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A STUDY ON FINANCIAL PERFORMANCE OF ULTRATECH CEMENT LTD AND

AMBUJA CEMENTS LTD

Article in Juni Khyat Journal · March 2022

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Aravam Dhanunjayulu Dr K. Jayachandra Reddy

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Juni Khyat ISSN: 2278-4632
(UGC Care Group I Listed Journal) Vol-12 Issue-03 No.01 March 2022
A STUDY ON FINANCIAL PERFORMANCE OF ULTRATECH CEMENT LTD AND
AMBUJA CEMENTS LTD

Aravam Dhanunjayulu Research Scholar, Department of Commerce, S. V. University, Tirupati,

Andhra Pradesh. Email: adhanunjayulu@gmail.com
Prof. K. Jayachandra Reddy Professor, Department of Commerce, S. V. University, Tirupati,
Andhra Pradesh. Email: drjcreddy@gmail.com

ABSTRACT:
India is the world’s second largest cement producer. Cement is a main raw material for building the
infrastructure projects, housing facilities and industrial development. Present, Government of India
focusing on various development activities like industrial parks, smart cities, highways, metros and
irrigation projects etc. Not only government projects, there is lot of rural and urban housing
development also creating new demand to cement. Cement industry is high capital-intensive business
and running of business requires lot of working capital. To establish and running cement company is
not an easy task, it involves strong financial muscle and proper financial management. The present
study mainly focused on analysis of the financial strengths and weakness of two large market
capitalization cement companies, which is listed in Indian stock exchange. And the study is purely
based on secondary data, 10 years (2011-12 to 2020-21) of period taken for research purpose. Various
financial ratios and statistical techniques to evaluate the profitability performance, efficiency of
utilisation of fixed assets, liquidity and solvency position of selected cement companies were used in
the present study. At the end of the study the researcher reveals financial strengths and weakness of
selected cement companies during the study period.
Key Words: Cement industry, Financial, Performance, Infrastructure, Profitability, Solvency

I. INTRODUCTION:
“The Indian cement consumption stood at 327 million tonnes in financial year 2020 and it will reach
379 million tonnes by financial year 2022” according to information of India Brand Equity Foundation.
Per capita consumption of cement is taken as one of the indicators of nation economic development.
Cement industry plays a key role in both the infrastructure and socio-economic development of the
Country. Consumption of cement is correlated with growth rate of infrastructure, if more infrastructure
projects is under progress, it creates more demand to cement industry. In every developing economy,
infrastructure facility plays a major role for making developing nation into developed economy.
Cement is a cyclical commodity with a high correlation with GDP and it generates significant revenue
to state and central government. Indian Cement Industry (ICI) creates more employment opportunities
directly and indirectly to the people of nation. Because of cyclical nature of cement industry revenues
of companies higher in the period of economic revival, prosperity and lower in the period of economic
recession, depression. Indian cement industry also facing certain internal environment challenges like
high capital expenditure, underutilization of capacity, scarcity of raw materials, inadequate
transportation and warehousing facilities. And external environmental factors such as political policies
like demonetisation of higher denomination currency, introducing of new regulations and
environmental factors like Covid 19, global warming etc, have impact on the revenues of cement
companies drastically. To overcome such types of difficulties companies must maintain robust
financial healthiness. Evaluation and knowing of financial strengths and weaknesses very useful to
management to makes better financial decisions.

II. REVIEW OF LITERATURE

S. Christina Sheela (2012) carried out research on financial performance of pharmaceutical industry
in India using DuPont analysis. In this research the researcher has analysed three main pharmaceutical
companies and used 10 years data from 2002-03 to 2011-12. By using different financial ratios and
statistical techniques, researcher found the financial position of those three companies are satisfactory.

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(UGC Care Group I Listed Journal) Vol-12 Issue-03 No.01 March 2022
The researcher mainly emphasized two profitability ratios i.e ROI and ROE. Cipla pharmaceutical
earned highest ROE and ROI followed by Dr. Reddy’s Laboratories, and Ranbaxy Laboratories
Dr. P. Krishna Kumar (2013) studied on growth of Indian cement industry since 1991. In this study
researcher assess the growth of cement sector by using various parameters like installed capacity,
production, exports and value addition. 15 years (1991-92 to 2005-06) of data used for the study. The
study stated that production of cement increased at the rate of 3.24% compound annual growth rate
(CAGR) during the study period. The study reveals that the implementation of new economic reforms
helped Indian Cement Industry (ICI) to grow at faster rate in terms of production, exports and increased
financial strength of cement companies
Dr. Kanagavalli (2018), this study attempts to evaluate financial performance of selected automobile
companies. Three main motor companies taken for research purpose and five years of data is used.
The researcher is used following financial ratios namely liquidity, solvency, turnover, profitability
ratios and statistical tools like mean, correlation, standard deviation and ANOVA. The study concluded
that Bajaj auto and TVS motors financial position are satisfactory and Hero moto corporation business
maintain a good position in the market

III. STATEMENT OF PROBLEM

In every business the internal and external environmental factors affect the business operations most.
Because of Uncontrollable nature of external factors Indian industrial sector facing number of issues
recently. For example, in 2016, Govt. of India implemented the demonetization of 500/-, 1000/- rupees
currency notes, latest covid 19 issues affect the revenue of all companies. From the consecutive
political and environment challenges has severe impact on the earnings and financial stability of
Cement industry. To meet internal and external challenges effectively companies need to have robust
financial strength, procurement of funds at low cost and those funds utilised in effective manner to
generates maximum returns is a primary objective of every business. In this context, the researcher
found great importance to know financial performance and stability of particular cement companies.

IV. OBJECTIVES OF THE STUDY

1. To analyse efficiency and profitability of select large market capitalization cement companies
2. To evaluate liquidity and solvency position of select large market capitalization cement
companies
3. To compare financial ratios between select cement companies

V. METHODOLOGY OF THE STUDY

SAMPLE DESIGN AND DATA COLLECTION
Present study is mainly focusing on evaluation of financial performance, hence secondary data is used
for research. The data is collected from different sources like cement company’s websites, Bombay
stock exchange of India website, different books, IBEF website and various financial flatforms. In this
study companies were selected on the bases of market capitalization of company.
There are more than 40 listed cement companies in Indian stock market out of which only two large
market capitalization companies are selected for research purposively, i.e,
1. UltraTech Cement Ltd 2. Ambuja cements Ltd and 10 years of data from 2011-12 to 2020-
21 used in the present study.

RATIOS USED FOR THE STUDY

The following financial ratios used, to know the financial performance of selected
cement companies
N Type Selected Ratio Formula
1 Liquidity Current Ratio Current Assets /Current Liabilities
Ratios Liquid Ratio Liquid Assets/Current Liabilities
2 Interest Coverage Ratio EBIT/ Interest Expense

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Solvency Debt Equity Ratio Long Term Debts/Shareholders’
Ratios Equity
3 Turnover Working Capital Turnover Net Sales/Net Working Capital
Ratios Ratio
Fixed Assets Turnover Ratio Net Sales/Net Fixed Assets
4 Profitability Net Profit Ratio Net Profit after Tax/Net Sales X 100
Ratios Return on Equity Net Profit after Tax and Preference
Dividend /Equity Shareholder's
Funds

VI. HYPOTHESIS
The Following hypothesis is formulated for research purpose
H1: There is no significant difference between the mean values of current and liquid ratios among the
Ultratech and Ambuja Cements Ltd.
H2: There is no significant difference between the mean values of interest coverage ratio and debt
equity ratio among the Ultratech and Ambuja Cements Ltd.
H3: There is no significant difference between the mean values of fixed asset turnover ratio and
working capital turnover ratio of select companies.
H4: There is no significant difference between the mean values of net profit ratio and return on equity
ratio of two companies.

VII. STATISTICAL INTERPRETATION OF FINANCIAL PERFORMANCE

Table 1: Liquidity Position of UltraTech and Ambuja Cements Ltd Companies

Current Ratio Quick Ratio

Year
UltraTech Ambuja UltraTech Ambuja
2011-12 1.37 1.42 0.95 1.07
2012-13 1.17 1.74 0.81 1.41
2013-14 1.45 1.94 1.06 1.61
2014-15 0.80 1.91 0.53 1.62
2015-16 0.87 2.02 0.64 1.74
2016-17 1.60 1.08 1.31 0.79
2017-18 1.01 1.25 0.72 0.97
2018-19 0.91 1.48 0.64 1.13
2019-20 0.86 1.58 0.61 1.35
2020-21 1.13 1.38 0.94 1.21
Mean 1.12 1.58 0.82 1.29
Sd 0.28 0.31 0.24 0.31
Variance 0.08 0.10 0.06 0.10
Source: Companies Annual Reports
The above table shows Ambuja Cements Ltd maintained a good current and quick ratios in
comparison to UltraTech Cement Ltd. UltraTech’s Current ratio varying between 0.8 to 1.6 with an
average of 1.12. And quick ratio varying between 0.53 to 1.31 with a mean of 0.82. Ambuja cements
Current ratio fluctuated between 1.08 to 2.02 with an average of 1.58 and quick ratio changed from

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0.79 to 1.74 with an average of 1.29. Ambuja Cements Ltd maintained good liquidity position to meet
their short-term obligations than UltraTech Cement.
Table 1.1: T test for current and quick ratios
Current Ratio Quick Ratio
Statistics
UltraTech Ambuja UltraTech Ambuja
Mean 1.117 1.579 0.821 1.289
Variance 0.077 0.098 0.059 0.096
Observations 10.000 10.000 10.000 10.000
Df 18.000 18.000
T Stat 3.488 3.755
P(T<=T) Two-Tail 0.003 0.001
T Critical Two-Tail 2.101 2.101
Regarding the above table 1.1 shows calculated value of current ratio’s t test (3.49) which is
greater than t critical value (2.10) and P value 0.003 is less than the 0.05 level of significance. Hence,
we concluded, there is a significance difference between current ratios of two companies.
Quick ratio t test value (3.75) is higher than t critical value (2.10) and P value is 0.001, which is less
than the 0.05 level of significance, there is a significant difference exists between quick ratios of two
companies
Table 2: Solvency Position of UltraTech and Ambuja Cements Ltd Companies
Interest Coverage
Debt Equity Ratio
Year Ratio
UltraTech Ambuja UltraTech Ambuja
2011-12 0.523 0.089 14.050 32.810
2012-13 0.474 0.070 16.330 25.160
2013-14 0.492 0.068 8.920 23.450
2014-15 0.419 0.065 6.090 28.060
2015-16 0.388 0.061 6.680 13.690
2016-17 0.389 0.065 7.050 15.200
2017-18 0.736 0.065 3.680 14.450
2018-19 0.820 0.060 3.280 18.120
2019-20 0.603 0.054 3.640 23.810
2020-21 0.485 0.060 6.290 29.470
Mean 0.530 0.070 7.600 22.420
Sd 0.146 0.009 4.400 6.753
Variance 0.021 0.000 19.361 45.607
Source: Companies Annual Reports
The above interpretation reveals that debt equity ratio of UltraTech Ltd ranged between
0.38 to 0.82 with a mean of 0.53. Interest coverage ratio ranges from 3.28 times to 16.33 times with
an average of 7.60. Ambuja Cements Ltd debt equity ratio shows declining trend from 0.089 to 0.054
with an average of 0.070, and interest coverage ratio varying between 13.690 times to 32.810 times
with an average of 22.420. After analysing the debt equity ratio, UltraTech Ltd used more debt funds
in contrast to Ambuja Cements Ltd.
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Table 2.1: T test for Debt Equity and Interest Coverage Ratio
Debt Equity Ratio Interest Coverage Ratio
Statistics
UltraTech Ambuja UltraTech Ambuja
Mean 0.533 0.066 7.600 22.421
Variance 0.021 0.000 19.361 45.607
Observations 10.000 10.000 10.000 10.000
Df 18.000 18.000
T Stat 10.126 5.815
P(T<=T) Two-Tail 0.000 0.000
T Critical Two-Tail 2.101 2.101
Table 2.1 reveals that debt equity and interest coverage ratios t values of both the companies as
(10.13) (5.81) which is more than t critical value 2.101 and p values is less than 0.05 level of
significance. So that it concluded that there is a significant different between two companies in terms
of debt equity and interest coverage ratios
Table 3: Efficiency Performance of UltraTech and Ambuja Cements Ltd Companies
Working Capital Fixed Assets
Year Turnover Turnover Ratio
UltraTech Ambuja UltraTech Ambuja
2011-12 9.92 6.95 1.26 1.25
2012-13 17.54 7.57 1.14 1.51
2013-14 7.29 7.19 1.07 1.34
2014-15 -10.95 6.73 0.95 1.43
2015-16 -16.45 11.74 0.96 1.44
2016-17 5.73 18.15 1.07 0.93
2017-18 249.36 16.67 0.78 1.17
2018-19 -33.92 11.96 0.79 1.20
2019-20 -19.06 12.94 0.73 1.21
2020-21 16.53 10.36 0.78 1.06
Mean 22.60 11.03 0.95 1.25
SD 81.48 4.08 0.18 0.18
Variance 6638.20 16.64 0.03 0.03
Source: Companies Annual Reports
In according to the above data working capital turnover and fixed assets turnover ratios of two
companies. The working capital turnover of UltraTech Cements fluctuated between -33.92 times to
249.36 times with a mean of 22.60 times, fixed assets turnover ratio ranging between 0.73 times to
1.26 times with an average of 0.95 times. Ambuja cement’s working capital turnover ratio varied
between 6.73 times to 18.15 times with a mean of 11.03 times, and fixed assets turnover ratio fluctuated
between 0.93 times to 1.44 times with an average of 1.25 times. Working capital turnover ratio of
Ambuja Cements Ltd continuously raising from 2011-12 to 2016-17, there after decreasing.

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Table 3.1: T test for Working Capital and Fixed Assets Turnover Ratios
Working Capital Fixed Assets Turnover
Statistics Turnover Ratio
UltraTech Ambuja UltraTech Ambuja
Mean 22.598 11.026 0.954 1.253
Variance 6638.196 16.643 0.032 0.033
Observations 10.000 10.000 10.000 10.000
Df 18.000 18.000
T Stat 0.449 3.700
P(T<=T) Two-Tail 0.659 0.002
T Critical Two-Tail 2.101 2.101
According to above table, t value of working capital turnover ratio 0.449 is less than t critical
value, of 2.101. Therefore, no significant difference exists between working capital turnovers of both
the companies. UltraTech and Ambuja Cements Ltd companies t value of fixed asset turnover ratio
3.70 is greater than 2.101 which indicates that there is a significant difference between both the
companies in terms of utilisation of fixed assets.
Table 4: Profitability Performance of UltraTech and Ambuja Cements Ltd Companies
Net Profit Ratio Return on Equity
Year
UltraTech Ambuja UltraTech Ambuja
2011-12 12.49 14.39 18.74 15.22
2012-13 12.56 13.20 17.58 14.70
2013-14 10.19 13.91 12.84 13.51
2014-15 8.62 14.87 11.02 14.76
2015-16 8.95 8.52 10.86 7.87
2016-17 9.48 5.51 11.13 5.74
2017-18 6.88 6.00 8.42 7.34
2018-19 6.51 8.36 8.58 9.73
2019-20 13.80 7.73 14.87 8.70
2020-21 12.21 9.65 12.37 10.39
Mean 10.17 10.21 12.64 10.80
Sd 2.52 3.56 3.48 3.49
Variance 6.34 12.71 12.12 12.20
Source: Companies Annual Reports
From the above interpretation, UltraTech’s net profit ratio varying between 6.51 percent
to 13.80 percent with a mean of 10.17 percent, return on equity varies from 8.42 percent to 18.74
percent with an average of 12.64 percent. Ambuja’s net profit ratio varying between 5.51 percent to
14.87 percent with an average of 10.21 percent, return on equity ranged between 5.74 percent to 15.22
percent with an average of 10.80 percent. From 2011-12 to 2014-15 Ambuja Cements Ltd maintain
more net profit margin in compare to UltraTech Cement. Whereas from 2015-16 to 2020-21 UltraTech
Cement maintained good net profit ratio than Ambuja Cements Ltd.

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Table 4.1: T test for Net Profit and Return on Equity Ratios
Net Profit Ratio Return On Equity
Statistics
UltraTech Ambuja UltraTech Ambuja
Mean 10.170 10.214 12.640 10.796
Variance 6.342 12.707 12.119 12.200
Observations 10.000 10.000 10.000 10.000
Df 18.000 18.000
T Stat 0.032 1.182
P(T<=T) Two-Tail 0.975 0.252
T Critical Two-Tail 2.101 2.101
The t test shown in the above table, net profit ratio calculated t value 0.032, is less than t critical
value of 2.01, hence there is no significant difference between two companies in terms of net profit
ratio. Return on equity t value 1.182 is less then t critical value 2.101 Hence, we conclude that there is
no significant difference between the two companies with regard to return on equity.

VIII. CONCLUSION:
It is known fact that the cement industry plays a key role in the nation building. In view the importance
of cement industry, the present study on financial performance of UltraTech and Ambuja Cements
companies have a critical examination and analysis of liquidity status, solvency position and
operational results covered over 10 years of period of 2011-12 to 2020-21. Based on the analysis of
the data it is concluded that the liquidity position of both the units are not satisfactory during study
period. With regard to solvency position UltraTech is better than Ambuja Cement Limited in availing
debt advantage in its operations because Ambuja Cement Ltd follows a conservative approach in used
debt funds. Working capital impact on turnover is favourable in case of Ambuja cements than the
UltraTech Cement Ltd. The consistency and efficacy of fixed assets utilisation is greater in Ambuja
Cements Ltd than the UltraTech Cement Ltd. Finally, during the study period the profitability of
UltraTech and Ambuja Cements Ltd showing a declining Trend, however the returns on equity of
UltraTech Cement Ltd is better than the Ambuja Cements Ltd.

REFERENCES:
1. Christina Sheela, S., & Karthikeyan, K. (2012). Financial Performance of Pharmaceutical
Industry in India using. European Journal of Business and Management.
2. Kanagavalli, G. (2018). FINANCIAL PERFORMANCE OF SELECTED AUTOMOBILE
COMPANIES. International Journal of Management.
3. Krishna Kumar, P. (2013). A STUDY ON THE PROGRESS OF INDIAN CEMENT
INDUSTRY. British Journal of Marketing Studies, 15.
4. kothari, C. (n.d.). Research Methodology and Techniques. New Age International Publisher.
5. Pandy, I.M. Financial Management, Vikas Publishing House, New Delhi.
6. www.ultratechcement.com
7. www.Ambujacement.com
8. www.bseindia.com
9. www.sceneer.in

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