QUANTITATIVE METHODS PROJECT

Group Name:- CHANAKYAS

Group Members –

1) Anish Buche
2) Gaurav Madan
3) Jayant Agrawal
4) Kapil Gupte
5) Mitesh Jain
6) Shouvik Banerjee
7) Viral Shah

1
AMBUJA CEMENT

Ambuja cement was set up in 1986. The cement industry presented an opportunity of steady
growth and ethical competition to the promoters. In the last decade the company has grown
tenfold .The total cement capacity of the company is 18.5 million tones. Its plants are some of
the most efficient in the world with the environment protection measures that are on par with the
finest in the developed world.

However, a decade later, it became one of world’s most efficient cement companies producing
the finest cement in the world at the lowest cost, while adhering to the most stringent
international pollution-control norms. The company’s distinctive attribute however, is its
approach to business Ambuja follows the philosophy of giving its people the authority to set
their own targets and the freedom to achieve their goals. This simple vision has created an
environment where, there are no limits to excellence, no limits to efficiency and has proved to be
a powerful engine of the growth for the company.

Today, Ambuja is the 3 rd largest cement company in India, with an annual plant capacity of 16
million tones including Ambuja Cement Eastern Ltd. and revenue in excess of Rs.3298 crores.
As a result Ambuja is the most profitable cement company in India, and one of the lowest cost
cement producer in the world.

ACHIEVEMENTS –

• Benchmarking the quality standards for the industry, its also the first to receive ISO 9002
quality certification.
• Reinventing transportation ambuja became the first company to introduce the concept of
bulk cement movement by sea in India, which made its transportation speedy and cheaper
as compare to other transport like rail and road.
• National Award for commitment to quality by the Prime Minister of India.
• National Award for outstanding pollution control by the Prime Minister of India.
• Eco-Gold Star by TERI(Tata Energy Research Institute)
• Best Export Award by CAPEXIL.
• Award for Corporate Social Responsibility by Business World- FICCI
• International Award for Rural Development by Asian Management Institute.
2
 • ISO 14000 Certification for Environmental Systems.

STRENGTHS-

Infrastructure- over 40% of the cement cost is comprised of power the company set up its own
power plant at a substantially lower cost than National grid , in order to control its cost of power.
The result is that today they are in a position to sell their excess power to the local state
government.

The sea borne bulk transportation facilities meanwhile have brought many coastal markets within
reach. It has also made ambuja India’s largest exporter of cement consistently for the last five
years

1) Analysis Performed:

3
 1.1 ) Estimating the share price:

Time Period Market Price of Sensex Market

(2006 – (2008) Ambuja (BSE) Return
Jan 88.5 9919.89
4.5398688
Feb 88.2 10370.24 9
8.7724102
Mar 103.25 11279.96 82
6.7606622
Apr 124.05 12042.56 72
-
13.651167
May 92.9 10398.61 19
2.0256553
Jun 99.5 10609.25 52
1.2689869
Jul 104.7 10743.88 69
8.8903636
Aug 112.35 11699.05 3
6.4566781
Sep 116.85 12454.42 06
4.0746979
Oct 117.25 12961.9 79
5.6659131
Nov 144.15 13696.31 76
0.6614920
Dec 141.3 13786.91 37
2.2050626
Jan 137.15 14090.92 28
-
8.1813678
Feb 115.95 12938.09 6
1.0357788
Mar 106.7 13072.1 51
6.1219696
Apr 117.95 13872.37 91
4.8448102
May 113.15 14544.46 23
0.7291436
Jun 124.55 14650.51 05
6.1464071
Jul 131.5 15550.99 9
-
1.4943743
Aug 133.45 15318.6 13
Sep 143.8 17291.1 12.876503

4
 07
14.729485
Oct 144.65 19837.99 11
-
2.3933876
Nov 150 19363.19 37
4.7709080
Dec 146.9 20286.99 99
-
13.004787
Jan 119.6 17648.71 8
-
0.3994059
Feb 120.95 17578.22 62
-
11.001000
Mar 121.05 15644.44 1
10.501302
Apr 113.9 17287.31 7
-
5.0426584
May 95.2 16415.57 59
-
17.994927
Jun 75.7 13461.6 99
6.6422267
Jul 81.2 14355.75 78
1.4543301
Aug 80.2 14564.53 46
-
11.700343
Sep 78.4 12860.43 23
-
23.890103
Oct 60.95 9788.06 21
-
7.1039613
Nov 52.3 9092.72 57
6.0992750
Dec 69.7 9647.31 24
0.3261841
92

We are using the tools of statistics to perform some financial functions. We have calculated the
market risk of Ambuja Cement Beta (β) through the use of statistical functions of covariance and
variance. Covariance suggests us the fluctuations in the price of Ambuja Cement with respect to
the changes in BSE Sensex. With the help of it we can calculate the expected return from the
shares of Ambuja cement to the investors’ point of view. The share price in this regards comes to

5
be around Rs. 74.17. The current price is Rs. 100.55. Thus we can see that the price of Ambuja
Cement is overpriced.

1.2 ) Analyzing the Different prices in different cities:

(fo-
prices of (fo- fe)^2/f
City cement(fo) fe fe)^2 e
150.4 465.2
Mumbai 172.00 3 6 3.09
150.4
Delhi 158.00 3 57.30 0.38
150.4 555.5
Kolkatta 174.00 3 4 3.69
150.4
Chennai 145.00 3 29.48 0.20
150.4 1327.
Hyderabad 114.00 3 14 8.82
150.4
Ahmedabad 151.00 3 0.32 0.00
150.4 130.6
Jaipur 139.00 3 4 0.87
2565.
150.43 71 17.06

Looking at the data we found out that the price of cement in 7 different cities that includes
Mumbai, Delhi, Chennai, Kolkata, Jaipur, Ahmedabad and Hyderabad were different. We tried
to find out whether there is a dependence of price on the region or not. Performing a chi square
test we conclude that the price of the cement is dependent on the region at 90% level of
confidence. We infer that the price of the cement depends on the demand of the particular region.
For example in Mumbai which is the financial capital of the country we found out cement prices
are maximum as the price of real state is also the maximum in Mumbai which shows that region
determines price.

1.3) Impact of recession on Ambuja:

year sales(yearly)n1 % growth
2003 1735.00 25.36%
2004 1968.00 13.43%
2005 2606.00 32.42%
23.74% u1

6
 n2
2006 4178.67 60.35%
2007 4370.67 4.59%
2008 4186.00 -4.23%
20.24% u2

Ho:u1= No impact of
u2 recession
H1:u1> Recession has
u2 impacted sales

STD.
DEV. 1 9.60%
STD.
DEV. 2 35.01%
STD.
ERR. 0.39
Dof 4.00
Ho:u1=u2
H1:u1>u2

t=u1-u2/std errr
Tactual
= 0.09
Tcritical
= 2.13

Tcritical > Tactual

Thus Ho is rejected

We have taken two samples of percentage growth in sales of three years each. The first sample is
from 2003-2005 and the second is from 2006-2008. By using the Hypothesis testing of means for
small samples using the t-test, we arrive at the conclusion whether there is any significant
difference between the means. As per the calculations done by us , we infer that there is certain
difference in the means which we believe is due to the economic recession and subsequent
decrease in the infrastructure projects and purchasing power thereby reducing the demand of
cells.

7
 Price Before Dividend announcement Price after announcement
1 98 95
2 97.5 100
3 97 99.5
4 96 108.5
5 96.5 108
Average 97 102.2
Variance 0.625 34.325

H0: µ1 =µ2
H1: µ1 ≠µ2
α = .05
Pooled Estimate 17.475
Standard error 11.05216042
t-actual -0.470496247
t-critical 2.306
Thus we accept the hypothesis

ANALYSIS OF SHARE PRICE BEFORE AND AFTER DIVIDEND

ACCOUNCEMENT

8
IMPACT OF ANNOUNCEMENT OF DIVIDEND ON SHARE PRICE

Ambuja cement on the 23rd of July 2009 announced a dividend to its shareholders. It also
announced about the operational performance of the quarter which was considerably low in
comparison to the performance of the same quarter last year. We made an analysis on the share
prices that were prevalent in the BSE before 5 days of the announcement and after 5 days of the
announcement to see if their was any effect due to it.

We made a test of hypothesis of difference in mean of small sample size to further to test our
analysis and tried to test our analysis at alpha = .05, whereby the confidence interval is .95. As
per our analysis, we accepted our null hypothesis which suggested that there was no considerable
change in the share price due to the announcement of dividend. The value of t-actual lies within
the relevant range given my t-critical.

From the above analysis we can conclude that the market price of Ambuja is not being affected
much by the internal operations of the company or the declaration of any sorts of benefit. It is
more dependent on the market factors or the forces that drive the sensex of BSE. Generally we
believe that the impact of various company operational aspects such as increase or decrease in
the production, sales, profit etc should have a direct impact on the share prices of the company.
However, in this case the hypothesis testing shows completely opposite results.

Thus we can conclude that Share price of Ambuja Cement is not that much detrimental to the
operational performance of the company rather it is more determined by the market factors. The
fluctuation in sensex and positive or negative externalities in the market seems to be most
important factor impacting the share price.

9
CHI-SQUARE ANALYSIS

SALES ARE DEPENDENT ON REGION OR NOT

Region Sales(in million tones) fo fe (fo-fe) (fo-fe)2 (fo-fe)2/fe

Western 27.5 28.2 -0.7 0.49 0.02
Northern 33.5 28.2 5.3 28.09 1.00
Eastern 23.6 28.2 -4.6 21.16 0.75

Sum = 84.6

Ho:The sales are not dependent on the region

H1:The sales are dependent on the
region

Xcritical = ∑(fo-fe)2/fe 1.76

Xactual
dof=2 0.21
LOS=10%

Thus Ho is rejected.
Thus sales are dependent on the region

10
EFFECT OF PRODUCTION UNIT ON CAPACITY
Capacity (tonnes) Capacity [(fo-
Location fo (fe) fo-fe (fo-fe)^2 fe)^2]/fe
Ambujanagar (Amreli,
GUJ) 5180 1887 3293 10843849 5746.61
Bhatapara (Raipur, CTG) 1110 1887 -777 603729 319.94
Bhatinda (Bathinda, PUN) 740 1887 -1147 1315609 697.20
Darlaghat (Solan, HP) 1480 1887 -407 165649 87.78
Farakka (Murshidabad,
WB) 185 1887 -1702 2896804 1535.14
Maratha (Chandrapur,
MAH) 3515 1887 1628 2650384 1404.55
Rabriyawas (Pali, RAJ) 2035 1887 148 21904 11.61
Roorkee (Hardwar, UTR) 185 1887 -1702 2896804 1535.14
Ropar (Rupnagar, PUN) 3145 1887 1258 1582564 838.67
Sankrail (Haora, WB) 1295 1887 -592 350464 185.73

Sum = 18870

Ho: No effect of production unit on capacity

H1: Effect of production unit on capacity

X= ∑[(fo-fe)2/fe]
Xactual = 12362.35

Xcritical
dof=9
L.O.S = 10% 14.68

Thus Ho is rejected
Thus the the capacity of production in affected by the location of unit.

11
PRODUCTION AFFECTED BY LOCATION OR NOT
Production (fo-
Location (fo) fe (fo-fe) (fo-fe)2 fe)2/fe
Ambujanagar (Amreli, 1719.8 3001.2 9007621.6
GUJ) 4721.1 3 7 1 5237.51
1719.8
Bhatapara (Raipur, CTG) 1011.66 3 -708.17 501504.75 291.60
-
1719.8 1045.3 1092840.2
Bhatinda (Bathinda, PUN) 674.44 3 9 5 635.44
1719.8
Darlaghat (Solan, HP) 1348.89 3 -370.94 137596.48 80.01
-
Farakka (Murshidabad, 1719.8 1551.2 2406283.4
WB) 168.61 3 2 9 1399.14
Maratha (Chandrapur, 1719.8 1483.7 2201603.0
MAH) 3203.61 3 8 9 1280.13
1719.8
Rabriyawas (Pali, RAJ) 1854.72 3 134.89 18195.31 10.58
-
1719.8 1551.2 2406283.4
Roorkee (Hardwar, UTR) 168.61 3 2 9 1399.14
1719.8 1146.5 1314576.9
Ropar (Rupnagar, PUN) 2866.38 3 5 0 764.36
1719.8
Sankrail (Haora, WB) 1180.28 3 -539.55 291114.20 169.27

Sum =
17198.3

Ho:The production of plant is not affected by the

location.
H1:The production of plant is affected by the location.

∑(fo-fe)2/fe =11267.17

Xcritical = 11267.17
Xactual
dof=9 4.168
LOS=10%

Thus Ho is rejected
Thus the production of plant is affected by the location.

12
Chi-Square analysis of the production and capacity of the plants, whether
they are dependent on the plant location and analysis of whether the sales the
company are dependent on the region of sales.

Chi-square analysis of the effect of capacity of plant on production unit.

Ambuja cement has around 10 production units located at different parts of the country. The
proximity to raw materials as well as to enhance the level of distribution and sales, Ambuja went
with its expansion plan in various parts of the country. Different units are of different capacity.
Each capacity is subjected to cater the needs of the particular area or sector. Some plants are
closely located to major metropolitan or the areas where the infrastructural development are at a
high speed, thus those plants are operating at a higher capacity whereas others are not. However
the idea of having multiple plants is to get the economies of scale both in production as well as
sales.

The analysis considers the capacity of different units and also the location of all the plants. Using
this data chi-square analysis is carried out, whether capacity are dependent on the location of
unit. The null hypothesis here is that the capacity of production unit is not affected by the
location of unit & the alternate hypothesis is the capacity of production unit is affected by the
location of unit. After analysis it is found that the critical value is much greater than the actual
value and thus the null hypothesis is rejected. Thus it is concluded that the capacity of the
production unit is affected by the location of the unit.

Chi-square analysis of the effect of total production on the location

The production output of plants is dependent on a number of factors such as operational

efficiency, availability of cheap labor, government policies for the particular area etc. Also
nearness to highly demanded area of cement is also an important factor of consideration. The
plants which are near to developing areas (for e.g. Mumbai and other metros) where there are lot
of construction projects under operation, there will be high demand for cement. Other factors

13
which can affect the production of the plant can be management problems in the plant, improper
coordination among the workers in plant, whether lower wages are provided to labors. Thus
considering all these factors, there are a lot of other factors also which directly or indirectly
affect the production of plants. For e.g. improper utilization of available resources, other social
problems etc.

The data used for analysis here is the production of all the plants. Chi-square analysis is carried
out using this data to see whether the production of the plant is dependent on the location. Null
hypothesis here is that the production is not dependent on the location and the alternate
hypothesis is production is dependent on the location. On conducting the analysis, it found that
the null hypothesis is rejected. Thus it is concluded that the production of plant is dependent on
the respective location of plant.

Chi-square analysis of effect of the sales of company on respective region.

The sales of a particular region differ a lot depending on variable factors such as the economic
conditions of the region, current growth rate of the region, demand etc. Also the sales are
dependent on the number of people migrating to a specific region. For e.g. consider the city of
Mumbai, the financial capital of India. Thousands of people migrate to Mumbai every year for
jobs. Thus the rate of construction of homes in Mumbai is very fast, resulting in an high demand
of cement. The same factor is also responsible for other developing regions in the country
especially other metros and cosmopolitan cities. Thus there is lot of fluctuations in the demand
for cement in different areas which in turn affects the sales in that particular area.

Here the data used is the region wise (North, East, West) sales in the respective regions. The
analysis is then carried out to check whether the sales of company are affected by the respective
region. The null hypothesis considered here that the sales are not affected by the respective
region and the alternate hypothesis is that the sales are affected by the respective region. After
conducting the analysis it is found that the null hypothesis is rejected. Thus it is concluded that
the sales of company are dependent on the respective region of sales.

REGRESSION ANALYSIS

14
 Production v/s Raw Materials

SUM M AR Y O U T PUT

Reg ressio n Statistics

M u ltiple R 0 .9 48 113 5
R Square 0.898 919 20 9
Adju sted R Square 0.865 225 61 3
Standard Error 173 8.705 74 6
O bservations 5

AN O VA
Multiple Regressions df SS MS F
R egression OUTPUT
SUMMARY 1 8 065 391 7 .1 58 065 39 17.1526.67 9
R esidual 3 9 069 293 .0 1 73 023 09 7.672
T otal Regression Statistics 4 8 972 321 0 .1 7
Multiple R 0.971276132
R Square C oefficients Stand ard Error t Stat
0.943377325 P-va lu
Adjusted R Square
Intercept 0.88675465
-21 0 5.717 5 9 3 606 .5 673 6 5-0.583 8 5 6440.600 3
Standard
X Error
V ariable 1 1593.795497
0.000 997 67 9 0 .0 00 1 931 5 4 5 .1 651 940 60.014 0
Observations 5

ANOVA
df SS MS F
Regression 215 84642841.99 42321421 16.6
Residual 2 5080368.174 2540184.087
 Production v/s Energy

SUM M ARY O UT PUT

Regression Statistics
M ultiple R 0.336975665
R Square 0.113552599
Adjusted R Square -0.18192987
Standard Error 5148.945085
O bservations 5

AN O VA
SS df MS F
Year Production (thousand
Regression tonnes)(y)
1 10188303.71 ENE
10188303.7 0.38429
2004
Residual 10368.17
3 79534906.46 26511635.5
T otal 2005 4 89723210.17 12804.03
2006 22632.98
2007 Coefficients Standard Error 16861.08
t Stat P-valu
Intercept
2008 12446.90394 6303.966891 1.97445579
17757.71 0.1428
EN ERG Y 6.666123167 10.75327252 0.61991577 0.57921
Regression analysis:

Here we have done a regression analysis to determine the effects of various factors like sales,
energy consumed, raw materials on dependent variables like dividends, production. The purpose
of such an analysis is to determine the degree to which each of these independent factors affect
the dependent factors mentioned above, and to determine that how will a change in a particular
factor will increase or decrease the dependent factors such as dividends or production. Such an

16
analysis gives the company an insight into the decisions to be taken or changes to be made
urgently for maximizing production and profit. Let us see the various regression analysis and try
to understand how they play a major role in the decision making of the company.

Dividend and Sales:-

Here we have used the regression analysis to study whether there is any relation between the
sales per year and the dividends offered. We take the dividends offered as the dependent
variables and find its dependence on the independent variable sales.

We come to know that the value of coefficient of determination i.e. R square is 0.6919. Also the
standard error between the y estimate and y is very high i.e. 6.50. This indicates that the
dependence of dividends offered by the company on sales made is not very high. While offering
dividends, sales would not be the most determining factor on the basis of which the company
would offer dividends to its shareholders. On the other hand if the sales of the company are not
high in a particular year, the profits gained by the company in that year are also reduced,
reducing further the capacity of the company to offer dividends to its shareholders. Now the
main motive of any company is to increase the shareholders wealth. If the company is not in a
position to offer dividends it might loose the confidence of the investors in the company , putting
the company in a very undesirable condition. So the company must make efforts to continuously
increase the sales of its products by getting hold of the new opportunities offered by the ever
increasing realty and infrastructure market in India.

Since effect of sales is low in this case, it might not be a crucial factor while making a decision
on dividends to be offered . So a more detailed research is required to ascertain the factors which
actually affect the variable of dividends more than the sales made

Energy consumption and Raw materials on production: -

We have made an effort to determine the effect of energy consumed and Raw materials on the
production levels per year. Energy consumed and Raw materials are very necessary factors
affecting the production of the company, but we need to study their combined as well as

17
individual effect on production levels to better understand how the costs can be minimized
without reducing the level of production.

Now if we take an assumption that one of the factors is kept constant and then it gives us the
ability to study the effect of other factor in ideal conditions.

So we calculate the regression separately between production and energy consumed and
production and raw materials required. Also the multiple regression is calculated for the effect of
energy consumed and raw materials used on the production level. So we have three different
cases here:

Case 1: Now if we keep raw materials constant to study the effect of energy consumed on
production we can see that the valur of coefficient of determination (R square) is o.113 which is
very low. The standard error is 5148.94.

Case 2: If we keep energy consumed constant to study the effect of raw materials on production
we see that the R square is 0.8989, and the standard error is 1738.706.

We can see from the above calculations the effect of raw materials is much more on the
production per year than the effect of energy consumed, as the value of R square in the case of
raw materials is much more than in case of energy consumed. Also the standard error is very less
in raw materials as compared in the case of energy consumed. This indicates that if the cost of
raw materials can be reduced, the production costs of the company can be significantly reduced.
This will help the company in putting a more competitive product in the market and also to fare
better than other companies in times of recession. But no company can produce goods on the
basis of raw materials alone, hence it is essential that we make a study of effect of both the
energy consumed and raw materials on production.

18
Case 3: We can see that there is a tremendous increase in the value of R square(0.9433), which
is much more than the value in case 1 and case 2. Also the standard error is 1593.79, less than
the value of standard error in both the above cases. If we go for individual standard errors in the
case of multiple regression, the S.E(0.0002) for raw materials is very low as compared to
S.E(3.961) for energy consumed.

All the cases 1, 2 and 3 tend to give us the same indications. The cost of raw materials affects the
cost of production more than the energy consumed. So to be economical, the company should
put more efforts in finding cheaper raw materials which give equal or high production levels.

Regression analysis of purchase of raw material with the sales.

We have taken data from last 5 years i.e. from 2004 to 2008 for use of raw material & sales.

We have analyzed if purchase in raw material is affecting the sales.

Results of the analysis are as:

0.5195
R Square 85934
Standard Error 1855.772185

We can see that coefficient of determination (R square) is very weak i.e. only 51 % of the
variation in sales is determined by the purchase of raw materials for that particular year.

Also we can see that the standard error is very high, which tells about the error in judgment, the
larger the standard error of estimate, the greater the scattering of point along regression line &
thus weak is the relation.

Thus we can say that purchase of raw materials (i.e. gypsum, iron ore, limestone, clay & silica)
doesn’t have much effect on sales of the cement. We see that there is a relationship of association

19
between purchase of raw materials & sales but there seems to be no effective relation of cause &
effect.

Reasons for the behavior:

Sales doesn’t only relate with the purchase of raw material but also how much is been used. It
may happen that because of some of the seasonal factor there may be temporary halt in
production, so sales will not vary in proportion with the purchase in raw materials.

There may be temporary shut down of the plant or there may be delay in production cycle. Some
times due to unfavorable political situations & adverse government regulations company may
want to delay the production cycle.

Also we have taken into account not all the raw materials that is been use for production we have
done analysis mainly for gypsum, iron ore, limestone, clay & silica. Relationship may be a bit
stronger if we had taken all the raw material into account.

20
COMPETITOR ANALYSIS

TREND OF ACC PRODUCTION

Production(Y) Tonnes in
Year 1000 Coded (X) XY X2
-
3879
2005 12931 -3 3 9
-
1873
2006 18733 -1 3 1
1992
2007 19921 1 1 1
6250
2008 20836 3 8 9
2490
Sum 3 20
Average 18105.25

a 18105.25
B 1245.15

y 18105.25 + 1245.15X

Production for
year Growth
16.7738529
2009 24331 5
10.2350910
2010 26821.3 4
9.28478485
2011 29311.6 4
2012 31801.9 8.49595382

21
TREND OF ACC SALES

Coded
Year Sales (Y) Rs Time (X) XY X2
2005 2765.94 -3 -8297.82 9
2006 5310.69 -1 -5310.69 1
2007 6400.08 1 6400.08 1
21146.5
2008 7048.85 3 5 9
13938.1
Sum 2 20

Average 5381.39

a 5381.39
b 696.906

5381.39 +
y= 696.906X
Forecasted Sales Growth %
25.778247
2009 8865.92 5
15.721008
2010 10259.732 1
13.585267
2011 11653.544 1
11.960413
2012 13047.356 1

22
TREND OFAMBUJA PRODUCTION

Production (thousand Coded

Year tonnes) (Y) Time(X) XY X2
2005 12804.03 -3 -38412 9
2006 22632.98 -1 -22633 1
16861.
2007 16861.08 1 1 1
53273.
2008 17757.71 3 1 9
9089.1
Sum 4 20
Average
: 17513.95

a= 17513.95
b= 454.457

y= 17513.95 + 454.457X

Year Forecast production Growth %

11.423347
2009 19786.235 9
4.5936682
2010 20695.149 7
4.3919181
2011 21604.063 3

23
 4.2071438
2012 22512.977 1

TREND OF AMBUJA SALES

Year Sales (Y) Rs. Coded (X) XY X2

2005 3023.52 -3 -9070.56 9
2006 7010.47 -1 -7010.47 1
2007 6454.75 1 6454.75 1
21226.5
2008 7075.51 3 3 9
11600.2
Sum 5 20
Average 5891.0625

a 5891.0625
b 580.0125

5891.063+580.0125
y= X

Forecast
Sales Growth %
2009 8791.125 24.2472274

24
 1
13.1954101
2010 9951.15 4
2011 11111.175 11.6571954
10.4401649
2012 12271.2 7

PRODUCTION AND SALES ANALYSIS WITH ACC:

Here with the use of trend analysis we are able to forecast the production and sales of both ACC
and Ambuja from 2009 – 2012. On the basis of annual data of last four years we are able to
identify a trend that is in the industry. There has been a forecast of increment of sales in the
cement industry of 10.43%. However if we see here, the sales of Ambuja is expected to increase
by 24% and of ACC by 25%. This shows that the cement industry has a good prospect in sales
for the year 2009. This might be the result of the improvement in the economic condition.
Countries are believed to overcome the recessionary pressure they are facing. Even the Indian
Government in the current year budget has placed a special importance on the infrastructure
development which are positive vibes for cement industry. However after the year 2009 the
increment in sales as per the previous years seems to be increasing at a rate of average of 12%
for Ambuja and average rate of 13% for ACC. Thus we can derive that year 2007-2008 does not
seem to be a very happy time for the cement industry.

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We can also see that the forecasted production seems to increase considerably for the year 2009
whereas the increment in the production after that shows a declining trend. The production of
ACC is to be increased by 16% and that of Ambuja by 11% for the year 2009. This might be the
result of increased capacity utilization by ACC. We see the impact of recession on production
also. The sales is to be increased more than 20%, however production only by around 10% -
15%, thus showing that the facilities right now are probably having lots of inventory level with
them in the preceding two years of market downturn. The production after 2009 is expected to
increase around 4.5% for Ambuja and around 9.5% for ACC.

On the basis of trend analysis conducted for production and sales and forecasting both the
variables for next four years from the year 2009 we conclude that ACC is predicted to do better
than Ambuja. This also shows an increment in the market share for ACC as well as the
operational efficiency it will achieve

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AMBUJA AND ACC IN TIMES OF RECESSION:

ACC n1
YEAR SALES

2765.9
4
2006 4,549.80 39.21
6400.0
2007 8 28.91
7048.8
2008 5 9.20
std
x1 25.77 dev 1 15.25

AMBU
JA n2
YEAR SALES

4178.6
2006 7 27.64
6454.7
2007 5 35.26
7075.5
2008 1 8.77
std
x2 23.89 dev 2 13.64

Ho:u1= Peformance of ACC and Ambuja is simialr during downturn in

u2 economy

sp 7.23
std
error 5.91
Ho:u1> Performance of ACC is better than Ambuja during
u2 downturn

Ho is accepted .Not much of a difference between sales

of Ambuja and ACC
alpha 0.95
dof 2.00
Tactual 0.32

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 =
Tcritica
l= 2.92

ANALSYSIS

The recent downturn in the economy has had a huge impact on industries in terms of the total
sales and the cement industry is no exception. The cement industry thrives on its demand from
the infrastructure and the real estate sector both of which have taken a huge beating in terms of
their sales. Although government funding has enabled the infrastructure projects to redeem
themselves but the overall picture of the cement industry still seems to be pretty gloomy due to
the dampened demand from the private players. Owing to such situations of unpredictability, it is
of utmost importance to analyze the sales performance of companies with respect to their
competitors.

Thus we focus on the sales of ACC for the years 2006-2008 and compare it with that of Ambuja
and thereby conclude whether there exists any significant difference between both the sales. The
statistical tool that we use in this case is hypothesis. Following is a description of the test. The
null hypothesis for this test is that there is no significant difference between the sales of ACC
and Ambuja and the alternate hypothesis says that the sales of ACC are better than that of
Ambuja. We follow a one-tailed T-test with level of significance of 95%.

Based on our calculations for the value Tcritical and Tactual, our Null calculation is accepted
and thus the sales of ACC are similar to that of Ambuja during the recessionary period. The
recessionary period has had an equally impelling impact on all the firms and nota an industry in
particular. Private real esatate players have slowed down work on many of the projects in bigger
cities such as Mumbai, Delhi thereby affecting the bigger players such as Ambuja and ACC
operating in these regions. As we can see in the data sheet as shown, growth rate of both Ambuja
and its major competitor ACC have had an average growth rate of 8-9% during the year 2007-
2008.

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Thus if a comparative study is conducted between ACC & Ambuja, it can be safely concluded
that Ambuja is at par in terms of sensitivity to market returns and also the market trends. It also
provides evidence of the fact that the point of differentiation is very low in the products of
cement industry. Products in the cement industry have undergone a phase of standardization and
it has in turn led to commoditization of the cement.

This also provides food for thought for the cement manufacturing firms in terms of the difference
that can be brought about in their products to better sales than their competitors in times of
economic downturn. Difference can also be brought about in terms of the service that is provided
to the customer. Better delivery norms can be established by the organization, which can pioneer
the firm as a service differentiator. Supply and inventory storage norms can also be worked upon
for improvement and thereby bring variation in terms of the end product. Moreover innovation in
packaging can also be major factor in establishing the essence of your products in terms of its
value to the end user.

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