FINANCIAL ACCOUNTING

GROUP PROJECT ON FINANCIAL STATEMENT ANALYSIS

GROUP-1

INDUSTRY – Cement

Lead Company- UltraTech Cement Ltd.

UNDER SUPERVISION OF

Professor Ankur Mehra

Declaration

“Our group certify that this project is a result of our effort. Further, no part of this project has been
plagiarised from the internet or the annual report of the company. We understand that if our report
is found to be plagiarized, all members of the group will be awarded zero marks in the project report
component and may be awarded F grade overall.”

Group 1 MBA23
Akarshan Bansal-2110120001
Akshay Khandelwal-2110120002
Akshita Maheshwari-2110120003
Aman Jain-2110120004
Ananaya Gupta-2110120005
Anukul Pandita-2110120006
Arpita Gupta-2110120007
Background
India is the world's second-largest cement manufacturer. Ultratech Cement is one of the
pioneers in the cement industry of India. UltraTech Cement was founded in the year 1983 by the name
Larsen & Toubro. It was then demerged and acquired by Grasim, and in 2004 it was renamed Ultra Tech
Cement. Today, UltraTech Cement, a subsidiary of the Aditya Birla Group, is the country's largest cement
clinker exporter. It has a 52 million tonne yearly capacity. 
Its production units are spread across the country, making its geographical presence very wide. Its market
capitalisation is 230 hundred thousand crores. Customer centricity is the principal of all their initiatives.
They believe in maximum customer satisfaction. The company runs on the philosophy of growing
organically as well as inorganically which enables a balanced debt and equity.

Ultratech strongly believes in promoting sustainability. For the financial year 2020 the company’s CSR
spend was Rs.124.51 crores. Ultratech cement also focuses on areas like natural resource management,
water conservation, animal husbandry, education, healthcare, sustainable livelihood, infrastructure
development, self-empowerment, welfare, and basic life support under the Aditya Birla Centre for
Community Initiatives and Rural Development. It is also a founding member of Global Cement and
Concrete Association. The Dow Jones Sustainability Index (DJSI) listed UltraTech as one of the top ten
firms in the construction material category.

Key strategies of the company:

 Adopting measures like multi brand strategy, expanding market base, faster delivery to customers
has led to increased growth of sales volume.
 Taking capex initiatives consistently which results in power efficient plants.
 Production units are close to the raw material source, making it very convenient to secure key raw
material.
 Dedicated railway wagons have enabled better customer service and low freight costs 
 Increased use of pet coke to get a cost advantage.
 Captive thermal power plants for making its plants self-sufficient in power.
 Multiple fuel compatible kilns and power plants enable flexibility for using a different alternative
depending on the price.
 Investment in ships for better logistic movement. 

India is a developing nation; therefore, the cement and real estate industry is in boom and UltraTech has
tapped that opportunity well in all these years. It has planned a huge capex investment and has plans on
expanding its capacity. This investment will help the company to achieve its long-term volume growth.
They believe that this will also help to gain market share. UltraTech Cement currently controls 25% of the
industry's capacity. When this next round of growth is completed, the company's overall capacity will be
136.25 million tonnes per annum, ensuring that it remains India's largest cement maker and the world's third
largest. They have also planned on using waste heat to generate power. The revenue in the coming five years
is expected to rise by 55.75%.The chairman of Ultratech cement Mr. Kumar Mangalam Birla stated in a
recent annual meeting that the company is as tough as it gets.
Abridged Classified Standalone Balance Sheet
UltraTech Cement Ltd. (LEAD COMPANY) NSE: ULTRACEMCO (in cr.)

Description 2020-21 2019-20 2018-19 2017-18 2016-17

ASSETS
Current Assets 22992.37 14751.52 12677.95 10585.61 12475.05
Non-Current Assets 57423.73 57065.4 56593 43787.39 26806.04

Total assets 80416.1 71816.92 69270.95 54373 39281.09

Description 2020-21 2019-20 2018-19 2017-18 2016-17

EQUITY AND
LIABILITIES
Current liabilities 19587.76 14263.3 14539.59 11225.95 8058.4
Non-current liabilities 17475.7 19257.3 21434 17224.03 7281.68
Shareholders’ Fund
o Equity capital 288.65 288.63 274.64 274.61 274.51
o Reserves and
Surplus 43020.37 37971.86 27611.36 25631.12 23645.56

Total Equity and liabilities 80416.1 71816.92 69270.95 54373 39281.09

Multi-step Income Statement

UltraTech Cement Ltd. (LEAD COMPANY) NSE: ULTRACEMCO (in cr.)

Description 2020-21 2019-20 2018-19 2017-18 2016-17

Net sales 44725.8 42429.89 41608.81 30978.62 25374.94

Cost of goods sold 20837.39 20612.39 21735.51 15760.94 12297.2

Gross Profit 23888.41 21817.5 19873.3 15217.68 13077.74

Operating Expenses 12346.23 12682.73 12526.36 9072.52 7865.3

Operating Profits 11542.18 9134.77 7346.94 6145.16 5212.44

Other income 669.6 800.12 349.56 241.97 648.1

Depreciation and amortization 2700.23 2722.66 2450.73 1847.93 1348.41

Earnings before interest and

taxes (EBIT) 9511.55 7212.23 5245.77 4539.2 4512.13

Finance expense 1497.97 1991.65 1777.86 1237.6 640.1

 Earnings before taxes
(EBT) 8013.58 5220.58 3467.91 3301.6 3872.03

Income tax expense 2553.91 -531.53 1068.07 1077.01 1158.54

Net Income (PAT) 5459.67 5752.11 2399.84 2224.59 2713.49

Cash flow statement

UltraTech Cement Ltd. (LEAD COMPANY) NSE: ULTRACEMCO (in cr.)

Description 2020-21 2019-20 2018-19 2017-18 2016-17

Cash Flow from Operating

Activities 12502.95 8972.43 6013.66 3887.72 5005.02
Cash Flow from Investing
Activities -8859 -4192.42 1058.88 1861.57 -2480.31
Cash Flow from Financing
Activities -4356.47 -5075.88 -6756.33 -5735.05 -2534.98

Net change in cash and cash

equivalent -712.52 -295.87 316.21 14.24 -10.27
Cash and cash equivalent at
beginning of the year 147.23 442.63 101.13 58.8 90.18
Cash and cash equivalent at end
of the year -564.96 147.23 468.7 77.19 58.8
Operating metrics
1.Clinker Factor:
Clinker is a cement Company FY 2018-19 FY 2019-20 FY 2020-21
intermediate product made by
decarbonizing, sintering, and
Ultratech Cement 76.2% 75.2% 73.3%
rapidly cooling powdered
limestone. The percentage of
clinker in cement is known as JK Cement 78% - 75%
the clinker factor. It is
important because it helps to determine the cement quality. The lower the clinker factor, the better the
cement. The clinker factor varies from 78.3% to 72.9%, the optimal being 74.5%. Due to less wastage
company can sell more primary product i.e., cement as compared to its peers
The clinker factor for Shree cement stood at 1.52x,1.48x and 1.50x for FY 18,19 and 20 respectively.

2.Average capacity utilization:

Capacity utilization rate measures the Company FY 2018-19 FY 2019-20 FY 2020-21
percentage of a company’s potential
output that is being realized. The capacity
Ultratech Cement 76% 70% 70%
utilization rate of a company may be
measured to know how well it is reaching
its potential. It is important to determine Shree Cement 66% 59% 60%
productivity.
JK Cement 81% 76% 69%

3.Sales Volume (MMt)

The quantity of units sold during a reporting Company FY 2018-19 FY 2019-20 FY 2020-21
period is referred to as sales volume. Investors
look at this number to evaluate if a company
Ultratech Cement 85.05 81.81 85.10
is growing or shrinking. Sales volume can be
tracked at the product, product line, customer,
subsidiary, or sales area level within a Shree Cement 25.86 24.92 26.86
company. This data could be utilised to
change the investments made in any of these JK Cement 8.36 - 9.77
areas. Adopting measures like multi brand
strategy, expanding market base, faster
delivery to customers has led to increased growth of sales volume of Ultratech Cement.

4. Production Volume (MMt)

Production volume measures the total Company FY 2018- FY 2019- FY 2020-

19 20 21
amount a company can generate over time. Ultratech Cement 81.25 80.00 82.72
This KPI focuses on overall production and
measures the total quantity of products Shree Cement 25.06 24.11 26.36
made over a specified period. Knowing JK Cement 9.63 9.57 11
about the seasonal increase in production volume might help to plan of time to avoid downtime, equipment
malfunctions, and resource constraint.
Accounting Policies
 Obligation to Restore Mines:

Assumptions and estimations are made in regard to discount rates, the estimated cost of mines restoration,
and the expected timing of those expenses for establishing the fair value of the Mines Restoration
Obligation.

 Property, Plant, and Equipment (PP&E) useful lives:

The Company determines the economic life of an asset/component of an asset by combining its technical
expertise with historical and industry trends. Management reviews the useful lives on a regular basis and
revises them as needed. The unamortized depreciable amount is charged throughout the remaining useful
life of the assets in the event of a revision.

 Expenses incurred during the building phase:

Expenditure/Income throughout the construction phase (including financing costs connected to borrowed
money for building or acquisition of qualified PPE) is included in Capital Work-in-Progress, and the funds
are distributed to the appropriate PPE upon completion. Capital Advances are shown under "Other non-
current Assets" for advances provided toward the acquisition or construction of PPE that are outstanding at
each reporting date.

 Inventories

Raw materials, gasoline, inventory, replacement parts, and packaging materials:

The lower of cost and net realisable value was used to appraise the asset (NRV). These items, on the other
hand, are deemed cost-effective if the completed products in which they will be utilised are projected to sell
at or above cost. The cost is calculated using a weighted average method.
Inventories of work-in-progress, finished items, stock-in-trade, and trial runs:
Valued at the bottom end of the cost and NRV spectrum. The cost of raw materials, conversion expenses,
and other costs spent in getting inventories to their current location and condition are included in the cost of
finished items and WIP. A weighted average technique is used to calculate inventory costs.
Analysis of Financial Statement

 In Income Statement we can see there is a constant increase in net profit from 2016-17 to 2018-19.
In the year 2020 there is a drastic increase of almost 200% in net profit over 5 years, the reason
behind the same is Ultratech Cement acquired Century cement after first quarter of 2019. Due to
which their production capacity increased and they became third largest Cement manufacturer in the
world, outside China which led to rise in sale. There is more than 300% increase in financial cost of
the company and recently started to reduce, which can only mean company has started paying off its
borrowers to reduce this cost. There is a reversal of deferred tax payment that’s why there is a
negative balance and taxes have increased due to less financial cost and higher profits

 In the Balance Sheet we can see a constant rise in Total assets of the company can be seen through
the years since 2016 which means there is a constant investment to increase the capacity of
production and Non-current Liabilities since 2019 which is a great sign, as company is trying to
reduce financial cost and increase assets which is beneficial for companies’ prospects. The
company’s reserves are increasing over the years which means company is setting funds aside for
future expansions.

 The cash flow from operating activities is seeing a steady rise after the year 2017, which means the
company is doing well in its operating sector. CFO in each year is more than Net profit which means
enough cash is easily generated from daily operations means company has higher sales. This is a
good indicator for company’s future.

 The cash flow from investing activities conveys that since 2019-20 to 2020-21 there is lot of cash
outflow which means company is investing a lot of money in purchase of investments. There is a lot
of investment by company in bonds and shares but in capital expenditure such purchase of fixed
assets shows a very low investment, which shows company is trying to build its other sources of
income simultaneously with its operations. Ultratech has invested in other companies as well in the
form of intercorporate deposits which has increased for 10.9cr in 2019-20 to 1000cr in 2020-21.

 The cash flow from Financing activities, it can be seen in 2017-18 there is a major cash inflow by the
way of long-term borrowing. In addition to paying off its borrowings, the company is taking more
long term as well as short term borrowings. Management’s better grip on working capital and control
on cash flow has resulted in reductions of borrowing by 2000cr. This might be due to the heavy
investments made. It has also issued almost 50% more shares in 2020-21 as compared to 2019-20

 There is a negative cash and cash equivalent in the latest year of UltraTech which can mean
company has converted its liquid cash equivalents into long term investments, which is also the
reason of increase in short-term borrowings as well. Company is still growing and increasing its
capacity on yearly bases and trying to decrease it costs, which is working great for them.
 The company is at mature stage of its life cycle as it is still growing but at a slower pace than before.

TREND ANALYSIS
 1). UltraTech Cement Ltd.
TREND ANALYSIS INCOME STATEMENT TREND ANALYSIS BALANCE SHEET
PARTICULARS 2021 2020 2019 2018 2017 PARTICULARS 2021 2020 2019 2018 2017
Net sales revenue 176.26 167.21 163.98 122.08 100 Total assets 204.72 182.83 176.35 138.42 100
COGS 169.45 167.62 176.75 128.17 100
Non-current assets
Gross profit 182.66 166.83 151.96 116.36 100 214.22 212.88 211.12 163.35
operating expense 156.97 161.25 159.26 115.35 100 100
operating profit Current assets 184.31 118.25 101.63 84.85 100
221.44 175.25 140.95 117.89
(EBIT) 100 Equity and
Finance cost 234.02 311.15 277.75 193.34 100 Liability 204.72 182.83 176.35 138.42
other non-operating 100
103.32 123.46 53.94 37.34 Non-current
Results 100
liability 240.00 264.46 294.36 236.54
Profit before income 100
206.96 134.83 89.56 85.27
tax 100 Current liabilities
Income tax 220.44 -45.88 92.19 92.96 100 243.07 177.00 180.43 139.31
Profit after income 100
201.20 211.98 88.44 81.98 Total equity 181.08 159.96 139.08 108.28 100
tax 100

2). Shree Cement Ltd.

TREND ANALYSIS INCOME STATEMENT
TREND ANALYSIS BALANCE SHEET
PARTICULARS 2021 2020 2019 2018 2017
PARTICULARS 2021 2020 2019 2018 2017
Net sales revenue 158.79 151.63 147.93 115.86 100 Total assets 190.02 174.45 136.80 137.25 100
COGS 151.04 157.08 165.00 117.63 100 Non-current assets
Gross profit 176.97 159.54 143.55 121.04
164.80 147.39 134.68 114.49 100 100
operating expense 158.57 136.20 151.04 124.33 100 Current assets 219.36 207.97 121.62 173.68 100
operating profit (EBIT) 171.15 158.80 118.02 104.46 Equity and Liability
100 190.02 174.45 136.80 137.25
100
Finance cost 194.17 225.18 191.52 104.52 100 Non-current liability
other non-operating results 91.85 54.05 14.11 76.63 100 153.18 190.37 308.52 284.66
100
Profit before income tax 196.25 126.36 74.84 119.36 100 Current liabilities
176.74 191.49 99.88 149.18
Income tax 372.71 203.55 68.12 231.08 100 100
Profit after income tax 170.98 115.31 75.80 103.37 Total equity 198.10 168.05 124.67 115.57 100
100

3). J.K Cement Ltd.

TREND ANALYSIS INCOME STATEMENT
PARTICULARS 2021 2020 2019 2018 2017
Net sales revenue 164.27 144.27 130.77 120.69 100 TREND ANALYSIS BALANCE SHEET
COGS 153.29 138.37 136.71 122.86 100 PARTICULARS 2021 2020 2019 2018 2017
Gross profit 176.01 150.58 124.41 118.37 100
Total assets 162.18 137.36 120.67 104.02 100
operating expense 154.39 140.53 129.89 124.13 100
operating profit Non-current
212.39 167.50 115.18 108.70 assets 137.79 127.70 112.40 98.51
(EBIT) 100
100
Finance Expenses 83.52 91.31 86.28 93.86 100
Current assets 243.49 169.57 148.22 122.37 100
other non-
operating 139.86 105.66 99.53 137.67 Equity and
results 100 Liability 122.47 110.42 99.35 104.02
Profit before 100
382.57 257.15 144.41 134.18 Non-current
income tax 100
Income tax liability 99.97 99.06 115.43 146.94
342.79 220.90 130.93 85.90 100 100
Profit after income Current
408.87 281.11 153.31 166.09 178.20 156.96 134.98 111.27
tax 100 liabilities
100
Total equity 199.47 167.18 154.57 114.74 100
CHARTS
TREND ANALYSIS
1). UltraTech Cement Ltd

UltraTech Balance Sheet Trend Analysis

UltraTech Income Statment Trend 350
Analysis 300
250 250
200
200
150
150
100
100 50
50 0
2017 2018 2019 2020 2021
0
2017 2018 2019 2020 2021 Current Asset Non Current Asset Equity
Sales COGS Current Liability Non Current Liablity
Gross Profit PAT

2). Shree Cement Ltd.

Shree Balance Sheet Trend Analysis

350
Shree Income Statement Trend Analysis 300
180 250
160 200
140 150
120
100 100
80 50
60 0
40 2017 2018 2019 2020 2021
20
0
2017 2018 2019 2020 2021 Current Assets Non Current Asset
Sales COGS Equity Current Liablity
Non-Current Liability
Gross Profit PAT

3). J.K Cement Ltd.

J.K Balance Sheet Trend Analysis

J.K Income Statement Trend Analysis 300

450 250
400 200
350
300 150
250
200 100
150
100 50
50 0
0 2017 2018 2019 2020 2021
2017 2018 2019 2020 2021

Sales COGS Current Assets Non-Current Assest Equity

Gross Profit PAT Current Liability Non Current Liability
 COMMON SIZE ANALYSIS
1) UltraTech Cement Ltd.
COMMON SIZE INCOME STATEMENT COMMON SIZE BALANCE SHEET
PARTICULARS 2021 2020 2019 2018 2017
PARTICULARS 2021 2020 2019 2018 2017
Net sales revenue 100 100 100 100 100 Total assets 100 100 100 100 100
COGS 46.59 48.58 52.24 50.88 48.56
Gross profit 53.41 51.42 47.76 49.12 Non-current assets 71.41 79.46 81.70 80.53 68.24
51.14
27.60 29.89 30.11 29.29 Current assets 28.59 20.54 18.30 19.47 31.76
Operating Expense 31.00
Operating Profit 25.81 21.53 17.66 19.84 20.54 Total equity and
Other Income 1.50 1.89 0.84 0.78 liabilities
2.55 100 100 100 100 100
Depreciation 6.04 6.42 5.89 5.97 5.31 Shareholders Fund
EBIT 21.17 17.00 12.61 14.65 53.91 53.32 48.07 47.68 60.95
17.78
Non-Current
Finance Cost 3.35 4.69 4.27 4.00 2.52 Liabilities 21.73 26.81 30.94 31.68 18.54
EBT 17.92 12.30 8.33 10.66 15.26 Current liabilities 24.36 19.86 20.99 20.65 20.51
Income Tax Expense 5.71 -1.25 2.57 3.48 4.57
PAT (Net Income) 12.21 13.56 5.77 7.18 10.69

2) Shree Cement Ltd

COMMON SIZE INCOME STATEMENT
PARTICULARS 2021 2020 2019 2018 2017
Net sales revenue 100 100 100 100 100 COMMON SIZE BALANCE SHEET
COGS 41.56 45.26 48.73 44.36 43.69 PARTICULARS 2021 2020 2019 2018 2017
Gross profit 58.44 54.74 51.27 55.64 Total assets 100 100 100 100 100
56.31
Non-current assets 64.45 63.29 72.62 61.03 69.21
Operating Expense 28.38 25.53 29.01 30.49 28.42 Current assets 35.55 36.71 27.38 38.97 30.79
Operating Profit 30.06 29.21 22.25 25.15 27.89 Total equity and
Other Income 3.46 2.13 0.57 3.96 5.98 liabilities 100 100 100 100 100
Depreciation 9.37 14.05 11.72 9.15 14.31 Shareholders Fund 75.30 69.57 65.82 60.82 72.23
EBIT 24.16 17.30 11.10 19.96 19.56 Non-Current
Finance Cost 1.86 2.26 1.97 1.38 1.52 Liabilities 7.35 9.94 20.55 18.90 9.11
EBT 22.29 15.03 9.13 18.58 18.04 Current liabilities 17.36 20.48 13.63 20.28 18.66
Income Tax Expense 5.30 3.03 1.04 4.50 2.26
PAT (Net Income) 16.99 12.00 8.09 14.08 15.78

3) J.K Cement Ltd

COMMON SIZE INCOME STATEMENT

PARTICULARS 2021 2020 2019 2018 2017
Net sales revenue 100 100 100 100 100
COGS 48.21 49.55 54.01 52.29 51.66
Gross profit 51.79 50.45 45.99 47.41 48.34
Operating Expense 28.50 29.54 30.12 31.19 30.32
Operating Profit 23.29 20.92 15.87 16.22 18.02
Other Income 1.71 1.47 1.53 2.29 2.01
Depreciation 4.63 4.96 4.59 4.77 5.39
EBIT 20.37 17.42 12.81 13.75 14.63
Finance Cost 3.83 4.76 4.97 5.85 7.53
EBT 16.54 12.66 7.84 7.90 7.10
Income Tax 5.90 4.33 2.83 2.01
Expense 2.83
PAT (Net Income) 10.64 8.33 5.01 5.88 4.28
COMMON SIZE BALANCE SHEET
PARTICULARS 2021 2020 2019 2018 2017
Total assets 100 100 100 100 100
Non-current assets 65.35 71.51 71.65 72.85 76.92
Current assets 34.65 28.49 28.35 27.15 23.08
Total equity and
liabilities 100 100 100 100 100
Shareholders Fund 39.39 38.98 41.03 35.33 32.03
Non-Current
Liabilities 39.15 38.71 37.13 43.78 48.44
Current liabilities 21.45 22.31 21.84 20.89 19.53
Charts
Common Size Analysis
1). UltraTech Cement Ltd.

Common Size Analysis of Balance Sheet

Common Size Analysis of Income Statement 120
120
100
100
80
80
60 60
40 40
20
20
0
2017 2018 2019 2020 2021
0 Current Asset Non-Current Asset Equity
2017 2018 2019 2020 2021
Sales COGS Current Liabilities Non-current Liabilities Total Assets
Gross Profit PAT

2). Shree Cement Ltd.

Common Size Analysis of Income Statement

Common Size Analysis of Balance Sheet
120 120
100 100
80
80
60
60
40
40
20
0 20
2017 2018 2019 2020 2021
0 Total Assets Current Assets Non-Current Assets
2017 2018 2019 2020 2021
Sales COGS Equity Current Liabilties Non Current Liabilities
Gross Profit PAT

3). J.K Cement Ltd.

Common Size Analysis of Income Statement

120 Common Size Analysis of Balance Sheet
100 120

80 100

60 80

60
40
40
20
20
0
2017 2018 2019 2020 2021
0 Total Assets Current Assets Non-Current Assets
2017 2018 2019 2020 2021
Sales COGS Equity Current Liabilites Non-Current Liabilities
Gross Profit PAT
Analysis
Common Size Analysis
As we can see in Ultratech Cement that company has gradually increased its Non-Current Investments from
5.10% in 2016-17 to 8.40% in 2020-21 with a strategy to earn revenue from different sources and make its
excess idle funds to use as compared to Shree Cement and JK Cement whose Non-current assets are at
similar levels.
By looking at non-Current liabilities of Ultratech Cement we can see that company is maintaining an
average of 25% approx. over the 5 years of current liabilities to fund its operations as company believes in
keeping the debts low and funding its operations through its own fund where JK Cement’s 40% approx. as
company is competing with the large market player Ultratech so to increase its production and market share
company is taking debt.
In Income statement we can see that in 2018-19 there is the maximum COGS in all the 3 Companies as in
2018-19 companies were mostly dependent on non-renewable resources like coal for heat used in production
which increased the prices of coal due to high demand and therefore increased the cost of production but
after 2018-19 companies realised it and started investing more on using renewable resources as fuel which
gradually decreased their cost and hence they could increase their Profit after Tax.

Trend Analysis
As we can see UltraTech shows a constant growth in its sales. Even though after COVID-19 pandemic and
economy shut down the company still shows an upward trend in net sales and its sales are recovering to
normal growth. In 2018-19 company shows a negative trend in profits due to the very high finance cost and
low sales as compared to latest year. Even though finance cost is increasing but so as the operating profits
due with company is paying low taxes and there are higher profits after tax. In the case of Shree cement,
there is only 70% increase in profit after tax for 5 years.
Initially Ultratech Cement shows a drastic upward trend in non-current liabilities which can be because of
high borrowings by the company but is starts to reduce in 2019-20 which means company is paying off its
debt. The company’s current liability is showing an upward trend as well which means company is using its
cash elsewhere i.e. in investing in non-current assets, which shows an upward, trend as well. Both the peer
companies have most of the amount in shareholders fund over the year, which mean they are reserving fund
for future expansions and to compete with UltraTech cement.
DUPONT ANALYSIS

Return on Equity (in %) Return on Assets (in %)

COMPANY Avera
COMPANY 2021 2020 2019 2018 Average 2021 2020 2019 2018 ge
UltraTech UltraTech
Cement 13.12% 15.80% 7.98% 8.76% 11.4% Cement 11.1% 12.7% 7.5% 8.4% 9.9%
Shree Cement 16.03% 13.52% 10.93% 16.68% 14.3% Shree Cement 17.3% 15.3% 12.8% 17.8% 15.8%
J.K Cement 20.79% 16.87% 11.27% 15.50% 16.11% J.K Cement 26.0% 23.6% 19.1% 26.3% 23.8%

Financial Leverage Return on Sales (in %)

COMPANY 2021 2020 2019 2018 Average COMPANY 2021 2020 2019 2018 Average
UltraTech UltraTech
Cement 1.41 1.54 1.61 1.45 1.50 Cement 14.6% 16.8% 8.8% 10.0% 12.5%
Shree Cement 1.18 1.28 1.38 1.29 1.28 Shree Cement 18.3% 13.6% 9.5% 15.0% 14.1%
J.K Cement 2.01 2.06 2.22 2.65 2.23 J.K Cement 13.3% 11.7% 8.5% 10.0% 10.9%
COMPANY 2021 2020 2019 2018 Average
Asset Turnover UltraTech
Cement 0.76 0.76 0.86 0.84 0.80
Shree Cement 0.80 0.88 0.98 0.92 0.90
J.K Cement 0.97 0.98 1.01 1.00 0.99

Return On Equity: The return on equity (ROE) is a measure of a company's profitability in proportion to
its equity. As we can see after 2018-19, Ultratech Cement’s return on equity has increased from 7.98% to
15.80% and 13.12%. In the year 2020-21 which shows that in the case of Ultratech the company is not
distributing its profits as many dividends to its shareholders and is increasing its reserves and surplus to
expand its business and to enter new market and to expand its current capacity.
Financial Leverage: It is a multiplier which is a measure of Financial Leverage i.e., how the company is
sourcing its assets.
From the data, Ultratech Cement is maintaining an average of financial leverage of 1.5 throughout the last
five years and try to control its desk. JK Cement has a higher financial leverage of 2.23 from the past five
years which means that it is incurring high finance cost as it is borrowing funds to acquire assets to increase
the potential return on the investment and compete with its competitors in the market.
So, Ultratech Cement is in better condition than the JK Cement as Ultratech Cement is maintaining its
finance cost and trying to reduce them, which helps them to be ahead of its competitors.
Return on Sales: It is a measure of how efficiently a company turns sales into profits.
Ultratech Cement has an increasing trend of return on sales as compared to JK Cement which shows
Company’s efficiency of earning profits, which keeps Ultratech Cement ahead of its peer companies.
RATIO ANALYSIS

Operating
Margin 2021 2020 2019 2018 Average Gross Averag
Profit 2021 2020 2019 2018 e
UltraTech 22.9%
Cement UltraTech 50.4%
27.5% 23.4% 18.8% 21.7% Cement
53.4% 51.4% 47.8% 49.1%
SG&A as Average
Shree 29.6%
% of Shree 55.0%
Cement
33.5% 31.3% Sales 29.1% 2021
24.2% 2020 2019
Cement 2018
58.4% 54.7% 51.3% 55.6%
J.K UltraTech 20.9% 26.6%
Cement Cement J.K 48.9%
25.0% 22.4% 17.4% 18.9% 25.2% 26.5% 27.8%
Cement 26.9%
51.8% 50.5% 46.0% 47.4%
Shree 26.1%
Cement
26.3% 23.5% 25.9% 28.6%

Debt To J.K Average Inventory 27.7% Average

Equity 2021 2020 2019
Cement 2018 26.5% 27.4% Turnover
29.0% 2021
28.1% 2020 2019 2018

UltraTech 1.50 UltraTech 5.4

Cement 5.1 5.0 5.9 5.6
Cement 1.41 1.54 1.61 1.45 Gross Profit
Shree 1.28 Shree 3.3
1.18 1.28 1.38 1.29 Cement 3.3 3.3 3.6 3.0
Cement

J.K 2.23 J.K 4.5

2.01 2.06 2.22 2.65 Cement 4.4 4.4 4.7 4.4
Cement

It tells us the amount a company has after deducting all its direct cost incurred to produce the goods. Higher
the gross margin, the company can retain more funds, but in case of Ultratech cement it has a gross margin
of 50.4% whereas Shree cement has higher gross margin which is 55%. This is because Ultratech is a much
bigger company than Shree cement, which can be seen in the sales growth. Ultratech cement operates on a
lower profit margin than Shree cement because Ultratech has higher sales than Shree cement.
SG&A as percentage of Sales
It tells us the expenses a company incurs to as part of day-to-day operations of business. Ultratech cement
and Shree cement has approximately equal amount of selling, general and administrative expenses, whereas
J.k. cement incurs a lot more SGA expenses than both other companies do.
Inventory Turnover:
Ultratech cement has the highest inventory turnover ratio compared to all its peer companies. This tells us
that the company effectively manages its inventory. The company takes effective measures to turn inventory
into sales by better selling strategies, which results in more demand for Ultratech cement than those of the
peer companies.
Debt to Equity:
UltraTech cement has a low ratio than JK cement, which implies that the assets of Ultratech cement are not
acquired by borrowed funds rather purchased by their own equity funds.
Comparative Analysis
 Day’s inventory ratio tells us about the inventory management or we can say that the company holds
the average number of day’s inventory prior to the sales. As we compared the average days
Inventory ratio of the three companies, we concluded that Ultratech cement has the least day’s
inventory ratio i.e.,68.2 days, whereas Shree Cement has 111.8 days inventory ratio and JK cement
has 81.7 days inventory ratio. The difference among day’s inventory ratios of the three companies is
because of the policies and strategies they adopt. We all know India is still a developing country and
cement is an essential part of any construction, UltraTech cement’s production centres are widely
spread across the country, therefore giving them a competitive advantage over the peer companies.
 Dedicated railway wagons and ship investments resulted in improved logistic movement, which
made Ultratech cement self-sufficient in logistics, but Shree cement and JK cement rely on
outsourced logistic services. This practice of Ultratech cement helped them to deliver goods on time
or even before time, which in turn resulted in better customer satisfaction and a lower freight cost.
 Ultratech Cement selling and distribution costs are slightly higher than those of Shree Cement are
and JK Cement, which causes, owing to the company's goal of implementing multi-brand strategies
and increasing its market base hence company, is spending more to strengthen its core to grow.
 Net Profit margin tells us about the funds a company is left over-with after meeting all its expenses,
tax liabilities, depreciation, and interest expenses.
In our lead company UltraTech cement profit margin declined in the year 2019 as compared to 2018
but after 2019 there was a gradual increase in the net profit margins, not only for the lead company
but for the whole industry. Our lead company is not able to maintain a higher level of profit with one
of its peer companies i.e., Shree cement. Ultratech cement has production unit almost in every part of
the country, and the motive of the company is not on more profit earning nut more on volume based
as we can see that market cap of Ultratech cement is 230 hundred thousand crores which is
approximately double than Shree cement.
ASSESSMENT

PRICE TO EARNING RATIO 2021

P.E RATIO FOR UltraTech Cement Ltd. 35.62

P.E RATIO FOR Shree Cement Ltd 46.4324

P.E RATIO FOR J.K cement Ltd. 31.84025

Industry Average P.E ratio 33.08

Company 2021 2020 2019 2017

UltraTech Cement 35.62197 15.88745 45.755 48.7511
Shree Cement 46.4324 40.29606 64.073782 40.76757
J.K Cement
31.84025 14.95415 24.1948 24.8528

Based on our understanding of financial statements of Ultratech Cement, average price earnings ratio is less than
Shree Cement and greater than JK Cement which shows the price investor is paying to earn 1 rupee of earning. We
can also see that Ultratech cement in comparison to Shree cement and JK Cement has a large market share. We can
also see that Ultratech cement has the highest return on sales than JK Cement and is approximately at the same level
of Shree Cement, which shows that Ultratech margins are higher than JK cement. As we can see that the industry PE
ratio is 33.08 and the lead company Ultratech have a PE Ratio 35.62 which is above the industry PE ratio which is a
good thing as investors have a belief that Ultratech will generate more revenue and returns on its investment in future.

Also, it can be seen that Ultratech Cement has fixed asset turnover ratio and average of the fixed asset turnover ratio is
lowest as compared to other peer companies. This is because company is investing its funds in acquiring the plants
and factories near the raw material sites to reduce its cost and also UltraTech is shifting itself to renewable resources
for the purpose of energy utilization in factories and as an investor I see the potential in UltraTech’s share and would
recommend “to hold” the shares of Ultratech.