CHAPTER 1

INTRODUCTION

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1.1 INTRODUCTION

In India, the cement industry is the second most consumed material on the planet. The
cement companies have seen a net profit growth rate of 85 per cent. With this huge
success, the cement industry in India has contributed almost 8 per cent to India’s
economic development.

The cement industry in India is dominated by around 20 companies, which account for
almost 70 per cent of the total cement production in India. Because of its weight,
cement supply via land transportation is expensive, and generally limited to an area
within 300 km of any one-plant site. The industry is consolidating globally, but large,
international firms account for only 30 per cent of the worldwide market. China is the
fastest growing market today. Because it is both global and local, the cement industry
faces a unique set of issues, which attract attention from communities near the plant, at
a national and an international level.

Financial statement analysis is a process that both internal and external parties do on
companies to better understand how a company is performing. The overall health of a
business can be better understood by analysing financial performance. If done properly,
this analysis can yield insightful information that is beneficial for managing expenses,
vendor relationships, and employment. Analysing and evaluating a company's financial
position is done through financial performance analysis.

Financial ratio analysis is a quantitative method used by business managers to learn

about a company’s profitability, solvency, performance, liquidity, coverage and market
value. We can evaluate the company's potential and make better economic decisions
when we are aware of how it is performing.

The study examines the Indian cement industry's financial performance. The cement
business is currently growing fast, and it is important to understand how important
cement sector financial performance is to India. For this, it is necessary to examine the
financial health, profitability, and solvency of the chosen Indian cement enterprises.

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1.2 SIGNIFICANCE
The study discovers the importance of studying the historical financial data of the key
participants in the cement industry. It aims to determine the financial performance,
ratios etc of certain companies. Financial statements are packed with data that can
give important insights into a company's performance and status. Both internal and
external users of financial statements need to examine the company’s profitability,
liquidity and solvency. A study of the performance of cement companies in India is
necessary since the Indian cement industry has a very promising future and the
companies must meet the rising worldwide demand for cement.

1.3 STATEMENT OF THE STUDY

The growth of industries is heavily influenced by financial and operational factors.
This study examined the financial performance of a few selected companies. Financial
Ratios are crucial tool for businesses to evaluate their progress towards goals and to
compete with other businesses in the sector. Cement Industry’s financial statements
are analysed to understand the financial status of selected companies.

1.4 OBJECTIVES OF THE STUDY

The primary goal of the study is to evaluate the Financial Performance of selected
companies in India’s Cement Industry for the financial year from 2011-2021.
• To evaluate the Liquidity of the companies.
• To evaluate the Profitability of the companies.
• To analyse the Solvency of the companies.

1.5 HYPOTHESIS
H0 1: There is no significant relation between profitability and liquidity.
Ha 1: There is significant relation between profitability and liquidity.

H0 2: There is no significant difference in Net Profit of Shree Cement Ltd before and
after COVID-19.
Ha 2: There is significant difference in Net Profit of Shree Cement Ltd before and
after COVID-19.

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1.6 SCOPE OF THE STUDY

The study focuses on the financial performance of selected companies in India’s

Cement Industry. Data is collected from various websites and database in-order to gain
knowledge on Cement Industries. For Analysis and Interpretation only 10 years data
from the financial year 2011-2021 is taken.

1.7 RESEARCH METHODOLOGY

1.7.1 RESEARCH DESIGN

The study is analytical in nature.

1.7.2 SOURCES OF DATA

The study uses Secondary Data for evaluating Financial Performance. Data is obtained
from ProwessIQ. In addition to that, data is obtained from various website, Research
papers, and Annual Reports of the selected companies.

1.7.3 TOOLS FOR ANALYSIS

Ratio analysis is a technique used to examine and interpret general financial statements
in order to evaluate the financial performance of the companies.
The study uses Ratio analysis, Ms-Excel, SPSS to analyse the data obtained from
various sources.
For evaluating Liquidity, Current Ratio, Quick Ratio, are used. For evaluating
Profitability Gross profit Ratio, Net profit ratio, Operating Ratio and ROI are used and
for Solvency, Fixed Assets to Net worth Ratio are used.

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1.8.SAMPLE DESIGN

1.8.1 NATURE OF POPULATION

Cement Industry is used as population of the study.
1.8.2 SAMPLE UNIT

10 companies in Cement Industry are selected from NSE.

1.8.3 SAMPLING TECHNIQUE

For the study, Convenience Sampling method is used.

1.9 PERIOD OF STUDY

The study is conducted for a period of 10 years, from the year 2011-12 to 2020-21

LIMITATIONS OF THE STUDY

• As the study is based on Secondary data, reliability of results may depend upon
the validity of data.
• Time required to conduct the study was limited.
• Ratio Analysis, which is one of the bases of comparisons, had a number of
drawbacks. Financial analysis is a personal subject, and a ratio's value that is
suitable for one company or industry may not be acceptable for another.

CHAPTERISATION

The entire project is divided into 5 Chapters

Chapter 1 Introduction

Chapter 2 Review of literature

Chapter 3 Theoretical Framework

Chapter 4 Analysis and interpretation

Chapter 5 Findings, suggestions and conclusion

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 CHAPTER 2

REVIEW OF LITERATURE

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Haresh Budhrani & Aniruddha Sunil Gachake (2022) in their study “Fundamentals
of financial performance of Indian cement industry” aimed to evaluate the financial
performance of the Cement Industry of India through financial ratios and other
financial and statistical tools and techniques and its exact role in our economy. The
concludes by suggesting that the industry should try to increase production and sales for
getting maximum profit in-order to strengthen its financial position.

Dr K Pavithra (2022) in her study “Trend Analysis of Cement Companies In India”

attempted to compare the trend analysis of selected cement companies in India with
selected financial profitability ratios. From the study it is found that to measure trend
analysis that all the ratios data’s are perfectly fitted in their past year data’s and in
future there will be no decrease in their profitability position of the selected companies.

Dr. M. Nirmala & Pavithra K (2021) investigated the determinants of the financial
performance selected cement companies in India. The performance of selected cement
companies measured based on financial ratios like operating profit margin, gross profit-
margin, net profit margin, cash profit margin, return on capital employed, return on
networth, return on assets including revaluations, return on long term funds, current
ratio, quick ratio, cash ratio, debt equity ratio, proprietary ratio, long term debt equity
ratio, interest cover ratio and fixed asset to net worth ratio. it showing the comparative
financial performance of the selected ratios with dependent ratio Net Profit Margin.
Some comparative ratios showing the negative relationship and the companies have to
concentrate in those particular ratios.

Kalimuthu & Shreenithi (2021) studied the overall performance of the ACC Cement
limited to analyse the overall performance with the help of financial statement. From
the study it is found that the liquidity position of the company is satisfactory hence the
company can meet out its short term liabilities and have enough quick assets to pay off
current liabilities and in future it has to maintain day to day cash management to
increase the absolute liquid ratio alone. The study also reveals that the change in
working capital should be increased without decreasing and has to maintain the change
in working capital at a moderate position.

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Vineet Chouhan et.al. (2021) analyse the current sustainability of Accounting
Practices in Indian Cement Companies. To analyse the same, researchers have taken a
case study of five prominent cement companies, JK Cement Ltd., Shree Cement Ltd.,
ACC Cement Ltd, Binani Cement Ltd., and Ambuja Cement. It observed the common
reporting methods of the selected companies under various common heads in the Indian
Cement companies and later to make a comparison amongst them, further by taking the
views of the company respondents, with a questionnaire. For measuring combined
effect of the selected companies, financial and non-financial disclosure of the selected
13 items for sustainable reporting has been considered, and to analyse the independent
variables having influenced upon the combined effect of dependent variables
MANOVA statistical technique was applied. It was found that there is a critical
difference in the reporting of financial and non-financial sustainability factors by Indian
cement companies. shown that theoretical and practical sustainability accounting has
some of the characteristics of the traditional accounting model, but for the practice,
more studies are necessary.

Mayilsamy & Pradeep (2021) examined the financial strength of Indian cement
industry with the sample companies under consideration. it is forecasted that demand
would exceed production. It analyses region-wise and state-wise inflows and outflows
of cement in order to forecast the production demand and installed capacity. The
analysis of the company was undertaken with the help of ratios, which are important
tools of financial analysis. After the study of financial performance of Ultra tech
cement ltd from various financial aspects like profitability position of the company is
more or less depends upon better utilization of resources, decreased expenses etc and its
less than satisfactory level as the ratios are decreasing every year. the study reveals
there was a gradual rise and fall in the growth of company during the study period.

Karthika Murugeswari & A. Muthusamy (2020) in their study “Financial

performance of selected cement companies in India” aimed to find the short term
financial performance of the sample cement companies and to analyse the profitability
condition of the 2 chosen cement companies. From the study it is found that the
financial positions of the selected cement companies are reasonable, but both the
companies must improve their short-term solvency position. The profitability ratio of

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two cement companies are satisfactory and the two selected companies short term
liquidity position is not satisfactory.

Baridhara et.al. (2019) found that the trend value of Ultratech cements have more
opportunity to yield high return in future. The present study reveals that the share prices
of stocks listed under cement industry move forward in a positive trend. Among all
company evaluated, ACC limited has been found to the best one for making investment
as revealed by various parameters used in the study. A number of factors of risk or
investment characteristics may be considered in choosing among categories on
investments or individual investments which include financial risk. Market risk, Interest
rate risk to values of existing investments, interest risk to income from investments and
purchasing power risk to get a high rate of return.

Singh, K.P. (2019) in his study found that the size of the unit has a significant role in
the capital structure of the cement industry. The study has revealed that the returns and
profitability can be increased by increasing the firm’s size from small to big.

Tiwari R.S. (2018) in his research paper identified that the industry must earn
reasonable profits to survive and this will mostly depend on the cost of production. He
also suggested that proper management, effective control, and cost reduction strategies
are the most important methods that need to be adopted to improve the profitability of
cement companies.

Hemant Bhanawat (2018) in his study “Financial Performance of Indian Cement

Industry: Study of selected units” aimed to analyse the production and sales trends,
measure the short and long-term financial feasibility and also to identify the factors that
influence the profitability of the companies. For the study 3 companies were selected,
ACC Ltd, Ultratech Cement and India Cement and it used various liquidity, solvency
and profitability ratios to examine the financial performance. It is found that all the
selected companies have a satisfactory financial position. Ultra tech Cement has a
highest production and sales rate than compared to other 2 companies and the
profitability position of ACC Ltd is higher. The study suggested that by controlling cost
or increasing sales, profitability can be increased.

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Kumaran& Vani Hariharan (2018) studied the fundamental analysis of cement
industry in India based on their market capitalization. It focuses on suggesting the
investors to invest in a particular company in cement industry by analysing the
underneath facts affecting it. It has developed four interrelated models to give investors
a clear idea of how to analyse and in which companies should we invest. Fundamental
analysis is analysing the basic financials of the company from the balance sheet and
income statement to consider it for further investment. The study initially has
considered the stock price and then based on the data, has successfully applied
fundamental tools like ratio analysis and statistical tools to determine the health of a
company based on the past data. It determined that the investment is surely dependent
on the past performance of the company, the external factors (economic) and obviously
the price of the stock.

Arya Kumar (2018) in her study identifies the individual performance of cement
industries and present their performance from different angles and rank them through
various economic ranges. This analysis make them to know their actual level of
performance by comparing with all leading cement companies. Addition to it for the
development of the industry few suggestions is given to the market player of Indian
cement industry that will help for the formulation of strategy which in turn excel the
total industry in future.

Dhivya J (2017) studied the financial performance of the cement industry and evaluate
the profitability, liquidity and the operational position of the industry. the study
indicated that the company’s liquidity position and solvency are in comfortable
position. It examined minutely and evaluating the financial condition and the results of
operations (i.e., the performance) of a business enterprise. The liquidity position of the
company is satisfactory hence, the company can meet out its short –term liabilities. The
solvency ratios indicated that the company is also strong in solvency as there may not
be a problem in fulfilling their long-term liabilities. The study suggested that the
company may improve its profitability by measures like cost reduction, control and
modernization of the production.

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Pravin T Patel & Manoj Shah (2017) in the study titled “A Financial Performance
Analysis of Selected Indian Cement Company” evaluated the profitability of cement
companies in India. The study also evaluated the problems and prospects of selected
cement companies and suggested that the company should enrich its performance for
meeting various challenges in future and help management to take key decisions.

Pankaj Yadav (2017) in his study “An Analysis of Indian Cement Industry Based on
Profitability Performance” attempted to study about the profitability performance of 10
leading cement manufacturers in India. It also makes an effort to observe and test the
inter firm’s industry position. Profitability ratios are ranked and selected into a uniform
boundary to compare their performance. The study revealed that Shree Cement was in
the highest profitability position during the study period compared to other industry
players. The companies selected for the study shows that the industry is somewhat
doing well as far as profitability ratios are concerned.

Kumar Mohan M.S, Vasu. V. and Narayana T. (2016) A study has been made using
different ratios, mean, standard deviation and Altman’s Z score approach to study the
financial health of the company. The study reveals that there is a positive correlation
between liquidity and profitability ratios except return on total assets as well as Z score
value indicate good health of the company.

Farrukh Ijaz & Faizan Naqv (2016) in their study pointed out that how well an entity
is utilizing its resources to maximize the shareholders wealth and profitability. It
provides a comprehensive study of the financial performance literature with respect to
the cement industry of Pakistan. Return on Investment (ROI) is taken as predicted
variable and five ratio parameters are taken as predictor variables. The study found that
all parameters have positive relationship with the dependent variable except the
leverage ratios which has insignificant relationship.

The study shows that the overall financial performance of the company depends upon
the profitability position, liquidity position, and cash conversion cycle and asset
utilization ratios which have high correlation with one another.

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Ganesan (2016) studied the financial performance of Ultra Tech Cement Ltd in India.
Instead of using the common method of analysis, the financial performance is analysed
through operating performance, financial strengths and weaknesses, and utilization of
fixed assets, and working capital. it is observed that all the Ultra Tech Cement Ltd
perform well during this period. It can be concluded that given the sustained growth in
the housing sector, the governments’ emphasis on infrastructure (both the national and
state level) and increased domestic and global demand, the prospects for Indian cement
industry is exceedingly promising. It is observed that the cement companies have
matured with the help of all indicators of performance, such as size, production,
capacity utilization, consumption and exports, technology of production and quality of
product.

Anas Khan &Basman (2016) analyses the financial performance of five major cement
companies in India. It shows that there is a significant difference in selected cement
companies in India with respect to gross profit ratio, net profit ratio, current ratio, quick
ratio, and debt equity ratio.

Sasikala & Balakrishnan (2015) in their study analysed the problems and prospects of
selected cement companies in India. From the study it is found that the company should
enrich its performance for meeting challenges and exploiting chances in future and
helps the management to take key financial decisions. It also finds out the extent where
the industries can expand the position precision of its assets and funds.

Madiha Gohar et al. (2015) analysed the impact of capital structure on firms’ financial
performance in Construction and Material (Cement) Sector of Karachi Stock Exchange.

This study is related to the effects of empirical capital structure on the firm’s financial
performance. The balanced penal regression and correlation were used for analysis.
Also, financial performance of the sector is not influenced by the controlling variable
(size of the firm) and it may conclude that the optimal capital structure may not have
such importance in this sector.

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Dr. M. Thyigarajan and Mr J. Uday Kumar (2015) in their paper “Profitability
analysis of selected aluminium companies in India” the main objective of this study
was to analyse the profitability position of the selected aluminium companies for 10
years (2005-2014). The study was based on the secondary data and the tools used for
analysis are Mean, Standard deviation, co-efficient of variation and compound annual
growth. The study found out that the National Aluminium Company Limited shows
satisfactory performance in related with profitability.

Mohan Kumar, Safeer Pasha & Bhanu Prakash (2015) explained that Cement
industry is a largest industry in world economy and Indian cement industries place
second largest in the world. The study mainly focuses on analysis of profitability of
selected cement companies in India during period of 2005 to 2014, the tools used for
analysis are mean, standard deviation, co-efficient of variation and compound annual
growth rate. From the study it is found that the profitability position of Ambuja cements
is satisfactory when compared to other companies.

Dr. Md. Mushfiqur Rahman (2014) examined the ratio study of variables such as
solvency ratio, profitability ratio, operation or turnover ratio, and return on assets and
equity of Square Pharmaceuticals Ltd. For 8 years, this analysis gathered data and used
statistical instruments. The company's output through used ratio analysis shows that the
current asset ratio shows a fluctuating pattern, the company's liquidity position shows
not good and the profitability position and other ratios show a satisfactory amount.

Rapheal Nisha (2013) The author attempted to evaluate the financial performance of
Indian tyre industry. The study was conducted for period 2003-04 to 2011-12 in-order
to analyse the performance with financial indicators, sales trend, export trend,
production trend etc. The result suggests that the key to success in industry is to
improve labour productivity and flexibility and capital efficiency.

Hotwani Rakhi (2013) The author evaluates the profitability position and growth of
the company in light of sales and profitability for past ten years. Data is analysed
through rations, standard deviations and coefficient of variance. The study reveals that
there not exists a strong relationship between sales & profitability of company.

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Hajihassani (2012) “A Comparison of Financial Performance in Cement sector in
Iran”. Using financial ratios and measures from Iranian cement companies, this study
compares the financial performance for the years 2006 to 2009. Three basic categories
and measurements, including two indicators, are used to categorise financial ratios.
This study comes to conclusion that cement firms perform differently when measured
by profitability ratio than when measured by liquidity ratio or financial leverage.

Dharmendra S. (2011) Undertook a study to analyse the effect of various determinants

on the profitability of the selected companies. It concluded that debt equity ratio,
inventory ratio, total assets were important determinants which effect positive or
negative effect on the profitability. The study suggested to improve solvency so as to
reduce fixed financial burden on the company profit & give the benefit of trading on
equity to the shareholders.

Anupam et al. (2011) studied financial position and performance of the Iron and Steel
companies of India in a more practical and time saving manner. the study was to
identify the underlying categories present amongst the financial ratios so as to confirm
or modify the conventional categorization of financial ratios. In this study Factor
Analysis has been applied over audited financial data of selected cement companies of
India for a period of 10 years. Factor Analysis, conducted over remaining variables,
identifies 8 underlying categories (factors). Multiple Regression Analysis is conducted
taking the factor scores for each such factor as dependent variable and constituent
variables as independent variables.

S. Chandrakumarmangalam and P. Govindasamy(2010) investigated the

relationship between leverage (financial leverage, operating leverage and combined
leverage) and earning per share, and this study also explains the relationship between
the Debt equity ratio and Earning per Share and how effectively the firm be able debt
financing. The results of the study suggest’s that the leverage and profitability and
growth are related and the leverage is having impact on the profitability of the firm.

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Sanjay J Bhayani (2010) in his study revealed that judging the profitability of the firm
is not an independent decision. It suggested that efficiency, liquidity and age emerge as
an important factor affecting profitability. The results indicate that some of the
independent variables considered in this study have weak impacts on profitability. It
shows that liquidity, age of the firm, operating profit ratio, interest rate and inflation
rate has played a vital role in the determination of the profitability of Indian Cement
Industry. The results of the study appear to indicate that liquidity ratio is a useful factor
influencing firm performance.

Rajamohan S & Vijayaraghavan T (2008) have conducted a study on production

performance of Madras Cement Ltd . To analyse the comparative financial performance
of Madras Cement Ltd and all other cement units, Mann-Whitney U test was applied.
The results of the study showed that the production performance of all other cements
units in India.

Sudipta Ghosho (2008) has analysed the liquidity performance of Tata Iron and Steel
Company (TISCO). During the period of the study, it was found that the liquidity
position of the company, on the basis of current ratio as well as quick ratio, was not
satisfactory. It indicated that the share of current assets in total assets of the company,
on an average, was 29.1 percent during the period of study. The study suggested that to
maintain overall control of liquidity position, the company should give special attention
to the management of current assets and also found that the degree of influence of
liquidity on its profitability was low and insignificant.

Bardia (2006), in his study on Liquidity Management of Steel Authority of India

Limited, has evaluated the overall performance of liquidity maintained by steel sector
and the amount tied-up in various components of working capital. From the study it
was found that there was a positive relationship between liquidity and profitability.

Alovsat Muslumov (2005) in his study found out that the privatization was associated
with a declining value added and shareholders’ profitability in Turkish cement industry.
A decline in both were mainly caused by the decrease in return on assets. The decline in
the return on asset was traced to declining asset productivity. These results are not
consistent with previous cross-sectional privatization studies and a number of country
studies.

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Jayanth Sathaye (2005) According to the study, there have been large investments in
new cement kilns and related production machinery as a result of the Indian cement
industry's recent rapid growth. As a result, the cement industry in India is made up of
some of the most energy-inefficient plants and best-practice facilities worldwide. As
output unavoidably increases in the following decades, the challenge for the Indian
cement industry is to update or shut down the older, inefficient plants while acquiring
the best cement production technologies.

Ajay Swaminathan S (2004) undertook a study on financial analysis of India cement

limited for a period of 5 years from 1999- 2000to 2003- 2004. The study used various
ratios for analysis. From the study it is that found dismal performance in the last two
years of the study period while the first 3 years of the Study showed a decent
performance for the company. The study also found that the earnings of the company
had considerably come down resulting in the negative.

Ghosh S.K., and Maji S.G. (2004), in their paper, attempted to examine the efficiency
of Working capital management of the Indian cement companies from the year 1992-
1993 to 2001-2002. The study indicated that the Performance of Indian cement
industry, as a whole is not satisfactory during the selected period of the study.

Venkataraman etal. (2004) studied the financial performance and also to predict the
risk of bankruptcy for selected cement companies. It reveals that liquidity, working
capital turnover efficiency and solvency position of the selected cement companies are
not satisfactory. There is a need for predicting financial failure on-time for taking
curative and corrective measures in relating to financial investments, lending and
borrowings. The problem of business failures are attributed to both financial and
nonfinancial causes, such as poor planning, improper sales forecasting, inexperience
management, technological advances, excessive manpower, frauds and changes in
tastes and preferences of customers. The prediction of business failure is an important
for taking timely corrective and remedial measures for protecting business from the
problem of bankruptcy.

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Santany Kumar Ghosh & Etal (2003) “Utilization of current Asset and Operating
profitability: An Empirical study on Cement in India” The study came to conclusion
that the firm's operating profitability is positively correlated with the present asset level.

Padmaja Manoharan (2002) on her analytical study on “Profitability of cement

industry in India” has revealed the variation in profitability of Indian cement companies
depending on age, size and region. From the study it is identified that quality of
earnings depends on management and leverage management. The study concludes that
the profitability and quality of earnings is influenced by the liquidity factor.

Nand Kishore Sharma (2002), in his Study on financial appraisal of cement industry
in India, has found that the liquidity position was decreasing, current ratio and quick
ratio showed a decreasing trend and also these ratios varied from time to time. On
comparing the current ratio and quick ratio of cement industry, six companies were
found higher and four companies lower than industry average. The solvency position in
terms of debt-equity ratio has showed a decreasing trend in the first 4 years of study,
after that, it shows an increasing trend. The ratio of fixed assets to total debt showed
more than 100 percent which indicated that the claims of outsiders were covered by the
fixed assets of the cement companies.

Muthukrishnan S (2002) undertook a study to analysis the productivity in cement

industry in Tamil Nadu. For this purpose the researcher selected four cement companies
for the study period of 10 years from 1990-91 to 1999- 2000.The study used Alan
Lawler’s approach, single deflation method, Kendrick index and various ratios. The
study found that the cement industry will have to devise strategies for economizing the
use of inputs and curtailing cost so as to remain competitive in the global environment.

Chandrashekaran. N (1993) has made an attempt to evaluate to examine determinants

of profitability in cement industry & identified that profitability was determined by
structure, as well as, behavioural variables and also identified that the other variables
which influenced profitability are working capital, inventory turnover ratio. Some of
the main chances in the cement environment during 1980s identified in the study were:
from complete control to de-control, number of new entrants and substantial additions
of capacity, changing technology from inefficient dry from conditions of scarcity of
cement to near gloat in the market.

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Chandrasckaran N (1994) has studied about the market structure of the Indian
Cement industry like demand and supply. It was found that the demand and supply gap
has been considerably reduced and supply of cement during the period of study has
increased due to creation of additional capacity and capacity utilization.

Jain, D.C. has analysed the financial statements of cement companies in India. From
the study it is found that their financial performance was satisfactory, on the basis of
ratio analysis made.

Kumar B. Das (1987) has made an analysis of the financial performance of the cement
industry. It is found that the net fixed assets as a percentage of total assets decreased for
the period 1970-71 to 1977-78 that was 553.5% to 44.04 % respectively. Current
liabilities have increased than the current assets. Liquidity performance of the cement
industry is not healthy during the study period. The Debt Asset ratio has downward
trend and Debt Equity ratio has slightly increased while net worth ratio has decreased
over the years.

Nagarajrao B.S and Chandar K (1980) analysed the financial efficiency of cement
companies for the period of 1970 -71 to 1977-78.From the study it is found that ,
profitability of selected cement companies has been found downward trend from 1970-
71 to 1974-75 due to inflation, rise in manufacturing cost, continuous fall in capacity
utilization etc.

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 CHAPTER 3
THEORETICAL FRAMEWORK

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3.1 FINANCIAL PERFORMANCE ANALYSIS

Financial performance is a subjective measure of how well a firm can use assets from
its primary mode of business and generate revenues. The term is also used as a general
measure of a firm's overall financial health over a given period. Analysts and investors
use financial performance to compare similar firms across the same industry or to
compare industries or sectors in aggregate. Financial analysis refers to the process of
studying and assessing a company’s financial statements—a collection of data and
figures organized according to recognized accounting principles. The aim is to
understand the company's business model, the profitability (or loss) of its operations,
and how it's spending, investing, and generally using its money, summarizing the
company by the numbers.

A financial performance analysis examines the company at a specific period in time—

usually, the most recent fiscal quarter or year. There are several tools and techniques
which may be used when evaluating a company’s financial status. These tools and
techniques can especially be useful when reviewing a company’s financial data over
time (time-series analysis) vis-a-vis the performance of other companies (cross-
sectional analysis). These tools and techniques include financial ratios, common-sizing
financial statements, currency translations, and chart analysis.

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3.1.1 RATIO ANALYSIS

Ratio analysis is a widely used tool of financial analysis. It is defined as the systemic
use of ratio to interpret the financial statements so that the strengths and weaknesses of
a firm, as well as its historical performance and current financial condition, can be
determined.

Ratios make the related information comparable. A single figure by itself has no
meaning but when expressed in terms of related figures it yields significant inferences.
Thus ratios are relative figures reflecting the relationship between related variables. It
can be used to check various factors of a business such as profitability, liquidity,
solvency and efficiency of the company or the business.

Ratio analysis is mainly performed by external analysts as financial statements are the
primary source of information for external analysts. The analysts very much rely on the
current and past financial statements in order to obtain important data for analysing
financial performance of the company. The data or information thus obtained during the
analysis is helpful in determining whether the financial position of a company is
improving or deteriorating.

TYPES OF RATIOS

Ratios can be classified into 4 main categories.

1. Liquidity Ratio
2. Profitability Ratio
3. Solvency Ratio
4. Activity Ratio

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1. LIQUIDITY RATIOS:

A liquidity ratio is a type of financial ratio used to determine a company’s ability

to pay its short-term debt obligations. This metric helps determine if a company
can use its current, or liquid, assets to cover its current liabilities. The important
liquidity ratios are current ratio, quick ratio, inventory turnover ratio etc.

The data analysis of liquidity ratios of selected companies is as follows:

• Current Ratio
The current ratio measures whether the company have enough current assets to
meet its short-term liabilities. The ratio is calculated by comparing the current asset
of the firm with its current liabilities. A high current ratio indicates the company
have the ability to pay off its creditors in short run.
Standard or ideal current ratio is 2:1.

Current Ratio = Total current asset / Total current liabilities

• Quick Ratio
Quick ratio is also known as acid test ratio. this ratio measures the ability of the
firm to pay off their short-term obligations with the most liquid assets. The ratio
can be computed by dividing the quick asset with current liabilities. Quick asset is
the current asset without inventories. The Ideal liquid or quick ratio is 1:1.

Quick Ratio = Current assets – Inventories/ Current liabilities

Liquid ratio is considered to be superior to current ratio in testing the liquidity

position of a firm. If the current ratio is 2:1 and quick ratio is 1:1 the liquidity
position may be considered satisfactory.

22
2. PROFITABILITY RATIOS
Profitability ratios are a class of financial metrics that are used to assess a
business's ability to generate earnings relative to its revenue, operating costs,
balance sheet assets, or shareholders' equity over time, using data from a specific
point in time. Profitability ratios indicate how efficiently a company generates
profit and value 6 for shareholders.

The data analysis of profitability ratios of selected companies is as follows:

• Gross Profit Ratio
Gross profit ratio is used to measure the performance and the efficiency of the
company. It is calculated by dividing the gross profit by total net sales of the
company. The gross profit amount is determined by deducting the cost incurred for
the goods sold from the total sales of the company.

Gross Profit Ratio =Gross Profit / Net sale *100

• Net Profit Ratio

Net profit ratio is the ratio of net profit earned by a business and its net sales. It is
one of the best measures to compute the overall performance of the firm and it
measures overall profitability. It shows how much profit is left after all
manufacturing, administration, and finance costs have been deducted from sales
and income taxes have been taken into account. The ideal net profit ratio is 5% –
10%

Net Profit Ratio= Net profit/ Net sales *100

• Operating ratio
In finance the operating ratio is a company’s operating expenses as a percentage of
revenue. This financial ratio is most commonly used for industries which require a
large percentage of revenues to maintain operations.

Operating ratios= Cost of goods sold + operating expense / net sales*100

23
• Return on Investment (ROI)
It establishes the relationship between profit or return and investment.

ROI= (PBIT/capital employed) *100

3. SOLVENCY RATIO
A solvency ratio is a key metric used to measure an enterprise’s ability to meet its
long-term debt obligations and is used often by prospective business lenders. A
solvency ratio indicates whether a company’s cash flow is sufficient to meet its
long-term liabilities and thus is a measure of its financial health. An unfavourable
ratio can indicate some likelihood that a company will default on its debt
obligations.

The data analysis of solvency ratios of selected companies is as follows:

• Fixed asset to net worth ratio

This ratio shows the relationship between fixed asset and shareholders’ fund. The
ratio of fixed assets to net worth indicates the extent to which shareholder’s funds
are sunk into the fixed assets. Generally, the purchase of fixed assets should be
financed by shareholder’s equity including reserves, surpluses and retained
earnings.

Fixed asset to net worth ratio= Fixed Asset/ Net Worth

A value higher than 0.75 (optimal ratio may vary depending on the industry and
the specific circumstances in which the firm is operating) signifies that the firm in
investing excessively in non-liquid assets. It could mean that there is too little cash
left for day to day operations of the firm. A firm having such a high ratio might not
be prepared to handle any unexpected events that affect their business. Too high a
value indicates low solvency level and too low a value indicates that the firm has
insufficient fixed assets for continued operations.

24
3.2 INDIAN CEMENT INDUSTRY

India is the second largest producer of cement in the world. No wonder, India's cement
industry is a vital part of its economy, providing employment to more than a million
people, directly or indirectly. Ever since it was deregulated in 1982, the Indian cement
industry has attracted huge investments, both from Indian as well as foreign investors.
India has a lot of potential for development in the infrastructure and construction sector
and the cement sector is expected to largely benefit from it. Some of the recent
initiatives, such as development of 98 smart cities, is expected to provide a major boost
to the sector. Aided by suitable Government foreign policies, several foreign players
such as Lafarge-Holcim, Heidelberg Cement, and Vicat have invested in the country in
the recent past. A significant factor which aids the growth of this sector is the ready
availability of raw materials for making cement, such as limestone and coal. Cement
production reached 329 million tonnes (MT) in FY20 and is projected to reach 381 MT
by FY22. However, the consumption stood at 327 MT in FY20 and will reach 379 MT
by FY22. The cement production capacity is estimated to touch 550 MT by 2020.The
Indian cement industry is dominated by a few companies. The top 20 cement
companies account for almost 70 per cent of the total cement production in the country.
A total of 210 large cement plants account for a cumulative installed capacity of over
410 MT, with 350 small plant accounting for the rest. Of these 210 large cement plants,
77 are in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. Sale of cement in
India stood at Rs 58,407 crore (US$ 8.29 billion) in 9 May 20. According to the data
released by Department for Promotion of Industry and Internal Trade (DPIIT), cement
and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion
between April 2000 and March 2020.

25
 Some of the major investments in Indian Cement Industry are as follows:
• In February 2020, Nirmal Group announced acquisition of Emami Cement Limited
(ECL) for an enterprise value of Rs5500crore (US$ 786.95 million).
• In October 2019, UltraTech cement announced plans to invest Rs 940 crore (US$
134.50 million) to increase the production of premium products for strengthening its
position in eastern markets.
• Emami Cement currently has three cement manufacturing assets with a capacity of
5.6 million tonnes.
• In May 2019, SEBI approved Emami Cement Ltd.’s initial public offering (IPO).
• JK cement planned to invest Rs1,700 crore (US$ 246.7 million) to increase its
production capacity to 15 million tonnes by end of 2020.

In order to help private sector companies, thrive in the industry, the Government has
been approving their investment schemes. Some of the initiatives taken by the
Government off late are as below:

• In Union Budget 2020-21, the Government of India has extended benefits under
Section 80 - IBA of the Income Tax Act till March 31, 2020 to promote affordable
housing in India.
• The Union Budget has allocated Rs139 billion (US$ 1.93 billion) for Urban
Rejuvenation Mission: AMRUT and Smart Cities Mission. Government’s
infrastructure push combined with housing for all, Smart Cities Mission and Swachh
Bharat Abhiyan is going to boost cement demand in the country. The move is
expected to boost the demand of cement from the housing segment. As per Union
Budget 2019-20, Government planned to upgrade 125000 km of road length over the
next five years.

An outlay of Rs 27,500 crore (US$ 3.93 billion) has been allotted under Pradhan
Mantri Awas Yojana in the Union Budget 2020-21.

26
3.3 COMPANY PROFILE
1. ACC Ltd

ACC Limited (Formerly the Associated Cement Companies Limited) an Indian cement
producer, headquartered in Mumbai. It is a subsidiary of the Ambuja Cements and a
part of the Adani Group On 1 September 2006, the name of The Associated Cement
Companies Limited was changed to ACC Limited. The company had been established
in Mumbai, Maharashtra on 1 August 1936. ACC Ltd is India's foremost manufacturer
of cement and concrete. The company is engaged in manufacturing and selling of
cement and ready- mixed concrete. They manufacture a range of Portland cement for
general construction and special applications. In addition, they also offer two products
namely; bulk cement and ready mix concrete. The company's operations are spread
throughout the country with 17 modern cement factories more than 90 Ready mix
concrete plants several zonal offices and a vast distribution network of over 11000
dealers. The company was formed by merger of ten existing cement companies. In the
year 1944 they established India's first entirely indigenous cement plant at Chaibasa in
Bihar. In the year 1956 they established bulk cement depot at Okhla Delhi. In the year
1965 the company established Central Research Station at Thane. In the year 1973 they
acquired The Cement Marketing Company of India.

2. Birla corporation Ltd

Birla Corporation Limited is an Indian-based flagship company of the M P Birla group

of companies, founded by Shri Ghanshyam das Birla in the late 1910s and carried on by
Madhav Prasad Birla. In the 1890s, Birla Corporation was a jute manufacturing
company, but over time, it grew to operate four main divisions: cement, jute, linoleum,
and auto trim. Formerly known as Birla Jute Manufacturing Company Limited, with the
expansion of divisions, the company changed their name in 1998 to Birla Corporation
Limited. Under the chairmanship of Shrimati ji Priyamvada Birla, the Company crossed
the Rs. 1,300-crore turnover mark. In 1998, the name was changed from Birla Jute
Manufacturing Company to Birla Corporation Limited.

27
After the demise of Shrimati ji Birla, the Company continued to consolidate in terms of
profitability, competitiveness and growth under the leadership of late Shri Rajendra S.
Lodha, the then Chairman of the M.P. Birla Group. Under his leadership, the Company
posted its best ever results in the years ending on 31.3.2006, 31.3.2007 and 31.3.2008.
The Company continued to record impressive growth in 2008-09 and 2009-10.

3. Dalmia cement (bharat) Ltd

Dalmia Bharat Group, (DBG) is an Indian conglomerate company, Dalmia Cement is

one of India’s pioneering cement companies. which trace their origin to the businesses
established by Ramkrishna Dalmia and Jaidayal Dalmia. The Dalmia brothers
established a business conglomerate in eastern India, in the first half of the 20th
century. The Company markets cement and other allied products for oil wells, railway
sleepers, air strips, and road construction projects. Dalmia Cement serves customers in
India. The Dalmia Bharat Group is engaged in cement, sugar, refractories, renewable
energy and other businesses. The Group traces its origin to Dalmia Cement (Bharat)
Limited, established in 1939. The Dalmia Bharat Group was officially incorporated on
10 February 2006 as Sri Kesava Mines & Minerals Limited, with its office in Dalmia
Puram, Tamil Nadu. On 19 February 2010, the name was changed to DCB Renewable
Energy and Industries Limited. On 25 March 2010, the name was changed; this time, to
Dalmia Bharat Enterprises Limited. The present name, Dalmia Bharat Ltd was adopted
in 2012. Puneet Dalmia is controlling the business of DCBL and OCL.

4. Decaan cement Ltd

DCL was promoted and incorporated as a Public Limited Company in the year 1979 by
a technocrat entrepreneur Mr. M B Raju, who is also its current Executive Chairman.
The cement plant which commenced commercial production in 1982, is located at
Bhavanipuram in Nalgonda District of Telangana, at around 165 kms from Hyderabad.
The plant manufactures a wide variety of cements, including specialty cements for
certain special applications, conforming to BIS, British and ASTM standards, as per
requirements. The regular grades of cement manufactured include OPC 43, OPC 53,
PPC and PSC. Specialty cements produced include S53 for railway applications, SRC
(Sulphate Resistant Cement), Low Heat Cement, Low Alkali Cement etc.

28
5. India Cements Ltd

India Cements Limited is a cement manufacturing company in India. The company is

headed by former International Cricket Council Chairman N. Srinivasan. It was
established in 1946 by S. N. N. Sankar Linga Iyer and the first plant was set up at
Thalaiyuthu in Tamil Nadu in 1949. It has 7 integrated cement plants in Tamil Nadu,
Telangana and Andhra Pradesh, one in Rajasthan (through its subsidiary, Trinetra
Cement Ltd) and two grinding units, one each in Tamil Nadu and Maharashtra with a
capacity of 15.5 million tonnes per annum. Sankar Cement, Coramandel Cement and
Raasi Gold are the brands owned by India Cements. India Cements owned the Indian
Premier League franchise Chennai Super Kings from 2008 to 2014.

6. JK Lakshmi cement ltd

JK Lakshmi Cement Limited is a part of the prestigious JK Organisation. This eminent
industrial house is over a hundred and twenty five years old and boasts operations in
India and abroad with a leadership presence in the fields of tyre, cement, paper, power
transmissions, sealing solutions, dairy products and textiles. We are a renowned and
well established name in the Indian Cement industry for three decades and have an
annual turnover of over Rs 4000 crores. The combined capacity of the company is 13.3
Million MT per annum.

7. Mangalam cement ltd

Mangalam Cement Limited was promoted in the year 1978 by the famed House of Syt
B.K. Birla, the most eminent and illustrious industrialist of the country. It is a
professionally managed and well-established cement manufacturing company enjoying
the confidence of consumers because of its superior quality product and excellent
customer service. As a B.K. Birla Group wing the company is producing cement in 43
and 53 grades and Portland Pozzolana Cement (PPC) using the dry process and
marketing them under the brand names of Mangalam and Birla Uttam.

29
8. Ramco cement Ltd

The Ramco Cements Limited (formerly Madras Cements Limited) is a company of the
Ramco Group, a business group based in Chennai, India. Ramco Cements has 5
Integrated units, 5 grinding units pan India and 1 RRD Centre in Chennai. The
company also produces ready mix concrete and dry mortar products and operates wind
farms. he main product of the company is Portland cement, manufactured in eight
production facilities that includes Integrated Cement plants and Grinding units with a
current total production capacity of 16.45 MTPA (out of which Satellite Grinding units’
capacity alone is 4 MTPA).

9. Shree cement Ltd

Shree Cement is an Indian cement manufacturer, founded in Beawar, Rajasthan, in

1979. Now headquartered in Kolkata, it is one of the biggest cement makers in
Northern India. Shree Cement has been ranked 4th in 2017 Responsible Business
Rankings developed by IIM Udaipur. Plants are located in Jaipur, Rajasthan,
Uttarakhand, Haryana, UP, Chhattisgarh and Aurangabad in Bihar. Shree cements was
clearly the second largest cement company in India (By Market Cap) in 2018. The
company has installed 120 MW captive power plants split into two locations (Beawar
& Ras) to meet the complete power needs of a 15 million tonne Integrated Cement
Plant. Commissioned 2x18 MW Greenfield Power Plant at Beawar in 2002 and running
successfully.

10. Ultra tech cement

UltraTech Cement Limited is an Indian cement company based in Mumbai, and a part
of Aditya Birla Group. UltraTech is the largest manufacturer of grey cement, ready-mix
concrete (RMC) and white cement in India with an installed capacity of 116.75 million
tonnes per annum. It is the only company in the world to have a capacity of over 100
million tonnes in a single country, outside of China. Behind UltraTech Cement's
achievements is a highly motivated and dynamic team comprising of more than 22,000
employees spread across 5 countries, and is constantly growing. With an annual
capacity of 116.75 million tons, UltraTech Cement is amongst the top three cement
producers globally, and number one manufacturer of grey, ready mix concrete and
white cement in India.

30
 CHAPTER 4
ANALYSIS AND INTERPRETATION

31
4.1 LIQUIDITY RATIOS
4.1.1 CURRENT RATIO

TABLE 4.1
CURRENT RATIO OF SELECTED CEMENT COMPANIES IN INDIA
(2011-2021)

YEAR COMPANY NAME CURRENT RATIO

2011-2021 ACC Ltd 1.472880109
2011-2021 Birla corporation Ltd 2.252410153
2011-2021 Dalmia cement 1.323219335
(Bharat) Ltd
2011-2021 Deccan cement Ltd 1.858085018

2011-2021 India cement Ltd 0.724192206

2011-2021 JK Lakshmi cement 0.915605622
Ltd
2011-2021 Mangalam cement Ltd 1.352110383
2011-2021 Ramco cement Ltd 0.779199269

2011-2021 Shree cement Ltd 1.811525088

2011-2021 Ultra tech cement 1.274152631

Interpretation:

The above table reveals the average value of current ratio of the cement industries.
Here, Birla corporation Ltd. has the highest current ratio with an average value of
2.252410153. That means the company has greatest ability to meet short term debt but
very high current ratio also indicates that too much money is blocked in current assets,
and funds are not properly used. In the above table India cement Ltd has the lowest
ratio. The average current ratio value of India cement Ltd is 0.724192206 which
indicates the company will find difficult to pay of its debt, it shows inadequate working
capital of company.

32
4.1.2 QUICK RATIO

TABLE 4.2

QUICK RATIO OF SELECTED CEMENT COMPANIES IN INDIA

(2011-2021)

YEAR COMPANY NAME QUICK RATIO

2011-2021 ACC Ltd 1.135108959
2011-2021 Birla corporation Ltd 1.635757445
2011-2021 Dalmia cement (Bharat) 1.113910687
Ltd
2011-2021 Deccan cement Ltd 1.261336527

2011-2021 India cement Ltd 0.468999058

2011-2021 JK Lakshmi cement Ltd 0.684054662
2011-2021 Mangalam cement Ltd 0.936481169
2011-2021 Ramco cement Ltd 0.463623189

2011-2021 Shree cement Ltd 1.294117299

2011-2021 Ultra tech cement 0.956351728

Interpretation:
From the above table Birla corporation Ltd has highest quick ratio with value
1.635757445 and Ramco cement Ltd shows lowest value 0.463623189.
An Acid test ratio of 1:1 is considered satisfactory as a firm can easily meet all its
current liabilities, so Birla corporation ltd is financially sound and good and Ramco
cement ltd. is deemed to be unsound because its ratio is less than 1.

33
4.2 PROFITABILITY RATIOS

4.2.1. GROSS PROFIT RATIO

TABLE 4.3
GROSS PROFIT RATIO OF SELECTED CEMENT COMPANIES IN INDIA
(2011-2021)
YEAR COMPANY NAME GROSS PROFIT
RATIO
2011-2021 ACC Ltd 51.03574927
2011-2021 Birla corporation Ltd 42.22218531
2011-2021 Dalmia cement (Bharat) 50.15981357
Ltd
2011-2021 Deccan cement Ltd 53.34997

2011-2021 India cement Ltd 50.31760305

2011-2021 JK Lakshmi cement Ltd 45.7281395
2011-2021 Mangalam cement Ltd 45.2946084
2011-2021 Ramco cement Ltd 53.32466049

2011-2021 Shree cement Ltd 46.55648311

2011-2021 Ultra tech cement 52.24185347

Interpretation:
The ideal Gross profit ratio is 20 % to 25%. According to this, Deccan cement Ltd is
showing highest ratio that is 53.34997, so this is the most efficient company in terms of
gross profit and Birla corporation Ltd has the lowest ratio which is 42.222185.

34
4.2.2 NET PROFIT RATIO
TABLE 4.4

NET PROFIT RATIO OF SELECTED CEMENT COMPANIES IN INDIA

(2011-2021)
YEAR COMPANY NAME NET PROFIT RATIO
2011-2021 ACC Ltd 12.55171866
2011-2021 Birla corporation Ltd 8.073078377
2011-2021 Dalmia cement (Bharat) 3.342721351
Ltd
2011-2021 Deccan cement Ltd 12.31556106

2011-2021 India cement Ltd 2.14096411

2011-2021 JK Lakshmi cement Ltd 8.886943212
2011-2021 Mangalam cement Ltd 7.668785445
2011-2021 Ramco cement Ltd 13.44857398

2011-2021 Shree cement Ltd 14.73044829

2011-2021 Ultra tech cement 11.91013258

Interpretation:
From the above table it is clear that Shree cement Ltd shows highest value with an
average net profit ratio of 14.73044829. Higher the ratio means better operational
efficiency of the firm. So lower ratio means worst operational efficiency.
In this context, India cement Ltd is in the worst position because it shows net profit
ratio of 2.14096411. It is an index of efficiency of the business. So, India cement Ltd is
inefficient in their business.

35
4.2.3 OPERATING RATIO

TABLE 4.5
OPERATING RATIO OF SELECTED CEMENT COMPANIES IN INDIA
(2011-2021)
YEAR COMPANY NAME OPERATING RATIO
2011-2021 ACC Ltd 142.99514
2011-2021 Birla corporation Ltd 157.9161
2011-2021 Dalmia cement (Bharat) 140.2999
Ltd
2011-2021 Deccan cement Ltd 148.8728

2011-2021 India cement Ltd 149.849

2011-2021 JK Lakshmi cement Ltd 151.1298
2011-2021 Mangalam cement Ltd 155.7846177
2011-2021 Ramco cement Ltd 140.2599

2011-2021 Shree cement Ltd 135.6279696

2011-2021 Ultra tech cement 137.8148

Interpretation
This ratio is important to understand general profitability of the firm. Lower ratio
means the more profitable are the operations.
So, from the above table Shree cement Ltd. has the lowest average ratio which is
valued to 135.6279696. Ideal operating ratio is 75% to 85 %. In this the highest average
ratio is occupied by Birla corporation Ltd. It shows 157.9161074 as the average value.
It means operation cost is more than its sales value. It indicates that the margin for
meeting non-operating expenses, creating reserves and paying dividend is less.

36
4.2.4 RETURN ON INVESTMENT (ROI)

TABLE 4.6
ROI RATIO OF SELECTED CEMENT COMPANIES IN INDIA
(2011-2021)
YEAR COMPANY NAME ROI
2011-2021 ACC Ltd 0.125517187
2011-2021 Birla corporation Ltd 0.080730784
2011-2021 Dalmia cement (Bharat) 0.033427214
Ltd
2011-2021 Deccan cement Ltd 0.123155611

2011-2021 India cement Ltd 0.021409641

2011-2021 JK Lakshmi cement Ltd 0.088869432
2011-2021 Mangalam cement Ltd 0.076687854
2011-2021 Ramco cement Ltd 0.13448574

2011-2021 Shree cement Ltd 0.147304483

2011-2021 Ultra tech cement 0.119101326

Interpretation
ROI indicates an efficiency of generating profit by minimum utilization of capital
employed. So, from the above table it is clear that Shree cement ltd which is having a
high value (0.147304483 ) has more efficiency in the context of utilisation of capital for
profit maximisation. India cement Ltd which is having lower value(0.021409641) is in
the worst position to make profits by using its capital.it shows. The standard return on
investment is 15%. According to this standard India cement Ltd is in a bad position.

37
4.3 SOLVENCY RATIO

4.3.1 FIXED ASSET TO NETWORTH RATIO

TABLE 4.7
FIXED ASSET TO NET WORTH RATIO OF SELECTED CEMENT COMPANIES
IN INDIA (2011-2021)

YEAR COMPANY NAME FIXED ASSET TO NET

WORTH RATIO
2011-2021 ACC Ltd 3.940
2011-2021 Birla corporation Ltd 5.384
2011-2021 Dalmia cement (Bharat) 10.694
Ltd
2011-2021 Deccan cement Ltd 5.193

2011-2021 India cement Ltd 12.108

2011-2021 JK Lakshmi cement Ltd 7.633
2011-2021 Mangalam cement Ltd 7.679
2011-2021 Ramco cement Ltd 6.546

2011-2021 Shree cement Ltd 1.938

2011-2021 Ultra tech cement 5.806

Interpretation:
The ratio of fixed assets to net worth indicates the extent to which shareholder’s funds
are sunk into the fixed assets. The higher the ratio becomes, the lower the solvency,
since more funds are tied up with fixed assets.
From the table above it is found that India Cement Ltd which is having a high ratio
(12.108) is less solvent than that of other companies. On the other hand Shree Cement
Ltd having a lower ratio indicates the sound solvency position of the company.

38
4.4 HYPOTHESIS TESTING

HYPOTHESIS 1

H0 1: There is no significant relationship between Overall Profitability and Liquidity of

Companies.
Ha 1: There is significant relationship between Overall Profitability and Liquidity of
the companies.

RESULT:
The following figures shows the result of T-Test in SPSS and Ms-Excel.

FIG 4.1

FIG 4.2

FIG. 4.3

39
 t-Test: Paired Two Sample for Means

LIQUIDITY PROFITABILITY
Mean 2.3705 204.6531
Variance 0.749318944 36.73745366
Observations 10 10
Pearson Correlation 0.132265059
Hypothesized Mean Difference 0
df 9
t Stat -106.4662116
P(T<=t) one-tail 1.44386E-15
t Critical one-tail 1.833112933
P(T<=t) two-tail 2.88772E-15
t Critical two-tail 2.262157163

Interpretation:
P value shows the significance. Here the P value is less than 0.05 so, we can Accept the
Alternate Hypothesis. Pearson’s Correlation value of 0.132 also shows that there is a
slightly positive correlation between two variables.
So, it is found that there is a significant relationship between overall liquidity and
profitability of the companies.

40
HYPOTHESIS 2

H0 2: There is no significant difference in Net Profit of Shree Cement before and after
Covid-19.
Ha 2: There is significant difference in Net Profit of Shree Cement before and after
Covid-19

RESULT

FIG 4.4

Interpretation:
The above figure shows that the mean value of Net profit before and After Covid is
different. The mean value of profit after Covid (1611.0533) is higher than that of Profit
before Covid (1288.8067).

FIG.4.5

41
 FIG 4.6

Interpretation:
The above figure shows the mean difference between profit before and after Covid
(-322.24667). P value is 0.428 which is greater than the standard 0.05, this indicates
that there is no significant difference in Net profits of Shree Cement Ltd before and
after Covid. Hence, the null hypothesis is failed to reject.

42
 CHAPTER 5

FINDINGS, SUGGESTIONS & CONCLUSION

43
 5.1 FINDINGS

• The company Birla corporation ltd has the highest position in terms of liquidity as it
having a current ratio more than 2. It is considered to be satisfactory and this company
have ability to repay the debt and India cement ltd is in lowest position.
• As in case of quick ratio, Birla corporation Ltd is having best position, followed by
Shree cement Ltd, Deccan Cement, ACC Ltd and Dalmia (Bharat) Ltd. All other
companies have a trouble in paying current liabilities as its ratio is less than the ideal
ratio, in which Ramco cement Ltd has lowest ratio and is considered as unsound
company.
• Gross profit ratio is a best indicator of company’s profitability position. Operating
performance of Deccan cement Ltd is in the best position, it is more efficient in its
operations. and Birla corporation Ltd is having the last position in case of Operating
performance as its GP ratio is the least compared to other companies.
• Net Profit Ratio of Shree Cement ltd, followed by Ramco cement ltd, ACC Ltd,
Deccan Ltd and Ultratech cements shows a significant ratio in which Shree cement
holds the first position. India cement Ltd shows lower net profit ratio. It indicates that,
this company use an ineffective cost structure or poor pricing strategies.
• All the companies are showing high operating profit ratio. It reveals adequate resource
management. Birla corporation ltd has the highest operating profit ratio. And Shree
cement has the lowest ratio.
• Shree Cement ltd shows a highest ROI and it indicates that the company is effective in
generating profits from its investment. On the other hand, India Cement Ltd is having a
lower ratio and inefficiency in generating profits out of investments.
• India cement ltd and Dalmia cement having the high fixed asset to net worth indicates
that the firm is vulnerable to solvency problems. Almost all other companies are
showing above ideal value in fixed asset to net worth ratio. So, in overall cement
industries have good financial health.
• By conducting the T-TEST it is found that the Liquidity and Profitability of the
companies are significantly related to each other.
• There is no significant difference in Net Profit of Shree Cement Ltd efore and after
Covid19.

44
5.2 SUGGESTIONS

• Most of the companies having low current ratio than standard and it represents low
liquidity of the companies. So, all company should keep proper current asset to meet
their current needs. Always keep high current asset it will help them to satisfy the short-
term needs.

• Quick ratio of around 5 companies are below the ideal range in which they have to
improve by increasing sales and inventory turnover, by paying off liabilities quickly,
discarding unproductive assets etc.

• Cement companies should try to sustain their competitiveness and must also focus on
their performance.

• As the operating cost of the companies are high, general profitability of the sector
needs more concentration and makes necessary management to decrease cost of goods
sold and operating expenses.

45
5.3 CONCLUSION

The financial health plays a significant role in the successful functioning of a firm.
Therefore, the financial health of cement industries has been subject to empirical
investigation. This study aims at analysing financial performance of cement industries
in India and comparing them on the basis of some ratios. From the study profitability,
solvency, liquidity positions are analysed and the result showing development of
cement industry from 2011 onwards. Ratios like current ratio, quick ratio, gross profit
ratio, net profit ratio, etc. are used for data analysis. According to the study's findings,
all cement sectors differ significantly from one another in terms of growth rate and
efficiency position. In liquidity ratios overall performance of the cement sector is
satisfied and Birla corporation ltd is well performing company in case of liquidity ratio.
Researchers, cement manufacturers, investors, and policy officials will all benefit
greatly from the study. Maintaining liquidity, profitability, and solvency can help
certain businesses retain their financial soundness.

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