After sector, Government focus on infrastructure and
After deregulationin 1982, Growth in housing sector, Government focus on infrastructure and 100smart city developments has scope for increase in cement demands. The cementindustry has been facing various challenges and constraints due to mismatch of demandand supply, excess capacity, actuate shortage of coal, railway wagonavailability for transportation, lime stone availability, and energy crisis.Changes in monsoon, rising cost of production, GST tax reform, currencydemonetization, Real Estate Regulatory Authority Bill, Shortage in Sand supplyhave also poses major challenges to cement industry. Hence, it is worth tostudy on operational performance, working capital management, financialhealthiness and wealth creation possibilities of cement companies and explorethe chances of improving their performance.
STATEMENT OF THE PROBLEM:Themajor problems of cement industry in India are the requirement of large capitalinvestment, latest production technology, improved labour productivity andefficient management. The cement production in India is affected by scarcity ofraw materials, energy crisis and inefficient administration and more productioncycle time enhances production cost. High fluctuation of cement prices and globalcompetition are the main problems for this sector. Therefore it is the immenseneed to measure the performances and wealth created by cement companies inIndia. NEEDFOR THE STUDY:This study has been undertaken to assessthe operational performance and wealth creation of the select cement companiesnamely, Ultratech cement and Birla Corporation.
The present study has focusedon analyzing the various aspects related to the operational performance andwealth creation of the cement industry in India. The companies in cementindustry in India will also be able to know their existing financial strengthby this study so as to take the policy decisions relating to finance in future.This study will be of immense help to the society by enabling the prospectiveinvestors and other stakeholders of the cement industry in India to takeeconomic decisions. REVIEW OF LITERATURE:Saleem andRehman (2011)examined the relationship between liquidity and profitability in the oil andgas companies of Pakistan. The study findings established that there was asignificant impact of only liquid ratio on ROA while insignificant on ROE andROI. In addition, the findings established that ROE had no significant effecton three ratios current ratio, quick ratio and liquid ratio while ROI wasgreatly affected by current ratios, quick ratios and liquid ratio. Al Debi’e(2011) examined the relationship between profitability and workingcapital management measures for industrial companies listed on Amman StockExchange in Jordan during the period 2001-2010. Industrial companies in Jordaninvest significantly in working capital.
Therefore, efficient working capitalmanagement is expected to enhance the profitability of these companies. Theresults showed that less profitable companies wait longer to sell theirproducts, to collect credit sales, and to pay their supplies of goods.Moreover, the results showed that regardless of the level of profitabilityindustrial companies in Jordan pay their suppliers before collecting creditsales. The control variables (Size, Leverage, and GDP growth) included in allregression models were significant and have the expected signs. Profitabilityincreased with Size and GDP growth and decreased with leverage.Hajihassani(2012)presented A Comparison of Financial Performance in Cement Sector in Iran. Thisstudy presents comparison of financial performance for the period 2006 – 2009by using financial ratios and measures of cement companies working in Iran.Financial ratios are divided into three main categories and measures includingtwo indicators.
This work concludes that the performance of cement companies onthe basis of profitability ratio is different than on the basis of liquidityratio, leverage financial. Islam andMili (2012) attemptedto study the financial health, strength and weakness ofPharmaceuticalindustry of Bangladesh by measuring financial performance and risks. The studyobserved that the liquidity, profitability and solvency position of most of theselected pharmaceuticals are in average position. The factors behind thisposition were unsound financial management, inadequate working capital, slowconversion of receivables and inventory into cash, lower position of sales,higher amount of debt, no professional distribution house, restrictions onpatent right, fixed mark-up system, contrary policy of the government, vulnerabilityof environmental risk and increased cost of production.Dr PratibhaJain & Prof. Megha Mehta (2013) In their study on financialperformance of automobile companies finds that Hero Honda company performedwell because of its usage of latest technology and Tata motors weak performancedue to increased manufacturing overheads and company’s inability to facecompetition.
Dr.ShishirPandey and Vikas Kumar Jaiswall(2014) in their paper”Comparative Study ofProfitability Analysis of Indian Aluminium Industries between public andprivate sector “the main objective of this research paper is to analysis theprofitability position of the selected Aluminium companies for 5 year (2008 – 2014).thestudy based on the secondary data thetools used for the analysis is different profitability ratio and regression analysis, the study found thatAluminium industries in India shows Satisfactoryperformance in concern with profitability.Dr.M.Thyigarajan and Mr J.Uday Kumar (2015) in their paper “Profitabilityanalysis of select aluminium companies in India” the main objective of thisresearch paper is to analyse the profitability position of the selectedaluminium companies for 10 years (2005-2014). The study based on the secondarydata, the tools used for analysis are Mean, Standard deviation, co-efficient ofvariation and compound annual growth.
The study ascertains the NationalAluminium Company Limited shows satisfactory performance in concern withprofitability.Poonam Gautam Sharma and Preet Kaur (2015) examine the impact of working capital management on profitabilityof Bharti Airtel Telecom Company. The study period was 2007-08 to 2014-15 and statisticaland econometric tools were used for study. The results reveal that there issignificant negative relationship between liquidity and profitability of thecompany and it also reveals that quick ratio, inventory turnover ratio, debtorsturnover ratio of company shows satisfactory performance and current ratio ofcompany was found not satisfactory. MohmadMushtaq Khan1, Dr. Syed Khaja Safiuddin2(2016) Indian pharmaceutical market (IPM) is one of the fastest growingpharmaceutical markets, highly fragmented with about 24000 players out of which330 belong to organized sector. There are approximately 250 large units and8000 small scale units, which form the core of the pharmaceutical industry inIndia.
The market is dominated by the branded generics, as we see the top tencompanies make up for more than 3/4th of the market, that means nearly 70% to 80% of the market. Asfar as the reputation and rank of the IPM is concerned, it tops amongst theIndia’s science based industries; is 3rd largest in terms of its volume, and13th largest as per its value in the world pharmaceutical market. Indianpharmaceutical market is expected to expand at a CAGR of 23.9 % to reach US$ 55billion by 2020. Indian pharmaceutical companies receive a large sum ofrevenues from the exports besides the domestic market, as some of them focus onthe generics market in US, Europe and semi regulated markets; and some of themfocus on custom manufacturing for innovator companies.
The study throughempirical approach, may use ratios and indicators to measure the performanceand identify the financial health status of the companies operating under oneof the most dynamic sector in Indian economy.Dr.Hemant Bhanawat (2017), Working capital is considered to belife -giving force to an economic entity and managing working capital one ofthe most important activity of corporate management. Working capital management(WCM) is the management of short-term financing requirements of a firm whichincludes maintaining optimum balance of working capital components –receivables, inventory and payables – and using the cash efficiently forday-to-dayoperations. The main objectives of this study are toexamine and evaluate the working capital management in ACC Limited, examine themanagement pattern of inventory, liquidity, cash position and receivablesmanagement. This also finds the relationship between Working Capital Efficiencyand Profitability, Profitability and Market ratios. OBJECTIVES OF THE STUDY:Basedon the issues stated above, the following objectives are framed for the:1.
To analyse operational and financial performanceof select cement companies in India.2. To analyse the wealth creation of selectcement companies in India..3. To offer suggestions for the improvementof performances HYPOTHESES: The study has been undertaken to test thefollowing hypothesis:1.
Thereis no significant relationship between working capital management andprofitability of select cement companies in India.2. Thereis no significant relationship between wealth creation, solvency, leverage andworking capital and profitability.3.
There is no significantdifference in the profitability of select cement companies in India.4. There is no significant difference in themarket capitalisation of the select cement companies in India.SCOPE OF THE STUDY:This study intends to analyse the Operationalperformance and wealth creation of the selected companies. It has identifiedareas which can be improved. Further, the study has made suggestions to helpthe management of cement companies to better utilize corporate resources.
Thepresent study analyses the efficiency of working capital management and itscomponents i.e. inventory, cash and bank balances, and various currentliabilities. The study attempts to determine the efficiency and effectivenessof management in each segment of working capital. LIMITATIONS OF THE STUDY:Hereare some limitations of the study: (1) This study based on secondary data taken from published annual reportsand accounts of selected companies and as such its finding depends on integrityof such data.(2) The selected companies for study are based onmarket capitalisation and hence, limited the scope of study to few companies. (3) This study was limited to a few numbers of companies within theselection criteria due to lack of availability of data.
RESEARCH METHODOLOGY:The methodology proposedin the study is to analyze the impact of performance on the profitability andwealth creation.Periodof Data: Data related to the select tow cementcompanies in India have been taken from Annual reports for the 11 years from2006-2007 to 2016-2017. Framework of Analysis: After the collection ofsecondary data of select cement companies, various statistical tools andtechniques are used to complete the study.Selectionof Companies: Based on Market Capitalization one smallcap –Birla company having capitalization up to 2,000 cr and one large Cap–Ultra tech Company having market cap between above 10,000 cr have been takenfor the study. DATAANALYSIS:OPERATIONALPERFORMANCE:The operational performance can be measuredusing Accounts receivable turnover ratio,Inventory turnover ratio, Accounts payable, Total Assets turn over ratios,Operating expense ratios, Return on Investment etc., The quicker a company cansell its inventory, the better. Quicker turnover allows for more opportunitiesto generate profit.
Table No.1 workingcapital management ratios ULTRATECH BIRLA Year Working Capital Turn Over Ratio Asset Turn Over ratio Inventory Turn Over Operating Cash Flow Ratio Debtor Turn Over Ratio Working Capital Turn Over Ratio Asset Turn Over ratio Inventory Turn Over Ratio Operating Cash Flow Ratio Debtor Turn Over Ratio 2007 0.04 1.05 13.49 1.43 26.75 -0.06 1.07 14.44 0.51 1.67 2008 -0.05 0.88 12.05 0.87 25.45 -0.06 0.85 11.62 0.48 0.68 2009 -0.03 0.83 11.00 0.94 34.30 0.08 0.87 10.35 0.78 0.59 2010 0.02 0.84 10.21 1.17 32.63 0.05 0.71 10.01 0.62 0.89 2011 0.14 0.66 10.77 0.39 21.93 0.48 0.59 7.58 0.39 0.70 2012 0.12 0.79 10.30 0.76 23.72 0.44 0.56 6.70 0.36 0.91 2013 0.08 0.74 10.42 0.57 19.84 0.32 0.58 6.07 0.29 0.81 2014 0.16 0.68 9.75 0.57 15.83 0.45 0.62 6.41 0.41 0.73 2015 -0.04 0.65 10.14 0.46 19.06 0.53 0.64 6.92 0.44 0.59 2016 -0.08 0.64 10.56 0.39 17.04 0.48 0.64 6.73 0.25 0.62 2017 0.18 0.61 10.74 0.59 18.72 0.24 0.52 6.53 0.58 0.44 Average 0.05 0.76 10.86 0.74 23.21 0.27 0.70 8.49 0.46 0.78 Std.dev 0.09 0.13 1.06 0.34 6.10 0.23 0.17 2.73 0.15 0.33 CV 52% 570% 1028% 220% 380% 118% 416% 311% 304% 241% CAGR 16% -5% -2% -8% -3% -214% -6% -7% 1% -11% Interpretation: Working capital ratios indicates cover of short-term assets by itsshort-ter