International Journal of Commerce and Management Research

ISSN: 2455-1627, Impact Factor: (RJIF 5.22)

[Link]
Volume 2; Issue 4; April 2016; Page No. 22-27

Analysis and Comparative Study of J.K. Cement Ltd and Ultra Tech Cement Limited
Farhat
Lecturer (Ext.) Department of Commerce Dronacharya Government College Gurgaon

Abstract
The main purpose of this research is to analysis and compares the most populous Indian cement company’s J.K. Cement Ltd and
Ultra Tech Cement Limited. The methodology is based on a comprehensive literature review of major contribution made in this
field of cement industry. The opinions and information contained in this paper are from secondary data studies, published materials
and also include author personal opinions. I have taken ratio analysis as tool for the comparison. I found in my research Ultra Tech
Cement Limited is much better than the J.K. Cement Ltd in all areas.

Keywords: Liquidity position, Profitability, Turnover Position, Cement Industry.

Introduction the previous fiscal's total production of 147.8 MT (million

The Indian cement industry is second biggest producer of tons). Due to rising demand of cement the sales volume of
cement, which touch global standards. The cement industry cement companies are also increasing & companies reporting
includes 130 large cement plant sand more than 300 mini higher production, higher sales and higher profits.
cement plants. The cement industry's capacity at the end of the The net profit growth rate of cement firms was 85%.Cement
year reached 188.97 million tons which was 166.73 million industry has contributed around 8% to the economic
tons at the end of the year [Link] Indian Cement industry development of India. Outsiders (foreign players) eyeing India
production during April to March 2007-08 was 168.31 million as a major market to invest in the form of either merger or FDI
tons as compared to 155.66 million tons during the same period (Foreign Direct Investment). Cement industry has a long way
for the year [Link] were 167.67 million tons to go as Indian economy is poised to grow because of being on
during April to March 2007- 08 whereas155.26 during the verge of development
same period. During April-March 2007-08 cement export
was3.65 million tons as compared to 5.89 during the same Economic Trends
period. Cement industry in India is currently going through a India is among the fastest-growing economies in the world,
consolidation phase. Some examples of consolidation in the with close to 8% annual growth since 2002, and expected to be
Indian cement industry are: Gujarat Ambuja taking a stake of sustained for the next 5 years as well. Inflation rate remained
14 per cent in ACC, and taking over DLF Cements and Modi below 5% between 2001 to 2007, but has since increased,
Cement; ACC taking over IDCOL; India Cement taking over touching 8.75% in May 2008. The business regulatory
Raasi Cement and Sri Vishnu Cement; and Grasim's environment is fairly open, and follows free-market
acquisition of the cement business of L&T, Indian Rayon's competition principles. All quantitative restrictions on trade
cement division, and Sri Digvijay Cements. Foreign cement were removed in 2001, except for a few highly sensitive goods.
companies are also picking up stakes in large Indian cement Trade as a % of GDP has risen from 13% in 1991 to nearly
companies. Swiss cement major Holcim has picked up14.8 per 30.2% in 2005-06. The total cumulative foreign direct
cent of the promoters' stake in Gujarat Ambuja Cements investment (FDI) received into India up to March 2007 was
(GACL). US$ 54.63 billion, of which Italy‘s share is about 1.2%. The
The Indian cement industry is one of the main beneficiaries of monetary unit of India is Indian Rupee (1 Indian Rupee = 100
the infrastructure boom. With robust demand and supply, the paisa). The exchange rate of Indian Rupee is Euro 1 = Rs. 63.20
industry has bright future. The Indian Cement Industry with and US$ 1 = Rs. 40.45 (March 2008 - Reserve Bank of India).
total capacity of 165 million tones is the second largest after
China. Cement industry is dominated by 20 companies who Demographics
account for over 70% of the market. Individually no company India is a unique market on account of its diversity in age,
accounts for over 12% of the market. The major players like income, and urban-rural demographics. Nearly 58 million
L&T and ACC have been quiet successful in narrowing the gap households, comprising 32.3% of India‘s dwelling units, live
between demand and supply. Private housing sector is the in urban areas. Nearly 38% of urban households are in middle
major consumer of cement (53%) followed by the government and higher income strata, and only 14% of rural households
infrastructure sector. forecasted to grow by over 22% by 2009- have similar income levels.
10 from [Link] the states, Maharashtra has the
highest share in consumption at12.18%,followed by Uttar  Income Classification
Pradesh, In production terms, Andhra Pradesh is leading with Though the population is more than 1.1 billion, the real
14.72% of total production followed by Rajasthan. Cement consuming class of 300 million people outnumbers several of
production grew at the rate of 9.1 per cent during 2006-07 over the world‘s large markets in terms of market potential. Of

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these, around 150 million people (2 million very rich and 30 Domestic demand plays a major role in the fast growth of
million rich households) represent the consuming potential, cement industry in India. In fact the domestic demand of
particularly for lifestyle goods and services. cement has surpassed the economic growth rate of India. The
 There are close to 80,000 high net worth Individuals in cement consumption is expected to rise more than 22% by
India, with saving and Assets exceeding US$1 million. 2009-10 from 2007-08. In cement consumption, the state of
 At least 50,000 households buy premium cars every year Maharashtra leads the table with 12.18% consumption,
(priced at US$ 30,000 and above) followed by Uttar Pradesh. In terms of cement production,
Andhra Pradesh leads the list with 14.72% of production, while
The history of the cement industry in India dates back to the Rajasthan remains at second position.
1889 when a Kolkata-based company started manufacturing The production of cement in India grew at a rate of 9.1% during
cement from Argillaceous. But the industry started getting the 2006-07 against the total production of 147.8 MT in the
organized shape in the early 1900s. In 1914, India Cement previous fiscal year.
Company Ltd was established in Porbandar with a capacity of During April to October 2008-09, the production of cement in
10,000 tons and production of 1000 installed. The World War India was 101.04 MT comparing to 95.05 MT during the same
I gave the first initial thrust to the cement industry in India and period in the previous year. During October 2009, the total
the industry started growing at a fast rate in terms of cement production in India was 12.37 MT compared to a
production, manufacturing units, and installed capacity. This production of 11.61 MT in the same month in the previous
stage was referred to as the Nascent Stage of Indian Cement year. The cement companies are also increasing their
Company. In 1927, Concrete Association of India was set up productions due to the high market demand. The cement
to create public awareness on the utility of cement as well as to companies have seen a net profit growth rate of 85%. With this
propagate cement consumption. huge success, the cement industry in India has contributed
The cement industry in India saw the price and distribution almost 8% to India's economic development.
control system in the year 1956, established to ensure fair price
model for consumers as well as manufacturers. Later in 1977, Technology Up-Gradation
government authorized new manufacturing units (as well as Cement industry in India is currently going through a
existing units going for capacity enhancement) to put a higher technological change as a lot of up gradation and assimilation
price tag for their products. A couple of years later; government is taking place. Currently, almost 93% of the total capacity is
introduced a three-tier pricing system with different pricing on based entirely on the modern dry process, which is considered
cement produced in high, medium and low cost plants. as more environment-friendly. Only the rest 7% uses old wet
Cement Company, in any country, plays a major role in the and semi-dry process technology. There is also a huge scope of
growth of the nation. Cement industry in India was under full waste heat recovery in the cement plants, which lead to
control and supervision of the government. However, it got reduction in the emission level and hence improves the
relief at a large extent after the economic reform. But environment.
government interference, especially in the pricing, is still
evident in India. In spite of being the second largest cement Objective of the Research
producer in the world, India falls in the list of lowest per capita To find out the liquidity position, profitability and turnover
consumption of cement with 125 kg. The reason behind this is position of both the company (J.K. Cement Ltd and Ultra Tech
the poor rural people who mostly live in mud huts and cannot Cement Limited) for the mentioned period i.e. 2011-2015.
afford to have the commodity. Despite the fact, the demand and
supply of cement in India has grown up. In a fast developing Financial Ratios of J.K. Cement Ltd
economy like India, there is always large possibility of
expansion of cement industry.
Cement Production and Growth
Table 1. 1: Financial ratios of J.K. Cement Ltd for the years 2011-2015
S. No Name Of The Ratio 2015 2014 2013 2012 2011 TOTAL Average
1 Current Ratio .83 .89 .88 1.03 1.00 4.63 0.926
2 Quick Ratio .78 .73 .75 .83 .77 4.08 0.816
3 Debt equity ratio 1.47 1.42 .78 .84 .98 5.49 1.098
4 Inventory turnover ratio 7.59 5.16 6.31 7.02 6.52 32.6 6.52
5 Debtor Turnover Ratio 26.67 24.64 29.27 35.25 29.37 145.2 29.04
6 Gross Profit 9.34 8.47 14.58 15.07 7.76 55.22 11.044
7 Return on capital employed 9.30 7.74 18.39 18.48 8.60 62.51 12.502
8 Earnings per share 22.44 13.88 33.40 25.36 9.16 104.24 20.848
9 Dividend Per Share 4 3 6.5 5 2 20.5 4.1

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Financial Ratios of Ultra Tech Cement Limited

Table 1.2: Financial ratios of Ultra Tech. Cement Limited for the years 2011-2015
S. No Name Of The Ratio 2015 2014 2013 2012 2011 Total Average
1 Current Ratio .90 1.57 1.25 1.49 1.37 6.58 1.316
2 Quick Ratio .59 1.16 .88 1.04 .99 4.66 0.932
3 Debt Equity Ratio .39 .30 .36 .32 .39 1.76 0.352
4 Inventory Turnover Ratio 35.94 37.43 35.02 35.41 33.89 177.69 35.538
5 Debtor Turnover Ratio 17.44 18.23 14.23 12.14 9.98 82.02 16.404
6 Gross Profit 13.21 13.45 17.65 17.58 13.74 75.63 15.126
7 Return On Capital Employed 14.14 14.41 21.43 22.73 19.56 92.27 18.454
8 Earnings Per Share 73.42 78.20 96.85 89.25 51.24 388.96 77.792
9 Dividend Per Share 9 9 9 8 6 41 8.2

Fig 1: Five years average financial ratio of J.K Cement and Ultra Tech Cement Limited

Current Ratio If current ratio is less than ideal ratio that is 2:1 it indicates lack
This ratio is used to assess the firm capability to meet it short of liquidity and shortage of working capital. But a much higher
term liability on time. According to the principles, a current ratio, even it is good for the short term creditors but not good
ratio of 2:1 is considered to be an ideal ratio. It shows that for the firm. A much higher ratio shows the poor investment
current assets of the organization should at least, be double of policies of the management of the firm. It is not better for the
its current liabilities. The higher the ratio better it is for the firm because of following reason:-
organization, because the firm will be able to pay it current 1) An inventory might piling up because of poor sales
liabilities on time more easily. The reason of fixing 2:1 as the 2) Huge amount is locked up in debtors due to inefficient
ideal ratio is that current assets include stock, debtors etc from collection policy.
which full amount cannot be realized in case of need. So half 3) The cash or bank balances is not utilized it is might be
the amount is realized from the current assets on time, the firm lying idle.
can easily meet its current liability on time. 4.63 6.58

Fig 2: Current Ratio of J.K. Cement Ltd and Ultra Tech Cement Limited (Year 2011-15)
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While browsing the secondary data from money [Link] it Debt Equity Ratio: This ratio shows the relationship between
was observed that current ratio of different plant is distinct long term debts and shareholder funds. It shows the proportion
from each other with respect to their current assets and current of funds which are acquired by long term borrowing in
liabilities. the above line graph of current ratio of both the plant comparison to shareholders funds.
shows the current ratio of J.K. Cement Ltd and Ultra Tech This ratio is calculated to assess the capability of the form to
Cement Limited year wise during from 2011 to 2015 current meet its long term liabilities. Generally, debt equity ratio is 2:1
ratio of J.K. Cement Ltd is.83 in 2015,.89 in 2014,.88 in 2013 is considered safe. If the ratio is more than this ideal ratio it
1.03 in 2012, 1.00 in 2011. The above graph also shows the indicates a rather risky financial position from the long term
current ratio for Ultra Tech Cement Limited for mentioned point of view, as it shows that more and more funds invested
time period i.e. for the year.90 in 2015, 1.57in 2014, 1.25 in in the organization are provided by long term lenders. A high
2013, 1.49 in 2012 and 1.37 in [Link] now we can say that Debt equity ratio is a danger signal for long term lenders.
current ratio of Ultra Tech Cement Limited is much better in Formula of Debt Equity ratio = Debt/equity.
each mentioned time period because higher the ratio better it is
for the organization so in current ratio Ultra Tech Cement is
better than J.K. Cement.

Quick Ratio: Quick ratio shows whether the firm is in the

position to pay its current liability very quickly such as within
a month or immediately As such the quick ratio is calculated
by dividing liquid assets by current liabilities.
Liquid assets mean those assets which yield cash very quickly.
All the current assets except stock and prepaid expenses are
included in liquid assets. An ideal quick ratio is 1:1 if it is more
it is considered to be [Link] ratio is a better test of short
term financial position of the company than the current ratio,
as it considered into those assets which can be easily and
readily converted into cash. Fig 4: Debt Equity Ratio of J.K. Cement Ltd and Ultra Tech Cement
Quick ratio is a more rigorous test of liquidity than the current Limited (Year 2011-15)
ratio and when used together with current ratio, this ratio is
gives a better picture of the short term financial position of the Inventory Turn Over Ratio: This ratio shows whether stock
firm has been efficiently used or not. It shows the speed with which
the stock is rotated into sales or the number of times the stock
is turned into sales during the year. The higher the ratio, better
it is because it shows that stock is selling [Link] a business
where stock turnover ratio is high goods can be sold at a low
margin of profit yet the profitability may be quite very high.
A low stock turnover ratio shows that stock does not sell
quickly and remains lying in the go down for the longer time
period. This increase the storage cost, blocking of funds and
losses on account of goods becoming obsolete or unsalable.
This ratio is used for comparing the efficiency of sales polices
of two firms doing same business. The stock policy of the
management of that firm, whose stock turnover ratio is higher,
will be treated as more efficient.

Fig 3: Quick Ratio of J.K. Cement Ltd and Ultra Tech Cement
Limited (Year 2011-15)

The above line graph of quick ratio of J.K. Cement Ltd and
Ultra Tech Cement Limited shows year quick ratio of both the
companies during from 2011 to 2015. If one looks at the graph
quick ratio of Ultra Tech Cement Limited is.59 in 2015, 1.16
in 2014,.88 in 2013, 1.04 in 2012,.99 in 2011 and the above
graph also shows the statistic of J.K. Cement Ltd for mentioned
time period i.e..78 in 2015,.73 in 2014,.75 in 2013,.83 in
2012,.77 in 2011.
This ratio indicates that Ultra Tech Cement Limited is better
than the J.K. Cement Ltd in each year because in each year
quick ratio of Ultra Tech Cement Limited is higher than Ultra Fig 5: Inventory turnover ratio of J.K. Cement Ltd and Ultra Tech
Tech Cement Limited. Cement Limited (Year 2011-15)

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The above line graph of J.K. Cement Ltd and Ultra Tech should be adequate enough not only to cover the operating
Cement Limited shows year wise inventory turnover ratio for expenses but also to provide for depreciation, interest on loans,
the mentioned time period. Inventory turnover ratio of J.K. dividends and creation
Cement Ltd for the 2011 it was 6.52 times, in 2012 it was 7.62
times, in 2013 it was 6.31 times, in 2014 it was 5.16 times, in
2015 it was [Link] above line graph also shows the
inventory turnover ratio of Ultra Tech Cement Limited for the
mentioned time period i.e. for the year 2011 it was 33.89 times,
in 2012 it was 35.41times, in 2013 it was 35.02times, in 2014
it was 37.43 times, in 2015 it was 35.94times. So now we can
say that ultra tech is far better than J.K. Cement Ltd, because
higher the ratio better it is since it indicates that stock is selling
quickly. Ultra tech is selling its goods very quickly than J.K.
Cement Ltd.

Debtor Turnover Ratio: This ratio indicates the speed with

which the amount is collected from the debtors. The higher the
ratio, better it is since it indicates that amount from debtors is Fig 7: Gross Profit ratio of J.K. Cement Ltd and Ultra Tech Cement
collected more quickly. The more quickly the debtors pay, the Limited (Year 2011-15)
less the risk from bad debts, and so lower the expenses of
collection and increase in the liquidity of the firm. A lower The above line graph of J.K. Cement Ltd and Ultra Tech
debtor turnover ratio will shows the inefficient credit sales Cement Limited shows year wise Gross profit ratio for the
policy of the management. It means that credit sales have been mentioned time period. Gross Profit ratio of J.K. Cement
made to customers who do not deserve much credit. It is very Ltd for the 2011 it was 7.76, in 2012 it was 15.07, in 2013 it
difficult to set up a standard for this ratio. It fully depends upon was 14.58, in 2014 it was 8.47, in 2015 it was9.34. The above
the policy of the management and nature of the industry. line graph also shows the gross profit ratio of Ultra Tech
Cement Limited for the mentioned time period i.e. for the year
2011 it was 13.74, in 2012 it was 17.58, in 2013 it was 17.65,
in 2014 it was 13.45, and in 2015 it was 13.21. So now we can
say that Ultra Tech Cement Limited is far better than J.K.
Cement Ltd, because higher the ratio better it is.

Return on Capital Employed: This ratio indicates the overall

profitability of the business. It is calculated by comparing the
profit earned and the capital employed to earn it. The term
Capital Employed here refers to long term fund deployed in the
enterprise. Long term fund means total of shareholders’ funds
and long term loans.
Return on Capital Employed = profit before Interest, tax,
dividends/Capital Employed*100
Fig 6: Debtor turnover ratio of J.K. Cement Ltd and Ultra Since the capital employed includes shareholders’ funds and
Tech Cement Limited (Year 2011-15) long term loans, interest paid on long term loans will not be
deducted from profits while calculating this ratio.
The above line graph of J.K. Cement Ltd and Ultra Tech
Cement Limited shows year wise debtor turnover ratio for the
mentioned time period. Debtor turnover ratio of J.K. Cement
Ltd for the 2011 it was 29.37 times, in 2012 it was 35.25 times,
in 2013 it was 29.27 times, in 2014 it was 24.64 times, in 2015
it was [Link] above line graph also shows the debtor
turnover ratio of Ultra Tech Cement Limited for the mentioned
time period i.e. for the year 2011 it was 9.98times, in 2012 it
was 12.14 times, in 2013 it was 14.23 times, in 2014 it was
18.23 times, in 2015 it was 17.44times. So now we can say that
J.K. Cement Ltd is far better than Ultra Tech Cement Limited
in this debtor turnover ratio, because higher the ratio better it is
since it indicates that amount from Debtor is being collected
more quickly by J.K. Cement Ltd than Ultra Tech Cement
Limited. Fig 8: Return on capital employed ratio of J.K. Cement Ltd and
Ultra Tech Cement Limited (Year 2011-15)
Gross Profit: This ratio measures the margin of profit
available on sales. The higher the gross profit ratio, the better The above line graph of J.K. Cement Ltd and Ultra Tech
it is. No ideal ratio is fixed for this ratio, but gross profit ratio Cement Limited shows year wise Return on Capital Employed
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ratio for the mentioned time period. Return on Capital D.P.S = Dividend paid to Equity Shareholders/Numbers of
Employed ratio of J.K. Cement Ltd for the 2011 it was 8.60, in Equity Shares
2012 it was 18.48, in 2013 it was 18.39, in 2014 it was 7.74, in
2015 it was 9.30. The above line graph also shows the Return
on Capital Employed ratio of Ultra Tech Cement Limited for
the mentioned time period i.e for the year 2011 it was 19.56, in
2012 it was 22.73, in 2013 it was 21.43, in 2014 it was 14.41,
in 2015 it was 14.14. So now we can say that Ultra Tech
Cement Limited ii better than Ultra Tech Cement Limited,
because higher the ratio better it is.

Earnings per Share: This ratio is find out the profit available
to equity shareholders on a per share basis. Profits left after
payment of tax and preference dividend are available to equity
shareholders. This ratio is calculated by dividing the net profit
available to equity shareholders by number of equity shares
issued: Fig 10: Dividend per share ratio of J.K. Cement Ltd and Ultra Tech
Cement Limited (Year 2011-15)
Earnings per Share: Net profit- Dividend on preference
Shares/ Number of Equity Shares The above line graph of J.K. Cement Ltd and Ultra Tech
This ratio is helpful in the determination of the market price of Cement Limited shows year wise Dividend Per Share ratio for
the equity share of the company. The ratio is also helpful in the mentioned time period. Dividend per share ratio of J.K.
estimating the capacity of the company to declare dividends on Cement Ltd for the 2011 it was 2, in 2012 it was 5, in 2013 it
equity shares was 6.5, in 2014 it was 3 in 2015 it was 4. The above line graph
also shows the Dividend Per Share of Ultra Tech Cement
Limited for the mentioned time period i.e. for the year 2011 it
was 6, in 2012 it was 8, in 2013 it was 9, in 2014 it was 9, in
2015 it was So now we can say that ultra tech ii far better than
J.K. Cement Ltd, because Dividend Per Share of Ultra Tech
Cement Limited is much better than the J.K. Cement Ltd.

Concluding Remarkjs: The ratio analysis of J.K. Cement

Ltd and Ultra Tech Cement Limited is clearly a strategic
decision, but it is a highly complex issue. We can says that the
relationship between two figures, expressed in arithmetical
terms is called a ratio in other words a ratio is simply one
number expressed in terms of another. If it found by dividing
one number in to other. The cross sectional analysis of this real
Fig 9: Earning per share ratio of J.K. Cement Ltd and Ultra Tech data from money [Link]. Gives a reflection on ratio
Cement Limited (Year 2011-15) analysis of two cement plants that J.K. Cement Ltd and Ultra
Tech Cement Limited that showed the ultra tech cement
The above line graph of J.K. Cement Ltd and Ultra Tech limited is far better than J.K. Cement Ltd in almost all the areas.
Cement Limited shows year wise Earning Per Share ratio for This paper analyzed the casual ratio analysis between the ultra
the mentioned time period. Earnings per share ratio of J.K. tech cement limited and J.K. Cement Ltd in cement industry
Cement Ltd for the 2011 it was 9.16, in 2012 it was 25.36, in for the period between 2010 to 2015. This statistics refers to
2013 it was 33.40, in 2014 it was 13.38 in 2015 it was 22.44. conclude that Ultra Tech Cement Limited is much better than
The above line graph also shows the Earning Per Share of Ultra the J.K. Cement Ltd in almost all the areas.
Tech Cement Limited for the mentioned time period i.e. for the
year 2011 it was 51.24, in 2012 it was 89.25, in 2013 it was References
96.85, in 2014 it was 78.20, in 2015 it was 73.42 So now we 1. [Link]
can say that Ultra Tech Cement Limited is far better than J.K. 2. [Link] [Link]
Cement Ltd, because Earning Per Share of Ultra Tech Cement 3. [Link]
Limited is much better than the J J.K. Cement Ltd. 4. [Link]

Dividend per Share Ratio: Profit remaining after payment of

tax and preference dividend is available to equity shareholders.
But all of these are not distributed among them as dividend.
Out of this profit, a portion is retained in the business and after
that remaining is distributed among equity shareholders as a
dividend. D.P.S is the dividend distributed to equity
shareholders divided by the number of equity shares:

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