Mangalam Birla institutionalised the
concept of triple bottom line accountability represented by economic success, environmental
responsibility and social commitment. In a holistic way thus, the interests of all the stakeholders
have been textured into our Group's fabric.

The footprint of our social work today spans 2,500 villages in India, reaching out to seven
million people annually. Our community work is a way of telling the people among whom we
operate that We Care.

31
 PRODUCT PROFILE

ULTRA TECH CEMENTS manufactures and distributes its own main product lines of
cement .We aim to optimize production across all of our markets, providing a complete
solution for customer's needs at the lowest possible cost, an approach we call strategic
integration of activities.

Cement is made from a mixture of 80 percent limestone and 20 percent clay.

These are crushed and ground to provide the "raw meal”, a pale, flour-like powder.
Heated to around 1450° C (2642° F) in rotating kilns, the “meal” undergoes complex
chemical changes and is transformed into clinker. Fine-grinding the clinker together
with a small quantity of gypsum produces cement. Adding other constituents at this
stage produces cements for specialized uses.

QUALITY
Six strong benefits that make 43, 53 Grade, Super fine, Premium and Shakti
the ideal cement

 Higher compressive strength.

 Better soundness.
 Lesser consumption of cement for M-20 Concrete Grade and above.
 Faster de shuttering of formwork.
 Reduced construction time with a superior and wide range of cement catering to every
conceivable building need, ULTRA TECH CEMENTS is a formidable player in the
cement market.

Here just a few reasons why ULTRA TECH CEMENTS chosen by millions of India.

 Ideal raw material

 Low lime and magnesia content and high proportion of silicates.
 Greater fineness.

32
 CHAPTER - IV

DATA ANALYSIS &

INTERPRETATION

33
 DATA ANALYSIS & INTERPRETATION

SECONDARY DATA

The investment on raw materials over a period of 5 years from 2014 to 2019 is
presented in the following table.

4.1 Investment on Raw Materials:

Year Investment on Raw Material (in

crores)
2014-2015 11690.67

2015-2016 49950.88

2016-2017 42950.66

2017-2018 46087.45

2018-2019 93605.78

Table: 4.1 Investment on Raw Materials

Investment on Raw Material

(in crores)
100000
80000
60000
40000 Investment on Raw
20000 Material (in
0
crores)

Fig: 4.1: Investment on Raw Materials

Interpretation:

 From the above table it can be understood that the inventory was recorded
11,690.67 during the year 2014 – 15 and it is increased to 93605.78 during the
year 2018 – 19.
 It shows that there is an increase in the inventory to the more extent of 81915.11.
 The average inventory of Ultratech Cement was recorded at Rs.48857.08.
 The highest investment in inventory was recorded in the years 2018-19.
34
4.2 Trend Analysis:

Trend analysis technique is applied to know the growth rate in investment of raw
material of Ultratech Cement over the review period which is shown in the following table.

Trend Analysis:

Year Raw Materials (In Lakhs) Trend %

2014-2015 11690.67 87%
2015-2016 49950.88 373%
2016-2017 42950.66 315%
2017-2018 46087.45 344%
2018-2019 93605.78 699%
Table : 4.2 : Trend Analysis

Fig: 4.2: Trend Analysis

100000
90000
80000
70000
60000
50000 Raw Materials (In Lakhs)
40000 Trend %
30000
20000
10000
0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Interpretation:

 The investment on inventory has increased in the year 2014 – 15. And the last
year investment has decline continuously. The percentage in 2016–17 was 315%
as compared to years 2014 – 15 to 2015 – 16.
 The trends in inventories show that inventory have been more in the year
2018 – 19 and then it has shown a downward trend and again it increased to
some extent.
 The investment in inventories has shown fluctuating trend in initial years and
then it increase to 699% and again showing fluctuating trend

35
4.3 Inventory Turnover Ratio:

This ratio indicates the number of times the stock has been turned over during the period
& evaluates the efficiency with which a firm is able to manage its inventory. This ratio is
calculated by applying the following formula.
Cost of goods sold
Inventor turn over ration = _________________
Average inventory
Inventory turnover ratio:

Year Cost of goods sold Avg. Inventory Ratio

2014-2015 59021.41 37975.30 1.55
2015-2016 121551.71 95065.28 1.27

2016-2017 127533.58 12390.06 10.29

2017-2018 130392.68 13338.01 9.78
2018-2019 311636.92 160035.93 1.947
Table – 4.3: Inventory Turnover Ratio

400000

300000
Cost of goods sold
200000
Avg. Inventory
100000 Ratio

0
1 2 3 4 5 6

Fig: 4.3: Inventory Turnover Ratio

Interpretation:

 From the above table it can be observed that inventory turnover ratio is 10.29
and it gradually decreased to 9.78 during 2017 – 2018.
 In the year 2015 – 16 it is clear that the ratio is very less i.e., his stock Is not
turned into sales quickly. As compared to all the years the ratio is very less in
2015– 16.
 The average inventory turnover ratio was recorded at 7.3 times during the review
period.

36
4.4 Inventory conversion period:
It may also be of interest to see average time taken for clearing the stocks. This can be possible
by calculating inventory conversion period. This period is calculated by dividing the number of
the days by inventory turns over.
This formula may be as:
Days in a year (360 days)
Inventory conversion period = _____________________
Inventory turnover ratio
Inventory conversion period: (in crores)
Cost of goods Avg.
Year Ratio ICP (Days)
sold inventory
2014-2015 59021.41 37975.30 1.55 232
2015-2016 121551.71 95065.28 1.27 283.46
2016-2017 127533.58 12390.06 10.29 34.98
2017-2018 130392.68 13338.01 9.78 36
2018-2019 311636.92 160035.93 1.94 185.56
Table: 4.4: Inventory conversion period: (in crores)

400000
300000 Year
200000
Cost of goods sold
100000
Avg. Inventory
0
1 Ratio
2 3 4 5 6

Fig: 4.4: Inventory conversion period: (in crores)

Interpretation:

From the above table it can be identified the following observations:

 The inventory conversion period was 283.46 days during the year 2015-16
which indicates that the stock has been very quickly converted into sales which
mean the company is managing the inventory efficiently.
 The lowest inventory conversion period was recorded at 34 days in the year
2015 – 16 and the highest inventory conversion was recorded at 283.46 days in
the year 2015– 16.
 The average inventory conversion period was recorded at 107 days during the
review period.

37
4.5 Percentage of Inventory over current assets:
In order to know the percentage of inventory over current assets theRatio of inventory to
current assets is calculated and which is presented in the Following table.
Inventory
Inventory over current assets ratio = __________ X 100
Current assets
Percentage of Inventory Over current assets:

Year Inventory Current Assets Ratio (%)

2014-2015 11690.67 28770.78 40%

2015-2016 49950.88 53063.75 94%
2016-2017 42950.66 45598.02 94%
2017-2018 46087.45 49713.32 92%
2018-2019 93605.78 86811.49 107%
Table: 4.5 :Percentage of Inventory Over current assets

350000
300000
250000
200000
Cost of goods sold
150000
Avg. Inventory
100000
Ratio
50000
0
1 2 3 4 5 6

Fig: 4.5: Percentage of Inventory Over current assets

Interpretation:
 From the above table it can be understand that the % of inventory over current
assets ratio was showing a declined trend for two years 2017– 2018.
 However from the year 2018 – 19 it is showing an increasing trend.
 The lowest inventory over current assets ratio was recorded at 40% during the
year 2014 – 15 and the highest inventory over current assets ratio we recorded at
107% during 2018-2019.
 The average inventory over current assets ratio was recorded at 85%.

38
4.6 Percent of Inventory Over total current assets & fixed assets:

Inventory / Current + Fixed assets x 100

Year Inventory Total Assets Ratio (%)

2014-2015 11690.67 87468.76 13.36%

2015-2016 49950.88 117985.89 42.33%

2016-2017 42950.66 112647.26 38.12%

2017-2018 46087.45 112637.07 40.91%

2018-2019 93605.78 197330.50 47.43%

Table: 4.6: Percent of Inventory Over total current assets & fixed assets

250000

200000

150000
Inventory
Current Assets
100000
Ratio (%)

50000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Fig: 4.6: Percent of Inventory Over total current assets & fixed assets

Interpretation:

 From the year 2014-15 it is showing fluctuating trend but as compared to above
2 years it is increasing.
 The lowest inventory over total assets ratio was recorded at 13.36% during the
year 2014-15 and the highest inventory ratio was recorded at 47.43% during the
year 2018-19.
 The average inventory to total assets ratio was recorded at 36.43% during the
review period

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4.7. Percentage of Inventory over current liabilities:
In order to know the percentage of inventory over current liabilities the Ratio of
inventory to current liabilities is calculated and which is presented in The following
table.
Inventory
Inventory over current liabilities ratio = __________________ X 100
Current liabilities
Percentage of Inventory Over current liabilities:

Year Inventory Current liabilities Ratio (%)

2014-2015 11690.67 8042.62 145%

2015-2016 49950.88 16204.14 308%

2016-2017 42950.66 16204.14 265%

2017-2018 46087.45 17728.22 229%

2018-2019 93605.78 36253.41 258%

Table : 4.7: Percentage of Inventory over current liabilities

100000
80000
60000 Inventory
40000 Current liabilities
20000 Ratio (%)
0
2014-20152015-20162016-20172017-20182018-2019

Fig: 4.7: Percentage of Inventory over current liabilities

Interpretation:
 During the year 2014-15 the ratio was it gradually increased to 145% and there
is a net increase to the extent of 308% in the year 2015-2016.
 The lowest inventory over total amounts ratio was recorded at 145 during the
year 2014-15.
 The highest inventory to current liabilities ratio was recorded at 308% during the
year 2015-16
 The average inventory to current liabilities ratio was recorded at 241 during the
review period.

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4.8 Current Ratio:
In order to know the current ratio the percentage of current assets to current liabilities is
calculated and which is presented in the following table.
Current assets
Current Ratio = _____________________
Current liabilities
Calculation of Current Ratio’s:
Year Current Assets Current liabilities Ratio (%)
2014-2015 28770.78 8042.62 3.57%
2015-2016 53063.75 16204.14 3.27%
2016-2017 45598.02 16204.14 2.81%
2017-2018 49713.32 17728.22 2.80%
2018-2019 86811.49 36253.41 2.39%
Table: 4.8 :Calculation of Current Ratio’s

100000

90000

80000

70000

60000
Inventory
50000
Current liabilities
40000 Ratio (%)
30000

20000

10000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Fig: 4.8: Calculation Of Current Ratios

Interpretation:
 From the above table it can be interpreted that the % of current assets over
current liabilities ratio i.e., current ratio was showing a decreasing trend from
year 2014-2015.
 In the year 2014-2015 the ratio was 3.57% and has decreased to 3.27% in the
year 2015-2016.
 The lowest current ratio was recorded at 2017-18 which is 2.39% and the highest
current ratio was recorded at 3.57% during the year 2014-15.
 The average current ratio was recorded at 2.968% during the review period.

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4.9 Quick Ratio:
The quick ratio is the relationship between quick to current liabilities quick assets is more
rigorous test of liability position of a firm it is computed by applying the following formula.
Quick ratio = Quick assets / Current Liabilities
Where Quick assets = Current Assets – Inventory
Year Quick Assets Current liabilities Ratio (%)
2014-2015 17080 8042.62 2.12%
2015-2016 3112 16204.14 0.192%
2016-2017 3347 16204.14 0.20%
2017-2018 3625 17728.22 0.20%
2018-2019 3207 36253.41 0.08%
Table : 4.9 : Quick Ratio

40000

35000

30000

25000
Inventory
20000
Current liabilities
15000 Ratio (%)

10000

5000

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Fig: 4.9 : Quick Ratio
Interpretation:
 From the above table it can be understand as that the % of quick assets to current
liabilities i.e., the quick ratio was 2.12% in 2014-15 and from that year it is
showing decreasing trend.
 The highest quick ratio was recorded at 2.12% during the year 2014-15 and the
lowest quick ratio was recorded at 0.192% during the year 2015-16.
 The average quick ratio was recorded at 0.5584 during the review period.

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 CHAPTER V

FINDINGS
SUGGESTIONS
&
CONCLUSION

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 FINDINGS

The Economic Order Quantity (EOQ) is the number of units that a company should add
to inventory with each order to minimize the total costs of inventory—such as holding
costs, order costs, and shortage costs. The EOQ is used as part of a continuous review
inventory system in which the level of inventory is monitored at all times and a fixed
quantity is ordered each time the inventory level reaches a specific reorder point. The
EOQ provides a model for calculating the appropriate reorder point and the optimal
reorder quantity to ensure the instantaneous replenishment of inventory with no
shortages. It can be a valuable tool for small business owners who need to make
decisions about how much inventory to keep on hand, how many items to order each
time, and how often to reorder to incur the lowest possible costs.

The EOQ model assumes that demand is constant, and that inventory is depleted at a
fixed rate until it reaches zero. At that point, a specific number of items arrive to return
the inventory to its beginning level. Since the model assumes instantaneous
replenishment, there are no inventory shortages or associated costs. Therefore, the cost
of inventory under the EOQ model involves a tradeoff between inventory holding costs
(the cost of storage, as well as the cost of tying up capital in inventory rather than
investing it or using it for other purposes) and order costs (any fees associated with
placing orders, such as delivery charges). Ordering a large amount at one time will
increase a small business's holding costs, while making more frequent orders of fewer
items will reduce holding costs but increase order costs. The EOQ model finds the
quantity that minimizes the sum of these costs.

The basic EOQ relationship is shown below. Let us look at it assuming we have a
painter using 3,500 gallons of paint per year, paying $5 a gallon, a $15 fixed charge
every time he/she orders, and an inventory cost per gallon held averaging $3 per gallon
per year.

The relationship is TC = PD + HQ/2 + SD/Q '¦ where

 TC is the total annual inventory cost—to be calculated.
 P is the price per unit paid—assume $5 per unit.

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  D is the total number of units purchased in a year—assume 3,500 units.
 H is the holding cost per unit per year—assume $3 per unit per annum.
 Q is the quantity ordered each time an order is placed—initially assume 350
gallons per order.
 S is the fixed cost of each order—assume $15 per order.
Calculating TC with these values, we get a total inventory cost of $18,175 for the year.
Notice that the main variable in this equation is the quantity ordered, Q. The painter
might decide to purchase a smaller quantity. If he or she does so, more orders will mean
more fixed order expenses (represented by S) because more orders are handles—but
lower holding charges (represented by H): less room will be required to hold the paint
and less money tied up in the paint. Assuming the painter buys 200 gallons at a time
instead of 350, the TC will drop to $18,063 a year for a savings of $112 a year.
Encouraged by this, the painter lowers his/her purchases to 150 at a time. But now the
results are unfavorable. Total costs are now $18,075. Where is the optimal purchase
quantity to be found?
The EOQ formula produces the answer. The ideal order quantity comes about when the
two parts of the main relationship (shown above)—"HQ/2" and the "SD/Q"—are equal.
We can calculate the order quantity as follows: Multiply total units by the fixed ordering
costs (3,500 × $15) and get 52,500; multiply that number by 2 and get 105,000.
Divide that number by the holding cost ($3) and get 35,000. Take the square root of that
and get 187. That number is then Q.
In the next step, HQ/2 translates to 281, and SD/Q also comes to 281. Using 187 for Q
in the main relationship, we get a total annual inventory cost of $18,061, the lowest cost
possible with the unit and pricing factors shown in the example above.
Thus EOQ is defined by the formula: EOQ = square root of 2DS/H. The number we get,
187 in this case, divided into 3,500 units, suggests that the painter should purchase paint
19 times in the year, buying 187 gallons at a time.
The EOQ will sometimes change as a result of quantity discounts offered by some
suppliers as an incentive to customers who place larger orders. For example, a certain
supplier may charge $20 per unit on orders of less than 100 units and only $18 per unit
on orders over 100 units. To determine whether it makes sense to take advantage of a
quantity discount when reordering inventory, a small business owner must compute the
EOQ using the formula (Q = the square root of 2DS/H), compute the total cost of

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inventory for the EOQ and for all price break points above it, and then select the order
quantity that provides the minimum total cost.
For example, say that the painter can order 200 gallons or more for $4.75 per gallon,
with all other factors in the computation remaining the same. He must compare the total
costs of taking this approach to the total costs under the EOQ. Using the total cost
formula outlined above, the painter would find TC = PD + HQ/2 + SD/Q = (5 ×
3,500) + (3 × 187)/2 + (15 × 3,500)/187 = $18,061 for the EOQ. Ordering the
higher quantity and receiving the price discount would yield a total cost of (4.75 ×
3,500) + (3 × 200)/2 + (15 × 3,500)/200 = $17,187. In other words, the painter can
save $875 per year by taking advantage of the price break and making 17.5 orders per
year of 200 units each.
EOQ calculations are rarely as simple as this example shows. Here the intent is to
explain the main principle of the formula. The small business with a large and
frequently turning inventory may be well served by looking around for inventory
software which applies the EOQ concept more complexly to real-world situations to
help purchasing decisions more dynamically.
 There was good coordination between the Marketing, planning procurement,
production and distribution.
 Ultratech exports stock to my countries in world like china, USA,
 They do not to satisfy the employees needs.
 The company is having good sales for their products during all the years of the
study.
 The inventory turnover ratio is on a declining trend year after year in the period
of the study. It indicates inefficiency of management in turning of their
inventory into sales.
 The company should adopt sophisticated techniques to manage its inventory in a
better manner. The EOQ calculated is suggesting that the company should
obtain its inventory requirements by placing orders frequently to its suppliers
rather than one time replenishment.

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 SUGGESTIONS

 Inventory in Ultratech Cement was more. They have to minimize the inventory.
 They have to satisfy the employees needs.
 JIT system has to be implemented in the Ultratech Cement .This systemeliminates
the necessity of carrying large inventories, and thus, saves carrying and other related
costs to the manufacturer
 Verify count--Make sure you are receiving materials as are listed on the delivery
receipt.
 Carefully examine each material for visible damage--If damage is visible, note it on
the delivery receipt and have the driver sign your copy.
 After delivery, immediately open all materials and inspect for merchandise damage.

Steps to take when damage is discovered:

 Retain damaged items--All damaged materials must be held at the Point

received.
 Call carrier to report damage and request inspection.
 Confirm call in writing--This is not mandatory but it is one way to protect
yourself.

Steps to take when carrier makes inspection of damaged items:

 Have all damaged items in the receiving area--Make certain the damaged items
have not moved from the receiving area prior to Inspection by carrier.
 After carrier/inspector prepares damage report, carefully read before signing.

Steps to be taken after inspection has been made:

 Retain damaged materials--Damaged materials should not be used or disposed

of without permission by the carrier.
 Do not return damaged items to shipper without written authorization from
shipper / supplier

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SPECIAL TIPS FOR MANUFACTURERS.

If you are in the business of bidding, specifications play a very important role.
In writing specifications, the following elements should be considered.
 Do not request features or quality that is not necessary for the items' intended
use.
 Include full descriptions of any testing to be performed.
 Include procedures for adding optional items.
 Describe the quality of the items in clear terms.

The following actions can help save money when you are stocking inventory:
 Substitution of less costly materials without impairing required quality;
 Improvement in quality or changes in specifications that would lead to savings
in process time or other operating savings;
 Developing new sources of supply;
 Greater use of bulk shipments;
 Quantity savings due to large volume, through consideration of economic
order quantity;
 A reduction in unit prices due to negotiations;
 Initiating make-or-buy studies;
 Application of new purchasing techniques;
 Using competition along with price, service and delivery when making the
purchase selection decision.

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 CONCLUSIONS

 There should be proper accounting and physical controls.

 The inventory should be stored properly to avoid the losses like breakage,
spoilage, wastage, damage, deterioration, pilferage etc.
 Fixation of inventory levels like, minimum, maximum and reorder levels
and economic order quantity to ensure the optimum level of stocks.
 Proper care should be taken to avoid stock-out situation.
 Continuous supply of material should be ensured at the right time and right
cost.
 The investment in the inventory should be optimized by avoiding over-
stocking.
 Regular monitoring of stock movements and reduce the investments in
dormant and slow moving stocks

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BIBLIOGRAPHY

50
 BIBLIOGRAPHY

Referred from the following standard texts and websites:

 Financial Management I.M.Pande

 Financial Management Prasanna Chandra
 Management Accounting and Control S.N.Maheswari
 Cost& Management Accounting M.RaviKishore
 Financial Management Khan and Jain

ULTRATECH Websites:
 www.Ultratech .com
 http://www.Google.com

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