financial analysis of ultratech

8/11/2019 Financial Analysis of Ultratech

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MANAC-1 GROUP ASSIGNMENT

COMPANY: ULTRATECH CEMENT

GROUP NO.

ROLL NO. NAME

B14128 Abhinav

B14130 Akshya Kattuputhur Murali (Ms)

B14132 Ankit Singh

B14133 Ankur PatelB14134 Anshul Kr Agrawal

B14135 Ansuman Mishra

B14159 Nikhil Arora


2/13

STATEMENT OF PROFIT/ LOSS

(All amounts are in crores of )

For the year

ended 31.03.2014

For the year

ended 31.03.2013

Revenue

Sale of Products and Services (Gross) 22803 22705

Less: Excise Duty (2725) (2682)Sale of Products and Services (Net) 20078 20023

Other Operating Revenues 202 157

Revenue from Operations (Net) 20280 20180

Other Income 329 305

Total Revenue (I) 20609 20485

Expenses

Cost of Raw Materials Consumed 2911 2792

Purchases of Stock-in-Trade 309 236

Changes in Inventories of Finished Goods,Work-in-Progress and Stock-in-Trade 107 (118)

Employee Benefits Expense 1015 968

Power and Fuel 4135 4299

Freight and Forwarding Expense 4581 4224

Other Expenses 3436 3149

16494 15549

Less: Captive Consumption of Cement{Net of Excise Duty ` 28.89 Crores, (Previous

Year `39.80 Crores)}

(32) (45)

Total Expenses (II) 16462 15504

Profit before Interest, Depreciation and Tax

(PBIDT) (I)-(II)4147 4980

Finance Costs 319 210

Depreciation and Amortisation Expense 1052 945

Profit before Tax 2776 3825

Income Tax Expenses:

Current Tax 559 1006

MAT Credit (222)

Excess tax provision reversal related to prior years (96) (4)

Deferred Tax Charge 390 168

Total 631 1170

Profit for the Year 2144 2655

Earnings Per Equity Share (Face

Value 10 each)

Basic (in `) 78.21 97

Diluted (in `) 78.18 97


3/13

BALANCE SHEET

(All amounts are in crores of )As At

31.03.2014

As at

31.03.2013

EQUITY AND LIABILITIES

ShareholdersFunds

Share Capital 274 274

Reserves and Surplus 16823 14961

Total 17098 15235

Non-Current

Liabilities

Long-term Borrowings 4494 3894

Deferred Tax Liabilities(Net)

2296 1906

Other Long-termLiabilities

2 2

Long-term Provisions 138 134

Total 6930 5936

Current

Liabilities

Short-term Borrowings 379 569

Trade Payables 2424 2173

Other Current Liabilities 2088 2561

Short-term Provisions 835 935

Total 5727 6238

TOTAL EQUITY AND LIABILITIES 29754 27409

ASSETS

Non-Current

Assets

Fixed Assets

Tangible Assets 15781 13074

Intangible Assets 91 48

Capital Work-in-Progress

2038 3505

Intangible Assets

under Development3 0

TOTAL 17913 16628

Non-Current Investments 1662 1982

Long-Term Loans and

Advances1181 983

TOTAL NON-CURRENT ASSETS (a) 20756 19593

Current Assets

Current Investments 3729 3127

Inventories 2368 2350

Trade Receivables 1281 1017

Cash and Bank Balances 278 143

Short-term Loans andAdvances

1326 1173

Other Current Assets 15 6

TOTAL CURRENT ASSETS (b) 8998 7816

TOTAL ASSETS (a + b) 29754 27409


4/13


5/13

IMPORTANT FINANCIAL INFORMATION EXTRACTED FROM THE REPORT

Dividend: UltraTech Cement has recommended a dividend of Rs. 9/- per equity share of Rs.

10/- each for the year ended March 31, 2014.

Other Income: Other income is up from 462 crores to 531 crores in FY14. This can be

attributed to financial incentives attributed due to investing in increasing capacity

Finance cost: It has risen from 210 crores to 319 crores mainly due to lower capitalization of

interest upon the commissioning of various projects.

Margins: EBITDA margin decreased to 21% from 25% mainly due to decrease in cement

prices

Capital Expenditure: The Company has earmarked around Rs. 10,000 Crore to be incurred

in setting up the grinding units, clinkerisation plants, cement terminals and other capex, and

these are likely to be commissioned in a phased manner by 2015. During the year the

Company has commissioned Clinkerisation plant of 3.30 mtpa, 25 MW TPP and 1.45 mtpa

cement plant at Rajashree Cement in Karnataka.

Inventories: Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-

Trade was Rs 107 Cr in FY14 compared to (Rs 118 cr) in FY13. However endinginventory has remained at similar level at Rs 2368 cr in FY14.

Sales: Sales increased by 5% to Rs 22803 cr compared to FY13. However the capital

turnover ratio has declined from 1.05 to 0.93 from FY13 to FY14. The company needs to

endure that its capital is being used efficiently.

Depreciation charge: Depreciation expense has increased from Rs 388 cr in 2009-10 to Rs

1052 cr in current year due to high capital expenditure capitalization.

Penalty: Competition Commission of India has imposed a fine of Rs 1,175.49 cr with stay

permission on deposit of Rs 117.6 cr. However the company has not made any provisions in

the account believing that it has a good case.

Liabilities:The Company has decreased its current liabilities from Rs 6238 cr to Rs 5727 cr

while increasing its non-current liability to Rs 6930 cr from Rs 5936 cr. This is in line with

the companys long term investments in increasing cement production capacity.


6/13

Analysis of Profitability: Gross Profit ratio declined from 56.16% in FY13 to 51.51% in

FY14. However due to high depreciation and interest expenses Net profit ratio stands 9.1%.

Overall GPR, NPR, ROE, ROA have declined due to lower cement prices in the market. A

5% increase in sales has slightly negated this effect on the bottom line but the company needsto respond to decreasing margins.

Liquidity Analysis: The Companys current ratio has increased from 1.25 in FY 2014 to 1.57

in FY 2013. The quick ratio also increased from 0.69 in FY13 to 0.93in FY14. This shows

a healthy shift by the company towards long term liabilities. Its current assets also increased

by 15% owing to increase in current investments. The Cash and Bank balance has almost

doubled from Rs.143 cr in FY 2013 to Rs. 278 cr in FY 2014. Thus overall company has

improved its solvency position by increasing current assets and decreasing current liabilities

in accordance to the high amount of capex it is indulging towards. Only the InventoryHolding Period has increased to 96 days in FY14 from 91 days in FY13 as a small risk

towards liquidity. This can be attributed to the mismatch between high capacity and lower

demand in the market.

Solvency Position Analysis: The Share Capital remained stable at Rs 274 cr in FY14

although 15440 stock options were vested to employees. The Debt/Equity ratio remained

stable at 0.43. This highlights that the company is currently able to manage its borrowings

well with equity. However its interest coverage ratio has decreased drastically from 19.24 in

FY13 to 9.59 in FY14. The company has good solvency condition currently but needs tomake sure that its revenues also increase correspondingly to the increasing interest charges.

Cash Flow from Operations: Although PBT declined to Rs 2775 cr from 3825 cr between

FY13 and 14, Cash flow from operation has remained relatively stable at Rs 3241 cr in

FY14 compared to Rs 3552 cr in FY13. This is mainly due to the change in Working

Capital.


7/13

SPECIFIC AREAS OF STRENGTHS

1. The company managed to reduce Energy costs required for Cement productions by

5% during the financial year which reduced the overall cost of production.

2.

The Company set up many new plants during the financial year, increasing its overall

capacity to 62 million tonnes which will boost sales and keep them in a state of

preparedness, with a favourable market condition likely in the coming financial year

due to a lot of infrastructure projects in the pipeline

3.

The Company also acquired a plant with capacity of 4.8 million tonnes which willfurther the cause of the company to increase its capacity to meet expected demands.

4. During the financial year the growth for the company was 6%, while the growth in the

segment was 3.5%, a good indicator of the good performance of the company.

Moreover it is expected to grow at a rate of 8% in the coming financial year.

5.

They have good solvency and liquidity ratios, which is indicative of the good

performance if the company despite the year not being very good for the industry.

6.

While the profit has come down as compared to last year, the cash generated from

Operations has not declined in the same ratio, again an indicator of good performance

in a tough year.

7. The Gross Profit Ratio of the company is very high (51.51%), an indication of

reduced cost of goods, which will help increase overall profitability.

8.

The book value per share has increased from 556 in FY 2013 to 623 in FY 2014. This

shows a favorable condition for an investor in case the company is liquidated in the

future.

9. Proprietary Ratio: The proprietary ratio shows the contribution of stockholders in

total capital of the company. The increase of proprietary ratio from 0.55 to 0.57

despite the increase in total assets, therefore, indicates a strong financial position of

the company and greater security for creditors.


8/13

SPECIFIC AREAS OF WEAKNESS

1.

All the key Profitability ratios have gone down considerably from the previous financial

year.

2. Inventory Holding Period: The inventory holding period has gone up to 101.59 days

(2013-14) from 95.98 days (2012-13), resulting in increased holding costs.

3. Debt Service Coverage Ratio: The debt service coverage ratio (DSCR) measures how

effectively a company's operations-generated income is able to cover outstanding debtpayments. The reduction in the value of DSCR from 6.49 to 2.72 indicates decreased

capability to cover outstanding debt payments.

4. The demand has been low in cement industry due to infrastructural slowdown resulting in

lower sales and weak pricing leading to poor realization on cement sold.

5. The Earning per share(EPS) has dropped from 96.87 to 78.21 while the number of shares

have remained same

6.

The acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation has led to

increase in the interest expenses leading to slashing of interest coverage ratio by more

than 50% and also affected the profitability ratios.

7. The new acquisitions have drastically increased the depreciation for the company and

have risen finance cost from 210 crores to 319 crores.

8. Freight costs have risen by more than 5% year which has resulted in poor operating

performance.

9. As per the judgment of Supreme Court the company is to pay a sum of Rs.100 crores on

charges of cartelisation. Provisions for the same have not been created.

10.Clinker export volume declined to 0.11 million tonnes in FY13-14 from 0.33 million

tonnes in FY12-13 and the export of grey cement remained almost flat

11.Cement demand, as projected, has not materialised, while capacity has been created

leading to excess production capacity


9/13


10/13

ANNEXURE (SUPPORTING CALCULATIONS)

Financial Ratios

Ratio Definition 2014 2013

Gross Profit Ratio Gross Profit/Sales11376/22803*100=

51.51%

11683/22705*100=

56.16%

Net Profit Ratio PAT/Sales 2144/228.03=9.70% 2655/22705=11.69 %

Capital turnover

RatioNet Sales/Capital Employed 20078/21591=0.93 20023/19129=1.046

Return on

Investment (ROI)(EBIT-Taxes)/Net Assets 2144/21184=10% 2655/18206=14.6%

Return on Equity

(ROE)PAT/Equity 2144/17098=12.5% 2655/15235=17.43%

Return on Net

Worth (RONW)PAT/Net Worth 2144/17098=12.6% 2655/15235=17.43%

Return on Total

AssetsPAT/Total Assets 2144/29754=7% 2655/27409=9%

Return on Capital

Employed (ROCE)Net Profit/Capital Employed 2144/21591=10% 2655/19129=13.9%

Earnings per Share

(EPS)

PAT/Number of equity

shares2144/27.424=78.17 2655/27.418=96.83

Earning Power EBIT/Total Assets 3095/29754=0.104 4035/27409=0.147

Quick Ratio

(Current Assets -

Inventory)/(Current

Liabilities)

(8998-2368-

1326)/5727=0.93

(7816.2-1173-2350.47)

/6238.38 =0.69

Current RatioCurrent Assets / Current

Liabilities8998/5727 = 1.57 7816/6238=1.25

Debt Equity Ratio Debts/Equity 7309/17098 = 0.43 6504/15235 = 0.43

Proprietary Ratio Stockholder's Equity/TotalAssets

17098/29754 = 0.57 15235/27409=0.56

Dividend Coverage

Ratio

(Profit after tax - Dividend

paid on Irredeemable

Preference

Shares)/Dividend paid to

Ordinary Shareholders

2144/246=8.72 2655/218= 12.18

Interest Coverage EBIT/Interest Expense 3095/319=9.70 4035/210=19.21

Debt Service

Coverage Ratio

(DSCR)

Net Operating Income/Total

Debt Service

3242/(405+786)=2.72 3552/(327+220)= 6.49

Total Asset

TurnoverSales/Average Assets 22803/28581=0.80 22705/25177=0.90


11/13

Inventory Turnover COGS/Average Inventory 8702/2359.42=3.59 8777/2193.21=3.80

Ratio Definition 2014 2013

Net Working CapitalCurrent Assets-Current

Liabilities8998-5727=3271 7816-6238=1578

Fixed asset turnover Net Sales/Fixed Assets 20078/ 17913= 1.12 20023/16628 = 1.20Inventory Holding

Period

365*(Avg.Inventory/

COGS)365/3.59=101.59 days 365/3.80 = 95.98 days

Operating leverage Gross Profit / EBIT 11376/3095=3.67 11683/4.35=2.89

Financing leverage EBIT / PBT 3095/2776=1.11 4035/2655=1.52

Combined leverage Gross Profit / PBT (OL*FL) 3.675*1.11=4.1 2.89*1.52=4.40

COMMON SIZE STATEMENT SHOWING PROFIT & LOSS

Comparative Profit & Loss Year Ended

31st March 2014

% Year Ended

31st March

2013

%

Income

Net Sales 20078 97 20023 98

Other Income 531 3 462 2

Total Income 20609 100 20485 100

Expenses

Cost of Raw Materials Consumed 2911 14 2792 14

Purchases of Stock-in-Trade 309 2 236 1

Changes in Inventories of Finished

Goods, Work-in-Progressand Stock-in-Trade

107 1 (118) (1)

Employee Benefits Expense 1015 5 968 5

Power and Fuel 4135 20 4299 21

Freight and Forwarding Expense 4581 22 4224 21

Other Expenses 3402 17 3104 15

Total Expenses 16462 80 15504 76

PBIDT 4147 20 4980 24

Finance Costs 319 2 210 1

Depreciation and AmortisationExpense

1052 5 945 5

PBT 2776 13 3825 19(Taxation) 631 3 1170 6

Profit After Tax 2144 10 2655 13

ALTMAN Z-SCORE ANALYSIS

The Altman Z Score was designed as a way to rank a manufacturing company's risk of going

bankrupt. A Z Score above 2.99 is safe; 1.81 to 2.99 means there is a chance the company

will declare bankruptcy in the next two years; and less than 1.81 means the company is

severely distressed. It is given by:

Z = 1.2 * [(Current Assets Current liabilities)/Total Assets] + 1.4 * [Retained Earnings/Total Assets] +

3.3 * [EBIT/Total Assets] + 0.6 * [Equity Value/Total Liabilities] + 1 * [Sales/Total Assets]


12/13

The Z score for Ultratech Cements for the FY 2013-14 is 3.10, indicating this is a healthy

firm.

DU-PONT CHART: Return on Equity (ROE)

WORKING 2014 2013Current Assets 8998 Current Assets 7816

Non-current assets 20756 Non-current assets 19593

Assets 29754 Assets 27409

Share capital 274 Share capital 274

Reserves and

surpluses 16823

Reserves and

surpluses 14961

Equity 17098 Equity 15235

Sales 20078 Sales 20023EBIT 3095 EBIT 4035

PBT 2776 PBT 3825

Net Income 2144 Net Income 2655

Assets/ Equity 1.74 Assets/ Equity 1.80

Sales/Assets 0.675 Sales/Assets 0.731

EBIT/Sales 0.154 EBIT/Sales 0.202

PBT/EBIT 0.897 PBT/EBIT 0.948

Net income/PBT 0.773 Net income/PBT 0.694

ROE 0.125 ROE 0.174


13/13

financial analysis of ultratech

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