Rajni SH

FUNDAMENTAL ANALYSIS OF CEMENT SECTOR ReLIANCe
Securities ltd. office NO.4003, 4th Floor Grand plaza, Frazer Road Near Dak Bungalows Chouraha Patna 800001
Project report
Submitted to:
LOVELY PROFESSIONAL UNIVERSITY
Under the Guidance of: Mr Atin Garg

(Asst. professor)
Submitted by: Rajnish Kumar

ROLL NO. B38 Reg.No. 11200669 Section: Q1202
2012-2014
1|Page LOVELY PROFESSIONAL UNIVERSITY, JALANDHAR
CONTENTS
Chapter-1: EXCUTIVE SUMMARY a) b) c) Objective of study...................................................................................5-6 Scope of the study...................................................................................6 Mythology to be used to study.................................................................6
Chapter-2: INTRODUCTION OF THE ORGANISATION a) Organisation profile......................................................................................7-8 b) History of the Organisation..........................................................................8-14

c)
Administrative Setup.........................................................................15
Chapter-3: STUDY ABOUT TOPIC a) Subject of the study....................................................................................16-63 b) Analysis of the data.....................................................................................64-75
Cheapter-4 a) Findings & Conclusions..............................................................................76 b) Suggestion & Recommendations.................................................................76 c) Bibliography.................................................................................................77
Acknowledgement
It gives me great pleasure in presenting the Project Report that gives the details of my project in ANALYSIS OF CEMENT SECTOR. I thank the college guide Prof Atin Garg for his kind and consistent guidance and help during the project work. It is impossible to list all the people who have helped us during my project. I take this opportunity to express whole heart thanks to Mr.Sanad Kumar BRANCH MANAGER of RELIANCE SECURITIES, PATNA BRANCH. I would like to thank Mr.Santosh Kumar Jha who guided me at every step in the execution of the project & their experience and valuable guidance were very helpful. I would like to express deep sense of gratitude towards all Staff and workers and to all those who directly or indirectly helped me in successful completion of project.
NAME Rajnish Kumar
EXECUTIVE SUMMARY
The project work is pursued as a part of MBA (FINANCE) Curriculum at LOVELY PROFESSIONAL UNIVERSITY, JALANDHAR. It is undertaken as a traineeship at Reliance securities Ltd. The project is done under expert supervision and guidance of prof. Mr Atin Garg (Lecturer Finance) and Mr. SANTOSH JHA (Centre Manager, Reliance Securities under Reliance Capital) the project is about the marketing and sales of financial products and also the efforts done to make improvements in the customer acquisition process for better results. At RELIANCE SECURITIES, initially the trainees were imparted process and product knowledge. They were given sufficient time to know about the products such as demate and trading A/C, Equity, ADB, Life insurance, Mutual fund, Structure product, currency, Terminal portal also about sales and distribution channel, They had to work with the sales representatives of the Distributor and think of ways of improving the sales and distribution channel and implementing them. The main aim was to increase the marketing actual knowledge, interact to customer and pitch the product, and learn about the customer need and demand about the customer, also gain the financial product knowledge and deeply stock market knowledge. And learn briefly about those parameters and ratio which basis we do fundamental analysis of cement sector. This project is an attempt to understand the basics of stock market. A project which will make me well versed with the market happenings ups & downs in the stock market, daily analysis- fundamental & a little bit of technical. The chapter methodology explains the steps that I took in understanding the equity market. It mentions a step by step detail of how I went by in order to answer my own doubts & the techniques that I used to go ahead. The next chapter gives a brief description about the company where I did my internship from, which is ADP (advance brokerage plan) which is a trading arm of Reliance Securities Pvt Ltd. The following chapter explains about the formation & company composition of Reliance Securities Pvt Ltd.
The next chapter gives a detailed report of my summer internship done at the company. It gives the jobs assigned to me at work, followed by the methods which I undertook in going about my internship. The conclusion gives the details about the learning that I have gained in the company. Apart from this next one gives the details about the methodology that I have used to do the fundamental analysis of cement sector.
OBJECTIV OF STUDY:Practical-work is very important in any professional-course it Is well known that any professional- course give only 20% knowledge throw rest of 80% we got from practical training which concluded with the submission of PROJECT REPORT is an important part of professional course. But we cant avoid the importance of theoretical part of the course, because without knowledge of theory not perfect for practical. Theory provide the base of the knowledge
As a student of management I have also been strongly convened with the above concept of study. I also support that sound theoretical knowledge and good practical work both are the pillar of the profession. Before the training we have only theoretical knowledge which we cant say complete knowledge.
The main aim was to increase practical knowledge and face the actual problem of market where how implement our theoretical knowledge. They were provided with database and had to make cold calls from the data. Company activity was also one of the major sources for generating business. Initially they even accompanied sales representatives to the clients place. Main objective was to know the need of the customer and how to fulfil that in the best way.
Objective of the study of fundamental analysis of cement sector is evaluating the fund on scheme which gives the good return to the investor. Investors are interested to know about the different type of return and risk.
Being a student of financial management my main aim and basic objective of study key parameters and ratio was following:1) To know about the profit earnings ratio of investment. 2) To know about the risk of the fund. 3) Compare the different cement company shares. 4) Evaluate the ratio of profit earning. 5) To know about the different opportunity of investment in cement sector.
SCOPE OF THE STUDY:The scope of the study refers to the job that to know about the activities of the organization. During the summer training the volunteer need to find out the corporate strategies of the running company and the mile stone which the company has covered during its journey. In the summer training, it is necessary for the student that he involves with the experience guys to get the knowledge about the company.
That is how the company has got the success, Or if it is going in the loss, why. In my training period I have found that the reliance group is the biggest group in Indian companies.
METHDOLOGY USED
To make a project work successful following aspect are required:1. A sound theoretical knowledge of the subject of the cement sector. 2. Select the appropriate method to implementation of theoretical knowledge.
CHEAPTER 2
INTRODUCTION:The following project is a study of the Indian Stock Market & an investment opportunity in the cement sector in India. The capital market (securities markets) is the market for securities, where companies and the government can raise long-term funds. The capital market includes the stock market and the bond market. A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately.
The objective of my internship is as follows: Understanding the various activities in an E- Broking firm. To get acquainted with all the workings of online trading. To gain practical knowledge in share trading To analyze the financial market & the share movements in order to study the prospects of investing in a particular stock or sector.
The aim of the project is to understand the overall equity market, to get to know the trading, clearing & settlement aspect of the equity market. As far as this project is concerned, it will help us to understand the overall working of the equity market & its importance to the economy of the India. A huge amount of money flows & millions of shares exchange hands in a single market day. This exchange of shares enables the flow of money in & out of a firm. The company whose shares are listed & the government who plays a pivotal role through the Policies formed in the market, helps them to raise long term funds which can be used for the benefit & the growth of the companies & also give back some part of their profit to the investor in the form of dividends.
COMPANY PROFILE About the Company

Reliance Securities Ltd (Reliance Securities), a Reliance Capital company is one of the leading brokerage houses and distribution arms of the Reliance Anil Dhirubhai Ambani Group (RDAG). The firm was established in 2005 and offers comprehensive services such as trading in equity, derivatives, investment banking, portfolio management services (PMS), wealth management services (WMS), research & distribution of financial products such as mutual funds, insurance and IPOs among others. Reliance Securities is present in the currency and debt market segment as well.
Company History: Reliance Capital Limited (RCL) was incorporated in year 1986 at Ahmadabad in Gujarat as Reliance Capital & Finance Trust Limited. The name RCL came into effect from January 5, 1995. In 2002, RCL shifted its registered office to Jamnagar in Gujarat before it finally moved to Mumbai in Maharashtra, in 2006.
In 2006, Reliance Capital Ventures Limited merged with RCL and with this merger the shareholder base of RCL rose from 0.15 million shareholders to 1.3 million.
RCL entered the Capital Market with a maiden public issue in 1990 and in subsequent years further tapped the capital market through rights issue and public issues. The equity shares were initially listed on the Ahmadabad Stock Exchange and The Stock Exchange Mumbai. Presently the shares are listed on The Stock Exchange Mumbai and the National Stock Exchange of India. RCL in the initial years engaged itself in steady annuity yielding businesses such as leasing, bill discounting, and inter-corporate deposits. Later, in 1993 diversified its business in the areas of portfolio investment, lending against securities, custodial services, money market operations, project finance advisory services, and investment banking.
RCL was accredited a Category 1 Merchant banker by the Securities Exchange Board of India (SEBI). It had lead managed/co-managed 15 issues of an aggregate value of Rs. 400
crore and had underwritten 33 issues for an aggregate value of Rs. 550 crore. All these companies were listed on various exchanges.
RCL obtained its registration as a Non-banking Finance Company (NBFC) in December 1998. In view of the regulatory requirements RCL surrendered its Merchant Banking License.
Market & Network

Reliance Securities acquired memberships of the premium stock exchanges in India, namely BSE and NSE in 2005 and 2006 respectively. It offers trading facilities in the cash and derivatives market segment of both NSE and BSE. The company provides trading in the debt market segment as well. It also acts as a DP with CDSL. Reliance Securities website www.rsec.co.in also facilitates trading in commodities for its partner company, Reliance Commodities Ltd which holds memberships in NCDEX, MCX and NMCE Reliance Securities is headquartered in Mumbai with operations across all major Indian cities. Majority of the companys terminals are located in Mumbai. It has a vast network spread across 3,393 cities, with 116 offices, and 2,822 equity broking terminals allocated to 2,943 registered sub-brokers.
As on Dec 31, 2009, Reliance Securities had 73 NEAT terminals, 40 BOLT terminals and 2,709 CTCL licenses. During the same period, the company added 1, 84, 550 client accounts of which 1, 82,720 were e-broking accounts.
Products and Services

Trading: Reliance Securities facilitates trading activities in all the major market segments including, cash, derivatives, debt and currency futures. The company offers online trading facility through its website, www.rsec.co.in. Reliance Securities has recently migrated all its customers to its new trading platform, Insta Plus and Insta Express.
Apart from internet trading, customers are also provided with the option of trading through the Call & Trade facility and through RSec.mobi, a personal mobile phone service. Clients can place and track their orders on BSE and NSE on a real time basis with access to RSec.mobi. This facility is available to Reliance Securities trading account holders across all mobile platforms independent of device, operator and the underlying carrier technology. Investment Banking: Reliance Securities also offers Investment Banking services.
Distribution of Financial Products: Reliance Securities is involved in the distribution of financial products such as mutual funds, insurance and IPOs. DEMAT Services: The company offers DEMAT services through Reliance Capital and is a registered member with NSDL and CDSL.
PMS: Reliance Securities is a SEBI registered portfolio manager and offers customized services to their client which is designed to meet their investment objectives.
These services cover all administrative aspects while providing periodic reporting to clients. WMS: The Company makes available Wealth Management Solutions to its customers Research: Reliance Securities offers research based services to its clients. Its research wing encompasses 100 companies across 20 sectors. This division offers complete research solutions on IPOs, mutual funds, economic research and other special reports and newsletters.
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Insurance: Reliance Securities also provides a range of insurance products including life insurance and general insurance through Reliance Composite Insurance Broking.
NRI Services: NRI clients can place orders using the new their trading platform such as Insta plus and Insta Express. NRIs can execute their securities transactions under the provisions of the RBI guidelines for NRI Portfolio Investment Scheme (PIS).
FUTURE PLAN:PLAN FOR CHILDRENS FUTURE: Children future planning is all about arranging a corpus to meet known expenses like there higher education & wedding. Childrens education & marriage is amongst the most important goal in our life.
If cost of higher education e.g. MBA is Rs. 5 lakh today, After 18 years when our child is ready to pursue higher education, the same higher education will cost us Rs. 14.27 lakhs
That innovative tool will help us to find out Whether our current savings set aside for this goal are sufficient enough to meet these goals or How much additional amount we need to save & invest to achieve these goals.
CALCULATE OUR SAVINGS Systematic Investment Planning (SIP) may get complicated if we have just lost track, with our SIP Calculator, calculate NAV, number of units purchased, SIP Value & Index Value, all in a bifurcated systematic manner.
ASSET PURCHASE GOAL Owning our own house / car, whether its our first one or the one which we have dreamt of, can create a great sense of pride and accomplishment.
Accomplishing of these goals requires planning. We should plan for these goals early. These innovative tools will help us to plan for these goals.
LIVE COMFORTABLY POST RETIREMENT Dying too early is a risk & living too long is another risk. Retirement planning caters to the latter. People generally think of retirement planning as distant future goal however it is important to understand that this goal cannot be deferred for long. It is important to plan for our post retirement due to shift to nuclear families & knowing that longevity is on increasing side.
We need to know What is the corpus required to meet our post retirement expenses? Whether our current savings set aside for retirement is sufficient enough to meet that corpus? How much additional amount we need to save & invest to achieve that corpus?
COMPARE FUNDS FOR BETTER INVESTMENTS There are a number of Mutual Funds available, confused which one to buy? With Reliance Securities Fund Compare Tool, we can now compare various available funds and invest in the best one suited for us.
Success sutras of Reliance security:The success story of the company is driven by 8 success sutras adopted by it namely trust, integrity, dedication, commitment, enterprise, hard work and team play, learning and Innovation, empathy and humility. These are the values that bind success with Reliance securities.
Vision of Reliance securities

Reliance securities achieve & sustain market leadership, Reliance securities shall aim for complete customer satisfaction, by combining its human and technological resources, to provide world class quality1services. In the process Reliance securities shall strive to meet and exceed customer's satisfaction and set industry standards.
Mission statement
mission is to be a leading and preferred service provider to customers, and aim to achieve this leadership position by building an innovative, enterprising , and technology driven organization which will set the highest standards of service and business ethics.
COMPANY STRCTURE
Awards & Achievements

'Most Admired Service Provider in Financial Sector' by IPE BFSI, 2012 'Indian E-Retail Awards for Best Customer Experience Award' by Franchise India, 2012 'My FM Stars of the Industry 2012'for excellence in Online Demat (Broking category) Reliance Securities Limited is now ISO 9001:2008 certified for Online Trading Platform 'Brand Leadership Legacy Award' at the Asian Leadership Awards - Dubai, 2011 'My FM Stars of the Industry 2011' for excellence in Online Demat / Broking 'Largest E-Broking House 2010' by Dun & Bradstreet 'Largest E-Broking House & Best Equity Broking House for the year 2009' by Dun & Bradstreet
'Best in category Service Franchise' at the 6th International Franchise & Retail show 2008 'Best E-Brokerage House 2008' (runner's up) by Outlook Money NDTV Profit Awards 'Debutant Franchisor of the Year' at the 5th International Franchisee & Retail Show 2007 Reliance Securities has been rated no. 1 by Starcom Worldwide for online security and cost effectiveness in 2007
MANAGEMENT TEAM Reliance Securities is lead by a team of distinguished individuals dedicated towards scaling the company to greater heights through innovative products and services that create value for customers & stake holders. Management Team Vikrant Gugnani - Executive director Sanjay Wadhwa - Chief Financial Officer Ganesh Pai - Head Compliance Hitesh Agrawal - Head Research
ON-JOB-TRAINING INTRODUCTION
I have been done my summer internship in Reliance Securities Private Limited to perform various activities undertaken by an E broking firm (Depository Participant).
OBJECTIVE
Reliance Securities Pvt. Ltd. Performs as intermediary between stock exchange and clients. Various task related to e broking has been assigned to me.
The main objectives are as follows: To understand various activities in E-Broking firm. (D P). To get familiar with the working of online trading. To gain practical knowledge in share trading. To get an exposure
TASK ASSIGNED
Market observation Customer acquisition. Technical Issues Administrative tasks Customer follow-up
MARKET OBSERVATION
It was the basic task assign during the SIP. While working with an e broking firm it very essential to be aware about the current market issues like current market news, Current market position, stock watch, global market condition, past trend of the market etc. It was also imperative to target particular stocks & track their daily movements. By targeting & tracking individual stocks & scripts, it helped me understand the various factors that lead to stocks price movements. Also taking with clients during market hours helped me to understand the investment psychology of the client.
CUSTOMER ACQUISITION
To acquire new customers for the company it was the task given to me. 2 new Demat accounts, 5 MGP account have been opened in this duration.
Strategy in acquiring new customers

Reference by existing customers. Lead by company guide Tele calling (by lead data) Cold callings
TECHNICAL TASKS
Various technical tasks has been performed like, software down loading, to give software demonstration to the clients, solving various problems of the clients regarding software handling etc.
ADMINISTRATIVE TASK
These were the secondary task given bellow, which has been performed during the training period. Completion of account opening form. Collection of requires documents from existing clients. Margin funding form. To transfer shares.
CUSTOMER FOLLOW-UP
Follow-up has been given to newly acquire as well as existing clients for various issues. Trading for offline clients under the relationship managers guidance. To give markets updates to newly acquire as well as existing clients in market duration, etc.
ACHIEVEMENTS
Stock Market observation has been done during internship period. 2 new clients have been acquired. Companies trading software has been downloaded. Software demonstration has been given to newly acquire as well as existing clients. Various administrative activities have been performed. Follow-up to the customer has been given. Company generated brokerage from the newly acquired customer by me during the internship period. Offline customers orders have been taken in regular market schedule.
LIMITATIONS
It was hard to acquire knowledge about this field in such short span of time Share market is very vast & fast sector, it was very difficult to cope-up with the environment in such short span of time. This field is requiring with very deep fundamental & technical knowledge. Acquiring new clients it was the tough task to perform. High risk involve while trading on behalf of the clients under the guidance of RM.
CONCLUSION
Learning Experience:
In my summer training, I knew about the stock market and its nitty-gritty. And now I am confident about equity knowledge. Although nobody can claim complete expertise but there is a sea change at least from our point of view. I have learnt what are the various indices and their significance in market. I have learnt about various fundamentals and technical aspects, which affect the stock prices in short run and long run.
Selling Experience:
Apart from this my specific task is to sell the Demat accounts. During this venture I came across many people who came from different walks of life. I learnt how to deal with them, how to persuade them and guide them in trading.
Selling an online trading account requires special focus on targeting the customers. Each and every person does not trade / invest in the stock market. Actually what I had to do was to identify the prospect and then convince them.
As we met more and more people, we came to know more about how to talk to them, how much time be given to each person we met. Even, by solving the customer queries, my own understanding was enhanced.
While selling the product in the market, I also came to know more about competitors product like, icicidirect.com, India bulls and their strategy of marketing and the consumers preference towards the competitors product.
After forms were filled clients after the procedures were given client Id. After that, I was required to show the customer how to make a transaction and how to get access to the
terminal. Also, other queries, which the customer faced, had to be solved by us. So, it was all a very good learning experience for me.
There were senior trainees always to solve the difficulties I faced in approaching a customer, filling up the form, demonstrating the site, or solving their queries.
I faced some bad and resentful experiences like being sent out of offices and waiting for hours for a customer and went to the customer again in case if a signature is left in the form or in occurrence of any proof problems. This was again a learning to increase my tolerance and be more careful while filling up the form.
RESEARCH METHODOLOGY
My first task before starting the process was to understand how to conduct the analysis. I was suggested by my coordinator Mr. SANTOSH KUMAR JHA AND THE branch head Mr. SANAD KUMAR to conduct the analysis through EIC model. My next step was to understand what EIC model all about and what are the steps to achieve it. For which my first step was going through various internet sites and reading about the EIC model and usefulness off the whole process.
Once, I got to know about the basic of the EIC model my task was to select sector on which I can conduct the analysis. I have chosen Cement Sector as it comes under the Infrastructure Industry which is very vital for the growth of the Economy. After doing the a thorough research on the cement sector in India, the company I chosen was Ambuja Cement Limited, as cost is the important factor for the cement industry, and the strategy which any company can adopt is cost leadership and Ambuja Cement Limited is the Cost Leader in the cement sector.
The next step leads me to know the economic conditions which will have a bearing on the cement sector. Then I studied the Industry through the following characteristics :Capacity Utilization, Regional Updates, Evaluating the Cement Industry through Porters
Model, Indian Cement Industry-The current Scenario, etc. the next step lead me to know the history about the company along with the growth prospects that possess for the future.
Once this was done I went ahead and started my analysis on the company and concluded the project with my say on the future investment in the company.
Chapter 3
Introduction
Overview of the Financial Market
FINANCIAL MARKETS
A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend.
Money Market
The money market is a wholesale debt market for low-risk, highly-liquid, short-term instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions.
Capital Market
The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year.
Forex Market
The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe.
Overview of the Capital Market

Financial markets, financial assets, financial services and financial institutions constitute the financial system. Financial market provide channels for allocation of savings to investment, that is how the savings are canalized into investments thus generating further income, cash or assets. Financial market has two major components viz. money market and capital market. Money market refers to the market where borrowers and lenders exchange short-term funds, to solve their liquidity needs. Money market instruments have low default risk, maturities under one year and high marketability (liquidity). Low default risk implies that generally the risk of non-payment of money is low. Maturities under one year imply that all contracts are of maximum one Year. Capital market is wider that securities market and embraces all form of lending and borrowing. It comprises of institutions and mechanisms through which medium to long term funds are pooled and made available to business, government and individuals. Securities market refers to the markets for those financial instruments/claims/obligations that are commonly and readily transferable by sale. This implies that the title to ownership is with the holder; whosoever holds the securities is deemed to be the owner of the securities, unless proved otherwise. These do not contain the name of the holder and hence are transferable by sale.
Securities market consists of primary market and secondary market.
Primary market consists of channel for sale of new securities, while secondary market deals in the securities already issued.
Primary markets involve the following methods of issue. IPO Further issue of capital Rights issue Offers to public Bonus issue
Secondary market enables those who already hold securities to adjust their investment in response to change in their assessment of risk and return, the statement implies that those who already holds the securities may want to sell them in case if those securities are not paying off, or if he needs to adjust his liquidity or for any other reason. Secondary market refers to the stock exchanges, a stock exchange provides mechanism to buy and sell the securities already issues in primary market.
There are at present 23 stock exchanges in India Participants in the securities market are Issuers of securities Investors in securities Intermediaries- brokers, sub brokers, merchant bankers, underwriters etc. Regulators
Stock Exchange:
The Securities Contract (Regulation) Act, 1956 [SCRA] defines Stock Exchange as anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. Stock exchange could be a regional stock exchange whose area of operation/jurisdiction is specified at the time of its recognition or national exchanges, which are permitted to have nationwide trading since inception. NSE was incorporated as a national stock exchange.
Trading
The Dutch started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short selling, option trading, debt-equity, merchant banking, unit trusts and other speculative instruments ". There are now stock markets in virtually every developed and most developing economies, with the world's 25 biggest markets being in the United States, Canada, China (Hong Kong), India, UK,Germany, France and Japan.
Importance of stock market: Function and purpose

The stock market is one of the most important sources for companies to raise money. This allows businesses to go public, or raise additional capital for expansion. The exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system Functions. Financial stability is the raison outlook of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.
Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via banks' traditional lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. The major part of this adjustment in A financial portfolio has gone directly to shares.
Regulators of Stock Market:

The absence of conditions of perfect competition in the securities market makes the role of the Regulator extremely important. The regulator ensures that the market participants behave in a desired manner so that securities market continues to be a major source of finance for corporate and government and the interest of investors are protected.
The responsibility for regulating the securities market is shared by Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for protecting the interests of investors in securities
a) Promoting the development of the securities market and b) Regulating the securities market. Its regulatory jurisdiction extends over corporate in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market.
SEBI has been obligated to perform the aforesaid functions by such measures as it thinks Fit. In particular, it has powers for: Regulating the business in stock exchanges and any other securities markets. Registering and regulating the working of stock brokers, subbrokers etc. Promoting and regulating self-regulatory organizations. Prohibiting fraudulent and unfair trade practices. Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self regulatory organizations, mutual funds and other persons associated with the securities market.
IMPACT OF STOCK EXCHANGES IN INDIA:

Following are the changes due to the existence of Stock Exchange 1. Mobilization of savings The savings of the individuals are easily mobilized in various types of industries. Therefore the amount of investments in the stock exchange increases. 2. Increase in rate of return on investment The investors get more rate of return i.e. the market rate and not the normal bank rate which is much lower.
3. Availability of funds for growth of industries

The amount of funds required for the growth of the industries is easily available whereas there was always shortage of capital.
4. Diversification of industries
Due to the availability of funds the industry becomes financially strong and has scope or diversification due to which more strongly in the market.
5. Increase in employment
Growth and diversification of industries leads to increase in the amount of work and thus increase job opportunities for the unemployed.
6. Increase in standard of living

The increased job opportunities and the availability of goods of higher quality have increased the standard of living of people.
7. Increase in GDP
Increase in business in overall all industries has automatically lead to the rise in GDP of the country and thus its prosperity.
8. Decrease in Trade Deficit.

Due to growth in industries the country is becoming self-sufficient leading to decrease in trade deficit.
ECONOMIC ANALYSIS
OVERVIEW OF THE ECONOMY
GROWTH AND INVESTMENT
The Indian economy after reporting fairly robust growth of over 9 per cent during 2005-08, moderated to a growth of 6.7 per cent in 2008-09 because of the global financial crisis. Because there was fiscal and monetary space, timely stimulus allowed the economy to recover fairly quickly to a growth of 8.4 per cent in 2009-10 and 2010-11. Since then, however, the fragile global economic recovery and a number of domestic factors have led to a slowdown once again.
The slowdown in the Indian economy that began in the second quarter of 2011-12, when the growth rate declined to 6.7 per cent from a level of 8.0 per cent in the first quarter, continued in subsequent quarters. Growth has been in the range of 5.3-5.5 percent in the last three quarters (Q4 of 2011-12 to Q2 of 2012-13). The slowdown is not just confined to India. There has been a general slowdown in the global economy which has been passing through a rather prolonged phase of uncertainty. The recovery from the global crisis of 2008-09 in the advanced economies has been uneven, with a decisive resolution yet to emerge to the sovereign debt problem in the Euro zone. Having achieved a GDP growth of 5.1 percent in 2010, the rate of growth in the global economy declined to 3.8 per cent in 2011 and is expected to decline further to 3.3 per cent in 2012, as per the World Economic Outlook released by the IMF in October 2012. The rate of growth of advanced economies declined from 3.0 per cent in 2010 to 1.6 percent in 2011 and is expected to decline further to 1.3 per
cent in 2012. Even the emerging economies have slowed down during this period, partly as a result of the slowdown in their export markets. Chinas growth declined from 10.4 per cent in 2010 to 9.2 per cent in 2011 and is expected to be 7.8 per cent in 2012. Brazils growth dipped from 7.5 per cent in 2010 to 2.7 per cent in 2011 and is expected to be 1.5 per cent in 2012.
The growth rate of the Indian economy (measured in terms of GDP at factor cost at 2004-05 prices) was 5.4 per cent in the first half (H1) of year 2012-13 as against 7.3 per cent in the corresponding time period of the previous year. The growth for the full year of 2011-12 was 6.5 per cent vis--vis the growth rate of 8.4 per cent achieved in each of the previous two years i.e. 2009-10 and 2010-11. The slowdown has been all pervasive and almost all the sectors have been affected. The growth rate has been 2.1 per cent for agriculture and allied sectors, 3.2 per cent for industry sector and 7.0 percent for the services sector in the first half of 2012-13. The growth rates were 3.4 per cent, 4.7 per cent and 9.5 per cent, for agriculture, industry and services, respectively in H1 of 2011-12. The growth of GDP in the first and second quarters of 2012-13 was 5.5 per cent and 5.3 per cent respectively (Table 1.1)
The slowing growth rate in India during the first half of 2012-13 can be explained in terms of both global factors and domestic factors. The slowdown in growth in advanced economies and near recessionary conditions prevailing in Europe resulted not only in lower growth of international trade but also lower capital flows. The growth rate of Indias exports declined. At the same time, however, the international price of crude oil remained high. Indias trade and current account deficits widened. Turning to domestic factors, rainfall in the monsoon season of 2012-13 has been below normal, particularly in the key months of June and July. This affected sowing and resulted in a lower growth rate of agriculture and allied sectors. The Reserve Bank of India continued to follow a relatively tight monetary policy to control inflation, although there has been some relaxation in the recent months in the Statutory Liquidity Ratio (SLR) as well as Cash Reserve Requirement (CRR). The cost of borrowing remains at elevated levels and this has had an impact on investment and growth in the economy, particularly that of the industry sector. Finally, bottlenecks in project implementation have made financing more difficult and investors more cautious.
The reduction in the growth rate of the services sector in the first half of current year vis--vis the first half of 2011-12 was primarily due to a reduction in the growth rate of Trade, hotels, transport and communications sector from 11.6 per cent in H1 of 2011-12 to 4.7 per cent in H1 of 2012-13. Within the services sector, this sub sector is the most crucial and accounts for nearly 45 to 50 per cent of the value added of services sector. Growth in activities like trade, hotels and transport, etc. are linked with the growth of agriculture and industry sectors and a slowdown in these activities has had an adverse impact on the growth of the trade and transport sectors. In contrast, the growth of financial, business and community and social services in the first half of the current year was in fact, higher than the growth rate for these sectors in the corresponding period of 2011-12.
The sectoral composition of the GDP (in terms of its relative shares) undergoes a change depending on the relative performance of different sectors. The sectoral composition of GDP is shown in Table 1.2. The quarterly shares reflect seasonal aspects also and may not change significantly in the short run. However, the long-term trends clearly show that the share of agriculture sector has been declining. This is to be expected agriculture declines as a share of GDP as countries grow. In India, however, the services sector became the dominant sector, without a significant increase in industrial sector. In fact, the share of the industrial sector in GDP has remained in the range of 25-29 per cent since the late 1960s. A decline in the share of the agricultural sector has been offset by an increase in services sector since then.
The contribution of services sector to incremental growth has been significantly increasing over time. Nearly 60 per cent of the increase in GDP is accounted for by the services sector in the last two decades. In fact, since 2008-09 the contribution of services sector in the increase in GDP has been 73 percent (Fig 1.1).
The growth rate in terms of GDP at market prices fell even more sharply in the first half of 2012-13. The growth declined from 7.9 per cent in H1 of 2011-12 to 3.4 per cent in H1 of 2012 13.Almost all the major components of GDP at market prices viz. private final consumption expenditure, gross fixed capital formation, exports as well as imports declined significantly. The exception has been government final consumption expenditure that registered an increase. The Sectoral composition of expenditure side of GDP is shown in Table 1.3.
The rate of growth of GDP at factor cost and at market prices have differed significantly over recent quarters. In 2008-09 and in the first two quarters of 2009- 10, growth of GDP at market prices was
Fig 1.1: Point contribution of three sectors to GDP Growth
Lower than the growth of GDP at factor cost. This was largely due to the stimulus package and a decline in the ratio of taxes to GDP (indirect taxes are subtracted from GDP at market prices and subsidies are added to obtain GDP at factor cost). In the next seven quarters, the growth of GDP at market prices exceeded the growth of GDP at factor cost. In last two quarters (Q1 and Q2 of 2012-13) the growth of GDP at market prices has been lower than the growth of GDP at factor costs largely because of the increase in subsidies.
(Fig 1.2). Higher growth of GDP at market prices relative to the growth of GDP at factor cost has occurred in the quarters which had a positive growth of net indirect taxes and vice versa.
The share of private final consumption expenditure has generally been in the range of 55 to 60 per cent. The share of gross fixed capital formation has been lower in the first half of 2012-13 as compared to its share in 2011-12.A detailed examination of the contribution of various components of GDP to growth (Fig 1.3) suggests a decline in the contribution of investment (gross fixed capital formation, inventories and valuables) beginning with Q2 of 2011-12.
AGRICULTURE Rainfall during the South West Monsoon (01st June 30th September) in 2012 has been both erratic and uneven. It was deficient by 28 per cent in June, 2012 and 13 per cent in July, 2012 as compared to the respective monthly Long Period Averages (LPA). With better rainfall in
August and September, the deficiency declined. During the monsoon season, the country as a whole received 819.8 mm of rainfall against a normal rainfall of 887.5 mm which represents a deviation of 8 per cent from the LPA. (Table 1.4). At the meteorological sub-division level, 23 out of 36 met sub-divisions received excess or normal rainfall and 13 met sub-divisions received deficient rainfall. Out of 628 districts for which rainfall data were available, 62 districts (10 per cent) received excess rainfall, 303 (48 per cent) received normal rainfall, 235 (37 per cent) received deficient rainfall and 28 districts (5 per cent) received scanty rainfall.
Agricultural Growth
As per the National Accounts Statistics, the agriculture and allied sector registered a growth of 2.1 per cent during the first half of 2012-13 which is lower than the growth rate of 3.4 per cent in the first half of 2011-12.
INDUSTRY AND INFRASTRUCTURE
The deceleration in the industrial sector was sharper during the first half of the current financial year in comparison to that in the same period of the previous year. The combination of factors that affected industrial production during 2011-12, continued to be a drag on industrial output even during the current financial year. However, a major cause of manufacturing sluggishness in this financial year has been the drop in investment as reflected in the slower rate of growth in disbursement of bank credit and lower investment in new projects. The cycle of adverse business sentiment leading to lower investment and aggregate
demand slowdown has delayed the industrial recovery. Corporate sector capacity utilization and sales growth have also continued to be low. Further, infrastructure bottlenecks also impinged on the performance of the mining and electricity sectors. During April-September 2012-13, IIP growth was 0.1 per cent as compared to 5.1 per cent in April-September 201112 (Table 1.15).
IIP based comparative growth rates of broad industrial groups are given in Table 1.15. IIP followed a declining trend since the third quarter of 2010-11 till the first quarter of 2012- 13. A reversal in this trend is observed only in the second quarter. Keeping in line with the overall IIP, the growth in the manufacturing sector also exhibited a similar trend. In the last 15 months, growth has averaged less than 1 per cent. In the first six months of the current financial year, growth in the manufacturing sector has been (-) 0.4 per cent as compared to the 5.5 per cent growth during the same period of the previous year. Mining sector performance was dragged down by the sharp reduction in natural gas output and the near stagnant production of crude oil. Electricity generation growth during the current financial year slowed down to 4.6 per cent as compared to a robust 9.4 per cent increase recorded in the first half of previous year. Shortage of coal led to capacity underutilization in the thermal based power generation during the first half.
As per the use based classification of sectoral growth, the slowdown was pervasive (Fig 1.5). Basic goods, intermediate goods and consumer goods sectors had comparatively lower growth during the first half of the current financial year. Higher borrowing costs and the dip in investment impacted the capital goods sector the most. Output of the capital goods sector had declined by 4 per cent in 2011-12. This trend continued during 2012-13 with the output growth of this sector further declining by 20.1 per cent and 6.9 per cent in the first and second quarters respectively of the current financial year (FY). Overall, there was a decline of 13.7 per cent in the capital goods sector during AprilSept. of the current FY as compared to 4.6 per cent growth during the corresponding period of 2011-12. During the first half of the current financial year, the dip in production had
Been under the categories "machinery and equipment", "electrical machinery" and "transport". The dip in the transport segment was mainly due to the decline in output of commercial vehicles and three wheelers. Production of major individual products falling under the capital goods sector namely computers, UPS, transformers, insulated cables, turbines and construction machinery declined. While imports of capital goods increased significantly during 2010-11 and 2011-12, the trend reversed during the first two quarters of the current financial year as imports Contracted in line with the overall performance of the manufacturing and capital goods sector. There appears to be complementarity at times between the growth of production of capital goods and the growth of imports of these goods, as can be seen from Figure 1.6 in the period before Q1 2011-2012, perhaps because investment drives them both. More recently, though, there seems to be more substitution, though some caution is necessary in extrapolating recent trends.
INDUSTRIAL ANALYSIS
Cement is the most essential raw material in any kind of construction activity. Accordingly, cement industry plays a crucial role in the infrastructural development of the country. Given the vast geographical size and massive population of the country, various construction activities undertaken by the Central Government, State Governments, Public Sector Undertaking and other organizations, including private sector generate huge demand for cement. In addition, provision for housing is the first and foremost requirement of every household and, therefore, market demand of cement for private consumption is increasing constantly.
The Ministry of Commerce and Industry, in their background note, stated that in view of the increasing demand and the scarcity, the price and distribution control was completely removed by the Government in the year 1989. The cement industry was de-licensed in 1991. According to the Ministry, the liberalization process provided the much desired boost to the cement industry and, the growth was quite visible leading to perceptible growth in terms of 100 million tones capacity addition during the decade 1999 to 2009. This capacity addition of cement during the decade could match the capacity addition built over a period of eight decades prior to that. The first cement industry in India was set up at Porbundar, Gujarat in 1914, with a production capacity of 1000 tons per annum, thus making it about a century old industry in India.
Indian Cement Industry is now the second largest cement producer in the world, next only to China. Indias share in the worlds cement production is around 6%. It comprises 154 large cement plants, with an installed capacity of 230.82 million tones, employing 1.35 lakh persons directly. The Committee was also informed that the industry underwent rapid technological up gradation and vibrant growth during the last two decades. Some of the cement plants in the country can be compared in every respect with the best operating plants in the world. According to the Government, the salient features of Indian cement industry are:
1. The industry presents a mixed picture with many new plants that employ state-of-the-art dry process technology and a few old wet process plants having wet process kilns. 2. Production from large plants (with capacity above 1MTPA) account for 88% of the total production. 3. The cement industry has achieved significant progress in terms of reducing the overall energy intensity. 4. The industrys average thermal energy consumption was 725 kCal/kg clinker and average electrical energy consumption was 82 kWh/tonne of cement. The best thermal and electrical energy consumption are 667 kCal/kg clinker and 68 kWh/tonne of cement respectively.
Cement production growth touched a peak of 12.00% in 2009-10, as against 7.90% in 200809. The industry is likely to achieve the capacity of 298 million tones by the end of 11th five year plan. According to the Ministry an investment of approximately Rs. 500 crore is required for creating a capacity of 1 million tonne.
Cement industry recorded a commendable growth of around 8 per cent in 2007-08, as well as in 2008-09. In the year 2009- 10, the pace of growth of the industry accelerated above double digit.
The following table indicates the major players and their share in the Cement sector:-
There is regional imbalance in cement production in India due to the limitations posed by raw material and fuel sources, and most of the plants are located in proximity to the raw material sources. This industry is mainly concentrated in Andhra Pradesh (16%), Rajasthan (15.5%), Madhya Pradesh (9%), Gujarat (9%), Tamil Nadu (13%), Maharashtra (6%), Karnataka (7%) and Chhattisgarh (5%).
During 2010-11, the industry consumed 35 million tones of fly-ash and 7.5 million tones of slag. According to the Ministry a continuous increase in the production of blended cement is expected to reduce the problem of waste disposal, improve energy efficiency and reduce carbon footprint.
Bangladesh, Nepal, Sri Lanka, Maldives, Mauritius and UAE are major export destinations for the cement industry. Exports constitute less than one per cent of the capacity. India is largely self-sufficient in cement production and its import is less than one million tones.
The prices of cement are determined by the market forces, as this industry has been delicensed under the Industrial (Development & Regulation) Act, 1951. The price and distribution control of cement has been removed since 1989. Cement has also been deleted from the list of essential commodities w.e.f 15th February, 2002.
Cement industry is vital for the economy and for the infrastructure building, yet various stages of cement production lead to environmental pollution. Several cement plants had been striving to adopt eco-friendly technologies like installing of Multicyclone, Electrostatic Precipitators Bag Filters, and Hybrid Filters etc. At Present, 144 cement plants are known to be complying with the standards of pollution set by the Ministry of Environment and Forests.
Three types of cement are produced in India. The Portland Pozzolana Cement (PPC) enjoys the major share (67%) of the total production, followed by Ordinary Portland Cement (OPC) (25%) and Portland Slag Cement (PSC) (8%). A positive trend towards the increased use of blended cement is discernible with the share of blended cement increasing to 75%.
Recently cement industry has started consuming 75% of the Fly Ash recycled in the country, a hazardous waste posing problems of disposal by Thermal Power Plants. Similarly, the Cement Industry has also helped in providing a clean environment by consuming blast furnace slag, which also poses a problem of disposal.
Cement Production and Supply

As being a fast growing economy, the country has witnessed a steady growth of cement industry. While India has become the second largest cement producing country in the world, the gap between the largest producer viz. China and the second largest producer is quite wide. China produces 1400 million tons per year and India produces a mere 183 million tones.
There is an interlinking relation between cement consumption and the growth of economy. The country is on a high growth track and the focus now is on the development of the infrastructure facilities such as, highways, ports, canals, bridges, power-houses etc. Infrastructural development obviously gives rise to increased demand for cement. The performance of cement industry has been commendable even during the global economic slowdown. The sector has survived the adverse impact as public spending on infrastructure projects remained optimum, keeping in view its multiplier effects to spur the economy.
China besides being the largest producer of cement in the world is also the largest consumer of cement in the world. It manufactures and consumes around 50% of global output. Per capita consumption in China is around 1040 Kg whereas in India it is 178 Kg.
Study conducted by the National Council for Applied Economic Research (NCAER), on Demand for Cement in 2005. NCAER observed that in India, most of the infrastructurerelated cement consumption falls under the category of departmental and non-departmental enterprises, which constituted about 21 per cent of total cement consumption during 2001-02. Government and defence (which also include government buildings) account for another 18 per cent, and housing for about 42 per cent. As against this, according to the study, about 42 per cent of cement in Japan goes to make buildings and another 40 per cent towards infrastructure-related activities. Cement for making roads and bridges in Japan accounts for 10.5 per cent as compared to an almost minuscule share in India. This means about seven million tons of cement is used for making roads in Japan on an annual basis. The NCAER felt that this area of cement application is highly under exploited in India.
According to a study of the Tariff Commission, demand for cement can be categorized into Housing-64%, industrial-6%, Commercial & Institutional-13% and infrastructure-17%.
The annual domestic demand of cement, the annual production of cement and the export of cement during the last five years is as given below:-
As per the Report of the Working Group on Cement Industry for the XI Five Year Plan (2007-2012), the projected demand of cement for the next three years is as given below:-
It would be seen from the above table that the demand for cement has been constantly increasing and the demand projected by the Working Group is likely to touch 290 million tons by 2012-13.the above table depicted that the Working Group has projected a production requirement of 268 million tons by the year 2012 to meet the growing demand. This leads to capacity requirement of 290 million tones. As the industry is highly capital intensive, for one million tons of production an investment of Rs. 500 crore is required. The industry is implementing a massive expansion programme of an investment of around Rs. 55000 crore over the five year period of the 11th Plan to add 110 million tones capacity.
INDIAS TOTAL CEMENT SALE
EVALUATING THE CEMENT INDUSTRY PORTERS MODEL
The model of the Five Competitive Forces was developed by Michael E. Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes.
Porter's Five Forces Model is probably the most widely used tool in business strategy. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
ENTRY BARRIER Entry barriers are not too high in cement industry. The key barriers are: As cement industry is capital intensive, Capital is the biggest constraint, which only big player will have access to. Economies of scale are an important factor of the industry and this will reduce the cost of cement which would favor the bigger players, like Birla group or Gujarat Ambuja. Knowledge to this fact will discourage the new entrant. Price plays an important factor, as differentiation in cement industry is low. Thus, Cost advantage is critical. Companies, which can have a sustainable low cost position, will have a competitive advantage. The major players in India do seem to have a similar cost position. Gujarat Ambuja has been able to sustain a low cost position. Cement, being a bulk commodity, is a freight intensive industry and transporting cement over long distances can prove to be uneconomical which acts as an important constrain to enter the cement industry. High capital costs and long gestation periods is also an important factor for an entry in cement industry.
Not an easy access to limestone reserves (principal raw material for the manufacture of cement) also acts as a significant entry barrier.
IMPACT OF ENTRY BARRIER OF CEMENT INDUSTRY ON AMBUJA CEMENTS: -
This element is in favor of Ambuja cement - as the companies in cement industry needs to be capital intensive so not everyone can enter the industry easily.
Secondly as brand does not play an important role in the industry but price is a very important factor to sustain in the industry it favors Ambuja cement, as it is the cost leader in the industry.
Thirdly as high capital cost, long gestation period and difficulty in accessing to raw material like limestone reserve etc helps the company to avoid intense competition.
BARGAINING POWER OF SUPPLIERS: -
The cement industry is dependent on three major infrastructural sectors of the economy: coal, power and transport. The inputs from these three sectors account for roughly 50% of the cost of cement. Both the availability and the cost of these inputs have a vital bearing on the fortunes of the cement players. As the raw material required by cement industry are in control of the government, so government pricing would have an impact. As government largely controls all these sectors, thus cement companies have no control on the cost and the Availability of these inputs.
Suppliers have a low impact in cement industry. As this would be common to all companies there would be the similar kind of impact on all the companies in the cement industry.
IMPACT OF SUPPLIER OF CEMENT INDUSTRY ON AMBUJA CEMENTS: Licensing of coal and limestone reserves, supply of power from the state grid and availability of railways for transport are all controlled by a single entity, which is the government. However, Ambuja cement is relying more on captive power as power consists over 40% of the production cost of cement. The company improved efficiency of its kilns to get more output for less power. Thereafter Ambuja Cements has set up a captive power Plant at a substantially lower cost than the national grid. Shortage of coal and rising fuel prices remain a concern. Hence, the industry response has largely been in the form of achieving efficiency gains and finding alternatives. The shortage in domestic coal production coupled with the poor quality has resulted in Ambuja cement resorting to importing coal and going in for open market purchase of coal, and using alternative fuel such as lignite or pet coke. The company sourced a cheaper and higher quality coal from South Africa, and better furnace oil from the Middle East. As a result, today, the company is in a position to sell its excess power to the local state government.
BARGAINING POWER OF CUSTOMERS: Private housing sector is the major consumer of cement (65%) followed by the government infrastructure sector. Encouraging trend in demand due to pick-up in rural housing demand and industrial revival. In recent times, industrial and infrastructure including SEZ, retail chains, shopping malls and entertainment houses have also emerged as demand drivers for cement. India has significant potential to cater to the cement requirements of the Middle East and the South East Asian nations.
Consumers have a very high impact on bargaining power of cement. As cement is essential product in the construction sector but non-differentiated products, the consumers can easily switch off to another brand without a cost. So a company in cement sector needs to be a cost efficient company to sustain its self in the industry.
IMPACT OF BUYERS OF CEMENT INDUSTRY ON AMBUJA CEMENTS: -
As consumer have a more power on the industry, which is unfavorable for the industry but have, a positive impact on the company as: Gujarat Ambujas strength lies in its ability to produce cement at a significant discount to the industry so it as a competitive advantage of low cost. It also has an effective logistics system. As a result Ambujas brand continues to enjoy a premium position, not only for its consistently outstanding quality, but also for the excellent customer care and support provided.
SUBSTITUTE PRODUCT:
As cement is a basic construction material with practically no substitute, it is used worldwide for all construction work.
IMPACT OF SUPPLIER OF CEMENT INDUSTRY ON AMBUJA CEMENTS: -
As there is no near and direct substitute of cement, which would hamper the profitability of the industry, this is a favorable force, which has added to the profitability of Ambuja cement.
THE RIVALRY AMONG THE EXISTING PLAYERS: -
High rivalry in the industry as the industry is still fragmented. Top 6 players have 60% capacity. However local players can have an impact on pricing as cement as the industry depends on local supply. Cement being bulky is generally not transported from long distance
Due to large number of players in the industry and very little brand differentiation, the competition is intense with players resorting to expanding reach and achieving pan India presence.
KEY PLAYERS IN THE INDUSTRY ARE:
Associated Cement Companies Ltd (ACC), Birla Corp, Century Textiles And Industries Ltd (Ctil), Grasim-Ultratech Cemco, Gujarat Ambuja Cements Ltd (Gacl), India Cements, Jaiprakash Associates Limited Jk Synthetics, Madras Cements, Holcim, Lafarge India, Italcementi Group.
It can be said in short that low brand strength, high fragmentation, low cost advantages (except in case of some players), the competitive intensity is high. Pricing is poor and depends on demand scenario. If demand drops, the profitability suffers as the players cut price to run plants at full capacity (due to high fixed costs).
IMPACT OF COMPETITORS IN CEMENT INDUSTRY ON AMBUJA CEMENTS: -
As Ambuja is the most profitable cement company in India, and the lowest cost producer of cement in the world. The Indian business group, Grasim, is amongst the top ten companies in the world.
GRASIM-ULTRATECH CEMCO
With the acquisition of UltraTech, L&T's cement division in early 2004, Grasim has now become the world's seventh largest cement producer with a combined capacity of 31 million tones. It is also planning to enter into international ventures. This pose a threat to Ambuja cement as this may hamper the market share of Ambuja cement and also affect the exports of Ambuja as it is planning to enter international ventures.
BIRLA CORPORATION
As Large quantities of Birla Corp cement are exported to Nepal and Bangladesh. Going forward, the company is setting up its captive power plant to remain cost competitive, which indicates that the company will be capable of cost cutting, which will definitely affect the prices and profitability of Ambuja cement.
ITALCEMENTI GROUP
The Italecementi group is one of the largest producers and distributors of cement with 60 cement plants spread across 19 countries in Europe, Asia, Africa and North America. Italcementi is present in the Indian markets through a 50:50 joint venture company with Zuari Cements. As Italecementi group is an international group it will definitely impact and pose competition to Ambuja cement as they have a pan presence which leads to economies of scale leading to cost advantage. But it can be said that Ambuja Cements has set up a captive power plant at a substantially lower cost than the national grid, secondly company sourced a cheaper and higher quality coal from South Africa, and better furnace oil from the Middle East. Thirdly Ambuja has managed to partner Holcim Company as it has the following benefits:
-Economies of scale resulting from the larger size of operations -Savings in the time and cost required to set up a new unit -Access to new markets -Access to special facilities / features of the acquired company
ENVIRONMENTAL SCANNING FOR AMBUJA CEMENT
The environment in which a organization exists could be broadly divided into two parts: - the external environment and the internal environment .the process of strategic formulation starts with, and critically depends on the appraisal of external and internal environment of an organization .the process by which organization monitors their relevant environment to identify opportunities and threats affecting their business is known as environmental scanning.
There is wide range of methods and techniques available for environmental scanning. One of such techniques, suggested by Glueck, is that of preparing an environmental threat and opportunity profile (ETOP) for an organization.
In the table below ETOP is prepared for Ambuja cement.
ETOP
MARKET
Private housing sector is the major consumer of cement (65%) followed by the government infrastructure sector.
Encouraging trend in demand due to pick-up in rural housing demand and industrial revival
Housing sector acts as the principal growth driver for cement. However, in recent times, industrial and infrastructure including SEZ, retail chains, shopping malls and entertainment houses have also emerged as demand drivers for cement.
India has significant potential to cater to the cement requirements of the Middle East and the South East Asian nations.
TECHNOLOGY
In essence, cement is a simple business. Unlike other industries it does not suffer rapid technological obsolescence or shifting consumer trends. Therefore, it constantly attracts new investments. This results in surplus capacity.
Still technological up gradation in industry is in process which introduces improve quality, reliability & speed of work.
SUPPLIERS
Nearly 55-60% of the inputs controlled by the government.
Facing problems due to power shortage. Coal availability and quality affecting production. Licensing of coal and limestone reserves, supply of power from the state grid and availability of railways for transport are all controlled by a single entity, which is the government.
ECONOMIC
The cement industry accounts for approximately 1.3% of GDP and employs over 0.14 million people.
It is a significant contributor to the revenue collected by both the central and state governments through excise and sales taxes.
REGULATORY
The impact of government policies on cement demand has been steadily decreasing with the sector being gradually deregulated. At present, 100 per cent foreign direct investment (FDI) is permitted in the cement industry. Lafarge was the first foreign company to enter the Indian market in 1999.
The major taxes/ levies comprise central excise duty; sales tax levied by the respective state governments; royalty and cess on limestone and coal; and, duties on power tariff. These duties account for around 30% of the sale price of cement or around 70% of the ex-factory price (excluding local transport and dealer margins).
Cement industry in India has been identified as one of the major air polluting industries for which the Central Pollution Control Board evolved emission regulations which are applicable for all sections of production in cement plant.
POLITICAL
Designing new SEZ increase construction demand and the demand for cement. The continuation of fiscal benefits for promoting housing, lower housing finance rates, sustained growth in disbursements of housing finance etc will give a fillip to the cement demand growth.
SOCIO CULTURE
As the standard of living is increasing in the country there is demand for cement industry.
INTERNATIONAL
As there is high potential growth, quite a few foreign transnational have been eyeing the Indian markets and are planning to acquire domestic companies. Already, while companies like Lafarge, Heidelberg and Italicementi have made a couple of acquisitions, majors like Holcim managed to partner a domestic company, Gujarat Ambuja, and acquire a stake in
ACC. After acquiring stake in big companies, transnational are now eyeing median capacity producers. However, it must be noted that the transnationals will find the going tough since cement is a game of volumes and with the median capacity of fragmented players being just about 1 m tonne, the transnationals will have to acquire capacities piecemeal and this route is fraught with a lot of uncertainties. INDIAN CEMENT INDUSTRY CURRENT SCENARIO
The first half of the year 2012 of the cement industry witnessed a sluggish demand and almost the other half felt the cost pressure. In the states like Andhra Pradesh, the year ended on a discouraging note since the prices dipped further by Rs 40-45. However as per the Working Committee report on cement industry suggests that the Government of India plans to increase its investment in infrastructure to US $ 1 trillion in the Twelfth Five Year Plan (2012-17) as compared to US $ 514 billion expected to be spent on infrastructure development under the Eleventh Five Year Plan (2007-12). Further, infrastructure projects such as the dedicated freight corridors, upgraded and new airports and ports are expected to enhance the scale of economic activity, leading to a substantial increase in cement demand. Housing sector and road also provide significant opportunities. The cement demand is likely to be sensitive to the growth in these sectors and also the policy initiatives. Further, capacity addition in cement would continue to be preferably front loaded. It may be desirable to create some excess capacity rather than operate with shortages or supply bottlenecks. Keeping in view the factors responsible for the increasing demand for the sector and the assumptions mentioned below, four lines of projection in the demand for cement up to next 25 years (2027) have been given. The annual average growth in the demand, production and installed capacity of the cement during the period could be within the range of 10-11.75 per cent. The production of cement would be sensitive to the GDP growth and the growth of sectors which are major users of cement. A step up in demand of these sectors could provide some stimulus to the cement sector as well.
Assumptions Base line growth from 2014-15 is kept at assumed GDP growth, or an elasticity of 1.0. The growth is expected to increase by 1 per cent above the base line in scenario 2 assuming NH and SH to be initially covered. In scenario 3, assuming a further increase in growth by 0.5 per cent and in scen ario 4 growth is scaled up further by 0.25 per cent. Base Growth kept a little lower than GDP growth in first three years because of pickup in demand may take some time. With all the three expectations being met, growth improves to 10.75 per cent or with an assumed elasticity of roughly 1.2, as against observed elasticity of 1.07 during 12th Plan and further to 11.75 per cent in the next 10 years. Elasticity tapers off to 1.175.
COMPANY ANALYSIS AMBUJA CEMENTS LIMITED COMPANY PROFILE

Ambuja Cements was set up in 1986. In the last decade the company has grown tenfold. The total cement capacity of the company is 16 million tones. Its plants are some of the most efficient in the world. With environment protection measures that are on par with the finest in the developed world. The company's most distinctive attribute, however, is its approach to the business. Ambuja follows a unique homegrown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. This simple vision has created an environment where there are no limits to excellence, no limits to efficiency. And has proved to be a powerful engine of growth for the company. As a result, Ambuja is the most profitable cement company in India, and the lowest cost producer of cement in the world.
VISION Ambuja cements vision statement: Energize, involve and enable communities to realize their potential. Ambujas vision is very much inspiring. It vision statement is also original and unique and very competitive. The vision statement indicates long-term thinking. It also represents integrity; they are truly genuine and can be used for the benefits Of the people. Ambuja cement vision statement is change agent for it employees Thus helping in creation of common identity and a shared sense of purpose.
MISSION Ambuja cements mission statement: 'Let people set their own targets, give them freedom to achieve them and their task becomes a personal mission: I CAN' As seen the mission statement of Ambuja cement fulfils various characteristics of Ideal mission statements.
It is a feasible and very clear and precise mission statement, which gives a source
Of inspiration.
It can also be seen that the mission statement is very distinctive then many other
Mission statement
Ambujas mission statement is also very motivating in the sense that it talks of
Employees and giving them authority
The mission statement also indicates how the objectives of the firms should be
Accomplished.
Thus Ambuja cements mission statement is focusing on the unique aim that
Differentiates it from similar organization.
THE COMPANY MANAGEMENT
Mr. N. S. Sekhsaria (Non-Executive Chairman Independent)
Mr. Sekhsaria is a doyen of the Indian Cement Industry and one of the most respected business personalities in India. In a career spanning over 32 years, he has introduced new standards in manufacturing, management, marketing efficiency and corporate social responsibility to an industry he has helped transform. A first generation industrialist, Mr. Sekhsaria, holds a Bachelors Degree with honours and distinction in Chemical Engineering, from the University of Bombay. As a founder promoter of Ambuja Cement he was the Chief Executive & Managing Director of the Company since its inception in April 1983 till January 2006. Mr. Sekhsaria relinquished the post of Managing Director and was appointed as Non-executive Vice Chairman when the management control was transferred to Holcim. In September 2009, he was appointed as Non-executive Chairman after Mr. Suresh Neotia relinquished the post of Chairman.
Mr. Paul Hugentobler (Non-Executive Vice Chairman - Promoter Director representing Holcim Ltd., Non Independent)
Mr. Hugentobler, a Swiss national, obtained a degree in civil engineering from the Swiss Federal Institute of Technology, ETH, Zurich, and a degree in economic science from the University of St. Gallen. He joined Holcim Group Support Limited in 1980 as Project Manager and in 1994 was appointed Area Manager for Holcim Limited. During 1999-2000, he served as CEO of Siam City Cement, Thailand. He has been a Member of the Executive Committee of Holcim since January 2002 with responsibility for South Asia and ASEAN excluding Philippines.
Mr. Bernard Fontana (Non-Executive Promoter Director representing Holcim Ltd., Non Independent w.e.f. 10.02.2012)
Mr. Fontana, a French national, holds a degree in engineering from the Ecole Polytechnique and the Ecole Nationale Superieure des Techniques Avancees in Paris. He began his career with Groupe SNPE in France where he held various positions including the head of its US operations and the member of the Group Executive Committee. In the year 2004 he joined Arcelor Mittal where he was given the responsibility for HR, IT and Business Development at Flat Carbon division. From 2006 to 2010 he was a member of the Management Committee of Arcelor Mittal with responsibility for the Automotive Worldwide Business Unit and then Group HR. In the year 2010 he was appointed the CEO of Aperam, a company spun off from Arcelor Mittal. He was appointed as the CEO of Holcim Ltd. from 1st February, 2012. He joined the Board in February, 2012.
Mr. Nasser Munjee (Non-Executive, Independent Director)
Mr. Munjee holds a Bachelors and Masters degree from the London School of Economics, U.K. His journey in creating financial institutions began with HDFC, whom he has been assisting since its inception in February 1978. In March 1993, he joined the Board of HDFC as Executive Director on which he continues to be along with 14 other companies. Mr. Munjee has deep interest for rural development, housing finance, urban issues, specially the development of modern cities and humanitarian causes. He is also the Chairman of Development Credit Bank and of two other Aga Khan institutions in India. He was the President of the Bombay Chamber of Commerce and Industry the citys oldest Chamber of Commerce and he has served on numerous Government Task Forces on Housing and Urban Development. He has been awarded as the Best Non-Executive Independent Director 2009 by Asian Centre for Corporate Governance (ACCG). He joined the Board in August 2001.
Mr. Rajendra Chitale (Non-Executive, Independent Director)
Mr. Chitale, an eminent Chartered Accountant, is the Managing Partner of M/s M. P. Chitale & Associates, a leading boutique international structuring, tax and legal advisory firm. He is a member of the Insurance Advisory Committee of the Insurance and Regulatory Authority of India, and has served as a member of the Company Law Advisory Committee, Government of India, the Takeover Panel of the Securities & Exchange Board of India, the Advisory Committee on Regulations of the Competition Commission of India, and the Maharashtra Board for Restructuring of State Enterprises, Government of Maharashtra. He has served on the board of Life Insurance Corporation of India, Unit Trust of India, Small Industries Development Bank of India, National Stock Exchange of India Ltd., and SBI Capital Markets Ltd. He is on the Board of several large corporate. He joined the Board in July 2002.
Mr. Shailesh Haribhakti (Non-Executive, Independent Director)
A Fellow Chartered Accountant and Cost Accountant, Mr. Shailesh Haribhakti is a Certified Internal Auditor, Financial Planner & Fraud Examiner. During a career span of four decades, he has successfully established and led many innovative services. His current passion involves Outsourcing of Knowledge Processes, Engaged Investing and efficiency & effectiveness enhancement in Social, Commercial and Governmental Organizations. He strongly believes in Shared Value creation, good public and corporate governance and promoting a green environment. He actively promotes these causes, and contributes towards their evolution by participating in the process of framing regulations and standards. He is on the Board of Directors of several listed and private companies. He joined the Board in May 2006.
Dr. Omkar Goswami (Non-Executive, Independent Director)
Dr. Goswami, a professional economist, did his Masters in Economics from the Delhi School of Economics and his D. Phil (Ph.D.) from Oxford University. He taught and researched economics for 19 years at various reputed universities in India and abroad. During a career spanning over 31 years, he has been associated as advisor to several Government
committees and international organizations like the World Bank, the OECD, the IMF and the ADB. He has also served as the Editor of Business India, one of Indias prestigious business magazines and as the Chief Economist of the Confederation of Indian Industry. Dr. Goswami is the Founder and Executive Chairman of CERG Advisory Pvt. Ltd., which is engaged in corporate advisory and consulting services for companies in India and abroad. He is also on the Board of several large corporate. He joined the Board in July 2006.
Mr. Haigreve Khaitan (Non-Executive, Independent Director w.e.f. 27.07.2012)
Mr. Khaitan is a law graduate and is a Partner of reputed law firm, Khaitan & Co. He started his career in litigation and has over the years been involved in many Mergers & Acquisitions and private equity transactions, as well as project finance transactions. He has rich experience in all aspects of Mergers & Acquisitions, Corporate Restructuring, Demergers, Spin-offs, Sale of Assets, Foreign Investments, Joint Ventures and Foreign Collaborations. He advises a range of large Indian conglomerates and multinational clients in various business sectors including infrastructure, power, telecom, automobiles, steel, software and information technology, retail, etc.
IFLR 1000 has recommended him as one of the leading lawyers in India. Asialaw Leading Lawyers 2008 / 2009 has also voted him as the leading lawyer for Project Finance. He is on the Board of some of the large public listed companies. He joined the Board in July, 2012. Mr. B.L. Taparia (Non-Executive, Non Independent Director w.e.f. 01.09.2012)
Mr. Taparia is a Commerce and Law graduate and a fellow member of the Institute of Company Secretaries of India. He is having more than 40 years of experience in the fields of Legal, Secretarial, Accounts, Finance, HR, Health & Safety, and Sustainability. He joined the Company in the year 1983 as Deputy Company Secretary and after working in different positions in the Company including as a Whole-time Director from the year 1999 to 2009. Mr. Taparia superannuated from the Company in July 2012 as Company Secretary and Corporate Sustainability Officer.
Looking at his vast and rich experience and his long association with the Company, Mr. Taparia was appointed on the Board as Non-Executive, Non Independent Director W.e.f. 1st September, 2012.
Mr. Onne van der Weijde (Promoter Director representing Holcim Ltd., Managing Director, Non Independent)
Mr. Onne, a Dutch national, holds a Bachelors degree in Economics & Accounting from Rotterdam, the Netherlands and a Masters degree in Business Administration from the University Of Bradford, UK. In the year 1996 he joined Holcim and after holding various positions, he was appointed Director and General Manager for Holcim (India) Pvt. Ltd. in March 2005. He was the CFO of ACC for around 2 years during 2006-2008. He possesses more than 16 years of experience in cement industry including 8 years in Indian cement industry. Recently Holcim Ltd. has given him additional responsibility by appointing him as the Area Manager and a member of its Senior Management Team. He joined the Board in January 2009.
Executive Management Team

Mr. Onne van der Weijde, Managing Director Mr. Ajay Kapur, Chief Executive Officer Mr. Jagdish C. Toshniwal - Business Head (North) Mr. Vivek Agnihotri - Business Head (East) Mr. Vilas Deshmukh - Business Head (W&S) Mr. Sanjeev Churiwala, Chief Financial Officer Mr. Jacques van Niekerk, Head Supply Chain Mr. Sanjay Gupta - Head (Marketing & Commercial Services) Ms. Meenakshi Narain - Joint President (HR) Mr. Ghassan Broummana Head - Techport Mr. Henning Sasse, Head - Techport Mr. Ranjan Sachdeva, Head - Central Purchase Officer
SWOT ANALYSIS: -
SWOT, which is the acronym for strengths, weakness, opportunities and threats, is carried out for Ambuja cement.
Through such analysis, the strengths and weaknesses existing within the organization can be matched with the opportunities and threats operating in the environment so that an effective strategy can be formulated.
STRENGTHS: Most profitable cement company in India. Lowest cost producer of cement in the world. India's largest exporter of cement. The company sourced a cheaper and higher quality coal from South Africa, and better furnace oil from the Middle East. Effective and well managed distribution channels Ambuja cement has been a partner with Holcim, which provides it with advantages like economies of scale resulting from the larger size of operations, savings in the time and cost required to set up a new unit and access to new markets
WEAKNESS: Availability of coal: -The availability of coal is critical for their existing plants and for new expansions. The demand for coal is higher than its supply. The Ministry of Coal has responded to the shortage Transportation: - A judgment of the Supreme Court of India banned over-loading of transport trucks. As a result, the availability of trucks to move he required quantity has become a serious constraint
OPPORTUNITIES: Cement demand has grown in tandem with strong economic growth; derived from: Growth in housing, retail chain and SEZ Infrastructure projects like ports, airports, power projects, dam & irrigation projects National Highway Development Programme Bharat Nirman Yojana for rural infrastructure Rise in industrial projects Export potential
THREATS: Government intervention to adjust cement prices Coal prices climbing up; industry players say current shortage of coal in the country is to be over 10 million tones Cement Industry is highly fragmented Industry is also highly regionalized
It can been seen that AMBUJA CEMENT strengths outright it threat as it can been seen that coal prices are rising and so the company sourced a cheaper and higher quality coal from South Africa, and also has started it power plant so that it can keep it cost of production under control as power accounts for 40%of cement input.
Relevance of Porters Generic Strategy for Ambuja Cement: Ambuja Cement as adopted Cost Leadership strategy:
Cost leadership strategy is best-suited strategy for Ambuja cement as: Cement is undifferentiated product Ambuja cement with cost leadership strategy would earn the highest profits in the event when the competing As this strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation
that are perfectly acceptable to the majority of customers, so cost leadership is a perfect strategy.
Secondly as brand does not play an important role in the industry but price is a very important factor to sustain in the industry it favors Ambuja cement, as it is the cost leader in the industry. Thirdly as consumer have a more power on the industry, which is unfavorable for the industry but have, a positive impact on the company as Ambuja's strength lies in its ability to produce cement at a significant discount to the industry so it as a competitive advantage of low cost. AMBUJA CEMENT THE COST LEADER
Ambuja Cement Ltd is widely considered to be the producer with the lowest costs in the Indian cement industry. It has won various awards for management excellence, quality, and environmental management. Quest for cost leadership had been driven by various productivity improvements and cost cutting measures. The company's modern plants, large kilns, high degree of automation, low power and fuel costs has helped it to control costs in a way which was unmatched in industry. Ambuja cement had cut energy costs by reducing the usage of coal through use of substitutes like crushed sugarcane. The company operated most of its plants at above 100 per cent capacity utilizations. The company's engineers have absorbed the best practices in mining and manufacturing during visits to overseas plants in countries like Japan and Australia. The company pioneered the use of ship transportation to cut freight costs and also established the necessary infrastructure like ports, freight and handling terminals. Low-cost funds helped Ambuja cement to cut the cost of capital.
Ambuja Cement Effort towards Cost Cutting Measures:

Cement, being a bulk commodity, is a freight intensive industry and transporting cement over long distances can prove to be uneconomical. At the same time as judgment of the Supreme Court of India banned over-loading of transport trucks. Ambuja cement is the company pioneered the use of ship transportation to cut freight costs i.e. the use of ship transportation to cut freight costs and also taken up by steps to streamline its logistics. Ambuja cement was one of the first cement producers of the country to introduce an Integrated Logistics System (ILS).
POWER
Ambuja cement is relying more on captive power as power consists over 40% of the production cost of cement. The company improved efficiency of its kilns to get more output for less power. Thereafter Ambuja Cements has set up a captive power plant at a substantially lower cost than the national grid. As a result, today, the company is in a position to sell its excess power to the local state government. This has lead to the lower cost of production of cement for Ambuja cement.
COAL
Shortage of coal and rising fuel prices remain a concern. Hence, the company response has largely been in the form of achieving efficiency gains and finding alternatives. The shortage in domestic coal production coupled with the poor quality has resulted in resorting to importing coal, or going in for open market purchase of coal, or using alternative fuel such as lignite or pet coke.
Ambuja cement sourced a cheaper and higher quality coal from South Africa, and better furnace oil from the Middle East. Also Ambuja cement had cut energy costs by reducing the usage of coal through use of substitutes like crushed sugarcane. Ambuja cement operated most of its plants at above 100% capacity utilization.
TECHNOLOGICAL CHANGES
The company has undergone vital changes though technological up gradation in the pursuit of cost efficiency and the drive for consolidation. Modernization at the plants and the improvement of plant processes has helped reduce manpower requirements leading to cost reduction in the production of cement.
RISKS & AREAS OF CONCERN
Looking ahead to identifying and respond to changing conditions.
COAL:
The availability of coal is critical for our existing plants and for new expansions. The demand for coal is higher than its supply. The Ministry of Coal has responded to the shortage by reducing linkages and forcing cement companies to source coal frame auctions at highly inflated rates sometimes40% to 50% higher than the notified prices. The Supreme Court intervened and issued an order banning this exploitative practice. There are indications that even the old system of coal allocation through Standing Linkage Committee is being done away with. The Ministry of Coal is working on a new scheme for allocation of resources. Currently, the situation is tenuous. Not much progress has been made on the allotment of coal blocks to cement companies. We will have to respond in ways to ensure energy security in the coming years.
TRANSPORT:
A judgment of the Supreme Court of India banned over-loading of transport trucks. As a Result, the availability of trucks to move the required quantity has become a serious constraint. Many companies have shifted up to 15% of their dispatches from road to rail transport, putting pressure on availability of rakes. Apart from the transportation costs going up, the availability of cement to consumers may be affected.
RATIO ANALYSIS
Mere statistics/data presented in the different financial statements do not reveal the true Picture of a financial position of a firm. Properly analyzed and interpreted financial statements can provide valuable insights into a firms performance. To extract the information from the financial statements, a number of tools are used to analyze such statements. The most popular tool is the Ratio Analysis.
INTERPRETATION:CURRENT RATIO
The current ratio measures the ability of the firm to meet its current liabilities from the current assets. Higher the current ratio, greater the short-term solvency (i.e. larger is the amount of rupees available per rupee of liability). The current ratio of Ambuja cement has increased over the years& it is reaching its ideal of 2:1 which shows that the liquidity position of Ambuja cement is increasing & its ability to pay short term obligations is also increasing.
INVENTORY CONVERSION PERIOD
The inventory turnover ratio tells the efficiency of inventory management. The inventory Conversion period should always be less because it indicates the time period in converting Finished goods into sales. In the year 2011, the conversion period of Ambuja cement has increased which shows its operating inefficiency. But in the year 2012 the inventory conversion period has come down which shows its efficiency in turning its finished goods into sales. It also shows that the fund blocked in inventory has decreased which can be used for other profitable things.
AVERAGE COLLECTION PERIOD
Average Collection Period represents the number of days worth credit sales that is locked in debtors (accounts receivable).In the year 2011, the ratio has decreased which shows the credit collection efficiency of Ambuja cements in turning its debtors outstanding money into cash. But in the year 2012 the Average Collection Period has increased but is basically due to increase in credit sales of Ambuja cements ltd.
CREDITORS DEFERRAL PERIOD
Creditors deferral period shows the credit period given by creditors till which we can postpone making payment to creditors. In the year 2012, the ratio has decreased which is Due to increase in credit purchases .But in the year 2012, in spite of increase in credit purchases the ratio has increased which is due to the fact that creditors confidence in short term liquidity of the firm has increased which may also be due to improvement in liquidity ratio.
EARNINGS PER SHARE
EPS measures the profit available to the equity shareholders per share, that is, the amount That they can get on every share held. It is calculated by dividing the profits available to the shareholders by number of outstanding shares. It indicates the value of equity in the market. Since the EPS of Ambuja cement has decreased drastically in the year2011 which does not make it a favorable investment for existing as well as new shareholders. But in the year 2012, the ratio has improved which shows the confidence of the investors in the current & future earnings of Ambuja cements ltd.
DIVIDEND PER SHARE
Dividend per share ratio shows the proportion of EPS which is being declared as dividends. The DPS has decreased drastically in the year2005 which is mainly due to drastic decrease in EPS. In line with EPS the DPS of Ambuja cement ltd. has improved which is mainly due to the fact that due to increased earnings the Ambuja cements has declared more dividends thus making it attractive for existing as well as prospective shareholders.
CONCLUSION:
Studying by the fundamentals it can be conclude that the further outlook of cement industry is very positive. As brand does not play an important role in the industry but price is a very Important factor to sustain in the industry it favors Ambuja cement, as it is the cost leader in the industry. The company focuses on strategy that makes the operations more efficient and cutting costs wherever possible. It may result from scale efficiencies, tight overhead control, and careful selection of customers, standardization and automation. As a result the company ranks high in utilizing assets efficiently and as a result, operating margin is significantly higher than competition. The prospect for Ambuja Cement Ltd is positive for the purpose of investment.
RECOMMENDATIONS
The financial structure of the company has always been very strong. There is some sort of doubt with the investors that the company is highly indebted and other financial worries. However, the company has always enjoyed good margins, gearing is also not very high, never diluted stake at throw away prices and everything has gone as planned. The Company has no other alternative than to increase spending for construction. In next 5 years cement consumption is going to double in India. Prime mover for cement demand will be housing sector, construction sector and infrastructure sector. As cement layers are becoming more matured, fragmentation is getting reduced, which will result in stable cement prices. Current valuations given to domestic cement companies are very low as compared to valuations given to international companies. Valuations are even below replacement cost and that also for a product, which has no substitute. So, it is recommended to accumulate the stocks of Ambuja Cement Limited at the current price as currently its valuations are low and its fundamentally strong company.
BIBLIOGRAPHY: www.rsec.co.in www.moneycontrol.com www.nseindia.com www.bseindia.com www.managementparadise.com www.moneypore.com www.buzzingstocks.com www.wikipedia.org www.indiabudget.nic.in www.ongcindia.com www.iocl.com

Rajni SH

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FUNDAMENTAL ANALYSIS OF CEMENT SECTOR ReLIANCe

LOVELY PROFESSIONAL UNIVERSITY

Under the Guidance of: Mr Atin Garg

Submitted by: Rajnish Kumar

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Chapter-2: INTRODUCTION OF THE ORGANISATION a) Organisation profile......................................................................................7-8 b) History of the Organisation..........................................................................8-14

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NAME Rajnish Kumar

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COMPANY PROFILE About the Company

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Market & Network

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Products and Services

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Vision of Reliance securities

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Awards & Achievements

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Strategy in acquiring new customers

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Overview of the Capital Market

Securities market consists of primary market and secondary market.

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Importance of stock market: Function and purpose

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Relation of the stock market to the modern financial system

Regulators of Stock Market:

IMPACT OF STOCK EXCHANGES IN INDIA:

3. Availability of funds for growth of industries

6. Increase in standard of living

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8. Decrease in Trade Deficit.

GROWTH AND INVESTMENT

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Fig 1.1: Point contribution of three sectors to GDP Growth

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INDUSTRY AND INFRASTRUCTURE

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Cement Production and Supply

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INDIAS TOTAL CEMENT SALE

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