MANAGERIAL ACCOUNTING AND CONTROL

ASSIGNMENT 1

INDIA CEMENTS LTD - ANALYSIS

Submitted by
Section D, Group 3
ANUBHA GOYAL

2014PGP047

ASHOK KOTHIYAL
BINIT KIRAN

2014PGP068
2013PGP107

M VISHVANATH
RAJAT KUMAR
SARAGADE PRIYANKA DILIP
SOMA BANIK

2014PGP187
2014PGP287
2014PGP329
2014PGP370

ABOUT THE COMPANY

India Cements Limited is a cement manufacturing company in India. It was established in 1946 and the
first plant was set up at Thalaiyuthu in Tamil Naduin 1949. The company is headquartered in
Sankarnagar, Tirunelveli, Tamil and is headed by N. Srinivassan (Managing Director)The company's
brands include: Sankar Super Power, Coromandel King and Raasi Gold.
Major competitors: ACC Limited, Birla Corporation Limited, Deccan Cements Limited, Ambuja Cements
Limited, UltraTech Cement Limited etc.
INDUSTRY ANALYSIS-

THREAT OF NEW ENTRANTS - MODERATE

key barriers- high capital costs, long gestation
periods and availability of raw materials.
BARGAINING
POWER OF
BUYERS- LOW

BARGAINING POWER OF
SUPPLIERS - MODERATE
Some raw materials in
control of government. Delay
in issuance of new licenses
act as detremental

COMPETITIVE INTENSITY MODERATE

Fragmented players present -->
lower pricing flexibility (35%
marke share)

Buyers market is
relatively fragmented
and they are retail in
nature.

THREAT OF SUBSTITUTES - LOW

virtually no viable substitue for
cement

Source: Crisil research Report

2014
COMPANY COST ANALYSIS FOR THE LAST 5YEARSThe companys Contribution Margin ratio has saw a decreasing trend from 37% in 2009 to 32% in 2011
and since then has steadily grown to 43% in 2013. This progress is a function of the more than
proportionate increase in the selling price over the variable cost which is a positive signal for the
company. The volume of sales hasnt increased for the company which is not a good indicator given the
demand in this industry has grown. It can mean that the company is losing its share in the market.
Similarly profit margins dipped from 2009 to 2011 then saw and increase. Even when the company has
maintained steady contribution margin ratio of 43% from 2012 to 2013, the profit margins have
declined. This indicates that the fixed costs have increased. And this has further led to increase in
required breakeven level of sales from 0.69crore in 2012 to .79crore in 2013 because the same
contribution margin had to cover the increased fixed costs.
Operating Leverage gives an idea of proportion of fixed costs in the cost structure. Higher the operating
leverage more is the companys ability to increase its operating profits with incremental revenue. The
companys situation was the worst 2011 when increasing sales was detrimental to companys health.
Since then it has steadily increased till the year 2013 which is positive indicator.

Margin of Safety is the buffer sales made over and above the break-even level. More the margin of
safety, more are the profits and thus the better it is. The company saw a steady decline in this figure
from 2009 to 2011, but then recovered and has been on a rising trend till now which is a good indicator.
Cost Efficiency (Expenses/Revenue) The efficiency ratio is a quick and easy measure of a firms ability to
turn resources into revenue. The lower the ratio, the better it is. Thus 95% cost efficiency ratio in 2009
suggests that to generate revenue of Re1 we have to incur cost of 95paise. This situation deteriorated
and was the worst in 2011 when cost efficiency was at 105%. It has come down to 91% now which is
decently fine.
All in all we see that the company saw a decline in the year of 2011 and since then it has fared well and
has been showing positive signs of growth through the years 2012 and 2013.