A Project Report on Management control System

Submitted To: Prof. sidhharth Mehta Submitted By:Bhanu Pratap (M00151) Rashika Gupta (M00111) Shaiva Shah (M00153) Ravi Mistry (M00146) Akshita Paliwal (M00112) Hardik Joshi (M00122)
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TABLE OF CONTENT
Particulars Chapter: 1 Strategic Planning For Ambuja Cement 1.1 Company Profile: 1.2 SWOT analysis: 1.3 BCG Matrix Analysis 1.4 Strategic plan: (Current and upcoming projects) Page No. 3 4 5 8 9

Chapter: 2Budgets (Capital Budgets, Revenue Budget, Expenses budget 11 for 1 year) 2.1 Capital Budget 12 2.2 Revenue Budget: 2.3 Expense Budget: 2.4 Budgeted Figures for year 2013-14 12 13 14

Chapter: 3Variance Analysis (Comparison between Actual and Budget 16 figures) 3.1 Actual Budget of Ambuja Cement for 2013-14 17 3.2 Variance Analysis: References: 19 22

Chapter: 1 Strategic Planning For Ambuja Cement

Ambuja Cement: 1.1 Company Profile: Ambuja Cements Ltd, a part of a global conglomerate Holcim, is one of Indias leading cement manufacturers and has completed over 25 years of operations. The company, initially called Gujarat Ambuja Cements Ltd, was founded by Narotam Sekhsaria in 1983 in partnership with Suresh Neotia. Global cement major Holcim acquired management control of Ambuja in 2006. The Company has also made strategic investments in ACC Limited. Ambuja Cement is an established brand in India for Ordinary Portland Cement (OPC) and Pozzolana Portland Cement (PPC), with significant footprints across western, eastern and northern markets of India. Its current cement capacity is 27.25 million tons. The Company has five integrated cement manufacturing plants and eight cement grinding units across the country. It is the first Indian cement manufacturer to build a captive port with three terminals along the countrys western coastline to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers. The Company has its own fleet of ships. It is one of the most profitable and innovative cement companies in India. The Company has also pioneered the development of multiple bio-mass co-fired technologies for generating greener power in its captive plants. About Holcim Founded in Switzerland in 1912, Holcim is one of the worlds leading s uppliers of cement and aggregates employing some 80,000 people, with production sites in around 70 countries. Holcims core businesses include the manufacture and distribution of cement, and the production, processing and distribution of aggregates (crushed stone, gravel and sand), ready-mix concrete and asphalt. The Company also offers consulting, research, trading, engineering and other services.

Vision: To be the most sustainable and competitive company in our industry. Mission - Create Value for all Delighted Customers Inspired Employees Enlightened Partners Energized Society Loyal Shareholders Healthy Environment

Our Reach We have a nationwide reach with strong footprints in the West, North and East India. Our cement plants cover strategic locations in all these regions. A wide dealer network of over 26000 dealers and retailers nurtured on empowered partnership enables our cement to reach even the tiniest village.

1.2 SWOT analysis: Strengths

Third largest cement producer in India. Lowest cost cement producer in India as well as in world AMBUJA cement profit is highest and most deleveraged balance sheet in industry. Logistic management Market leader in northern India as AMBUJA BRAND. Presence in prime market Pioneer in sea transport First cement company to receive the ISO 9002 quality certification & the only to be awarded, the National Quality Award
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 Well diversified fuel mix and efficient operation. Largest cement exporter in India. Geographically positioned, which gives flexibility to choose both domestic as well as export market. No1 in northern and no #2 in western market. It has strong presence in high growth market like west, east, north, which does not suffer from oversupply. It has extensive dealership network of 7000 dealers and 25000 retailers network. Captive logistic and transport management for efficient delivery and optimal cost.

Weaknesses Its cyclical industry High transport cost. Highly regionalized and localized market. Limited presence in southern market. Capacity constraints to limit sales. Lack of timely capacity addition to restrict sales. Dependent on govt. for license of mines. High excise duty creates cost high. Levy of royalty over and above the technical services fees.

Opportunities Huge govt. expenditure in infrastructure development to boosts the cement demand high. Low cost housing loan increased the real estate and individual housing also. Rising population works as a catalyst for housing boom. As per govt. budget, tax free income increased to Rs. 200000/- which create saving and boost up the housing. Low per capita consumption as 176kg where as 256kg on developed country. Long term growth for cement industries are favorable and it may grow at the rate of 7% to 8% Threats Rising input cost of material like limestone, gypsum, and mart. Due to high duty and high mining cost. Gypsum are imported, due to low quality of gypsum in India, which impact on price of production by paying the import duty. Rising cost of logistics. Rising cost of power. Currency risk Increasing diesel price are the another threat which increase the transportation cost, which may create a material effect in freight and forwarding cost. Penalty threats of cartel by competition commission of India. New entrant threats due to high potential market.

1.3 BCG Matrix Analysis

Ambuja cement enjoys

STAR Position

ACL acquires Holcims 50.01% equity stake in ACC

Holcim India value of INR 14,584 crore (USD ~2.4 bn) consists of 50.01% stake in ACC for INR 11,727 crore (USD ~2.0 bn) and 9.76% stake in ACL for INR 2,857 crore (USD ~0.4 bn)

1.4 Strategic plan: (Current and upcoming projects) Capacity Expansion projects: The new Bulk Cement Terminal (BCT) at Mangalore commissioned in 2013 will help the Company expand its footprint in the southern markets of India the efforts by the Company for the usage of cost efficient fuel mix are part of the GEO 20 project which will be operational in the first half of year 2014. Here, as a result of handling, storing and processing of waste materials, the Company will be able to ensure more usage of Greener Fuels thereby reducing energy cost. Upcoming Capacities and Investments A new brown-field expansion project was announced in 2011 at Sank rail grinding unit in the eastern region comprising a roller press and related logistics. The project is underway, with extended scope to include advanced technical specifications. It is slated to cost `325 crore and aimed for completion by 2016. So far, equipment orders have been placed and civil work is in progress. This project would add 0.80 million tonne grinding capacity to the unit, along with Significant cement capacity addition of approximately 4.50 million tonnes with associated clinkerisation capacity of 2.17 million tonnes is coming up at the proposed integrated plant at Marwar Mundwa, Nagaur district in Rajasthan with cement capacity of 1.5 MTPA. Similar capacity grinding units at Osara (M.P.) and Dadri (U.P.), the total project cost is estimated at `3500 crores.Part of the mining land is already in possession and the rest is under an advanced stage of acquisition The Company is also in the process of tying-up water sources required for construction and operations. Fullfledged construction work is expected to commence in the latter part of 2014. A new brown-field expansion project to set up a roller press at a cost of `70 crore at the Rabriyawas unit in Rajasthan, will add 0.80 million tonne grinding capacity in the first Half of 2014. The year 2014 will see capital expenditure worth `802 crores, over and above the `725 crores investment mad

Ambuja Cement to set up three new plants :( Main 5 years Strategic Plan) Ambuja Cements will invest US$133m in 2014 from internal funds in order to partially finance its on-going capacity expansion projects. "2014 will see capital expenditure worth US$133m, over and above the US$120m investment made in 2013. The entire proposed expenditure will be financed by internal funds, At present, Ambuja Cements has a cement production capacity of 27.25Mt/yr. It is setting up three 1.5Mt/yr capacity Greenfield cement plants in Rajasthan, Madhya Pradesh and Uttar Pradesh. Ambuja Cements is investing US$581m for setting up the three new plants. In first 5 year we will be completed our Madhya Pradesh plan

MAJOR COST MOVEMENTS: 1) Cost of major raw material, fly ash, increased by 7% on per tonne basis. However, strategy to change in mix of gypsum results in cost decrease by 2% on per tonne basis. Overall, the absolute raw material cost decreased by approx. 6% over the 2013 2) Power and fuel costs account for approximately 26% of the total operating cost of the Company. 3) Coal cost for kiln and captive power plants reduced by 8% and 10% respectively, due to reduced usage of imported coal and also substitution of high cost coal by pet coke usage. 4) The cost of packing bags went: around 14%, driven by increase in PP granule prices. 5) Freight and forwarding cost works out to 30% of total operating costs the same hardened by 6% on per tonne basis (due to an increase in diesel prices)

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Chapter: 2 Budgets (Capital Budgets, Revenue Budget, Expenses budget for 1 year)

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2.1 Capital Budget Capital Expenditures is referred as amount of money needed to spend on capital items or fixed assets such as land, buildings, roads, equipment, etc. that are projected to generate income in the future. Capital Budget of Ambuja cement for year 2013-14 Particular Amount (Rs) Leasehold Land 5000,00,000 Buildings 10,00,000 Construction & Survey Equipments 320 971 Vehicles* 11828569 Furniture & Fixtures 11296329 Computers 9699912 Audio & Visual Equipments 2415227 Office Equipments 5681112 Technical & Sports Equipments 804829 Total 5427,25,978 2.2 Revenue Budget: Revenue Budget for Ambuja cement 2013-14 Particulars Amount(Rs) income from sales 1000000 7000 Other income Total Revenue: 1007000

Sources of Fund Internal fund 10000,00,000

The cost of project Specify in the strategy planning that $ 133 US Dollar but its for 3 project so we taken part of that for our particular year

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2.3 Expense Budget:

Expense Budget for Ambuja cement 2013-14 Particulars Amount (Rs) Cost of Material Consumed 73499 b) Change in inventories of finished goods, work-in-progress and stock-in-trade 13689 c) Employee benefits expense 65000 d) Depreciation and amortisation expense 48703 e) Power and fuel 350000 f) Freight and forwarding: On finished goods 215698 On Internal material 120569 g) Other Expenses 300000 Total Expenses 1187158

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2.4 Budgeted Figures for year 2013-14

Budgeted AMBUJA CEMENTS LIMITED YEARLY PERFORMANCE OF THE YEAR 2013-14 Particulars Income from Operations a) Net sales/ income from 1000000 operations(Net of excise duty) b) Other operating income 7000 Total income from operations 1007000 (Net) Expenses a) Cost of Material Consumed b) Change in inventories of finished goods, work-in-progress and stock-intrade c) Employee benefits expense d) Depreciation and amortisation expense e) Power and fuel f) Freight and forwarding: On finished goods On Internal material g) Other Expenses Total Expenses Profit from operations before other income, Other income a) Interest income b) Others Total other income Profit before finance costs but before exceptional item Finance costs

73499 13689

65000 48703 350000 215698 120569 300000 1187158 7484614

46355 35489 7566458 265984 7529

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Profit after finance costs but before exceptional item Exceptional Item Profit before tax Tax expense Net profit for the period Paid- up- equity share capital ( Face value Rs 2 each) Reserves excluding Revaluation Reserves as per balance sheet of previous accounting year Earnings per share (in Rs): (of Ts 2 each) (not annualised) a) Basic b)Diluted Data as per assumption

258455

258455 43698 214757 123057

11.08 11.08

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Chapter: 3 Variance Analysis (Comparison between Actual and Budget figures)

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3.1 Actual Budget of Ambuja Cement for 2013-14 AMBUJA CEMENTS LIMITED YEARLY PERFORMANCE OF THE YEAR 2013-14 Sr. Q4 Q3 Q2 Q1 Annual NO Figures Three Three Three Three as months months months months on ended ended ended ended 31.3.2014

1)

Particulars Income from Operations a) Net sales/ income from operations(Net of excise duty) b) Other operating income Total income from operations (Net) Expenses a) Cost of Material Consumed b) Change in inventories of finished goods, work-in-progress and stock-in-trade c) Employee benefits expense d) Depreciation and amortisation expense e) Power and fuel f) Freight and forwarding:

263980 200494 234573 254483 952 1251 3077 1219 264932 201745 237650 255702

953530 6499 960029

2)

20168 5347

14342 5959

16554 -6257

17627 6797

68691 11846

12908 11974 57832

13003 12456 45682

13179 12233 55597

12076 12040 54945

51166 48703 214056

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On finished goods On Internal material g) Other Expenses Total Expenses 3) Profit from operations before other income, finance costs and exceptional item 4) Other income a) Interest income b) Others Total other income 5) Profit before finance costs but before exceptional item 6) Finance costs 7) Profit after finance costs but before exceptional item 8) Exceptional Item 9) Profit before tax 10) Tax expense 11) Net profit for the period 12) Paid- up- equity share capital ( Face value Rs 2 each) 13) Earnings per share (in Rs):(of Ts 2 each) (not annualised) a) Basic b)Diluted

51416 57179

40078 12388

45258 16160

49827 14659

186579 100386 176113 815636 144393

43290 43507 44854 44462 218191 187415 197603 212427 46741 14330 40047 43275

6224 6965 13189 59930 1610 58320

5579 2570 8149 22479 1783 20696 2482 23178 6581 16597 30898

5804 1633 7437 47484 1708 45776

6037 8915 14952 58227 1324 56903

23644 20083 43727 188120 6425 181695 2482 142977 34369 149808 123057

58320 6319 52001 30925

4576 13356 32420 30385

56903 8113 48790 30849

3.36 3.36

1.07 1.07

2.08 2.07

3.16 3.15

9.67 9.65

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3.2 Variance Analysis: Particulars Variance Analysis Actual Annual Figures as on 31.3.2014 953530 6499 960029 Budgeted Variance A/F Annual Figures as on 31.3.2014

Income from Operations a) Net sales/ income from operations(Net of excise duty) b) Other operating income Total income from operations (Net) Expenses a) Cost of Material Consumed b) Change in inventories of finished goods, work-in-progress and stock-in-trade c) Employee benefits expense d) Depreciation and amortisation expense e) Power and fuel f) Freight and forwarding: On finished goods On Internal material g) Other Expenses Total Expenses Profit from operations before other income, finance costs and exceptional item Other income a) Interest income b) Others Total other income Profit before finance costs but before exceptional item

1000000 7000 1007000

-46470 A -501 -46971 0 0 -4808 -1843 A A

68691 11846

73499 13689

F F

51166 48703 214056 186579 100386 176113 815636 144393

65000 48703 350000 215698 120569 300000 1187158 7484614

-13834 F 0 -135944 0 -29119 -20183 0 -123887 -371522 F -7340221 F

23644 20083 43727 188120

46355 35489 7566458 265984

0 -22711 -15406 -7522731 -77864

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Finance costs Profit after finance costs but before exceptional item Exceptional Item Profit before tax Tax expense Net profit for the period Paid- up- equity share capital ( Face value Rs 2 each) Reserves excluding Revaluation Reserves as per balance sheet of previous accounting year Earnings per share (in Rs): (of Ts 2 each) (not annualised) a) Basic b)Diluted Data as per assumption Sales Variance: Actual sales Budgeted sales 953530 1000000

6425 181695 2482 142977 34369 149808 123057

7529 258455

-1104 -76760 2482 -115478 -9329 -64949 0 0

258455 43698 214757 123057

0 9.67 9.65 11.08 11.08 -1.41 -1.43

46470 A(Adverse)

Interpretation: - This is negative variance. The sales goes down as per the pre decided budgeted

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Revenue variance: Actual revenue Budgeted revenue (revenue include other income of the firm) 960029 1007000 46971 A(Adverse)

Interpretation: - This is negative variance. The revenue is also getting affected. The company incurred loss in the Revenue. Expense Variance: Total Expense: Actual Expenses Budgeted Expenses 815636 1187158 - F(Favourable) 371522

Interpretation: - The positive thing is that there is control in the overall expenses of the company. The variance is favorable for the company. Employee benefits expenses: Actual Expenses Budgeted Expenses 51166 65000 13834 F(Favourable)

Interpretation: - The positive thing is that there is control in the overall expenses in the employees benefits of the company. The variance is favorable for the company. Conclusion: - Sales and Revenue are in negative side for the company but on another hand Expense and Employee benefits are in the favorable for the company. The company must have to look after the strategy and the control mechanism to secure competitive advantage in the market.
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References: 1) http://www.ambujacement.com/investor-relations/annual-reports/ 2) http://www.ambujacement.com/wpcontent/uploads/Ambuja%20Cement%20Annual%20Report_2013.pdf_0.pdf 3) http://www.globalcement.com/news/item/2422-ambuja-cements-to-set-upthree-new-plants 4) http://www.moneycontrol.com/annual-report/ambujacements/directorsreport/AC18#AC18 5) http://www.ambujacement.com/wpcontent/themes/ambuja/downloads/investorpresentations/Investor_Presentation7thSept2013.pdf

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