A STUDY ON FIXED ASSET MANAGEMENT WITH SPECIAL REFERENCE TO ZUARI CEMENT (HYDERABAD) (Submitted in Partial Fulfilment of the Award

of the Degree Of) MASTER OF BUSINESS ADMINISTRATION Submitted By K.NARENDRA REDDY M.B.A H.T NO: 112G1E0022 LOGO Under The Guidance Of Mr.RAGHAVENDRA M.B.A (ASST.PROF) DEPARTMENT OF MANAGEMENT STUDIES ______________________________ (AFFILIATED TO JNT UNIVERSITY) HYD 2011-2013

DECLARATION
I here declare that the project report entitled FIXED ASSET MANAGEMENT has been prepared by me in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATIONI also declare that this project work is a result of my effort and it has not been submitted to any other university for the award of any degree or diploma. DATE: PLACE: ________________________ H.T NO: 112G1E0022

ACKNOWLEDGMENT
With a profound sense of thankfulness, I acknowledge my indebtedness to my company guide Mr.PIYUSH MODI (RELATIONSHIP MANAGER) Faculty guide Mr.RAGHAVENDRA M.B.A., for their valuable guidance, timely suggestions and constant encouragement. Their insightful criticisms and patience throughout the duration of this project have been instrumental in allowing this project to be completed. My sincere thanks are to the name of Director, Mr. RAMESH NAIDU (M.A) (P.hd)., name of HOD NAGA PRABHAKAR (M.com, M.B.A) and all the staff members of Department of management studies, _________________ ,For their consistent guidance in my project work. Their continual support and careful attention to the details involved in producing a document of this nature are very much appreciated.

___________________ H.T NO:

INDEX

CH. NO. PARTICULARS CHAPTER -1 INTRODUCTION NEED &IMPORTANT OF THE STUDY OBJECTIVES OF THE STUDY SCOPE OF THE STUDY RESEARCH METHODOLOGY LIMITATIONS OF THE STUDY COMPANY PROFILE INDUSTRY PROFILE CHAPTER -3 LETERATURE REVIEW CHAPTER-4 ANALYSIS & INTERRETATION OF THE STUDY CHAPTER -5 FINDINGS OF THE STUDY SUGGESTIONS CONCLUSIONS BIBLIOGRAPHY

PAGE NO.

1-8

CHAPTER 2

9-28 29-43 44-59

60-71

CHAPTER-1 INTRODUCTION

INTRODUCTION
FIXED ASSETS MANAGEMENT: Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence. Many organizations face a significant challenge to track the location, quantity, condition, and maintenance and depreciation status of their fixed assets. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Off-the-shelf software packages for fixed asset management are marketed to businesses small and large. Some Enterprise Resource Planning systems are available with fixed assets modules. Some tracking methods automate the process, such as by using fixed scanners to read bar codes on railway freight cars or by attaching a radio-frequency identification (RFID) tag to anasset. Finance may be defined as the provision of money at the time where, it is required. Finance refers to the management of flews of money through an organization it concerns with the application of skills in the manipulation, use and control of money. Different authorities have interpreted the term finance differently. However there are three main approaches to finance.

NEED &IMPORTANT FOR THE STUDY Valuation of fixed assets is important in order to have fair measure of profit or loss and financial position of the concern. Fixed assets are meant for use for many years the value of these assets decreases with their use or with time or for other reasons. A portion of fixed assets reduced by use is converted into cash though charging depreciation for correct measurement of income proper measurement of depreciation is essential, as depreciation constitutes a part of the total cost of production. IMPORTANCE OF STUDY Fixed Assets are the assets, which cannot be liquidates into cash within one year. The large amount of funds of the company is invested in these assets. Every year the company investments an additional fund in these assets directly or indirectly the survival and other objectives of the company purely depends on operating performance of management in effective utilization of their assets. Firm has evaluate the performance of fixed assets with proportion of capital employed on net assets turnover and other parameters which is helpful for evaluating the performance of fixed assets.

OBJECTIVES OF THE STUDY:

The study is conducted to evaluate fixed assets performance of ZUARI Through Analysing the Data. 1. The study is conducted to evaluate the fixed assets turnover of ZUARI 2. The study is made to known the amount of capital expenditure made by the company during study period. 3. The study is conducted to known the amount of finance made by long-term liabilities and owner funds towards fixed assets.. 4. The study is evaluate is giving adequate returns to the company.

SCOPE OF THE STUDY

The project is covered of fixed assets of ZUARI drawn from annual reports of the company. The fixed assets considered in the project are which cannot be converted into cash with one year. The subject matter is limited to fixed assets it analysis and its performance but not any other areas of accounting corporate, marketing and financial matters.

METHODOLOGY The data used for analysis and interpretation form annual reports of the company that is secondary forms of data. Ratio analysis is used for calculation on purpose. The project is presented by using tables graphs and with their interpretations. No survey is undertaken or observation study is conducted in evaluating Fixed assets performance of ZUARI ANALYSIS TYPE: PRIMARY DATA SECONDARY DATA

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LIMITATIONS 1 2 3 4 5 The study period of 45 days as prescribed by university The study is limited unto the date and information provided by ZUARI and its annual reports The report will not provide exact fixed assets status and position in ZUARI; it may vary from time to time and situation to situation. This report is not helpful in investing in ZUARI either through disinvestments or capital market. The accounting procedure and other accounting principles are limited by the company changes in them may vary the fixed assets performance.

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CHAPTER -2
LITERATURE REVIEW

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LITERATURE REVIEW

FUNCTIONS 1. Accounts payable management Invoice Verification Payment scheduling Disclosure Bank reconciliation Vendor reconciliation Budget 2. Cash Management Cash reconciliation IOU reconciliation Fund Management Statutory Payment Accounts Payable Management Invoice verification Invoices are verified against the purchase orders made. The quantity and quality of the materials received as per the purchase order or not is seen. If materials are not according to the purchase order made then amount is deducted and then payment is made. Invoices are also verified for the duties charged or whether CENVAT credit is received or not or whether that material is excise able or not. Payment is only made after the detail verification of invoice. If the material sent
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is rejected then quantity rejected is deducted from the actual quantity and payment is made for the approved material. Payment Scheduling & preparation of Cheque Payment is made to the vendors as per the auto scheduling of overdue invoices. Vendor Reconciliation If any payment is due even after the due date then the ledger balances is reconciled if money is not received by the vendors. Acknowledgement from the vendors is received by the accounts Department. Accounts department verify about the payment made whether it is received by the vendors or not through this acknowledgement. Bank Reconciliation Bank book and pass book is maintained is by the accounts department. Difference in bank charges is reconciled by the accounts Budget The expenses which are incurred for production, the estimation of these expenses is sent by various plants to the accounts department. After getting estimation from the entire plants budget is prepared by the accounts department and sent to the head office for approval. 2. Cash management A certain level of cash is maintained for working capital requirement. The amount of cash maintained in the company should be neither too high nor too low. If its too low then day to day activities can be hampered and if its too high there is a risk.

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Cash reconciliation Cash balance is matched daily against the amount disbursed. Person to whom amount is disbursed submits a voucher as a proof of the expenses made IOU reconciliation Any employee takes IOU for the office use or personal use. That employee submits a voucher for the amount spent and left money is returned. This amount is also reconciled against the voucher received. Fund Management Every department estimates the expense to be incurred in the coming month and gives this estimate to the accounts department. Some statutory payments like electricity bills, water bills also included in these. Accounts department intimate this to head office and ask for funds for these expenses. At the end of every month stock shown in SAP should be matched with the physical stock. Audit for that is conducted on any day in a month. Statutory Payments Statutory payments like GEB bills, water bills, and ETP bills are also made by the accounts department.

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 The first approach views finance as to providing of funds needed by a business on most suitable terms this approach confines finance to the raising of funds and to the study of financial institutions & instruments from where funds can be procured. The second approach relates finance to cash. The third approach views finance is being concerned with rising of funds& their effective utilization. Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed. Moreover, a fixed/non-current asset can also be defined as an asset not directly sold to a firm's consumers/end-users. As an example, a baking firm's current assets would be its inventory (in this case, flour, yeast, etc.), the value of sales owed to the firm via credit (i.e. debtors or accounts receivable), cash held in the bank, etc. Its non-current assets would be the oven used to bake bread, motor vehicles used to transport deliveries, cash registers used to handle cash payments, etc. Each aforementioned non-current asset is not sold directly to consumers. These are items of value which the organization has bought and will use for an extended period of time; fixed assets normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favourable tax treatment (depreciation allowance) over short-term assets. According to International
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Accounting Standard (IAS) 16, Fixed Assets are assets whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably. It is pertinent to note that the cost of a fixed asset is its purchase price, including import duties and other deductible trade discounts and rebates. In addition, cost attributable to bringing and installing the asset in its needed location and the initial estimate of dismantling and removing the item if they are eventually no longer needed on the location. Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence. Many organizations face a significant challenge to track the location, quantity, condition, maintenance and depreciation status of their fixed assets. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Off-the-shelf software packages for fixed asset management are marketed to businesses small and large. Some Enterprise Resource Planning systems are available with fixed assets modules. Some tracking methods automate the process, such as by using fixed scanners to read bar codes on railway freight cars or by attaching a radio-frequency identification (RFID) tag to an asset.

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Tracking assets is an important concern of every company, regardless of size. Fixed assets are defined as any 'permanent' object that a business uses internally including but not limited to computers, tools, software, or office equipment. While employees may utilize a specific tool or tools, the asset ultimately belongs to the company and must be returned. And therefore without an accurate method of keeping track of these assets it would be very easy for a company to lose control of them. With advancements in technology, asset tracking software is now available that will help any size business track valuable assets such as equipment and supplies. According to a study issued in December, 2005 by the ARC Advisory Group, the worldwide market for Enterprise Asset Management (EAM) was then at an estimated $2.2 billion and was expected to grow at about 5.0 percent per year reaching $2.8 billion in 2010. Asset tracking software allows companies to track what assets it owns, where each is located, who has it, when it was checked out, when it is due for return, when it is scheduled for maintenance, and the cost and depreciation of each asset. The reporting option that is built into most asset tracking solutions provides prebuilt reports, including assets by category and department, check-in/check-out, net book value of assets, assets past due, audit history, and transactions. All of this information is captured in one program and can be used on PCs as well as mobile devices. As a result, companies reduce expenses through loss prevention and improved equipment maintenance. They reduce new and unnecessary equipment purchases, and they can more accurately calculate taxes based on depreciation schedules.
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The most commonly tracked assets are:

Plant and equipment Buildings Fixtures and fittings

He primary objective of a business entity is to make profit and increase the wealth of its owners. In the attainment of this objective it is required that the management will exercise due care and diligence in applying the basic accounting concept of Matching Concept. Matching concept is simply matching the expenses of a period against the revenues of the same period.

The use of assets in the generation of revenue is usually more than a year- that is long term. It is therefore obligatory that in order to accurately determine the net income or profit for a period depreciation is charged on the total value of asset that contributed to the revenue for the period in consideration and charge against the same revenue of the same period. This is essential in the prudent reporting of the net revenue for the entity in the period.

Net book value of an asset is basically the difference between the historical cost of that asset and it associated depreciation. From the foregoing, it is apparent that in order to report a true and fair position of the financial jurisprudence of an entity it is relatable to record and report the value of fixed assets at its net book value. Apart from the fact that it is enshrined in Standard Accounting Statement (SAS) 3 and IAS 16 that value of asset should be carried at the net book value, it is the best way of consciously presenting the value of assets to the owners of the business and potential investor.

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In finance, a revaluation of fixed assets is a technique that may be required to accurately describe the true value of the capital goods a business owns. This should be distinguished from planned depreciation, where the recorded decline in value of an asset is tied to its age. Fixed assets are held by an enterprise for the purpose of producing goods or rendering services, as opposed to being held for resale in the normal course of business. For example, machines, buildings, patents or licenses can be fixed assets of a business. The purpose of a revaluation is to bring into the books the fair market value of fixed assets. This may be helpful in order to decide whether to invest in another business. If a company wants to sell one of its assets, it is revalued in preparation for sales negotiations. DEFINITION OF FINANCIAL MANAGEMENT: Financial management as practice by corporate firms can be called corporation finance or business finance, financial management refers to that part of the management activity which is concerned with the planning & controlling of firms financial resources. sources for raising funds for the firm. also forms a part of financial management. OBJECTIVES OF FINANCIAL MANAGEMENT: Financial management is concerned with procurement and use of funds. Its main aim is to use business funds in such a way that the firms valve/earnings are maximized there are various alternatives available for using business funds.
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It deals with finding out various The sources must be suitable &

economical for the needs of the business the most appropriate use of such funds

The pros & cons of various decisions have to look into before making a final selection. Financial management provides a frame work for selecting a proper cause of action and deciding a viable commercial strategy. The main objective of a business is to maximize the owner economic welfare. These objectives can be achieved by 1. Profit maximization 2. Wealth maximization A fixed asset register (FAR) is an accounting method used for major resources of a business. Fixed assets are those such as land, machines, office equipments, buildings, patents, trademarks, copyrights, etc. held for the purpose of production of goods or rendering of services and are not held for the purpose of sale in the ordinary course of business. Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. Even in the case of service entities such as hotels, banks, financial institutions, insurers, mobile / telephone service providers etc. it has become imperative to invest heavily in furnishing, equipment, and technology to attract, and retain customers. Just as it is important for a person investing on the NASDAQ to know those investments, so it is important for a business entity to have a list of its fixed assets. A fixed asset register is that list of assets. MANAGEMENT OF FIXED ASSETS The selection of various Fixed Assets required creating the desired production facilities and the decision as regards determination of the level of
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fixed assets is primarily the task at their production/technical people. The decision relating to fixed assets involve huge funds for a long period of time and are generally of irreversible nature affecting the long term profitability of a concern an unsound invest decision may prove to be total to the very existence of the organization Thus, management of fixed asset is of vital importance to any organization. The process of fixed asset management involves: 1. Selection of most worthy projects or alternatives of fixed assets 2. Arranging the requisite funds/capital for the same The first important consideration to be acquire only that much amount of fixed assets which will be just sufficient to ensure smooth and efficient running of the business. In some cases it may be economical to buy certain assets in a lot size. Another important consideration to be kept in mind is possible increase in demand of the firms product necessarily expansion of its activities. Hence a firm should have that much amount of fixed assets, which could adjust to increase demand. The third aspect of fixed assets management is that a firm must ensure buffer stocks of certain essential equipments/services to ensure uninterrupted production in these events of emergencies. Sometime there may be a breakdown in some equipment or services affecting the entire production it is always better to have some alternative arrangements to deal with such situations. But at the same time the cost of carrying such buffer stock should also be evaluated. Efforts should also be made to minimize the level of buffer stock of fixed assets be encouraging their maximum utilization during learn period, transferring a part of peak period and living additional capacity. FIXED ASSETS:
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Fixed assets are those assets which are required and held permanently for a pretty long-time in the business and are used for the purpose for earning profits The successful continuance of the business depends upon the maintenance of such assets, They are not meant for resale in the ordinary course of business and the utility of these assets remains so long as they are in work order, so they are also known as capital assets. Land and buildings, plant and machinery, motor vans, furniture and fixtures are some examples of these assets. Financial transactions are recorded in the books keeping in view the going concern aspect of the business unit. It is assumed the business unit has a reasonable expectation of continuing business at a profit for an indefinite period of time. It will continue to operate in the future. This assumption provides much of the justification for recording fixed assets at original; cost and depreciating them in a systematic manner without reference to their current realizable value. It is useless to show fixed assets in the balance sheet at their estimated realizable values if there is no immediate expectation of selling them. Fixed resale; so they are shown at their book values (i.e. cost less depreciation provided) and not at their current realizable values. Depreciation is, simply put, the expense generated by the uses of an asset. It is the wear and tear of an asset or diminution in the historical value owing to usage. Further to this; it is the cost of the asset less any salvage value over its estimated useful life. It is an expense because it is matched against the revenue generated through the use of the same asset. Depreciation is usually spread over the economic useful life of an asset because it is regarded as the cost of an asset absorbed over its useful life. Invariably the depreciation expense is charged against the revenue generated through the use of the asset. The method of depreciation to be adopted is best left for the
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management to decide in consideration to the peculiarity of the business, prevailing economic condition of the assets and existing accounting guideline and principles as implied in the organizational policies. It is worth noting that not all fixed assets depreciate in value year-over-year. Land and buildings, for example, may often increase in value depending on local real-estate conditions.[1] A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. Fixed assets are sometimes collectively referred to as "plant The market value of a fixed asset may change with the passage of time, but for accounting purpose it continues to be shown in the books at its bulk value, i.e., the cost at which it was purchased minus depreciation provided up to date. The cost concept of accounting depreciation calculated on the basis of historical costs of old assets is usually lower than that of those calculated at current value or replacement value. This result in more profits on paper, which if distributed in full, will lead to reduction of capital. Types of Ratios Several ratios, calculated from the accounting data, can be grouped into various classes according to financial activity or function to be evaluated. The parties interested in financial analysis are short-term and long term creditors, owners and management. Short term creditors main interest is in the liquidity position or the short term solvency and profitability of a firm. Similarly, owners concentrate on the firms profitability and financial condition. Management is
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interested in evaluating every aspect of the firms performance. They have to protect the interest of all parties and see that the firm grows profitably. In view of the requirements of the various users of ratios, we may classify them into the following four categories: 1. Liquidity ratios 2. Leverage ratios 3. Activity ratios 4. Profitability ratios. 1. Liquidity ratios It is extremely essential for a firm to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligations. In fact, analysis of liquidity needs the presentation of cash budgets and cash and fund flow statements; but liquidity ratios, but establishing a relationship between cash and other current assets to current liabilities provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity, and also that it does not have excess liquidity. The failure of a company to meet its obligations due to lack of sufficient liquidity, will result in a poor credit worthiness, loss of creditors confidence, or even in legal tangles resulting in the closure of the company. A very high degree of liquidity is also bad; idle assets earn nothing. The firms funds will be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance between high liquidity and lack of liquidity. The most common ratios, which indicate the extent of liquidity or lack of it, are (i) Current ratio (ii) Quick ratio

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Current Ratio Current ratio is calculated by dividing current assets by current liabilities; Current ratio= Current assets Current liability Current assets include cash and those assets that can be converted in to cash within a year, such as marketable securities, debtors and inventories. Prepaid expenses are also included in current assets as they represent the payments that will not be made by the firm in the future. All obligations maturing within a year are included in current liabilities. Current liabilities include creditors, bills payable, accrued expenses, short-term bank loan, income-tax liability and long-term debt maturing in the current year. The current ratio is a measure of the firms short-term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims against them. Quick Ratio Quick ratio, also called acid test ratio, establishes a relationship between quick, orliquid,assets and current liabilities. An assets is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets are considered to be relatively liquid and included in quick assets are debtors and bills receivables and marketable securities. Inventories are considered to be less liquid. Inventories normally require some time for realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities. DEPRECIATION
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Refers to two very different but related concepts:

1. the decrease in value of assets (fair value depreciation), and 2. the allocation of the cost of assets to periods in which the assets are used

(depreciation with the matching principle). The former affects values of businesses and entities. The latter affects net income. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. Such expense is recognized by businesses for financial reporting and tax purposes. Methods of computing depreciation may vary by asset for the same business. Methods and lives may be specified in accounting and/or tax rules in a country. Several standard methods of computing depreciation expense may be used, including fixed percentage, straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in service. Example: a depreciation expense of 100 per year for 5 years may be recognized for an asset costing 500. ACCOUNTING CONCEPT In determining the profits (net income) from an activity, the receipts from the activity must be reduced by appropriate costs. One such cost is the cost of assets used but not currently consumed in the activity.[1] Such costs must be allocated to the period of use. The cost of an asset so allocated is the difference between the amount paid for the asset and the amount expected to be received upon its disposition. Depreciation is any method of allocating such net cost to those periods expected to benefit from use of the asset. The asset is referred to as a depreciable asset. Depreciation is a method of allocation, not valuation.[2]

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Any business or income producing activity[3] using tangible assets may incur costs related to those assets. Where the assets produce benefit in future periods, the costs must be deferred rather than treated as a current expense. The business then records depreciation expense as an allocation of such costs for financial reporting. The costs are allocated in a rational and systematic manner as depreciation expense to each period in which the asset is used, beginning when the asset is placed in service. Generally this involves four criteria:

cost of the asset, expected salvage value, also known as residual value of the asset, estimated useful life of the asset, and a method of apportioning the cost over such life.[4]

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Depreciable basis Cost generally is the amount paid for the asset, including all costs related to acquisition.[5] In some countries or for some purposes, salvage value may be ignored. The rules of some countries specify lives and methods to be used for particular types of assets. However, in most countries the life is based on business experience, and the method may be chosen from one of several acceptable methods. Net basis When a depreciable asset is sold, the business recognizes gain or loss based on net basis of the asset. This net basis is cost less depreciation. Impairment Accounting rules also require that an impairment charge or expense be recognized if the value of assets declines unexpectedly. [6] Such charges are usually nonrecurring, and may relate to any type of asset. Depletion and amortization Depletion and amortization are similar concepts for minerals (including oil) and intangible assets, respectively. Effect on cash Depreciation expense does not require current outlay of cash. However, the cost of acquiring depreciable assets may require such outlay. Thus, depreciation does not affect a statement of cash flows, but cost of acquiring assets does.

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Historical cost Depreciation is generally recognized under historical cost systems of accounting. Some proposals for fair value accounting have no provision for depreciation expense. Accumulated depreciation While depreciation expense is recorded on the income statement of a business, its impact is generally recorded in a separate account and disclosed on the balance sheet as accumulated depreciation, under fixed assets, according to most accounting principles. Accumulated depreciation is known as a contra account, because it separately shows a negative amount that is directly associated with another account. Without an accumulated depreciation account on the balance sheet, depreciation expense is usually charged against the relevant asset directly. The values of the fixed assets stated on the balance sheet will decline, even if the business has not invested in or disposed of any assets. The amounts will roughly approximate fair value. Otherwise, depreciation expense is charged against accumulated depreciation. Showing accumulated depreciation separately on the balance sheet has the effect of preserving the historical cost of assets on the balance sheet. If there have been no investments or dispositions in fixed assets for the year, then the values of the assets will be the same on the balance sheet for the current and prior year. Quick ratio= Current assets Inventories Current liabilities

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Net Working Capital Ratio The difference between current assets and current liabilities excluding short-term bank borrowing is called net working capital (NWC) or net current assets (NCA). NWC is sometimes used as a measure of a firms liquidity. It is considered that, between two firms, the one having the larger NWC has the greater ability to meet its current obligations. This is not necessarily so; the measure of liquidity is a relationship, rather than the difference between current assets and liabilities. NWC, however, measures the firms potential reservoir of funds. It can be related to net assets: NWC ratio = Net working capital (NWC) Net assets (NA) 2. Leverage Ratios The short-term creditors, like bankers and suppliers of raw material, are more concerned with the firms current debt-paying ability. On the other hand, long-term creditors, like debenture holders, financial institutions etc. are more concerned with the firms long-term financial strength. In fact, a firm should have a strong short-as well as long-term financial position. To judge the long-term financial position of a firm, financial leverage, or capital structure ratios are calculated. These ratios indicate mix of funds provided by owners and lenders. As a general rule, there should be an appropriate mix of debt and owners equity in financing the firms assets. The manner in which assets are financed has a number of implications. First, between debt and equity, debt is more risky from the firms point of view. The firm has a legal obligation to pay interest to debt holders, irrespective of the profit made or losses incurred by the firm. If the firm fails to pay to debt holders in time, they can take legal action against it to get payments and in extreme cases, can force the

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firm into liquidation. Second, use of debt is advantageous for share holders in two ways: (a) They can retain control of the firm with a limited stake and (b) Their earning will be magnified, when the firm earns a rate of return on the total capital employed higher than the interest rate on the borrowed funds. The process of magnifying the shareholders return through the use of debt is called financial leverage or financial gearing or trading on equity. However, leverage can work in opposite direction as well. If the cost of debt is higher than the firms overall rate of return, the earning of shareholders will be reduced. In addition, there is threat of insolvency. If the firm is actually liquidated for non payment of debt-holders dues, the worst suffers will be shareholders- the residual owners. Thus, use of debt magnifies the shareholders earnings as well as increases their risk. Third, a highly debt-burdened firm will find difficulty in raising funds from creditors and owners in future. Creditors treat the owners equity as a margin of safety; if the equity base is thin, the creditors risk will be high. Thus, leverage ratios are calculated to measure the financial risk and the firms ability of using debt to shareholders advantage. Leverage ratios may be calculated from the balance sheet items to determine the proportion of the debt in total financing. Many variations of these ratios exist; but all these ratios indicate the same thing-the extent to which the firm has relied on debt in financing assets. Leverage ratios are also computed from the profit and loss items by determining the extent to which operating profits are sufficient to cover the fixed charges. 3. Activity Ratios Funds of creditors and owners are invested in various assets to generate sales and profits. The better the management of assets, the larger the amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm
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manages and utilizes its assets. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. Activity ratios, thus, involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that are managed well. Several activity ratios can be calculated to judge the effectiveness of asset utilization. Here we will take different activity ratio: (i) Net assets turnover, (ii) Total assets turnover (iii) Fixed and current assets turnover and (iv) Working capital turnover. Net assets turnover Methods of depreciation There are several methods for calculating depreciation, generally based on either the passage of time or the level of activity (or use) of the asset. Straight-line depreciation Straight-line depreciation is the simplest and most-often-used technique, in which the company estimates the salvage value of the asset at the end of the period during which it will be used to generate revenues (useful life) and will expense a portion of original cost in equal increments over that period. The salvage value is an estimate of the value of the asset at the time it will be sold or disposed of; it may be zero or even negative. Salvage value is also known as scrap value or residual value.

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STRAIGHT-LINE METHOD:

For example, a vehicle that depreciates over 5 years, is purchased at a cost of US$17,000, and will have a salvage value of US$2000, will depreciate at US$3,000 per year: ($17,000 $2,000)/ 5 years = $3,000 annual straightline depreciation expense. In other words, it is the depreciable cost of the asset divided by the number of years of its useful life. This table illustrates the straight-line method of depreciation. Book value at the beginning of the first year of depreciation is the original cost of the asset. At any time book value equals original cost minus accumulated depreciation. book value = original cost accumulated depreciation Book value at the end of year becomes book value at the beginning of next year. The asset is depreciated until the book value equals scrap value. Book value at beginning of year $17,000 (original cost) $14,000 $11,000 $8,000 $5,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $6,000 $9,000 $12,000 $15,000 $14,000 $11,000 $8,000 $5,000 $2,000 (scrap value Depreciation Accumulated Book value at

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If the vehicle were to be sold and the sales price exceeded the depreciated value (net book value) then the excess would be considered a gain and subject to depreciation recapture. In addition, this gain above the depreciated value would be recognized as ordinary income by the tax office. If the sales price is ever less than the book value, the resulting capital loss is tax deductible. If the sale price were ever more than the original book value, then the gain above the original book value is recognized as a capital gain. If a company chooses to depreciate an asset at a different rate from that used by the tax office then this generates a timing difference in the income statement due to the difference (at a point in time) between the taxation departments and company's view of the profit. Declining-balance method (or Reducing balance method) Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years are called accelerated depreciation methods. This may be a more realistic reflection of an asset's actual expected benefit from the use of the asset: many assets are most useful when they are new. One popular accelerated method is the declining-balance method. Under this method the book value is multiplied by a fixed rate. Annual Depreciation = Depreciation Rate * Book Value at Beginning of Year

35

The most common rate used is double the straight-line rate. For this reason, this technique is referred to as the double-declining-balance method. To illustrate, suppose a business has an asset with $1,000 original cost, $100 salvage value, and 5 years useful life. First, calculate straight-line depreciation rate. Since the asset has 5 years useful life, the straight-line depreciation rate equals (100% / 5) 20% per year. With double-declining-balance method, as the name suggests, double that rate, or 40% depreciation rate is used. The table below illustrates the double-declining-balance method of depreciation. Book value at beginning of year rate expense depreciation end of year $1,000 (original cost) $600 $360 $216 $129.60

Depreciation Depreciation Accumulate d Book value at 40% 40% 40% 40% $129.60 $100 $400 $240 $144 $86.40 $29.60 $400 $640 $784 $870.40 $900 $600 $360 $216 $129.60 $100 (scrap value)

When using the double-declining-balance method, the salvage value is not considered in determining the annual depreciation, but the book value of the asset being depreciated is never brought below its salvage value, regardless of the method used. The process continues until the salvage value or the end of the asset's useful life, is reached. In the last year of depreciation a subtraction might

36

be needed in order to prevent book value from falling below estimated Scrap Value. Since double-declining-balance depreciation does not always depreciate an asset fully by its end of life, some methods also compute a straight-line depreciation each year, and apply the greater of the two. This has the effect of converting from declining-balance depreciation to straight-line depreciation at a midpoint in the asset's life. It is possible to find a rate that would allow for full depreciation by its end of life with the formula:

, where N is the estimated life of the asset (for example, in years). ACTIVITY DEPRECIATION Activity depreciation methods are not based on time, but on a level of activity. This could be miles driven for a vehicle, or a cycle count for a machine. When the asset is acquired, its life is estimated in terms of this level of activity. Assume the vehicle above is estimated to go 50,000 miles in its lifetime. The per-mile depreciation rate is calculated as: ($17,000 cost - $2,000 salvage) / 50,000 miles = $0.30 per mile. Each year, the depreciation expense is then calculated by multiplying the rate by the actual activity level. Sum-of-years' digits method Sum-of-years' digits is a depreciation method that results in a more accelerated write-off than straight line, but less than declining-balance method. Under this
37

method annual depreciation is determined by multiplying the Depreciable Cost by a schedule of fractions. Depreciable cost = original cost salvage value book value = original cost accumulated depreciation Example: If an asset has original cost of $1000, a useful life of 5 years and a salvage value of $100, compute its depreciation schedule. First, determine years' digits. Since the asset has useful life of 5 years, the years' digits are: 5, 4, 3, 2, and 1. Next, calculate the sum of the digits. 5+4+3+2+1=15 The sum of the digits can also be determined by using the formula (n2+n)/2 where n is equal to the useful life of the asset. The example would be shown as (52+5)/2=15 Depreciation rates are as follows: The firm can compute net assets turnover simply by dividing sales by net assets. Net assets turnover= Sales Net assets

It may be recalled that net assets include net fixed assets and net current assets, that is, current assets minus current liabilities. Since net assets equal capital employed, net assets turnover may also be called capital employed turnover. A firms ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. Unutilized or under-utilised assets increase the firms need for costly financing as well as expenses for maintenance and upkeep. The net assets turnover should be interpreted cautiously. The net assets in the denominator of the ratio include
38

fixed assets net of depreciation. Thus old assets with lower book values may create a misleading impression of high turnover without any improvement in sales. Some analysts exclude intangible assets like goodwill, patents etc., While computing the net assets turnover. Similarly, fictitious assets, accumulated losses or deferred expenditures may also be excluded for calculating the net assets turnover ratio. Total assets turnover Some analysts like to compute the total assets turnover in addition to or instead of the net assets turnover. This ratio shows the firms ability in generating sales from all financial resources committed to total assets. Total assets turnover= Sales Total assets

Total assets (TA) include net fixed assets (NFA) and current assets (CA). so (TA=NFA+CA) Fixed and Current assets turnover The firm may wish to know its efficiency of utilizing fixed assets and current assets separately. Fixed assets turnover= Sales Net fixed assets Sales

The current assets turnover is: Current assets turnover= Working capital turnover A firm may also like to relate net current assets to sales. It may thus compute net working capital turnover by dividing sales by net working capital. Net current assets turnover= Sales
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Net current assets 4. Profitability Ratios A company should earn profits to survive and grow over a long period of time. Profits are essential, but it would be wrong to assume that every action initiated by management of a company should be aimed at maximizing profits, irrespective of concerns for customers, employees, suppliers or social consequences. It is unfortunate that the word profit is looked upon as a term of abuse since some firms always want to maximize profits at the cost of employees, customers and society. Except such infrequent cases, it is a fact that sufficient profits must be earned to sustain the operations of the business to be able to obtain funds from investors for expansion and growth and to contribute towards the social overheads for the welfare of the society. Profit is the difference between revenue and expenses over a period of time (usually one year). Profit is the ultimate output of a company and it will have no future if it fails to make sufficient profits. Therefore, the financial manager should continuously evaluate the efficiency of the company in term of profits. The profitability ratios are calculated to measure the operating efficiency of the company. Besides management of the company, creditors and owners are also interested in the profitability of the firm. Creditors want to get interest and repayment of principal regularly. Owners want to get a required rate of return on their investment. This is possible only when the company earns enough profits. Generally, two major types of profitability ratios are calculated: Profitability in relation to sales Profitability in relation to investment.

40

Here we will consider two profitability ratio: (i) Return on investment and (ii) Return on equity Return on Investment The term investment may refer to total assets or net assets. The funds employed in net assets are known as capital employed. Net assets equal net fixed assets plus current assets minus current liabilities excluding bank loans. Alternatively, capital employed is equal to net worth plus total debt. The conventional approach of calculating return on investment (ROI) is to divide PAT by investment. Investment represents pool of funds supplied by shareholders and lenders, while PAT represent residue income of shareholders; therefore, it is conceptually unsound to use PAT in the calculation of ROI. Also, as discussed earlier, PAT is affected by capital structure. It is, therefore more appropriate to use one of the following measures of ROI for comparing the operating efficiency of firms: Return on Investment= Or Return on Investment= EBIT(1-T) Net assets EBIT(1-T) Total assets

Where above formula is for return on total assets and second formula is for return on net assets. Return on net assets is equivalent of return on capital employed. Return on Equity Common or ordinary shareholders are entitled to the residual profits. The rate of dividend is not fixed; the earnings may be distributed to shareholders or
41

retained in the business. Nevertheless, the net profits after taxes represent their return. A return on shareholders equity is calculated to see the profitability of owners investment. The shareholders equity or net worth will include paid-up share capital, share premium and reserves and surplus less accumulated losses. Net worth can also be found by subtracting total liabilities from total assets. The return on equity is net profit after taxes divided by shareholders equity which is given by net worth. If a company has both preference and ordinary share capital, ROE should be calculated after deducting preference dividend from PAT, and using only the ordinary shareholders capital. Return on Equity= Profit after taxes Net worth (Equity)

Return on Equity indicates how well the firm has used the resources of owners. In fact, this ratio is one of the most important relationships in financial analysis. The earning of a satisfactory return is the most desirable objective of a business. The ratio of net profit to owners equity reflects the extent to which this objective has been accomplished. This ratio is, thus, of great interest to the present as well as the prospective shareholders and also of great concern to management, which has the responsibility of maximizing the owners welfare. The returns on owners, equity of the company should compare with the ratios for other similar companies and the industry average. This will reveal the relative performance and strength of the company in attracting future investments. Here certain ratios are calculated according to the data of balance sheet of last five years of

42

CHAPTER -3
COMPANY PROFILE

43

COMPANY PROFILE
This cement division project in 1978 and according to the Texaco it has taken the steps for acquiring the land at HYDERABAD in 1982. Constructing activity is started and the cement plant is completed in March 1985. Texaco is started production at clinker by March 1985. Original plant capacity was 5 lakh tones per annum at first. The Zuari cement is strategically located at HYD The plant location existence of 6km from HYDIt is connected to the railway station on by a railway track of 7 km length and is having on exchange plant inside the factory; plant is connected to the nearest highway by 0.2 km land private load. Basically this is belongs to DR.K.K. Birla. In 1994 January 1, this cement unit of Texaco being handed over to Zuari agro chemical industry. Under working agreement on 7-2-95. This unit is sold by Texaco to Zuari in 1997 company has conceives expansion project investing 370 crores and making increasing rated capacity from 5 lakh to 7 lakh. This project was completed by formally 1999 and in fact from1-4-2000. Company entered in agreement with joint venture partner with Italy cement with 50% of partnership and working agreement. The Group has strength of 22,300 employees worldwide. 62 cement plants.

14 Grinding Units. 4 stand alone terminals. 147 aggregate quarries. 575 concrete batching units.

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Part of the prestigious Dr.K.K.Birla Group a Rs 4000 crores conglomerate Zuari cement as within a short time span made its presence felt in the cement industry. It has done so by making top quality cement. Consistently, Cement that has won the confidence and trust of millions in the country. This commitment to quality has being it grow from a modest 0.5 million ton capacity in 1995 to 2 million tons today. Zuaries quality drive originates in its state of the are cement plant, situated at yerraguntla; Renewed for rich Narji limestone deposits, this plant is cement manufacturers envy. Yet, strategic location is just factor contributing to Zuari success. There are other equal important reasons. Superior work force. Cutting-edge technology. Decentralized quality assurance teams. All this combine seamlessly to ensure that every bag of cement. That leaves the plants is of consistent quality, and worthy of bearing the zuari label. World Wife excellence with ital cement.

Zuari industries ltd has entered into 50:50 joint venture with Ital cement group, the largest producer and distributor of cement in Europe and one of the leaders in cement production in the world. Ital cementi operates in 19 countries including Canada, France, Italy, Morocco, USA and Bulgaria. Italic cements global industrial network includes more than 50 cement plants, 500 concrete batching units 150 quarries. Zuari joint with Ital cement gives Sri Vishnu cement a global technological advantage which reflects in finesses of every grain of Sri Vishnu cement.

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History of Zuari cements: 1. Zuari cement was started in 1994 to operate the cement plant of Texaco Ltd. Subsequently, Texacos cement business was taken over by the company in 1995. 2. Zuari cements manufacturing facility at yerraguntla in Andhra Pradesh is one of the largest in south India and places Zuari cement among the top 5 manufacturers in the south. 3. In 2000, Ital cement group the second largest producer and distributor of cement in Europe and fifth largest cement producer in the world enter into a joint venture with Zuari cement and Zuari cement Limited was formed.

COMPETITORS:
1. CORAMANDAL CEMENT 2. MAHA CEMENT 3. NAGARJUNA CEMENT 4. LANCO CEMENT 5. ULTRATECH CEMENT 6. PENNA CEMENT, etc.

46

Joint venture with Ital cementi:

The scenario of mergers and acquisitions is still vast in the cement industry. The entry of many multinationals. The other MNCs planning to enter the Indian market and consolidation of the companies in India has been forcing mergers in the cement industry. Now company is under joint venture having rated capacity of 17 lakhs per annum. Ital cements group CCBs mother company ( Companies des cements ), and the Zuari Industries Ltd (ZIL) of India have reached an agreement to create a 50:50 joint venture which will assume the cement activities of ZIL, consisting of the cement plant of yerraguntla, in Andhra Pradesh.

Location of the plant:

Cement and its raw materials namely coal and lime stone, are all bulky that make transportation difficult and uneconomical. Given this, cement plants are located close to both sources of raw materials and markets. Most of lime stone deposits in India are located in Madhya Pradesh, Rajasthan, Andhra Pradesh, Maharashtra and Gujarat. There is a trade-off between proximity to markets and proximity to raw materials due to which some cement plants have been setup near big markets despite lack of raw materials. Zuari cement industries ltd., is located at Krishna Nagar, in Yerraguntla, Kadapa district. It was nearest to the railway station and also nearest to the road. It was 6 km distance to HYDLocation of the plant at this place is having the following advantages. Location in industrial belt of Rayalaseema with sophisticated facilities like water. Present of best suited limestone proved scientifically for cement. Low free limestone to ensure reduce surface cracks. Low heat of hydration from better soundness. Low magnesia content to ensure reduced tensile cracks. Specially designed setting time to suit Indian working conditions.

47

PRODUCTION:
Cement production during the period has also increased from about 72.23 Million tons about 90 million tons in 2005-2006 excluding the contribution of mini cement plants.

RAW MATERIALS:
The actual requirements of raw material at 100% capacity utilization would be; 1. 12.5 million tons of limestone per annum. 2. 70000 tons of Gypsum per annum. 3. 39000 tons of Bauxite per annum. 4. 20000 tons of Iron ore per annum. 1. The limestone is major component required for the plant is net from the mines located adjacent to the proposed site. 2. Gypsum is procured from fertilizer factories at Madras and Cochin. 3. Iron is soured partly from mini steel plants located at Tirupathi and partially from Bellary. 4. Bauxite is procured from Goa, Karnataka and Maharashtra.

POWER:
Maximum estimated power demand is 45 M.V. The company has an existing contract 50 M.V demands APSEB, the plant presents has D.G sets with an aggregate general capacity of 12.6 M.V.

WATER:
Water is required for seeds of consumption make for plant and machinery for general need in plant. Company has a pumping station and underground bore wells near Hanuman Gutta village at Penna River to tap the undergrounds water in riverbed.

TRANSPORT:
The factory is when connected to different part of the country through rail and road facilities is near to Yerraguntla railway station and has a railway lint to the factory 48

with an extern point within the factory premises 605 of the cement is dispatched by rail gal is received through rail. The plant is connected to the nearest state highway to Bangalore, Hyderabad and Chennai.

MANPOWER:
Existing plant has a total of 500 employees. After and addition of employees may be required.

QUARRY:
It is situated adjacent to the factory. It constituted limestone, one of the major materials for cement industry. The quarry has a mining base area of 1027.56 acres.

S.No

Description

Massive (MT) Flagged Total (MT) grade limestonestone(MT)

Total reserves of limestone 108442 36 blocks Un workable limestone due 29530 to mining obstacles Workable reserves 79912

9.894

118.36

2540

32.07

7354

86.266

Chambal fertilizers and chemicals ltd (CFCL) promoted by Zuari industries ltd., has set up a large gas based area manufacturing plant at Gadapan about 35 km from Keta, a major industrial town of Rajasthan state in India. CFCLs plant is a state-of-the-are-high-tech complex built at a cost of Rs.12.67 billions. Spread over an area of 1105 acres (or 447 hectares 4.47 sq.kms), containing the manufacturing units offsite facilities including captive power plant, railways siding and 49

amenities like residential complex, club, school, etc in a pleasant and green surroundings snamprogetti of Italy and Haldor topsoe of Denmark provided the technical know-how and Engineering and other services for Ammonia and urea plant while off-site facilities were built mainly by Tokyo engineering India ltd. The enterprise value of the unit has been pegged at Rs. 740 crores. The creation of this joint venture company is a new step in the international of the Ital cement group in Asia. It is a new opportunity for the group, to further increase its presence in the emerging countries by entering the promising Indian market, the third largest in the world. In combination with a very important partner says a release issued by laggard who advised ital cement on the deal. Here are 6 of the many reasons why Zuari 53 grade and 43 grades cement edges out its competitors. 1. 2. 3. 4. 5. 6. High compressive strengths. Low heat of hydration. Better soundness. Lesser consumption of cement for M-20 concrete grade and above. Faster de-shuttering of formed work. Reduced construction time. With a superior and wide range of cement catering to very conceivable building need, Zuari cement is a formidable player in the cement market. Here are just a few reasons why Zuari cement is chosen by millions in India. Ideal raw materials Low time and magnesia content and high proportion of silicates Greater fineness Slow initial and fast final setting Wide range of applications Quality customer service

A wide range to address every need:

Residential, commercial, multistoried buildings and complex. 50

Mass concreting-dams, canals, spillways Construction and repair of pavements, roads, flyovers and runways. Spun pipes and poles manufacturing Cold weather concreting Pre-fabricated elements such a pipes, sleepers, windows, door frames etc.

Quality customer service:

In an effort to reach out to customers better, Zuari cement as set up a technical cell named Zuari home partner. This cell gives guidance in the field of building. Technology, architecture, housing finance and economical usage of the high quality. Technical experts provide the assistance according to the individual requirements. So that customers get the best value for the investment they have made.

Products
Zuari Cement 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.

Zuari Cements range of cement

51

Process Technology, the Solid Foundation

52

The culture of quality that has always prevailed in Zuari Cement's manufacturing facilities is best exemplified in the process technology employed. Advanced technology methods are used to ensure that a high level of quality is attained and sustained right through the manufacturing process. Yet, these high standards are constantly improved upon by an experienced and dedicated R&D team to attain performance oriented cement The process Technology Advantages

Complete homogenization of limestone is achieved by stacking the limestone in stockplies with the use of stackers and reclaiming it through reclaimers. The optimum ratio of raw mix is attained by the use of X-ray analyzer and automatic weigh feeder which are linked to the centralized computers control room.

BOARD OF DIRECTORS

DIRECTORS

: Saroj Kumar Poddar, Chairman

Rodolfo Danielle Yves Rene Nanot Goran Siefert Maurizio Caneppele, Managing director Raghunathan Vishwanathan

EXECUTIVES

Director-Marketing Director-Technical Vice President

; K. Srivasthava : P. Sheoran : S. Suresh

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COMPANY SECRETARY BANKERS :

L.R Neelakanta

State Bank of India, Andhra bank, BNP Paribas, Standard chartered Bank, State Bank of Hyderabad.

AUDITORS FACTORY

: :

BSR & Co.,

Chartered accountants Bangalore Krishna Nagar, Yerraguntla,

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INDUSTRY PROFILE
Cement is a key infrastructure industry. It has been decontrolled from price and distribution on 1st March 1989 and deli censed on 25th July 1991. However, the performance of the industry and prices of cement are monitored regularly. The constraints faced by the industry are reviewed in the infrastructure coordination committee meetings held in the cabinet secretariat under the chairmanship of secretary (coordination). The cabinet committee on infrastructure also reviews its performance. Cement industry is one of the major and oldest established manufacturing industries in the modern sector of Indian economy. It is an indigenous industry in which the company is well endowed with the necessary raw materials, skilled manpower and equipment & machinery technology. Cement is required by firms, bridges, buildings, water supply projects, dams, roads, hydroelectric power projects, seaports, airports, and irrigation schemes. It is thus a vital industry which assumes a crucial part in the economic development of the country.

RAW MATERIALS:
The basic raw material for manufacturing cement is limestone. This is available in plenty in the form of limestone deposits in the nature. Limestone is excavated for mines by mechanical equipment with the help of stocker & reclaimed the correct. The raw materials consist of limestone, iron ore & bauxite. The correct proportions are fed into a grinding mill where they are reduced to a very fine of compressed air. The power from the storage ribs is fed into rotator kiln; the material is subjected to a temperature is about 1500c. chemical reaction takes place between the various materials resulting in the formation of cement compound like Tricalcium silicate (about 24%), die calcium silicate (about 20%), Tri calcium alumina (about 7 to 10%) and aluminum ferrate (about 10 to 12%).

CAPACITY AND PRODUCTION:

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The cement industry comprises of 125 large cement plants with an installed capacity of 148.28 million tones and more than 300 mini cement plants with and estimated capacity of 11.10 million tones per annum. The cement corporation of India, which is a central public sector undertaking, has 10 units. There are ten large cement plants owed by various State governments. The total installed capacity in the country as a whole is 159.38 million tones. Actual cement production in 2002-03 was 116.35 million tones as against a production of 106.90 million tones in 2001-02, regarding a growth rate of 8.84%. Keeping in view the trend of growth of the industry in previous years, a production target of 126 million tones has been fixed for the year 2003-04. During the period April-June 2003, a production (provisional) was 31.30 tones. The industry has achieved a growth rate of 4.86% during the year.

EXPORTS:
A Part from meeting the entire domestic demand, the industry is also exporting cement and clinker. The export cement during 2001-02 and 2003-04 was 5.41 million tones and 6.92 million tones respectively. Export during April-may, 03 was 1.35 million tones. Major exporters were Gujarat Ambuja Cement ltd. and L&T ltd.

RECOMMENDATIONS ON CEMENT INDUSTRY:

For the development of cement industry Working Group of cement industry was constituted by the planning commission for the formulation of X five year plan. The working group has projected creation of additional capacity of 40-62 million tones mainly through expansion of existing plants. The working group has identified following thrust areas for improving demand for cement. Further push to housing development programmers Promotion of concrete Highways and roads; and Use of ready-mix concrete in large infrastructure projects.

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Further, in order to improve global competitiveness of the Indian cement industry, the dept. of industrial policy & promotion commissioned a study on the global competitiveness of the Indian cement industry. The report submitted by the organization has made several recommendations for making the Indian cement Industry more competitive in the international market. The recommendations are under consideration.

TECHNOLOGY CHANGE:
Cement industry has made tremendous strides in technological up gradation and assimilation of latest technology. At present 93% of the total capacity in the industry is based in modern and environment-friendly dry process technology. There is tremendous scope for waste heat recovery in cement plants and there by reduction in emission level. One project for cogeneration of power utilizing waste heat in an Indian cement plant is being implemented with Japanese assistance under green Aid plan. The induction of advanced technology as helped the industry immensely to conserve energy and fuel and to save materials substantially. India is also production different varieties of cement like ordinary Portland cement (OPC), Portland Pozzolana cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland cement, Sulphate resisting Portland cement, While cement etc. Production of these varieties of cement conforms to the BIS Specifications. It is worth mentioning that some cement plants have set up dedicated jetties for promoting bulk transportation and export.

Ital Cementi Group:

OUR MISSION:Our shared ambition: Effective and Efficient
To become the most effective and most efficient cement manufacturer and distributor in the world.

OUR APPROACH: We are local, we think glow

Cement aggregates and ready mixed concrete manure and distribution are local business. Around the world we serve local customers in local market with local needs.

OUR WAY OF WORKING: Technological leadership is our goal,

57

Our technology plays the key role in realizing our ambition we are committed to and the ecological standards by which we operate.

increasing the

value of our group, our companies, our products and services, the capabilities of our employees

OUR SPIRIT: One team worldwide.

We operate worldwide in many diverse markets, culture and continents. We are proud of our cultural diversity and our distinctions character.

HISTORY OF CEMENTS:
1. 2. 3. 4. 5. Invention of cement of JOSEPH ASPARIN. Leeds builder in bricklayer. 21st October, 1824 patented as Portland cement. 1904 its and American standards of Portland cement. 1912 Indian cement company limited established factory at Portlander. 1951 Indian standards.

CEMENT MANUFACTURING PROCESS:

1. The cement manufacturing process beings when limestone, the basic raw material used to make cement, is transported by rail to the plant from the limestone quarry. 2. The limestone is combined with clay, ground in a crusher and fed into the additive silos. Sand, iron and bottom ash are then combined with the limestone and clay in a carefully controlled mixture with which is ground into a fine power in a 200hp roller mill. 3. Next, the fine power is heated as it passes through the pre-Heater tower into a large kiln, the power is heated to 1500degrees Celsius. This creates a new product, called clinker, which resembles pellets about the size of marbles. 4. Next the fine powder is heated as its passes through the pre-header tower into a large kiln, which is over half of the length of a football field and 4.2 meters in diameters. In the kiln, the powder is heated to 1500 degrees Celsius. This creates a new product, called clinker, which resembles pellets about the size of marbles.

58

5. The clinker is combined with small amounts of gypsum and limestone and finely ground in a finishing mill. The mill is large revolving cylinder containing 250 tones of steel balls i.e. driven by a 4000ph motor. The finished cement is ground so fine that it can pass through a sieve that will hold water. 6. The cement manufacturing process consists of many simulations and continuous operations using some of the largest moving machinery in manufacturing. Over 5000 sensors and 50. 7. Computers allow the entire operations to be controlled by a single operator from a central control room.

DIFFERENT TYPES OF CEMENT:

There are varieties of cement based on different compositions according to specific end uses namely Ordinary Portland Cement, Portland Pozolona cement, Portland Blast furnace slag cement, and specialized cement. The basic difference lies in the percentage of linker used.

ORDINARY PORTLAND CEMENT (OPC):

OPC, popularly know as grey cement has 95% clinker and 5% of gypsum and other materials. It contains for 56% of the total consumption. White cement is a variation of OPC and is used for decorative purposes like rendering of walls, flooring etc. Contains a very low proportion of oxide. PORTLAND POZZOLONA CEMENT (PPC): PPC has 80% clinker, 15%pozzolona and 5% gypsum and accounts for 18% of the total cement consumption. Pozzolona has siliceous and aluminous materials that do not possess cementing properties in the presence of water. It is cheaply manufactured because it uses fly ash / burnt clay/ coal waste as the ingredient. It has lower heat of hydration, which helps in preventing cracks where large volumes are being cast.

PORTLAND BLAST FURNACE SLAG CEMENT (PBSFC):

59

PBSFC consist of 45% clinker, 50% blast furnace slag and 5% gypsum and accounts for 10% of the total cement consumed. It has a heat of hydration even lower than PPC and is generally used in construction of dams and similar massive constructions.

SPECIALIZED CEMENT:

Oil Well Cement: Is made from clinker with special additives to prevent any porosity. RAPID HARDENING PORTLAND CEMENT:
It is similar to OPC, except, that it is ground much finer, so that casting, the compressible strength increases rapidly.

WATER PROOF CEMENT:

OPC, with small portion of calcium separate or non- specifiable of to impart waterproofing properties.

CEMENT INDUSTRY IN INDIA

OVERVIEW 1. Indian cement industry data back to 1914-first unit was setup at Proddatur with

a capacity of 1000 tones. 2. Currently India is ranked second in the world with an installed capacity of 114.2

million tones. 3. 4. Current per capita consumption-85 pages. Against world standard of 256 kgs. Cement grade limestone in the country reported to be 89 bit. A large proportion

however is unexplainable. 5. 55-60% of the cost of production is govt control.

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6.

Cement sales primarily through a distribution channel. Bulk sales account for <

1% of the total cement produced. 7. Ready mix concrete a relatively nascent market in India.

CEMENT INDUSTRY: STRUCTURE

Installed capacity 114.2 mn tones per annum, Production around 87.8 mn tones.

Major cement plants

Companies:59 Plant: 116 Typical installed capacity for plant: Above 1.5 mntpa. Total installed capacity: 1.05 mntpa Production 98-99:81.6 mntpa. Excise: Rs 408 tones All India reach through multiple plants Export to Bangladesh, Nepal, Srilanka, UAE and Mauritius Strong marketing network, tie ups with customers, contractors Wide spread distribution network Sales primarily through the Consumer channel

Mini cement plants

Nearly 300 plants Located in Gujarat, Rajasthan, MP.AP Typical capacity < 200 tpd installed capacity around gmm. Tones Production around : 6.2 mn tones Excise : Rs 250/ tone Mini plants were meant to tap scattered limestone reserves. However most set up in A.P. Most use vertical Kiln technology Production cost/ tone- Rs 1,000 to 1,400 Infrastructural facilities not to the best

However, cement consumption per capita in our country at about 99-kg/ capita is one of the Lowest. The world average is about 267 kg/ capita. While that of china is 450 kg / capita. Similar in Japan its 631 kg/ capita while in France it is 447 kg / capita.

Production:
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1. Excess capacity exists, through some units are sick. 2. 1999-2000 production expended to reach 95 mn tones 3. Exports around 2 mn tones. 4. Cement manufactured through the wet, semi-dry or process. 5. Dry process accounts for 90% of the installed capacity. 6. Wet process popular in the past- better control over mixing of raw materials. 7. Dry process replacing the wet process as it is space saving energy efficient and economical.

Prices
a. Price fluctuations. b. Essentially determined by demand. c. Prices also vary with grades

AVERAGE MAXIMUM RETAIL PRICE

Delhi
Amount (

Calcutta
Amount (

Chennai
Amount (

Bangalore
Amount (

Aug 1999 Sep 1999 Oct 1999 Nov 1999 Dec1999 Jan 2000

Rs.) 137 137 136 136 128 120

Rs.) 146 139 125 125 117 140

Rs.) 175 175 175 172 160 136

Rs.) 170 161 161 140 136

1. Over 370 companies in the organized sector. 2. However, industry dominated by 20 companies who account for ever 70% of the market. 3. Individually no company accounts for over of the market 62

Manufacturing Process:
Cement is manufactured by using the wet, semi dry and processes. The wet process was popular in the past as it provided better control over materials mixing process. However, the dry process has now gained popularity globally because it is space saving, energy efficient and economical.

Capacity Distribution and Consumption Norms Process

Dry Semi-Dry Wet Total

Capacity (TPD)
282486 13910 5260 301656

% of total
93 5 2 100

Power KHz/MT
120-125 115-120 110-115

Fuel Kcal/kg
750-800 900-1000 1300-1600

GEOGRAPHICAL DISPERSION
Limestone is the most important material input into cement manufacture. The plant locations are primarily determined based on the proximity of cement grade limestone deposits. These limestone deposits have been classified as cluster, some of which overlap two states.

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Cluster Wise Installed Capacity (Large Plants)

Capacity Cluster
Satna Ballarpur Gulbarga Chandrapur Chanderia Yerraguntla Sub total Non cluster Total

State
MP MP Karnataka/AP Maharashtra/AP Rajasthan/MP Nalgonda AP AP

No of plants (mn tpa)

8 7 7 7 8 4 50 63 120 12.18 11.16 7.82 7.49 7.45 5.85 5.40 57.37 (52.5%) 52.75 (47.5%) 110.10

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PRODUCTION CAPACITY
Cement plant with a capacity of up to 0.3 mntpa are classified as mini cement plants and are eligible for concessional excise duty. Though the minimum economic size of a cement plant is 1 mntpa, there are over 300 white and mini cement plants in India a collective capacity of only 9 mntpa (8% of the total domestic installed capacity). Most of the new cement plants being set up have a capacity of 1 mntpa or more. The average cost of setting up a mini cement plant is about Rs 1400 per ton, while for large cement it is about Rs 3500 per ton.

Ready mix concrete: Industry

1. RMC-ready to use concrete, a blend of cement, sand and aggregate and water mixed in convenient proportion. 2. Launched first in Mumbai a few years ago is gaining in other metros in India. 3. Typical cost of a plant- Rs. 7.8 crs (US $ 1.6 to 1.8 mn) to set up a 100 cubic meter (cum) plant with 4-5 transit mixers. Gestation period is around 3-4 months 4. Currently RMC is at a very nascent stage, accounts for 0.5% of the demand.

Company
ACC RMC Ready mix L&T Fletcher Challenge HCC Unitech Jog Construction Starmnac Madras Cement Birla Cement

No of plants
13 4 5 3 2 2 1 1 1 1

Capacity ( cu m/hr)
712 440 330 320 240 150 120 120 56 30

Three units of ACC to be commissioned

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Companies planning to enter this Market:

1. Priyadharshini Cements in Hyderabad. 2. Saurashtra Cements in Navy Mumbai. 3. Pioneer a world leader entering the market 4. Capacity additions expected in the next few years 5. ACC plans to treble its capacities. 6. Grasim is setting up four more plants. 7. L & T plans to add another eight more.

Concerns:
Cement industry going through a consolidation phase in the last few years.

Transportation:
1. Transportation costs high-freight accounts for 17% of the selling and distribution cost. 2. Road preferred for transportation for distances less than 250 kms. However, industry is heavily dependent on roads are the railway infrastructure is not adequate shortage of wagons.

Capacity additions:
1. Acquisitions have been the mainstay of the business. 2. Regional imbalance resulting in cross regional movement-limestone availability in Pockets has led to uneven capacity additions.

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3. Capacity additions have slow down.

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Industry inputs:
1. Highly capacity intensive industry. 2. Nearly 55-60% of the inputs controlled by the controlled. 3. Facing problems due to power shortage. 4. Coal availability the quality affecting production. 5. Mini plants realization of the revenue lower large plants, survival difficult.

Future out look

Most economic forecasts for the Indian cement industry indicate a favorable outlook for the Indian cement sector. With no significant addition expected, the supply demand position is expected to the better balanced. Retail housing segment is expected to show significant demand growth over the next two year. With the industrial production showing an upward trend, housing construction showing a sign so revival and the government gearing up to spend more on infrastructure, the sector looks favorably poised. The overall demand growth is expected to about 7-8 per cent. Withdrawal of sales tax benefits for the new units will give an added push to consolidation via acquisitions. Consolidations will be more regional, with companies seeking to gain dominance in their chosen regions. Indias per capital cement consumption is less than 100 kg compared to the world average of 250 kg. Currently, the total cement demand in India is lower than the total capacity. The cement manufacturers association of India projects a demand of 101 mn tap in 2000-01 as against 93 mn yap last year. Against this, the total installed capacity is 109 mn tap. However seven million tones of Cement Corporation of India and two million tones of UP cement are lying ideal. An 8-10 per cent growth is projected in the coming years, which will take the demand to 200 million tones in 10 years. A focus on more value added products likely Ready Mix Concrete (RMC) is emerging. RMC is a compound in which sand, gravel additives and water are added to cement and 68

sold as readymade concrete. Cement products benefit from RMC production as it involves low capital expenditure. The cost of setting up a 100 metric cube per hour plant is in the range of Rs 70 to 90 mn. While the central government has declare a zero excise duty on RMC, the Maharashtra government has made it mandatory to use RMC in construction of all the flyovers. With these measures, the total; RMC consumption is expected to touch 6 per cent of total cement capacity in next four year. To tap is existing potential, leading cement manufacturers in the country like L & T and ACC have already announced their plans to expand their RMC capacities is coming years. Next cost cutting measure appears to be transporting bulk cement. This method is cement transpiration is preferred by cement manufacturers as it results in lower packaging costs, hence lower demurrage costs. At present, cement is predominantly sold in 50 kg bags. But the pattern appears to the changing as cement manufacturers have increasingly started selling cement in bulk, especially in cities where construction activity as it is peak. Most of the cement sold in bulk is currently used by the ready mix concrete plants. Cement consumed in bulk could help save about Rs 110 per tone (Rs 5.50 per 50 kg bag) compared to the use of conventional bags. Around the world, almost 80% of the cement transportation is carried out in bulk form. But in India, only about 1%of total cement is transported in this form. This is because of the attendant problems like inadequate infrastructure in the form of port facilities and lack of timely availability of wagons from the railways. Cement packaging costs accounts for nearly 4 per cent of total costs for a cement manufacturer. The industry will see more action on the mergers and acquisition front. So far, the market has seen only two major international players. Lafarge and Cement Francais, in action. But others, such as CEMEX and the big daddy, Holders Bank are waiting in the wings. These global players are; looking towards getting a foothold in the Indian market, offering a higher acquisition price than the international standards. Within the next three to five years the industry is expected to be dominated by five six big players and less than ten companies in all, both Indian and foreign.

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C HAPTER-4
DATA ANALYSIS

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TABLE -1 GROWTH IN FIXED ASSETS

YEAR INVESTMENT 6,07,94,08,271 6,25,64,02,879 5,89,55,39,377 5,69,93,08,565 5,71,48,37,436 7,43,21,97,039 11,05,19,01,277 TREND PERCENTAGE 100 102.91 96.97 93.74 94 122.25 181.79

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

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TABLE 2
YEAR INVESTMENT 6,07,94,08,271 6,25,64,02,879 5,89,55,39,377 5,69,93,08,565 5,71,48,37,436 7,43,21,97,039 11,05,19,01,277 TREND PERCENTAGE 100 102.91 96.97 93.74 94 122.25 181.79

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Interpretation: Growth rate in fixed assets, the examination of the above tabic reveals analysis and interpretation. 1. During the year 2003-2004 the assets investment was recorded at 6,07,94,08,27 1 and it increased to Rs. 11,05,19,01,277 in 2009-2010 The fixed assets investment is quite satisfactory. 2. The trend percentage in the year 2003-2004 is taken as the base year as 100% and it was increased to 181.79% in the year 2009-2010.

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3. the average growth rate in fixed assets Rs.6,87,56,56,406 in 7 years

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TABLE 3

NETWORTH TO FIXED ASSETS:

NETWORTH TO FIXED ASSET YEAR NET WORTH 3,64,91,77,07 5 3,38,82,85,85 5 3,38,78,40,21 5 3,48,48,27,42 2 3,77,14,58,78 4 4,16,05,00,14 0 6,54,43,44,64 1 GROSS FIXED ASSETS 6,07,94,08,271 6,25,64,02,879 5,89,55,39,377 5,69,93,08,565 5,71,48,37,436 7,43,21,47,039 11,05,19,01,277 RATIO IN % 166.59 184.65 174.02 163.54 151.52 178.63 168.88

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Interpretation 1. The fixed assets as a % of long term liabilities the ratio is fluctuating from year to year. The fixed assets as a percentage of long term liabilities is recorded at 42.2% in the year 2004-2005 and it is recorded at 164.8% in the year 2005-2006
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2. The highest ratio is recorded at 164.8% in the year 2004-2005 the low ratio is 42.2% in 2005-2006 and it is increased during the year 2009-2010 at 119.7%

TABLE-4
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 FIXED ASSETS 6,07,94,08,271 6,25,64,02,879 5,89,55,39,377 5,69,93,08,565 5,71,48,37,436 7,43,21,47,039 11,05,19,01,277 CURRENT LIABILITES 2,053,36,47,518 2,03,50,59,123 2,40,99,51,568 2,14,80,89,665 2,30,72,27,432 3,72,38,07,994 5,05,58,08,066 RATIO IN % 2.96 3.07 2.44 2.65 2.47 1.99 2.18

Interpretation
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1. The ratio was fluctuating trend percentage in review period. 2. From the above table it is observed that the ratio was recorded at 2.96in the 20032004 and is gradually changing to 2.47 in 2007-2008 which indicates that the current funds are used in the fixed assets which is quite satisfactory. 3. The average ratio was recorded at 2.59 during the review period of time 4. The highest ratio was recorded at 3.07 which is higher than the average ratio. During the year 2004-2005. 5. The lowest ratio was recorded at 1.99 which is less than the average ratio. During the year 2008-2009.

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TABLE-5
YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 FIXED ASSETS 1,34,543,28 1,40,116,22 1,35,375,24 1,29,553,62 1,42,195,78
1,61,317,75 22,08,96,60,339 CURRENT LIABILITES 4,128,06 4,448,21 3,368,35 3,499,02 2,819,24 2,901,24 28,87,27,907 RATIO IN % 32.5 31.2 34.1 51.84 50.43 55.29 76.56

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TABLE-6

FIXED ASSETS
2011-12
gross block Less: depreciation net block capital work in progress Investment 171339.4 77297.5 94041.85 4164.28 89178.56

2010-11
170064.1 70159.58 94041.85 4164.28 88859.46

2009-10
134540.3 62587.76 71952.51 1358.36 104730.2

2008-09
123003.5 55397.84 67605.64 8568.51 98447.5

2007-08
136672.8 67765.8 68907 15604.81 73660.28

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79

ANALYSIS OF THE STUDY

ZUARI CMENT Balance sheet As on 31st March
(Rs. In lacs)

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2011-12 sources of fund share holders' fund shar capital reserve & surplus Loan Funds secured loans unsecured loans deffered tax liability total = Application Fixed Assets gross block Less: depreciation net block capital work in progress Investment current assets, loans & advances Inventories Debtors Cash Others Loans less: current liabilities and provisions current liabilities Provision net assets total = 6138.08 111153 75695.6 1 43575.2 4 2105.03 244667 171339. 4 77297.5 94041.8 5 4164.28 89178.5 6 28450.3 8 29694.3 5 2656.16 4332.3 27827.6 3 30367.1 4 5311.42 57282.2 6 244667 81

2010-11 6138.08 106560. 3 86884.8 1 47621.8 5 2837.2 252129. 2 170064. 1 70159.5 8 94041.8 5 4164.28 88859.4 6 34040.3 6 30447.6 1 4679.94 5066.34 23931.3 3 35044.2 3 5966.62 57154.4 8 252129. 2

2009-10 6138.08 133690. 4 50204.1 6 37472.2 1 5967.58 235559. 4 134540. 3 62587.7 6 71952.5 1 1358.36 104730. 2 32974.1 8 28988.5 6 2182.48 5775.49 23361.3 8 28210.0 3 7553.73 57518.3 3 235559. 4

2008-09 6138.08 129477. 9 56686.0 5 22074.9 6 5587.73 219964. 7 123003. 5 55397.8 4 67605.6 4 8568.51 98447.5 28366.3 6 26877.0 7 2561.4 2969.9 21715.8 6

2007-08 6138.08 112856.5 54667.56 22120.28 6402.73 202185.1

136672.8 67765.8 68907 15604.81 73660.28 31904.16 24846.74 2503.17 3315.06 14442.06

29083.9 8063.66 45343.0 3 219964. 7

26227.34 6770.84 44013.01 202185.1

CHAPTER-5

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SUGGESTIONS
1 Suggestions for efficient management of fixed assets of ZUARI 3 The ZUARI should analyze and measure a list of projects for evaluation. 4 The ratio of return on fixed assets is poor. The finance department (The manager of ZUARI should take remedial steps to improve the position. 5 The PAT ratio must be improved. 6 .The ZUARI h as to increase its consultancy services to other power project in India and abroad. 5. .ICICI DIRECTS must concentrate on other diversification and takeover. 8 ZUARI research must be expanded with profit making units with low cost.

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CONCLUSIONS After analyzing the financial position of (ZUARI CEMENT) and evaluating its fixed assets Management or capital budgeting techniques in respect of components analysis, trend analysis and ratio analysis. The following conclusions are drawn from the project preparation. The project is describing the financial analysis of fixed asset through ZUARI. Its adopted all financial tools for the knows positions fixed assets. It indicates the equity research for position of the company ZUARI followed all company financial data

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FINDINGS I tried to find to know the financial positions for the study through fixed assts I find current ratios of the financial position to understand the company obligation the particular data. Fixed asset management refers to know the analysing data through icici direct. This study interpret how the fixed assets are indicates to find the assets performance of the company.

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BIBLIOGRAPHY: Book Name FINANCIAL ACCOUNTING FINANCIAL MANAGEMENT COST AND MANAGEMENT ACCOUNTING ACCOUNTING FOR MANAGEMENT Author name S P JAIN IM PANDEY ICWA BOOK KHAN AND JAIN

Website: www.wikipedia.com www.Zuaricement.com www.yahoofinance,com

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