ABSTRACT

The purpose of inventory management is to ensure availability of raw material in

sufficient qualities as and when required and also minimize investment in inventories. There is

an essential to manage inventories efficiently and effectively in order to avoid excess investment.

It is possible for a company to reduce the level of inventories to a considerable extent without

any adverse effect on production and sales by using simple inventory planning and control

techniques. The reduction of excessive inventories will create a favorable impact on the company

profitability. Inventory turnover ratio, inventory conversion period are very helpful to know how

effectively plays and control in the organization analysis will enables the organization to use of

analysis is very effective and useful tool for classifying, monitoring and control of inventories.

1
 INTRODUCTION

Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is recurred at different locations within a facility or within multiple locations of a
supply or network to protect the regular and planned course of production against the random disturbance
of running out of materials or goods. The scope of Inventory management also concerns the fine lines
between replenishment lead time, carrying costs of inventory, asset management, Inventory forecasting,
physical inventory, available physical space for Inventory, quality management, returns and defective
goods and demand and forecasting.

Types of inventory

Normally the inventory has divided into two types. These,

1. Merchandising inventory,
2. Manufacturing inventory.

The manufacturing inventory has been subdivided into three types. These,

1. Raw materials,
2. Work in process,

3. Finished goods.

Raw Materials: Everything the crafter buys to make the product is classified as raw materials.
That includes leather, dyes, snaps and grommets. The raw material inventory only includes items
that have not yet been put into the production process.
Work in Process: This includes all the leather raw materials that are in various stages of
development. For the leather crafting business, it would include leather pieces cut and in the
process of being sewn together and the leather belts and purse etc. that are partially constructed.

In addition to the raw materials, the work in process inventory includes the cost of the labor
directly doing the work and manufacturing overhead. Manufacturing overhead is a catchall phrase
for any other expenses the leather crafting business has that indirectly relate to making the
products. A good example is depreciation of leather making fixed assets.

2
 Finished Goods: When the leather items are completely ready to sell at craft shows or other
venues, they are finished goods. The finished goods inventory also consists of the cost of raw
materials, labor and manufacturing overhead, now for the entire product.

The purpose of inventory management is to ensure availability of raw material in sufficient

qualities as and when required and also minimize investment in inventories. There is an essential to

manage inventories efficiently and effectively in order to avoid excess investment. It is possible for a

company to reduce the level of inventories to a considerable extent without any adverse effect on

production and sales by using simple inventory planning and control techniques. The reduction of

excessive inventories will create a favorable impact on the company profitability. Inventory turnover

ratio, inventory conversion period are very helpful to know how effectively plays and control in the

organization analysis will enables the organization to use of analysis is very effective and useful tool for

classifying, monitoring and control of inventories.

3
 OBJECTIVES OF THE STUDY

To study the manufacturing of ZUARI CEMENTSin Hyderabad

To analyze the inventory those are sufficient to perform production and sales activities
smoothly.

To study the inventory management followed in apllo tyres in Hyderabad

To identify the existing inventory management and its effectiveness.

To calculate analysis for their performance in inventory management.

4
 SCOPE OF THE STUDY

The study helps the management to improve its profitability through a reduction in non- moving
inventory.
It develops the policies for both continuous review of inventory management system.

The study helps to show the level of the inventory in the organization. The company will make
the proper inventory methods from the suggestions of the study.

5
 RESEARCH METHODOLOGY

Research Design

The Descriptive type of research has been applied in the study. This research the researcher
has no control over the variables. Only reports what has happened or what is happening. The research can
only discover causes but cannot control the variables.

Data collection

This study purely based on secondary sources of information. The necessary data calculated
from annual report, books, journals and websites.

Period of study

This study covers a period of five years from 2011-2015 MAR

Area of study

This study was conducted in ZUARI CEMENTS Hyderabad

Tools for analysis

The following tools have been applied in the present study.

They are listed below

Ratio analysis (inventory)

6
 LIMITATION OF STUDY
It consumes more time and requires lots of expenditure. More time is needed to do this
study.
Study is based on secondary data only.
The quality of inventory is not compared in analysis.
The analysis is based on figures present in the internal records only.
The study is based on two year reports given by marketing and finance department that
has its own limitation.
Working environment didnt permit more involved way of collecting data.

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 CHAPTER-II
REVIEW OF LITERATURE

8
 REVIEW OF LITERATURE

INVENTORY MANAGEMENT
Inventory management is primarily about specifying the shape and percentage of stocked goods.
It is required at different locations within a facility or within many locations of a supply network
to precede the regular and planned course of production and stock of materials.
The scope of inventory management concerns the fine lines between replenishment lead time,
carrying costs of inventory, asset management, inventory forecasting, inventory valuation,
inventory visibility, future inventory price forecasting, physical inventory, available physical
space for inventory, quality management, replenishment, returns and defective goods, and
demand forecasting. Balancing these competing requirements leads to optimal inventory levels,
which is an on-going process as the business needs shift and react to the wider environment.
Inventory management involves a retailer seeking to acquire and maintain a proper merchandise
assortment while ordering, shipping, handling, and related costs are kept in check. It also
involves systems and processes that identify inventory requirements, set targets, provide
replenishment techniques, report actual and projected inventory status and handle all functions
related to the tracking and management of material. This would include the monitoring of
material moved into and out of stockroom locations and the reconciling of the inventory
balances. It also may include ABC analysis, lot tracking, cycle counting support, etc.
Management of the inventories, with the primary objective of determining/controlling stock
levels within the physical distribution system, functions to balance the need for product
availability against the need for minimizing stock holding and handling costs.
DEFINITION
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is required at different locations within a facility or within multiple
locations of a supply network to protect the regular and planned course of production against the
random disturbance of running out of materials or goods. The scope of inventory management
also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset
management, inventory forecasting, inventory valuation, inventory visibility, future inventory
price forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecasting.

9
Or can be defined as the stock of any item used in an organization.
Business inventory
The reasons for keeping stock
There are three basic reasons for keeping an inventory:
Time - The time lags present in the supply chain, from supplier to user at every stage, requires
that you maintain certain amounts of inventory to use in this lead time. However, in practice,
inventory is to be maintained for consumption during 'variations in lead time'. Lead time itself
can be addressed by ordering that many days in advance.
Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and
movements of goods.
Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it, when
he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement
and storing brings in economies of scale, thus inventory.
All these stock reasons can apply to any owner or product
Special terms used in dealing with inventory
Stock Keeping Unit (SKU) is a unique combination of all the components that are assembled
into the purchasable item. Therefore, any change in the packaging or product is a new SKU. This
level of detailed specification assists in managing inventory.
Stock out means running out of the inventory of an SKU.
"New old stock" (sometimes abbreviated NOS) is a term used in business to refer to merchandise
being offered for sale that was manufactured long ago but that has never been used. Such
merchandise may not be produced anymore, and the new old stock may represent the only
market source of a particular item at the present time.
Typology
Buffer/safety stock
Cycle stock (Used in batch processes, it is the available inventory, excluding buffer stock)
De-coupling (Buffer stock held between the machines in a single process which serves as a
buffer for the next one allowing smooth flow of work instead of waiting the previous or next
machine in the same process)
Anticipation stock (Building up extra stock for periods of increased demand - e.g. ice cream for
summer)

10
Pipeline stock (Goods still in transit or in the process of distribution - have left the factory but
not arrived at the customer yet)
Inventory examples
While accountants often discuss inventory in terms of goods for sale, organizations -
manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture,
supplies, etc.) that they do not intend to sell. Manufacturers', distributors', and wholesalers'
inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in a
shop or store accessible to customers. Inventories not intended for sale to customers or to clients
may be held in any premises an organization uses. Stock ties up cash and, if uncontrolled, it will
be impossible to know the actual level of stocks and therefore impossible to control them.
While the reasons for holding stock were covered earlier, most manufacturing organizations
usually divide their "goods for sale" inventory into:
Raw materials - materials and components scheduled for use in making a product.
Work in process, WIP - materials and components that have began their transformation to
finished goods.
Finished goods - goods ready for sale to customers.
Goods for resale - returned goods that are salable.
Manufacturing:
A canned food manufacturer's materials inventory includes the ingredients to form the to be
canned, empty cans and their lids (or coils of electric goods or aluminum for constructing those
components), labels, and anything else (solder, glue, etc.) that will form part of a finished can.
The firm's work in process includes those materials from the time of release to the work floor
until they become complete and ready for sale to wholesale or retail customers. This may be vats
of prepared food, filled cans not yet labeled or sub-assemblies of food components. It may also
include finished cans that are not yet packaged into cartons or pallets. Its finished good inventory
consists of all the filled and labeled cans of food in its warehouse that it has manufactured and
wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to
consumers through arrangements like factory stores and outlet centers.

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Principle of inventory proportionality
Purpose
Inventory proportionality is the goal of demand-driven inventory management. The primary
optimal outcome is to have the same number of days' (or hours', etc.) worth of inventory on hand
across all products so that the time of runout of all products would be simultaneous. In such a
case, there is no "excess inventory," that is, inventory that would be left over of another product
when the first product runs out. Excess inventory is sub-optimal because the money spent to
obtain it could have been utilized better elsewhere, i.e. to the product that just ran out.
The secondary goal of inventory proportionality is inventory minimization. By integrating
accurate demand forecasting with inventory management, rather than to past averages, a much
more accurate and optimal outcome.
Integrating demand forecasting into inventory management in this way also allows for the
prediction of the "can fit" point when inventory storage is limited on a per-product basis.
Applications
The technique of inventory proportionality is most appropriate for inventories that remain unseen
by the consumer, as opposed to "keep full" systems where a retail consumer would like to see
full shelves of the product they are buying so as not to think they are buying something old,
unwanted or stale; and differentiated from the "trigger point" systems where product is reordered
when it hits a certain level; inventory proportionality is used effectively by just-in-time
manufacturing processes and retail applications where the product is hidden from view.
One early example of inventory proportionality used in a retail application in the United States
was for motor fuel. Motor fuel (e.g. gasoline) is generally stored in underground storage tanks.
The motorists do not know whether they are buying gasoline off the top or bottom of the tank,
nor need they care. Additionally, these storage tanks have a maximum capacity and cannot be
overfilled. Finally, the product is expensive. Inventory proportionality is used to balance the
inventories of the different grades of motor fuel, each stored in dedicated tanks, in proportion to
the sales of each grade. Excess inventory is not seen or valued by the consumer, so it is simply
cash sunk (literally) into the ground. Inventory proportionality minimizes the amount of excess
inventory carried in underground storage tanks. This application for motor fuel was first
developed and implemented by Petrol soft Corporation in 1990 for Chevron Products Company.
Most major oil companies use such systems today

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Roots
The use of inventory proportionality in the United States is thought to have been inspired by
Japanese just-in-time parts inventory management made famous by Toyota Motors in the
1980s.High-level inventory management

It seems that around 1880[4] there was a change in manufacturing practice from companies with
relatively homogeneous lines of products to horizontally integrated companies with
unprecedented diversity in processes and products. Those companies (especially in
metalworking) attempted to achieve success through economies of scope - the gains of jointly
producing two or more products in one facility. The managers now needed information on the
effect of product-mix decisions on overall profits and therefore needed accurate product-cost
information. A variety of attempts to achieve this were unsuccessful due to the huge overhead of
the information processing of the time. However, the burgeoning need for financial reporting
after 1900 created unavoidable pressure for financial accounting of stock and the management
need to cost manage products became overshadowed. In particular, it was the need for audited
accounts that sealed the fate of managerial cost accounting. The dominance of financial reporting
accounting over management accounting remains to this day with few exceptions, and the
financial reporting definitions of 'cost' have distorted effective management 'cost' accounting
since that time. This is particularly true of inventory.
Hence, high-level financial inventory has these two basic formulas, which relate to the
accounting period:
Cost of Beginning Inventory at the start of the period + inventory purchases within the period +
cost of production within the period = cost of goods available
Cost of goods available cost of ending inventory at the end of the period = cost of goods sold
The benefit of these formulas is that the first absorbs all overheads of production and raw
material costs into a value of inventory for reporting. The second formula then creates the new
start point for the next period and gives a figure to be subtracted from the sales price to
determine some form of sales-margin figure.
Manufacturing management is more interested in inventory turnover ratio or average days to sell
inventory since it tells them something about relative inventory levels.

13
Inventory turnover ratio (also known as inventory turns) = cost of goods sold / Average
Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2)
and its inverse
Average Days to Sell Inventory = Number of Days a Year / Inventory Turnover Ratio = 365 days
a year / Inventory Turnover Ratio
This ratio estimates how many times the inventory turns over a year. This number tells how
much cash/goods are tied up waiting for the process and is a critical measure of process
reliability and effectiveness. So a factory with two inventory turns has six months stock on hand,
which is generally not a good figure (depending upon the industry), whereas a factory that moves
from six turns to twelve turns has probably improved effectiveness by 100%. This improvement
will have some negative results in the financial reporting, since the 'value' now stored in the
factory as inventory is reduced.
While these accounting measures of inventory are very useful because of their simplicity, they
are also fraught with the danger of their own assumptions. There are, in fact, so many things that
can vary hidden under this appearance of simplicity that a variety of 'adjusting' assumptions may
be used. These include:
Specific Identification
Weighted Average Cost
Moving-Average Cost
FIFO and LIFO.
Inventory Turn is a financial accounting tool for evaluating inventory and it is not necessarily a
management tool. Inventory management should be forward looking. The methodology applied
is based on historical cost of goods sold. The ratio may not be able to reflect the usability of
future production demand, as well as customer demand.
Business models, including Just in Time (JIT) Inventory, Vendor Managed Inventory (VMI) and
Customer Managed Inventory (CMI), attempt to minimize on-hand inventory and increase
inventory turns. VMI and CMI have gained considerable attention due to the success of third-
party vendors who offer added expertise and knowledge that organizations may not possess.
Accounting for inventory
Accountancy
Key concepts

14
Accountant Accounting period Accrual Bookkeeping Cash and accrual basis Cash flow
forecasting Chart of accounts Convergence Journal Special journals Constant item purchasing
power accounting Cost of goods sold Credit terms Debits and credits Double-entry system Mark-
to-market accounting FIFO and LIFO GAAP / IFRS Management Accounting Principles General
ledger Goodwill Historical cost Matching principle Revenue recognition Trial balance
Fields of accounting
Cost Financial Forensic Fund Management Tax (U.S.)
Financial statements
Balance Sheet
Cash flow statement Income statement Statement of retained earnings Notes Management
discussion and analysis XBRL
Auditing
Auditor's report Control self-assessment Financial audit GAAS / ISA Internal audit Sarbanes
Oxley Act
Accounting qualifications
CIA CA CPA CCA CGA CMA CAT CIIA IIA CTP
vte
Each country has its own rules about accounting for inventory that fit with their financial-
reporting rules.
For example, organizations in the U.S. define inventory to suit their needs within US Generally
Accepted Accounting Practices (GAAP), the rules defined by the Financial Accounting
Standards Board (FASB) (and others) and enforced by the U.S. Securities and Exchange
Commission (SEC) and other federal and state agencies. Other countries often have similar
arrangements but with their own accounting standards and national agencies instead.
It is intentional that financial accounting uses standards that allow the public to compare firms'
performance, cost accounting functions internally to an organization and potentially with much
greater flexibility. A discussion of inventory from standard and Theory of Constraints-based
(throughput) cost accounting perspective follows some examples and a discussion of inventory
from a financial accounting perspective.
The internal costing/valuation of inventory can be complex. Whereas in the past most enterprises
ran simple, one-process factories, such enterprises are quite probably in the minority in the 21st

15
century. Where 'one process' factories exist, there is a market for the goods created, which
establishes an independent market value for the good. Today, with multistage-process companies,
there is much inventory that would once have been finished goods which is now held as 'work in
process' (WIP). This needs to be valued in the accounts, but the valuation is a management
decision since there is no market for the partially finished product. This somewhat arbitrary
'valuation' of WIP combined with the allocation of overheads to it has led to some unintended
and undesirable results.
Financial accounting
An organization's inventory can appear a mixed blessing, since it counts as an asset on the
balance sheet, but it also ties up money that could serve for other purposes and requires
additional expense for its protection. Inventory may also cause significant tax expenses,
depending on particular countries' laws regarding depreciation of inventory, as in Thor Power
Tool Company v. Commissioner.
Inventory appears as a current asset on an organization's balance sheet because the organization
can, in principle, turn it into cash by selling it. Some organizations hold larger inventories than
their operations require in order to inflate their apparent asset value and their perceived
profitability.
In addition to the money tied up by acquiring inventory, inventory also brings associated costs
for warehouse space, for utilities, and for insurance to cover staff to handle and protect it from
fire and other disasters, obsolescence, shrinkage (theft and errors), and others. Such holding costs
can mount up: between a third and a half of its acquisition value per year.
Businesses that stock too little inventory cannot take advantage of large orders from customers if
they cannot deliver. The conflicting objectives of cost control and customer service often pit an
organization's financial and operating managers against its sales and marketing departments.
Salespeople, in particular, often receive sales-commission payments, so unavailable goods may
reduce their potential personal income. This conflict can be minimised by reducing production
time to being near or less than customers' expected delivery time. This effort, known as "Lean
production" will significantly reduce working capital tied up in inventory and reduce
manufacturing costs (See the Toyota Production System).
Role of inventory accounting

16
By helping the organization to make better decisions, the accountants can help the public sector
to change in a very positive way that delivers increased value for the taxpayers investment. It
can also help to incentivise progress and to ensure that reforms are sustainable and effective in
the long term, by ensuring that success is appropriately recognized in both the formal and
informal reward systems of the organization.
To say that they have a key role to play is an understatement. Finance is connected to most, if not
all, of the key business processes within the organization. It should be steering the stewardship
and accountability systems that ensure that the organization is conducting its business in an
appropriate, ethical manner. It is critical that these foundations are firmly laid. So often they are
the litmus test by which public confidence in the institution is either won or lost.
Finance should also be providing the information, analysis and advice to enable the
organizations service managers to operate effectively. This goes beyond the traditional
preoccupation with budgets how much have we spent so far, how much do we have left to
spend? It is about helping the organization to better understand its own performance. That means
making the connections and understanding the relationships between given inputs the resources
brought to bear and the outputs and outcomes that they achieve. It is also about understanding
and actively managing risks within the organization and its activities.
[edit]FIFO vs. LIFO accounting
Main article: FIFO and LIFO accounting
When a merchant buys goods from inventory, the value of the inventory account is reduced by
the cost of goods sold (COGS). This is simple where the CoG has not varied across those held in
stock; but where it has, then an agreed method must be derived to evaluate it. For commodity
items that one cannot track individually, accountants must choose a method that fits the nature of
the sale. Two popular methods that normally exist are: FIFO and LIFO accounting (first in - first
out, last in - first out). FIFO regards the first unit that arrived in inventory as the first one sold.
LIFO considers the last unit arriving in inventory as the first one sold. Which method an
accountant selects can have a significant effect on net income and book value and, in turn, on
taxation. Using LIFO accounting for inventory, a company generally reports lower net income
and lower book value, due to the effects of inflation. This generally results in lower taxation. Due
to LIFO's potential to skew inventory value, UK GAAP and IAS have effectively banned LIFO
inventory accounting.

17
Standard cost accounting
Standard cost accounting uses ratios called efficiencies that compare the labour and materials
actually used to produce a good with those that the same goods would have required under
"standard" conditions. As long as actual and standard conditions are similar, few problems arise.
Unfortunately, standard cost accounting methods developed about 100 years ago, when labor
comprised the most important cost in manufactured goods. Standard methods continue to
emphasize labor efficiency even though that resource now constitutes a (very) small part of cost
in most cases.
Standard cost accounting can hurt managers, workers, and firms in several ways. For example, a
policy decision to increase inventory can harm a manufacturing manager's performance
evaluation. Increasing inventory requires increased production, which means that processes must
operate at higher rates. When (not if) something goes wrong, the process takes longer and uses
more than the standard labor time. The manager appears responsible for the excess, even though
s/he has no control over the production requirement or the problem.
In adverse economic times, firms use the same efficiencies to downsize, right size, or otherwise
reduce their labor force. Workers laid off under those circumstances have even less control over
excess inventory and cost efficiencies than their managers.
Many financial and cost accountants have agreed for many years on the desirability of replacing
standard cost accounting. They have not, however, found a successor.
Theory of constraints cost accounting
Eliyahu M. Goldratt developed the Theory of Constraints in part to address the cost-accounting
problems in what he calls the "cost world." He offers a substitute, called throughput accounting,
that uses throughput (money for goods sold to customers) in place of output (goods produced
that may sell or may boost inventory) and considers labor as a fixed rather than as a variable
cost. He defines inventory simply as everything the organization owns that it plans to sell,
including buildings, machinery, and many other things in addition to the categories listed here.
Throughput accounting recognizes only one class of variable costs: the truly variable costs, like
materials and components, which vary directly with the quantity produced
Finished goods inventories remain balance-sheet assets, but labor-efficiency ratios no longer
evaluate managers and workers. Instead of an incentive to reduce labor cost, throughput

18
accounting focuses attention on the relationships between throughput (revenue or income) on one
hand and controllable operating expenses and changes in inventory on the other.
National accounts
Inventories also play an important role in national accounts and the analysis of the business
cycle. Some short-term macroeconomic fluctuations are attributed to the inventory cycle.
DISTRESSED INVENTORY:-
Also known as distressed or expired stock, distressed inventory is inventory whose potential to
be sold at a normal cost has passed or will soon pass. In certain industries it could also mean that
the stock is or will soon be impossible to sell. Examples of distressed inventory include products
that have reached their expiry date, or have reached a date in advance of expiry at which the
planned market will no longer purchase them (e.g. 3 months left to expiry), clothing that is
defective or out of fashion, music that is no longer popular and old newspapers or magazines. It
also includes computer or consumer-electronic equipment that is obsolete or discontinued and
whose manufacturer is unable to support it. One current example of distressed inventory is the
VHS format.[5]
In 2001, Cisco wrote off inventory worth US $2.25 billion due to duplicate orders.[6] This is one
of the biggest inventory write-offs in business history.
Inventory credit
Inventory credit refers to the use of stock, or inventory, as collateral to raise finance. Where
banks may be reluctant to accept traditional collateral, for example in developing countries
where land title may be lacking, inventory credit is a potentially important way of overcoming
financing constraints. This is not a new concept; archaeological evidence suggests that it was
practiced in Ancient Rome. Obtaining finance against stocks of a wide range of products held in
a bonded warehouse is common in much of the world. It is, for example, used with Parmesan
cheese in Italy.[7] Inventory credit on the basis of stored agricultural produce is widely used in
Latin American countries and in some Asian countries.[8] A precondition for such credit is that
banks must be confident that the stored product will be available if they need to call on the
collateral; this implies the existence of a reliable network of certified warehouses. Banks also
face problems in valuing the inventory. The possibility of sudden falls in commodity prices
means that they are usually reluctant to lend more than about 60% of the

19
USES OF INVENTORY TURNOVER ANALYSIS, ANALYSIS

It is helpful in assessing the stock position and productivity position of a concern. The main
objectives of a inventory turnover analysis are to assess

The present and future stock capacity of a concern.

To give corrective solution for the inventory problem.
To differentiates the investment with and invest without for purchasing of the raw
material
INVENTORY TURNOVER RATIOS

Inventory turnover ratio

A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory turnover period

How often interest is calculated and added on to your investment. If you have two conversion
periods, it means that interest is calculated every six months. The inventory conversion period
for calculate the interest for credit sales to their agents
ECONOMIC ORDER QUANTITY

Economic order quantity is that level of inventory that minimizes the total of
Inventory holding cost and ordering cost. The framework used to determine this order quantity is
also known as Wilson Model. The model was developed by F. W. Harris in 1913.The most
economical quantity of a product that should be purchased at one time. The is based on all
associated costs for ordering and maintaining the product. refers to the size of the order which
gives maximum economy in punches of materials.

Where

20
 Bharathi pathak 1991 The bulk of the banking business in the country is in the public
sector comprising the state bank of India and its seven associated banks and twenty nationalized
commercial banks till 1991, the Indian banking industry was operating in a highly regulated and
protected regime. But with the acceptance of Norseman committee recommendation, competition
has been injected into the banking industry in two forms.

The study has been found that HDFC Bank emerged as a leader in this financial analysis
of the year ended 2000-01. It closest competitor was ICICI Bank. Financial performance of the
other three, no doubt, lagged behind them, but it by no means, depressing. These Bank obviously,
have to focus more improving parameters like credit quality and cost control for the emerge as
the top performance.

R. Hamsalakshmi-M.Manicham 2000 The study, it has been found the liquidity position
and working capital positions were favorable and good during period of study. Regarding
turnover ratio, efficiency in management of fixed assets and total assets must be increased.
Regarding return on investment and return on equity was proved that the overall profitability
position of the software companies had been increasing at a moderate way.

Dr R.Dharmaraj 2003 The study airtical positing in Indian management industry have
concluded that for the last five year, there has been proliferation of international and domestic
providence of mutual funds. He says that this increased growth is due to the increasing cash
flows among innovative young companies through India.

R. Hamsalakshmi-M.Manicham, Finance India Sep2 2009

Dr R.Dharmaraj Indian journal of finance volume4 Allen and Carolinian (2003)

Dr Harish kumar 2008 A capital adequacy ratio was constant over a period of time. During the
study period. It was observed that the return on net worth had negative correlation with the debt
equity ratio. Inters income to working funds also had a negative association with interest
coverage ratio and the non performing to net advance was negatively correlated with interest
coverage ratio.

21
 J R Raiyani 2009 During the periods of high inflation depending on conventional accounting
wisdom. May results in firms financial information losing its meaning and creation of unrealistic
expectation among information users.

Dr.Kavitha Chavvali 2009 Inventory analysis of gold exchange trade funds. Mathew
T.Jones and Maurice ousted (2007) revised and evaluated pre world war ii current date for
countries by treating gold follows on a continuous basis. The historical data of saving and
investment was taken over a time period of 1850- 1945.

N.Prasanna 2009 Stock performance Aitkin 1997 the external effect foreign direct
investment on export with example of Bangladesh where entry of a koala multinational in
garment exports led establishment of a member of domestic export firms creating the countrys
largest export industry.

Awedh 2005 defend that inflator does not have really an effect on the profitability measured
by return on equity of foreign banks exerting in Lebanon. In the same way, the author steers that
the level of inflation affect more than the return on assets of Lebanese bank than foreign banks in
Lebanon.

Dr Harish kumar single,The icfai journal of inventory management (vol vii Feb. 2008)

J R Raiyani, The infaciS university journal of inventory research (vol viii, No 2 Feb. 2009)

Dr.Kavitha Chavvali, Indian journal of inventory (vol 3 No: 2 dec 2009)

N.Prasanna, Indian journal of inventory (vol 5 No: 1 Jan 2008)

Dr.R.B.Bhatasna, Indian journal of inventory (vol 5 No: 2 Feb 2011)

Dr Sushil kumar Mehta 2010 The financial performance mutual funds schemes. Jayadew
(1996) attempted of evaluate the performance of two growth oriented mutual funds on the basis
of monthly return. It was found that master gain performed better according to Jensen and trey
nor measures and basis of sharps ratio.

22
 CHAPTER-III

COMPANY PROFILE
&
INDUSTRY PROFILE

23
 COMPANY PROFILE

Italcementi Group History

Founded in 1864, Italcementi was quoted for the first time on the stock markets, at the Milan Stock
Exchange, in 1925, under the name of Societ Bergamasca per la Fabbricazione del Cemento e della
Calce Idraulica and has been operating since 1927 under the name of Italcementi Spa.

Zuari Cement is part of the Italcementi Group, the fifth largest cement producer in the world and the
biggest in the Mediterranean region. With net sales over 6 billion Euros in 2009 and a capacity of 70
million tonnes. Italcementi Group combines the expertise, know-how and culture of a number of
companies from more than 22 countries in 4 continents. This includes an industrial network of 63 cement
plants, 15 grinding centres, 5 terminals, 134 aggregates quarries and 613 concrete batching units. In
India, with its inherent strengths, Italcementi Group's Zuari Cement is committed to give the building
industry a cement that is truly international.
A commitment to customer satisfaction has seen Zuari Cement grow from a modest 0.5 million tonne
capacity in 1995 to 3.5 million tonne today. Zuari Cement is in the process of increasing this capacity to 6
million tonne by 2009 through setting up of a new 5500 tonne per day clinker line at Yerraguntla and a
grinding center at Chennai. A captive power plant with a capacity of 43 MW has already been set up at
the Company's cement manufacturing facility at Sitapuram.
With a 6% market share in the south Indian cement market and sales of about Euro 188 million in 2009,
Zuari Cement has chalked out ambitious plans for the future. This includes strengthening its presence in
the Maharashtra, Orissa and West Bengal markets. While technology is just one of its strengths, there are
many other factors that contribute equally to Zuari's success. These include a high-level organisation and
decentralised quality assurance teams to guarantee the full compliance with the customers' expectations.

Our History Strong foundations for a company of strength.

Zuari entered the Cement business in 1994 to operate the Texmaco Cement Plant. In 1995, Texmacos
Plant at Yerraguntla was taken over by Zuari and a Cement Division was formed. The fledging unit came
into its own in the year 2001 when Zuari Industries entered into a Joint Venture with the Italcementi
Group, the 5th largest producer of Cement in the world , Zuari Cement Limited was born. Zuari Cement

24
took over Sri Vishnu Cement Limited in 2002. Today, the Company is amongst the topmost cement
produces in South India.

Zuari and Italcementi. The strength of two :

Zuari Cement is one of the leading cement producers in South India.A fully owned subsidiary of the Euro
6 billion Italcementi Group, Commitment to customer satisfaction has seen Zuari Cement grow from a
modest 0.5 million tonne capacity in 1995 to 3.5 million tones today.And earned a place among the most
reliable cement producers in the country.

Thanks to a careful plan of investments and take-overs of other cement producers, the company
expanded, quickly reaching a strong position on the market and becoming the leading cement
manufacturer in Italy.

After several acquisitions abroad, in 1992 Italcementi achieved important international status with its
take-over of Ciments Franais, one of the main global cement producer.

In 1997 Italcementi consolidated its verticalisation strategy with the acquisition of Calcestruzzi, thus
becoming Italian leader in the ready-mixed concrete sector.

In March 1997, all the international companies of the Group gathered under one single corporate identity.

Since 1998 Italcementi Group has been pursuing its internationalisation strategy by acquiring new cement
works in Bulgaria, Kazakhstan, Thailand, Morocco, India, Egypt and the United States.

Our Management:

While professional management and quality workforce ensure superior results, the role played by the core
management should not be discounted. With their vision and experience, they make sure that Zuari
Cement moves in the right direction. Towards becoming one among the leading cement producers in
India.

Maurizio Caneppele
Managing Director

Ramesh Surya Narayana

Director Technical

25
Emiliyan Andreev
Chief Financial Officer

S.SURESH
Vice President HR & IR

Appotiment of Director

Zuari Industries Ltd has informed BSE that the Board of Directors at its meeting held on January 21, 2011
have appointed Mr. Suresh Krishnan, as Additional Director of the Company.

With an annual production capacity of approximately 70 million tons of cement, Italcementi Group is the
worlds fifth largest cement producer.

The Parent Company, Italcementi S.p.A., is one of Italys 10 largest industrial companies and is included
in S&P/MIB Index of the Italian Stock Exchange.
Italcementi Groups companies combine the expertise, know how and cultures of 22 countries in 4
Continents boasting an industrial network of 63 cement plants, 13 grinding centres, 5 terminals, 135
aggregates quarries and 614 concrete batching units.

In 2009 the Group had sales amounting to almost 6 billion Euro.

Italcementi, founded in 1864, achieved important international status with the take-over of Ciments
Franais in 1992.
Following a period of re-organization and integration that culminates in the adoption of a single corporate
identity for all Group subsidiaries, the newly-born Italcementi Group began to diversify geographically
through a series of acquisitions in emerging countries such as Bulgaria, Morocco, Kazakhstan, Thailand
and India, as well as operating in North America. As part of the plan to further enhance its presence in the
Mediterranean area, in 2005 the Group boosted its investments in Egypt becoming the market leader.

In 2007 Italcementi acquired full control of the activities in India and signed an agreement to strengthen
its position in Kazakhstan while, in 2008, it further strengthened its presence in Asia and the Middle East
through the operations in China, Kuwait, Saudi Arabia. In 2009 the Group signed a joint venture in Libya
to build a 4 million tons/year cement plant.
As a member of the World Business Council for Sustainable Development (WBCSD) Italcementi Group

26
has signed the Cement Sustainability Initiatives Agenda for Action, the first formal commitment that
binds a number of world cement industry leaders to an action plan that aims at satisfying present-day
needs at the same time as safeguarding the requirements of future generations.
To further confirm its commitment on these issues, the Group has taken over the co-Chairmanship of the
Cement Sustainability Initiative for the period 2007-2008.

Our Products
Cement for every kind of task

Zuari Cement manufactures and distributes its own main product lines of cement .We aim to optimize
production across all of our markets, providing a complete solution for customer's needs at the lowest
possible cost, an approach we call strategic integration of activities.

Cement is made from a mixture of 80 percent limestone and 20 percent additives. These are crushed and
ground to provide the "raw meal, a pale, flour-like powder. Heated to around 1450 C (2642 F) in
rotating kilns, the meal undergoes complex chemical changes and is transformed into clinker. Fine-
grinding the clinker together with a small quantity of gypsum produces cement. Adding other constituents
at this stage produces cements for specialized uses.

Blended Cements

Zuari Blended Cement the eco-friendly, user-friendly cement :

Zuari Blended Cement has been developed in response to todays need for environment-friendly products
that are cost-effective, durable and have minimal by-products.

Durability is a very important property in concrete. And durability here means concrete that ensures the
long life span of structures like homes and residences that are lifetime investments. Since distress of
concrete and early failure of structures is a common phenomenon, research over a period of time helped
develop various remedial measures that improved durability and cost economics. One of them being
blended Portland Cement, with complementary pozzolanic and cementitious materials like fly ash, blast
furnace slag, etc. And Zuari Blended Cement is a fine example of it.

Our Products
Portland Cement

27
Zuari OPC is a high quality cement prepared from the finest raw material. Owing to optimum water
demand, it contributes to a very low co-efficient of permeability of the concrete prepared. This improves
the density of the concrete matrix and increases the durability of the concrete. Zuari OPC is a high
performance cement far exceeding the codal requirement of BIS.

It is this very durability that translates into long - lasting residential and commercial constructions of a
wide variety.

Zuaris edge:
With these unique advantages, Zuari Cement comes to you in two grades - 43 Grade OPC and 53 Grade
OPC.

Zuari OPC is a high quality cement prepared from the finest raw material. Owing to optimum water
demand, it contributes to a very low co-efficient of permeability of the concrete prepared. This improves
the density of the concrete matrix and increases the durability of the concrete. Zuari OPC is a high
performance cement far exceeding the codal requirement of BIS.

It is this very durability that translates into long - lasting residential and commercial constructions of a
wide variety.

Zuari 43 & 53 Grade Ordinary Portland Cement (OPC) - Strong cements for longlasting constructions:

Higher compressive strength

Better soundness

Lesser consumption of cement for M-20 grade concrete and above

Faster deshuttering of form work

Reduced construction time

Primo Concrete Cement - Concrete Redefined

Primo - The success story:

In 2008 Zuari Cement launched its high-strength cement under the brand name 'Primo Concrete Cement'
in Bangalore City. 'Primo' improves the density of the concrete matrix and increases the durability of the

28
concrete, making it an immediate hit among construction and infrastructure projects undertaken in and
around Bangalore. Recently Primo was also launched in Kochi and Chennai. An extensive marketing and
distribution network across south India concretes Zuari Cement's success story.
New products, on the line of the extremely successful 'Primo' launch, will play a significant role in key
markets.

Primo Concrete Cement - Concrete Redefined:

Primo concrete cement is a high quality cement prepared from the finest raw material. Owing to optimum
water demand, it contributes to a very low co-efficient of permeability of the concrete prepared. This
improves the density of the concrete matrix and increases the durability of the concrete. Primo is a high
performance cement far exceeding the codal requirement of IS 13269-1987. It is this very durability that
translates into long-lasting residential and commercial constructions of a wide variety, such as
dams,canals, highways, roads and flyovers.

Higher compressive strength

Better soundness

Lesser consumption of cement for M-20 Concrete grade

and above

Faster deshuttering of form work

Reduced construction time

Locations

CORPORATE OFFICE
No. 1, 10th Main, Jeevanbhima Nagar,
Bangalore - 560 075
Tel: 080 - 41194408
Fax: 080 - 40302844/ 40302888
E-mail: zclmkt@zcltd.com,zclho@zcltd.com

29
Works: Sitapuram
P.O.Dondapadu
Nalgonda - 508 246
Andhra Pradesh
Tel: 08683 - 235107
Fax: 08683 - 235229
E-mail: svclspm@zcltd.com

Works: Krishna Nagar

P.O. Yerraguntla
Kadapa - 516 311
Andhra Pradesh
Tel: 08563 - 275104 / 275301
Fax: 08563 - 275164
E-mail: zclygl@zcltd.com

Italcementi Group
Italcementi Group at a glance

With an annual production capacity of approximately 70 million tons of cement, Italcementi Group is
the worlds fifth largest cement producer.

The Parent Company, Italcementi S.p.A., is one of Italys 10 largest industrial companies and is included
in FTSE/MIB Index of the Italian Stock Exchange.

Italcementi Groups companies combine the expertise, know how and cultures of 22 countries in 4
Continents boasting an industrial network of 59 cement plants, 15 grinding centres, 5 terminals, 373
concrete batching units and 92 aggregates quarries.
In 2009 the Group had sales amounting to over 5 billion Euro.

30
Italcementi, founded in 1864, achieved important international status with the take-over of Ciments
Franais in 1992.
Following a period of re-organization and integration that culminates in the adoption of a single corporate
identity for all Group subsidiaries, the newly-born Italcementi Group began to diversify geographically
through a series of acquisitions in emerging countries such as Bulgaria, Morocco, Kazakhstan, Thailand
and India, as well as operating in North America. As part of the plan to further enhance its presence in the
Mediterranean area, in 2005 the Group boosted its investments in Egypt becoming the market leader.

In 2006 Italcementi acquired full control of the activities in India and signed an agreement to strengthen
its position in Kazakhstan while, in 2007, it further strengthened its presence in Asia and the Middle East
through the operations in China, Kuwait, Saudi Arabia.

As a member of the World Business Council for Sustainable Development (WBCSD) Italcementi Group
has signed the Cement Sustainability Initiatives Agenda for Action, the first formal commitment that
binds a number of world cement industry leaders to an action plan that aims at satisfying present-day
needs at the same time as safeguarding the requirements of future generations.
To further confirm its commitment on these issues, the Group has taken over the co-Chairmanship of the
Cement Sustainability Initiative for the period 2006-2007. Moreover, Italcementi has been included in
The Sustainability Yearbook 2010 the most comprehensive publication on corporate sustainability
released yearly by SAM (Sustainable Asset Management).

31
 INDUSTRY PROFILE

CEMENT INDUSTRY AN OVERVIEW

Cement is the preferred building material in India. It is used extensively in household and industrial
construction. Earlier, government sector used to consumer over 50% of the total cement sold in India, but
in the last decade, its share come down to 35% Rural areas consume less than 23% of the total cement.
Availability of cheaper building materials for non-permanent structures affects the rural demand.
Demand for cement is linked to the economy activity in any country. Broadly, it can be categorized into
demand for housing construction (homes, offices etc) and infrastructure creation (ports, roads, power
plants etc). The real driver of cement demand is creation of infrastructure; hence cement demand in
emerging economies is much higher than developed countries where the demand has reached a plateau. In
India too, the demand for cement will be affected by spending on infrastructure (including housing).
With the boost given by the government to various infrastructure projects, road network and housing
facilities, growth in the cement consumption is anticipated in the coming year. The favorable housing
finance environment is expected to fulfill the vas housing requirements, both in rural and urban areas. The
increase in infrastructure projects by the government couple with the construction of Global Quadrilateral
and the North South and East- West corridor projects have led to an increase in consumption of cement.
This increase is expected to continue in the future. The reduction in import duties is not likely to affect the
industry as the cement produced is at par with the international standards and the prices are lower than
those prevailing in international markets.
Cement is a typical industry, characterized by the boom and bust syndrome. A huge potential market and
rapid growth in the early stages lead to a surge in interest and a flurry of research. The projected growth
rates point to a lucrative market. The buoyant markets and huge profits raked in by players tempt more
players into the market. Capacities increase in excess of demand and a glut in capacity is created.
Competition increases, prices fall and margins come under pressure. Competition addition comes to a
halt; weaker players shut ship or sell off to larger ones. Demand catches up and the cycle is repeated all
over again. Perhaps, of all the cyclical industries, the Indian cement industry exhibits this boom-and bust
cycle most visibly.

Consider the following:

Temptation

32
A huge potential market, easy availability of raw material and cheap labor leads to a flurry of activity and
a surge of interest. The easiest way to estimate the potential that exists is the per capita consumption of
cement, which is abysmally low in India at 82 kgs as against a world average of 255 kgs and the Asian
average of 200 kgs. Although the growth of the industry depends more on the level of consumer spending
rather than on the per capita consumption, nevertheless, it serves as an easy bench mark to estimate that
exists.
Fuel to Fire
The projected growth rates in demand (based on the potential per capita consumption growth or other
drives like the expected GDP growth rate) fuels stock market rallies. Consider the boom in cement stocks
in 1994. Every cement company was attracting valuations it never dreamt about. Scarcity induced by
lower capacities and to a large extends on non-availability of power, drove cement prices to hilt. The kind
of money minted by most cement companies as well as investors in that period made strategists plan
enormous increase in capacity. This explains why capacity creation starting 1994, was so enormous.
Government controls

The prices that primarily control the price of cement are coal, power tariffs, railway, freight royalty and
cess on limestone. Interestingly, all of these lrices pare controlled by government.

Coal

The consumption of coal in typically dry process system ranges from 20-25% of clinker production. This
means for per ton linker produced 0.20-0.24 ton of coal is consumed. This contributes 35-40% of the
production cost the cement industry consumes about 10mm tons of coal annually. Since coalfields like
BCCL supply a poor quality of a coal. NCL and CCL the industry has to blend high grade coal with it the
Indian coal has a low calorific value (3,500-4,000 kcal / kg) with as content as high as 25-30% compared
to imported coal of high calorific value (7,000-8,000 kcal /kg) with low ash content 6-7% lignite is also as
a fuel blending it with coal however this process is not very common.

Electricity

Cement industry consumes about 5.5bn units of electricity annually while one ton of cement
approximately requires 120-130 units of electricity power tariffs vary according to the location of the
plant and on the production process. The state government supplies this input and hence plants in different

33
state shall have different power tariffs. Another major hindrance to the industry is service power cuts most
of the cement producing states like AP, MP, experience power cuts to the tune of 25-30% every causing
substantial production loss.

Infrastructure
To reduce uncertainty relating to power, most of the leading companies like ACC, Indian Royan, and
Grasim rely on captive power plants a few companies are also considering power generating windmills.

Limestone

This constitutes the largest bulk in terms of input to cement for producing one ton of cement,
approximately 1.6 ton of limestone is required therefore the cement plant location is determined by the
location of limestone mines. The major cash outflow takes place in way royalty payment to the central
government and cess on royalties levied by the state government the total limestone deposit in the country
is estimated to be 90 billion tons. AP has the largest share 34%, Karnataka 13%, Gujarat 13% ,M.P.8%
and Rajasthan 6.5% the plants near the limestone deposit pay less transportation cost than others.

Transportation

Cement is mostly packed bags now. It is then transported either by rail or road. Road transportation
beyond 200 kms is not economical therefore about 55% cement is being moved by railways. Therefore is
also the problem of inadequate availability, under this scenario, manufactures are looking for sea routes,
this being not only cheap but also reducing the losses in transit. Today 70% of he cement movement

34
worldwide is by sea compared to 1% in India. However, the scenario is changing with most of the big
players like ULTRA TECH, ACC and Grasim have set up their bulk terminals.

Infrastructure for Future

The consumption of cement is determined by factors influencing the level of housing and industrial
construction, irrigation projects, roads and laying of water supply and drainage pipes etc, the level and
growth of GDP and its sect oral composition, capital formation, development expenditure, growth in
population, level of urbanization, etc, in turn, determine these factors. But the domestic demand for
cement is mainly from the housing activities and infrastructure development. The government paved the
way for the entry of the private sector in road projects. It has amended the National Highway Act to allow
private toll collection and identified projects, bridges, expressways big passes for private construction the
budged gave substantial incentives to private sector construction companies ongoing liberalization will
lead to an increase in industrial infrastructure development. So it is hoped that Indian cement industry
shall boom in near feature.

NATURE OF INDUSTRY

Installed Capacity
India is not the worlds second largest cement producing company after china. The industry is
characterized by a high degree of fragmentation that has created intense competitive pressure on price

35
realization. Spread across the length and breadth of the country, there are 120 large plants belonging to 56
companies with an installed capacity of around 135mm tons as on March 2002.

State wise Capacity

As cement is a low value commodity, freight costs assume a significant proportion of the final cost.
Transporting costs render the prices of cement in distant destinations uncompetitive. For instance, it is
financially infeasible to transport cement by road over 250 kms. Railways are mostly used to transport
cement over longer distances. However, its bulky nature and infrastructure bottlenecks render even rail
transport unviable over very long distances (that is why Madras Cements or Indian Cements, located in
the south, can hardly make a difference to the fortunes of west-based companies like Gujarat Ambuja)
Therefore, manufactures tend to sell cement at the nearest market first and sell in distant markets only if
additional realizations is greater than freight costs incurred this highlights the region nature of the cement.

CEMENT INDUSTRY IN INDIA

The Indian cement industry is at fourth in the world and by 2010 it expects to be next to China. With a
total of 54 million tons during 1993, from the both large and mini plants, cement consumption in India is
equal to that of wheat. This marked cement the largest consumed commodity in the country after rice and
wheat innumerable technological development has been taken place in cement production the wet kilns of
the 70s will replace by dry kilns, reducing fuel cost of 30%. Further improvement in thermal efficiency

36
was obtained by installation of preheats and further by addition of precalcinators. Finally computerization
and quality control or raw material in optimal usage of fuel and power.

Position of Cement Industry in India:

The eighth-plant document gave the targeted capacity and production as 900 million tons and 76 million
tons respectively. This includes export target of 5 million tons placing the domestic demand at 71 million
tons. The industry is well on the way to achieving this target in 1996 97.

Forecast of Cement Demand:

The Indian Institute of Management has forecasted a minimum demand of 84.81% million tons and a
maximum demand of 107.5% by 2001 02. The corresponding forecast by the National Council of
Applied Economic Research is 93.89 million respectively. The demand estimates 90 tons of 1997 98, 86
million tons for 1998 99, 94 million tons for 1999 02, 100 million tons if economic growth shows
further acceleration. The demand for the cement could be even higher than the projected levels.

Consumption of Different Varieties:

The quality of Indian cement is matches the best in the world, with increased production and usage to go
global, quality assumes paramount importance. The physical and chemical characteristics of ISO
standards are equivalent to most of the international specifications. Perception is the process by which an
individual selects, organizes and interprets information inputs to create a meaningful picture of the world.

Perception is the one of the most important psychological factors affecting human behavior. It affects the
out come of behavior; this is so because people act on the basis of what they see. Hence, in understanding
human behavior and in order to bring integrated behavior from the employees, it becomes imperative for
the management to recognize the managerial implications of the perception.

What is Cement?

Cement is a binding material, which is obtained by binding calcareous silicon argillaceous raw material
mixed in definite proposition n and crushing the resultant clinkers to a fine powder. Bricklayer named
Joseph Asp Din in 1824 first introduced cement into use. It is the most costly ingredient in available in

37
a variety of forms. The properties of cement are dependent upon chemical composition and the process
adopted to manufacture and the degree of fineness. Limestone is the most important for the cement
products. It is also known as white gold.

Composition of Cement:

The chemical analysis of the cement is as follows:

Limestone 75% Limestone

Coke Benzene 12% to 13% Iron ore Rawmill
Additive 2% Bauxite
Gypsum 5%
Kiln Granules called clinker

Cement mill
(Clinker + Gypsum)
Finished

ROLE OF CEMENT INDUSTRY IN ANDHRA PRADESH

In Andhra Pradesh there are many cement plants due to abundant availability of raw materials i.e.,
limestone. There are 18 major cement plants (whose installed capacity is more than 1500 tons per day)
and more than 20 mini cement plants (whose installed capacity is up to 600 tons per day).

Andhra Pradesh has a total installed capacity of 11.70 million tons from large or major cement plants and
1.55 million tons from mini cement opulence as against the countries total installed capacity of 70.00
million tons (approx.). Some of the major cement plants in Andhra Pradesh.

ACC Cement

38
Orient Cement
Kakatiya Cement
Zuari Cement
Andhara Cement (2 plants)
India Cements Ltd. (3 plants coromandal)
Raasi Cement
Priyadarshani Cement
Sri Vishnu Cement
Penna Cement

39
STAGE -2 STATICALLY ANALYSIS RESEARCH

40
 DATA ANALYSIS

BALANCE SHEET OF ZUARI CEMENTS.

Rupees in crores Mar '15 Mar 14 Mar 13 Ma12 Mar 11

Sources Of Funds
Total Share Capital 50.41 50.41 50.41 48.85 46.41
Equity Share Capital 50.41 50.41 50.41 48.85 46.41
Share Application Money 0 0 0 4.57 11.72
Preference Share Capital 0 0 0 0 0
Reserves 1,842.03 1,673.07 1,302.18 1,176.84 917.56
Revaluation Reserves 3.12 3.12 3.12 3.16 3.16
Networth 1,895.56 1,726.60 1,355.71 1,233.42 978.85
Secured Loans 1,093.30 875.95 462.39 223.15 473.76
Unsecured Loans 814.67 257.02 233.13 237.51 144.94
Total Debt 1,907.97 1,132.97 695.52 460.66 618.7
Total Liabilities 3,803.53 2,859.57 2,051.23 1,694.08 1,597.55
Application Of Funds
Gross Block 3,299.13 2,414.17 1,838.00 1,569.66 1,492.51
Less: Accum. Depreciation 915.55 803.95 694.66 598.66 541.66
Net Block 2,383.58 1,610.22 1,143.34 971 950.85
Capital Work in Progress 502.83 536.04 281.41 94.41 80.46
Investments 559.35 559.38 297.45 302.71 258.11
Inventories 1,136.33 552.73 417.05 513.29 451.95
Sundry Debtors 204.28 137.54 87.28 155.13 203.06
Cash and Bank Balance 133.65 193.44 175.36 156.13 131.7
Total Current Assets 1,474.26 883.71 679.69 824.55 786.71
Loans and Advances 889.36 802.25 590.65 538.56 451.75
Fixed Deposits 7.61 65.39 165.24 109.73 40.3
Total CA, Loans & Advances 2,371.23 1,751.35 1,435.58 1,472.84 1,278.76
Deffered Credit 0 0 0 0 0
Current Liabilities 1,277.81 897.45 627.15 718.31 681.64
Provisions 735.65 699.99 479.55 428.83 289.12
Total CL & Provisions 2,013.46 1,597.44 1,106.70 1,147.14 970.76
Net Current Assets 357.77 153.91 328.88 325.7 308
Miscellaneous Expenses 0 0 0.15 0.26 0.12
Total Assets 3,803.53 2,859.55 2,051.23 1,694.08 1,597.54
Contingent Liabilities 697.77 921.46 682.36 444.96 119.29
Book Value (Rs) 37.55 34.19 26.84 25.09 207.74

PROFIT & LOSS ACCOUNT OF ZUARI CEMENTS

41
------------------- in Rs. Cr. -------------------
Mar 15 Mar '14 Mar '13 Mar '12 Mar 11
Income
Sales Turnover 6,025.45 5,438.57 4,559.23 4,255.04 3,781.01
Excise Duty 544.53 392.58 468.37 549.11 490.07
Net Sales 5,480.92 5,045.99 4,090.86 3,705.93 3,290.94
Other Income 24.71 17.29 9.64 11.29 17.43
Stock Adjustments 408.72 26.17 -37.41 51.32 39.41
Total Income 5,914.35 5,089.45 4,063.09 3,768.54 3,347.78
Expenditure
Raw Materials 4,291.28 3,243.95 2,947.64 2,523.61 2,375.82
Power & Fuel Cost 179.02 163.47 149.29 134.82 132.68
Employee Cost 306.85 289.31 207.55 226.83 199.22
Other Manufacturing Expenses 89.37 78.42 59.85 51.52 12.77
Selling and Admin Expenses 388.98 417.14 304.56 285.58 243.86
Miscellaneous Expenses 53.65 62.76 28.19 44.68 34.59
Preoperative Exp Capitalised 0 0 0 0 0
Total Expenses 5,309.15 4,255.05 3,697.08 3,267.04 2,998.94
Mar '11 Mar '10 Mar '09 Mar '08 Mar '07
Operating Profit 580.49 817.11 356.37 490.21 331.41
PBDIT 605.2 834.4 366.01 501.5 348.84
Interest 198.66 113.54 103.83 80.26 89.23
PBDT 406.54 720.86 262.18 421.24 259.61
Depreciation 147.35 122.78 98.01 87.81 74.23
Other Written Off 0 0 0 0
Profit Before Tax 259.19 598.08 164.17 333.43 0
Extra-ordinary items 4.36 0.11 6.98 0 185.38
PBT (Post Extra-ord Items) 263.55 598.19 171.15 333.43 0
Tax 65.3 183.21 63.05 114.14 185.38
Reported Net Profit 198.25 414.99 108.12 219.3 72
Total Value Addition 1,017.86 1,011.10 749.44 743.43 113.42
Preference Dividend 0 0 0 0 623.11
Equity Dividend 25.2 37.8 22.68 25.2 0
Corporate Dividend Tax 4.09 6.28 3.86 4.28 20.88
Per share data (annualised) 2.93
Shares in issue (lakhs) 5,040.25 5,040.25 5,040.25 4,884.45 464.02
Earning Per Share (Rs) 3.93 8.23 2.15 4.49 24.44
Equity Dividend (%) 50 75 45 50 45
Book Value (Rs) 37.55 34.19 26.84 25.09 207.74

42
 DATA ANALYSIS &INTERPRETATIONS
Ratio analysis is the major and efficient tool for management to analyze the data. So here some ratios are
given which are related to inventories and with analysis.

13.1>Raw material conversion period

This ratio shows in how many day raw materials is used to manufacturing.

To find this ratio, the formula is;

Average stock of raw material

Total raw material consumed x 365

Where average stock of raw material = (Op. stock of raw mat.+ Cl. Stock of raw mat.)/2

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Opening stock of raw
material 901.56 720.52 707.54 603.7 287.02
Closing stock of raw
material 1433.26 901.56 720.52 707.54 603.7
Average stock of raw
material 1167.41 811.04 714.03 655.62 445.36
Total raw material
consumed 5709.91 3429.52 3121.46 2368.3 1715.14

INTERPRETATION: If we look towards for the year 2011 then we can easily observe that, the raw
material conversion period is too high than the year 2011-12. This trend is showing that the period for
conversion of raw material is decreasing year by year. It very good sign for the company. Because as soon
as raw material is used for production the storing cost will be less. So this chart is showing how
efficiently As reducing its storing cost and how fast raw material is used for production.

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13.2>WIP conversion period
This ratio shows, in how many days the WIP converted into finished products.

To find out this ratio, the formula is;

Average stock of work-in-process x 365

Cost of production

Where average stock of WIP = (Op. stock of WIP+ Cl. Stock of WIP)/2

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Opening stock of WIP 71.48 28.94 23.93 32.42 13.76
Closing stock of WIP 73.17 71.48 28.94 23.93 32.42
Average stock of WIP 72.325 50.21 26.44 28.18 23.09
Cost of production 18917.71 14423.47 13300.17 11469.71 9516.97

INTERPRETATION: As we can see in the chart that WIP converted into finished product within a day
in the year 2009-10to 2008-09. But in recent year it is taking more than one day. If we measure this chart,
we can say that the efficiency level of ZUARI CEMENTSyear by year to convert WIP to finished goods.

FINISHED GOODS CONVERSION PERIOD

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It refers to the time in which the finished goods are converted into sales or in other way we can
say that the time period between production and sales when the finished goods kept in the ware
house before the actual sale is made.

So formula for FGCP is;

Average stock of finished goods x 365

Cost of goods sold

Where average stock of finished goods

= (Op. stock of finished goods +Cl. Stock of finished goods)/2

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Opening stock of finished goods 1074.27 1078.08 1000.62 887.82 622.13
Closing stock of finished goods 1361.85 1074.27 1078.08 1000.62 887.82
Average stock of finished goods 1218.06 1076.18 1039.35 944.22 754.975
Cost of goods sold 18989 14874.23 13673.31 12012.39 10555.24

INTERPRETATION: From the table and the chart we can easily observed that, though in the
year 2009-10 the conversion period increased than the year 2007-06. But fortunately the recession period
couldnt hit the sales for the year 2009-10 TO 2011-12 The finished goods were converted into sales even
less than only 25 days in the year 2010-09. It shows the efficiency of not only quality of the electric goods
but also the efficiency of marketing department of ZUARI CEMENTSPVT LTD.

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13.4>Raw material to current asset

It indicates the percentage of raw materials in the current asset of the company.

To find out this;

Raw material(closing) x 100

Current asset

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Raw
material(Closing) 1433.26 901.56 720.52 707.54 603.7
Current asset 10047.48 6636.28 13701.89 4237.6 4083.58

INTERPRETATION:

This chart and table can show the one unexpected downfall in the year 2009-10, which is less than 6%. If
we observe carefully then we can see that, in the year 2009-10, the raw material trend is nearly same to
other years, but due to huge cash in hand increase the current asset. Which reduce the percentage of raw
material to current asset.

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13.5>Finished goods to current asset

It indicates the percentage of finished goods in the current assets of the company. Finished goods are such
a component of the current assets which can be easily converted into cash.

So the formula is;

Finished goods(closing) x 100

Current asset

2012- 2011-
Particulars 2015-14 2013-2012 2011 2010 2010-2009
Finished
goods(Closing) 1361.85 1074.27 1078.08 1000.62 887.22
Current asset 10047.48 6636.28 13701.89 4237.6 4083.58

INTERPRETATION: As we saw in the raw material to current assets, which is same as finished goods
to current assets. Due to huge amount of cash held in the year 2009-10, the percentage of finished goods
is lesser than the other years. But in the year 2007-06it is near to 25%. But the percentage is going
downwards in the year 2011-2012, which is less than 15%.

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13.6>Average inventory turnover ratio

It indicates the percentages of inventory with gross sales.

The formula is;

Average inventory x 100

Gross sales

Where average inventory = (Op. inventory+ Cl. Inventory)/2

2013-
Particulars 2015-14 2012 2012-2011 2011-2010 2010-2009
Opening inventory 2047.31 1827.54 1732.09 1532.34 922.91
Closing inventory 2868.28 2047.31 1827.54 1732.09 1532.34
Average inventory 2457.8 1937.43 1779.82 1632.22 1227.63
Gross sales 26843 22191.8 19762.57 17144.22 15876.87

INTERPRETATION: As we can observed that, the trend is showing nearly constant, except the year
2009-10 The inventory level is increasing as well as the gross sales. It shows the constant growth of sales
and inventory.

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13.7>Stock turnover ratio

Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the
requirements of the business. But the level of inventory should neither be too high nor too low.

The stock turnover ratio measures the number of times a company sells its inventory during the year.

The formula for stock turnover ratio is;

Cost of goods sold

Average stock

Where average stock = (Op. inventory+ Cl. Inventory)/2

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Cost of goods sold 18989 14874.23 13673.31 12012.39 10555.24
Average stock 2457.8 1937.43 1779.82 1632.22 1227.63

INTERPRETATION: As we can find out that in the year 2009-10 the ratio was very high as compare to
other years. In the year 2009-10 it is even less than 7.5, but after that ZUARI CEMENTSmaintained the
consistency on its growth.

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13.8>Average age of stock

This ratio shows how many days stock are kept as inventory in the company before sales.

To find out the average age of stock is;

365

Stock turnover ratio

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Stock turnover ratio 7.72 7.67 7.68 7.37 8.63

INTERPRETATION: From the chart as given below, we can see that average age of stock is not more
than 50 day in any of the year. But in year 2009-10 it is near to 40 days where, in the year 2009-10 it is
near to 50 days. But in the recent year it is near to 48 day.needs to reduce the day, through its sale with the
help of marketing department.

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Spare parts index

It shows the index of spare parts, which are used to fixed asset.

To find out spare parts index, the formula is;

Stores and spares parts(closing) x 100

Net block of fixed asset

2013- 2012- 2011- 2010-
Particulars 2015-14 2012 2011 2010 2009
Stores and spares parts(closing) 505.44 442.66 505.44 442.66 349.06
Net block of fixed assets 11040.56 9865.05 11040.56 9865.05 9112.24

INTERPRETATION: This index is showing downwards in recent years. But in the year 2009-10 it is
less than 4. And in the year 2009-10 it is more than 4.5. So should try to reduce this index. But the chart is
showing very impressive that index is reducing year by year.

13.10>Inventory conversion period

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This ratio shows in how many days inventories are converted into sales. It is major ratio analysis for cash
conversion period. Because it is the first component of the cash conversion period.

The formula is;

Inventories(closing)

Sales/365

2010-
Particulars 2015-14 2013-2012 2012-2011 2011-2010 2009
Inventories(Closing
) 1,136.33 552.73 417.05 513.29 451.95
Sales 24315.77 19693.28 17551.09 15139.39 14498.95

INTERPRETATION: From this chart we can observed that in the year 2007-08 and 2007-06, the
inventory was most efficiently converted into sales. But unfortunately it is very high in the year 2010-09.
So it shows the inefficiency for the company.

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13.11>Current ratio

This ratio is used to judge the short term solvency of a company and is worked out by dividing the
aggregate Current Assets by its aggregate Current Liabilities.

To find out the current ratio, the formula is;

Current asset

Current liabilities

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Current asset 10047.48 6636.28 13701.89 4237.6 4083.58
Current liability 8974.05 6768.78 5453.66 3808.72 3699.99

INTERPRETATION: In the year 2009-10 this ratio is too high due to huge amount cash held in the
company. From here we can say that company has huge liquidity but in other sense we can say that
company blocked this huge amount of cash without investing. Again it is very good sign for the company,
because the recession hit the world in the year 2010-11 and company has huge amount of liquidity to face
the crisis moment. Again we can see that the in the year 2007-08 the ratio is even less than 1. So 2009-10
heavy cash amount saved in the year 2010-11. Rest of the year maintained the consistency, which is just
above 1.

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13.13>Total inventories to total assets

This ratio shows the percentage level of inventories in compare to total asset.

The formula is;

Total Inventories(closing) x 100

Total assets

Particulars 2015-14 2013-2012 2012-2011 2011-2010 2010-2009

Total inventory 1,136.33 552.73 417.05 513.29 451.95
Total Assets 58741.77 47075.52 25597.5 14617.16 12143.3

INTERPRETATION: The percentage level is decreasing year by year to increase the liquidity level. But
in the year 2007-06, it is very low because of recession period to increase the liquidity percentage.

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 FINDINGS

In inventory level of the company, the in inventory level has been increased year
by year. There is no problem in the inventory level of the ZUARI CEMENTSPVT
LTD.
In inventory turnover ratio, the ratios of the year has been finded as low in the
years of 2011-2012 and 2013-14. After those periods the inventory turnover ratio
has slightly increased in the year 2009-2014. Even though that level is quite low
when compare with 2009-10
In inventory conversion period is finded as good level. Even though they wants to
keep the inventory conversion period as low.

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 SUGGESTION

In inventory level of the company shows the increase of the raw materials, work-

in-process and finished goods. The inventory level of ZUARI CEMENTSis well.
In inventory turnover ratio finded some problems. They want sell their product to

outside also. Now they use their cement which are produced in ZUARI

CEMENTSfor their own purpose. They want to sell that to others also then only

the ratio will be increased.

ZUARI CEMENTSsells the 25 per cent of the tyres produced, remaining they

used for own purpose. For sales to others they allowed more days as credit to their

agents.
In analysis there is no problems finded in findings for the ZUARI

CEMENTSPVT LTD. Even though they want to keep that situation in upcoming

years also. Then only they can retain position.

In analysis there is no problem finded in findings for the ZUARI CEMENTSPVT

LTD. Even though they want to keep that situation in upcoming years also. Then

only they can retain position.

In analysis there are no problems finded in findings for the ZUARI

CEMENTSLimited. Even though they want to keep that situation in upcoming

years also. Then only they can retain position.

56
 CONCLUSION

The study covers the inventory management for effective inventory control. I have used a

technique Economic Order Quantity Analysis named as Analysis for find out the rate

with and without investment for purchasing of good in the manufacturing the cement in

ZUARI CEMENTS Limited. Hence the inventory management of the organization quite

good. During the year 2009-2014 from this study I concluded that organization would be

effective inventory management. The study will be use for ZUARI CEMENTS in various

ways.

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BIBLIOGRAPHY

58
 BIBLIOGRAPHY
BOOKS
Asohok Banerjee - Financial Accounting A Managerial Emphasis Excel Books
2005
Collis Business Accounting Palgrave Macmillan 2007
Khan MY Jain P.K Management Accounting : Text, problems and cases 4th Edition
Tata McGraw Hill 2007
Pandikumar Management Accounting Excel Books 2007
Ramachandran N Kakani Kumar Ram Financial Acccounting For Management Tata
McGraw Hill 2006
Robert N.Anthony David F.Hawkins Kenneth A.Merchant Accounting Text and Cases
Tata McGraw Hill 2007
S.K Bhattacharyya Jhon Dearden Costing for Management Vikas Publishing 2002
S.N Maheswari S.K Maheswari Accounting for Management Vikas Publishing 2006
WEBSITES
en.wikipedia.com
Info.shine.com
www.ask.com
www.chettinad.com
www.google.com
www.indiacatalog.com
www.inventoryquzz.com
www.reportjunction.com

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