AProject ReportOf Financial Management-II

TECHNOLOGIES LTD.

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COMPANY PROFILEULTRATECH CEMENT LtdType: PublicTraded as: BSE: 532258Industry: Building MaterialsFounded: 1983Headquarters: Mumbai , Maharashtra, IndiaArea served: WorldwideKey people: O P Puranmalka, DirectorServices: IT, business consulting and outsourcing servicesRevenue: Increase US$6.7 Billion (FY2014)[citation needed]Operating income: Increase US$335 million (Q3, 2014)[citation needed]Profit: Increase US$1.0 Billion (FY2014)[citation needed]Number of employees: 100,000Divisions: Enterprise Application Services Custom Application Services Engineering and R&D Services Enterprise Transformation Services IT Infrastructure Management Services Business Services/BPO1Website: www.hcltech.com

INTRODUCTIONHCL Technologies is a leading global IT services company working with clients in the areas that impact and redefine the core of their businesses. Since its emergence on global landscape after its IPO in 1999, HCL has focused on 'transformational outsourcing', underlined by innovation and value creation, offering an integrated portfolio of services including softwareled IT solutions, remote infrastructure management, engineering and R&D services and Business services.HCL leverages its extensive global offshore infrastructure and network of offices in 31 countries to provide holistic, multiservice delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare & Life sciences. HCL takes pride in its philosophy of 'Employees First, Customers Second' which empowers its 90,190 transformers to create real value for the customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 5.2 billion, as on 31st March 2014 (on LTM basis).HCL Technologies has portfolio of services including softwareled IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL has global partnerships with several leading Fortune 1000 firms, including several IT and technology majors. It provides services to industry sectors including financial services, manufacturing, aerospace & defense, telecom, retail & CPG, life sciences & healthcare, media & entertainment, travel, transportation & logistics, automotive, government and energies & utilities.As a $5.2 billion global company, HCL Technologies brings IT and engineering services expertise under one roof to solve complex business problems for its clients. Leveraging its extensive global offshore infrastructure and network of offices in 31 countries.Why should you consider HCL? Growth through innovative approaches.Our clients from Fortune 500 corporations to regional financial services companies that are a lifeline for their local communities partner with us to discover innovative ways to adapt to shifting regulations, achieve continuous simplification of IT and operations, improve their customer experience, and gain access to new products and markets. HCL delivers these benefits with help of its financial IT solutions through a tailored combination of nine critical factors categorized across three mainstays of value creation. Leveraging the eco-system Co-innovation for technology: Identifying end-user insights and developing ideas for a joint go-to-market Co-development with partners: Best-in-class products and SI capabilities that reduce risk and accelerate time to market Co-creation for thought leadership: Engaging analysts, advisors, and influencers to create business value from IT Nurturing the value chain Fully served customer: Business-aligned IT to offer seamless integration of business processes, applications, and infrastructure Cost-structure transformation: Unlocking capital from best-in-class Run The Business (RTB) processes and reinvesting the savings into a transformational agenda of customers Front-office transformation: Helping banks and financial services companies address the evolving needs of the connected-customer community Expanding the business model Skin in the game: Joint ventures and special-purpose vehicles that deliver financial value beyond traditional finance and accounting outsourcing benchmarks Pricing constructs: Convenient models such as Day 1 Committed Cost Savings and Gain share models Collaborative sourcing: Customer-need-based commercial structuring, benchmarked predictable SLAs, continuous reportage, and process innovation HCL as a Valuable Partner.Traditional finance and accounting outsourcing models are beginning to disintegrate in the new normal. CIOs and vendor management offices now seek partners who can assist them with financial services consulting, and financial services software and strategies that help reduce supplier fragmentation, align with business objectives, leverage outcome-based models, and seek innovation and value addition beyond the contract. This model also provides global service delivery and delivery excellence, along with simplified engagement governance.Capital Structure:DEBT TO EQUITY RATIO: - Following were the debt to equity ratios for the ULTRATECH CEMENT Ltd. from2010-2014:-YearDebt to Equity

20109.044011596

20118.028335089

20128.795600665

201321.09444304

201458.51206514

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.Here, ULTRATECH CEMENT Ltd is continuously increasing its proportion of debt in each year by year.A ratio is generally considered to be good as in this case creditors and shareholders contribute equally to the assets of the business. This ratio will vary from sector to sector.

Times interest ratio:-Following were times to interest ratio for ULTRATECH CEMENT Ltd. from 2010-2014:-Year Times interest ratio

20102.902303237

20113.19139956

20122.234324694

20132.825163723

20144.819927812

Interpretation: - This ratio measures a companys ability to meet its debt obligations, failing to meet this obligations could force the company into bankruptcy. A ratio >2 is considered to be good , as it is adequate to protect the creditors interest but less than 1 will mean company is having problem in paying interest on borrowings. In case of idea company has been able to maintain its ratio above 2 for all the 5 years consecutively.

Quick ratio: following are quick ratio for ULTRATECH CEMENT Ltd. from mar 2010-mar-2014

YearQuick Ratio

20100.3303549

20110.3198879

20120.3

20130.2857393

20140.2684149

This ratio is an indicator of the solvency of the company; they aim to maintain a quick ratio that provides sufficient leverage against liquidity risk. The ideal quick ratio is 1:1.Here we can see that company has maintained the ideal ratio all through its 5 years.

Current ratio: - following are the current ratios for the ULTRATECH CEMENT Ltd. from mar-10 to mar-14:-YearCurrent Ratio

20101.553955916

20111.275286115

20120.705580785

20131.16169778

20141.775900172

Interpretation: This ratio tells us the liquidity position of the company, generally companys aim to have a ratio at least 1 to ensure that the value of current assets cover the value of current liabilities a value greater than 1 provides a cushion against unforeseen contingencies that may arise in the future. Ideal current ratio is 1:1. Since ULTRATECH CEMENT Ltd have ideal ratio.Z SCORE: - following were the z score calculated from mar-2010 to mar-2014

Calculation of Z SCORE

20102011201220132014Total

A0.1507950.072055-0.105340.0558520.2411660.414528

B0.420260.4376210.48670.6345730.7515182.730671

C0.2044570.2074490.3364630.4171850.4730761.63863

D0.0258950.0523370.0492780.0435830.0478180.218911

E0.2722141.0131111.2192571.153411.043484.701472

Interpretation: - the Z score is helpful in calculating and predicting the probability that company will go bankrupt in next 2 years.=2.6- safe zoneULTRATECH CEMENT Ltd has its Z-Score between 0.414528 to 4.701472 in 5 years which means that the co. is at Safe Zone.

Profit margin:-YearProfit Margin

20100.294593562

20110.207063675

20120.28472071

20130.36736109

20140.447079747

Assets turnover:-Year Total Asset turnover

20100.272214108

20111.013111063

20121.219256856

20131.15340997

20141.043479553

Leverage:-20102011201220132014

DOL0.025312.4657972.0771892.050623

20102011201220132014

DFL1.0849251.0786041.0412031.0171771.011037

Return on capital employed:-Year Return on Capital Employed

20100.280930737

20110.280999931

20120.523910514

20130.63731979

20140.686433429

Interpretation:- This ratio indicates that higher the value of return on capital employed indicates company generates more earnings per dollar of capital employed, ULTRATECH CEMENT Ltd return on capital employed is increasing from 4,609.25-7,104.22.

Dividend decision:-From mar-10 till mar-14 dividends of ULTRATECH CEMENT Ltd.Yr20102011201220132014

DPS0008.3842874619.980914661

EPS3.192.561.742.475.09

Dividend Yield 0003.3944483651.960886967

Market Price of Share70.8583.25106.4168.65154.3

Retained Earning5,110.807,070.239,182.2312,395.4916,396.20

Net Income123,978.90154,384.00194,886.90224,074.50264,919.70

Dividend000667.41280.4

Dividend payout ratio0000.0497141270.064685124

Dividend payoutA reduction in dividends paid is looked poorly upon by investors, and the stock price usually depreciates as investors seek other dividend-paying stocks. A stable dividend payout ratio indicates a solid dividend policy by the company's board of directors. Bosch has given his dividend in the every year and we can see there is increase in dividend payout in every year which shows the company is able to increase the price of its share.Dividend YieldDividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. Investors who require a minimum stream of cash flow from their investment portfolio can secure this cash flow by investing instocks paying relatively high, stable dividend yields. ULTRATECH CEMENT Ltd has decreased its dividend yield which means that investors are receiving are less for the amount they have invested.

Retained EarningsRetained earnings is the percentage ofnet earningsnot paid out asdividends, but retained by the company to be reinvested in its core business, or to pay debt. It is recorded undershareholders' equityon the balance sheet.In most cases, companies retain their earnings in order to invest them into areas where the company can create growth opportunities, such as buying new machinery or spending the money on moreresearch and development. Should anet lossbe greater than beginning retained earnings, retained earnings can become negative, creating adeficit. The retained earnings general ledger account is adjusted every time a journal entry is made to an income or expense account.We can see that ULTRATECH CEMENT Ltd is increasing its retained earnings year by year. This means that it is paying no or less dividend to its shareholders as because company has some growth projects in mind where it can invest and increase the capital gain.

Degree of financial leverage:-Year Financial Leverage

20101.084925263

20111.078604211

20121.041203182

20131.01717739

20141.011037274

Interpretation:- This ratio calculates the proportional change in the net income that is caused by change in the capital structure of a business to either increase or decrease the amount of debt for which the company is liable. The ratio for the ULTRATECH CEMENT Ltd is increasing and decreasing over the years. It means the company is not consistent to its breakeven point.

Working capital managementCash conversion cycle:- A cash conversion cycle (or jut cash cycle) is the amount of time it takes for a company, business or organization to receive payment for its products after it has paid for its materials or inventory. You calculate your cash conversion cycle by adding your inventory costs over a certain time to your accounts receivable costs over that same period and then subtracting your accounts payable cost over that period.Cash conversion cycle = days in inventory + days receivable outstanding-days payable outstanding

Day Receivable Turnover Ratio20102011201220132014

0.8269784.0998274.4705534.6204695.116749

This much time it takes to collect the cash i.e. accounts receivableDays payable outstanding:-There is No Payable Outstanding shown in Balance Sheet

Days sales outstanding:- A measure of the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivable. A high DSO number shows that a company is selling its product to customers on credit and taking longer to collect money.

Days payable outstanding: -Days payable outstanding tells how long it takes a company to pay its invoices from trade creditors, such as suppliers. DPO is typically looked at either quarterly or yearly.Interpretation: Since the cash conversion cycle is coming to be +ve in this case which is bad as it takes more time for this company to collect from its debtor.

Cash conversion cycle20102011201220132014

444.656493.4245985.7427682.6402471.60074

A metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows. The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers. This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties.Usually a company acquires inventory on credit, which results in accounts payable. A company can also sell products on credit, which results in accounts receivable. Cash, therefore, is not involved until the company pays the accounts payable and collects accounts receivable. So the cash conversion cycle measures the time between outlay of cash and cash recovery.This cycle is extremely important for retailers and similar businesses. This measure illustrates how quickly a company can convert its products into cash through sales. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company's bottom line.

Source Of Working CapitalWorking capital finance is defined as the capital of a business that is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. For many companies, this is wholly comprised of trade debtors (that is, bills outstanding) and trade creditors (bills the company in question has yet to pay).Short Term Sources of Working Capital FinancingFactoringFactoring is a traditional source of short term funding. Factoring facility arrangements tend to be restrictive and entering into a whole-turnover factoring facility can lead to aggressive chasing of outstanding invoices from clients, and a loss of control of a companys credit function.Instalment CreditInstalment credit is a form of finance to pay for goods or services over a period through the payment of principal and interest in regular payments.

Invoice DiscountingInvoice Discounting is a form of asset based finance which enables a business to release cash tied up in an invoice and unlike factoring enables a client to retain control of the administration of its debtors.Income received in advanceIncome received in advance is seen as a liability because it is money that does not correlate to that specific accounting or business year but rather for one that is still to come. The income account will then be credited to the income received in advance account and the income received in advance will be debited to the income account such as rent.

Advances received from customersA liability account used to record an amount received from a customer before a service has been provided or before goods have been shipped.Bank OverdraftA bank overdraft is when someone is able to spend more than what is actually in their bank account. The overdraft will be limited. A bank overdraft is also a type of loan as the money is technically borrowed.Commercial PapersA commercial paper is an unsecured promissory note. Commercial paper is a money-market security issued by large corporations to get money to meet short term debt obligations e.g.payroll, and is only backed by an issuing bank or corporations promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings will be able to sell their commercial paper at a reasonable price.Trade financeAn exporter requires an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importers bank assists by providing a letter of credit to the exporter (or the exporters bank) providing for payment upon presentation of certain documents, such as a bill of lading. The exporters bank may make a loan to the exporter on the basis of the export contract.Letter of CreditA letter of credit is a document that a financial institution issues to a seller of goods or services which says that the issuer will pay the seller for goods/services the seller delivers to a third-party buyer. The issuer then seeks reimbursement from the buyer or from the buyers bank. The document is essentially a guarantee to the seller that it will be paid by the issuer of the letter of credit regardless of whether the buyer ultimately fails to pay. In this way, the risk that the buyer will fail to pay is transferred from the seller to theletter of credits issuer.

Long Term Source of Working Capital Financing

Equity CapitalEquity capital refers to the portion of a companys equity that has been obtained (or will be obtained) by trading stock to a shareholder for cash or an equivalent item of capital value. Equity comprises the nominal values of all equity issued (that is, the sum of their par values). Share capital can simply be defined as the sum of capital (cash or other assets) the company has received from investors for its shares.

LoansA loan is a type of debt which it entails the redistribution of financial assets over time, between the lender and the borrower. In a loan, the borrower initially receives or borrows an amount of money from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular instalments, or partial repayments; in an annuity, each instalment is the same amount. Acting as a provider of loans is one of the principal tasks for financial institutions like banks. A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral. Unsecured loans are monetary loans that are not secured against the borrowers assets.

Classification Of Working CapitalThe amount of funds needed for meeting requirements normally varies from time to time in every business.However, business always needs a certain amount of assets in the form of working capital if it is to carry out its functions.This permanent need and the variable requirements are the basis for a convenient classification of working capital as regular, permanent, or variable as follows:

Permanent or Fixed Working CapitalA part of the investment in current assets is as permanent as the investment in fixed assets. It covers the minimum amount necessary for maintaining the circulation of the current assets. Working capital invested in the circulation of the current assets and keeping it moving is permanently locked up.

The permanent or fixed working capital is of two kinds:(a) Regular working capital, and(b) Reserve margin or cushion working capital.

(a) Regular working capital:It is the minimum amount of liquid capital required to keep up the circulation of the capital from cash to inventories to receivables and back again to cash. This would include a sufficient amount of cash to maintain reasonable quantities of raw materials for processing into finished goods to ensure quick delivery etc.(b) Reserve margin or cushion working capital:It is extra capital required to meet unforeseen contingencies that may arise in future. These contingencies may crop up on account of rise in prices, business depression, strikes, lock-outs, fires and unexpected competition. It is needed over and above the regular working capital requirements.

Variable working capital:The variable working capital fluctuates with the volume of business. It may be sub-divided into: (i) Seasonal and (ii) Special working capital.

(i)Seasonal working capital:It refers to liquid capital needed during the particular season. Beyond initial and regular working capital, most businesses will require at stated intervals a large amount of current assets to fill the demands of the seasonal busy periods.During the season, the business enterprises have to push up purchase of raw materials (sugarcane by sugar mills, wool by woollen mills) and employ more people to convert them into finished goods and thus require large amount of working capital.(ii)Special working capital:It is that part of the variable capital which is needed for financing special operations such as the organization of special campaigns for increasing sales through advertisement or other sale promotion activities for conducting research experiments or execution of special orders of Government that will have to be financed by additional working capital.The distinction between permanent and variable working capital is important in arranging the finance for an enterprise. Permanent working Capital should be raised in the same way as fixed capital is procured.It is undesirable to bring regular working capital into business on a short-term basis because a creditor can seriously handicap the business by refusing to continue lending permanently. Its only recourse is to curtail operations unless another lender can be found. Variable capital requirement can, however be financed out of short term loans from the banks or inviting public deposits.

CONCLUSIONULTRATECH CEMENT Ltd. is one of the important players in IT sector of our country , in capital structure we calculated capital structure, dividend policy, working capital management and analyzed the various corporate action by the company, various ratios in capital structure like debt to equity, financial leverage, quick ratio, Altman z-score etc, then in dividend ratio we calculated the price to earning ratio , current ratio etc in the working capital management we calculated the cash conversion cycle how much time it takes to convert the inventory to sales, how much time to collect the cash