CHAPTER 1 CEMENT INDUSTRY

1
1.1 INTRODUCTION OF CEMENT INDUSTRY
The Indian cement industry is the second largest producer of quality cement. Indian
Cement Industry is engaged in the production of several varieties of cement such as Ordinary
Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement
(PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland
Cement, White Cement, etc. They are produced strictly as per the Bureau of Indian Standards
(BIS) specifications and their quality is comparable with the best in the world.

The Indian cement industry is the second largest in the world. It comprises of 140 large
and more than 365 mini cement plants. The industry's capacity at the beginning of the year 2009-
10 was 217.80 million tonnes. During 2008-09, total cement consumption in India stood at 178
million tonnes while exports of cement and clinker amounted to around 3 million tonnes. The
industry occupies an important place in the national economy because of its strong linkages to
other sectors such as construction, transportation, coal and power. The cement industry is also
one of the major contributors to the exchequer by way of indirect taxes.

Cement production during April to January 2009-10 was 130.67 million tonnes as
compared to 115.52 million tonnes during the same period for the year 2008-09. Despatches
were estimated at 129.97 million tonnes during April to January 2009-10 whereas during the
same period for the year 2008-09, it stood at 115.07 million tonnes.

Over the last few years, the Indian cement industry witnessed strong growth, with
demand reporting a compounded annual growth rate (CAGR) of 9.3% and capacity addition a
CAGR of 5.6% between 2004-05 and 2008-09. The main factors prompting this growth in
demand include the real estate boom during 2004-08, increased investments in infrastructure by
both the private sector and Government, and higher Governmental spending under various social
programmes. With demand growth being buoyant and capacity addition limited, the industry
posted capacity utilisation levels of around 93% during the last five years. Improved prices in
conjunction with volume growth led to the domestic cement industry reporting robust growth in
turnover and profitability during the period 2005-09.

2
1.2 GROWTH DYNAMIC OF CEMENT INDUSTRY
Even during the economic slowdown in 2008-09, growth in cement demand remained at
a healthy 8.4%. In the current fiscal (2009-10) cement consumption has shot up, reporting, on an
average, 12.5% growth in consumption during the first eight months with the growth being aided
by strong infrastructure spending, especially from the govt sector. The trends in all-India
consumption and the growth in consumption in the major cement-consuming States over the last
five years are presented in below table:

Growth in Cement Demand

Figures in Million Tonnes

2008-09 Apr-Nov 09

Domestic Consumption 178 100

Year-on-Year Growth (%) 8.4 12.5

Source: Cement Manufacturers Association (CMA), ICRA Research

TABLE 2.1

1.3 DEMAND AND SUPPLY SCENARIO OF CEMENT

INDUSTRY
3
1.3.1 DEMAND SOURCES
Cement demand in the country emanates from three major sources viz. Housing Sector
accounts for 60% of total cement demand, infrastructure projects 20% and industrial projects
20%.

GRAPH 4.9

1.3.2 DEMAND FROM RESIDENTIAL HOUSING SECTOR

Housing demand accounts for 60% of total cement demand and 90% of total real estate
demand. Housing demand has supported the cement industry even in times of low infrastructure
or industrial demand.
The growth in the residential real estate market in India has been largely driven by rising
disposable incomes, a rapidly growing middle class, low interest rates, fiscal incentives on both
interest and principal payments for housing loans and heightened customer expectations, as well
as increased urbanisation and nuclearisation.
A large proportion of the demand for houses, especially in urban centres such as Mumbai,
Bangalore, Delhi (Gurgaon, Noida) and Pune, is likely to come from high-rise residential
buildings. Since this is a fairly new segment, the growth of the highrise segment will be faster as
compared to the growth of the urban housing segment. The reasons for the construction of high
rise apartment buildings are the lack of space in cities and proximity to offices and IT parks.

• Growth Drivers
○ Favourable demography and higher disposable income

4
 ○ Nuclear families and urbanization

1.3.3 DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTOR

Commercial construction comprises construction of office space, hotels, hospitals,
schools, stadiums etc. In India, most of the investment in this segment is driven by office space
construction. Within office space construction activity, almost 70-75 per cent of the demand
comes from IT/BPO/call centres. The other key demand drivers include banking and financial
services, FMCG and telecom.
This dependency on IT/ITES is expected to continue due to India’s emergence as a
preferred outsourcing destination, despite China and Russia also emerging as strong contenders.
The industrial and commercial sector comprises of all the major industrial set ups, commercial
offices, IT & ITES parks and organized retail formats.
The growth in the sector will translate into substantially higher demand for commercial
space, adding to the overall investment in construction activities. CRIS INFAC, believes the
growth in IT/ITES is likely to translate into construction investments of Rs 148 billion (118
million sqft) by 2007-08 as compared with investments of Rs 74 billion (61 million sqft) in the
last 3 years. The investments are based on the manpower/workspace requirement in the sector.
Retail boom to result in construction investments of Rs 112 billion over the next 5 years CRIS
INFAC, estimates that retail spending in India in fiscal 2005 was Rs. 9.9 trillion, of which
organised retail accounted for Rs. 349 billion, or approximately 3.5%. The organised retail
segment in India is expected to grow at a rate of 25% to 30% over the next five fiscal years. The
growth of organised retail is expected to be driven by demographic factors, increasing disposable
incomes, changes in shopping habits, the entry of international retailers into the market and the
growing number of retail malls.
CRIS INFAC, believes the current spark in mall construction activity across India will
result in around 105 million sqft of mall space by 2010. This would translate into construction
investment of Rs 112 billion over the next 5 years.
The increase in disposable incomes, demographic changes (such as the increasing number
of working women, who spend more, the rising number of nuclear families and higher income
levels within the urban population), the change in the perception of branded products, the growth
in retail malls, the entry of international players and the availability of cheap finance will drive

5
the growth in organized retail. We expect cement consumption from this sector to register a
CAGR of 9-10% driven by large-scale construction activities.

1.3.4 DEMAND FROM INFRASTRUCTURE SECTOR

The Indian economy is all set to grow at a pace of over 7% in the current fiscal. Increased
emphasis on infrastructure development made it achievable. Infrastructure has been witnessing
extraordinary growth across all sectors such as roads, railways, irrigation, power, water supply
urban infrastructure, ports and airports. However, in order to achieve this kind of growth on a
sustainable basis, a further impetus is required to be given to the Infrastructure development in
the country. GOI, recognizing this fact has planned to spend around Rs. 13.2 trillion on
infrastructure development for the next five year.
However, this figure has been revised upwards to Rs.19.2 trillion. Out of total proposed
expenditure, a construction activity are expected to account for more than 50% of total
investment and is expected to be the biggest beneficiary of the surge in infrastructure investment
over the next five years. Planning commission projected that the total spending by the central
government, state government, PSUs and through the Public-Private partnership (PPP) would be
around Rs19.3 trillion ($470 billion) for the next 5 years as against Rs. 7.7 trillion spend during
Xth Five Year Plan, a jump of over 150%.
This would imply a construction opportunity of over Rs.11.2 trillion for the next 5 years. In
light of such huge expenditure on construction activities, the demand for cement from
infrastructure sector is expected to grow at a CAGR of 24-25%.

➢ Overall Demand
Driven by a strong residential housing demand, growing industrial and commercial
activities and the continued momentum in infrastructure investment, the cement consumption is
expected to witness a CAGR of more than 12% in line with the economic growth because of the
strong co-relation with GDP and the increased activity in the construction sector. We further
believe that due to huge expenditure by GOI on infrastructure the proportionate demand from
infrastructure sector will move northwards and we expect the total share of cement demand from
infrastructure to be close to 25% in 2010. However, proportionate demand from housing sector
will move southwards and will come down to around 55% while remaining 20% will be from
commercial sector.

6
1.3.5 DEMAND-SUPPLY MISMATCH
Though India is the second largest cement manufacturer, it is among the lowest cement
consuming countries. In India per capita cement consumption is 122 kg, which is far below the
world average of approximately 320 kg. Hence, the cement industry has been in a surplus
position since a long time.
There exist regional surplus/shortages in the Indian cement industry. The oversupply is
largely in the Southern and Northern regions. By contrast, there is a supply shortage in Eastern
and Western regions. There is significant inter-regional movement of cement, which plays a
crucial role in the regional demand-supply dynamics. Most of the cement movement across
regions takes place from North to Central (3.35 mt), South to West (5.20 mt), Central to North
(2.45 mt), and Central to East (2.51 mt).

GRAPH 4.10

1.4 SWOT ANALYSIS

Strengths:

7
 ✔ Second largest in the world in terms of capacity: In India there are approximately 124
large and 300 mini plants with installed capacity of 200 million tonnes.
✔ Low cost of plroduction: due to the easy availability of raw materials and cheap labour.

Weakness:

✔ Effect of global recession on real estate: The real estate prices are stabilizing and facing
steady slowdown especially in metros. There are approximately one hundred thousand
completed flats without occupancy in Bangalore. There has been drastic reduction in
property prices due to reduced demand and increased supply.
✔ Demand-Supply gap, overcapacity: The capacity additions distort the demand-supply
equilibrium in the industry thereby affecting profitability.
✔ Increasing cost of production due to increase in coal prices.
✔ High Interest rates on housing: The re-pricing of the interest rates in the last four years
from 7% to 12% has resulted in the slowdown in residential property market.

Opportunities:

✔ Strong growth of economy in the long run: Indian economy has been one of the stars
of global economics in the recent years, growing 9.2% in 2007 and 9.6% in 2006.
However, India is facing tough economic times in 2008.
✔ Increase in infrastructure projects: Infrastructure accounts for 35% of cement
consumption in India. And with increase in government focus on infrastructure spending,
such as roads, highways and airports, the cement demand is likely to grow in future.
✔ Growing middle class: There has been increase in the purchasing power of emerging
middle-class with rise in salaries and wages, which results in rising demand for better
quality of life that further necessitates infrastructure development and hence increases the
demand for cement. Technological changes: The Cement industry has made tremendous
strides in technological up gradation and assimilation of latest technology. At present
ninety three per cent of the total capacity in the industry is based on modern and
environment-friendly dry process technology and only seven per cent of the capacity is
based on old wet and semi-dry process technology. The induction of advanced
technology has helped the industry immensely to conserve energy and fuel and to save
materials substantially and hence reduce the cost of production.

8
Threats:

✔ Imports from Pakistan affecting markets in Northern India: In 2007, 130000 tonnes
in 2008, 173000 Metric tones of cement was exported to India. This was done to keep the
price of cement under check.
✔ Excess overcapacity can hurt margins, as well as prices.

1.5 STRUCTURE OF THE INDIAN CEMENT INDUSTRY

• It is a fragmented industry. There are 56 cement companies in India, operating 124 large
and 300 mini plants, where majority of the production of cement (94%) in the country is
by large plants.
• One of the other defining features of the Indian cement industry is that the location of
limestone reserves in select states has resulted in it’s evolving in the form of clusters.
• Since cement is a high bulk and low value commodity, competition is also localized
because the cost of transportation of cement to distant markets often results in the
product being uncompetitive in those markets.
• Another distinguishing characteristic comes from it being cyclical in nature as the market
and consumption is closely linked to the economic and climatic cycles. In India, cement
production is normally at its peak in the month of March while it is at its lowest in the
month of August and September. The cyclical nature of this industry has meant that only
large players are able to withstand the downturn in demand due to their economies of
scale, operational efficiencies, centrally controlled distribution systems and geographical
diversification.

1.5.1.MAJOR PLAYERS IN THE NORTH:

TOTAL SALES for the year 2009 = Rs. 33589.02 Cr

Name of the Net Sales in Percentage

Cr. (2009) (%)
Company

9
 ACC 7,942.66 23.64659642
AmbujaCem. 7,040.70 20.96131414
Birla Corpn. 1,790.19 5.329688095
J K Cements 1,664.42 4.955250257
JK Lakshmi Cem. 1,223.90 3.643750249
Shree Cement 2,716.46 8.08734521
UltraTechCem. 6,385.50 19.0106767

1.5.2.MAJOR PLAYERS IN SOUTH:

TOTAL SALES for the year 2009 = Rs. 11266.01 Cr

Name of the Net Sales in Percentage (%)

company Cr.(2009)
Andhra Cements 369.36 3.278534281
Chettinad Cement 1,137.67 10.09825129
Dalmia Cement 1,758.68 15.61049564
India Cements 3,358.34 29.8094889
Madras Cement 2,530.90 22.46491881
Rain Commodities 1,111.01 9.861610277
Zuari Cements 438.72 3.894191466

10
11
CHAPTER 2 BIRLA GROUP OVERVIEW

12
2.1 INTRODUCTION

Birla Corporation Limited is the flagship Company of the M.P. Birla Group. Incorporated
as Birla Jute Manufacturing Company Limited in 1919, it was Mr. Madhav Prasadji Birla who
gave shape to its present form. As Chairman of the Company, Shri Madhav Prasadji Birla
transformed it from a manufacturer of jute goods to a leading multiproduct corporation with
widespread activities. Under the Chairmanship of Mrs. Priyamvadaji Birla, the Company crossed
the Rs. 1300 - crore turnover mark and the name was changed to Birla Corporation Limited in
1998.
After the demise of Mrs. Priyamvadaji Birla, the Company continued
to consolidate in terms of profitability, competitiveness and growth under the leadership of Mr.
Rajendra S. Lodha, late Chairman of the M.P. Birla Group. Under his leadership, the Company
posted its best ever results in the years ended 31.3.2006, 31.3.2007 and 31.3.2008.

Birla Corporation Limited has products ranging from cement to jute goods, PVC floor
covering, as well as auto trims (jute felt-based car interiors manufactured with German
technology).

2.2 GROUP DIVISION

➢ CEMENT DIVISION
The Cement Division of Birla Corporation Limited has seven plants, two each at Satna
(M.P.) - Satna Cement Works & Birla Vikas Cement, Chanderia (Rajasthan) - Birla Cement
Works &Chanderia Cement Works, Durgapur (W.B.) - Durgapur Cement Works &DurgaHitech
Cement - and one at Raebareli (U.P.)-Raebareli Cement Works. The total installed capacity of
these plants is 57.8 lakh tonnes. They manufacture varieties of cement like Ordinary Portland
Cement (OPC), 43 & 53 grades, Portland Pozzolana Cement (PPC), Fly Ash - based PPC, Low
Alkali Portland Cement, Portland Slag Cement, Low Heat Cement and Sulphate Resistant
Cement.

The cement is marketed under the brand names of Birla Cement SAMRAT, Birla Cement
KHAJURAHO, Birla Cement CHETAK, Birla Cement and Birla Premium Cement, bringing the

13
product under the common brand of Birla Cement while retaining the niche identity of SAMRAT
for blended cement, i.e. PPC & PSC, for all the units, KHAJURAHO (for the OPC product of
Satna) and CHETAK (for the OPC product of Chanderia).

The Division exports large quantities of cement to Nepal, under the brand names of Birla
Cement Samrat, Birla Cement Khajuraho and Birla Cement. The special variety of Birla Cement
SAMRAT, being produced by the company, is ideal for mass concrete, RCC/pre-stressed/precast
structure (for reduced thermal crack), increased water tightness of concrete, increased resistance
to sulphate soils and aggressive water and increased resistance to alkali aggregate reaction
besides corrosion resistant properties 2007.

➢ JUTE DEVISION
Eight decades of experience. Modern spinning technology.Skilled workforce. Above all, an
innovative, customer focused outlook. That’s the Jute Division of Birla Corporation Limited,
manufacturing more than 120 tonnes of a variety of jute products in Birla Jute Mills.

The product range comprises almost every major application of jute - the most versatile, eco-
friendly, bio-degradable fibre available. Jute- durable, natural, anti-static.

Being an ISO 9001 accreditation unit, the Jute Division is a leading exporter of Jute Products
to the demanding markets of the European Community, USA, Japan and others, Birla
Corporation Limited has been acknowledged in these countries for its ability to anticipate
buyers’ requirements, fulfill expectations and develop technically superior products.

As a pioneer, the Jute Division thrives on challenges, and is always ready to customize the
golden fibre for new and exciting end-uses.

➢ VENOLEUM DIVISION

The Division is in operation since 1991, with a production capacity of 48.60 lac square metres of
Cushion Vinyl flooring, PVC Coated Wallpaper, Coated Fabric and Cellular Plastic Sheet. It has the
distinction of having facilities for in-line Rotogravure and Screen printing and meeting the finest
international standards.

14
 Birla Vinoleum Super Corporate : This 2.0 mm thick flooring has been certified and
conforms to BIS : 3462 : 1986. Resistant to mild diluted acids and alkalies, fire-retardant, anti-
static and noise-dampener, the product is suitable for medium and heavy traffic areas.

Salient features of the Birla Vinoleum Cushion Vinyl Floor Covering : Extra cushioning for
additional comfort and durability.

Cellular Plastic Sheet: Being used in automobile industries for lamination of door trims.

➢ AUTO TRIM DICISION

Ever since the Auto Trim Division started producing automotive interiors, the most important task
has been to provide consumers with products that offer the true value. The division has endeavoured to
develop technologies which are friendly to the people and environment. The process of manufacturing
two-step based automotive interiors like Door trims, Parcel shelf and Pillar trims in technical cooperation
with EmpeWerke of Germany and lately indigenously developed highly cost-effective, recyclable,
environment-friendly natural fibre-based one-step technology is now a standard in various Indian
vehicles.

With its three units at Birlapur (West Bengal), Chakan (Maharashtra) and Gurgaon (Haryana),
supplemented with Research & Development as well as testing facilities, the Division is equipped today
to contribute for a better global environment.

Its proven production process boosted by non-stop R&D exercise, has been meeting the requirement
for upgraded Interiors, maintaining it's ranking in the race with global players who are now in India. The
Auto Trim Division's commitment to quality has been benefiting not only the upfront car industry but the
national economy as well.

2.3PRODUCT

Product Sales Product

Year Month UOM Sales Value (Cr.)
Name Quantity Mix
Metric
Cement 2009 12 5292540 1866.02 91.58
Tonnes
Metric
Jute Goods 2009 12 33835 127.01 6.23
Tonnes
Clinker 2009 12 51184 Metric 15.02 0.73

15
 Tonnes
Export
2009 12 0 12.62 0.61
Incentives
PVC 2009 12 462062 SqMetres 7.08 0.34
Miscellaneous
2009 12 0 3.61 0.17
Sales
Auto Trim
2009 12 48433 Pieces 2.55 0.12
Parts
Power 2009 12 3567450 KWH 2.05 0.10
Castings (Iron Metric
2009 12 126 1.54 0.07
& Steel) Tonnes

2.6.1 The Product And Brand Names Are As Follows :-

Units Products BIS Brand names
Specification
s
Birla Cement Portland IS 1489 Birla Cement Samrat
Works Pozzolana (Part - I) Birla Cement Chetak
Chanderia Cement (PPC) 43 Gr - IS
Cement Works Ordinary 8043
Portland Cement 53 Gr - IS
(OPC) - 12269
43 Gr, 53 Gr
Satna Cement PPC IS 1489 Birla Cement Samrat
Works OPC (43 Gr.) (Part - I) Birla Cement Khajuraho
Birla Vikas IS 8043
Cement
Raebareli Cement PPC IS 1489 Birla Cement Samrat
Works (Part - I)

16
Durgapur Cement Portland Slag IS 455 Birla Cement
Works Cement (PSC) Birla Premium Cement
Durga Hitech PPC IS 1489 Birla Cement Samrat
Cement (Part - I)

Special Cements

• Sulphate Resistant Cement IS 12330

• Low-alkali Cement

• Railway Sleeper Grade Cement IRS T-40 (OPC 53S)

• Low Heat Cement IS 12600

2.6.2 Location Of Plants In India

State Town Units Capacity

Mill. Ts
Madhya Satna Satna Cement Works / Birla Vikas Cement 1.55
Pradesh
Rajasthan Chanderi Birla Cement Works / Chanderia Cement 2.29
a Works
West Durgapur Durgapur Cement Works / Durga Hitech 1.60
Bengal Cement
Uttar Raebareli Raebareli Cement Works 0.63
Pradesh

17
2.6.3 SWOT ANALYSIS
STRENGTHS
✔ We are the only company in India, which manufacture eight types of cement
✔ Low cost of production

WEAKNESS
✔ Effect of global recession on Real Estate and Infrastructure
✔ Demand-Supply gap, Overcapacity
✔ Increasing Cost of Production
✔ High Interest rates

OPPORTUNITIES
✔ Strong growth of economy in the long run.
✔ Increase in infrastructure projects
✔ Growing middle class
✔ Technological Changes
✔ Increase in govt spending.
✔ We have big market in western India .

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 ✔ Gujarat government has opened of blocks of lime stone for lease in kutch district, we
have opportunity to install a 2 million tonne cement plant in this area

THREATS
✔ Excess over capacity can hurt margins as well as prices.
✔ Expected competiton new arrivals like Jaypee cement, Choromandal king Cement

CHAPTER 3 RESEARCH METHODOLOGY

19
Objectives
• Fundamental Analysis to assess the profitability, liquidity and other financial ratios of the
firm.

• Technical analysis for the stock exchange of a ‘Birla Corporation Limited’ on a Japanese
Candlestick graph.

SOURCES OF DATA

• Only secondary data was collected from the internet, company websites, magazines and
various articles.
• Primary data: Basic information collected from the local sources as well as from the company
staff like managers, accountants and officers. Moreover information gathered through practically
preparing the data for

20
CHAPTER 4 RATIO ANALYSIS

21
 Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick
indication of a firm's financial performance in several key areas. The ratios are categorized as
Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability
Ratios, and Market Value Ratios.

Ratio Analysis as a tool possesses several important features. The data, which are
provided by financial statements, are readily available. The computation of ratios facilitates the
comparison of firms which differ in size. Ratios can be used to compare a firm's financial
performance with industry averages. In addition, ratios can be used in a form of trend analysis to
identify areas where performance has improved or deteriorated over time.

Because Ratio Analysis is based upon accounting information, its effectiveness is limited
by the distortions which arise in financial statements due to such things as Historical Cost
Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in
financial analysis, to obtain a quick indication of a firm's performance and to identify areas
which need to be investigated further.

The pages below present the most widely used ratios in each of the categories given
above. Please keep in mind that there is not universal agreement as to how many of these ratios
should be calculated. You may find that different books use slightly different formulas for the
computation of many ratios. Therefore, if you are comparing a ratio that you calculated with a
published ratio or an industry average, make sure that you use the same formula as used in the
calculation of the published ratio.

22
There are mainly four types of Ratio

I. Liquidity Ratio
II. Leverage Ratio
III. Activity Ratio
IV. Profitability Ratio

(I) Liquidity Ratio

(i) Current Ratio

Current Assets / Current Liability

year 2005-06 2006-07 2007-08 2008-09 2009-10

Current Assets 31213.53 50946.06 73673.84 68371.00 84175.71
Current Liabilities 30242.42 43308.23 34220.75 39651.97 42993.69
Current Ratio 1.03 1.18 2.15 1.86 1.96

Interpretation:

Current ratio indicates the liquidity of the enterprise.Min. Expected even for a new unit in India
is 1.33:1 therefore we can see that the ratios in F.Y 2005-2006 and F.Y. 2006-2007 are below
1.33 but after it well over 1.33 which ensures us that the company is in a good condition and has
ample liquidity.

(ii) Quick Ratio/ Liquid Ratio

Total Current Assets – Inventory/ Total Current Liability (in times)

year 2005-06 2006-07 2007-08 2008-09 2009-10

Total Current Assets 31213.53 50946.06 73673.84 68371 84175.71

23
Inventory 10572.33 14258.83 20044.82 19287.91 28371.32
Total Current Liability 30242.42 43308.23 34220.75 39651.97 42993.69
Ratio 0.68 0.85 1.567 1.24 1.30

Interpretation:

Generally, a liquid ratio of 1 : 1 is considered to represent a satisfactory current financial

condition. In all the year 2005-06 the Birla Corporation Ltd’s ratio and 2006-07 is below 1 so it
is not good for the company. After 2006-07 the company’s ratio is above 1 i.e 1.567:1 1.24:1 and
1.30:1 so after F.Y 2006-07 the company’s position is good.

24
 (iii)Net Working Capital :

Current Assets – Current Liability/ Total Assets

year 2005-06 2006-07 2007-08 2008-09 2009-10

Current Assets 31213.53 40946.06 73673.84 68371 84175.71
Current Liability 30242.42 43308.23 34220.75 39651.97 42993.69
Total Assets 95844 138155 193139 196067 293035
Ratio Analysis 0.010 -0.017 0.20 0.15 0.14

Interpretation:

Net working capital should always be positive. In short, the the net working capital, the greater
is the degree of overall short-term liquidity.The Net working Capital ratio in F.Y 2005-2006 is
positive but in F.Y 2006-2007 it is in negative in this situation company’s liability is more than
the company’s assets. But after F.Y 2007-2008 its drastically increase so company’s situation is
better cope up with on liability.

25
(II) Leverage Ratio
(i) Earnings Per Share

Profit After Tax/ No. of Equity Share

Year 2005-06 2006-07 2007-08 2008-09 2009-10

P.A.T. 12576 32623 39357 32351 55718
No. of Equity Share 770.134 770.134 770.134 770.134 770.134
Ratio 16.33 42.36 51.11 42.01 72.35

Interpretation:

The ratio measures the overall profitability in terms of per equity share of capital contributed by
the owners.

Earning Per Share means it is a share price which increase gradually year- on-year so it is good
for comp any that company’s earning per share is in good manner so company can earn profit.
By it we can say that company’s profit is maximizes.

If company’s EPS will increase its affect on profit, it pulls profit upward.

(ii) Debt Equity Ratio

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Long Term Debts 70918.73 28264.88 27225.72 27644.66 70918.73
Shareholders Fund 179122.58 66581.37 100497.53 128770.96 179122.58
Ratio 0.70 0.42 0.27 0.21 0.39

26
Interpretation

The ratio measures the proposition of debt and capital both equity and preference, in the capital
structure of a company. In other words, it measures the extent of assets financed through long
term borrowings.

Here, in the year F.Y. 2005- 2006 the debt equity ratio it is very high 0.70 that is not good for the
company gradually it decreases it means company is covering her debt from share holders. The
lesser the debt of a company it is good for the company.i

(III) Activity Ratio:

(i) Fixed Assets Turnover Ratio

Net Sales/ Net Block of Assets

year 2005-06 2006-07 2007-08 2008-09 2009-10

Net Sales 143344 179451 199678 203884 238707
Net Block of Assets 53037 52630 62746 74887 102645
Ratio 2.70 3.41 3.18 2.72 2.33

Interpretation:

This ratio indicates the company’s ability to generate net sales revenue from fixed assets of the
company, such as property, building and other equipments. A higher fixed asset turnover ratio
shows that the company has been more effective in utilizing the revenue invested in fixed assets
for generating net sales.

27
The above table indicates that the change in the fixed assets turnover from F.Y. 2005-2006 is
increased in 2006-2007 and its gradually decrease but its quite similar.So the utilization of fixed
assets is different year on year.

➢ Inventory turnover ratio

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Sales 143344 179451 199678 203884 238707
Inventory 10572.33 14258.83 20044.82 19287.91 28371.32
Ratio 13.55 12.58 9.96 10.57 8.41

Interpretation:

The company is turning its inventory of finished goods into sales 13.55 times in the year 2005-
06. It holds average inventory holdings of: 12 months(365 days)/13.55 = 27 days. In the figure
we are shown that the ratio is declining gradually .As such, the general rule high inventory
turnover is desirable but high inventory turnover ratio may not necessary indicates the profitable
situation. An organization, in order to achieve a large sales volume may sometime sacrifice on
profit.

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 (i) Net Worth Turnover Ratio

➢ Net sales/ Net worth

year 2005-06 2006-07 2007-08 2008-09 2009-10

Net Sales 143344 179451 199678 203884 238707
Net Worth 38424 66581 100498 128771 179123
Ratio 3.73 2.695 1.99 1.58 1.33

Interpretation:

The ratio measures the extent of turnover or volume of gross income generated by the net worth
of a company. In other words it is the efficiency in the resource utilization from the angle of the
residual interest i.e. equity shareholders.

Here the net worth ratio is decreasing it means it is not good for the company. The company has
to take some necessary action to cope up with Net Worth

(IV) Profitability Ratio:

(i) Return on Investment

Profit after Tax/ Investment

year 2005-06 2006-07 2007-08 2008-09 2009-10

P.A.T 12576 32623 39357 32351 55718
Investment 42807 85525 130393 121180 190390

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Ratio 0.29 0.38 0.30 0.267 0.29

Interpretation

This ratio indicates that, what is the return that we invest our profit The more the return on the
investment the more they can earn and it is good for the Company. Here, Birla Corporation Ltd
is earning in F.Y 2005-06 is 0.29,0.38. 0.30,0.267, and 0.29.

Birla corporation Ltd had increase their return in 2006-07 to 2008-09 but again in 2009-10 they
reach 0.29. The company’s return on investment is fluctuating year on year.

(ii)Net Profit Ratio

Profit After Tax/ Sales*100 (in %)

year 2005-06 2006-07 2007-08 2008-09 2009-10

P.A.T 12576 32623 39357 32351 55718
Sales 143344 179451 199678 203884 238707
Ratio 8.77 18.18 19.71 15.87 23.34

Interpretation

The net profit margin is increased in the year2007-08. There is a difference in the net profit
margin the 2005-2006 & 2007. The high net profit margin shows that the co. would be in
advantageous position to survive in the face of falling selling prices, rising costs of production or
declining demand for the product. In the year 2009 2010 company earns high profit that means it
is good for the company.

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31
(iii)Gross Profit Margin Ratio

Gross Profit/Sales*100

year 2005-06 2006-07 2007-08 2008-09 2009-10

Gross Profit 19187 51992 61433 50193 84342
Sales 143344 179451 199678 203884 238707
Ratio 13.39 28.97 30.77 24.62 35.33

Interpretation

As shown in the figure the gross profit margin of this Co. It is more increasing in the year 2006-
07,and 2007-08 So here we can say that Co.’s production is efficient. But after that it is
declining in next year, and somehow in the year 2009-10 it is again increasing 35.33% which is
highest so it is said that now Co. manages efficiently.

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 CHAPTER 5 TECHNICAL ANALYSIS

5.1 The destination and fundamentals of technical analysis

Dow Theory is a heterodox theory (outside the mainstream) on stock price movements that

includes what is now called technical analysis as well as some portion of sector rotation. The

theory was derived from 255 Wall Street Journal editorials written by Charles H. Dow (1851–

1902), journalist, founder and first editor of the Wall Street Journal and co-founder of Dow Jones

and Company. Technical analysis is used for the prediction of market movements (that is

alterations in currencies prices, volumes and open interests) outgoing from the information

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obtained for the past. The main instruments of technical analysis are different kinds of charts,

which represent currencies price change during a certain time preceding exchange deals, as well

as technical indicators. The latter are obtained as a result of the mathematical processing of

averaging and other characteristics of price movements.

Dow Theory
The fundamental principles of technical analysis are based on the Dow Theory with the

following main thesis:

A. The price is a comprehensive reflection of all the market forces. At any given time, all market

information and forces are reflected in the currency prices (―The market knows everything‖).

B. Price movements are trend followers (―Trend is your friend‖); trends are classified as up

trends (bullish), downtrends (bearish) and flat (sideways).

5.2 Charts for the technical analysis

Charts for technical analysis are being constructed in coordinates, ―price (the vertical axis) –

time (the horizontal axis)‖. The following kinds of currency prices represented on charts are

being distinguished.

Open – a price at the beginning of a trade period

Close - a price at the end of a trade period;

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High – the highest from prices observed during a trade period;

Low – the lowest from prices observed during a trade period.

Line chart: The line chart is plotted connecting single prices for a selected time period. The
most popular line chart is the daily chart. Although any point in the day can be plotted, most

traders focus on the closing price, which they perceive as the most important (see Figure). But an

immediate problem with the daily line chart is the fact that it is impossible to see the price

activity for the balance of the period as well as gaps – breakups in prices at joints of trade

periods. Nevertheless, line charts are easier to visualize. Also, technical analysis goes well

beyond chart formation; in order to execute certain models and techniques, line charts are better

suited than any of the other charts.

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Bar chart: The bar chart consists from separate histograms (See figure). To plot a histogram in
coordinate‘s price – time the points responding to high, low, open and close prices for a time

period analyzed should be marked on the one vertical bar. The opening price usually is marked

with a little horizontal line to the left of the bar; and the closing price is marked with a little

horizontal line to the right of the bar. Bar charts have the obvious advantage of displaying the

currency range for the period selected. An advantage of this chart is that, unlike line charts, the

bar chart is able to plot price gaps. Hence, it is impossible to see on a bar chart absolutely all

price movements during the period.

36
Candlestick chart: Candlesticks provide unique visual cues that make reading price action
easier. Candle Charts allow traders to better comprehend market sentiment. Offering a greater

depth of information than traditional bar charts - where the high and low are emphasized -

candlesticks give emphasis to the relationship between close price and open price. Traders who

use candlesticks may more quickly identify different types of price action that tend to predict

reversals or continuations in trends - one of the most difficult aspects of trading. Furthermore,

combined with other technical analysis tools, candlestick pattern analysis can be a very useful

way to select entry and exit points.

37
The opening and closing prices form the body of the candlestick. To indicate that the opening

was lower than the closing, the body of the bar is left blank.

The following image represents the design of the typical candlestick.

38
Out of the three charts as mentioned above, candlestick chart is intensely explained in this

project report. Thus the following will explain the different patterns of candlestick.

5.3 Stars
The color of the star is not important. Stars can occur at tops or at bottoms (sometimes a star

during a downtrend is labeled a rain drop). If the star is a doji instead of a small real body, it is

39
called a doji star. The star, especially the doji star, is a warning that the prior trend may be

ending. The star's small real body represents a stalemate in the tug of war between the bulls and

bears. In a strong uptrend, the bulls are in charge. The same is true, but in reverse, for a star in a

downtrend. The star is part of four reversal patterns including:

 The evening star;

 The morning star;

 The doji star; and

 The shooting star.

In any of these star patterns the real body of the star can be white or black.

 The Evening Star Commonly regarded as a bearish reversal pattern, this three-day pattern

consists of a long white body, followed by a smaller gap up candlestick, with the third and final

day closing below the midpoint of the first day.

 The Morning Star

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This formation is considered a three day bullish reversal pattern that consists of a long bodied

black first day, a short gap down second day, followed by a third long white bodied candle,

which closes above the midpoint of the first day.

 The Doji Star

When the opening and closing price are essentially the same, the candlestick formed resembles a

plus sign, cross, or inverted cross and is referred to as Doji. It represents indecision on the part of

the market, and is interpreted by traders that a turning point is imminent.

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42
5.3Tweezers tops and bottoms
Tweezers are two or more candlestick lines with matching highs or lows. They are called

tweezers because they are compared to the two prongs of a tweezers. In a rising market, a

tweezers top is formed when the highs match. In a falling market, a tweezers bottom is made

when the lows are the same. The tweezers could be composed of real bodies, shadows, and/or

doji. A tweezers occurs on nearby or consecutive sessions and as such are usually not a vital

reversal signal

Figure 10 Tweezers top and Harami class Figure 1 Tweezers top and Hanging Man
Figure 12 Tweezers top and shooting stars

Figure 13 Tweezers top and dark cloud cover Figure 14 Tweezers Bottom and Hammer
Figure15 Tweezers Bottom and piercing pattern

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Source: Candlestick Charting – techniques Figure 18: More Reversal Patterns

5.4 Continuous pattern

Most candlestick signals are trend reversals. There are, however, a group of candlestick patterns

which are continuation indicators. As the Japanese express it, "there are times to buy, times to

sell, and times to rest." Many of these patterns imply a time of rest, a breather, before the market

resumes its prior trend.

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 Rising and Falling three methods

These three methods include the bullish rising three methods and the bearish falling three

methods. These are both continuation patterns.

Figure 19: Rising and Falling three methods

The benchmarks for the rising three methods pattern (see Exhibit 7.25) include:

 A long white candlestick.

 This white candlestick is followed by a group of falling small real body candlesticks. The

ideal number of small candlesticks is three but two or more than three are also acceptable as long

as they basically hold within the long white candlestick's range. Think of the small candlesticks

as forming a pattern similar to a three-day harami pattern since they hold within the first

45
session's range. (For this pattern that would include holding within the shadows; for a true

harami it would only include the real body.) The small candlesticks can be any color, but black is

most common.

 The final day should be a strong white real body session with a close above the first day's

close. The final candlestick line should also open above the close of the previous session.

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5.5 CANDLESTICK CHARTS INTERPRETATION & FORECAST
The purpose of the project was to show the candlestick patterns on the charts and to indentify the

entry and the exit points for the trade. The primary objective of doing so was to give a rough idea

that how the candlestick charts work. For this project the candlestick chart of share price of Birla

corporation limited has been prepared through use of open, high, low and close data.

The data collected from the websites in the form open, high, low and close. This data then was

converted in form of candlestick charts. The entire model of candlestick chart has been prepared

on the excel sheet.

47
Candle stick chart represents the share price of the company from
January 2006 to may 2010

Interpretation:

(i) It might be a rising three pattern as the charts starts from the group of raising small real
body candlestick. This trend indicates the buyers to wait n when some morning star,
engulfing bullish or tweezer bottom he can buy the trade.
(ii) In this candle stick chart we can see that in the beginning of the year 2006 the market
price is going to recover it on bullish trend it creates a higher high in comparision to
previous year but suddenly it falls down in June 2006. In this situation the buyer should
not attempt to buy. Because what the market is doing it doesn’t known to no one.
(iii)After September the market is again taking a place in bullish trend. But it still fluctuating
and cant take a correct decision when to buy a when to sell.
(iv)Now, we can see that in November 2006 its creates a pattern in engulfing bullish, that
shows the market is recovering the position.
(v) In the year 2007 the market gets is going in a uptrend here it creates morning star for the
buyers.

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 (vi)In the year 2008 all know that it’s the time to recession in the economy. So, the market is
taking downtrend

In the beginning if the year 2009 it is going upward an it seems to uptrnd that is bullish trend
and it is a safe signal to the traders to trade in stock exchange.

(ii)Last Eight month candle stick chart

Interpretation:

• The above chart shows the share price of the ‘Birla Corporation Ltd.’ The share Price of
the company is approximately 300 to 400. The company’s position in the stock
exchange remains in a sideways manner.
• We can also say that the company’s price is good. The company is maintaining its
position in the market.
• From that we can say that the company’s position is remains as it is in the ear future.

Forecasting of the Market Price of a Share

1. We can forecast about the Share price of the company by the latest previous 8 months
data.

49
2. The share price of a company of the last years are remains in a sideways. Here we can
see that the company’s position is stable in the last 8 months.
3. It suggest that the market may be remains in sideways or it may be go bullish or bearish.
4. So, This situation shows the buyer that they can invest the company’s stock.

50
CHAPTER 6 FINDINGS

51
➢ Based on Secondary Data

✔ India is the second largest cement manufacturer, it is among the lowest cement
consuming countries.

✔ The capacity of cement industry at the end of 2008-09 was 219.17 million tonnes (large
plants). The industry witnessed a growth of 7.9% during the year 2008-09

✔ Birla Corporation announced that it would be setting up a US$ 282.27 million cement
plant with a capacity of 3 million tonnes in Madhya Pradesh. With this new plant, the
company's overall cement capacity would cross 10 MT, by 2011.
✔ The Birla Corporation Ltd. Is doing export of 71.09 crores so that there more income part
is also from exporting.
✔ The real estate prices are stabilizing and facing steady slowdown especially in metros.
✔ Demand-Supply gap, overcapacity The capacity additions distort the demand-supply
equilibrium in the industry thereby affecting profitability.
✔ Due to increase in coal price the cost of production can be increased.

52
➢ Based on Primary Data
Fundamental Analysis
✔ From the Ratio Analysis we can see that what is company’s situation of the last five
years.
✔ We can see that company’s position in 2005-2006 and in 2006-2007 are quite low as
compare to 2007-2008, 2008-2009, 2009-2010, but it is in increasing manner
✔ We also can see that the company’s situation is drastically increase in the 2007-2008 but
in 2008 -2009 is decrease because of recession.
✔ Here we can see that the profitability is increase of the Company
✔ So it is good for the company.

Technical Analysis

✔ For the Technical analysis I have choose Japanese Candle Stick Chart for the NSE price
of Birla Corporation Limited that what is the pattern are going to be occur.
✔ We can see that in the beginning of the year 2006 its increasing but in April 2006 its take
a bearish pattern.
✔ From the Candle Stick chart we can say that the chart shows us a indecision trend that the
pattern is changing.
✔ In the year 2008 the share price of a Birla Corporation’s share price falls down because of
effect of a Global recession.
✔ After the year 2008 we can see that the market takes its place against towards bullish
trend.
✔ We can find also some pattern engulfing bullish pattern in September October we see that
it is engulfing bearish pattern.
✔ We can also see that there is a tweezer bottom pattern. And we can ultimately say that
after the end of the month May 2010 it’s a morning star pattern for buyers
✔ So we can say that market has give us to green signal to trade.

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CHAPTER 7 SUGGESTIONS/ RECOMMANDATION

54
✔ Company should raise funds through short term sources for short term requirement of
funds, which comparatively economical as compare to long term funds.\
✔ Company should improve their Inventory Turnover Ratio, By increasing inventory turn
over ratio they can increase their sales and cut down their cost of production.
✔ Over all company has good liquidity position and sufficient funds to repayment of
liabilities. Company has accepted conservative financial policy and thus maintaining
more current assets balance.

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CHAPTER 8 LIMITATIONS

56
✔ The articles and the theoretical part of the report are strictly on the basis of secondary
information. No research was conducted for the same.
✔ Financial statement interpretation is being made depending on my knowledge and skills.
✔ The data for the candlestick charts are uploaded from the website and was able to acquire
data of about 365 days, through which daily and weekly chart is prepared.
✔ Due to lack of data for the candlestick charts, a mid-term forecast was only possible.
✔ Market price of the share of a Birla Corporation Ltd is forecast is strictly on the basis of my
knowledge, skills and the available data.

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CHAPTER 9 BIBLIOGRAPHY

58
✔ http://www.cmaindia.org/company.html
✔ http://candlestickforum.com/
✔ http://www.candlestickanalysis.com/
✔ http://oee.nrcan.gc.ca/publications/industrial/BenchmCement_e.pdf
✔ http://www.mydigitalfc.com/companies/birla-corp-lines-rs-2400-cr-capex-cement-sector-
514
✔ Steve Nison, - Japanese Candlestick Charting Techniques, New York Institute of
Finance, printed in: United Sates of America.

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