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MANAGERIAL ACCOUNTING AND CONTROL

ASSIGNMENT 1

INDIA CEMENTS LTD - ANALYSIS

Submitted by

Section D, Group 3

ANUBHA GOYAL 2014PGP047

ASHOK KOTHIYAL 2014PGP068

BINIT KIRAN 2013PGP107

M VISHVANATH 2014PGP187

RAJAT KUMAR 2014PGP287

SARAGADE PRIYANKA DILIP 2014PGP329

SOMA BANIK 2014PGP370

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ABOUT THE COMPANY

India Cements Limited is a cement manufacturing company in India. It was established in 1946 and the

first plant was set up at Thalaiyuthu in Tamil Naduin 1949. The company is headquartered in

Sankarnagar, Tirunelveli, Tamil and is headed by N. Srinivassan (Managing Director)The company's

brands include: Sankar Super Power, Coromandel King and Raasi Gold.

Major competitors: ACC Limited, Birla Corporation Limited, Deccan Cements Limited, Ambuja Cements

Limited, UltraTech Cement Limited etc.

INDUSTRY ANALYSIS-

COMPANY COST ANALYSIS FOR THE LAST 5YEARS-

The companys Contribution Margin ratio has saw a decreasing trend from 37% in 2009 to 32% in 2011

and since then has steadily grown to 43% in 2013. This progress is a function of the more than

proportionate increase in the selling price over the variable cost which is a positive signal for the

company. The volume of sales hasnt increased for the company which is not a good indicator given the

demand in this industry has grown. It can mean that the company is losing its share in the market.

Similarly profit margins dipped from 2009 to 2011 then saw and increase. Even when the company has

maintained steady contribution margin ratio of 43% from 2012 to 2013, the profit margins have

declined. This indicates that the fixed costs have increased. And this has further led to increase in

required breakeven level of sales from 0.69crore in 2012 to .79crore in 2013 because the same

contribution margin had to cover the increased fixed costs.

Operating Leverage gives an idea of proportion of fixed costs in the cost structure. Higher the operating

leverage more is the companys ability to increase its operating profits with incremental revenue. The

companys situation was the worst 2011 when increasing sales was detrimental to companys health.

Since then it has steadily increased till the year 2013 which is positive indicator.

COMPETITIVE INTENSITY -

MODERATEFragmented players present -->

lower pricing flexibility (35%

marke share)

THREAT OF NEW ENTRANTS - MODERATE

key barriers- high capital costs, long gestation

periods and availability of raw materials.

BARGAINING

POWER OF

BUYERS- LOW

Buyers market isrelatively fragmentedand they are retail in

nature.

THREAT OF SUBSTITUTES - LOW

virtually no viable substitue forcement

BARGAINING POWER OF

SUPPLIERS - MODERATE

Some raw materials incontrol of government. Delay

in issuance of new licenses

act as detremental

Source: Crisil research Report

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Margin of Safety is the buffer sales made over and above the break-even level. More the margin of

safety, more are the profits and thus the better it is. The company saw a steady decline in this figure

from 2009 to 2011, but then recovered and has been on a rising trend till now which is a good indicator.

Cost Efficiency (Expenses/Revenue) The efficiency ratio is a quick and easy measure of a firms ability to

turn resources into revenue. The lower the ratio, the better it is. Thus 95% cost efficiency ratio in 2009suggests that to generate revenue of Re1 we have to incur cost of 95paise. This situation deteriorated

and was the worst in 2011 when cost efficiency was at 105%. It has come down to 91% now which is

decently fine.

All in all we see that the company saw a decline in the year of 2011 and since then it has fared well and

has been showing positive signs of growth through the years 2012 and 2013.