Sanjeev Roll No. 34

LOVELY SCHOOL OF BUSINESS (LSM)
Term PAPER
OF
Financial Management
TOPIC: - J K Lakshmi Cement Ltd. & Ultratech
Cemrnt Ltd.
( Comparative analysis of Cost of Capital)
SUBMITTED TO: SUBMITTED BY:

Ashu, Ma’am NAME: Sanjeev kumar
REG. NO: 10907431
ROLL NO: RS1905A34
Section: 1905
BEIEF HISTORY OF CEMENT
There is hardly any other product that has so greatly contributed to the
growth of modern human civilization as Cement. The massive urban
infrastructure that we see today across the world would have been
unthinkable without cement. Cement is the root substance that has given
the essential element of strength and durability to our houses, schools,
offices and other buildings so that we can occupy them with peace of mind.
The word Cement literally means a substance that can bind material
together and can acquire strength on hardening. The cement as we know
today is a specialized building material which is a result of various
innovations over the past and is made in sophisticated manufacturing
facilities.
Its use associated with ancient civilizations...
The oldest use of cement dates back to the thousands of years old Egyptian
civilisation. The Egyptians used natural cement made by combining
limestone and gypsum for the construction of their massive and highly
impressive pyramids. The fact that the Egyptian Pyramids have proudly
stood the test of time over such a long period of human history is a
testimony to the phenomenal strength of cement. However it must be stated
that the ancient Egyptian cement was very different from the cement in use
today.
Later in the Roman era, the concept of cement advanced further. Romans
used a combination of slaked lime with Pozzolana, a volcanic ash from Mount
Vesuvius. The Romans made many impressive structures using this cement.
The Basilica of Constantine is one popular example of Roman construction in
which they used such cement mortar.
The Eddystone Lighthouse...

In eighteenth century England, John Smeaton, a British engineer, was
assigned the task of re-constructing the Eddystone Lighthouse, a structure
that had witnessed repeated structural failure. In 1756, Smeaton conducted
a number of experiments that led to the discovery that cement made from
limestone containing a considerable proportion of clay would harden under
water. Based on this discovery, Smeaton rebuilt this lighthouse in 1759 and
this time, it stood strong for 126 years.
Subsequently, until the early part of the nineteenth century, large quantities
of natural cement was used, that was made with a combination of naturally
occurring lime and clay.
The first patent for cement...
In 1824, Joseph Aspdin, a British mason obtained a patent on his hydraulic

cement formula that closely resembled the modern cement as we know
today. He called this cement Portland Cement, and it was made through the
proportionate mixing, burning and the subsequent grinding of a combination
of clay and limestone.
Cement as we know today...
Cement went through many more improvements and developments in the

nineteenth and twentieth centuries. The industrial revolution and the
subsequent development of the rotary kiln paved the way for huge and
sophisticated cement manufacturing plants. These plants possess the
capability of a homogenous mixing and intense heating of the raw material
thus vastly improving the quality of the cement produced. The sophisticated
quality-testing equipment employed by modern cement plants further helps
in ensuring the quality of the cement produced.
J K Lakshmi Cement Ltd.

One of the established names in the cement industry, JK Lakshmi Cement Ltd
has state-of-the-art plant at Jaykaypuram, dist. Sirohi, Rajasthan. With the
capacity expansion and further commissioning of a split location grinding
unit at Motibhoyan, Kalol (Gujarat), the combined capacity of the Company
today stands at 4.75 Mn. MT per annum. With the use of the latest
technology from M/s Blue Circle Industries and modern equipments from M/s
Fuller International of USA, the Company is going from strength to strength.
It is also the first cement producer of Northern India to be awarded an ISO

9002 certificate and be accredited by NABL (Department of Science &
Technology, Government of India) for its Lab Quality Management systems.
JK Lakshmi Cement manufacturing facility has been rated amongst Greenest

Cement Plant of India by CSE GRP 2005 thus highlighting our commitment to
the environment even while ensuring the highest standards of quality for our
products. We have also won the Productivity Excellence Award 2007-08,
Energy Conservation Award 2008, NCB award 2007, Building Leadership
Award 2007, National Award for Environmental Excellence & Energy
Management 2007, Golden Peacock Award for Corporate Social
Responsibility 2007, ICWAI National Award 2007 for Excellence in Cost
Management, The Pinnacle Cement 2006 award by MTech Zee TV, Green
Tech Safety Award and a place of pride amongst the top ten companies in
India in HR practices. (as per the Business Today- TNS Mercer survey).
Its wide network of 70 cement dumps and over 2200 dealers spread across
the states of Rajasthan, Gujarat, Delhi, Haryana, U.P., Uttaranchal, Punjab,
J&K, Mumbai & Pune and the vast pool of highly trained & dedicated
marketing and technical service team helps the Company to service it's
customers at their doorstep.
The First Cement Manufacturer in Northern India to introduce coloured bags,

JK Lakshmi Cement’s Technical Service Cell provides construction solutions
to its customers & carries out regular & innovative contact programmes with
Individual House Builders, Masons and Business Associates to keep in tune
with their needs and requirements.
Keeping in touch with the global construction trends & changing needs of
customers, the company has introduced state-of-the-art Ready Mix Concrete
(RMC) with the brand name” JK Lakshmi Power Mix”. Currently, the company
has 10 fully operational plants in Western & Northern regions of the country
and is further expanding in this area. ‘JK Lakshmiplast’ the first premium
branded Plaster of Paris (POP) in Northern India is another value added
product launched by the Company for discerning customers.
An integral part of Major Projects like IGNP, Sardar Sarovar Dam, Golden
Quadrilateral and major corporations like L&T, Reliance, NTPC, Essar and
Airport Authority of India, JK Lakshmi Cement has become the preferred
choice among the customers because of its consistency, high level of quality
and impeccable customer service.
A true showcase of 'Mazbooti Guaranteed', the Company has been able to

connect very strongly with its customers at an emotional level. With this
thought as a constant reminder of company’s values, everyone at JK Lakshmi
strive to keep up the standards and continue with the good work for many
years to come
JK Lakshmi's journey towards excellence is being spearheaded by our

Chairman Shri. Hari Shankar Singhania closely supported by his Board of
Directors. They are the pillars of strength leading the company towards its
mission of being one of the most efficient, competitive and premium Cement
Brands of our region.
MANAGEMENT
Hari Shankar Singhania, Chairman
- Bharat Hari Singhania, Vice Chairman & Managing Director

- B.V. Bhargava, Director
- Nand Gopal Khaitan, Director
Pradip Roy, Director (Nominee of IDBI)
- Pravinchandra V. Gandhi, Director
- Raghupati Singhania, Director
- P. Narasimharamulu, Director (Nominee of ICICI)
- V.K. Guruswamy, Director (Nominee of LIC)
- Vinita Singhania, Managing Director
- Shailendra Chouksey, Whole-time Director
- S.K. Wali, Whole-time Director
About Aditya Birla Group
A US $24 billion corporation with a market capital of US $23 billion and in

the League of Fortune 500, the Aditya Birla Group is anchored by an
extraordinary force of 100,000 employees, belonging to 25 different
nationalities. Over 50 per cent of its revenues flow from its operations across
the world.
The Aditya Birla Group’s products and services offer distinctive customer
solutions worldwide. The Group has operations in 20 countries - India,
Thailand, Laos, Indonesia, Philippines, Egypt, China, Canada, Australia, USA,
UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland,
Malaysia and Korea.
In India, the Group has been adjudged “The Best Employer in India and
among the top 20 in Asia” by the Hewitt-Economic Times and Wall Street
Journal Study 2007.
Globally the Aditya Birla Group is : A metals powerhouse, among the world’s
most cost-efficient aluminium and copper producers. Hindalco, from its fold,
is a Fortune 500 Company. It is also the largest aluminium rolling company
and one of the 3 biggest producers of primary aluminium in Asia, with the
largest single location copper smelter No. 1 in viscose staple fibre The 3rd
largest producer of insulators. The 4th largest producer of carbon black. The
11th largest cement producer globally and the 2nd largest in India Among
the world’s top 15 BPO companies and among India’s top 3 Among the best
energy efficient fertilisers plants.
In India :
A premier branded garments player. The 2nd largest player in viscose

filament yarn
The 2nd largest in the Chlor-alkali sector. Among the top 5 mobile telephony
companies
A leading player in Life Insurance and Asset Management. Rock solid in

fundamentals, the Aditya Birla Group nurtures a culture where success does
not come in the way of the need to keep learning afresh, to keep
experimenting.
Ultratech Cement Ltd.
UltraTech Cement Limited is an India-based company engaged in the

production of cement. UltraTech Cement Limited has an annual capacity of
18.2 million tons. It manufactures and markets ordinary Portland cement,
Portland blast furnace slag cement and Portland Pozzalana cement. It also
manufactures ready mix concrete (RMC). UltraTech Cement Limited has five
integrated plants, six grinding units and three terminals, two in India and one
in Sri Lanka. The Company is also an exporter of cement clinker. The export
market comprises of countries around the Indian Ocean, Africa, Europe and
the Middle East. The Company’s subsidiaries include Dakshin Cements
Limited and UltraTech Ceylinco (Private) Limited.Quick Financial Synopsis
BRIEF: For the fiscal year ended 31 March 2009, UltraTech Cement Limited's
revenues increased 16% to RS66.64B. Net income decreased 3% to RS9.78B.
Revenues reflect an increase in demand for Company's products & services.
Net was offset by an increase in consumption of raw materials, a rise in
employee costs, increased depreciation & amortization expenses, an
increase in freight & handling expenses and higher other expenditure.
UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It

manufactures and markets Ordinary Portland Cement, Portland Blast
Furnace Slag Cement and Portland Pozzalana Cement. It also manufactures
ready mix concrete (RMC).
UltraTech Cement Limited has five integrated plants, six grinding units and
three terminals — two in India and one in Sri Lanka.
UltraTech Cement is the country’s largest exporter of cement clinker. The

export markets span countries around the Indian Ocean, Africa, Europe and
the Middle East.
UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco

(P) Limited.
Board of Directors
:: Mr. Kumar Mangalam Birla, Chairman
:: Mrs. Rajashree Birla
:: Mr. R. C. Bhargava
:: Mr. G. M. Dave
:: Mr. N. J. Jhaveri
:: Mr. S. B. Mathur
:: Mr. V. T. Moorthy
:: Mr. S. Rajgopal
:: Mr. D. D. Rathi
Mr. O. P. Puranmalka, Wholetime Director
Executive President & Chief Financial Officer
:: Mr. K. C.Chief Manufacturing Officer
:: Mr. R.K. Shah
Chief Marketing Officer
:: Mr. S.N.Jajoo
Chief People Officer
:: Mr. C. B. Tiwari
Company Secretary
:: Mr. S. K. Chatterjee
Milestones
As part of the eighth biggest cement manufacturer in the world, UltraTech

Cement has five integrated plants, five grinding units as well as three
terminals of its own (one overseas, in Colombo, Sri Lanka). These facilities
gradually came up over the years, as indicated below:
2006:: Narmada Cement Company Limited amalgamated with UltraTech
pursuant to a Scheme of Amalgamation being approved by the Board for
Industrial & Financial Reconstruction (BIFR) in terms of the provision of Sick
Industrial Companies Act (Special Provisions)
2004 :: Completion of the implementation process to demerge the cement

business of L&T and completion of open offer by Grasim, with the latter
acquiring controlling stake in the newly formed company UltraTech
2003:: The board of Larsen & Toubro Ltd (L&T) decides to demerge its
cement business into a separate cement company (CemCo). Grasim decides
to acquire an 8.5 per cent equity stake from L&T and then make an open
offer for 30 per cent of the equity of CemCo, to acquire management control
of the company.
2002 :: The Grasim Board approves an open offer for purchase of up to 20

per cent of the equity shares of Larsen & Toubro Ltd (L&T), in accordance
with the provisions and guidelines issued by the Securities & Exchange
Board of India (SEBI) Regulations, 1997.
:: Grasim increases its stake in L&T to 14.15 per cent
:: Arakkonam grinding unit
2001 :: Grasim acquires 10 per cent stake in L&T. Subsequently increases

stake to 15.3 per cent by October 2002
:: Durgapur grinding unit
1998-2000:: Bulk cement terminals at Mangalore, Navi Mumbai and Colombo
1999 :: Narmada Cement Company Limited acquired
:: Ratnagiri Cement Works

Cost of capital Analysis
Of
J k Lakshmi Cement
Year 2005 –
1. Cost of Debt:-
Kd = Interest / face value of debt
Interest = 7.2 crore ,Total debt = 6.88 crore
So Kd = 7.2*100/688.87
= 720/688.87
= 1.04 %
Cost of debt = 1.04 %
2 Cost of Equity:-
Ke = EPS/Market price
Note – Market price is not given so we are considering Book Value of the
firm.
EPS = Rs. 4.71 , B V = Rs. 22.83 ,
Ke = 4.71*100/22.83
= 471/22.83
= 20.63 %
Cost of Equity = 20.63 %

3 Cost of Preference Share
Note- Company has not issued preference share.
4 Cost of Retained Earning:-
PBT = 26.24 crore ,Total tax = - 0.43 crore
Tax rate = - 0.43*100/26.24
= - 1.63 %
Kr = Ke (1-t) (1-b)
Blockage cost is not given
Tax rate = -1.63 % , Ke = 20.63 %
Kr = 20.63 [1 –( -.01)]
=20.63*1.01
= 20.83%
Cost of retained earning = 20.42%
5 weighted Average Cost of Capital
Weighted Average Cost of Capital =
Source of Amount (in Proportion Before tax After tax X*W

fund crore) %age (W) cost %age cost
%age(X)
Debt 688.87 84.51 1.04 1.05 88.73
Equity 55.29 6.78 20.63 20.63 139.81
Retained 70.97 8.7 54.25 54.25 471.97
earning
total 815.13 ∑W=100 ∑ X*W
=700.67
Weighted Average Cost of Capital = ∑X*W/ ∑W
= 700.57/100
=7%
So WACC = 7 %
Work note- cost of debt after tax = Kd(before tax) (1- tax rate)
= 1.04[1 –( -0.01)]
= 1.04*1.o1
=1.05%age
Note:- Retained Earning is not given so we are considering reserves.
Year 2006–
1. Cost of Debt:-
So Kd = 22.31*100/681.79
= 2231/681.79
= 3.27 %
Cost of debt = 3.27%
2 Cost of Equity:-
firm.
EPS = Rs. 11.14 , B V = Rs.36.07 ,
Ke = 11.14*100/36.07
= 30.88%
Tax rate = - 0.80*100/56.24
= 1.42 %
Kr = Ke (1-t) (1-b)
Tax rate = 1.42 % ,Ke = 20.63 %
Kr = 30.88 (1 –.014)
=30.88*.986
= 30.84%
5. weighted Average Cost of Capital


%age(X)
Debt 681.79 84.37 3.27 3.23 272.51
Equity 55.29 6.84 30.88 30.88 267.26
Retained 70.97 8.73 30.44 30.44 211.21
earning
total 815.13 ∑W=100 ∑ X*W=750.98
= 750.98/100
= 7.5 %age
So WACC = 7 .5%
= 3.27(1 –.01)
= 3.27*0.99
=3.23%age
Note:- Retained earning is not given so we are considering reserves.
Year 2007–
1. Cost of Debt:-
So Kd = 43.89*100/717.67
= 6.11 %
2 Cost of Equity:-
firm.
EPS = Rs. 31.21 , B V = Rs.68.17 ,
Ke = 31.21*100/68.27
= 45.78%
Tax rate = - 0.71*100/178.81
= 0.39 %
Kr = Ke (1-t) (1-b)
Tax rate = 0.39 % ,Ke = 45.78 %
Kr = 45.78 (1 –0.0039)
=45.78*0.996
= 45.60
4 . weighted Average Cost of Capital

%age(X)
Debt 717.67 64.84 6.11 6.01 394.22
Equity 57.09 5.15 45.78 45.78 235.76
Retained 331.98 29.99 45.6 45.6 1367.54
earning
Total 1106.74 ∑W=100 ∑ X*W=1997.52
= 1997.52/100
= 19.97 %age
So WACC = 19.97%
Year 2008–
1. Cost of Debt:-
So Kd = 53.96*100/694.84
= 7.76
2 Cost of Equity:-
firm.
EPS = Rs. 36.56 , B V = Rs.103.74 ,
Ke = 36.56*100/103.74
= 35.22%
Tax rate = - 26.93*100/250.59
= 10.74 %
Kr = Ke (1-t) (1-b)
Tax rate = 10.74 % ,Ke = 35.22 %
Kr = 35.72 (1 –0.10)
=35.72*0.9
= 31.69%

%age(X)
Debt 694.88 52.56 7.76 6.98 364.77
Equity 61.19 4.6 35.22 35.22 162.01
Retained 573.43 43.13 31.69 31.69 1366.78
earning
Total 1329.56 ∑W=100 ∑ X*W=1893.56
= 1893.56/100
= 18.93 %age
So WACC = 18.93%
Year 2009–
1. Cost of Debt:-
So Kd = 49.51*100/686.74
= 7.2%
Cost of debt = 7.2%

2 Cost of Equity:-
firm.
EPS = Rs. 29.19 , B V = Rs.128.75 ,
Ke = 29.19*100/128.75
= 22.76%
Tax rate = - 28.09*100/266.68
= 21.21 %
Kr = Ke (1-t) (1-b)
Tax rate = 21.21 % ,Ke = 22.76 %
Kr = 22.76 (1 –0.21)
=22.76*0.79
= 17.98%

%age(X)
Debt 686.74 46.57 7.2 5.68 264.51
Equity 61.19 4.15 22.76 22.76 54.45
Retained 723.44 49.16 17.98 17.98 883.89
earning
Total 1471.37 ∑W=100 ∑ X*W=1242.85
= 1242.85/100
= 12.42 %age
So WACC = 12.42%
Cost of Capital Analysis
Of
Ultratech Cement
Year 2005–
1. Cost of Debt:-

So Kd = 128.05*100/1531.38
= 8.36%
2 Cost of Equity:-
firm.
EPS = Rs. 0.23 , B V = Rs.85.78 ,
Ke = 0.23*100/85.78
= 3.97%
PBT = -33.6 crore ,Total tax = - -36.45 crore
Tax rate = - 36.45*100/-33.6
= 108.4 %
Kr = Ke (1-t) (1-b)
Tax rate = 108.4 % ,Ke = 3.97 %

Kr = 3.97 (1 –1.08)
=3.97*-0.08
= -0.31%
Cost of retained earning = -0.31%

%age(X)
Debt 1531.38 58.92 8.36 -0.66 -38.88
Equity 124.4 4.78 3.99 3.97 18.97
Retained 942.73 36.27 -0.31 -o.31 -11.24
earning
Total 2598.51 ∑W=100 ∑ X*W=-31.15
= = -31.15/100
= -0.31 %age
So WACC = - 0.31%
Year 2006–
1. Cost of Debt:-
So Kd = 96.99*100/1451.33
= 6.68 %
2 Cost of Equity:-
firm.
EPS = Rs. 18.47 , B V = Rs.83.47 ,
Ke = 18.47*100/83.47
= 22.17%
PBT = 285.59 crore ,Total tax = 55.83 crore
Tax rate = 55.83*100/285.89
= 19.54 %
Kr = Ke (1-t) (1-b)
Tax rate = 19.54 % ,Ke = 22.17 %
Kr = 22.17 (1 –0.19)
=30.88*0.81
= 17.95%

%age(X)
Debt 1451.83 58.3 6.68 5.54 322.98
Equity 124.4 4.99 22.17 22.17 110.62
Retained 913.78 36.69 17.95 17.95 658.58
earning
Total 2490.01 ∑W=100 ∑ X*W=1092.18
= 1092.18/100
= 10.92 %age
So WACC = 10.92%
= 6.68(1 –0.17)
= 6.68*0.83
=5.54%age
Year 2007–
1. Cost of Debt:-
So Kd = 92.61*100/1578.63
= 5.68 %
2 Cost of Equity:-
firm.
EPS = Rs. 62.84 , B V = Rs.141.69 ,
Ke = 62.84*100/141.69
= 44.35%
Tax rate = 383.91*100/1166.19
= 32.92 %
Kr = Ke (1-t) (1-b)
Tax rate = 32.92 % ,Ke = 44.35 %
Kr = 44.35 (1 –0.32)
=30.88*0.68
= 30.15%

%age(X)
Debt 1578.63 47.23 5.86 3.98 187.97
Equity 124.49 3.72 44.35 44.35 169.98
Retained 1639.29 49.04 30.15 30.15 1478.55
earning
Total 3342.41 ∑W=100 ∑ X*W=1831.15
= 1831.15/100
= 18.31 %age
So WACC = 18.31%
Year 2008–
1. Cost of Debt:-
So Kd = 8193*100/1740.5
= 4.7 %
Cost of debt = 4.7%
2 Cost of Equity:-
firm.
EPS = Rs. 80.94 , B V = Rs.216.58 ,
Ke = 80.94*100/216.58
= 37.2%
Tax rate = 499.4*100/1507.01
= 33.13 %
Kr = Ke (1-t) (1-b)
Tax rate = 33.13 % ,Ke = 37.2 %
Kr = 37.2 (1 –0.33)
=37.2*0.67
= 24.92%

%age(X)
Debt 4437.49 62.2 4.7 3.14 155.3
Equity 124.49 1.74 37.2 37.2 64.72
Retained 2571.73 36.05 24.92 24.92 898.36
earning
Total 7133.71 ∑W=100 ∑ X*W=1158.38
= 1158.38/100
= 11.58 %age
So WACC = 11.56%
Year 2009–
1. Cost of Debt:-
Interest = 134.09 crore ,Total debt = 2141.63crore
So Kd = 134.09*100/2141.63
= 6.26 %
2 Cost of Equity:-
firm.
EPS = Rs. 78.48 , B V = Rs.289.22 ,
Ke = 78.48*100/289.22
= 27.13%
Tax rate = 384.44*100/1361.46
= 28.23 %
Kr = Ke (1-t) (1-b)
Tax rate = 28.23 % ,Ke = 27.13 %
Kr = 27.13(1 –0.28)
=27.13*0.72
= 19.53%

%age(X)
Debt 2141.63 36.98 6.26 4.5 166.41
Equity 124.49 2.15 22.13 22.13 58.32
Retained 3475.93 60.02 19.63 19.63 1172.19
earning
total 5790,56 ∑W=100 ∑ X*W=1396.92
= 1396.92/100
= 13.96 %age
So WACC = 13.96%
= 6.26(1 –0.28)
= 6.26*0.72
=4.5%age
Comparative Analysis of Cost of Capital of J K Lakshmi Cement

and Ultratech Cement Ltd:-
Cost of capital is a central concept in financial management. Cost of capital

from the firm’s point of view, is the minimum required rate of return that a
firm must pay to the fund suppliers, who have provide the capital. In the
other words, cost of capital is the weighted average cost of various sources
of finance used by the firm. These source are equity, preference share, long
tern debts , shout term permanent debt. The concept of cost of capital is
useful in determining optimal capital structure, investment evaluation, and
financial performance appraisal. It is an important concept in formulating a
firm’s capital structure , the part of financial structure that represents long
term sources, is generally defined to include only long term debt and total
stockholder investment. it may consist of single class of stock or several
issues may complicate it. The inherent
financial stability of an enterprise and risk of insolvency to which it is

exposed, primarily depends on the source of its funds as well as the type of
assets it holds and relative magnitude of such assets categories. To quote
Ezra optimum leverage is the mix of debt and equity that maximizes market
value of the firm and minimizes the firm’s overall cost of capital in the
optimum capital structure, the marginal real cost of each available financing
is the same. The capital structure balances the financing, so as to achieve
the lowest average cost of long-term funds. capital structure involves a study
of the debt-equity mix with the object of lowering the overall cost of capital
and with a view to maximizing the market value of the firm’s securities.
capital structure involves a study of the debt-equity mix with the object of
lowering the overall cost of capital and with a view to maximizing the market
value of the firm’s securities
We are going to analyzing the cost of capital of J K Lakshmi Cement and

ultratech Cement Ltd.
Cost of Equity:-
When we see the cost of equity of both the companies, the following
interpretations can be done. In the initial year as 2005 J K Lakshmi has more
cost of equity than the Ultratech Cement Ltd. Ke in 2005 20.63% and 3.97%
respectively in J K Lakshmi and Ultrateck. But in the next year Ultratech
earns more profit than J K Lakshmi and its Ke reached 36.07 % and 44.35 %
in 2007 so Ultratech has made profit quickly than the j k Lakshmi but
because Ke of Ultratech is more so it is dividing its profit among its share
holders. Both the companies are increasing their profits .These figures from
the point of view of shareholders are good and their rate of interest is
increasing but from the company’s point of view it is not beneficial because
it is paying more from their profit or we can say that it is dividing its profits
among share holders. But In 2008 -09 the Ke of both companies decreasing
comparatively to its last year cost of equity. It is good sign for companies
that they are earning more profits in 2008 and 2009 but the cost of capital
is less in both companies from the last year. So it is indication that they are
dividing less their profit among share holder. A similar thing in both
companies is that profit in 2009 are decreasing and in this way the cost of
equity is also less.
Cost of Debt:-
Both the companies rely upon the debt but J K Lakshmi is more interested in
debt. As the figure showing that the cost of debt in the case of J K Lakshmi is
increasing year by year. Reason for increasing their debt may be that they
are increasing profit year by year. 2009 is exception. When a firm is going in
the growth , debt will be more beneficial to the firm than the issue of share
to finance because in this situation debt will decrease the weighted average
cost of capital. J K Lakshmi is utilizing this opportunity in its financing
scheme. On the other hand Ultratech Cement Ltd. Is also increase its profits
year by year but still they are not believing much in debt. The cost of debt in
Ultratech is decreasing from 2005 to 2008. Figures of Kd from 2005 to 2009
in JK Lakshmi Cement Ltd are 1.04%, 3.27 %, 6.11 % , 7.76% , 7.21 % . and
in Ultratech Cement Ltd. Are 8.36 %, 6.68 %, 5.86 %, 4.7%, and 6.26 % .
Although in beging year the cost of debt bearded by J K Lakshmi was less but
it increases as they rely more on debt. In the case of Ultratech which cost of
debt is decrease because they are not much interest in debt.
Cost of Retained Earning:-
From the point of view of companies the retained earning is a good

indication that they are making profit. Still in this situation the companies
have to bear the expense of blocking the profit or funds which can be use for
the growth of the company or to expending the companies.
In the 2005 cost of retained earning in Ultratech is negative. It indicate that

it has not much retained earning and do not paying for blocking the capital.
But in the next year the Kr is 17.95 % that shows that now they are
retaining their earning. Figures are as
Kr of J K Lakshmi 20.83% , 30.44% , 45.6% , 31.68% 17.98%
Kr of Ultratech - 0.31% , 17.95 , 30.15 , 24.12 , 19.53 ,
It show that J K Lakshmi retaining much money in comparison to Ultratech so

they have to pay much amount. Ultratech is using their profit in growing the
company but J K Lakshmi is believing in retaining the profit. In this case
Ultratech is more beneficial as they are paying less amount for retained
earning.
Weighted Average Cost of Capital:-
A firm obtains capital from various sources. As explained earlier, because of

the risk differences and the contractual agreements between the firm and
the investors, the cost of capital of each sources of capital differs. The cost
of capital of each source of capital is known as component cost of capital.
The combined cost of all source of capital is called average cost of capital.
The component costs are combined according to the weight of each
component capital to obtain the average costs of capital.
The figures of WACC from 2005 to 2009 are as given –
WACC in J K Lakshmi Cement Ltd. 6.85% , 7.5% , 19.97% , 18.93% , 12.42% ,
In Ultratech Cement Ltd. – 0.32% , 10.92% , 18.31% , 11.58% ,

13.96%
Weighted Average Cost of Capital in J K Lakshmi is increasing for three years

but later it is decreasing. It shows that later when they increasing the debt
their WACC started to decline because in the later year they are making
profit more. On the other hand Ultratech is also increasing its profit year by
year but they are not more reliable on debt so their WACC is increasing.
Although in 2008 it decrease but next year it went to upward. The figure
show that the WACC bearded by J K Lakshmi is decreasing but in Ultratech it
is Increasing so it is not good sign for Ultratech.

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LOVELY SCHOOL OF BUSINESS (LSM)

SUBMITTED TO: SUBMITTED BY:

Its use associated with ancient civilizations...

The Eddystone Lighthouse...

The first patent for cement...

In 1824, Joseph Aspdin, a British mason obtained a patent on his hydraulic

Cement as we know today...

Cement went through many more improvements and developments in the

J K Lakshmi Cement Ltd.

It is also the first cement producer of Northern India to be awarded an ISO

JK Lakshmi Cement manufacturing facility has been rated amongst Greenest

The First Cement Manufacturer in Northern India to introduce coloured bags,

A true showcase of 'Mazbooti Guaranteed', the Company has been able to

JK Lakshmi's journey towards excellence is being spearheaded by our

Hari Shankar Singhania, Chairman

- Bharat Hari Singhania, Vice Chairman & Managing Director

- Nand Gopal Khaitan, Director

Pradip Roy, Director (Nominee of IDBI)

- Pravinchandra V. Gandhi, Director

- Raghupati Singhania, Director

- P. Narasimharamulu, Director (Nominee of ICICI)

- V.K. Guruswamy, Director (Nominee of LIC)

- Vinita Singhania, Managing Director

- Shailendra Chouksey, Whole-time Director

- S.K. Wali, Whole-time Director

About Aditya Birla Group

A US $24 billion corporation with a market capital of US $23 billion and in

A premier branded garments player. The 2nd largest player in viscose

A leading player in Life Insurance and Asset Management. Rock solid in

Ultratech Cement Ltd.

UltraTech Cement Limited is an India-based company engaged in the

UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It

UltraTech Cement is the country’s largest exporter of cement clinker. The

UltraTech’s subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco

:: Mr. Kumar Mangalam Birla, Chairman

:: Mrs. Rajashree Birla

Mr. O. P. Puranmalka, Wholetime Director

Executive President & Chief Financial Officer

:: Mr. K. C.Chief Manufacturing Officer

:: Mr. R.K. Shah

Chief Marketing Officer

Chief People Officer

As part of the eighth biggest cement manufacturer in the world, UltraTech

2004 :: Completion of the implementation process to demerge the cement

2002 :: The Grasim Board approves an open offer for purchase of up to 20

:: Grasim increases its stake in L&T to 14.15 per cent

:: Arakkonam grinding unit

2001 :: Grasim acquires 10 per cent stake in L&T. Subsequently increases

:: Durgapur grinding unit

1998-2000:: Bulk cement terminals at Mangalore, Navi Mumbai and Colombo

1999 :: Narmada Cement Company Limited acquired

:: Ratnagiri Cement Works

Kd = Interest / face value of debt

Interest = 7.2 crore ,Total debt = 6.88 crore

Cost of debt = 1.04 %

EPS = Rs. 4.71 , B V = Rs. 22.83 ,

Cost of Equity = 20.63 %

Note- Company has not issued preference share.

4 Cost of Retained Earning:-

PBT = 26.24 crore ,Total tax = - 0.43 crore

Tax rate = - 0.43*100/26.24

Blockage cost is not given

Tax rate = -1.63 % , Ke = 20.63 %