2011

ANALYSIS OF FINANCIAL STATEMENT, ULTRATECH CEMENT LTD. KOVAYA

RICHA DUA MTech-CPM 11/16/2011

CONTENTS
Sr.No 1 TITLE CONSTRUCTION INDUSTRY IN GLOBAL SCENARIO

CONSTRUCTION INDUSTRY IN INDIAN SCENARIO

COMPARISON OF CONSTRUCTION IND WITH OTHER INDUSTRIES

4 EXECUTIVE SUMMARY 5 OBJECTIVE OF THE STUDY 6 COMPANY PROFILE 7 8 TREND ANALYSIS RATIO CALCULATIONS

COMPARISON OF ULTRATECH CEMENT WITH AMBUJA CEMENT

10 11

MERGER AND ACQUISTION CONCLUSION

12

REFERENCE

Chapter:1 Construction & Infrastructure Scenario In Global

Introduction Government policies around the globe and the worlds capital markets are currently more enthusiastic about emerging markets infrastructure. This renewed enthusiasm has attracted new sources of funding and driven infrastructure development. In particular, more governments are placing greater emphasis on the development of infrastructure projects and, in recognition of the unprecedented level of capital needed to meet growth objectives; there is greater interest in private sector involvement and public-private partnerships (PPPs). Yet, from the private sector perspective, the flow of PPP deals is inconsistent and, in many markets, is constrained by politics, making it difficult to build long-term businesses around the hope that this opportunity will materialize. At the same time, some emerging market host countries (such as China, India and Qatar) are ramping up aggressively as project sponsors. In particular, Chinese investors and the Government of China are taking a growing role in infrastructure investment in Africa and other parts of the emerging world. Growth in private infrastructure investment funds has been driven by robust capital market activity and low interest rates. However, the sheer number of new funds has led to intense competition for assets, rising prices and talk of a bubble. At the same time, new sources of funding are becoming available from public financial institutions in emerging countries, particularly the export-import banks of Brazil, the Russian Federation, India and China (the BRIC countries). Traditional multilateral agencies are undergoing a period of soul searching as they try to re-establish their relevance and role in the midst of competition from young new financial institutions in the emerging markets. In addition, the availability of local currency financing in many of the emerging markets is at an all time high.

The rise of new sources and sponsors of funds There are four current trends in emerging markets infrastructure. After full privatization stalled in many emerging markets, there has been an increase in the importance of dual firms; these are quasi-government, quasi-private firms that have grown out of stalled reform processes and that own and operate infrastructure (Woodhouse, 2005). In several markets, dual firms have been able to acquire assets at low prices after international investors have lost money and pulled out. The second trend involves the rise in the importance of South-South investors; that is, infrastructure investors from within developing countries who are investing in local and regional projects. This has resulted in an increase in local currency financing (Yanosek et al., 2007). A third trend has to do with the rise of BRIC country export import banks. This refers to public financial institutions situated in the BRIC countries that are rapidly expanding their trade and investment promotion functions (Caspary, 2007). The fourth trend is the rise of petrodollars: as a result of supply-demand imbalances, national oil companies and sovereign wealth funds have become key investors in energy infrastructure and ancillary infrastructure along the extraction supply chain.

Private infrastructure funds

The 1990s witnessed significant growth in private investment in both developed and emerging country infrastructure, accompanied by the rise of several pioneering private infrastructure funds. Some of these firms include Emerging Markets Partnership, the Hastings Fund, Barclays Private Equity and Macquarie. Today, Macquarie has almost $22 billion under management, which demonstrates the growth potential of infrastructure funds. Local and regional sponsors from emerging markets Project sponsors shape speculative project concepts into functioning assets that generate financial returns. A World Bank analysis (Ettinger et al., 2005; Schur et al., 2006) of the involvement of local and regional sponsors from emerging markets in infrastructure projects noted that the exodus of international investors from Asia and Latin America following the 1997-1998 economic crises may have benefited local and regional investors. These investors were able to fill the void left by foreign investors, buying distressed projects and acting as catalysts in the development of local capital markets, and new projects. The data suggest that overseas investment by emerging country investors is about one-third of overall investment volumes (that is, 13 out of the 42% mentioned). This sub-group tends to favour ventures in regions neighbouring their own, enjoying a cultural advantage over foreign competitors. Across industries, in the period 1998-2004, local and regional sponsors accounted for a large portion of private investment in transportation (56%) and telecoms (46%), but much less in energy (27%) and water (19%). Across types of projects, they were responsible for almost half of all investment in concessions (54%) and Greenfield projects (44%), but significantly less for management contracts, lease contracts or divestitures (30%). In terms of location, investments accounted for by emerging market sponsors were not divided evenly across regions. South Asia, East Asia and the Pacific regions stand out with larger than 50% shares, while other regions lag behind. Growth of project finance from the capital markets There are several key trends in the evolution of project finance from the capital markets. In terms of regional activity for rated project finance transactions, approximately half of rated transactions between 1994 and 2006 took place in the United States, although the use of this type of instrument is growing in Europe, Latin America and the Middle East. Most project ratings tend to fall in the lowest investment grade category (Baa3) with a persistent spike at the highest (AAA) level. These transactions involve a monoline insurance guarantee. Ratings methodologies for target sectors are gradually evolving. Initially, rated deals were mostly for power projects, but today toll roads are also being financed via the international capital markets.

Chapter 2: Construction & Infrastructure Scenario in India

Indian real estate industry has also improved substantially in terms of quality of development. The construction sector in India is the second highest employer after agriculture, and provides direct or indirect employment to about 32 million people. Indias real estate sector is undoubtedly on a high growth path and recognized as global investors choice. India is holding ninth position among retail markets in the world with organized retailing and growing at the rate of 30 percent per annum. India has played up to its image of being one of the most attractive FDI destinations. Key Facts The construction industry in India is the second largest contributor to the national economy. The Indian construction industry is the second largest employment generation avenue in the country. The Planning Commission of India published the 11th Economic Plan in 2007, and set aside $492bn as investment outlay for infrastructure development. The country may have joined the group of top 21 elite countries in the world and maybe the third largest economy in the world in terms of PPP GDP and the 12th largest in terms of GDP, but infrastructure in India continues to be an impoverished sight (US $906bn). When compared to China, it lies way behind in terms of infrastructure. Chinese investment in infrastructure amounted to $100bn last year, while that of Indias was a mere $ 20bn. In short, a huge opportunity lies ahead for India and to sustain growth, basic infrastructure has to be improved. The Indian middle class is emerging strongly. The lower middle class has grown at a CAGR of 7.9%, which again is expected to grow by 49% in the coming four years. Similarly, the upper middle class has grown with a CAGR of 19% and is expected to grow by 116% over the next four years. Another forecast is that the number of million plus cities which is now 35, will reach 70. This will further accelerate the demand from the housing sector. All this points at just one thing the huge potential lying ahead for the Indian retail market. The 11th five year plan has proposed an investment of $320 bn in infrastructure. At present infrastructure contributes to 4.5% of GDP. However, to sustain the growth rate of 9%, it is important that the government strive for a contribution of around 7-8%. According to a committee report on infrastructure headed by the Prime Minister, the required sector wise investment is as follows: Highways : Rs.2,20,000 crores Railways : Rs. 3,00,000 crores Urban infrastructure : Rs. 1,97,000 crores Power generation : Rs. 4,10,000 crores Energy : Rs. 2,12,000 crores Airports : Rs. 40,000 crores Ports : Rs. 50,000 crores The institute of international finance (IIF) expects FDI in India to rise to $8 billion in 2008 from $6.5 billion in the last year Foreign direct investment is encouraged and permitted, in the following real estate sectors in India:

Hotel development Tourism Hospitality Township development

Developing commercial real estate Built-up infrastructure Housing and construction projects Building resorts Building hospitals etc.

Coming to the residential side, there has always been a shortage in the housing demand-supply. However the ever increasing population will see that this demand stays perennial. In 2008, the share of housing loans to GDP was 10.5%. Household savings are growing at an estimated 15%. This valuable source of investable capital is likely to shoot up to US$ 392bn by 2010. India is one of the worlds largest retail markets and continued growth will boost the organized retail trade. Other factors include the Rupee getting stronger and imports becoming cheaper. Moreover, with new townships coming up, investment in India is likely to increase. Thus there will be an increase in returns, investments and again, better returns. Indian construction and infrastructure firms (except L&T) may not break into the top league, which includes the 8-billion Hochtief, the $3.75-billion Consolidated Contractor Company, etc. Although some would make the cut as a decent mid-tier player even in the global context. They would compare quite favourably with firms like the euro 547-million VINCI, a French construction major. And as they grow, they are beginning to acquire design skills and build balance sheets that are strong enough to support towering projects. Their operational efficiencies are improving. In short, infrastructure projects in India are getting closer and closer to global size and quality.

Chapter 3: Comparison of Construction Industry with Other Industries

Houses, apartments, factories, offices, schools, roads, and bridges are only some of the products of the construction industry. This industrys activities include the building of new structures, including site preparation, as well as additions and modifications to existing ones. The industry also includes maintenance, repair, and improvements on these structures. From the financial point of view, it can be said that, projects in construction industry are having quite higher risk & at same time may also have a mouth-watering chance of earning good profits. Unlike other industries, which are generally are less risky, in terms of returns. Apart from that, also construction industries have larger gestation periods, & that too of a huge investment. So the investors need to keep patience & trust on project. Also, in other industries, it is comparatively easy to get equity capital for investment, whereas, in construction industries, large portion of investment is either through debt, or through internal accruals, or through own personal contribution, & a mere or nil part consists of equity. There are remarkable chances of the construction project getting blocked in midway, which may be due to number of reasons, like: Environment factors. Any technical fault ( Faulty structural design) Blockage of funds Natural calamities Breakdown of Equipment/ machineries Due to occurrence of some accidents causing death of workers etc However, such issues hardly occur in any other industries, & thus making them less risky.

Similarity Both industries exist to make products. Manufacturing tends to make the same product over and over, while construction makes a unique product, one at a time. This making of products provides opportunities for sharing experiences, research results, empirical evidence, etc., between these two industries. Both industries are part of the larger business community, seeking to survive, and striving to make a profit. Today, it is commonly accepted that profitability and survivability are driven by "customer satisfaction." While not a new theme, to be sure, for either industry, "customer satisfaction" is now the dominant, most important consideration for setting company direction and assuring profitability in both industries.

Differences Quality in Manufacturing The development of a quality attitude and capability within both current employees and those planning to enter manufacturing is regarded as a high priority. Technology-based programs focused on manufacturing at colleges and universities often include significant study of quality control. Many institutions offer either a targeted option or a degree in quality. These areas of study usually relate to quality in the manufacturing environment, but are increasingly including other business sectors, such as the general business community and service industries. Quality in Construction Quality functions in construction are as diverse as the construction industry itself, which is commonly divided into residential, commercial, industrial, heavy, and highway. For most of the construction industry, quality requirements are established by several different stakeholders (owner, legal building requirements and codes, architect/engineer, international/national specifications, manufacturers, suppliers, etc.), but, the final arbiter is the owner (within legal bounds) who must balance among the competing interests of a project's price, time, quality, and scope. However, the following paragraphs focus on quality management processes within the direct control of the constructor, not the owner, architect/engineer, supplier, materials' manufacturer, or code writer. Nonetheless, the constructors' quality initiatives may be, in part, dictated by the owner, as found in the contract (specifications). Of the many inputs to the construction process, the constructor wields direct control over four distinct processes: work schedules, work procedures, equipment, and overhead operations; and indirect control over two distinct processes: materials and labourers. Traditional monitoring techniques tend toward "hard" measures (cost and schedule), which are now used by most construction companies to evaluate performance on projects. Traditional techniques also include using formally trained and qualified skills (labor), following acceptance sampling, visual inspections, and testing processes.

CHAPTER 4 :EXECUTIVE SUMMARY

Project Title: Financial Statement Analysis

Company Name: UltraTech Cement Limited

The training at UltraTech Cement Limited involved the day to day working at corporate accounts departments with the senior & junior managers and research department in the company. This project helped me to get the deeper understanding of the process of Financial Statement Analysis and how decisions are taken to strengthen the financial position.

For this study five years comparative Income Statement & Balance Sheet have been taken for calculating ratio analysis. Main objective in undertaking this project is to supplement academic knowledge with absolute practical exposure to day to day functions of the sector.

Financial analysis which is the topic of this project refers to an assessment of the viability, stability and profitability of a business. This important analysis is performed usually by finance professionals in order to prepare financial or annual reports. These financial reports are made with using the information taken from financial statements of the company and it is based on the significant tool of Ratio Analysis. These reports are usually presented to top management as one of their basis in making crucial business decisions. During the summer training period at UltraTech Cement Limited, I had close connection with preparation of financial statements and also their analysis which was made by professionals in the accounting team of the company. This experience was an emphasis on the importance of these Ratios which could be the roots of decisions made by management that can make or break the company. So, I was influenced to allocate the aim of this project to study the details about these ratios and their possible effects on the decisions made by not only people inside the company but also the outsiders such as investors.

CHAPTER 5: OBJECTIVE OF THE STUDY

There have been various objectives for this study, the first of which is a detailed analysis of the financial statements that is the balance sheet and the income statement of UltraTech Cement Ltd.

The second objective, however the most important one or in other word the principle aim of this project is the understanding and assessment of financial ratios based on the statements of the company.

The next aim of the project is to recognize the position of the company through those ratios and data available. This recognition is a leading factor in changes of each and every company and the base and root of lots of management decisions.

CHAPTER 6 : COMPANY PROFILE

ADITYA BIRLA GROUP: BUSINESS OVERVIEW & BENCHMARKS: A US $28 billion premium conglomerate, the Aditya Birla Group is in the league of Fortune 500. It is anchored by an extraordinary force of 100,000 employees, belonging to 25 different nationalities. In India, the Group has been adjudged The Best Employer in India and among the top 20 in Asia by the Hewitt Economic Times and Wall Street Journal Study 2007. Over 50 percent of its revenues flow from its overseas operations. The group operates in 25 countries India, UK, Germany, Hungary, Brazil, Italy, France, Luxemburg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, Dubai, Singapore, Myanmar, Bangladesh, Vietnam, Malasia and Korea.

Globally the Aditya Birla Group is: A metals powerhouse, among the worlds most cost-efficient aluminium and copper producers. Hindalco-Novelis is the largest aluminium rolling company. It is one of the 3 biggest producers of primary aluminium in Asia, with the largest single location copper smelter. No. 1 in Viscose staple fibre. The 4th largest producer of insulators. The 4th largest producer of carbon black. The 11th largest cement producer. Among the worlds top BPO companies and among Indias top 4. Among the best energy efficient fertilizer plants. In India A premier branded garment player. The 2nd largest player in viscose filament yarn. The 2nd largest in the Chlor-alkali sector. Among the top 5 mobile telephony companies. A leading player in Life Insurance and Asset Management. Among the top 3 super-market chains in the Retail Business.

Rock solid in fundamentals, The Aditya Birla Group nurtures a culture where success does not come in the way of the need to keep learning afresh to keep experimenting.

Beyond Business The Aditya Birla Group is: Working in 3700 villages. Reaching out to 7 million people annually through the Aditya Birla Centre for Community Initiatives and Rural Development, spearheaded by Mrs. Rajshree Birla. Focusing on: health care, education, sustainable livelihood, infrastructure and espousing social causes. Running 41 Schools and 18 Hospitals.

VISION: To be a premium global conglomerate with a clear focus on each business. MISSION: To deliver superior value to our customers, shareholders, employees and society at large. VALUES: Integrity Commitment Passion Seamlessness Speed

ADITYA BIRLA GROUP- MAJOR PRESENCE

Businesses of ABG

FINANCIAL OVERVIEW CEMENT LIMITED BALANCE SHEET

As On Fixed Assets Gross Block Net Block Capital WIP Investment Current Assets Inventories Debtors Other Current Assets Balance Sheet Total 283.71 171.95 381.99 3619.52 379.57 172.55 220.4 3623.11 31-03-2005 Rs. Cr. 4304.29 2548.9 48.18 184.79 31-03-2006 Rs. Cr. 4605.38 2537.21 141.03 172.39

OF

ULTRATECH

31-032007 Rs. Cr. 4784.7 2517.28 696.95 483.45

31-03-2008 Rs. Cr. 4972.60 2500.46 2283.15 170.90

31-03-2009 Rs. Cr. 7,401.02 4,635.69 677.28 1,034.80

433.58 183.50 343.09 4657.85

609.76 216.61 477.52 6258.40

691.97 186.18 483.46 7709.38

Liabilities

Rs. Cr.

Rs. Cr.

Rs. Cr.

Rs. Cr.

Rs. Cr.

Shareholders Funds Equity Share Capital Share Capital Suspense Employees Stock Option 0.77 1.68 Outstanding Reserves and Surplus Loan Funds Deferred Tax Liabilities 942.73 1531.38 581.71 913.78 1451.83 576.96 1639.29 1578.63 560.26 2571.73 1740.50 542.35 3475.93 2141.63 722.93 124.40 124.40 0.09 124.49 124.49 124.49 -

Current Liabilities Creditors Other Current Liab./Prov. 224.67 214.63 318.13 237.92 463.99 291.19 776.79 501.77 723.09 519.63

Balance Sheet Total

3619.52

3623.11

4657.85

6258.40

7709.38

SUMMARISED P&L ACCOUNT

As On Net Sales Operating profit (PBIDT) PBIT Gross profit (PBDT) PBT PAT( net profit) 31-Mar-05 2,681.05 272.81 51.03 188.18 43.24 2.85 323.00 31-Mar-06 3,299.45 554.26 338.23 501.62 285.59 229.76 237.23 31-Mar-07 4,910.83 1,417.81 1191.56 1392.44 1166.19 782.28 226.25 31-Mar-08 5,509.22 1,720.06 1482.83 1744.24 1507.01 1,007.61 216.03 31-Mar-09 6,383.08 1,760.29 1437.29 1684.46 1361.46 977.02 221.78

DIVIDEND
As On Equity dividend Preference dividend 31-Mar-05 9.33 31-Mar-06 21.79 31-Mar-07 49.79 31-Mar-08 62.24 31-Mar-09 62.24 -

Chapter: 7 Ratio Of Ultra-tech Cement Limited

LIQUIDITY RATIOS: The two liquidity ratios, the current ratio and the acid test ratio, are the most important ratios in almost the whole of ratio analysis and they are also the simplest to use. Liquidity ratios provide information about a firms ability to meet its short- term financial obligations. They are of particular interest to those extending short term credit to the firm. Two frequently-used liquidity ratios are current and quick ratio.

While liquidity ratios are most helpful for short-term creditors/suppliers and bankers, they are also important to financial managers who must meet obligations to suppliers of credit and various government agencies. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern. A complete liquidity ratio analysis can help uncover weaknesses in the financial position of the business. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

1. CURRENT RATIO:

Current Asset Current Ratio = Current Liabilities

2005 Current Asset Current Liabilities Current Ratio 837.65 439.30 1.91

2006 772.52 556.05 1.39

2007 960.17 755.18 1.27

2008 1303.89 1278.56 1.02

2009 1361.61 1242.72 1.10

Comments: The ratio is mainly used to give an idea of the companys ability to pay back its short- term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio in each year suggests that the company would be able to pay off its obligations if they came due at that point, but the company has shown constant decreasing trend in its financial health in subsequent years, Since low current ratio does not necessarily mean that the firm will go bankrupt, but it is definitely is not a good sign. Short term creditors prefer a high current ratio since it reduce their risk.

2. Quick or Acid-Test Ratio

The essence of this ratio is a test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. So it is the backing available to liabilities that must be paid almost immediately. There are two terms of liquid asset and liquid liabilities in this formula, Liquid asset is all current assets except the inventories and prepaid expenses, because prepaid expenses cannot be converted to cash. The liquid liabilities include all current liabilities except bank overdraft and cash credit since they are not required to be paid off immediately.

Liquid Asset

Quick Ratio=

Liquid Liabilities

Liquid Asset Liquid Liabilities Quick Ratio

2005 553.94 439.30 1.26

2006 392.95 556.05 0.70

2007 526.59 755.18 0.70

2008 694.13 1278.56 0.54

2009 669.64 1242.72 0.54

Comments: The acid-test ratio is far more forceful than the current ratio, primarily because the current ratio includes inventory assets which might not be able to turn to cash immediately. Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Furthermore, if the acid-test ratio is much lower than the current ratio, it means current assets are highly dependent on inventory.

TURN OVER RATIOS Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues. Such ratios are frequently used when performing fundamental analysis on different companies.

1. FIXED ASSETS TURN OVER RATIO: It shows how the company uses its fixed assets to achieve sales. The formula is as follows: Net Sales Fixed Asset Turn Over Ratio= Fixed Assets

2005 NET SALES 2681.06

2006 3299.45

2007 4910.83

2008 5508.78

2009 6,383.08

FIXED ASSETS FIXED TURN RATIO: ASSETS OVER

2597.08

2678.24

3214.23

4783.61

5312.97

1.032

1.23

1.53

1.15

1.20

Comments: A High fixed asset turnover ratio indicates the capability of the firm to earn maximum sales with the minimum investing in fixed assets. So it shows that the company is using its assets more efficiently. As it is shown in above the Company is using its assets specially fixed assets more efficiently each year although it had a light decrease in efficiency in 2008 and 2009 compared to 2007.

2. WORKING CAPITAL TURN OVER RATIO: As its name suggests it is the relationship between turnover and working capital. It is a measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. A company uses working capital to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations.

The formula related is:

Net Sales Working Capital Turn Over Ratio = Working Capital

2005 NET SALES 2681.06

2006 3299.45

2007 4910.83

2008 5508.78

2009 6,383.08

WORKING CAPITAL WORKING CAPITAL TURN OVER RATIO

398.35

216.47

204.99

25.33

118.89

6.73

15.24

23.96

217.48

53.69

Comments: The term working capital is a measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as:

Working Capital = Current Asset Current Liabilities

Positive

working

capital

means

that the company

is

able

to

pay

off

its

short-

term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales..

FINANCE STRUCTURE RATIOS: Gearing is concerned with the relationship between the long terms liabilities that a business has and its capital employed. The idea is that this relationship ought to be in balance. It is a general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds. The shareholders and lenders of long term loans may be interested in this ratio.

1. Debt Equity ratio: This ratio reflects the relative claims of creditors and share holders against the assets of the firm, debt equity 39 ratios establishment relationship between borrowed funds and owner capital to measure the long term financial solvency of the firm. The ratio indicates the relative proportions of debt and equity in financing the assets of the firm.

It is calculated as debt debt equity ratio= shareholders fund

The debts side consist of all long term liabilities of the firm. The shareholders fund is the share capital plus reserve surpluses. and

The lower the debt equity ratio the higher the degree of protection enjoyed by the creditors. The debt equity ratio defined by the controller of capital issue, debt is defined as long term debt plus preference capital which is redeemable before 12 years and shareholders fund is defined as paid up equity capital plus preference capital which is redeemable after 12 years plus reserves & surpluses. The general norm for this ratio is 2:1. on case of capital intensive industries as norms of 4:1 is used for fertilizer and cement industry and a norms of 6:1 is used for shipping units.

2005 DEBT SHAREHOLDERS FUND DEBT RATIO EQUITY 1531.38 1067.13 1.43

2006 1451.83 1038.27 1.40

2007 1578.63 1763.78 0.90

2008 1740.50 2696.99 0.65

2009 2141.63 3602.1 0.59

Comments: In this ratio shareholders fund is the share capital plus reserve and surpluses. In case of high debt equity it would be obvious that the investment of creditors is more than owners. And if it is so high then it brings the firm in a risky position. Or if it is too low it might indicate that the organization has not utilized its capacity of borrowing which must be utilized and that is because the borrowing from outsiders is a good source of fund for business with lower returns in compare to equity. The UltraTech Cement Ltd. is trying to lower its debt equity ratio by lowering its liabilities and increasing its equity. So it wants to improve its position since, a relatively lower ratio is favorable.

PROFITABILITY RATIO

As the name itself suggests, this ratio is calculated to determine profitability of the firm. The basic objective of almost every business is to earn profit which is essential for survival of the business. A business needs profits not only for its existence but also for its expansion and diversification. The investors want an adequate return on their investments, workers want higher wages, creditors want higher security for interest and loan and the list could continue.

It is a class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

1. GROSS PROFIT RATIO:

The gross profit margin ratio tells us the profit a business makes on its cost of sales. It is a very simple idea and it tells us how much gross profit our business is earning. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. So we should have a much higher gross profit margin than net profit margin. High ratios are favorable in this, since it indicates the business is earning a good return on the sale of its merchandise.

Gross Profit Gross Profit Ratio = Net Sales X 100

2005 NET SALES 2681.06

2006 3299.45

2007 4910.83

2008 5508.78

2009 6,383.08

GROSS PROFIT GROSS PROFIT RATIO

265.02 9.88

501.62 15.20

1392.44 28.35

1507.01 27.36

1684.46 26.40

Comments: This ratio indicates the relation between production cost and sales and the efficiency with which goods are produced or purchased. If it has a very high gross profit ratio it may indicate that the organization is able to produce or purchase at a relatively lower cost. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. Here company has achieved very good efficiency in 2007 compared years. to other financial

2. NET PROFIT RATIO: This shows the portion of sales available to owners after all expenses. A high profit ratio is higher profitability of the firm. This ratio shows the earning left for shareholder as percentage of Net sales. Net Margin Ratio measures the overall efficiency of production, Administration selling, financing, pricing and Taste Management.

Net Profit After Tax Net Profit Ratio = Net Sales X 100

2005 NET SALES 2681.06

2006 3299.45

2007 4910.83

2008 5508.78

2009 6,383.08

NET PROFIT NET PROFIT RATIO

2.85 0.11

229.76 6.96

782.28 15.93

1007.61 18.29

977.02 15.30

Comments: It is depicted from the above diagram that company has been trying to improve its profitability year by year except for 2009 because of environmental instability which includes the economic meltdown in the country and whole world.

3. OPERATING NET PROFIT RATIO:

This ratio establishes the relation between the net sales and the operating net profit. The concept of operating net profit is different from the concept of net profit operating net profit is the profit arising out of business operations only. This is calculated as follows: Operating net profit = Net Profit + Non operating expenses non operating income. Alternatively, this profit can also be calculated by deducting only operating expenses from the gross profit. This ratio is calculated with help of the following formula.

Operating Net Profit operating n.p. ratio = Net sales 2005 NET SALES 2681.06 2006 3299.45 2007 4910.83 2008 5508.78 2009 6,383.08 X 100

OPERATING PROFIT

NET

272.81

554.26

1,417.81

1,720.06

1,760.29

OPERATING NET PROFIT RATIO

10.18

16.80

28.87

31.22

27.57

OVERALL PROFITABILITY OR ROR RATIOS: The ROI is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, the owner may be wiser to sell the company, put the money in risk-free investment such as a bank savings account, , and avoid the daily struggles of small business management.

These Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. The owner may thus determine the business's relative strengths and weaknesses.

1. RETURN ON EQUITY:

This ratio also known as return on shareholders funds or return on proprietors funds or return on net worth, indicates the percentage of net profit available for equity shareholders to equity shareholders funds and not on total capital employed.

It is calculated as:

N.P.A.T. - Preference Dividend ROE Ratio = Equity Share Holders Fund X 10

Note: Here Equity Share Holders Fund = Equity Capital + Reserves and Surplus 2005 N.P.A.T PREF.DIVIDEND Equity Share Holders Fund ROE RATIO 2.85 2006 229.76 2007 782.28 2008 1007.61 2009 977.02

1067.13 0.26

1038.27 22.13

1763.78 44.35

2696.99 37.36

3602.1 27.12

Comments: This ratio indicates the productivity of the owned funds employed in the firm. However, in judging the profitability of a firm, it should not be overlooked that during inflationary periods, the ratio may show an upward trend because the numerator of the ratio represents current values whereas denominator represents historical values.

VALUATION RATIOS

1. EARNINGS PER SHARE:

EPS measures the profit earned per share. The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time. So it is of utmost importance to investors in order to decide the prospects. It is calculated as: N.P.A.T. - Preference Dividend EPS = Number of equity shares Outstanding 2005 0.22 2006 18.47 2007 62.84 2008 80.94 2009 78.5

EPS

Comments: As mentioned above, EPS is one of the important criteria for measuring the performance of a company. If EPS increases, the possibility of a higher dividend per share also increases. However, the dividend payment depends on the policy of the company. Market price of shares of a company may also show an upward trend if the EPS is showing a rising trend.

SUMMARY OF RATIOS Table of Financial Ratios of ULTRATECH CEMENT LTD. for last Five Years

2005 Current Ratio Quick Ratio Fixed Asset Turn Over Ratio 1.91 1.26 1.032

2006 1.39 0.70 1.23

2007 1.27 0.70 1.53

2008 1.02 0.54 1.15

2009 1.10 0.54 1.20

Working Capital Turnover Ratio Debt Equity ratio

6.73 1.43

15.24 1.40

23.96 0.90

217.48 0.65

53.69 0.59

G.P. Ratio

9.88

15.20

28.35

27.36

26.40

N.P. Ratio Operating N.P. Ratio

0.11 10.18

6.96 16.80

15.93 28.87

18.29 31.22

15.30 27.57

ROE Ratio EPS

0.26 0.22

22.13 18.47

44.35 62.84

37.36 80.94

27.12 78.5

Observation and Findings Based on the ratios and calculations made on my project we can analyze as follows: The year 2007 could be called the peak on the business during last five year which almost divides the ratios into two parts, before 2004 and after that. Liquidity ratios shows that the firm has been facing some problems regarding paying short term liabilities for 3 years, but it is trying to improve the situation. The usage ratio of the company had followed a comparable pattern. The overall efficiency of the company to use its assets, capital or the working capital had increased from 2005 to 2007. However in the later years, it is declining and falling to a lower level of efficiency, for which we can blame the environmental conditions of the country, and that involves the economical and political challenges of India and the world. The Company fails to increase its profitability in the last year, though it should be mentioned that we see a noticeable net profit point in the 2008. It also fails to give satisfactory rate of return in the two years compared to 2007.

CONCLUSION

Ratios make the related information comparable. A single figure by itself has no meaning, but when expressed in terms of a related figure, it yields significant interferences. Thus, ratios are relative figures reflecting the relationship between related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute figures, are not of much use.

Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company.

Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give company. the decision-maker insights into the financial performance of a

The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firms position and performance.

The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing of inferences and conclusions. In brief, financial analysis is the process of selection, relation and evaluation.

Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an important tool of financial analysis.

Chapter: 8 TREND ANALYSIS

SALES & PROFIT SALES 2681.5 3299.45 4910.83 5509.22 6383.08 NET PROFIT 2.85 229.76 782.28 1007.61 977.02 YEAR 2005 2006 2007 2008 2009

NP & DPS NET PROFIT 2.85 229.76 782.28 1007.61 977.02 DIVIDEND PER SHARE 0.75 1.75 4 5 5 YEAR 2005 2006 2007 2008 2009

FA & TA FIXED ASSESTS 2597.08 2678.24 3214.23 4783.61 5312.97 TOTAL ASSESTS 3619.52 3623.11 4657.85 6258.4 7709.38 YEAR 2005 2006 2007 2008 2009

EQUITY & RESERVES EQUITY 124.4 124.4 124.49 124.49 124.49 RESERVES 942.73 913.78 1639.29 2571.73 3475.93 YEAR 2005 2006 2007 2008 2009

MV & BV MARKET VALUE 0.02 0.02 0.01 0.01 1.44 BOOK VALUE 301.22 1396.47 1953.41 1652.62 2054.12 YEAR 2005 2006 2007 2008 2009

NWC & TA NET WORKING CAPITAL 398.35 216.47 204.99 25.33 118.89 TOTAL ASSESTS 3619.52 3623.11 4657.85 6258.4 7709.38 YEAR 2005 2006 2007 2008 2009

EPS & MP EARNING PER SHARE 0.22 18.47 62.84 80.94 78.5 MARKET PRICE 0.02 0.02 0.01 0.01 1.44 YEAR 2005 2006 2007 2008 2009

CHAPTER 9: COMPARISON OF AMBUJA CEMENT & ULTRATECH CEMENT

AMBUJA CEMENT Ambuja Cements (previously known as Gujarat Ambuja) has a cement capacity of 22 m tonnes (MT). The company, which pioneered the concept of transport of cement by sea, is particularly strong in the northern and western markets. Holcim Mauritius, an indirect wholly owned subsidiary of Holcim (Europe), over a period of time has acquired close to 46% stake in the company. ULTRATECH CEMENT UltraTech, an Aditya Birla Group Company and a 51% subsidiary of Grasim, has a capacity of 23.1 MT at the end of FY10. However, once the merger with Samruddhi Cement culminates Ultratech will catapult to being the number one cement company with an aggregate capacity of 49 MT. The company has presence in the western, eastern and southern regions. It also manufactures ready mix concrete (RMC) and is the largest exporter of cement clinker. Its export markets span out around the Indian Ocean, Africa, Europe and the Middle East. AMBUJA CEMENT ULTRATECH CEMENT 31/12/2010 High Low Sales per share Earnings per share Cash flow per share Dividends per share Dividend yield (eoy) Book value per share Shares outstanding (eoy) Bonus/Rights/Conversions Price / Sales ratio Avg P/E ratio P/CF ratio (eoy) Price / Book Value ratio Dividend payout Avg Mkt Cap No. of employees Total wages/salary Avg. sales/employee Avg. wages/employee Avg. net profit/employee x x x x % Rs m `000 Rs m Rs Th Rs Th Rs Th Rs Rs Rs Rs Rs Rs % Rs m 167 95 48.3 8.3 10.8 2.60 2.0 47.9 1,529.86 ESOS 2.7 15.9 12.1 2.7 31.5 200,412 0 3,437 20.0 21.0 22.0 AMBUJA CEMENT ULTRATECH CEMENT 31/3/2011 1,175 820 499.6 49.9 79.6 6.00 0.6 388.3 274.04 GDR 2.0 20.0 12.5 2.6 12.0 273,355 12 6,990 11,896.0 607.4 1,188.0 14.2% 11.6% 9.7% 16.5% 13.6% 43.3% 330.0% 12.3% 558.3% 135.8% 79.4% 96.9% 106.5% 261.9% 73.3% 0.0% 49.2% 0.2% 3.5% 1.9%

INCOME DATA Net Sales Other income Total revenues Gross profit Depreciation Interest Profit before tax Minority Interest Prior Period Items Extraordinary Inc (Exp) Tax Profit after tax Gross profit margin Effective tax rate Net profit margin Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m % % % 73,902 2,476 76,378 18,230 3,872 487 16,347 0 371 265 4,354 12,629 24.7 26.6 17.1 136,911 2,896 139,807 25,621 8,130 2,911 17,476 63 1,255 0 5,121 13,673 18.7 29.3 10.0 54.0% 85.5% 54.6% 71.2% 47.6% 16.7% 93.5% 0.0% 29.6% 85.0% 92.4% 131.8% 90.9% 171.1%

BALANCE SHEET DATA Current assets Current liabilities Networking cap to sales Current ratio Inventory Turnover Debtors Turnover Net fixed assets Share capital "Free" reserves Net worth Long term debt Total assets Interest coverage Debt to equity ratio Sales to assets ratio Return on assets Return on equity Return on capital Exports to sales Imports to sales Net fx Rs m Rs m % x Days Days Rs m Rs m Rs m Rs m Rs m Rs m x x x % % % % % Rs m 31,353 23,971 10.0 1.3 45 6 65,627 3,060 68,819 73,261 497 103,191 34.6 0.0 0.7 12.7 17.2 23.7 1.3 7.0 -6,113 41,359 36,432 3.6 1.1 56 22 135,052 2,740 101,465 106,418 46,820 216,263 7.0 0.4 0.6 7.7 12.8 14.2 2.8 8.1 -7,876 75.8% 65.8% 277.6% 115.2% 79.8% 28.8% 48.6% 111.7% 67.8% 68.8% 1.1% 47.7% 493.6% 1.5% 113.1% 165.7% 134.2% 167.2% 46.3% 86.6% 77.6%

CHAPTER 10: MERGER AND ACQUISTION

HISTORY OF THE TAKEOVER BATTLE The story of the takeover battle between Grasim and L&T had its roots in another takeover battle in early nineties. In the late 1980s, Reliance Industries Limited (RIL) had acquired 10.05 percent stake in L&T. Armed with this, RIL was aspiring to acquire L&T as a whole, and not just its cement business. Established in 1923, L&T had been (and even today is) a truly professionally managed company with core competence in turnkey engineering projects. Acquiring L&T very well fitted in RILs plan that was setting up mega projects one after another. For L&T management, however, it was a life and death issue for had RIL taken over L&T, the top management of L&T would have certainly lost their freedom and control over the company and in all probability their jobs too. So L&T management fought back tooth and nail and managed to successfully ward of RIL attack. The story of that battle is quite thrilling but not the subject matter of this case. It may be sufficient to say that RIL could not manage to get support from the government, public at large and financial institutions. At that the time, the largest shareholders of L&T were financial institutions which collectively held 40 percent stake in L&T. LIC and UTI held approx. 27 percent and the rest was held by other FIs. FIs backed L&T management and RIL had to step back. MAIN STORY Finally, on November 18, 2001 RIL sold its entire 10.05 percent stake (25000000 equity shares) to Grasim, an A.V. Birla group company for Rs. 766.5 crore, The price of Rs. 306.6 that Grasim paid was approx. 46 percent higher than the then prevailing market price of around Rs. 208 210 per share. Thereafter, an investment company that was a subsidiary of Grasim acquired another 4.48% stake (1.112 crore equity shares) at an average price of Rs. 176.75 per share taking Grasims stake to 14.53 percent. Thereafter on October 13, 2002 Grasim made a public announcement of open offer to acquire 20% stake (4.973 crore shares) in L&T at Rs. 190/- per share. While Grasim had paid Rs. 306.6 per share to RIL, it had waited for more than six months to make an open offer. The highest price paid by Grasim for L&Ts shares in twenty six weeks prior to October 13, 2002 was only 188. 15 and the average of twenty six weeks and two weeks was 174.93 and 170.08 respectively. Grasim filed the draft letter of offer with the SEBI on October 24, 2002. On November 8, 2002 the SEBI asked the merchant bankers JM Morgan Stanley (JMMS) not to proceed with the open offer since it (i.e. the SEBI) wanted to investigate the matter of an alleged violation of Takeover Regulations in regard to Grasims acquisition of 10.05 percent stake from RIL. Grasim, ON November 18, 2002, preferred an appeal the Securities Appellate Tribunal (SAT) against the SEBI order and gave a public notice to that effect on November 20, 2002. Thereafter the investigation by the SEBI went on till almost third week of April 2003. Meanwhile in December 2002, L&T management tried to outsmart Grasim by mooting a proposal to carve out its cement business into a subsidiary wherein L&T would have retained around 75 percent stake and the shareholders of have got balance 25 percent or so. This would have brought down Grasims direct stake in the

cement business to about 3.75 percent as against its 14.53 percent stake in L&T. Grasim managed to get a stay from the court on this proposed de-merger. Further, on January 27, 2003 Grasim made a counter proposal of vertical de-merger of cement business to L&T board, Grasim valued L&Ts cement business at Rs. 130/- per share and engineering and other businesses at Rs. 162.5 per share thereby valuing L&T as a whole at Rs. 292.5 per share. Grasim also proposed that upon de-merger it would like to make an open offer to acquire control the cement business / company. By April 2003, the SEBI came to conclusion that Grasim had not violated Takeover Code, and that its offer was valid subject to making some additional disclosures. The SEBI then offered its comments to the draft letter of offer of Grasim on April 22, 2003. Finally Grasims open offer for L&Ts 20 percent stake opened on May 7, 2003 and closed on June 5, 2003. Grasim, accordingly, withdrew its appeal before SAT. The offer failed miserably and Grasim could get only 9.44 lac shares or 0.38% stake in the open offer. However, post announcement of open offer, Grasim, through its subsidiary, had purchased another 20.56 lac shares or 0.83% stake from the open market thereby taking its total holding to 15.73 percent of L&Ts equity capital. This paved way for Grasim to make creeping acquisition without making an open offer as also to get board seats on L&Ts board. Thereafter, in June 2003 itself the L&T management and Birlas hammered out a deal to carry out a structured de-merger of cement business of L&T and about further terms and conditions of Grasims takeover of control of the resultant cement company. THE DE-MERGER DEAL With effect from April 1, 2003, the cement business of L&T was vested in a separate company (UltraTech Cement Limited). It was decided that post de-merger, Grasim will acquire the control of the resultant cement company. However, L&T managed to retain certain key assets like L&T brand, ready mix cement (RMC) business, the gas power plant in Andhra Pradesh, and the entire residential and office property of the cement division. As a part of the scheme of de-merger / arrangement, L&Ts equity capital of Rs, 248.67 crore, consisting of approx. 24.88 crore shares of Rs. 10/- each was reduced. L&Ts paid up capital was brought down to Rs. 24.88 crores consisting of 12.44 crore shares of Rs. 2 each. Accordingly shareholders of L&T received one share of Rs. 2/- face value of new L&T for every two shares of Rs. 10/- face value of old L&T. UltraTechs paid up capital was fixed at Rs. 124.91 crores consisting of approx. 12.49 crore shares of Rs. 10/face value. L&T was allotted 20 percent of UlraTechs equity. The remaining 80 per cent was allotted to shareholders of L&T in the same proportion as the stake held by them i.e. for every five shares held in L&T shareholders got two shares of UltraTech. With this Grasim would receive approx. 12.5 percent stake in UltraTech against its 15.73 percent stake in L&T. It was decided that out of L&T's 20 percent stake in Ultra Tech, L&T will sell 8.5 percent stake to Grasim at a price of Rs. 171.30 per share as against the earlier offer of Grasim at Rs. 130/- per share. With this, Grasim will hold approx. 21 per cent in UltraTech. Grasim would then make an open offer for 30 percent of the UltraTechs equity at the same price and would take its stake to 51 per cent. The open offer by Grasim was meant for not only taking control of UltraTech, but to give a chance to FIs to bring down their stake, in the process making hefty capital gains. In subsequent developments, Grasim bought L&Ts stake actually at Rs. 342.60 per share and made an open offer at the same price. Grasim, thus, had to shell out Rs. 362 crores to L&T and Rs. 1298 crores in the open offer.

It was also decided that the residual stake of L&T in UltraTech of approx. 11.5 percent would be liquidated by L&T in small trenches and to non cement entities by 2009, if Birlas do exercise their right of first refusal in negative. In turn, Grasim sold approx. 14.93 percent of its 15.73 per cent stake in L&T to an employee's trust of L&T at Rs 120/- per pre de-merger share or Rs. 240/-per post de-merger share. The remaining approx. 0.8 percent would be sold when the employee trust would dilute its stake by 1 percent or so. BIRLAS MOTIVE Why were Birlas so desperate to acquire L&T? As on 31st March 2003, the total cement capacity in India was approx. 135 mn tonnes. There were over 400 plants in the country consisting of 120 or so large plants and the rest mini cement plants. In terms of company wise capacity, L&T had the largest capacity of 18mn tonnes, followed by ACC at 15 nm tonnes, Grasim at 13 mn tonnes and Gujrat Ambuja at 12.5 mn tonnes. In acquiring L&Ts cement business, Birlas had a simple motive of growth through acquisition. After acquisition the combined capacity of Grasim and UltraTech went up to 31 mn tonnes, making Grasim the largest producer in India and the eighth largest in the world. L&T was also considered as a premium brand and used to fetch higher price. Though this brand would not be available to Grasim in the long run, L&T allowed Grasim to use it for more than a year post acquisition. Later on, through an ad blitzkrieg Grasim managed to transfer brand equity of L&T cement to UltraTech cement. While Grasim was strong in the Southern markets, L&T was strong in the rest of India. L&Ts strong distribution network was very vital to Grasim to push its own brands also. Last but not the least, around 2002-03, the economy had just started coming out of woods. Stock markets were still bearish and valuations low. A look at Exhibit 1 tells us that in 2003-04, the first post de-merger year, on the gross turnover of Rs. 2700 crore, UltraTech posted a PBT of just Rs. 49.20 crore. In fact, considering that other businesses of L&T grew by 32 percent in 2003-04, engineering division turnover in 2002-03 would have been around Rs. 7500 crore and that of cement division around Rs. 2000-2100 crore. Cement division must have made losses in 2002-03. However, Birlas were aware that in the next immediate 4 to 5 years cement business would turn highly profitable and valuations would skyrocket. So they were in a hurry to acquire while they could still get it cheap. WHY L&T SURRENDERED The first and foremost reason was survival. At the time RIL tried to takeover L&T, FIs had backed L&T management to control over L&T. However, this time around the situation was a bit different. It is believed that while the open offer for L&T was going on, Birlas had succeeded in convincing FIs about the structured vertical de-merger and about FIs selling their shares in the resultant cement company either directly or through open offer. It is also believed that, if L&T management had continued to be adamant about not agreeing to vertical de-merger, FIs were willing to sell their stake in L&T to Birlas provided the price was right. Also, now Birlas could up their stake in L&T through either creeping acquisition or through another open offer. So in order to keep their control over L&T, which by then was a ten thousand crore empire even sans cement, L&T management had no choice but to agree to give away the cement business.

However, having accepted this fate accompli, L&T management did a very good job of negotiating. They managed to retain ready mix cement business and other key assets of the cement division as stated earlier. They also managed to allot to L&T 20 percent of the new companys equity and sold 8.5 percent stake at a whopping Rs. 362 crore. Considering that the first offer of Birlas was for Rs. 130/- per share of cement company (including RMC business and all assets), the price of Rs. 346.60 per share was extremely good at that time. They also got for themselves time upto 2009 to sell the balance 11.5 percent. Considering that during October 2007, UltraTech share crossed Rs. 1100/-, this was a very good negotiation on behalf of L&T management. Also they made Birlas sell approx. 14.95 percent stake at Rs. 120/- per share to employees welfare trust, in the process achieving two things getting Birlas off their backs permanently and increasing their own stake without having to shell out any money from their own pockets. L&T management also used de-merger to strengthen L&T balance sheet. (See Exhibit 2). In de-merger, L&Ts paid up capital was reduced to 10 percent of what it was prior to de-merger. The number of equity shares was reduced to half and face value to one fifth. This resulted into EPS shooting up. In de-merger, while L&T had to transfer reserves worth approx. Rs. 790 crore to UltraTech, and L&T also suffered loss of paid up capital of Rs. 225 crore, debts amounting to Rs. 1900 to 2000 crore got transferred to UltraTech, due to the formula of splitting common loans specified under section 2 (19AA) of the Income Tax Act, 1961 which is mandatory if the de-merger has to be tax neutral. Due to this L&Ts Debt: Equity ratio sharply improved to 0.5: 1. All in all the deal had a lot of positives for L&T and its management. However, a look at the performance of UltraTech for the year 2007-08 (see Exhibit 1) will show that the real winners were Birlas and not L&T.

CHAPTER 11: CONCLUSION

From the above analysis it is held that overall performance of the company is satisfactory. Based on the ratios and calculations made we can analyze as follows: The year 2007 could be called the peak on the business during last five year which almost divides the ratios into two parts, before 2004 and after that. Liquidity ratios shows that the firm has been facing some problems regarding paying short term liabilities for 3 years, but it is trying to improve the situation. The usage ratio of the company had followed a comparable pattern. The overall efficiency of the company to use its assets, capital or the working capital had increased from 2006 to 2007. However in the later years, it is declining and falling to a lower level of efficiency, for which we can blame the environmental conditions of the country, and that, involves the economical and political challenges of India and the world. The Company fails to increase its profitability in the last year, though it should be mentioned that we see a noticeable net profit point in the 2008. It also fails to give satisfactory rate of return in the two years compared to 2007

Chapter 12: REFERENCES

www.wikipedia .com www.ultratechcement.com www.adityabirla.com www.studyfinance.com www.bussinessline.com www.infoline.com Induction manual, GCW. www.ktec.com www.investopedia.com www.moneycontrol.com