Economy & Finance

A study on financial analysis of jk cement limited

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1. “A STUDY ON FINANCIAL ANALYSIS OF J.K.CEMENT LIMITED.” Presented by:- Tanya (MBA) 2. FINANCIAL ANALYSIS  The primary objective is to judge profits and financial…
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  • 1. “A STUDY ON FINANCIAL ANALYSIS OF J.K.CEMENT LIMITED.” Presented by:- Tanya (MBA)
  • 2. FINANCIAL ANALYSIS  The primary objective is to judge profits and financial soundness of the company.  The financial analysis are the mirrors, which reflect the financial positions and operating strength or weakness of the concern.  Better understanding of a firm’s position and performance.  Consist of various ratios.
  • 3. BASIC FOUNDATIONOF J.K.CEMENTLTD  TYPE : Cement industry  FOUNDED : 1888  FOUNDER : Lala Juggilal Singhana & Lala Kamlapat Singhania  HEADQUATERS : New Delhi, India  PRODUCTS : Cement, Tyre , Paper , Software  REVENUE : 15,692 Lac’s (as per FY 2015)
  • 4. INTRODUCTION  J. K. Cement Ltd. is one of the largest cement manufacturers in India.  J.K. Cement Ltd is an affiliate of the multi-disciplinary industrial conglomerate J.K. Organisation which was founded by Lala Kamlapat Singhania.  J.K. Cement Ltd. has formed a wholly owned subsidiary namely J.K. Cement (Fujairah) FZC , UAE.  The company has two manufacturing facilities located at Nimbahera and Mangrol in the state of Rajasthan.  The Company is the second largest manufacturer of white cement in India, with an annual capacity of 600,000 tonnes in India.  J.K.Cement started its commercial production in May 1975 in its first plant Nimbahera in Rajasthan.
  • 5. MISSON • To deliver superior value to customers, shareholders, employees & society at large. VISION • Customerization , Employee empowerment • Quality consistency • Product range & Cost competitiveness Mission & Vision
  • 6. Objectives of the study To analyze the profitability and solvency position of the firm. To analyze the efficiency of the firm through ratios. To suggest ways and means to improve the present condition. To examine the effectiveness of working capital management practices of the firm To get aware with the procedure and problems of the finance department.
  • 7. Research methodology Type of research Analytical Research Data collection technique Ratio analysis Working capital analysis Company’s Performance indicators Sample size Financial Statements of J.K. Cement ltd of 2011 to 2015 Type of data & data collection Secondary data- Text book , Websites, Annual reports Statistical tools used Charts , Trends and Tables
  • 8. SWOT STRENGTH • Quality in products and services •Convinient price •Customer loyalty •Strong market presence OPPORTUNITY •Global expansion: New geographical areas •Increasing online sales THREATS •Intense Competition •Slow market Growth •Cultural barriers •economy WEAKNESS •Low global presence •Brand image : Weak reputation
  • 9. Financial analysis
  • 10. B A L A N C E S H E E T
  • 11. Management of Working Capital at J.K. Cement:- PARTICULARS 31-03-15 31-03-14 Amt (in lacs.) Amt (in lacs.) Current assets Inventories 50978.54 54195.48 Trade Receivables 13940.46 11170.68 Cash & Cash equivalents. 40770.57 34755.29 Other Current Assets 954.01 1422.61 Current Investments 3050.00 4650.00 Loans & Advances Short term loans &advances 28454.29 23081.95 Gross working capital 138147.87 129276.01 Less- Current Liabilities Trade Payables 22925.76 24672.66 Other current liabilities 40268.95 36305.44 Provisions 4766.56 3452.49 Working Capital 70186.60 64845.42 Less – Borrowings 26335.28 19850.33 (Short term cash credits) Net Working capital 43851.32 44995.09
  • 12. Particulars 2014-15(IN LACS.) 2013-14(IN LACS.) Total current assets 138147.87 129276.01 Total current liabilities 94296.55 84280.92 Net Working capital 43851.32 44995.09 Particulars 2014-15(IN LACS.) 2013-14(IN LACS.) Gross Working Capital 138147.87 129276.01 Working Capital 70186.60 64845.42 Net Working Capital 43851.32 44995.09 Interpretation From above we can see that the Company has 43851.32 lacs working capital which is 31.54% of its current assets which more than the ideal value of 25% .So Company has excess of working capital the which is good for the company ,which means company can easily be able to meet out its current obligations.
  • 13. Financial Review (` in lacs) YEAR 2014-15 2013-14 Growth (%) Net Sales 3,33,731 2,78,154 20% EBIDTA 45,524 37,491 21% PBT 15,915 13,627 17% PAT 15,692 9,703 61% EPS( Rs.) 22.44 13.88 61% 2014-15 2013-14 Interpretation :- The renewed performance of the company can be attributed to additional volumes and contribution from all its individual plants and products. The Financial Year 2014-15 has been a successful year as the Company has added Grey Cement capacity of 3 MnTPA and White Cement capacity of 0.6 MnTPA of its subsidiary J.K. Cement Works (Fujairah) FZC, UAE. Company’sperformance
  • 14. LIQUIDITY RATIOS 2015 2014 2013 2012 2011 Current Ratios 0.83 0.89 0.88 1.03 1.00 Quick Ratios 0.78 0.73 0.75 0.83 0.77 Ratio analysis •The ideal current ratio is 2:1 but here it is 0.83 in FY2015 and it has decreased too from last year. But it is considered somewhat satisfactory from organizational point of view. But still company should look forward towards liquidity. •The quick ratio has improved this year from last year, but there are also chances of further improvement in liquidity position.
  • 15. Solvency Ratios Debt- Equity Ratio 1.47 1.42 0.78 0.84 0.98 Interest Coverage Ratio 1.73 1.89 3.44 3.03 1.64 •The debt-equity ratio has increased thus the aggressiveness of the company in financing its growth with debt has increased. •The capability of company in covering the interest from capital earnings has reduced from last year , but the ideal ICR is considered to be 1.5 thus the company is still in satisfactory position.
  • 16. EFFICIENCY RATIOS 2015 2014 2013 2012 2011 Inventory turnover ratios 7.59 5.16 6.31 7.02 6.52 Debtors turnover Ratios 26.67 24.64 29.27 25.25 29.37 Asset Turnover Ratios 0.84 0.82 1.07 0.99 0.86 • Inventory is being used effectively & effeciently for generating sales in FY2015 as compared to last years. • As the debtor turnover ratio has increased as in FY2015 from last year it is clear that the company has improved its credit collection policy, but still there are chances of further improvements. • Fixed assets has been used effectively in FY2015 than FY2014 but in previous years the use of fixed assets were more efficient.
  • 17. PROFITABILITY RATIOS 2015 2014 2013 2012 2011 Operating Profit Margin % 13.59 13.40 19.23 20.28 13.26 Gross Profit Margin % 9.51 8.61 14.82 15.35 7.87 Net Profit Margin % 4.68 3.47 8.02 6.96 3.05 Return On Capital Employed % 9.30 7.74 18.39 18.48 8.60 • The OP margin has increased from last year and thus it reveals better operational profitability & managerial effeciency but the company can find ways to further increase OP margin. • The GP margin has increased in FY2015 than FY2014 thus it ensures adequate coverage effeciency of operating expenses in 2015 •The NP margin has increased to that of last year thus the overall profitability of the firm has increased in 2015. • Return of capital employed has also improved & thus reveals that the investment made by the shareholders & creditors has been effeciently being used in the business in this FY2015 than FY2014.
  • 18. Findings  The Financial results of the company has improved from last year.  Company has excess of working capital the which is good for the company.  The liquidity position of the concern needs attention as liquidity ratios are not that much satisfactory.  There is improvement in turnover & effeciency ratios in 2015 , but there are chances for further improvement.  The turnover ratios reveals that the operational effeciency of the business concern is good.  The overall performance of the concern is better as compared to the last year.  The overall financial position of the company is satisfactory.
  • 19. 1. The profit of the company has improved from last year but for further more improvement company has to take alternative actions such as : • Increase in procurement of coal • Control in expenses like administrative etc 2. The firm should maintain proper liquid funds like cash and bank balances in order to improve its liquidity position. 3. It should enhance its employee’s effeciency , more training needed to its employees in order to increase its production capacity. 4. The firm must reduce the stock by increasing sales. 5. The firm should check on the manufacturing process of the plant. Suggestions & Recommendations
  • 20. Conclusion 1. Company has Rs 43851.32 Lac working capital which is 31.54% of current assets. Working capital should be 25% of current assets. So Company has excess of working capital the which is good for the company, which means company can easily be able to meet out its current obligations. 2. J.K. Cement Ltd. has 25.83% current assets of total assets this is fine percentage of current assets. But the company still needs to increase its current assets. 3. Liquidity analysis shows that the company has solvent enough to meet its all obligations. Current ratio is little bit less from the satisfactory level . 4. Company has managed their receivables properly as FY 2015 debtors turnover ratio is 26.67 times which is 24.6% In the PY2014.
  • 21. Limitations  The accuracy of financial information largely depends on how accurately financial statements are prepared. if their preparation is wrong, the information obtained from their analysis will also be wrong, which may mislead the user in making decisions.  Some financials statements are prepared by using historical financial data therefore, the information derived from such statements may not be effective in corporate planning, if the previous situation does not prevail.  Here financial statement analysis provides only quantitative information about the company financial affairs. however it fails to provide qualitative information such as management labour relation, customer satisfaction & management’s skills and so on which are equally important for decision making.
  • 22. Bibliography  J.K. Cement: India’s premier Cement Company. (n.d.). Retrieved May 5, 2015, from http://www.jkcement.com/  J.K. Cement Key Financial Ratios, J. K. Cement Financial Statement & Accounts(n.d.). Retrieved June 1, 2015, from http://www.moneycontrol.com/financials/jkcement/ratios/JKC03#JKC03  Cement industry in India. (n.d.). Retrieved June 2, 2015, from http://www.ibef.org/industry/cement-india.aspx Kothari C.R ,Research Methodology (Methods and Techniques) Published by New Age International (P) ltd., Publishers – Second Revised Edition: 2004, (page no. 2,3) Accounting CPE & Books - Accounting Tools. (n.d.). Retrieved June 9, 2015, from http://www.accountingtools.com/
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