CONTENTS

1. CHAPTER 1 INTRODUCTION

2. CHAPTER 2 PROFIKE & INTRODUCTION OF ZUARI CEMENTS

3. CHAPTER 3 CAPTIAL STRUCTURE IN ZUARI CEMENTS

4. CHAPTER 4 ANALYSIS AND INTERPRETATION

5. CHAPTER 5 6. ANNUAL REPORTS SUGGESTION & CONCLUSIONS BIBLIOGRAPHY

CAPITAL STRUCTURE
INTRODUCTION:

As the objective of firm should be directed towards the maximization of the value of the firm, the capital structure decision should be examined from the point of its impact on the value of the firm. If the value of the firm can be affected by capital structure, which maximize the market value of the firm. There exist conflicting theories on the relationship between capital structure and value of the firm. Capital structure decisions are significant finance decisions of the corporate firms in that they Influence the return as well as the risk of equity shareholders. That there exist close nexus between optimum/judicious debt and the market value/valuation of the firm is well recognized in literature of finance. While the excessive use of debt may endanger the very survival of the corporate firms, the conservative policy may deprive its equity holders the advantage of dept as a cheaper source of finance to magnify their rate of return. Following such an over-conservative policy runs counter the basic objective of financial decision making to maximize the wealth of equity holders.

Apart from financial risk return consideration, non-financial factors are also likely to be very decisive in designing capital structure of the corporate famous for instance use of dept, unlike equity doesn t dilute the controlling power of existing owners in brief, debt is not an unmixed blessing and, hence a dilemma for the corporate finance manager.

ASSUMPTIONS:
1 Firms employ only two types of capital. 2 The form has a policy of paying 100% dividends. 3 The corporate and personal income taxes do not exist. 4 The operating profits (EBIT) are not expected to grow. 5 The total assets are given and do not change. 6 Business risk is constant over time and is assumed to be independent of its capital structure.

IMPORTANCE OF CAPITAL STRUCTURE

1.

Capital structure is a combination of equity , preference shares and debentures . all of these are used in financing the firm s assets

2.

The mix of capital structure is very useful of the firm

3.

The long-term fixed interest bearing debt and preference share capital along with equity share or used to analyze the financial leverages

4.

The capital structure cannot affect the total earnings of a firm but it can affect the share of earnings available for equity share holders.

DEFINITIONS AND SYMBOLS BASIC SYMBOLS S=total market value of equity. B=total market value of debt. I=total interest payment. V=total market value of the firm. (V=S+B) NI=net income available to equity holder.

BASIC DEFINITIONS 1. Cost of debt (Ki)=I/B

Value of debt (B)=I/Ki

2. cost of equity capital (Ke)=(D1/Po)+g(if there is income tax)

Where D1=net dividend;

Po=current market price of share

g= br (r=rate of return) (If there is no IT) ke= (E1(X)N)=(EBIT-I orNI)/s

i. per share basis(Po)=E1/Ke ii. Total basis(s)=PoN=(EBIT-1)/Ke Weighted average cost of capital

Ko=W1K1+W2K2 (W1, W2 are relative weight) (or) Ko=(I+NI)/V=EBIT/V

Where V=EBIT/Ko

SORUCE OF DATA:

The study is mainly based on the secondary data obtained for last 5 year. The data is calculated from the annual reports of ZUARI CEMENT and other printed material available from the company. Only secondary data is collected for the purpose of the study. The secondary data consists of extracted financial statement from the company records to a possible extent for the period. THE FIELDS OF STUDY: The study was conducted at Zuari cement factory in financial department.

SCOPE OF THE STUDY:

A study of capital structure involves an examination of long term sources that a company taps in order to meet its requirements of finance. The scope of the study is confines to sources that zuari cements. has tapped.

Determinants of capital structure

1. Cost of borrowings(CB): when the cost of borrowing increases, the dep ESendence on borrowed funds is likely to decline. As a result, the leverage ratio id expected to have a negative relationship with the cost of borrowing. The cost of borrowing can be measured as total interest payment as percentage of total borrowing of the firm. 2. Cost of equity (CE): If the cost of equity increases, the firm is likely to depend More on debt then equity capital. Therefore, the leverage ratio can be expected to

be an increasing function of the cost of equity. This variable can be measured as the ratio of dividend payment to share capital of the company. 3. Size of the firm(SZ): It has the been suggested by a number of authors that the size of the firm is likely to be positively related to have leverage ratio. The rational behind this view is provided by Warner (1977), and Ang chua and McConnell (1982). They have argued that the ratio of direct bankruptcy costs to to have firm s value decreases has the value of firms is said to be neglibibleit is also argued that the larger firms are more diversified and they have easily access to capital markets, and borrow more favorable

interest rates. Also chung (1993) argued that the large firms have lower agency costs associated with the asset substitution and under investment problems which mostly arise form the conflicting interests of shareholders? Further, the similar firms are more likely to be liquidated when they are in financial distress. All such considerations suggest a positive relationship between the firm size is measured as the volume of total assets of firms and the leverage ratio.

4. Profitability(PR):Myers (1977), Myers (1984) suggested that the firms prefer retained earnings as their main source of financing. Their second preference is for debt Financing followed by new equity issued, which might be due to the significant transaction cot of issuing new equity. It is suggested that the observed capital structure of the firm would reflect the cumulative requirements for external financing. An unusually profitable firm with a slow growth rate3 will end up with an unusually low leverage ratio compared with a slow growth rate will end up with an operatives. On the other hand, an unprofitable firm in the same industry will end up with a relatively high leverage tatio. The profitability of the firm enables it to use

retained earnings over external finance and therefore, one should expect a negative association between the profitability of the firm and its debt ratio. Barton and Gordon (1988) have also argued that a firm with high rates would maintain a relatively lower debt level because of its ability to finance it self with internally generated funds. This is consistent with the proportion that the management of firm desire flexible and freedom from the excessive restrictions often associated with debt covenants. Hence our hypothesis is that the profitability of the firm. Which can be measured as the ratio of operating income to total assets, be negatively related to the debt level of the firm. 5. Growth Rate(GR): The growing firms need more funds. The greater the future need for the funds, the more likely that the firm will earnings or issue debt. A firm is expect to rely on debt financing to rely on debt financing to maintain its debt ratio as its equity increases due to the large retention of earnings. Thus the firm s debt level and growth rate are expected to have a positive relationship. This variable can be measured as the annual growth rate are expected to have a positive relationship. This variable can be measured as the annual growth rate of total assets of the company. 6. Collateral value of Assets(CVA): some capital structure theories have argued that the type of assets owned by the firm affects its capital structure choice. Scott (1977) has suggested that by selling the secured debt, the firms can increase the value of their equity by taking away the wealth without payment, from their existing unsecured debtors. By issuing debt secured by assets, the firm can avoid higher interest costs and high issuing cost. For these reasons the firms with assets that can be used as collateral may be expected to issue more debt. Therefore, the collateral value attribute can be

one of the determinants of capital structure of the firm. this variable can be measured as the ratio of accounts receivable plus net fixed assets to total assets, and it can be expected to be positively related with the leverage ration. 7. liquidity(LQ): Liquidity rations are mostly used to judge a firm s ability to meet its short term obligations. The liquidity ratio may have conflicting effects on the capital structure decisions of the firm first, the firms with higher liquidity rations might have relatively higher debt rations. This is due to greater ability to meet short-term obligations. Form this viewpoint one should expect appositive relationship between the firm liquidity position and its debt ratio. However, the firms with greater liquid assets may use these

assets to finance their investments. If this happens there will be a negative relationship between the firm s liquidity ratio and the debt ratio. We include the liquidity as the arguments in our capital structure determination model. It is measured as the ratio of current assets to current liabilities and the direction of its effects on capital structure is allowed to be empirically determined. 8. Non-debt Tax Shields (NDTS): DeAndelo and Masulis(1980)presented a model of optimal capital structure that incorporated the impact of corporate taxes personal taxes and non-debt related corporate tax shields such as depreciation, investment tax credits, etc. they argued that to use less borrowed capital. interest NDTS=[operating income

payments-(tax payments/corporate tax rate)]/total assets. The relationship

between the non-debt tax shields and leverage ratio can be expected to be negative.

THEORIES OF CAPITAL STFUCTURE Different kinds of theories are have been 1. Net Income Approach (NI). 2. Net operating Income Approach(NOI). 3. The Traditional Approach 4. Modigliani and Miller Approach(MM) 1.Net Income Approach: This approach introduced by Durand . A firm can minimize Weighted average cost of capital and increase the value of the firm and share value in the market. This approach is based upon the following assumptions: i. ii. iii. The cost of debt is less than the equity. The are no taxes. The risk percentage of investors is not changed by the use of debt.

0.1 cost of capital 0.05

ke

Ka

Degree of leverage The reasons for assuming cost of debt is less then the cost of equity are that interest rates are lower than divided rates due to element of risk and the benefit of tax as the interest is a deductible expense.

The total market value of a firm on the basis of NI is: V=S+D V=Total market value of firm S=Total market value of equity shares (or)NI/Equity capitalization rate. D= market value of debt. Weighted Average cost of capital can be calculated as: Ko=EBIT/V

2.Net Operating Income Approach: this theory suggested by Durand , It is opposite to the NI approach. Here change in the capital structure of a company

does not effect in the market value of the firm and the weighted cost of capital remain constant whether the debt equity mix is 50:50 or 20:80 or 0:100.this theory presumes that:

i) ii) iii)

The market capitalizes the value of the firm as a whole. The business risk remains constant. There are no corporate taxes.

The value of the firm can be determined as: V=EBIT/Ko

Ko=Overall cost of capital

Ke(0/0)

Ko(0/0)

Ki(0/0)

Leverage & cost of capital (Noi) 000The Market value of equity is: S=V-D S=market value of equity shares V=Total market value of firm D=Total market value of debt 3.The Traditional Approach: The traditional approach also known, as Intermediate

Approach is a compromise between the two extremes of net income approach and net operating income approach. According to this theory, the value of the firm can increase initially or the cost of capital can be decreased by use more debt as the debt is cheaper source of funds than equity. Thus, a proper debt equity mix reach the capital structure. When the increased cost of equity can t be offset by the advantage of low cost debt. Thus the overall cost of capital according to this theory, decrease up to a certain point, remains more are less unhinged for moderate increase in debt thereafter, and increase or rises beyond a certain point

Ke

Traditional Approach

4. Modigliani-Miller (MM) Approach: The MM thesis relating to the relationship between capital structures, cost of capital of capital and valuation is akin to the NOI approach, in other words, does not provide operational justification for the irrelevance of the Capital structure. The MM proportion supports the NOI approach relating to the independence of the capital of the degree leverage level of debt-equity ratio.

(0/0)Ko In (Rs)

Degree of Leverage (B/V)

Vo

Basic Proportions:

1)

The Over all cost of capital (Ko) and the value of the firm (V) are independent of the capital structure.

2)

Ke is equal to the capitalization rate of a pure equity stream plus a premium for financial risk to the difference to the pure equity capitalization (Ke) time the ratio of debt to equity.

3)

The cut off rate for investment purposes is completely independent of the way in which an investment is financed.

Assumptions: a) Perfect capital market: The implication of a perfect capital market is that.

 Securities are infinitely divisible;  Investors are free to buy/sell securities;  Investors can barrow without restriction;  There is no transactions cost;  Investors are rational;

b) c)

Given the assumptions of perfect information and rationality. Business risk is equal among all firms with in similar operating environment.

Capital structure planning and policy. Introduction: Capital structure refers to the mix of long-term of source of the funds, such as debentures, long-term debt and preference shares. Some companies do not plan there capital structure they may face considerable difficulties in raising funds to finance there activities. May also fail to economize the use of their funds.

Features of an appropriate capital structure:

The capital should be planned Generally

keeping in view the interest of the equity shareholders and the financial requirements of a company. The equity shareholders, being the owners of the company. An appropriate capital structure should have the following features:

 Return  Risk  Flexibility

 Capacity  Control Approaches to establish capital structure: There are 3 most common approaches to decide about a firm s capital structure

1. EBIT-EPS APPROACH 2. VALUATION APPROACH

: For analyzing the impact of debt on EPS. : For determining the impact of debt on the Shareholder s value.

3. CASH FLOW APPROACH

: For analyzing the firm s ability to serve debt.

Practical Considerations in determining capital structure:  Concern for dilution of control.  Desire to maintain operating flexibility.  Ease of marketing capital Inexpensively.  Capacity for economics of scale.  Agency costs.

CHAPTER 1 INTRODUCTION

OVERVIEW OF CEMENT INDUST During the world war- II cement was declared an essential commodity and it was brought under the defense of Indian rules, controlling the price and distribution of cement. Cement remained under price and distributions control during the period 193945.

After their world war II arrangement was made between cement manufacturers reading price and distribution of cement of avoid rate war. In order to boost up sale of cement and concert Association of India was formed.

During the year 1947 India Standard Specification for indigenous cement has applied in place of British standard Specification. All cement manufacturers were obliged to maintain quality of cement as per the standard laid down in the specification. Norms for 1day 3day s strength as well as setting time was prescribed to safeguard the interest of the customer.

In 1956, cement control orders was promulgated and price and distribution of cement was vested with standard trading corporations and this arrangement continued up to 1966. For Government and functions of earlier being performed by STC was taken by cement allocation and Co-ordination Organization formed by the cement manufactures and pricing irregularities Government again brought under control which lasted up to 28th Feb.1989.

It will thus be seen form the above that right from the beginning cement industry as whole barring for very short period, was constantly under the control by the government

Cement manufacturing units were just carrying out the instructions of the Government authorities regarding dispatching cement to stipulated destinations and on price fixed by the Government from time to time

Results of partial decontrol: Installed capacity in 70 s was 2, 13, 29,000.00 tones, which was raised to 4, 19, 03,000.00 Tones in 80, s. Number of other entrepreneurs entered the cement field with latest technology.

On account of partial decontrol the financial position of existing units improved which attracted other manufacturers in the cement manufacturing activities. The unpredicted growth registered by cement industry after 982-83 is only because of partial decontrol.

Existing sick unit turned into viable units. Cements manufacturers earned a good profit during 1982-83 to 1983-84, the part of which was utilized for the modernization of cement plants and setting Research and Development center.

Cement was then available to the public at reasonable rates between Rs.60-70 per bag at free market. Black marketing of cement disappeared to some extent.

Partial decontrol of cement by government: Cement industries had continuously been knocking doors of government fro relief a dnd everything after an inordinate delay government announced a meager increase in retention price. The increase was so inadequate that the same could not take care of even partial increase in cost of input on cement of Government.

Action i.e., increases in petroleum product rates, coal power, and tariff and consequently numbers of cement units were of sick list.

On 28th Feb 1982, Government declared partial decontrols by introducing principles of levy and frees sale cement as it was existing in sugar industry. Under the new

dispensations for existing units the levy quota was fixed at 66.6% and for six units at 50% of installed capacity. Partial decontrol announcing by the Government gave a good relief to the industry, as cement industry was able to set off their loss on cement of levy sales out of free sales. Uniform pricing system for levy cement after partial decontrol. From 1982 Rs.335 Pet tones for ordinary Portland Cement. (OPC) and Portland stage Cement (PSC). Rs.320 From 1984 Rs.375 Rs.360 From 1986 Rs.399.50 Rs.384.50 Per tone for OPC and PSC. Per tone PPC. Per tone for OPC and PSC. Per tone for PPC. Per tone for Portland Pozzolona Cement (PPC)

Complete decontrol of cement: Howere things were not so smooth as expected. Most of old units were having out dated technology and consequently cost of cement production as compared to the retention price fixed by the Government was very high.

In the face sale area they had to complete with new units having latest technology and comparatively less share of levy obligations, Government had also increased excise duty which partially these units had to absorb to complete with other new units.

More new units started adding which brought the ear of competitions, which was earlier absent. Cost of inputs like railway and road freight, tariff went up day by day and once a better looking cement area again started going back. Government continued changing basis of levy, free sale quota. Earlier it was on capacity basis of which was subsequently linked to actual production sick units were also identified Gradually levy quota was reduced and during 1986 the concept of levy/non levy was removed from cement and control on price and distribution was lifted ORGANISATION PROFILE ZUARI cement industry is one of the leading manufacturers of cement in India. It is a day process cement plant. The capacity is 8.26 lakh tones per annum. It is located at Basanthnagar in karimnagar district of Andrapradesh. Basanthnagar is 8 km qway from the Ramagundam Railway station, linking Madras to New Delhi. The chairman of the company is syt.B.K.Birla.

HISTORY: The first unit at Basanthnagar with a capacity of 2.1 lakh tones per annum incorporating humble suspension preheated system was commissioner during the year 1969. The second unit was setup in the year 1971 with a capacity of 2.1 lakh tones per annum went on stream in the year 1978. The coal for this company is being supplied from Singareni Collieries and power is obtained from APSEB. The power demand for the

factory is about 21 MW. ZUARI has got 2DG sets of 4 MW each installed in the year 1987. ZUARI Cement has set up a 15 KW captor power plant to facilitate for uninterrupted power supply for manufacturing of cement at 24th august 1997 per hour 12 mw, actual power is 15 mw.

Brila Supreme in popular brand of ZUARI cement from its prestigious plant of Basanthnagar in AP which has outstanding track record. In performance and productivity serving the nation for the last two and half decades. It has proved its distinction by bagging several national awards. It also has the distinction of achieving optimum capacity utilization. ZUARI offers a choice a top quality portioned cement for light, heavy constructions and allied applications. Quality is built every fact of the operations.

The plant lay out is rational to begin with. The limestone is rich in calcium carbonate a key factor that influences the quality of final product. The day process technology uses in the latest computerized monitoring overseas the manufacturing process. Sample are sent

regularly to the bureau of Indian standards. National council of construction and building material for certification of derived quality norms.

The company has vigorously under taking different promotional measures for promoting their product through different media, which includes the use of newspapers, magazine, hoarding etc.

ZUARI cement industry distinguished itself among all the cement factories in Indian by bagging the National Productivity Award consecutively for two years i.e., for the year 1985-1987. The federation of Andra Pradesh Chamber & Commerce and Industries (FAPCCI) also conferred on ZUARI Cement. An award for the best industrial promotion expansion efforts in the state for the year 1984. ZUARI also bagged FAPCCI awarded for Best Family Planning Effort in the state for the year 1987-1988

One among the industrial giants in the country today, serving the nation on the industrial front. ZUARI industry ltd., has a checked and eventful history dating back to the twenties when the Industrial House of Birlas acquired it. With only a textile mill under its banner 1924, it grew from strength and spread its activities to newer fields like Rayon, Pulp, Transparent paper, Pipes, Refractors, tyres and other products. Looking to the wide gap between the demand and supply of a virtual commodity cement, which play in important role in National building activity the Government of India had de-licensed the cement industry in the year 1966 with a review to attract private entrepreneur to augment the cement production. ZUARI rose to the occasions and dividend to set up a few cement plants in the country. ZUARI cement undertaking marketing activities extensively in the state of Andra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In AP sales Depts., are located in different areas like Karimnagar, Warangal, Nizamabad, Vijayawada and Nellore. In other states in has opened around 10 dpots.

The market share of ZUARI Cement in AP is 7.05%. The market share of the company in various states is shown as under.

STATES Karnataka Tamilnadu Kerala Maharashtra

MARKET SHARE 4.09% 0.94% 0.29% 2.81%

Process and Quality control: It has been the endeavor of ZUARI to incorporate the World s latest technology in the plant and today the plant has the most sophisticated.

x-ray analysis:

fully Computerized XRF and X-RAY Analyzers keep a constant round the clock vigil on quality.

Supreme performance: One of the largest Cement Plants in Andra Pradesh, the Plant in corporate the latest technology in cement-making.

It is professionally managed and well established Cement Manufacturing Company enjoying the confidence of the consumers. ZUARI has outstanding track record in performance and productivity with quite a few national and state Awards to its credit.

BIRLA SUPREME, the 43 Grade Cement, is a widely accepted and popular brand in the market, commanding a premium.

However to meet specific demands of the consumer, ZUARI brought out the 53 grade BIRLA SUPREME-GOLD, which has special qualities like higher fineness, quick setting, high compressive strength and durability.

Supreme strength:

ZUARI Cement has huge captive Limestone Deposits, whitch make it possible to feed high-grade limestone consistently. Its natural Grey colour is anion-born ingredient and gives good shade.

Both the product offered by ZUARI, i.e., BIRLA SUPREME-43 Grade and BIRLA SUPREME GOLD-53 Grade cement are outstanding with much higher compressive strength and durability. The following characteristics show their distinctive qualities

Comprehensive strength

Opc-43 grls 8112 1989 Min.23 Min.23 Min.43

Birla Supreme 43 grade 31+ 42+ 50+

Opc 53 gr Is1226987

Birla Supreme Gold 53 gr. 38+ 48+ 60+

3 days mpa 7days mpa 28 days mpa

Min.27 Min.37 Min.53

D.C.S SYSTEM: Clinker making process is a key step in the overall cement making process. In the case of BIRLA SUPREME/GOLD, the clinker-making process is totally computer control. The Distributed Control System (DEC) constantly monitors the process and ensures operating efficiency. This eliminates variation and ensures consistency in the quality of Clinker.

SUPREME PROCESS Closed-Circuit Cement grinding process involving high efficiency separators manufacturers BIRLA SUPREME. This ensures uniform and high quality in cement, which in turn contributes to its superior strength and optimum setting time.

PHYSICAL CHARACTERISTECS ope 43 Is 811289 setting time a.Initial(msts) b.final(mats) Finenessm2/Kg Soundness a. le-chart (mm) b.autocave(%) Min 30 Max600 Min225 Max10 Max0.8 birla supreme 43 grade 120-180 180-240 270-280 0.1-2.0 0.04-0.08 Opc 53 gr Is1226987 Min30 Max 600 Min225 Max10 Max 0.080 Birla Supreme Gold 53 gr. 130-170 170-220 300-320 0.5-1.0 0.04-0.02

SUPREME EXPERTISE:

The Best Technical Team, exclusive to ZUARI, mans the plant and monitors the process, to blend the cement in just the required proportions, to make BIRLA SUPREME/GOLD OF Rock Strength.

18 MILLION TONES OF SOLID FOUNDATION:

Staying at the top for over a Quarter Century is no achievement. Infect, ZUARI is synonymous with for over 28 years. Over the years, ZUARI has dispatched 18 million tones cement to the nook and corners of the country and joined hands in strengthening the Nation. No one else in Andhra Pradesh has this distinction. The prestigious world bank aided Ramagundam super Thermal power project of NTPC and Mannair Dam of pochampad project in AP are a couple of projects for which ZUARI cement was exclusively uses: to cite an example. CHEMICAL CHARACTERISTICS:

ope 43 Is 811289 Loss on Inflection % Insoluble residue % Magnesium oxide %

birla supreme 43 grade

Opc 53 gr Is1226987

Birla Supreme Gold 53 gr.

Max 5 Max 2.0 Max 6.0

<1.6 <0.8 <1.3 0.8-0.9 1.5-1.7

Max 4.0 Max 2.0 Max 6.0 0.8-1.02 Min 0.66

<1.5 <0.6 <1.3 0.88-0.9 1.5-1.7

Lime saturation 0.66factor 1.02. Alumina: iron ratio Min 0.66

Sulfuric anhydride % Alkalis Chorides

Max 2.5/3

1.6-2.0

Max 2.5/3 Max 0.05

1.6-2.0 Max 0.4

Max 0.05 Max 0.01

ZUARI Cement-advantages: 1. Helps in designing sleeker and more elegant. Structures, giving greater flexibility in design concept. 2. Due to its fine quality, super fine construction can be achieved. 3. Its gives maximum strength at minimum use of cement with water in the water cement ratio, especially the 53 grade Birlas supreme gold.

Min Pcc M10 M15 M20 M25

C:faLca 1:4:8 1:3:6 1:2:4 1:1.5:3 1:1:2

Water 30 Lts. 28 Lts. 27 Lts. 26 Lts. 24 Lts.

W/c ratio 0.60 0.56 0.54 0.52 0.487

4. Improve durability is achieved, the permeability reduces and the volumetric changes are also 5. Better water proofing is achieved due to low heat of hydration as the shrinkage will be less, which means less cracks.

6. Better finish is achieved due to fineness and hence better workability. Thus plastering becomes easier with better finish. 7. Faster constructions is possible as both Birla Supreme and Birla Supreme-Gold achieve their high early strength in just 24 hours and hence the form work can easily be removed; the improving the efficiency and saving in cost and time.

Feathers in ZUARI s cap: ZUARI has out standing track record, achieving over 100% capacity utilization I productivity and energy conservation. It has proved its distinction by bagging several national and state awards, noteworthy being.

STATE 1. A.P State productivity award for 1988 2. State award for best industrial management 1988-89. 3. Best industrial productivity award of FAPCCI (federation of A.P.chamber of commerce and industry). 1991 4. Best management award of the state Govt.1993. 5. FAPCCI award for the workers welfare, 1995-96. I.S.O 9002

All quality systems of ZUARI have been certified under I.S.O.9002/I.S.4002, which proves the worldwide acceptance of the products. All quality systems in production and marketing of the product have been certified by B.I.S under ISO 9002/IS I 4002.

ECO-FRIENDLY : ZUARI has been doing its best for protecting the environment and maintaining the ecological balance in the area.

Appropriate pollution control equipments have been installed in the plant. Lot of a forestation measures have been taken and green belts developed and lacks of trees have been planted in a around the factory, Mines township and in the nearby area. Thanks to the massive tree plantation driver over the years, Basanthnagar has become a paradise with lush greenery, beautiful landscapes and avenues. The tree plantation is so dense that it has virtually drowned the township.

It s but natural that the ambient temperature in the township is now less by 3-4C, compared to the near by Ramagundam one of the hottest spot in the country. It s in the fitness of things that ZUARI s senior president Shri K.C.JAIN has been recommended by the state government to the Central Government for the prestigious Vrikshamithra national award. CAPTIVE POWER:

For uninterrupted power supply, a captive thermal power plant of 15 MW capacity has been installed at ZUARI. This would ensure consistency in the supply of cement even during power-cut periods. This is in addition to the D.G. sets generating 8MW of power.

CHAPTER-2 PROFILE & INTRODUCTION OF ZUARI INDUSTERIES LIMITED

1. INVESTMENTS

Total investment, as on 31st March, 2010 is Rs.2887.28 Lakes as against Rs.2901.51 Lakes as on 31st March 2008. the decrease in investment is due to payable of 7 year National savings certificate of Rs.5000 and 6.30% Government of India loan 2023

sold during the year, 6.01%Government of India loan 2028 sold during the year. Ceat Ltd.,1,655 and J.K Industries Ltd.,1,039 and Ceat Ltd.,1,750 and Indo gulf Fertilizers Ltd.,7,99,450 Equity Shares sold during the year. Indore Exporting and Importing Co., Ltd (A SERIES, B SERIES)- Ordinary shares of Rs.5841261& 40290 (Extinguished during the year pursuant to a scheme of amalgamation of Indore Export & Importing Co., Ltd., with padmavati Investment Ltd., sanctioned by high court)

2. FINANCIALS TURNOVER AND PROFIT: ZUARI INDUSTRIES LIMITED recorded a turnover of Rs.251645.89 Lakes during 2009-10 as against Rs.187781.55 Lakes during 2009-10. Net profit after Tax is Rs.26568.32 Lakes as compared to Rs.4570.92 Lakes during the previous year i.e 2009. CAPITAL STRUCTURE: The authorized share capital of ZUARI INDUSTRIES LIMITED is Rs.12000.00 (Lakes). The Issued, subscribed and paid up capital 5, 75,435 shares of Rs.10/- each allotted as fully paid up with out payment being received in cash pursuant to a scheme of amalgamation and 59,49,480 shares of Rs.10/-each allotted as fully paid up bonus shares by way of Capitalization of reserve, 4,00,000 shares of Rs,10/- each Rs. 3.75 per share received in cash and balance credited as bonus by way of Capitalization of Reserve. 4, 57, 43,318 Ordinary Shares of Rs.10/- each fully paid Rs.4574.16 Lakes.

3. SECURED LOANS 1. TERM LOANS from

a) Rs.38000 Lakes from State Bank of India. b) Rs.6000 Lakes from Stet Bank of Hyderabad. c) Rs.200 Lakes from State Bank of Bikaner& Jaipur d) Rs. 400 Lakes from State Bank of Indor&1500Lakes from State Bank of Mysore. 2. FROM SCHEDULED Banks 12650.96 Lakes UNSECURED LOANS a) By Fixed Deposits 162.32 Lakes b) By Security Deposits from selling agents and others7973.4, Lakes c) Short Term Loans Rs. 14541.2 Lakes d) Interest free loan from State Industrial & Investment Corporation of Maharashtra Ltd.Rs.16.05 Lakes.

4. RESERVES AND SURPLUS A) CAPITAL RESERVE: During the year the company has not transferred any capital. B) GENERAL RESERVE: Rs.3000 Lakes have been transferred from profit & Loss A/C During the year. The closing balance as on 31st March,2010 is Rs.21481.9Lakes. C) FOREIGN PROJECT RESERVE: During the year, the company Did not made Foreign project Reserve.

CAPITALISATION STATEMENT

SL.NO

Particulars Debt: a) Short term debt b) Long term Debt Total Debt a)Equity Share capital b) results and Surplus Total equity Total value of the company

As on 31-03-2010

64319.00 22960.08 87289.00 4574.16 60869.28 65443.44

A.

B.

5. SHARE
0.98%

C.

Debt/ equity Ratio

CAPITAL

The Company did not raise any Capital during the year under report. The authorized Capital of the Company is 1,20,00,00,000 Equity Shares of Rs.10/- each. The ISSUED AND, SUBSCRIBED, PAID UP Capital of Company is 4,57,43,318 Equity shares of Rs.10/each fully paid.

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

TOTAL DIVIDEND PAID 2086.35 1564.76 1303.97 1290.11 1036.11

TOTAL PAID UPCAPITAL 4574.16 4574.16 4574.16 4574.16 4592.66

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2010-09 2009-08 2008-07 2007-06 2006-05

TOTAL DIVIDEND PAID TOTAL PAID UP CAPITAL

6. DIVIDENTDS

ZUARI INDUSTRIES LIMITED pays Interim dividend. The Company paid Interim dividend of Rs.2086.35 Lakes to the Equity Share holders for financial year of 2007-08.

BOARD OF DIRECTORS MEETING

The Board of Directors annual General meeting of ZUARI INDUSTRIES LIMITED held on 14th March, 2008. They declared interim dividend for the financial year 2007-08. The

interim dividend paid on 4,57,43,318 Ordinary Shares face value of Rs.10/- each @Rs.4.00per sher.

FOR THE YEAR ENDED MARCH, 2010

DIVIDEND REPORT

(Rs. In Lakes)

particulars Share Capital Face value(Rs.) Rate of Dividend Final Interim Amount of dividend Final Interim

2010 4574.16 10/-

2009 4574.16 10/-

2008 4574.16 10/-

2007 4574.16 10/-

2006 4592.66 10/-

4/-

4/-

4/-

4/-

4/-

1829.73

1372.29

1143.5

1143.5

918.56

7. PROFIT Profit Before Depreciation & Tax Rs.40008.97 Lakes during the current year 200708 against previous year 2009-10 was Rs.13250.09 lakes. Provision for income Tax for the year 2007-08 Rs.7500 Lakes as against previous year 2009-10 Rs.5157.17 Lakes.

Profit After Tax works out Rs.26568.32 Lakes in 2009-10 against Rs.4570.92 Lakes for the year of 2009

8. EPS Calculation

particulars Net profit After Tax (Rs. In Lakhs) No. fo Equity shares EPS Face Value of share

2009-10

2008-09

26568.32 45,743,318 58.08 10/-

4570.92 45743318 9.99 10/-

9. WORKING RESULTS

Particulars Turnover(Lakhs ) Intrest Depreciation PBT Provision for Tax PAT Dividend & Tax

2005-06 138,917.8 3 4,249.92 5,410.96 3,239.60 425.00 2,814.60 918.56

2006-07 156,572.1 5 3,149.73 5,359.18 8,299.50 2,000.00 6,299.50 1,143.50

2007-08 170,901.5 3 2,041.10 5,349.20 4,351.28 1,000.00 3,351.20 1,143.50

2008-09 187,781.5 5 2,278.97 5,157.17 8,092.92 3,400.00 4,570.92 1,372.29

2009-10 251,645.8 9 2,991.29 5,830.64 34,178.32 7,500.00 26,568.30 1,829.73

CHAPTER 3

CAPITAL STRUCTURE

OF

ZUARI INDUSTRIES LIMITED

2009-10 FINANCIALYEAR CAPITAL STRUCTURE ANALYSIS

1. Capitalization Information

Particulars A. Debt:a) second loans b) Un secured loans

Rs. In Lakhs

64319.00 22960.00 87289.00

Total debt B. Equity Capital:a) Equity Share Capital b) Reserves & Surplus

4574.16 60869.28 65443.44

Total Equity capital C. Total Value:e) Capital Employed f) Value Added Total Value of the Company D. Debt/Equity Ratio

152732

152732 0.98

CHAPTER 4 ANALYSIS AND INTERPRETATION

2. EBIT EPS ANALYSIS

Particulars EBIT Less: interest Profit before Tax Less: Provision for Tax Less: Provision for Fringe Benefit Tax Profit After Tax Proposed/Interim Dividend & Tax Earning Per Share (EPS) [(PAT/Share capital) X 10]

2009-10 ( Rs. In Lakhs ) 37528.63 3350.30 34178.32 7500.00 110.00 26568.32 2086.35 [(26568.32/45743318) X 10] = 58.08

Overall Cost of = EBIT/Value of the company X 100 Ko =37528.63/152732.X 100 Ko = 24.57% Cost of debt = Interest/Market Value of Debt X 100 Kd = 3350.30/87289.00 X 100 Kd =3.83%

3. RATIOS

2009 10

Return on Capital employed Return on Net worth Current Ratio Dept / Equity Ratio

40.85% 40.59% 2.39 0.98

Interpretation: i. Total debt value of ZUARI INDUSTRIES LIMITED was increased in the year 2009-18 form 62135.45 to 87250.00. ii. Equity Capital of the ZUARI INDUSTRIES LIMITED was same as the previous year. The value is 4574.16 Lakhs. iii. iv. v. Debt/Equity Ratio was recorded as 0.98 in the financial year 2009-10. Net Worth of the company was 40.59% in the financial year 2009-10. Earning per share of the company was Rs. 58.08.

SOURCES OF FINANCE

The total investments on 31st March, 2010 is Rs,2887.28Lakes. The source of investment are given bellow.

ZUARI INDUSTRIES LIMITED S sources of finance as on 31st March, 2010

Total Investment Rs.2887.28 (Lakes)

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES PARTIALLYPAID SHARES

0.13 19.64 2591.64 5.72

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES PARTIALLYPAID SHARES

2009-10 FINANCIAL YEAR

CAPITAL STRUCTURE ANALYSIS

1.Capitalization Information

Particulars A. Debt:c) second loans d) Un secured loans

Rs. In Lakhs

41336.83 20798.60 62135.43

Total debt B. Equity Capital:c) Equity Share Capital d) Reserves & Surplus

4574.16 37030.84 41605.00

Total Equity capital C. Total Value:g) Capital Employed h) Value Added Total Value of the Company D. Debt/Equity Ratio

103740.48

103740.48 0.99

2. EBIT EPS ANALYSIS

Particulars EBIT Less: interest Profit before Tax Less: Provision for Tax Less: Provision for Fringe Benefit Tax Profit After Tax Proposed/Interim Dividend & Tax Earning Per Share (EPS) [(PAT/Share capital) X 10]

2009-10 ( Rs. In Lakhs ) 11368.29 3275.37 8092.92 3400.00 122.00 4570.92 1564.76 [(4570.92/45743318) X 10 ] = 9.99

Overall Cost of = EBIT/Value of the company X 100 Ko =11368.29/103740.48.X 100 Ko = 10.95% Cost of debt = Interest/Market Value of Debt X 100 Kd = 3275.37/62135.43 X 100 Kd =5.27%

3. RATIOS

2009 1 0

Return on Capital employed Return on Net worth Current Ratio Dept / Equity Ratio

17.04% 10.98% 2.8 0.99

Interpretation: i. Total debt value of ZUARI INDUSTRIES LIMITED was increased in the year 2009-10 form 50455.24 to 62135.45. ii. Equity Capital of the ZUARI INDUSTRIES LIMITED was same as the previous year. The value is 4574.16 Lakhs. iii. iv. v. Debt/Equity Ratio was recorded as 0.99 in the financial year 2009-10. Net Worth of the company was 10.98% in the financial year 2009-10. Earning per share of the company was Rs. 9.99. SOURCES OF FINANCE

The total investments on 31st March, 2007 is Rs.2901.51Lakes. The source of investment are given bellow.

ZUARI INDUSTRIES LIMITED S sources of finance as on 31st March, 2009

Total Investment Rs.2901.51 (Lakes)

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES PARTIALLYPAID SHARES

17.17 19.64 3008.7 2.86

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES PARTIALLYPAID SHARES

2009-10 FINANCIAL YEAR

CAPITAL STRUCTURE ANALYSIS 1.Capitalization Information

Particulars A. Debt:e) second loans f) Un secured loans

Rs. In Lakhs

26051.36 24403.87 50455.23

Total debt B. Equity Capital:e) Equity Share Capital f) Reserves & Surplus

4574.16 33140.44 37714.59

Total Equity capital C. Total Value:i) Capital Employed j) Value Added Total Value of the Company D. Debt/Equity Ratio

88169.82

88169.82 0.69

2. EBIT EPS ANALYSIS

Particulars EBIT Less: interest Profit before Tax Less: Provision for Tax Less: Provision for Fringe Benefit Tax Profit After Tax Proposed/Interim Dividend & Tax Earning Per Share (EPS) [(PAT/Share capital) X 10]

2005-06 ( Rs. In Lakhs ) 7116.02 2764.74 4351.28 1000 3351.28 1303.97 [(3351.28/45743318) X 10 ] = 7.33

Overall Cost of = EBIT/Value of the company X 100 Ko =7116.02/88169.82X 100 Ko = 8.07% Cost of debt = Interest/Market Value of Debt X 100 Kd = 2764.74/50455.23 X 100 Kd =5.47%

3. RATIOS

2009 10

Return on Capital employed Return on Net worth Current Ratio Dept / Equity Ratio

12.93% 8.88% 2.73 0.69

Interpretation: i. Total debt value of ZUARI INDUSTRIES LIMITED was increased in the year 2009 form 44663.73 to 50455.24 ii. Equity Capital of the ZUARI INDUSTRIES LIMITED was same as the previous year. The value is 4574.16 Lakhs. iii. iv. v. Debt/Equity Ratio was recorded as 0.69 in the financial year 2009. Net Worth of the company was 8.88% in the financial year 2009. Earning per share of the company was Rs. 7.33.

SOURCES OF FINANCE

The total investments on 31st March, 2010 is Rs.2819.24Lakes. The source of investment are given bellow.

ZUARI INDUSTRIES LIMITED S sources of finance as on 31st March, 2009

Total Investment Rs.2819.24 (Lakes)

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES PARTIALLYPAID SHARES

17.17 19.64 2809.7 9.52

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES PARTIALLYPAID SHARES

2009-10 FINANCIAL YEAR

CAPITAL STRUCTURE ANALYSIS

1.Capitalization Information

Particulars A. Debt:g) second loans h) Un secured loans Total debt B. Equity Capital:g) Equity Share Capital h) Reserves & Surplus

Rs. In Lakhs

30768.09 13895.63 44663.73

4574.16 30274.12 34848.27

Total Equity capital C. Total Value:k) Capital Employed l) Value Added Total Value of the Company D. Debt/Equity Ratio

79512

79512 0.88

2. EBIT EPS ANALYSIS

Particulars EBIT Less: interest Profit before Tax Less: Provision for Tax Less: Provision for Fringe Benefit Tax Profit After Tax Proposed/Interim Dividend & Tax Earning Per Share (EPS) [(PAT/Share capital) X 10]

2009 ( Rs. In Lakhs ) 8642.85 3432.28 8799.57 2000.00 6299.57 1290.11 [(6299.57/45743318) X 10] = 13.77

Overall Cost of = EBIT/Value of the company X 100 Ko =8642.85/79512X 100 Ko = 10.86% Cost of debt = Interest/Market Value of Debt X 100 Kd = 3432.28/44663.73 X 100 Kd =7.68%

3. RATIOS

2008 09

Return on Capital employed Return on Net worth Current Ratio Dept / Equity Ratio

23.81% 18.07% 2.51 0.88

Interpretation: i. Total debt value of ZUARI INDUSTRIES LIMITED was increased in the year 2009 form 44090.21 to 44663.73. ii. Equity Capital of the ZUARI INDUSTRIES LIMITED was same as the previous year. The value is 4574.16 Lakhs. iii. iv. v. Debt/Equity Ratio was recorded as 0.88 in the financial year 2009. Net Worth of the company was 18.07% in the financial year 2009. Earning per share of the company was Rs. 13.77.

SOURCES OF FINANCE

The total investments on 31st March, 2009 is Rs.2499.03Lakes. The source of investment are given bellow.

ZUARI INDUSTRIES LIMITED S sources of finance as on 31st March, 2010

Total Investment Rs.2499.03 (Lakes)

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES

8.88 19.64 2499.02

GOVERNAMENT SECURITES BONDS FULLY PAID SHARES

2009-10 FINANCIAL YEAR

CAPITAL STRUCTURE ANALYSIS

1.Capitalization Information

Particulars A. Debt:i) second loans j) Un secured loans Total debt B. Equity Capital:i) Equity Share Capital j) Reserves & Surplus

Rs. In Lakhs

38007.02 6083.18 44090.20

4592.66 29285.74 33876.40

Total Equity capital C. Total Value:m) Capital Employed n) Value Added Total Value of the Company D. Debt/Equity Ratio

1.12

2. EBIT EPS ANALYSIS

Particulars EBIT Less: interest Profit before Tax Less: Provision for Tax Less: Provision for Fringe Benefit Tax Profit After Tax Proposed/Interim Dividend & Tax Earning Per Share (EPS) [(PAT/Share capital) X 10]

2009-10 ( Rs. In Lakhs ) 78992.57 4659.58 3239.37 425.00 2814.67 1036.26 [(2814.67/459266060) X 10] = 6.04

Overall Cost of = EBIT/Value of the company X 100 Ko =78992.57/ Ko = % - X 100

Cost of debt = Interest/Market Value of Debt X 100 Kd = 4659.58/44060.20 X 100 Kd =10.5%

3. RATIOS

2009 10

Return on Capital employed Return on Net worth Current Ratio Dept / Equity Ratio

16.22% 8.30% 2.06 1.12

Interpretation: i. ii. iii. iv. v. Total debt value of ZUARI INDUSTRIES LIMITED was 44090.21 Lakhs. Equity Capital of the ZUARI INDUSTRIES LIMITED was 4592.66 Lakhs. Debt/Equity Ratio was recorded as 1.12 in the financial year 2009. Net Worth of the company was 8.30% in the financial year 2009-10. Earning per share of the company was Rs. 6.04.

Balance sheet as at 31st March 2010

Rs

Particulars

Schedule reference

Current year

SOURCES OF FUNDS 1. shareholders Funds

a) Capital b) Reserves & surplus 1 2 45,74,16,365 6,08,69,28,276 6,54,43,44,641 2. Loan Funds a) Secured Loans b) Un Secured Loans 3 4 6,43,19,70,165 2,29,60,29,565

8,72,79,99,730 Deferred Tax liability(net) (Note 6 on Schedule 17) 1,12,40,92,879 16,39,64,37,250 APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Works-in-progress 5 16,76,31,75,670 7,21,93,42,588 9,54,38,33,082 1,50,86,68,195 11,05,19,01,277 2. Investments 3. Current Assets, Loans & Advances I) Inventories II) Sundry Debtors III) Cash & Bank Balances IV) Other Current Assets V) Loans and Advances 7 8 9 10 11 3,76,88,27,777 2,45,94,52,581 27,24,22,341 11,81,99,412 2,06,22,47,261 8,68,11,49,372 LESS: Current Liabilities & Provisions a) Current Liabilities b) Provisions 12 2,26,82,92,085 1,35,70,49,221 3,62,53,41,306 Net Current Assets 5,05,58,08,066 16,39,64,37,250 6 28,87,27,907

Profit & Loss account for the year ended 31st March 2010 Rs Particulars Schedule reference INCOME Sales Less: Excise Duty Net Sales Other Income 13 25,16,45,89,369 3,07,49,29,030 22,08,96,60,339 49,04,06,410 22,58,00,66,749 EXPENDITURE Raw Material and Finished Goods Manufacturing, Selling & Administrative Expenses Depreciation[Notes1(c) &16onschedul17] Less: Transfers from Capital ReserveRevaluation of Fixed Assets [Note 1 (c ) (IV) on schedule 17] 1,21,74,487 58,30,64,022 Interest 16 33,50,30,376 19,16,22,33,857 Profit Before Taxation 3,41,78,32,892 15 59,52,38,509 9,03,43,03,781 14 9,20,98,35,678 Current year

Provision for Current Taxation[Note15on Schedule17] Provision for Fringe Benefit Tax (excluding Rs.139,797 Referred to in Note 17 on schedule 17)

75,00,00,000 1,10,00,000

Profit after Taxation

2,65,68,32,892

Profit Available for Appropriations

2,65,68,32,892

APPROPRIATIONS Proposed Dividend Tax on Proposed Dividend Interim Dividend Tax on Interim Dividend General Reserve 18,27,73,272 2,56,62,001 30,00,00,000 50,86,35,273 Balance Carried to Schedule 2 2,14,81,97,619

Earning Per Share (Basic and diluted)[Note 19 on schedule 17]

58.08

CHAPTER 5 SUGGETIONS AND CONCLUSIONS

SUGGESTIONS

The ZUARI INDUSTRIES LIMITED is one of the private sector cement Company in India. It is a profitable Company.

Now a days the cement industry playing a major and important role in the construction field, These are for construct Homes, Flyovers, Industries etc. Now a days cement industry facing number of challenges like  Regional requirements  Regional cement demands(Ex: Rajiv Gruha Kalpa)  Lack of resourcs With all the above problems cement industry has to produce the cement with profits.

I want to express my views with few points, they are 1) ZUARI INDUSTIES LIMITED has been maintaining constant Equity share Capital since 2004, this has to improve.

2) Offer additional shares to investors from profits instead of giving Dividend. With this, there is a chance to increase reserves and surplus. 3) Debt/ Equity Ratio in ZUARI INDUSTRIES LIMITED is 0.98 this is more than the idle ratio of debt/ Equity i.e. 0.5 it indicates that proportion of Debt/ Equity(0.5 and not less than 0.5)will decrease from 0.98 to 0.5. It would decrease the responsibility. 4) Investment through Equity from rural people i.e. Rural investments are important

CONCLUSIONS:

After analyzing the financial position of ZUARI INDUSTRIES LIMITED and evaluating its Capital structure Analysis in respect of Ratio of Analysis and source and utilization of founds. The following conclusions are drawn from the project preparation.

The progress of ZUARI INDUSRIES LIMITED shows that Equity Capital to Rs. 41605.00 Lakhs from during the year 2009-10. And the Net worth of the Company 40.59%.

Regarding Capital Structure Analysis Equity Capital was decreased from 2007-2009 to 2009-10 and total Debt Value increased from 62135.43 to 87289.00 Lakhs during the year .

Regarding Capital Structure Analysis Debt Turn over was increased and other income was decreased in the year 200-10. profit after tax was increased during the year 2009-10.

Regarding Capital Structure Analysis Debt/Equity Ratio was decreased from 0.99 to 0.98 and current ratio increased from 2.8 to 2.39.

From the above study it can be said that the ZUARI INDUSTRIELIMITED financial position on Capital Structure Analysis is quite satisfactory.

BIBLIOGRAPHY

Reference Books:

 LM.Pandey-Financial Management  M.Y.Khan & P.K.Jain financial Management  ZUARI INDUSTRIES LIMITED Annual Reports