katuri penna

8/6/2019 katuri penna

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yINTRODUCTION

A funds flow statement is a technical device designed to

analyze, the changes in the financial condition of a business enterprise

between two years. It is also called as a statement of sources and

applications of funds. The funds flow statement is becoming popular with the

management because it not only helps them in analyzing financial

operations, providing basis for comparison with budgets, and serving as a

tool of communication, but also explains the financial consequences of such

operations such as the reason why the company is experiencing difficulty in

making payments to creditors or why the bank balance is getting thinner.

There is a general recognition in industry and business and

among professional accounting bodies that financial statements should

provide relevant information which sub serves the multiple objectives of

shareholders, investors, creditors, customers and the public and which

enable them to arrive at rational economic decisions. Normally what the

shareholders look for in these statements is an account of the stewardship of

the firm and the amount which may be expected as dividend. Potential

investors look upon funds flow statements as the source of there realistic

view of the value of a companys shares in terms of an expected futures

stream of distribution and judge the efficiency of the management

accordingly.


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MEANING OF FUNDS

Fund:

According to the dictionary meaning of the term Funds implies an

accumulation or deposit of resources from which supplies are may be drawn

a more or less permanent store or supply. It is also defined as available

pecuniary resources but these two meanings are abroad in nature and apt to

macro level planning and control. A number of definitions of the term fund

have been given.

Some people call fund as cash. But it is seen in practice that the

current assets are constantly circulating through cash

Meaning of Flow of Funds :

The term flow means movement and includes both inflow

and out flow. The term flow of funds means transfer of economic values

from one asset of equality to another. Flow of funds is said top have taken

place when any transaction makes changes in the amount of funds available

before happening of the transaction.


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NEED FOR THE STUDY

A project is an activity sufficiently self-contained to permit financial

and commercial analysis. in most cases projects represent expenditure of

funds by pre-existing which want to expand or improve their operation

In general a project is an activity in which, we will spend money in

expansion of returns in which logically seems to lead it self planning.

Financing and implementations as a unit, is a specific activity with a specific

point and a specific ending point intended to a accomplish a specific

objective of the study.

1. For the purchases of Raw-materials, components and spares2. To pay Wages and simplicity3. To meet the selling costs as packing, advertising etc.4. To provide credit facilities to the customers.5.To maintain the inventories of Raw-Materials, Work-in-process,

stores and spares and Finished stock.


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SCOPE OF THE STUDY

The present study focuses as sources funds and application of funds

for a period of time. The study is confirmed to find out the changes in the

financial position of The Penna Cement Financial Services Limited between

the beginning and ending financial Year.It is a technical device designed to

analyze the changes in the financial condition of the business enterprises

between two dates.

This funds flow statement is a statement which indicates various

means by which the funds have been obtained during a certain period and

the ways to which these funds have been used during the period.

The term funds used here means working capital that is the excess of

current assets over current liabilities. It is an essential tool for the financial

analysts and is of primary importance to the financial management.

Now a days it is being widely used by the financial analyst credit

granting institutions and financial managers. The basic purpose of the funds

flow statement is to reveal the changes in the working capital on the two

balance sheet dates. It helps in the analysis of financial operations. It helps

in the formation of realistic dividend policy. It helps in the proper allocation


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of resources. It helps in appraising the use of working capital and finally it

acts as future guide.

OBJECTIVES OF THE STUDY

1. To study the financial statements of The Penna Cement FinancialServices limited for the 4 years.

2. To analyze how The Penna Cement Financial Services is utilizing itsresources.

3. To analyze the changes in assets and liabilities from the end of oneperiod of the time to the end of another period of time

4. To find out the sources from which additional funds were derived andthe use to which their sources were put.

5. To evaluate the elements consider by the penne cement industrieslimited expansion project.

6.To offer findings, suggestions & conclusion based on the study.


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METHODOLOGY OF STUDY

Research

Research is a process in which the researcher wishes to find out the end

result for a given problem and thus the solution helps in the future course of

action. Redman and Mory defines research as a systematized effort to gain

new knowledge.

Research Design

A research design is the arrangement of conditions for collection and

analysis of data in a manner that aims to combine relevance to the research

purpose with company in procedure. In fact, the research design is the

conceptual structure within which research is conducted; it constitutes the

blue print for the collection, measurement and analysis of data.

Sources of Data:

The data was collected through primary and secondary

sources.

Primary Data:


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y First hand information was collected using the direct personalinterview.

y Interaction with guide to understand the general & specific aspectsregarding utilization of resources.

Secondary Data:

y Annual reports collected from the M/S Penna cement Ltd., Tadpatri.

Period of study:

The analyze presented in the study are Annual Reports of M/S

PENNACEMENT, TADPATRI from 2004-2005 to 2007-2008

LIMITATIONS OF STUDY

y It should remember that a funds flow statement is not a substitute ofan income statement or a balance sheet. It provides only some

additional information as regards changes in working capital


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y The study based on the available annual reports and internalinformation of Pennas cement Financial Services Ltd only.

y It cannot reveal continuous changes.

INTRODUCTION

Cement Industry has been decontrolled from price and

distribution on 1st March 1989 and de licensed on 25th July 1991.

However, the performance of the industry and prices of cement are

monitored regularly. Being a key infrastructure industry.

The constraints faced by the industry are reviewed in the

Infrastructure Coordination Committee meetings held in the Cabinet

Secretariat under the Chairmanship of Secretary (Coordination). The

Committee on Infrastructure also reviews its performance. The industry is

subject to quality control order issued on 17.2.2003 to ensure quality

standards.

CEMENT INDUSTRY IN INDIA

In India it came to be established during the beginning of 20th century.

In fact the cement era in India commenced with the establishment of a small

cement factory at WASHERMANPET in 1904 by South India industry Ltd. a

company that dates to 1879. The potential capacity of this plant was only

10,000 metric tones per annum. This was the first attempt of manufacturing


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Rs.427.81 lakhs and provided employment for 1262 persons and 19

factories were functioning with a production of 85lakh tones.

Capacity, Production and Exports

India today boasts 129 large plants and over 300 mini cement

plants with a capacity of 165 million tones and production of 134 million

tones (2004-05).

It ranks second in the world among cement producing countries,

with per capita consumption at 118Kg compared to the world avg. Of

around 317. Per capita consumption is 366 Kg in Thailand, 626 Kg in China,

606 Kg in Malaysia and 1216 Kg in South Korea. This indicates a huge

potential for increase in consumption.

The Cement Corporation of India, which is a central public sector

undertaking, has 10 units. Besides, there are 10 large cement plants owned

by various state Governments. Keeping in view the past trends, a

production target of 133 million tons has been set for the year 2004 05.


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During the Tenth Plan, the Industry is expected to grow at the rate of 10%

per annum and is expected to add capacity of 40 52 million tons.

Mainly through expansion of existing plants and use of more fly ash

inthe production of cement. A part from meeting the domestic demand, the

cement Industry also contributes towards exports. The export of cement

and clinker during the last three years is as under:-

Export of Cement

(In million tons)

Year Cement Clinker Total

2005 06 3.47 3.45 6.92

2006 07 3.36 5.64 9.00

2007 08 3.31 4.82 8.13

Overview oftheperformance ofthe Cement Sector:

The Indian Cement Industry not only ranks second in the

production of cement in the world but also produces quality cement, which

meets global standards. However, the Industry faces a number of

constraints in terms of high cost of power.

High railway tariff; high incidence of state and central levies and

duties; lack of private and public investment in infrastructure projects; poor

quality coal and inadequate growth of related infrastructure like sea and rail


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transport, ports and bulk terminals. In order to utilize excess capacity

available with the cement Industry, the Government has identified the

following thrust areas for increasing demand for cement:

(i) Housing development programs;(ii) Promotion of concrete highways and roads;(iii) Use of ready mix concrete in large infrastructure projects;

Technological advancements

Indian cement industry is modern and uses latest technology.

Only a small segment of industry is using old technology based on wet and

semi-dry process. Efforts are being made to recover waste heat and success

in this area has been significant.

India is also producing different varieties of cement like

Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland

Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening

Portland Cement, Sulphate Resisting Portland Cement, White Cement, etc.

Production of these varieties of cement conforms to the BIS Specifications. It

is worth mentioning that some cement plants have set up dedicated jetties

for promoting bulk transportation and export.

Infrastructure driven demand push


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The bulk of cement demand is from housing and commercial

development of which metros account for a significant amount. It is

estimated that Mumbai, which consumes almost six million tones, along with

Pune, accounts for 45 percent of Maharastras cement consumption,

Bangalore consumes four million tones and Chennai around 3 million tones,

these are really the growth clusters. Today bulk of the demand is driven by

housing and commercial construction and as infrastructure picks up, for

example, Bangalore international airport, Hyderabad airport and

modernization of Mumbai and Delhi airports.

Another large consumer has been the roads sector. The off take

was good when the NHDP programme was launched but there was a lull last

year. Once again new orders have been placed and in 2006, the industry

will pick up. The estimate is that from roads, sdemand is not more than 4-5

million tones but it makes a difference in the growth numbers.

Narrowing demand-supply gap:

The industry has a capacity of 165 million tons and in Jan 2006,

dispatches were at almost 100%. On an overall basis, the industry does not

do more than 90-92% because of constraints such as transport and raw

material.

The industry has been adding capacity of 6-7 million per annum

by Brownfield expansion and de-bottlenecking which is expected to partly


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cater to the requirement because it is growing by around 20 million tons per

annum.

Challenges beforethe industry:

Energy costs account for half of the cost of production of

cement. Last year saw a 15-16% increase in coal prices and then diesel

prices went up pushing up transportation costs.

Freightproblems

The importance of freight for the cement industry cannot be

emphasized enough. While in the last few months railways have been

steadily losing freight to road sector they have been confined cement to

market-is around Rs.350-400 a ton or Rs.20 and bag that could go as high a

Rs.800 for long leads. This would only easy the first level of sale and

additional costs are involved to take it further.

Another issue, which will hit the industry hard, is that of

logistics and a Supreme Court judgment on carrying capacity for trucks.

Accordingly, a state govt. has been directed to enforce the discipline that

trucks only carry a specified load. Many states and already implementing

this and there is already an increase in freight rates and in some cases, it

has gone up by 50%. Also, the requirement for trucks to carry the same

freight has nearly doubled and in many places the industry is being forced to

move to railways.


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Hightaxes

While the railways have had capacity to meet the requirement, it is

expected that in March the commencement of peak season for the

procurement of food grains, the railways would be constrained to provide

adequate number of wagons.

So fright rates are up, railways cannot provide wagons and trucks

are unlikely to be viable so there could be a serious dislocation of supplies

going forward. According to the cement manufactures association total taxes

and duties on cement come to around Rs.900 a ton or Rs. 45 a bag. So at a

price of Rs.150 a bag in the market, taxes and duties account for one third.

Which is high for such a basic product. This includes excise duty, sales tax

and royalty on limestone.

The importance of limestone can only be underscored as for every ton

of cement produced. 1.5tons of limestone is required. For limestone, royalty

is on a per ton basis at Rs. 40 whereas for most minerals it is a percentage

of the pithead cost. Effectively we are paying Rs.70 a ton for limestone as

royalty. VAT is at 12.5% without any justification and it should be in 4%

category, excise is at Rs.408 per ton when it should be around Rs.200.

ExportAdvantages


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From a modest beginning if 1.6 lacks tons in 1989-90, Indian exports

of cement/clinker have grown rapidly at about 30-40% and this year exports

will cross 10 million tons.

Majorcementproducers market shares:

y Acc -12.8%y Abuja -10.7%y Grasim-10.4%y Ultra tech-9.5%y India cement-6.0%y Jaypee-4.1%y Lafarge-3.2%y Madras-3.2%

Overall, the industry is in a better state today than 2 years ago.

Cement prices even today are way below global levels. So setting up

Greenfield capacities is not attractive, as prices will not give attractive

returns on investment. That is a minor reason why there is no Greenfield

capacity coming up. It has to be born in mind that one third of the prices is

accounted for by taxes and duties and nearly 20-25% by the freight

component. So what produces earn at the factory gate is among the lowest

in the world.


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This year 2008 has commenced on a good note and in fact, December

was a very good month wit dispatches at 12.5 million tons and January

dispatches were in excess of 13 million tons.

This means capacity utilization is in the nineties which is healthy

and will actually lead to firming up of prices. It looks like sales could be 137

million a ton for 2007-08(125 million tons in 2006-07) and so far growth has

been 10%. There are enough reasons to believe it will sustain.

INTRODUCTION

A Penna cements industry Ltd was incorporate on Oct 24th

1991, to set up a cement plant at Tadpatri in Anantapur District of Andhra

Pradesh. The plant commenced commercial production on Aug 10th 1994 as

mini cement plant with initial capacity of 0.30 million tones. The company

short period getting profits. Later 1995 plant capacity was increased 0.4

million tones which upgrade its state major plant


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Penna cement industries ltd establishing by Mr. Prathap Reddy aged

44 began his entrepreneur career with civil engineering contracts by

lunching pioneer builders mr.prathp reddy has experiences of two decades in

cement industry .he was the executive director of priyadrashini cement right

from its inception in 1984 in 1991 Mr. Pratap Reddy incorporated his own

cement company located in between Talaricheruvu and Urichintala village.

At present about 2720 tones of various grades of cement is being

manufactured daily at the factory.

Quarry:

Major raw material for cement industry. The quarry has a mining

lease of 235.52 acres in Talaricheruvu village. 440.47 acres in Urichintala

village and 629.75 acres in Korumanipalli village of Kurnool district.

RAW MATERIALS :

Limestone:

Limestone is the major raw material for the cement industry.

Limestone constitutes 60 to 70 percent of the total raw material costs.

Nearly 1.5 1.6 tons of limestone is required for producing one ton of

cement clinker limestone (calcium carbonate) is a rock of either sedimentary


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or metamorphic origin with calcium oxide as its main constituent. In India

limestone occurs mainly as sedimentary rocks and constitutes 30 percent of

the total sedimentary rocks in the country. Cement grade limestone is

available in 21 states in the country. About 65 percent of the cement plants

in India uses sedimentary limestone and 20 percent use metamorphic

crystalline limestone. India has 85,980 million tones of cement grade

limestone deposits, which is enough to produce 100 million tones of cement

for the next 500 years.

Total reserve

No. of years limestone reserve would last = --------------------------------

-----

Avg., limestone Consumption

It is quite clear that Indias limestone reserves are adequate for the

next several years. More over new reserves would be discovered every year

Limestone is mixed extensively in India and ranks second in production next

to coal mining. Major portion of limestone mining portion of limestone

mining is for cement industry (nearly 75% to 80%) therefore the demand

supply situation is quite comfortable.


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In India limestone deposits are abundantly found only in Siroly

(Rajasthan), Santna, Belaspur (M.P., wadi (Karnataka), Tadpatri (A.P.) and

some places in Gujarat. Units are generally located in close proximity of

limestone deposits in Madhya Pradesh, Andhra Pradesh, Tamil Nadu,

Karnataka, Rajasthan, and Gujarat.

The quality of required for the cement production should have the

following composition.

Lime : 50%

Silican : 3%

Aluminium : 4%

Iron oxide : 0.50%

Magnesiam : 0.50%

Loss on Ignition : 42%

Total : 100%

If Magnesia content exceeds 0.4-o.5 percent, the limestone is not

suitable for cement. Similarly, lime content is directly proportional to the

clinker and cement quality and quantity.

Gypsum:

Gypsum is another important required material for cement

manufacturing, constitutes about 5 percent of the weight of the cement.

Gypsum is added in required quantity at the time of grinding of clinker. The


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clinker and the required amount of the Gypsum is added to control the

setting time of the cement. India possesses resources of gypsum. Hence its

availability is not a concern for the cement manufacture.

Other Raw Materials:

A few other raw materials like Blast furnace slag and fly ash are also

required for the manufacture of the cement. Blast furnace slag is a waste

product obtained from iron smelting furnace whereas fly ash is the left over

ash from thermal power station.

Inputs:

Although limestone is the major raw material for cement industry, the

critical raw material is energy. How well the company uses coal and

electricity and how much it costs will determine the success ratio for cement

manufacturers. Major inputs in cement manufacturing include coal, power

and freight.

Coal:

In India coal I am being used as the fuel for the manufacturing of

cement. Else where in the world lignite, nature gas and oil are also used.

They are not used in India as continuous supply of natural gas is not assured

used by plants in southern plants ogf India, like Dalmia Cement, Chettinad

cement etc., as a supplement to coal which compensates the storage for

coal in this area. Non cooking coal of lower ash content is required by

cement plants. It should be less than 30%. A useful heat of 4500 kilocalories


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per kg of coal. Coal of lower ash enables comparatively lower quality of

limestone. The coal should have volatile matter and high temperature.

Transport of coal is another big issue as many of larger cement plants are

located close to the limestone deposits, which may not have coal deposits

nearby.

Power:

Power constitutes about 10% of the total cement production costs.

About 3 percent of the total power generated in the country is used by

cement industry. The average consumption of power in the dry process kilns

is around 125 units per million tons of clinker.

Freight:

Freight constitutes a very significant part of the cost structure of

cement units in India. On an average freight for transporting finished

product alone forms 13.85% of the cost of production of large cement

plants.

The main areas of freight coast for the cement industries are

i. Transporting coal from the coal fields to the cement factories.ii. Transporting cement from the plants to their markets.


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Limestone transport would be even costlier than transporting coal or

cement. Hence cement plants are located in cluster near limestone deposits.

Indian railway is moving up to 60% of the total cement production.

SALIENT FEATURES OF PENNA CEMENT:

y High strength and great durabilityy A very perceptible saving in costs (up to 20% to 25%) due to

low setting time

y Superior quality of the cement resulting in a better overallfinest

y Stronger bonding with aggregates.Growthand Performance:

The company has enhanced its capacity from 600 TPD to 8000 TPD

over the period of 10 years. The Existing cement plant was upgraded to

5000 tones capacity per day. The profits for the year 2007-08 are Rs.

92.77 lakhs and sales of Rs. 946.20 lakhs. The company holds the assets of

Rs. 601.92 lakhs. The annual capacity of the company 18,25000 tones.

Competitiveness of Cement Project:

companies Ultra tech, Andhra Cement, Grasim Cement, Gujarat

Ambuja cement, Parasakthi, Larsen and Tubro,Coramandal cement,Priya

Cement, Nagarjuna cement, Sagar cement ACC Suraksha cement, Zuari

cement, and India cement Ltd


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TECHNOLOGY ADOPTION AND INNOVATION:

The company has obtained the basic engineering designs and other

technical know-how from M/s. ONADA ENGINEERING and consulting

company limited Japan for the cement plant he technical collaborates are

continuously guiding the company for achieving improved productivity and

benefits such as conservation of energy etc., besides trouble shooting a

specific.

Man power:

Based on requirement of individual departments, Head of that

department is asked to give information to man power planning department

regarding the number of persons required. The departmental heads assess

their requirements based on the available departmental job description to

ensure role clarity and to avoid role ambiguity. The Central Personnel Dept.

carries out the recruitment process.

The total employees in PENNA CEMENT are 345 covering all

departments. There are nearly 500 contract labor working every day on

casual basis.

Raw Materials & Requirement:

Limestone, Iron ore, Bauxite, Gypsum and Coal are the basic raw

materials used in the manufacturing process of cement. The average

consumption of various raw materials is shown in the table.

REQUIREMENT OF RAW MATERIALS


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S. No Raw material Tones per day Consumption per

tones of Cement

1 Limestone 2282 1.4 to 1.5

2 Additives 375 0.06 to 0.75

3 Bauxite iron ore 155 1.16 to 0.20

4 Gypsum 85 0.04 to 0.05

5 Product clinker 500 ------

Source: Annual reports of Penna Cement Limited.,

Note:

Due to change in the quality of lime stone and coal, the consumption

of additives has been changed accordingly.

Material Balance:

Limestone + Additives Raw material

Raw material (1.46%) +coal Calcinations clinker


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Clinker + Gypsum Ordinary Portland cement

Clinker + Fly ash Pozzoland Portland

PRODUCT PROFILE:

Penna Cement manufactures and distributes its own main product lines

of cement. It aims to optimize production across all the marketers,

providing a completer solution for customers needs at the lowest possible

cost, an approach known as strategic Integration of Activities. Cement is

made from a mixture of 80 percent limestone and 20 percent clay. These

are crushed and ground to provide the raw meal, a pale, flour like

powder. Heated to around 1450o C (2642o F) rotating kilns, the meal

undergoes complex chemical changes and is transformed into clinker. Fine

grinding the clinker together with a small quality of gypsum produces

cement. Adding other constituents at this stage produces cements for

specialized uses.

PRESENTLY THE PLANT PRODUCES THREE TYPES OF PRODUCTS:


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Presently the company is manufacturing 43 grade, 53 grade.

Ordinary portal cement port land slag cement, soleplate Resistant with brand

name of PENNA

Penna Suraksha - 53 Grade

Penna Power - 53 Grade

Penna Super - 43 Grade

ADVANTAGES:

Here are five of the many reasons why Penna 53 Grade and 43 Grade

cement edges out its competitors.

y High compressive strengthy Low heat of hydrationy Better soundnessy Lesser consumption of cement for M-20 Concreate Grade and

above

y Faster de shuttering of formed worky Reduced construction time with a superior and wide range of

cement catering to every conceivable building need, Penna

Cement is a formidable player in the cement market.

Herearejusta few reasons why Penna Cementchosen

by millions of India.


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y Ideal raw materialy Low lime and magnesia content and high proportion of

silicates

y Greater fineness

y Slow initial and fast final setting

y Wide range of applications

y Quality customer services

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