22-01-2013, 03:54 PM
Analysis of Indian cement Industry & Financial performance of ACC LTD IN
ACC CEMENT LIMITED
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EXECUTIVE SUMMERY
The major objective of the study is to understand the working capital of ACC & to suggest measures to overcome the shortfalls if any.
Funds needed for short term needs for the purpose like raw materials, payment of wages and other day to day expenses are known as working capital. Decisions relating to working capital (Current assets-Current liabilities) and short term financing are known as working capital management. It involves the relationship between a firm’s short-term assets and its short term liabilities. By definition, working capital management entails short-term definitions, generally relating to the next one year period.
The goal of working capital management is to ensure that the firm is able to continue its operation and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses.
Working capital is primarily concerned with inventories management, Receivable management, cash management & Payable management.
Inventories management at ACC:
ACC is a large scale manufacturing company involved in production of Cement. Therefore, it has to maintain large quantity of inventories at production units for its smooth running and functioning.
Cash management at ACC:
ACC has been accumulating huge cash surpluses over last several years, which enables the organization to maintain adequate cash reserves and to generate required amount of cash.
Receivables management at ACC:
ACC has set up its marketing office at all major cities in India i.e Bangaluru , Bhopal, Chandigarh , Coimbatore , Kanpur, Kolkata, Mumbai, Pune , Secunderabad New Delhi & patna
This marketing office obtains sales order from Cement users in India as well as globally. The cement production and dispatch figures for the month of May 2010 are 1.81 & 1.75 million tones respectively. The Sales recorded for the FY 2009 was Rs. 83,861,000,000
INTRODUCTION
Working Capital:-
The life blood of business, as is evident, signified funds required for day-to-day operations of the firm. The management of working capital assumes great importance because shortage of working capital funds is perhaps the biggest possible cause of failure of many business units in recent times. There it is of great importance on the part of management to pay particular attention to the planning and control for working capital. An attempt has been made to make critical study of the various dimensions of the working capital management of ACC.
Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of Working capital management is to ensure that the firm is able to continue its operations and that it has sufficient money flow to satisfy both maturing short-term debt and upcoming operational expenses.
Industry Overview:-
The cement industry is one of the vital industries for economic development in a country. The total utilization of cement in a year is used as an indicator of economic growth.
Cement is a necessary constituent of infrastructure development and a key raw material for the construction industry, especially in the government’s infrastructure development plans in the context of the nation’s socio-
Economic development.
India is the world's second largest producer of cement with total capacity of 219 million tones (MT) at the end of FY 2009, according to the Cement Manufacture’s Association.
According to the Cement Manufacturer’s Association, cement dispatches during 2009-10 were 159.43 million tones (MT) increasing by 12 per cent over 142.23 in 2008-09. Cement production during 2009-10 was 160.31 MT an increase of 12.37 per cent over 142.65 MT in 2008-09.
Moreover, the government’s continued thrust on infrastructure will help the key building material to maintain an annual growth of 9-10 per cent in 2010, according to India’s largest cement company, ACC.
Weakness: -
1. Cement Industry is highly fragmented & regionalized.
2. Low – value commodity makes transportation over long distances un-economical.
3. High capital cost and investment cost for each and every project.
4. The complex Excise Duty structure based on the category of buyer and end use of the cement has caused at lot of confusion in the industry.
5. The recent ban on export of cement clinker would increase the availability of cement in the domestic market, which in turn would put pressure on cement prices.
Opportunities: Demand–supply gap
1. Substantially low per capita cement consumption as compared to developing countries (1/3 rd of world average) Per capita cement consumption in India is 82 kgs against a global average of 255 kgs and Asian average of 200 kgs.
2. Despite slightly lower economic growth, the construction and infrastructure sector is expected to record healthy growth, which augurs well for cement industry.
3. Additional capacity of 20 million tons per annum will be required to match the demand.
Introduction of the Company
ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 14 modern cement factories, 19 Ready mix concrete plants, 19 sales offices, and several zonal offices. It has a workforce of about 9000 persons and a countrywide distribution network of over 9,000 dealers. ACC's research and development facility has a unique track record of innovative research, product development and specialized consultancy services. Since its inception in 1936, the company has been a trendsetter and important benchmark for the cement industry in respect of its production, marketing and personnel management processes. Its commitment to environment-friendliness, its high ethical standards in business dealings and its on-going efforts in community welfare programs have won it acclaim as a responsible corporate citizen. In the 70 years of its existence, ACC has been a pioneer in the manufacture of cement and concrete and a trendsetter in many areas of cement and concrete technology including improvements in raw material utilization, process improvement, energy conservation and development of high performance concretes.
History & Profile of ACC Cement Works
ACC was formed in 1936 when ten existing cement companies came together under one umbrella in a historic merger – the country’s first notable merger at a time when the term mergers and acquisitions was not even coined. The history of ACC spans a wide canvas beginning with the lonely struggle of its pioneer F E Din Shaw and other Indian entrepreneurs like him who founded the Indian cement industry. Their efforts to face competition for survival in a small but aggressive market mingled with the stirring of a country’s nationalist pride that touched all walks of life – including trade, commerce and business.
The first success came in a move towards cooperation in the country’s young cement industry and culminated in the historic merger of ten companies to form a cement giant. These companies belonged to four prominent business groups – Tatas, Khataus, Killick Nixon and F E Din Shaw groups. ACC was formally established on August 1, 1936. Sadly, F E Din Shaw, the man recognized as the founder of ACC, died in January 1936. Just months before his dream could be realized.
The ACC Board comprises of 13 persons. These include executive, non-executive, and nominee directors. This group is responsible for determining the objectives and broad policies of the Company - consistent with the primary objective of enhancing long-term shareholder value.
The Board meets once a month. Two other small groups of directors - comprising Shareholders'/Investors' Grievance Committee and Audit Committee of the Board of Directors - also meet once a month on matters pertaining to the finance and share disciplines. During the last decade, there has been a streamlining of the senior management structure that is more responsive to the needs of the Company's prime business. A Managing Committee - comprising, in addition to the Managing Director and the two executive directors, the presidents representing multifarious disciplines: finance, production, marketing, research and consultancy, engineering and human resources – meets once a week.