ECONOMIC VALUE ADDED

1.1 INTRODUCTION:

Today one of the major goals of the financial management is maximum utilization of the
capital employed. Since capital resources are scare and costly, companies try to employee
these resources in a way that yield highest returns. Of course this should be accompanied by
step taken to minimize the cost of acquired resources. Otherwise, it will not increase the
shareholders wealth and firms value.

The manager of a firm (as the external users) are interested to use an appropriate performance
measure in order to assess how the managerial actions affect the value of the firm. For this
purpose the performance measure used, much consider at least three things, which are: the
amount of capital invested, the return earned on the capital and the cost of capital (Weighted
Average cost of capital).

Economic value added has been put use for management performance evaluation and much
more than just a measure of performance, It is a frame work for complete financial
management. EVA is an accounting- based measure for the corporate performance of one
year.

The EVA analysis has attracted much attention in both as a management innovation as well as
a stock market analysis. The recognition of a such technique in India context, nevertheless,
shows to some extent, diverse trend. Majority of companies are still not prepared to put in the
EVA technique for evaluating their financial performance. But, in a country like India where
capital is still costly, one would think, that corporate management will try to get bigger return
from every rupee invested in the business. This will happen if the new performance measure,
EVA is utilized. This study is to calculate the EVA of the company and to find out whether the
company has added value or not

DEFINITION OF EVA:-

The expansion of capital market increased shareholders awareness; institutional investors

with large equity positions and high competition to acquire the capital resources, has
contributed to heighten the pressure on companies to constantly perform better and try to
maximize the shareholders wealth. In responds, and regarding the short coming of traditional
performance measure, consultancies companies, such as stern stewart, has developed a new
and probably most popular periodic value-based performance indicators, called economic
value added.

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EVA is defined as an economic profit measure that includes a charge for the opportunity cost
of all capital invested in an organization, and it can be used for setting managerial
performance target, playing bonus and a valuing capital project or companies. EVA is an
estimate of economic profits or the amount by which earnings exceed or fall short of the
required minimum rate of return that the shareholder and lenders could get by investing
capital in other securities having analogous risk.

If a companys earnings after tax exceed the cost of capital employed, EVA is positive and
thus, value has been created. If the result is negative, the firms management could not meet
the expected returns target of the investors.

EVA Methodology:-

For the purpose of calculating EVA, information required regarding the profits, capital, cost
of the capital, etc., which are based on the mission and objectives of an organization. The
EVA, in turn, is liked with various plans formed for each particular action and defines the
measure to be applied for achieving the value creation objectives. The measure are defined
for each activity; profits, cost, capital and cost of capital.

Benefits of EVA:-

Its primary used for evaluating the performance of management.

It can be applied to capital budgeting like NPV.

Usage of EVA included:-

Setting organization goals

Measuring performance
Capital budgeting
Corporate valuation
Motivation of managers

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1.2 INDUSTRY PROFILE

Cement is a generic term and used for all powers material, which, when mixed with water has
a plastic form, but becomes a solid structure within a few hours, the structure gaining strength
and bonding properties with age. Thus defined, cement is an ancient building material. Lime
and volcanic ash cement used for the pyramids of Egypt. Evidence exists of its use age in
the Indus Valley civilization of Mohenjo-Daro.
Credit for the invention of cement goes to an English man by the name of Joseph Aspasia
of Leeds. England. In 1824 Aspasia manufactured cement in a rudimentary form, by burning
mixture of limestone and clay. It was termed Portland cement as it resembled the Portland
Stone a popular lime stone used for building construction in England. Another quarter of
centaury passed before a slightly better quality of cement was produced in 1850 by yet
another English-man Isaac Charles Johnson. In 1857, an American named David Saylor
improved the mix design of limestone and clay resulting in a much more superior quality of
cement. He also called his cement by the same name Portland cement.
Origin of the industry in India
In India Portland cement was first manufactured in 1904 near madras, by the south India
industrial ltd., is a 30 tons per day plant. However, this venture failed. In October, 1914
another enterprise, Indian company limited commissioned 100 tons per day Rotary Kiln at
Porbander, Gujarat. The next couple of years saw the emergence of two new factories at
Katni-Madhya Pradesh and Laksher-Rajasthan were commissioned. The First World War
gave a fillip to the cement industry and by 1918. The three together were able to produce
about 85,000 tons per year. Starting with less than a1000 tones per annum in 1914, cement
product is expected to reach capacity of over 60 Million tones per annum by the end of the
Seventh Five Year Plan

Milestones

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The following milestones achieved by the Indian cement industry will give an idea of growth
pattern.

Year capacity crossed (MIL. tons) no of years taken.

1914 commissioning of first successful plans

1920 00.10 06
1920 01.00 23
1937 05.00 42
1964 10.00 50
1975 20.00 61
1982 30.00 68
1984 40.00 70
1989 60.00 75 (Est.)

Capacity and production

The cement industry comprises of 52 companies and 132 plants with an installed capacity of
177.83 Million tones as per the statistics of cement manufacturers Association 2007. The
man power employed in cement sector is around 1,35,000 people approximately, Actual
cement production in 2006-2007, 161.66 Millions tones as against the previous years
production of 147.81 Millions tones thus registering a growth rate of 9%. The sector wise
capacity as on 31-03-07 was private sector 160.96 Million tones and public sector 5.77
Million tones. As far as state wise and region wise capacities are concerned, Andhra Pradesh
stood first among the states with a capacity of 25.14 Million tones. Region wise, South stood
first both in production and consumption with 32.22% of total production and 30% of total
consumption. India ranks second in the world cement production 142.67 Million tones after
china as of 31.3.07.

Exports

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Apart from meeting the entire domestic demand, the industry is also exported and cement, the
details are as follows

Year Clinker in Mill, Tons Cement in mil Tons

2002-03 3.45 3.47
2003-04 5.64 3.36
2004-05 5.99 4.07
2005-06 3.18 6.01
2006-07 3.10 5.80
Major Exports were M/s Gujarat Ambuja Cement and Larsen & Turbo Ltd.
Technology Change
Cement industry has made tremendous strides in Technological Up-gradation and
assimilation of latest Technology. The industry switched over from wet process to dry
process technology. At present ninety three percent of the total capacity in the industry is
based on modern and environment friendly dry process technology. There is tremendous
scope for waste recovery in cement plants, there by reduction in emission level. Recently one
of the cement plants in Andhra Pradesh has installed waste Heat Recovery system in
Nalgonda District with Japanese Technology, under World Bank Aid.

Historical Development
The Historical Development of the cement industry in India can broadly classify into the
following areas.
Era of Dominant Imports 1914 - 1924
Era of Struggle and survival 1924 - 1941
Era of Price controls pre plan 1942 - 1951
Era of planning & control 1951 - 1982
Era of partial document 1982 - 1988
Era of Total Decontrol from 1989
Challenges Facing The Industry
Freeing Markets forces by the Government has not only given boost to the production but
also allowed entry of competent entrepreneurs into the Market setting up a spirit of
competition to capture an increasing share of the domestic market export market in some
cases. Exports have helped in improving capacity utilization and profitability of these firms
besides earning.

List of Top 10 Cement Companies in India

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Name ACC Limited

Production 17,902

Installed Capacity 18,640

Net Profit (Quarter ended Sep 30, 2009) 41,550.89 lakhs

Name Gujarat Abuja Cements Limited

Production 15,094

Installed Capacity 14,860

Net Profit (Quarter ended on Sep 30, 2009) 31,848 lakhs

Name Ultratech

Production 13,707

Installed Capacity 17,000

Net Profit (in 2008-09) 97,700 lakhs

Name Grasim

Production 14,649

Installed Capacity 14,115

Net Profit (in 2008-09) 1,64,800 lakhs

Name India Cements

Production 8,434

Installed Capacity 8,810

Net Profit (in 2008-09) 43,218 lakhs

Name JK Cement Ltd

Production 6,174

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Installed Capacity 6,680

Net Profit (in 2008-09) 14,234.40 lakhs

Name Jaypee Group

Production 6,316

Installed Capacity 6,531

Name Century Cement

Production 6,636

Installed Capacity 6,300

Name Madras Cement

Production 4,550

Installed Capacity 5,457

Net Profit (in 2008-09) 49,081 lakhs

Name Birla Corp.

Production 5,150

Installed Capacity 5,113

Net Profit (in 2008-09) 9,061 lakhs

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1.3 COMPANPROFILE

Since the performance of the Company was not encouraging and started making losses
from 1985-86 onwards due to sluggish market of cement and also severe competition in
Engineering products. In 1988 PANYAM was became sick and the management of the
company was taken over by late M.V. SubbaRao and Associates. M.V. SubbaRao and
Associates have taken various steps to improve the profitability of the company which has
yielded results wiping out the accumulated losses and the company reported excellent
performance in the years 1996-97 and 1997-98.

However, the Cement Industry went through severe crisis in 1999 consequent to the
liberalization policy announced by the Government of India. In addition, due to paucity of
working capital finance, the Cement Unit could not run continuously to its capacity due to
various reasons.

Considering the worst situation prevailing in Panyam Cements as the workmen were
striving hard for their livelihood, Sri S.P.Y. Reddy, B.E.(Mech)& Member of Parliament, who
is a seasoned and successful technocrat having proven track record of more than 30 years as
Chairman of Nandi Group of Companies has taken over the management of the company
during September 2004 being assisted by Sri S. Sreedhar Reddy, an Engineering Graduate in
Electronics and Telecommunications as Managing Director & CEO of the Company. The
present management has invested amount for restarting the operations of the company.
Immediately after take over the unit, the new management has settled the dues of Financial
Institutions/Banks and also settled the dues of the workmen by implementing VRS. The
present management has put in best efforts to revive the unit and put the same back on rails.

As stated above has 20.8 acres of prime land at Bommanahalli, Bangalore on Bangalore
to Hosur National Highway adjoining the main road. The said land is situated at prime
location and it is useful for residential flats on the rear side. Further, the operations at the
Engineering Division was suspended from September 2005 due to spiralling increase in the
cost of raw materials and other inputs and also due to cheaper imports of finished products
and to relieve the workmen under VRS..

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The built up area comes to 2.87 million sft. The company has entered into an agreement
with M/s. Salarpuria Developers (P) Limited for developing the land under joint development
considering the boom in the real estate. The company has received advances from the
prospective buyers against the companys proportionate share under joint development and
the same was utilized for settlement of dues of banks/ secured creditors, payment of VRS
dues etc.

The company has taken up modernization of Kiln No.1 by enhancing the capacity of the
said kiln to 2000 M. Tonnes. After trial runs and initial teething problems, the output has
started from the kiln. The project has started the commercial production from 10th August,
2011. After completion of the Modernisation Scheme, . The present capacity of the cement
plant is 3000 M.Tonnes per day. The project was financed by Indian Overseas Bank,
Adarshnagar, Hyderabad and State Bank of Hyderabad, Overseas Branch, Somajiguda,
Hyderabad.

State Of The Art Plant

Initially one kiln with a capacity of 200 TPD was installed and later on the capacities
were augmented by addition of two more kilns with a capacity of 300 TPD and 600 TPD
respectively. Over the years, the wet process kilns were converted into dry process and the
capacities were increased to a level of 2200 TPD by 1997 running three kilns.

The company has diversified its activities in 1980 by amalgamating Deccan Wires
Limited (a unit of the then promoters group) which was incorporated in 1976 at Bangalore
for manufacture of 10000 tonnes of high carbon and alloy steel wires. The said Engineering
Division was having about 20.80 acres of prime land at Bommanahalli, Bangalore

PRODUCTS

OPC 53 Grade Cement

PANYAM 53 Grade Cement is a prime brand cement with remarkably high C3S(Tri
Calcium Silicate) providing long lasting durability to concrete structures.

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Advantages

Gives more flexibility to architects and engineers to design sleeker and economical
sections.

Develops high early strength so that form work of slabs and beams can be removed
much earlier resulting in faster speed of construction and saving in centering cost.

Produces highly durable and sound concrete due to very low percentage of alkalis,
chlorides, magnesia and free lime in its composition.

Almost negligible chloride content results in restraining corrosion of concrete

structure in hostile environment

Significant saving in cement consumption while making concrete of grades M15,

M20 & M25 and pre-cast segments due to high early strength.

OPC 43 Grade Cement

43 Grade Cement is the popular brand cement with low heat of hydration and long life of
Concrete Structures.

Advantages

Develop early strength at 3 and 7 days with exceptionally high 28 days strength. Form
work of slabs and beams can be removed much earlier which results in increased
speed of construction.

Unbeatable consistency in quality gives better accountability for mix design.

The higher characteristics strength of concrete leads to higher bond strength

minimizing the possibility of slippage of reinforcements.

Its high fineness offers better workability for a given water cement ratio ensuring very
dense, compact and durable concrete.

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Being the low alkali cement it provides insurance against alkali-aggregate reaction,
this results in durable structures.

Concrete roads and Ferro-cement concrete elements

Test Report
FACTORY TEST Requirements as per IS :
Description
RESULTS 8112-89
CHEMICAL PROPERTIES
1. Loss on Ignition % 1.46 5.0 max
2. MgO % 0.91 6.0 max
3. SO3 % 2.04 3.0 max
4. Insoluble Residue % 1.52 3.0 max
5. Alumina Modulus 1.47 0.66 min
6. Lime Saturation Factor 0.88 0.66 - 1.02
7. Chloride Content % 0.06 0.1 max
PHYSICAL PROPERTIES
1. Fineness( m/Kg ) 2.76 225 min
2. Setting Time( minutes )
Initial: 105 30 min
Final: 160 600 max
3. Compressive
Strength( Mpa )
3days 28 23 min
7days 38 33 min
28days 53 43 min
4. Soundness
LechatelierExpansion( mm ) 1 10 max
Autoclave Expansion( % ) 0.06 0.8 max
Room Temperature( C ) 28 272C

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PPC Cement is the popular brand cement with low heat of hydration and long life of
Concrete Structures.

Advantages

Develop early strength at 3 and 7 days with exceptionally high 28 days strength. Form
work of slabs and beams can be removed much earlier which results in increased
speed of construction.

Unbeatable consistency in quality gives better accountability for mix design.

The higher characteristics strength of concrete leads to higher bond strength

minimizing the possibility of slippage of reinforcements.

Its high fineness offers better workability for a given water cement ratio ensuring very
dense, compact and durable concrete.

Being the low alkali cement it provides insurance against alkali-aggregate reaction,
this results in durable structures.

Concrete roads and Ferro-cement concrete elements.

Test Report
Description FACTORY TEST Requirements as per IS :

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RESULTS 1489(Pt-1)-91
CHEMICAL PROPERTIES
1. Loss on Ignition % 1.36 5.0 max
2. MgO % 0.91 6.0 max
3. SO3 % 2.04 3.0 max
4. Insoluble Residue % 17.96 -
5. Chloride Content % 0.06 0.1 max
PHYSICAL PROPERTIES
1. Fineness Specific
314 300 min
Surface( m/Kg )
2. Setting Time( minutes )
Initial: 110 30 min
Final: 160 600 max
3. Compressive
Strength( Mpa )
3days 23 16 min
7days 30 22 min
28days 48 33 min
4. Soundness
LechatelierExpansion( mm ) 1 10 max
Autoclave Expansion( % ) 0.06 0.8 max
5. Drying Shrinkage( % ) yet to come 0.15 max
Room Temperature( C ) 28 272C

Investors

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Panyam Cements & Mineral Industries Limited is dedicated to enhancing shareholder

value by strengthening its leadership position in a competitive environment. We have long
been recognized as a financially stable and well respected company in the investor
community. Our proven business model, deep engagement with customers, robust systems
and processes, strong focus on creating value for our customers, and a strategic business mix
have all provided the resilience required to withstand economic uncertainties.

We believe in steady growth even in volatile markets, and we continue to maintain our
strategic goals and improve our competitive position in today's global economy. Access the
latest financial news and information about Panyam Cements & Mineral Industries Limited.

Code of Conduct

Introduction

This Code of Conduct (hereinafter referred to as "the Code") has been framed and adopted by
Panyam Cements & Mineral Industries Limited (hereinafter referred to as "the Company") in
compliance with the provisions of Clause 49 of the Listing Agreements entered into by the
Company with the Stock Exchanges.

Applicability

The Code applies to the Members of Board of Directors (hereinafter referred to as "Board
Members") and Members of the Senior Management Team of the Company one level below
the Board Members, viz. Managing Director & CEO, CFO and Unit Head viz. Chief General
Manager, General Manager (Marketing) Deputy General Manager (Corporate Affairs) and all
other executives having similar or equivalent rank in the Company and the Company
Secretary of the Company (hereinafter referred to as "Senior Managers").

The Company Secretary shall be the Compliance Officer for the purpose of this Code.

The Code shall come into force with effect from 1 January 2005 and future amendments /
modifications shall take effect from the date stated therein.

The Code shall be posted on the website of the Company.

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Code of Conduct

The Board Members and Senior Managers shall observe the highest standards of ethical
conduct and integrity and shall work to the best of their ability and judgment.

The Board Members and the Senior Managers of the Company:

Shall maintain and help the Company in maintaining highest degree of Corporate
Governance practices.
Shall act in utmost good faith and exercise due care, diligence and integrity in
performing their office duties.
Shall ensure that they use the Company's assets, properties, information and
intellectual rights for official purpose only or as per the terms of their appointment.
Shall not seek, accept or receive directly or indirectly, any gift, payments or favour in
whatsoever form Company's business associates, which can be perceived as being
given to gain favour or dealing with the Company and shall ensure that the
Company's interests are never compromised.
Shall maintain confidentiality of information entrusted by the Company or acquired
during performance of their duties and shall not use it for personal gain or advantage.
Shall not commit any offences involving moral turpitude or any act contrary to law or
opposed to the public policy.
Shall not communicate with any member of the press or publicity media or any other
outside agency on matters concerning the Company, except through the designated
spokespersons or authorized otherwise.

Shall not, without the prior approval of the Board or Senior Management, as the case
may be, accept employment or a position of responsibility with any other
organization for remuneration or otherwise that are prejudicial to the interests of the
Company and shall not allow personal interest to conflict with the interest of the
Company.
Shall in conformity with applicable legal provisions disclose personal and/ or
financial interest in any business dealings concerning the Company and shall declare
information about their relatives (spouse, dependent children and dependent parents)
including transactions, if any, entered into with them.

Annual compliance reporting

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Board Members and Senior Managers shall affirm compliance with this Code on an annual
basis as at the end of the each financial year of the Company (as per Appendix I within 7
days of the close of every financial year).

Acknowledgement of receipt of the code

Each Board Member and Senior Manager both present and future shall acknowledge receipt
of the Code or any modification(s) thereto, in the acknowledgement form annexed to this
Code as Appendix - II and forward the same to the Compliance Officer.

Any breach of the aforesaid Code brought to the notice of the Compliance Officer or any
Member of the Board or Senior Management shall be reported to the Board of Directors of
the Company for necessary action.

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Promotors

Sri.S.P.Y.REDDY (B.E.(Mech)

Founder and chairman Nandi Group

Sri S.P.Y.Reddy is the Chairman of Panyam Cements & Mineral Industries Limited. He is
Engineering Graduate in Mechanical from Regional Engineering College, Warangal.On
completion of graduation, he has worked for a shorter period of three years in Bhaba Atomic
Research Centre, Mumbai. He started his own business in the year 1977 and has essential role
in establishment of NANDI GROUP He has served as Chairman of Nandyal Municipality
for a brief period. Sri S.P.Y.Reddy is a sitting Member of Parliament from Nandyal
Parliamentary Constituency.

Several innovations to his credit like

PVC Pipes on Hire Basis to farmers at nominal rent

Introduction of Co-operative farming

Bore - Well Schemes

Additional Subsidy to Drip / Sprinkler Irrigation

Permanent Sprinkler System with PVC Pipes

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2. Research Methodology

2.1 Need Of The Study:-

Maximizing the shareholder value is considered as one of the fundamental goals of all
businesses. In United State, top management is expected to maximize shareholder value.
There are a number of value based management(VBM) frame works. Shareholder value
analysis(SVA) rapport (1986) and economic value analysis (EVA) developed by stern stewart
(1990) are the two well-known ones. Maximizing shareholders value is becoming the new
corporate standard in India. The corporate, who gave the lowest performance to the
shareholders inquisitiveness, are now bestowing the utmost inclination it. Share holders
wealth is measured in terms of the returns they receive on their investment. The return can
either be in the form of dividends or in the form of capital appreciation or both. Capital
appreciation in turn depends on the subsequent change in the market value of shares. This
market value of shares is influenced by a number of factors, which can be company specific,
industry specific and macroeconomic in nature.

To help corporate to generate value for shareholders, value based management systems have
been developed. Indeed, value based management, which seeks to integrate financial
hypothesis with strategic economic philosophy is considered as one of the most significant
contribution to corporate financial planning in the last two decades or so. For measuring the
corporate financial performance, there is accounting profitability measure and shareholders
value based measures.

2.2Objectives of the study:-

To analysis the EVA of the Panyam cements & mineral industries limited.
To find out whether the value has been added in panyam cements or not.
To measure the ratios of panyam cement & mineral industries ltd.

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2.3 Research design:-

Descriptive research:-

The descriptive research design has been adopted in the present study; descriptive research
design largely interprets the already available information.

2.4 Source of data:-

Secondary data:

The analysis is purely based on the secondary data and discussions with the personals
concerned. The secondary data has collected from published annual reports of PANYAM
CEMENTS & MINIRAL COMPANY LTD; relevant information has been collected from
other publication.

2.5 Period Of The Study

The present study is based on 10 years data i.e., from 2007-2016.

2.6 Tools for analysis:-

Return on equity: (REO)

Common or ordinary shareholders are entitled to the residual profits. The rate of dividend is
not fixed; the earnings may be distributed to share holder or retained in the business.
Nevertheless, the net profits after tax represent their return. A return share holders equity is
calculated to see probability of owners investment. The share holder equity or net worth will
include paid- up share capital, share premium and surplus less accumulated losses. Net worth
can also be found by subtracting total liabilities from total assets.

profit ofter tax

Return on Equity= Networth

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Retention ratio:(b)

Retention ratio is a fraction of retained earnings 100% payout percentage of earning is called
retention ratio. It is the percentage of earning retained by the firm.

Earning per sharedividend per share

Retention ratio (b)= earni ng per share

Growth in share: (g)

Growth depend on the retention ratio (b) and the return on equity (ROE). Given the firms
ROE higher the retention ratio, higher ratio, higher will be the growth rate. However, a higher
growth rate does not necessarily increase the shareholders value

Growth in share (g) = return on equity retention ratio

Cost of equity: (ke)

Firm may increase capital internally by relating earning. Alternatively, they could distribute
the entire earning to equity shareholder and raise equity externally by isssuing new shares.
The cost of equity is, thus, equal to the expected dividend yield (DIV 1/ PO) plus capital gain
rate as reflected by expected growth in dividend (g).

dividend
Cost of equity = +g
po

Where po= market share price of security for current year.

Cost of debt:

Cost of debt = I (1-T)

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Weighted Average Cost Of Capital: (WACC)

Once the component costs have been calculated, they are multiplied by the weight of the
various source of capital to obtain a weighted average cost of capital (WACC).

The composite or overall cost of capital is the weighted average of the cost of various source
of funds, weights being the proposition of each source of funds in capital structure.

D E
WACC = KD D+ E + KE D+ E

Cost of Invested Capital:

Cost of capital employed is the minimum required rate of return on funds committed to the
project which depends on the risky ness of its cash flow. The firm cost of capital employed
will be the overall or average required rate of return on the aggregate of investment project.

Invested capital = Net fixed assets + Investments + net current assets

Net Operating Profit After Tax : (NOPAT)

Net operating profit after tax is an alternative indicator of measuring operating efficiency of
leveraged companies. It is an estimated of what a company earn if it didnt have any debt,
which is equal to operating income times (I tax rate). NOPAT is frequently used for
calculating.

Net operating profit after tax = (NOPAT) =PAT Interest expense

Economic Value Added :(EVA)

EVA attempt to measure how much value was created by an organization for its shareholders,
during an accounting period. It is defined as the excess of a companys after tax net operating
profit over the required minimum rate of return that the investor and lenders could get by
investing in other securities of comparable risk.

EVA = NOPAT (WACC Invested capital)

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3.DATA ANALIS AND INTERPRETATION

TABLE 3.1 Calculation return on equity during the year 2007-2016
profit ofter tax
Return on Equity= Networth

Year Profit after tax Networth Ratio

2007-2008 -35.58 -97.60 0.36
2008-2009 8.52 -79.63 -0.10
2009-2010 41.91 -37.72 -1.11
2010-2011 34.47 -3.26 -10.57
2011-2012 14.54 11.28 1.28
2012-2013 -3.81 7.47 -0.51
2013-2014 9.13 16.60 0.55
2014-2015 17.49 34.09 0.51
2015-2016 -4.26 29.83 -0.14
2016-2017 -15.16 14.45 -1.04
Average -1.05
SD 3.26
CR -3.10
Graph: 3.1 Return on equity

100

50
34.09
11.28 16.6 29.83
7.47 14.45
0 -3.26 Ratio
-37.72 Networth
-79.63 Profit after tax
-50

-97.6
-100

-150

Source: annual data from Panyam cement and mineral industries.

Interpretation: Above the return on equity ratio of panyam cement & mineral Industries
from 2007-16 return on equity ratio is fluctuated during the study period .The highest return
on equity ratio is 1.28 in the year 2011-12 and the least is -10.57 in the year 2010-11.The avg.

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return on equity ratio is -1.05 with standard deviation of 3.26 & Coefficient of Variation is-
3.10.

TABLE 3.2 Calculation total retention ratio during the year of 2007-2016
Earning per sharedividend per share
Retention ratio (b)= earning per share

Year EPS DPS EPS-DPS EPS Ratio

2007-2008 -25.55 1.80 -27.35 -25.55 1.07
2008-2009 5.32 1.80 3.52 5.32 0.66
2009-2010 26.16 1.80 24.36 26.16 0.93
2010-2011 21.52 1.80 19.72 21.52 0.91
2011-2012 9.08 1.80 7.28 9.08 0.80
2012-2013 -2.38 1.80 -4.18 -2.38 1.75
2013-2014 5.70 1.80 3.9 5.70 0.68
2014-2015 10.92 1.80 9.12 10.92 0.83
2015-2016 -2.66 1.80 -4.46 -2.66 1.67
2016-2017 -9.46 1.80 -11.26 -9.46 1.19
Average 1.04
SD 0.48
CR 0.46
Graph: 3.2 Retention ratio

100
80
26.16
60
21.52
40
10.92 Ratio
20 9.08
5.32 5.7 EPS
0 EPS-DPS
-2.38 -2.66
-20 DPS
-9.46
EPS
-40
-60
-25.55
-80
-100

Source: annual data from Panyam cement and mineral industries.

Interpretation: Above the retention ratio of panyam cement & mineral Industries from
2007-16 retention ratio is fluctuated during the study period .The highest retention ratio is

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1.75 in the year 2013-14 and the least is 0.66 in the year 2008-09.The avg. retention ratio is
1.04 with standard deviation of 0.48 & Coefficient of Variation is0.46.

TABLE 3.3 Calculation growth in share during the year of2007-2016

Growth in share (g) = return on equity retention ratio

Year Return on Retention Ratio

equity ratio
2007-2008 -25.55 10.53 -269.04
2008-2009 5.32 10.53 56.01
2009-2010 26.16 10.53 275.46
2010-2011 21.52 10.53 226.60
2011-2012 9.08 10.53 95.61
2012-2013 -2.38 10.53 -25.06
2013-2014 5.70 10.53 60.02
2014-2015 10.92 10.53 114.98
2015-2016 -2.66 10.53 -28.00
2016-2017 -9.46 10.53 -99.61
Average 40.69
SD 149.99
CR 3.68
Graph : 3.3 Growth in share

400

300

200
275.46
226.6
100
95.61 114.98 Ratio
56.01 60.02
0 -25.06 -28 Retention ratio
-99.61 Return on equity
-100
-269.04
-200

-300

-400

Source: annual data from Panyam cement and mineral industries.

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Interpretation: : Above the growth in share of panyam cement & mineral Industries from
2007-16 growth in share is fluctuated during the study period .The highest growth in share is
275.46 in the year 2009-10 and the least is -269.04 in the year 2007-08.The avg. growth in
share is 40.69 with standard deviation of 149.99 & Coefficient of Variation is 3.68.

TABLE 3.4 Calculation cost of equity during the year of 2007-2016

dividend
Cost of equity = +g
po

Year D/po D/po Growth(g) Ratio

2007-2008 1.80/-71.69 -0.02 0.38 0.36
2008-2009 1.80/-49.83 -0.03 -0.06 -0.09
2009-2010 1.80/-23.67 -0.07 -1.03 -1.1
2010-2011 1.80/-2.15 -0.83 -9.61 -10.44
2011-2012 1.80/6.93 0.25 1.02 1.27
2012-2013 1.80/4.55 0.39 -0.89 -0.49
2013-2014 1.80/10.25 0.17 0.37 0.54
2014-2015 1.80/21.16 0.08 0.42 0.5
2015-2016 1.80/18.51 0.09 -0.23 -0.14
2016-2017 1.80/8.91 0.20 -1.16 -0.96
Average -1.05
SD 3.21
CR -3.05

Graph : 3.4 Cost of equity

15

10

5
1.02
0 0.38 -0.06-1.03 -0.89 0.37 0.42 -0.23-1.16 Ratio
1 2 3 4 5 6 7 8 9 10 Growth(g)
-5 -9.61
D/po
-10 D/po
Year
-15

-20

-25

Source: annual data from Panyam cement and mineral industries.

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Interpretation: : Above the cost of equity of panyam cement & mineral Industries from
2007-2016 cost of equity is fluctuated during the study period .The highest cost of equity is
1.27 in the year 2011-12 and the least is -10.44 in the year 2010-11.The avg. cost of equity is
-1.05 with standard deviation of 3.21 & Coefficient of Variation is -3.05.

.TABLE 3.5 Calculation cost of debt during the year of 2007-2016

Cost of debt = I (1-T)

Year Interest(i) Tax(1-T) I(1-T)

2007-2008 4.56 (1-0.00) 4.56
2008-2009 6.62 (1-0.06) 6.56
2009-2010 7.65 (1-0.07) 7.58
2010-2011 14.93 (1-4.10) 10.83
2011-2012 12.23 (1-6.00) 6.23
2012-2013 7.92 (1-0.00) 7.92
2013-2014 13.81 (1-7.64) 6.17
2014-2015 12.61 (1-5.00) 7.61
2015-2016 12.93 (1-0.00) 12.93
2016-2017 11.79 (1-0.00) 11.79
Average 8.21
SD 3.58
CR 0.43

Graph : 3.5 Cost of debt

Cost of debt
14 12.93
11.79
12 10.83
10
7.58 7.92 7.61 Cost of debt
8
6.56 6.23 6.17
6
4.56
4

2
0
0

Source: annual data from Panyam cement and mineral industries.

Interpretation: Above the cost of debt of panyam cement & mineral Industries from
2007-16 cost of debt is fluctuated during the study period .The highest cost of debt is 12.93

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in the year 2015-16 and the least is 4.56 in the year 2007-08.The avg. cost of debt is 8.21
with standard deviation of 3.58 & Coefficient of Variation is 0.43.

.TABLE 3.6 Calculation weighted average cost of capital during the year of 2007-16
D E
WACC = KD + K
D+ E E D+ E

YEAR Kd D d Ke E Ke Kd
D+ E K d d+e D+ E E D E
+ Ke
D+ E bD+ E D+

2007-08 55.63 1.80/1.80+16.02 100.13/17.82 0.16 16.02/1.80+16.02 2..56/17.82 5.76

2008-09 44.17 1.80/1.80+16.02 79.50/17.82 0.16 16.02/1.80+16.02 2.56/17.82 4.60
2009-10 46.06 1.80/1.80+16.02 82.90/17.82 0.16 16.02/1.80+16.02 2.56/17.82 4.79
2010-11 82.07 1.80/1.80+16.02 147.72/17.82 0.16 16.02/1.80+16.02 2.56/17.82 8.43
2011-12 160 1.80/1.80+16.02 190.80/17.82 0.16 16.02/1.80+16.02 2.56/17.82 10.85
2012-13 100.86 1.80/1.80+16.02 181.54/17.82 0.16 16.02/1.80+16.02 2.56/17.82 10.33
2013-14 82.05 1.80/1.80+16.02 147.69/17.82 0.16 16.02/1.80+16.02 2.56/17.82 8.43
2014-15 65.28 1.80/1.80+16.02 117.50/17.82 0.16 16.02/1.80+16.02 2.56/17.82 6.73
2015-16 90.04 1.80/1.80+16.02 162.07/17.82 0.16 16.02/1.80+16.02 2.56/17.82 9.23
2016-17 81.48 1.80/1.80+16.02 146.66/17.82 0.16 16.02/1.80+16.02 2.56/17.82 8.37
Average 7.75
SD 3.13
CR 0.40

Graph: 3.6 Weighted average cost of capital

WACC
12 10.85
10.33
10 9.23
8.43 8.43 8.37
8 6.73 WACC

6 4.79
5.76
4 4.6
2
0
0

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Source: annual data from Panyam cement and mineral industries.

Interpretation: Above the weighted average cost of capital of panyam cement & mineral
Industries from 2007 2016 weighted average cost of capital is fluctuated during the study
period .The highest weighted average cost of capital is 10.85 in the year 2011-12 and the least
is 4.60 in the year 2008-09.The avg. weighted average cost of capital is 7.75 with standard
deviation of 3.13 & Coefficient of Variation is 0.40.

TABLE 3.7 Calculation cost of invested capital during the year of 2007-2016

Invested capital = Net fixed assets + Investments + net current assets

Year NFA Investment NCA Ratio

2007-2008 22.59 16.21 5.21 44.01
2008-2009 19.60 16.21 16.75 52.56
2009-2010 24.29 16.21 21.92 62.42
2010-2011 25.28 16.21 25.92 67.41
2011-2012 23.85 16.21 36.21 76.27
2012-2013 23.97 16.21 40.28 80.46
2013-2014 87.03 16.21 49.10 152.31
2014-2015 77.99 16.21 39.14 133.34
2015-2016 71.25 16.21 30.50 117.93
2016-2017 72.82 16.21 39.34 128.37
Average 91.50
SD 45.45
CR 0.50

Graph : 3.7 Cost of invested capital

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Cost of invested capital

160 152.31

140 133.34
128.37
117.93
120
Cost of invested
100
80.46 capital
80 67.41
62.42 76.27
60 52.56
44.01
40

20
0
0

Source: annual data from Panyam cement and mineral industries.

Interpretation: Above the invested capital of panyam cement & mineral Industries from
2007-16 invested capital is fluctuated during the study period .The highest invested capital is
152.31 in the year 2013-14 and the least is 44.01 in the year 2007-08.The avg. invested
capital is 91.50 with standard deviation of 45.45 & Coefficient of Variation is 0.50.

TABLE 3.8 Calculation net operating profit after tax during the year of 2007-2016

Net operating profit after tax = (NOPAT) =PAT Interest expense

Year PAT Interest expense Ratio

2007-2008 -35.58 4.56 -40.14
2008-2009 8.52 6.62 1.9
2009-2010 41.91 7.65 34.26
2010-2011 34.47 14.93 19.54
2011-2012 14.54 12.23 2.31
2012-2013 -3.81 7.92 -11.73
2013-2014 9.13 13.81 -4.68
2014-2015 17.49 12.61 4.88
2015-2016 -4.26 12.93 -17.19
2016-2017 -15.16 11.79 -26.75
Average -3.76
SD 20.59
CR -5.47

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Graph : 3.8 Net operating profit after tax

NOPAT
40 34.26
30
19.54
20
10 NOPAT
0 -40.14 -11.73-4.68 -17.19
-26.75
0 4.88
2.31
1.9 2008 2009 2010 2011 2012 2013 2014 2015
Year 2006 2007
-10
-20
-30
-40
-50

Source: annual data from Panyam cement and mineral industries.

Interpretation :Above the net operating profit after tax of panyam cement & mineral
Industries from 2007-2016 net operating profit after tax is fluctuated during the study
period .The highest net operating profit after tax is 34.26 in the year 2009-10 and the least is
-40.14 in the year 2007-08.The avg. net operating profit after tax is -3.76 with standard
deviation of 20.59 & Coefficient of Variation is -5.47

TABLE 3.9 Calculation economic value added during the year of 2007-2016

EVA = NOPAT (WACC Invested capital)

Year NOPAT WACC Invested WACCInvested NOPAT-

capital capital (WACCInvested
capital)
2007-2008 -40.14 5.76 44.01 253.49 -293.63
2008-2009 1.9 4.60 52.56 241.77 -239.87
2009-2010 34.26 4.79 62.42 298.99 -264.73
2010-2011 19.54 8.43 67.41 568.26 -548.72
2011-2012 2.31 10.85 76.27 827.52 -855.21
2012-2013 -11.73 10.33 80.46 831.15 -842.88
2013-2014 -4.68 8.43 152.31 1283.97 -1288.65
2014-2015 4.88 6.73 133.34 897.37 -892.46
2015-2016 -17.19 9.23 117.96 1088.77 -1105.96
2016-2017 -26.75 8.37 128.37 1074.45 -1101.2

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Average -743.33
SD 427.38
CR 0.54
Graph : 3.9 Economic value added

EVA
0 -293.63
-239.87
-264.73
-548.72
-855.21
-842.88
-1288.65
-892.46
-1105.96
-1101.2
0
Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-200

-400
EVA
-600

-800

-1000

-1200

-1400

Source: annual data from Panyam cement and mineral industries.

Interpretation: Above the economic value added of panyam cement & mineral Industries
from 2007-16 economic value added is fluctuated during the study period .The highest
economic value added is -239.87 in the year 2008-09 and the least is -1288.65min the year
2014-15.The avg. economic value added is -743.33 with standard deviation of 427.38 &
Coefficient of Variation is 0.54.

4. FINDINGS:

The average return on equity of the Panyam cement & mineral industry is -1.05.the
company maintains the negative returns, and it is not fair to the company.
The average retention ratio of the Panyam cement & mineral industry is 1.04. the
company is making low returns, during the study period over 4 years. It is satisfied
the company expectations to remaining years.
The average growth in share of the company is 40.69,it indicates company
performance is good but the high growth rate is does not increasing the share holders
value and it is fair to the company.
The average cost of equity of the company -1.05,it indicates the negative returns, firm
is not increase capital internally, since company making less returns and shareholders
not distribute any profit and it is not fair of the company.

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The average cost of debt of the company is 8.21,the company making low debt and
satisfies the company expectations and low debt indicates more benefit to the
company.
The average weighted average cost of capital is 7.75, the company is making returns
on investments positively and it satisfied the expectations. Highest weighted average
cost of capital is benefit to the company
The average cost of invested capital of the company is 91.50, and it shows the
performance of the company is good and low cost of invested capital indicates facing
of problems in the future
The average net operating profit after tax of the company is -3.76 it indicates negative
performance the returns of company while improve the net profit it is suitable to the
company
The average economic value added of the company is -743.38,it indicates the
economic growth rate is very low since the company making less returns and low
performance hence the company is poor economic value added, it is not fair to the
company

4.2 SUGGESTIONS

It is necessary to company to utilize the capital in efficient and effective manner to

generate returns in future.
It is needed to the company to improve retention Ratio for increase the growth rate in
the future ,the retained earnings is more it is benefit to the company
The company is making average cost of retained earnings is low it is not fair to the
company to improve the returns of the company it indicates the growth rate
increasing trend
To maintain the average cost of debt is low It is better to the company to increase the
profits ,and increasing the growth rate
The company maximize the shareholders wealth it is also one of the cause for
improving the growth rate
The company performance measure the economic value added based on the net
profit and share holders wealth ,cost of equity ,cost of debt, to maintain the
adequate ,the company growth rate will improving .

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4.3 Conclusion:

The economic value added of the company is low performance since to maximise the net
profit and shareholders wealth and increase internal capital and distribute the share holders
dividends. It indicates increasing growth rate, the company maintain profits at effective
manner to minimise the expenditure and decreasing capital investment on inventories for
making more returns, and reach the overall expectation of the company to increase the
economic growth effectively.

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BIBILIOGRAPHY

BOOKS

Title of the Book Authors Edition Years

1. Financial management My khan & PK Jain 2010

Himalaya publishers
2. Financial management I M Pandey 2010
Himalaya publishers
3. Financial management Prasanna Chandra 2010
Himalaya publishers

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