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International School of Informatics and
Management
A Project Report On:
IMPACT OF INVENTORY CONTROL AND RECEIVABLES
MANAGEMENT ON CEMENT INDUSTRY PROFITABILITY
Submitted to:- Submitted by:-
TRIPTI BISWA DILIP METHANI
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MBA RTU IV SEM.
TABLE OF CONTENT
1. Acknowledgement
2. Abstract
3. Introduction
4. Industry Profile
5. Company Profile
6. Analysis & Interpretation
7. Findings & Conclusion
8. Bibliography
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ACKNOWLEDGEMENT
A large number of individual has contributed to this project. I am thankful to all of
them for their help and encouragement. Like other reports, this report is also
drawn from the work of large number of researchers and author in the field of
finance.
I would like to express my gratitude to Mr. N.C. Jain A.V.P (finance) for
giving me the opportunity and enough of support to undergo training in their
organization, SHREE CEMENT LTD, BEAWER (RAJ)
I shall like to thank SHREES finance department for their able guidance,
support, supervision and care during the whole training program and to whom
words can never express my feeling of gratitude and reverence.
I would like to give my sincere thanks to officers, managers and employees of
SHREE CEMENT LTD, BEAWER (RAJ) for providing valuable information,
reports and data that were require for the study.
The successful completion of my project has been carried out under the
guidance of Mr. N.C Jain A.V.P (finance). I take upon this opportunity to thank
them for encouragement and guidance in completion of project. Their knowledge
and expertise was of great help for the project study.
I have tried to give credit to all sources form where I have drawn material in this
project, still I felt obliged if they are brought to my notice.
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(Dilip Methani)
ABSTRACT-
The aim of this study is to analyze the impact of inventory control and
receivables management on Shree Cement Ltd profitability. This study
will find out statistically significant relationships between profitability
and Inventory control and receivables management of Shree Cement
Ltd. This study analyzes Shree Cement Ltd under a multiple regression
model. Data of Shree Cement Ltd is collected from its last some yearsannual reports. Inventory control and Receivables management have a
great impact on profitability of a company. There are many inventory
control techniques like Economic Order Quantity, Just in Time etc.
Company can control its inventory turnover ratio and inventory period
lower the company profitability because companys working capital is
indulged in inventory. There is negative correlation between inventory
period and profitability.
Another variable is Average Collection Period. It is calculated by
dividing 365 days from Debtor turnover Ratio (365/Debtor Turnover
Ratio). Average collection period shows that in how many days
company recover from its debtors or how many days Credit Company
gives to its customer. It also has negative relationship with profitability.
Lower the average collection period higher the profitability.
This study will cover the inventory control techniques use by the
cement industry to lower down the inventory period as well as how the
inventory period and average collection period impact the firm
profitability.
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INTRODUCTION
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INTRODUCTION TO THE STUDY
INVENTORY CONTROL
Cement industry is a manufacturing industry and inventory control
plays a vital role in manufacturing industry. Companies need to
maintain sufficient level of inventory so that the production does not
stop. Inventory may be in various form like- raw material, consumables
and spares, work in progress and finished products. Companies need
many items for day to day operation and there is a lead time to procure
these materials, so every company need to maintain certain amount of
inventory in stock with them. Inventory control is necessary because
there should be optimum level of inventory. There is negative
correlation between inventory control and profitability. Higher the
inventory period lower will be the profitability and vice versa. Many
costs are associated with inventory management i.e. ordering cost,
inventory carrying cost, cost of capital, stock out cost etc. inventorycontrol comprises inventory control techniques like-
Economic Order Quantity(EOQ)
ABC Analysis
Fixation of Inventory levels
Value analysis etc.
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RECEIVABLES MANAGEMENT-
Receivables management impact directly cash flow. Cash flow can be
significantly enhanced if the amounts owing to the business are
collected faster. The company should have control over its receivables;
if a company is not able to collect its receivables on time then it will
impact its cash flow which will indirectly impact its profitability. There
should be effective receivables management system in every
organization. There is also a negative correlation between receivablesmanagement and profitability. Higher the account receivables period
lower will be the profitability and vice versa.
Receivables management may be concerned with the following aspects:
Credit Analysis
Credit Terms
Financing of Receivables
Credit Collection
Monitoring of Receivables
OBJECTIVE-
To find impact of inventory control and receivables management
on cement industry profitability.
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To understand the relationship between inventory control and
firms profitability.
To understand the relationship between receivables management
and firms profitability.
RESEARCH METHODOLOGY-
Type of research- research done is library based research.
Data collection- data collection is done through secondary sources
like internet, published & unpublished source.
Analysis of data- data analysis is done by using inferential
statistical tool i.e. regression analysis and correlation analysis.
Various charts and graphs are also used.
Interpretation and conclusion- on the basis of analysis of data and
output, interpretation and conclusion is done.
STEPS IN RESEARCH METHODOLOGY-
1. Identification of Objectives: Objectives are clearly defined that
determined the pathway to find out conclusions.
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2. Collection of Data: data are collected from various sources i.e. by
Internet, books, journals etc. according to the requirement of the
study.
3. Organization of Data: the bulk of data is not useful; it has to be
organized in way to conclude significant results.
4. Selection of Suitable Techniques: technique is used according to
objectives and availability of data.
5. Implementation / Execution: selected objectives and techniques
are implied upon organized data in order to find out better results.
6. Presentation: findings have been presented in tables and graphs
with a view to present the same in lucid style.
SCOPE OF STUDY-
The research project covers the Shree Cement Ltd. It covers the impact
of inventory period and average collection period on net profit margin
of company. Data related to Shree Cement Ltd is collected and study is
been done.
METHODS OF DATA COLLECTION & ANALYSIS OF
DATA
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Basically there are two types of data i.e. Primary data & Secondary
data. Primary data is collected through observation or through direct
communication with respondents in one form or another or through
personal interview. Whereas in secondary data the information is
collected through past researches, books, Annual reports, balance sheets
etc.
In this study the analysis & collection was extensively of secondary data
through the various Annual reports, Balance sheets & other important
documents of Shree Cement Ltd. Only form of primary data that was
involved in it was interviews with the higher official of Shree Cement (asort of Questionnaire was issued to them).
Analysis of Collected data was done by using various statistical
techniques (like Pie Charts & Bar Diagrams), comparative techniques
& analytical research methods.
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INDUSTRY PROFILE
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The Indian Cement Industry
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The Indian Cement industry date back to 1914, with first unit was set-up
at Porbandar with a capacity of 1000 tones. The Indian cement industry
is the second largest producer of quality cement. Indian Cement
Industry is engaged in the production of several varieties of cement such
as 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, White Cement, etc. They are produced strictly as per the
Bureau of Indian Standards (BIS) specifications and their quality is
comparable with the best in the world.
The Indian cement industry is the second largest in the world. It
comprises of 140 large and more than 365 mini cement plants. The
industry's capacity at the beginning of the year 2009-10 was 217.80
million tons. During 2008-09, total cement consumption in India stood
at 178 million tons while exports of cement and clinker amounted to
around 3 million tons. The industry occupies an important place in the
national economy because of its strong linkages to other sectors such as
construction, transportation, coal and power. The cement industry is
also one of the major contributors to the exchequer by way of indirect
taxes.
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Cement production during April to January 2009-10 was 130.67 million
tones as compared to 115.52 million tons during the same period for the
year 2008-09. Dispatches were estimated at 129.97 million tons during
April to January 2009-10 whereas during the same period for the year
2008-09, it stood at 115.07 million tones.
Over the last few years, the Indian cement industry witnessed strong
growth, with demand reporting a compounded annual growth rate
(CAGR) of 9.3% and capacity addition a CAGR of 5.6% between 2004-
05 and 2008-09. The main factors prompting this growth in demand
include the real estate boom during 2004-08, increased investments in
infrastructure by both the private sector and Government, and higher
Governmental spending under various social programs. With demand
growth being buoyant and capacity addition limited, the industry posted
capacity utilization levels of around 93% during the last five years.
Improved prices in conjunction with volume growth led to the domestic
cement industry reporting robust growth in turnover and profitability
during the period 2005-09.
Although consolidation has taken place in the Indian cement industry
with the top five players controlling almost 50% of the capacity, the
remaining 50% of the capacity remains pretty fragmented. Per capita
consumption has increased from 28 kg in 1980-81 to 115 kg in 2005. In
relative terms, Indias average consumption is still low and the process
of catching up with international averages will drive future growth.
Infrastructure spending (particularly on roads, ports and airports), a
spurt in housing construction and expansion in corporate production
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facilities is likely to spur growth in this area. South-East Asia and the
Middle East are potential export markets. Low cost technology and
extensive restructuring have made some of the Indian cement
companies the most efficient across global majors. Despite someconsolidation, the industry remains somewhat fragmented and merger
and acquisition possibilities are strong. Investment norms including
guidelines for foreign direct investment (FDI) are investor-friendly. All
these factors present a strong case for investing in the Indian market.
The growth trend has been on for some time now. If these trends are
anything to go by, it will not be long before the sector will match the
demand supply gap.
During the Tenth Plan, the industry, which is ranked second in the
world in terms of production, is expected to grow at 10 per cent per
annum adding a capacity of 40-52 million tons, according to the annual
report of the Department of Industrial Policy and Promotion (DIPP).
The report reveals that this growth trend is being driven mainly by the
expansion of existing plants and using more fly ash in the production of
cement.
CEMENT
Cements are of two basic types- gray cement and white cement.
Grey cement is used only for construction purposes while white cement
can be put to a variety of uses. It is used for mosaic and terrazzoflooring and certain cements paints. It is used as a primer for paints
besides has a variety of architectural uses. The cost of white cement is
approximately three times that of gray cement. White cement is more
expensive because its production cost is more and excise duty on white
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cement is also higher. Shree cement does not manufacture white cement
at present.
Pozzolona used in the manufacture of Portland cement is burnt clay of
fly ash generated at thermal power plants. PPC is hydraulic cement.
PPC differs from OPC on a number of counts. Pozzolona during
manufacturing consumes lot of hydration heat and forms cementious
gel. Reduced heat of hydration leads to lesser shrinkage cracks. An
additional gel formation leads to lesser pores in concrete or mortar. It
also minimizes problem of leaching and efflorescence.
THE CEMENT INDUSTRY STRUCTURE
CEMENT
GREY WHITE
Portland Pozzolona Cement Ordinary Portland cement
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Presently the total installed capacity of Indian cement industry is more
than 219MT per annum. Indian cement industry is divided into major
cement plants and mini cement plants.
Major Cement Plants:
Plants : 143
Typical installed capacity
Per plant : Above 1.5 mntpa
Total installed capacity : 207.26 mntpa
Production 08: 177.17 mntpa
All India reach through multiple plants
Export to Bangladesh, Nepal, Sri Lanka, UAE and Mauritius
Strong marketing network, tie-ups with customers, contractors
Wide spread distribution network.
Sales primarily through the dealer channel
Mini Cement Plants:
Nearly 365 plants & Located in Gujarat, Rajasthan, MP mainly
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Typical capacity < 200 tpd
Installed capacity around 11.10mn. Tones
Production 2008 : 6.0 mn tones
Mini plants were meant to tap scattered limestone reserves.
However most set up in AP
Most use vertical kiln technology
Production cost / tone - Rs. 1,000 to 1,400
Presence of these plants limited to the state
Infrastructural facilities not the best
Regional division (2009-10)
The Indian cement industry has to be viewed in terms of five regions:-
North (Punjab, Delhi, Haryana, Himachal Pradesh, Rajasthan,
Chandigarh, J&K and Uttranchal);
West (Maharashtra and Gujarat);
South (Tamil Nadu, Andhra Pradesh, Karnataka, Kerala,
Pondicherry, Andaman & Nicobar and Goa);
East (Bihar, Orissa, West Bengal, Assam, Meghalaya, Jharkhand
and Chhattisgarh); and
Central (Uttar Pradesh and Madhya Pradesh).
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REGIONWISE CEMENT PRODUCTION
EAST (14%)
WEST (16%)
CENTRAL (14%
NORTH (23%)
SOUTH (33%)
Major Players in Cement Industry:
Shree
Shree Cements Ltd. is a Rajasthan based company, located at Beawer.
The company has installed capacity of 9.1 mn tones per annum in
Rajasthan. For the last 18 years, it has been consistently producing
many notches above the name plate capacity. The company retains itsposition as north Indias largest single-location manufacturer. Shrees
principal cement consuming markets comprise Rajasthan, Delhi,
Haryana, Punjab, Uttar Pradesh and Uttranchal. Shree manufactures
Ordinary Portland Cement (OPC) and Portland Pozzolana Cement
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(PPC). Its output is marketed under the Shree Ultra Ordinary Portland
Cement and Shree Ultra Red Oxide Jung Rodhak Cement brandnames.
Ambuja
GACL was set up in 1986 with 0.7 million tones. The capacity has
grown 25 times since then to 18.5 million tones. GACL exports as much
as 15 percent of its production. Thirty five per cent of the companys
products transported are by sea which is the cheapest mode. It has
earned the reputation of being the lowest cost producer in the cement
industry. Ambuja cement one of GACLs well established brands. The
company plans to increase capacity by 3-4 million tons in the near
future.
ACC
Being formed in 1936, ACC has a capacity of 22.40 million (including
0.53 million tons of Damodar Cement and Slag and 0.96 million tons of
Bargarh Cement ). ACC Super is one of the companys well establishedbrands. It is planning to expand the capacity of its wholly-owned
subsidiary Damodar cement and Slag at Purulia in West Bengal. This is
aimed at increasing its presence in the eastern region.
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As on FY07, ACC was the largest player with a capacity of 22.4
million tons per annum (including 0.525 mn tones per annum of its
subsidiary Damodar Cement).
The Aditya Birla Group
The Aditya Birla Group is the worlds eighth largest cement producer.
The first cement plant of Grasim, the flagship of the Aditya Birla
Group, at Jawad in Madhya Pradesh went on Stream in 1985. In total,
Grasim has five integrated grey cement plants and six ready-mix
concrete plants. The company is Indias largest white cement producer
with a capacity of 4 lakh tones. It has one of the worlds largest white
cement plant at Kharia Khangar (Raj.) Shree Digvijay Cement, a
subsidiary of Grasim, which was acquired in 1998, has its integrated
grey cement plant at Sikka (Gujrat). Finally Grasim acquired controlling
stake in Ultra Tech Cement Limited (Ultra Tech), the demerged cementbusiness of L&T. Grasim has a total capacity of 31 million tones and
eyeing to increase it to 48 MT by FY 09. Grasim has a portfolio of
national brands which include Birla Supar, Birla Plus, Birla White and
Birla Ready mix and also regional brands like Vikram Cement and
Rajshree Cement.
Binani
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A fierce competitor with a 2.2 MTPA plant is located at Binanigram,
Pindwara, a village in Sirohi in the state of Rajasthan. Its a tough nut
player which is outside CMA (Cement Manufacturers Association) and
is prime reason for driving prices low in market. Offers a good qualityproduct at cheap rates and has very good brand image. Sales are focused
in the North India, Gujarat and Rajasthan markets and Holds around
14% of Rajasthan market.
JK
An entrenched competitor that has brands across the price spectrum
with JK Nembahera leading the pack. Also operates in the white cement
market with Birla as its only competitor. It lost significant market when
Ambuja came to Rajasthan.
Others
Other players like Shriram have insignificant share and are highly
localized. Shriram has a small presence and that too largely in southern
Rajasthan. There are various mini plants operating too which supply
cheap cement which has no ISI certification and does not confirm BIS
standards. Quite often they are supplied in other established brands
cement bags. L&T is a strong player nationally and regarded as quality
product. It has a footprint but not a foothold in Rajasthan market.
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COMPANY PROFILE
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District 3 MT and Khushkhera capacity is 3.5 MTPA) The
organization has performed exceptionally well in the year 2007-08
increasing the PBT by 95% the reasons for this remarkable
achievement and key strengths of the company are discussed in thereport. For the last 18 years, it has been consistently producing many
notches above the nameplate capacity. The company retains its position
as north Indias largest single-location manufacturer. Shrees principal
cement consuming markets comprise Rajasthan, Delhi, Haryana,
Punjab, Uttar Pradesh and Uttranchal. Shree manufactures Ordinary
Portland Cement (OPC) and Portland Pozzolana Cement (PPC). It has
three brands under its portfolio viz., Shree Ultra Jung Rodhak Cement,
Bangur Cement and Tuff Cemento.
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C O M P A N Y P R O F I L E
COMPANY SHREE CEMENT LTD.
INCORPORATION YEAR 1979
REGISTERED OFFICEBANGUR NAGAR, BEAWAR, AJMER
(RAJASTHAN)
CORPORATE OFFICE 21, STRAND ROAD, KOLKATA
INDUSTRY CEMENT MANUFACTURING
CHAIRMAN B.G. BANGUR
MANAGING DIRECTOR H.M. BANGUR
EXECUTIVE DIRECTOR M.K. SINGHI
EQUITY CAPITAL 34.84 CRORES
FACE VALUE OF SHARE 10
EQUITY CAPITAL 34.84 CRORES
FACE VALUE OF SHARE 10
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The Shree Vision
To be one of the Indias most respected enterprise through
best-in-class performance and leading by low carbon philosophy
making it a progressive organization that all stakeholders proud to deal
with.
The Shree Mission
The company continues to be one of the most operationally
efficient and energy conserving cements producers in the world. Its
mission statement is
To harness sustainability through low-carbon philosophy
To sustain its reputation as one of the most efficient manufacture
globally.
To continually have most engaged team.
To continually add value to its products and operation meeting
expectations of all its stakeholders.
To continually build and upgrade skills and competencies of its
human resource for growth
To be a responsible corporate citizen with total commitment to
communities in which it operates and society at large.
Origin of the Company
Promoted by the Bangur Group, Shree Cements is the largest cement
producer in Rajasthan. The company has a total installed capacity of 9.1
million tonne .The plants are strategically located in central Rajasthan,
from where it can cater to the entire Rajasthan market as well as Delhi
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and Haryana. The company has about 100 sales offices spread across
the states of Rajasthan, Uttar Pradesh, Uttaranchal, Delhi, Haryana,
Punjab and Jammu & Kashmir. Its cement is marketed under the brand
name of Shree Ultra Cement with different grades like 33, 43 and 53and sub-brand names like "red oxide cement", "Jung Rodhak Cement",
etc.
Shree Cement Ltd (SCL) is located at Beawer, Rajasthan, Indias largest
cement producing state. It was incorporated in 1979. Commercial
production at its 0.6 million tons per annum (mtpa) cement plant in
Rajasthan commenced in May 1985. Three companies of the Bangur
group promoted SCL. These companies are Shree Digvijay CompanyLtd, Graphite India Ltd and Fort Gloster Industries Ltd. Over the years,
SCL's capacity rose and touched 2 mtpa by 1997-98. Its current
cumulative installed capacity stands at 2.6 mtpa & in 2003-04 the
company produced 2.84 million tones of cement making it the largest
single location cement
Cement making it the largest single location cement producer in north
India. It is operating at over 100% capacity utilization.
Shree caters to cement demand arising in Rajasthan, Delhi, Haryana, UP
and Punjab. What is strategic for SCL is that it is located in central
Rajasthan so it can cater to the entire Rajasthan market with the most
economic logistics cost. Also, Shree Cement is the closest plant to Delhi
and Haryana among all cement manufacturers in its state and proximity
to these profitable cement markets renders the company an edge over
other cement companies of the company in terms of lower freight costs.
Shrees total captive power plant capacity today stands at 101.5 MW. In
2000-01, the company has succeeded in substituting conventional coke
with 100 per cent pet coke, a waste from refineries, as primary fuel
resulting in lower inventory and input costs. In the past two years the
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price of coal has gone up. Earlier dependent on good quality imported
coal, the company's switch to pet coke could not have come at a better
time. The company also replaced indigenous refractory bricks with
imported substitutes, reducing its consumption per ton of clinker. Thecompany has one of the most energy efficient plants in the world. The
captive plant generates power at a cost of Rs 4.5 per unit (excluding
interest and depreciation) as compared to over Rs 5 per unit from the
grid. In appreciation of its achievements in Energy sector, the Company
has been awarded the prestigious 'National Energy Conservation
Award" for the year 1997. Shree is rated best by Whitehopleman, an
international agency specializing in the rating of cement plants.
MULTIPLE COMPETITIVE BRANDS
Incisive execution of Shrees multiple competitive brand strategy has
been delivering results along anticipated lines. Consistency in brand
strategy is helping Shree to sustain its brands having lasting impression
among its consumers.
The steady growth in Shrees volume especially year-on year in the
last two fiscals, testifies to the effectiveness of its multi brand marketing
strategy.
SHREE ULTRA
Launched in 2002, Shree Ultra was the companys first brand, the first
manifestation of Shrees strategic move from commodity to brand
marketing.
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Its generic OPC version has been joined by a variant, Shree Ultra Jung
Rodhak, on the functional differentiator of rust prevention. Together the
two variance have made Shree Ultra the flagship brand of the company,
contributing half of the Shrees total sales.
The brand was launched with powerful media and promotional support,
the imaginative advertising and the momentum has clearly sustained its
growth over time.
Today it is present all of Shree Cements market territories. In 07-08 it
chalked up its highest volumes in the home market of Rajasthan, and in
the NCR, the main focus of the construction boom in north India.
Overall, a Shree Ultra volume reflects its acceptance by professional
influencers. Which in turn facilities acceptance by domestic consumers.
Their support, as well as sustained local promotions, has helped to
improve brand recall, and prepared the ground for fresh initiatives in the
market place.
BANGUR CEMENT
Bangur Cement was launched in 2006 as a premium brand, competitive
with best in the market designed to full fill user aspiration for high
quality construction; the brand tagline reflects its promise of top-of-
market value: Sasta Nahi, Sabse Achcha.
Given the premium profile design for it the brand is supported by a
matching network of business partners and business associates carefully
selected for the track record in selling to high end market segment.
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Its early successes are founded on a two tier marketing and distribution
programme. At one level Shrees field forts takes the trades in to the
confident with transparent terms and tested and proven promotional
offerings.
On a more exclusive level, it deploys special teams of highly
professional technical sales experts t conduct direct, one on one
interaction with opinion builders and influencers if high standing among
the fraternity of respected construction space list.
Bangur Cement has achieved 95% of its total sales in the trade segment.
It has made selective penetration in both urban and rural markets.
Bangur cement maintained its zero outstandings status in this year as
well.
TUFF CEMENTO
This is the latest brand offering from Shree Cement, directed at a highlycompetitive niche market, with aggressive and establish competitors.
It has been position as rock strong- on the promise of high performance,
able to withstand exceptionally harsh environmental conditions.
Launched in the first month of the year under review, Tuff Cemento
was able to secure a network of the 1000 dynamic and resourceful
dealers in a record time of about four months.
The brand is consolidated its position in the market, and the making
further highway in Rajasthan, Delhi, Haryana, parts of south Punjab and
Western U.P.
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While its current status would otherwise be regarded as reasonable.
Tuff Cemento has an altogether more ambitious agenda: to be
aggressively competitive and become a leading brand in the coming
months, and to enable Shree Cement to achieve the maximum possiblecombined market share in its market.
POLICIES
Quality Policy:
To provide products conforming to national standards and
meeting customers requirements to their total satisfaction.
To continually improve performance and effectiveness of quality
management system by setting and reviewing quality objectivesfor:
Customer Satisfaction
Cost Effectiveness
Energy Policy:
To reduce to the maximum extent possible the consumption of
energy without imparting productivity which should help in:
Increase in the profitability of the company
Conservation of Energy
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Reduction in Environmental pollution at energy producing areas
Since Energy is Blood of Industry, It is the responsibility of all of
us to utilize energy effectively and efficiently
Environment Policy:
To ensure:
Clean, green and healthy environment
Efficient use of natural resources, energy, plant and equipment
Reduction in emissions, noise, waste and greenhouse gases
Continual improvement in environment management
Compliance of relevant environmental legislation
Water Policy:
To provide sufficient and safe water to people & plant as well as
to conserve water, we are committed to efficient water
management practices viz,
Develop means & methods for water harvesting
Treatment of waste discharge water for reuse
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Educate people for effective utilization and conservation of water
Water audit & regular monitoring of water consumption.
Health & Safety Policy:
To ensure good health and safe environment for all concerned by:
Promoting awareness on sound health and safe working practices
Continually improving health and safety performance by regularly
setting and reviewing objectives & Targets
Identifying and minimizing injury and health hazards by effective
risk control measures
Complying with all applicable legislations and regulations
Human Resource Policy:
We at Shree Cement are committed to
Empower People
Honor individuality
Non discrimination in recruitment process
Develop Competency
Employees shall be given enough opportunity for betterment
None of the person below the age of 18 years shall be engaged to
work
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Incidence of Sexual Harassment shall be viewed seriously
Statute enacted shall be honored in letter & spirit & standard
Labor Practices shall be followed. Every employee shall be
accountable to the law of the land & is expected to follow the
same without any deviation
Management will appreciate observance of Business ethics &
professional code of conduct
To follow safety & Health. Quality, Environment, Energy Policy
IT Policy:
To provide a robust IT platform suitable to the business processes and
integrated management practices of the company, resulting into better
speed, efficiency, transparency, internal controls and profitability of
business
Trade and Non-Trade Networks
There are two types of Networks: Trade and Non-trade
a) Non-trade Network
Non-trade Network
Govt. non trade Private non trade
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b) Trade Network
Company Handling Agent Stockiest Retailers
Consumers
- for govt. infrastructurebuilding
- Govt. Housing Projects- Railways- Airports- Cement Roads- Bridges- Dams- Canals
These are all bulk
- for Group housing /retail housing
- Contractors projectson behalf of govt.
- Any industrial projectstaken up by the privatesector like bridges,roads etc.
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Advertising
Need for Advertising
Cement has evolved into a highly commoditized product category.
Due to competitive pricing within the industry, there was not
much differentiation among the various brands on offer.
People too did not pay much attention to this product unless there
was a need. Hence people who were currently making their houses
or were soon to embark on such a project became the targetmarket.
Because of the product being commoditized, there was a need for
differentiation for which there was made some changes in the
form of the product.
Shree Cement ltd. was not advertising its products past few years but
looking at the competitive market and opportunities ahead it introduced
a new ad campaign which was targeted to differentiate its product from
other cement brands. It introduced an ad campaign showing the anti
rusting capability of the Red Oxide Cement of the company. But still
the presence of the company has not been so intense as other brands
have like Ambuja and Grasim etc.
SWOT Analysis for Shree Cements
Strengths
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Focused strategy.
Lowest cost producer of cement in north India.
A secure source of raw materials.
High penetration in Govt. Projects.
Largest single plant capacity in India.
Shree power plant, which is producing electricity enough for Ras
plant.
Weaknesses
Less dealer incentives as compared to its competitors.
Color of the cement has not been perceived greatly; green color
was preferred the most.
Poor advertising and brand promotion.
Opportunities
Real estate boom will lead to increased demand.
International expansion.
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Demand from Pakistan side.
Reduction in customs duties.
Governments thrust on infrastructure and tax incentives onhousing loans.
Threats
Increased competition from domestic as well as international
players.
Rising input (oil) prices.
Sales highly dependent on monsoons.
Growth of counterfeits.
Creating Multiple Brands to Increase Market Share
Company wanted to increase its share in the more remunerative
markets. Rajasthan and Haryana are the markets where Shree have high
realization. They realized that a single brand has limited potential for
faster increase in market share in these markets.
This is because there are limits to the volume that a distribution and
retail network could handle. Thus there was a requirement for
increasing distribution network in these markets. To alleviate this, they
studied the brand strategy of a fast moving Consumer Goods Company.
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This company had multiple brands for soaps. Each brand had a unique
products differentiation property. All bands were competing with each
other.
The marketing teams, distribution channel and logistics were all
different for each brand. They found the same model could be applied in
cement business as well. They realized that they can also achieve their
objective by introducing another brand in the market.
The new brand would have its own marketing strategy, distribution
network and penetration. It required deployment of almost twice the
quantum of resources to sustain two brands in the markets.
An altogether new marketing team, additional advertising cost, another
set of storage and distribution logistics like godowns and offices, thus
all such costs were doubling. Yet, Shree Cement chose to go ahead and
launched Bangur Cement in 2006 and Tuff Cemento in 2007.The result,
market share in Rajasthan has substantially increased in last three years.
In Haryana it rose by almost 50 percent.
Encouraged by the success of having two brands, we decided to launch
a third brand-Tuff Cemento. With three brands we have further
consolidated our position in the market. Today Shree have three brands
in the same market: Shree Ultra, Bangur Cement and Tuff Cemento.
Each of these brands has been built on a unique product promise.
As a result of multiple brand strategy Companys market shares have
shown appreciable growth, as demonstrated below:
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Market share in different states
STATE 2007-08 2008-09 2009-10
RAJASTHAN 20.36% 22.17% 35.40%
HARYANA 19.03% 23.91% 22.03%
DELHI 17.94% 17.97% 11.22%
PUNJAB 7.32% 8.29% 7.56%
U.P. 3.98% 4.86% 14.40%
UTTARANCHAL
7.96% 10.13% 3.98%
Efforts made to maintain three brands
Independent marketing team
Separate distribution and retail network
Separate storage and logistics supports
Higher advertisement cost
Achievements by maintaining three brands
Higher Dealer Density
Higher market share
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Better Realization
Lower logistics cost
SUCCESS DRIVERS AT SHREE
PEOPLE AS PROGRESS DRIVERS
Shree believes that what is present in the minds of people is more
valuable than the assets on the shop floor. All the companys initiatives
are directed to leverage the value of this growing asset.
TEAMWORK
Shree leverages effective team working to generate a sustainable
improvement.
LEADERS AT EVERY LEVEL
Shree believes in creating leaders -not just at the organizational apex but
at every level, resulting in a strong sense of emotional ownership.
CULTURE OF INNOVATION
Shree believes that what is good can be made better -across the
organization.
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CUSTOMER FOCUS
Shree is committed to deliver a superior quality of cement at attractivelyaffordable prices.
SHAREHOLDER VALUE
Shree is focused on the enhancement of value through a number of
strategic and business initiatives that generate larger and a better quality
of earnings.
COMMUNITY AND ENVIRONMENT
Shrees community concern extends from direct assistance to safe and
dependable operations for its members and the environment.
LOWEST COST OF PRODUCTION
Its cost of production is around Rs.860 per ton, making it the lowest
cost cement producer in India.
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ENERGY EFFICIENT PRODUCER
Shree Cement is one of the most power efficient units in the country
with a power consumption of 75 units per ton. The Company sources
100% of power requirement from its captive power plants. The
company has existing power plant capacity of 117.5 MW. The company
is installing additional power plant of 143MW capacity, which would
supply power to its new cement units, thus ensuring self-sufficiency.
ALTERNATE FUEL IN PET COKE
The Companys captive power plant as well as cement plants runs on
alternate fuel, i.e., pet coke, the first in India to do so. Until recently, it
was obtaining pet coke domestically from Reliance Industries Ltd.,
Jamnagar refinery. Imported pet coke and the future plan to source it
from Panipat refinery of IOCL will further bring down costs by around
Rs.300 per tones.
INCREASED BLENDING
SCL is continuously trying to improve the ratio of sale of blended
cement (ROC) to 50:50 very soon. Although cost of production is lower
because of addition of cheap fly-ash, it commands higher prices due to
rust-retarding properties.
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CEMENT MANUFACTURING
Raw Material Preparation
Limestone of differing chemical composition is freely
available in the quarries. This limestone is carefully
blended before being crushed. Red mineral is added to
the limestone at the crushing stage to provide
consistent chemical composition of the raw materials.
Once these materials have been crushed and subjected
to online chemical analysis they are blended in a homogenized
stockpile. A bucket wheel declaimer is used to recover and further blendthis raw material mix before transfer to the raw material grinding mills.
Raw Mill
Transport belt conveyor transfers the blended rawmaterials to ball mills where it is ground. The
chemical analysis is again checked to ensure
excellent quality control of the product. The
resulting ground and dried raw meal is sent to a
homogenizing and storage silo for further
blending before being burnt in the kilns.
Fuels
Limestone Extraction
: Kiln
Kiln
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The heat required to produce temperatures of 1,800C
at the flame is supplied by ground and dried petroleum
coke and/or fuel oil. The Petcoke is imported via the
companies' internal wharf, stored and then ground indedicated mills. Careful control of the mills ensures
optimum fineness of the Petcock and excellent combustion conditions
within the kilns system.
Burning
The raw meal is fed into the top of a pre-heater tower
equipped with four cyclone stages. As it falls, the meal
is heated up by the rising hot gases and reaches 800C.At this temperature, The meal dehydrates and partially
decarbonizes. The meal then enters a sloping rotary
kiln, which is heated by a 1,800C flame, which
completes the burning process of the meal. The
Meal is heated to a temperature of at least 1,450C. At this temperature
the chemical changes required to produce cement clinker are achieved.
The dry process kiln is shorter than the wet process kiln and is the most
fuel-efficient method of cement production available.
Cooler Units
Fin side of Kiln
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The clinker discharging from the kiln is cooled by air
to a temperature of 70C above ambient temperature
and heat is recovered for the process to improve fuel
efficiency. Some of the air from the cooler is de-dusted and supplied to the coal grinding Plant. The
remaining air is used as preheated secondary air for the main
combustion burner in the kiln. Clinker is analyzed
to ensure consistent product quality as it leaves the cooler. Metal
conveyors transport the clinker to closed storage areas.
Filters
Dedicated electrostatic precipitators dedust the air and gases used in the
Clinker Production Line Process. In this way, 99.9% of the dust is
collected before venting to the atmosphere. All dust collected is
returned to the process.
Constituents
Different types of cement are produced by mixing and weighing
proportionally the following constituents:
Clinker
Gypsum
Limestone addition
Blast Furnace Slag
Cement Plant
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Cement manufacturing from the quarrying of limestone to the bagging
of cement.
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S H R E E C E M E N T L I M I T E D
BALANCE SHEET AS AT 31ST MARCH, 2010
As at As a
31.03.2010 31.03.2009
Schedule (Rs.in Lac) (Rs.in Lac
SOURCES OF FUNDS
Shareholders' Funds
Share Capital 1 3,483.72 3,483.72
Reserves & Surplus 2 179,840.25 117,517.97
183,323.97 121,001.69
Loan Funds
Secured Loans 3 178,853.25 122,050.73
Unsecured Loans 4 31,770.52 27,564.60
210,623.77 149,615.33
Total 393,947.74 270,617.02
APPLICATIONS OF FUNDS
Fixed Assets 5
Gross Block 295,086.48 225,591.46
Less: Depreciation 219,891.10 162,905.89
Net Block 75,195.38 62,685.57
Capital Work-in-Progress 96,741.59 47,888.98
171,936.97 110,574.55
Investments 6 159,224.04 84,483.47
Deferred Tax Assets (Net) 7 1,240.38 1,038.98
Current Assets, Loans & Advances
Inventories 8 35,813.30 15,445.84
Sundry Debtors 9 8,241.79 5,831.73
Cash & Bank Balances 10 41,637.42 47,226.05
Other Current Assets 11 1,127.84 755.20
Loans & Advances 12 71,397.03 73,678.81
158,217.38 142,937.63
Less: Current Liabilities & Provisions 13
Liabilities 46,684.53 29,000.38
Provisions 49,986.50 39,417.23
96,671.03 68,417.61Net Current Assets 61,546.35 74,520.02
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PROFIT & LOSS ACCOUNT
FOR THE YEAR ENDED 31ST MARCH, 2010
For the
Year For the Year
ended ended
31.03.2010 31.03.2009
Schedule (Rs. in Lac) (Rs. in Lac)
INCOME
Sales 14 401,408.60 309,159.96
Less: Excise Duty
38,196.30 38,096.87
Net Sales
363,212.30 271,063.09
Other Income 15 7,583.79 3,914.91
370,796.09 274,978.00
EXPENDITURE
Manufacturing Expenses 16 131,234.03 114,246.30
Captive consumption of Cement [Net of
Excise Duty Rs. 165.43 Lac (1,019.61)
(438.93)
(Previous year Rs. 117.80 Lac)]
(Increase) / Decrease in Stock 17 (1,965.58)962.74
Purchase of Finished Goods
918.42 652.47
Payment to and Provision for Employees 18 15,861.19 10,387.43
Administrative Expenses 19 4,949.31 3,976.39
Freight & Selling Expenses 20 62,983.14 45,927.70
Interest and Financial Expenses (Net) 21 7,658.07 3,341.11
220,618.97 179,055.21
PROFIT BEFORE DEPRECIATION,
EXCEPTIONAL ITEMS & TAX
150,177.12 95,922.79
Depreciation & Amortization
57,042.98 20,538.70
Exceptional Items
Provision for Statutory Liabilities of Earlier Years'
(Refer Note 7) 4,367.62 -
'
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Five Years Financial Highlights
Rs. In lacs
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Particular 2005-06 2006-07 2007-08 2008-09 2009-10
Sales-Gross 82412.79 161314.44 244032.08 309716.69 401408.60
Other Income 330.47 2127.33 7683.91 8289.61 7583.79
Total Income 82743.26 163441.77 251715.99 318006.30 408992.39
Operating Expenses 60963.58 102342.04 157791.11 214640.33 251157.20
Operating Profit 21779.68 61099.73 93924.88 103365.97 157835.19
Interest 1283.36 1037.37 5329.64 7443.18 7658.07
PBDT 20496.32 60062.36 88595.24 95922.79 150177.12
Less: Dep. &Amort. 18520.68 43305.33 47875.86 20538.70 57042.98
Less: Exceptional Items - (2123.73) 3888.46 3093.05 6342.85
Profit Before Tax 1975.64 18880.76 36830.92 72291.04 86791.29
Tax (Including FBT) 286.24 8451.75 12265.32 13686.98 19382.66
Deferred Tax 587.35 (7271.22) (1471.60) 807.12 (201.40)
Profit after Tax 1102.05 17700.22 26037.20 57796.94 67610.03
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Analysis & Interpretation
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ANALYSIS AND INTERPRETATION
RESEARCH OBJECTIVE
To analyze the impact of inventory control and receivables management
on cement industry profitability and what extent it impact profitability
through multiple regression analysis.
For this analysis preferred mode for data collection is gathering
secondary data. As part of the research data related to inventoryturnover, debtor turnover and net profit were collected of 5 companies.
Calculate inventory period, average collection period on the basis of
collected data.
For analyzing regression between asset classes initially one should
determine if there is any relationship between them. For that purpose
correlation analysis is implemented between net profit margin &
inventory period and between net profit margin & average collectionperiod. Here net profit margin is taken as dependent variable and
inventory period and average collection period are considered as
independent.
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RESEARCH DESIGN
INVENTORY CONTROL
Inventory management is a vital function to help insure the success of
manufacturing companies. The effectiveness of inventory management
is directly measurable by how successful a company is in providing
high levels of customer service, low inventory investment, maximum
throughput and low costs. A truly effective inventory management
system can significantly improve bottom line business performance.
From a financial perspective, inventory management is no small matter.
Inventory is the largest asset item on a manufacturers balance sheet.
There is a lot of management emphasis on keeping inventories down so
they do not consume too much cash. The objectives of inventory
management reduction and minimization are more easily accomplishedwith modern inventory management processes.
Many manufacturing companies suffer from lower customer service,
higher costs and excessive. Inventory control problems are usually the
result of using poor processes and systems.
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RECEIVABLES MANAGEMENT-
Receivables management has significant impact on profitability of anybusiness. Cash flow can be significantly enhanced if the amounts owing
to the business are collected faster. The company should have control
over its receivables. There is negative correlation between average
collection period and net profit margin. If average collection period of a
company is low than its net profit margin will be high and vice versa.
CORRELATION
A statistical measure of the length of a linear relationship between two
variables. The Pearson correlation coefficient measures the degree of
linear association between two variables. It varies between -1.00 and
+1.00, with 0 representing absolutely no association between two
variables. The higher the correlation coefficient, the stronger the level
of association. The correlation coefficient can be either positive ornegative, depending on the direction of the relationship between two
variables.
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MULTIPLE REGRESSIONS
Multiple regression analysis is a statistical technique which analyzes thelinear relationship between a dependent variable and multiple
independent variables by estimating coefficients for the equation for a
straight line.
Regression coefficient is an indicator of the importance of an
independent variable in predicting a dependent variable. Large
coefficients are good predictors and small coefficients are weak
predictors.
The correlation analysis explain the relationship between 2 variables
and direction of relationship, whether 2 variables are positively related
or negatively related.
The regression analysis indicate the amount of change in the dependent
variable that is associated with a one-unit change in the independent
variables.
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SHREE CEMENT LIMITED
Years Sales(Rs
in crores)
Inventory
Period
Average
Collection
Period
Net Profit Net Sales Net Profit
Margin
2000-01 554.60 22.85 26.86 26.12 479.21 5.45
2001-02 397.22 28.30 20.72 1.47 315.32 0.47
2002-03 582.43 38.97 20.52 6.70 455.75 1.47
2003-04 606.93 35.35 17.88 13.04 473.23 2.76
2004-05 723.00 36.64 12.09 29.07 582.08 4.99
2005-06 824.10 50.02 8.09 18.40 667.69 2.76
2006-07 1613.10 35.31 5.94 177.00 1367.98 12.94
2007-08 2440.30 26.41 7.39 260.37 2065.86 12.60
2008-09 3097.10 18.20 6.90 577.97 2715.02 21.29
2009-10 4014.86 32.56 7.49 676.10 3632.12 18.61
Net Profit Margin
05
10
15
20
25
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Net Profit Margin
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Inventory Period
0
10
20
30
4050
60
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Inventory Period
Average Collection Period
0
5
10
15
20
25
30
2000
-01
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
Average Collection Period
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ANALYSIS
SHREE CEMENT LIMITED CORRELATION
Years Net Profit Margin Inventory Period
2000-01 5.45 22.85
2001-02 0.47 28.30
2002-03 1.47 38.97
2003-04 2.76 35.35
2004-05 4.99 36.64
2005-06 2.76 50.02
2006-07 12.94 35.31
2007-08 12.60 26.41
2008-09 21.29 18.20
2009-10 18.61 32.56
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0
10
20
30
40
50
60
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
NP Margin
Inventory Period
By implementing Karl Pearsons method of correlation it can be said that Net Profit Margin and
Inventory Period are significantly negatively correlated i.e. rgs = -0.51
CORRELATION BETWEEN NET PROFIT MARGIN &
AVERAGE COLLECTION PERIOD
Years NP Margin Average Collection Period
2000-01 5.45 26.86
2001-02 0.47 20.72
2002-03 1.47 20.52
2003-04 2.76 17.88
2004-05 4.99 12.09
2005-06 2.76 8.09
2006-07 12.94 5.94
2007-08 12.60 7.39
2008-09 21.29 6.90
2009-10 18.61 7.49
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0
5
10
15
20
25
30
20
00-
01
20
01-
02
20
02-
03
20
03-
04
20
04-
05
20
05-
06
20
06-
07
20
07-
08
20
08-
09
20
09-
10
NP Margin
Avg Collection Period
By implementing Karl Pearsons method of correlation it can be said thatNet Profit Margin and average collection Period are significantly
negatively correlated i.e. rgs = -0.68
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MULTIPLE REGRESSION ANALYSIS
Years NP Margin Inventory Period Average Collection
Period
2000-01 5.45 22.85 26.86
2001-02 0.47 28.30 20.72
2002-03 1.47 38.97 20.52
2003-04 2.76 35.35 17.88
2004-05 4.99 36.64 12.09
2005-06 2.76 50.02 8.09
2006-07 12.94 35.31 5.94
2007-08 12.60 26.41 7.39
2008-09 21.29 18.20 6.90
2009-10 18.61 32.56 7.49
Multiple Regression Equation
Coefficients Standard Error
Intercept 35.4360 4.99199
Indep1 -0.5170 0.1270
Indep2 -0.7709 0.1532
Multiple Regression Equation
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Dependent = -0.5170Indep1 -0.7709Indep2 +35.4360
Here,
Indep1:- Inventory Period
Indep2:- Average Collection Period
By multiple regression equation it is found that change in inventory
period by 1% net profit margin will be down by 0.52%. Change in
average collection period by 1% will result in to net profit margin fall by
0.77% if other factors remain same.
Equation Parameters
R Square 0.8392
Adjusted R Square 0.7932
Standard Error 3.4018
Here by multiple regression model R Square value is 83.92%. It means
that 83.92% of the change in Dependent can be explained by the change
in the 2 Independent Variables. Here standard error is 3.4018, it means
that if repeated sampling done then data can varies by 3.4018. So it can
+/- on result of regression equation.
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Findings & Conclusions
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Findings
After doing the analysis of the impact of Inventory control andReceivables Management on Profitability the following things have been
found out-
Correlation between Inventory period & Net profit Margin = -0.51
Correlation between Average Collection Period & Net Profit margin =
-0.68
R Square = 83.92%
There is a negative relation between inventory period and net profit
margin of Shree cement limited in the last 10 years.
There is a negative relation between the average collection periodand net profit margin of Shree Cement limited in 10 years.
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CONCLUSION
After going through various analyses it can be said that the ShreeCement Ltd should maintain low inventory period and low average
collection period to maintain high net profit margin. Shree Cement Ltd
should reduce its inventory period by using various effective inventory
control tools and also should able to reduce its average collection period
by managing its debtor efficiently. It can also be said that there is high
correlation between average collection period and net profit margin than
inventory period and net profit margin.
After applying multiple regression model it is observed that movement
of net profit margin is affected by movement in inventory period and
average collection period up to 83% in case of Shree cement limited. So
it can be said that change in inventory period by 1% net profit margin
will be down by .51% and change in average collection period by 1%
net profit margin will be down by .77% if other factor remains same.
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Bibliography
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www.shreecementltd.com
Shree Cement annual reports
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Profit & Loss account of
Shree Cements
------------------- in Rs. Cr. ------------------
Jun '12 Mar '11 Mar '10 Mar '09
15 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 6,577.37 3,937.79 4,014.09 3,097.17
Excise Duty 710.86 438.90 385.89 380.70
Net Sales 5,866.51 3,498.89 3,628.20 2,716.47
Other Income 150.44 70.84 61.72 45.22
Stock Adjustments -18.69 34.81 23.58 -11.08
Total Income 5,998.26 3,604.54 3,713.50 2,750.61
Expenditure
Raw Materials 923.04 811.93 646.64 502.34
Power & Fuel Cost 1,499.87 912.32 610.48 605.81
Employee Cost 319.49 199.14 159.21 104.38
Other Manufacturing Expenses 68.11 50.33 41.79 36.44
Selling and Admin Expenses 0.00 659.54 670.73 481.40
Miscellaneous Expenses 1,391.55 12.63 18.88 21.32
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00
Total Expenses 4,202.06 2,645.89 2,147.73 1,751.69
Jun '12 Mar '11 Mar '10 Mar '09
15 mths 12 mths 12 mths 12 mths
Operating Profit 1,645.76 887.81 1,504.05 953.70
PBDIT 1,796.20 958.65 1,565.77 998.92
Interest 235.36 175.35 129.09 77.16
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PBDT 1,560.84 783.30 1,436.68 921.76
Depreciation 873.09 675.76 570.43 205.39
Other Written Off 0.00 0.00 0.00 0.00
Profit Before Tax 687.75 107.54 866.25 716.37
Extra-ordinary items 74.75 61.86 16.69 6.53
PBT (Post Extra-ord Items) 762.50 169.40 882.94 722.90
Tax 144.00 -40.27 206.84 144.94
Reported Net Profit 618.50 209.70 676.10 577.97
Total Value Addition 3,279.02 1,833.95 1,501.08 1,249.35
Preference Dividend 0.00 0.00 0.00 0.00
Equity Dividend 69.68 48.77 45.29 34.84
Corporate Dividend Tax 11.30 7.99 7.59 5.92
Per share data (annualised)
Shares in issue (lakhs) 348.37 348.37 348.37 348.37
Earning Per Share (Rs) 177.54 60.19 194.07 165.91
Equity Dividend (%) 200.00 140.00 130.00 100.00
Book Value (Rs) 784.77 570.13 526.23 347.33
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