Eq Research On Cement Industry

Equity Research On Cement Industry
RESEARCH PROJECT
ON
“Equity Research On Cement Industry with
respect to Union Budget”
Submitted in partial fulfillment of the requirements of the MBA
Degree Course of Bangalore University
Submitted By
SANJAY S
06XQCM6074
Under the Guidance and Supervision
Of
Prof. Praveen Bhagawan
M.P.BIRLA INSTITUTE OF MANAGEMENT

Associate Bharatiya Vidya Bhavan
# 43, Race Course Road
Bangalore-560001
2006 – 08
1 M. P. Birla Institute of Management

DECLARATION
I here by declare that the report entitled. “Equity Research on Cement
Industry with respect to Union Budget” is prepared under the guidance of
Prof. Praveen Bhagawan (Faculty, M.P.Birla Institute of Management).I also
declare that this project report has not been submitted to any other University /
Institute for the award of any other degree, diploma, fellowship or other similar
title or prizes.
Date: SANJAY S
Place: Bangalore (O6XQCM6074)

PRINCIPAL’S CERTIFICATE
This is to certify that Mr. SANJAY S bearing the register number

06XQCM6074 has undertaken a research project and has prepared a
report titled “Equity Research on Cement Industry with Respect to
Union Budget the Firm” under the guidance and supervision of
Prof.Praveen Bhagawan. This has not formed a basis for the award
of any degree/ diploma for any university.
Place: Bangalore
Date: Dr. Nagesh.S.Malavalli

Principal

GUIDE’S CERTIFICATE
This is to certify that Mr.SANJAY S a student of M.P.BIRLA

INSTITUTE OF MANAGEMENT Associate Bharatiya Vidya Bhavan,
Bangalore, has successfully completed the research work entitled
“Equity Research on Cement Industry with respect to Union
Budget” for the partial fulfillment of the requirements of MASTER OF
BUSINESS ADMINISTRATION degree of BANGALORE
UNIVERSITY, under my guidance and supervision.
Date: Prof.Praveen Bhagawan
Place: Bangalore (Internal guide)

ACKNOWLEDGEMENT
I am thankful to Dr. Nagesh malavalli, Principal M.P. Birla Institute of

Management, Bangalore, who has given his valuable support during the
study.
I am extremely thankful to Prof.Praveen Bhagawan, M.P. Birla Institute

of Management, Bangalore who has guided me to do this project by giving
valuable suggestions and advice.
My gratitude will not be complete without thanking God and I am most

grateful to my beloved parents who have been a constant source of aspiration
and blessings in my pursuit for studies. Finally, I express my sincere gratitude to
all my friends and well wishers who helped me to do this project.
Place: Bangalore
Date: (SANJAY S)

CONTENTS
1. Executive Summary 1-2

2. Introduction 3-6
2.1 Theoretical Background
2.2 Statement of the problem
2.3 Importance of the study
2.4 Scope of the study
2.5 Objectives of Research
3. Literature Review 7-8
3.1 Purpose
4. Research Methodology 9-11

4.1 Study Design
4.2 Data Gathering
4.3 Hypothesis Test
5. Data Analysis and Interpretation 12-49
5.1 Company Profile
5.2 Budget Review
6. Findings 50-52
7. Bibliography
8. Annexure

LIST OF GRAPHS AND TABLES
Sl no. PARTICULARS Page no.

01 Selected scripts 28
02 Trend Movement of Ultratech 06-07 36

05 Trend Movement of Prism 06-07 39
08 Trend Movement of India cement 06-07 42
11 Trend Movement of JK Lakshmi 07-08 45
12 Trend Movement of JK Lakshmi 08-09 46

13 Trend Movement of Mysore cements 06-07 47
16 Trend Movement of Ambuja cements 08-09 50

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
It is widely believed that stock market is related to macroeconomic fundamentals

of an economy, as companies that are listed for trading in stock exchanges are the ones
who contribute significantly to the economy's growth. The notion that macroeconomic
factors can drive the movement of stock prices is now widely accepted. However, it was
only in the past decade or so that attempts have been made to capture the effect of
economic forces in a theoretical framework and calibrate these effects empirically.
According to standard stock valuation model, the determinants of stock price are the
expected cash flows from the stock and the required rate of return. Chen, Roll and Ross
(1986) showed that economic variables have a systematic influence on stock return as a
result of their effect on future dividends and discount rate and they provided the
foundation for the belief in the existence of a long-term equilibrium relationship between
stock price and related macroeconomic variables.
A central issue in macroeconomics is the question of how financial markets are

connected to the real side of the economy.
The co-integration of macroeconomic variables and stock market has been and
extensive area of research in financial econometrics. In financial economics, there have
been a number of studies concerning developed markets like US, Japan, UK and
European markets.

INTRODUCTION

2.1 THEORETICAL FRAMEWORK
Volatility: Definition and Measurement

In pure financial terms, volatility is defined as, 'the degree to which the price of a
security, commodity, or market rises or falls within a short-term period’. As is evident
from the definition, volatility relates to the variability in the price of a security. In the
context of the stock market, volatility of the market refers to the volatility of the indices
of the securities within the market. In India, for instance, the Bombay Stock Exchange
(BSE) SENSEX (a 30 scrip weighted index of market capitalization) would be one of the
relevant indices to look into for examining stock market volatility. When examining the
issue of stock market volatility, it is relevant to measure percentage volatility of stock
return. This reflects the percentage change in the value of the amount invested in the
stock market. It reflects the change in the investor's wealth. Theorists use various
measures of volatility like standard deviation, variance, chi square test, to measure
volatility of stock market return.
Stock market volatility is often classified as historical (actual) volatility or
implied volatility. The most common measure of historical or actual stock market
volatility is the standard deviation. In simple terms, standard deviation measures the
deviation of the returns of equity from its mean return. It is a relative measure i.e.
standard deviation of stock returns in one period can be compared with standard
deviation of another period to understand which period has been more volatile.
This research is done in the field of Indian share markets taking into account three
years data from March 2006 to March 2008. The research includes how the share prices
of various selected companies vary w.r.t. to economic i.e., Union Budget. The research
work includes the collection of data regarding the share prices of the selected companies
during the past three years.
This research attempts to study the relationship of stock returns with respect to
Union Budget in Indian context. The data consists of 3 years from February 2006 to
March 2008 (pre and post 10 days data on announcement of Union Budget each year).

The Stock Market and the Economy
The stock market and the economy are deeply intertwined so that when something
happens in one it affects the other. It is said that stock market declines have a wide-
ranging effect on many sectors of the economy; therefore, the health of the stock market
is seen as an indicator of the general economic health.
2.2 STATEMENT OF THE PROBLEM:
Wide price fluctuations and heavy trading within a short span of time characterize
volatile markets. Volatility is a traditional worry of investors, and is associated with fast-
growing stocks.
Volatility of stock market is usually caused by company news, economic factors.

Share prices fluctuations affect the investor’s wealth creation. In this context, the study of
the impact of economic events on the movement of share prices in stock market is
undertaken. The problem could be characterized by the lack of information weather the
Union Budget is affecting the prices of cement company.
2.3 IMPORTANCE OF THE STUDY
• This study aids an investor to know the effect of Union Budget on share prices.
• Research on volatility will help investor to build and plan his investment portfolio
by considering the uncontrollable factors, which would lead to fluctuations in the
stock market by an individual investor.
• Since there are problems associated with volatile stock markets, the study can
help the investors to take informed decisions regarding buying or selling of stock.

• Study will also help the companies to know their share price variability.
2.4 SCOPE OF THE STUDY

The scope of the study is limited only for Cement Industry in India wherein the
fallowing companies are selected
COMPANIES
1. Ultratech Cement ltd.

2. Prism Cement ltd.
3. India Cement ltd.
4. JK Lakshmi Cement ltd.
5. Mysore Cement ltd.
6. Ambuja Cement ltd.
2.5 OBJECTIVES OF THE STUDY
• To study how share prices of Cement Companies fluctuate with respect to pre
budget and post budget.
• To predict the future prices of the shares.
• Fundamental Analysis of the major companies (both small and mid cap) in
the industry.
.

Review of Literature

3.1 Purpose
The project undertaken (Equity Research in the cement industry) aimed at

doing the Analysis of major firms in the cement industry in India with respect to Union
Budget.
The analysis serves to answer questions, such as:
• Is there any relation between the share prices and union budget?
• Is it actually any chances of making profits with this relation?
• To study the extent to which Union Budget affect values of shares?
This analysis has been done by studying the economic factors of the country,
industry trends as well as qualitative and quantitative factors of the firms. Based on the
analysis of the financial statements of the firms, industry structure, economic conditions
etc., the relation of shareprices between pre budget and post budget been made have
been made. Also valuation of the firms undertaken for analysis has been done using
Regression analysis.

RESEARCH METHODOLOGY

4.1 Study Design
a) Study Type: The study type is analytical, quantitative. Analytical because facts and
existing information is used for the analysis, Quantitative as relationship is examined by
expressing variables in measurable terms and also Historical as the historical information
is used for analysis and interpretation.
b) Sampling technique: Simple Random sampling is used because only particular units
are selected from the sampling frame. Such a selection is undertaken as these units
represent the population in a better way and reflect better relationship with the other
variable.
c) Sample size: Sample chosen is 6 major companies from cement industries from NSE
for the period started from 14th February to 14th march for 3 years.
d) Sampling frame: Sampling Frame would be Indian stock market for cement sector.
4.2 Data Gathering Procedures and Instruments:
Data and Data Source: Historical share prices and Historical daily prices of
Shares like opening price, closing price have been taken from NSE.
SECONDARY DATA
As the data relating to share prices of companies and SENSEX are of previous
years, secondary data is collected. Data is collected for the period from March 2006 to
March2008. The data is also collected from websites, journals, dailies, Bangalore Stock
Exchange Library, etc.

4.3 Testing of hypothesis
Hypothesis
H0: There is no relation in share prices between pre budget and post budget.
H1: There is relation in share prices between pre budget and post budget.
Tools used for testing of hypothesis:
Tools used for testing of hypothesis linear regression tool, co-efficient of

Correlation, co-efficient of determination and t statistic.

PRESENTATION AND ANALYSIS OF

DATA AND INTERPRETATION

5.1 COMPANY PROFILE
Howden Insurance Brokers
Howden Insurance Brokers is the largest specialist Lloyd’s Broker of its kind in the
UK. The broking arm of the Hyperion Insurance Group, Howden Insurance Brokers has a
first-rate reputation worldwide as a market leader in its specialist areas. This reputation is
built on an uncompromising philosophy of focus, expertise and service.
Focus
Howden Insurance Brokers is a specialist, focused solely on providing liability and
crime products. We offer:
1. Investment industry
2. Professional Indemnity
3. Directors and Officers Liability
4. Crime Insurance
5. Computer Crime Insurance
6. Cyber Liability/Esurance
7. Medical Malpractice Liability
8. Expertise
The knowledge and expertise of our people is second to none. When engaged to
represent clients to the insurance markets we are able to produce outstanding results,
from initial negotiation through to claims settlement – an issue that many clients overlook
when selecting their advisors.
Service
Our service is outstanding. You will find us approachable and accessible at all
levels of our organization. We are not just interested in winning your business; we want
to make sure you stay with us.

Claims
We have the best specialist claims departments in the industry. It is an integral
part of the business and one in which we continue to make substantial investment. No one
wants to envisage a problem that could lead to a claim but, if it does happen, you will
benefit from having the very best people on your side, who will vigorously ensure the
right result. Our claims expertise is a major strength and one in which we take great
pride.
Relationships
Howden Insurance Brokers is a relationship-led business. Consequently, all our
directors are entirely hands-on when it comes to placing risks. This enables us to retain
influence at the most senior level with all the leading insurers. Our strong, established
relationships deliver very competitive premiums. This, combined with our preference to
use our own policy wordings, enables delivery of affordable and highly responsive
insurance policies.
Consistency
Consistency throughout the insurance market’s cycles is key. Although there can be
great volatility in terms of pricing, we seek to provide stability. We work with insurers
that are financially secure and which have high ratings.
Global reach
Howden Insurance Brokers’ head office is in the City of London, offering direct
access to Lloyd’s and many major international insurance companies. However, our
reach extends far further and we have relationships with a range of territories that are
crucial insurance centres, such as the US, Continental Europe and Bermuda.
The Risk
Howden Insurance Brokers provides insurance placement and claims settlement
services to brokers and intermediaries world-wide. We have a reputation for delivery of
the highest levels of service. We are totally committed to those with whom we work and

seek to build long-term partnerships, in order to enable the partner to develop sustained
growth.
Our expertise
We are experts in insurance and reinsurance broking with unrivalled knowledge
of Professional Liability, Directors and Officers Liability and crime products. As an
accredited Lloy
Services to retail/producing brokers include:
• Access to a range of innovative insurance and reinsurance products
• Connections to leading insurers in London, the Caribbean, US and Europe
• Access to a range of specialist facilities, schemes and binders to support the
smooth running of large accounts
• Specific wordings tailored to suit the needs of a particular country or jurisdiction
• Co-branding or white labelling arrangements
• Delivery of expertise to support non-specialist distributors
Tailored service in your location
When working with our wholesale broker partners, integrity is vital. We never
forget that the client is yours but if specialist support is required, senior staff from
Howden Insurance Brokers can travel at short notice from our offices in the City of
London to assist with pitches and presentations. We have local knowledge of worldwide
markets and provide service that is second to none.
Pricing that fits the risk
We have a range of competitive pricing structures that reflect local exposures. We

constantly monitor the rates available and use our leverage to obtain the best deal. We
only work with quality insurers that meet stringent rating requirements.

Rewarding those we work with
Our commission rates are highly attractive. We also offer performance

arrangements, when appropriate.
Access to the best claims professionals
Howden Insurance Brokers has the best specialist claims team in the London insurance
market. In the event that your client has a claim, this expertise will be available to you.
We have in-depth knowledge of the most complex covers. We never forget that your
client comes first.
5.2 Union Budget

The budget of a country mainly covers the policies on various sectors of the
country’s economy. The world economy has grown by around 4.5 percent for the year
2005 and 2006. The impressive growth of the world economy is largely led by China,
India and Russia. Though the economic progress is satisfactory, still the world economy
suffers a lot from various social problems. The world economy has been largely suffering
from the problems of infant mortality rates, and various types of diseases. As in the year
2006, there were a total numbers of 48.87 deaths per 1,000 live births. This has been a
major global challenge. To meet these respective challenges, budget of a nation has larger
role to play.
Highlights of Union Budget 2006-2007.
The Indian cement industry with a total capacity of about 152 m tonnes (excluding mini
plants) in FY05, surpassed developed nations like the US and Japan and has emerged as
the second largest market after China. Although consolidation has taken place in the
Indian cement industry with the top five players controlling almost 50% of the capacity,
the remaining 50% of the capacity remains pretty fragmented. The per capita
consumption of 115 kgs compares poorly with the world average of over 250 kgs and
more than 450 kgs in China. This, more than anything, underlines the tremendous scope
for growth in the Indian cement industry in the long term.

Budget Measures
Customs duty on cement reduced from 15% to 12.5% in line with the reduction in peak
customs duty.
Budget Impact
The reduction in customs duty on cement would have no impact on the domestic cement
sector as strong international cement prices and lack of adequate port facilities would
continue to protect domestic cement players.
Sector Outlook
There was no major announcement for the cement sector in the Union Budget 2006-07.
Thus, we expect the industry to continue to grow at 8% to 9% in the medium to long
term. Government's initiatives on the infrastructure and housing sector fronts would
continue to remain the key drivers. With no major capacity expansion in the pipeline in
the country, the demand supply equation is expected to continue to remain favourable for
cement manufacturers and this will help in the improvement of prices. However, since
the level of demand supply mismatch is higher in the southern region, it will take longer
to achieve demand supply parity in that region. We expect average cement price to
increase by around 5% to 6% per annum at the national level in the medium-term owing
to fundamental reasons.
Industry Wish List

Cement Manufacturers Association of India (CMAI)
• Reduce excise duty on cement from the current Rs 408/tonne to Rs 250/tonne
• Lower royalty on cement grade limestone
• Fully meet coal requirements of the cement industry, reduce import duties on
coal/non-coking coal

• Provide incentives for construction of cement roads, continue the housing sector
sops, prioritise infrastructure projects such as ports, airports, etc.
Budget over the years
Budget 2004-05
.
• The Finance Minister has proposed to extend such a measure to other
infrastructure sectors. The IIG includes the like of IDBI, IDFC, ICICI Bank, SBI,
LIC, Bank of Baroda and Punjab National Bank. The consortium will pool their
resources to an extent of Rs 400 bn. Initially, airports, seaports and tourism will
be the target sectors of the IIG.
• The FM has also emphasized a great deal on completion of various irrigation
projects and the development of a multinational standard port in Kochi.
• Additional 2% education cess on all direct and indirect tax.
Budget 2005-06
• Customs duty on pet coke reduced from 20% to 10%

• Excise duty on clinker increased to Rs 350 per tonne from Rs 250 per tonne.
• Customs duty on cement reduced from 20% to 15% in line with the reduction in
peak customs duty rate.
• Deduction of upto Rs1 lakh on the repayment of principal amount of housing
loan.
Key Positives
Infrastructure spending - The ongoing road construction project, airport

privatization and river linking projects are fundamental long-term growth drivers for the
industry. The Golden Quadrilateral project is already in its final leg, albeit delayed.

Accelerated spending in infrastructure is likely to mute the cyclicality aspect of the

cement business.
Housing demand support - Cement demand has remained healthy also on

account of strong support from the housing sector. Considering the steep shortfall in
dwelling units in the country, prospects for the sector are promising.
Demand-supply dynamics - Unlike the last decade, the oversupply situation in

the cement sector is likely to reduce, thus bringing along with it some extent of pricing
power. So, the operating profit growth is likely to be faster than the topline growth in the
long-term.
Consolidation trigger - The industry is lot more consolidated now that it was
ever in the past. Top five players account for almost 50% of capacity. Fragmentation
reduces pricing power and consolidated operations improve efficiency apart from
providing pricing power.
Key Negatives
Slow progress of reforms - Infrastructure spending, in the recent past, has been
largely restricted to the government. The private sector has not been provided with
adequate impetus, which impacts the overall growth of the economy. Liberalizing FDI in
the public infrastructure sector could provide a big fillip. But this has been slow to come
by.
Susceptibility to coal and oil prices - Cement is a commodity business and any
company's ability to maintain margins is dependent on the pricing environment apart
from factors like access to coal and stable transportation cost. The rise in coal prices and
hike in petroleum product prices could pressurise margins.
Rise in interest rates - Interest rates are showing signs of hardening. The impact
of this on housing demand will play a crucial role on the future prospects of the sector.
The importance of the housing sector in cement demand can be gauged from the fact that

it consumes almost 75%-80% of the country's cement. If this support wanes, it could tilt
the odds against the cement manufacturers.
Highlights of Union Budget 2007-2008.
The Indian cement industry with a total capacity of about 157 m tonnes in FY06
is the second largest market after China. Although consolidation has taken place in the
Indian cement industry with the top five players controlling almost 50% of the capacity,
the balance capacity still remains pretty fragmented. Despite the fact that Indian cement
industry has clocked a production of more than 100 m tonnes for the last four consecutive
years, the per capita consumption of around 125 kgs compares poorly with the world
average of over 260 kgs and more than 450 kgs in China. This, more than anything,
underlines the tremendous scope for growth in the Indian cement industry in the long
term. Read more
Budget Measures
• Differential excise duties to be levied on cement. A retail price of less than Rs190
per bag will attract an excise duty of Rs350 per tonne while the same will be
jacked up to Rs600, if the retail price exceeds Rs190 per bag.
• Freight rates on cement remained unchanged but a discount of 40% on
incremental bag loading has been recommended.
• The customs duty on Portland cements has been reduced from 12.5% cent to nil.
• Dividend distribution tax to be hiked from 12.5% to 15%.
• A slew of incentives to be doled out for the housing sector

Budget Impact
• Lower manufacturing cost on account of reduction in freight rates will lead to

minimal increase in operating profits as approximately only 40% of cement is
transported by railways.
• The government has increased budgetary allocation for roads under NHDP.
Further, with still more incentives being spelled out for the infrastructure and
housing sector, good times continue to lie ahead for cement manufacturers.
Sector Outlook
The differential excise duty on price was a major announcement for the cement sector in
the Union Budget 2006-07. However, government's initiatives on the infrastructure and
housing sector fronts would continue to remain the key demand drivers. We believe that
the current good times will continue in the medium term. The demand for cement has
increased at the rate of 10% annually on account of buoyancy in the end user industries.
With capacity additions taking place at a slower pace, the demand supply equation is
expected to continue to remain favourable and this will lend support to current high
prices. Once new planned capacities become operational, the industry may face excess
supply situation, which in turn might impact margins.
Company Impact
The impact of hike in excise duty will not be so prominent in medium term on
account of pricing power lying with the producers. Once new capacities come onstream,
producers might be forced to absorb the impact themselves, thus negatively impacting
profitability.

Industry Wish List (Cement Manufacturers Association of India, CMAI)
• Reduce excise duty on cement from the current Rs 408/tonne to Rs 250/tonne

• Lower royalty on cement grade limestone
• In order to fully meet coal requirements of the cement industry, reduce import
duties on coal/non-coking coal
• Abolish import duty on pet coke from the current 5%
• To encourage cement utilization, provide incentives for construction of cement
roads, continue the housing sector sops, prioritise infrastructure projects such as
ports, airports, etc. 50% reduction in railway freight for cement/clinker meant for
export
• No levies /duties be charged on captive power generation as cement units have to
depend on captive power for continuous running of their plants
Key Positives
Infrastructure spending: The ongoing road construction project, airport

privatization and river linking projects are fundamental long-term growth drivers for the
cement business.
Housing demand support: Cement demand has also remained healthy on

Demand-supply dynamics: Unlike the last decade, the oversupply situation in

the cement sector has reduced, thus bringing along with it some degree of pricing power.
So, the operating profit growth has been faster than the topline growth and the scenario is
likely to continue in the near to medium term.

Consolidation trigger: The industry is a lot more consolidated now than it ever
was in the past. Top five players account for almost 50% of capacity. Fragmentation
Key Negatives
Slow progress of reforms: Infrastructure spending, in the recent past has been
adequate impetus, which impacts the overall growth of the economy. Liberalizing FDI in
by.
Spiralling input costs: Cement is a commodity business and any company's

ability to maintain margins is dependent on factors like access to coal and stable
transportation cost apart from favorable pricing environment. The rise in input costs like
coal prices and hike in petroleum product prices could pressurise margins.
Rise in interest rates: Interest rates are showing signs of hardening. The impact
of this on housing demand will play a crucial role on the future prospects of the sector.
The importance of the housing sector in cement demand can be gauged from the fact that
it consumes almost 70% of the country's cement. If this support wanes, it could tilt the
odds against the cement manufacturers.
Huge capex: Recently, demand has surpassed supply, resulting in healthy cement
prices across the country. On account of favorable pricing scenario and growing demand
for the commodity, almost all the players have lined up capacity expansion plans.
However, this scenario is likely to change once the planned capacities come onstream.
The announced capacities are expected to be operational by the end of calendar year 2008
leading to a situation of excess supply and in effect, driving down the current high
realizations

Highlights of Union Budget 2008-09
The Indian cement industry with a total capacity of about 165 m tonnes in FY07
is the second largest market after China. Although consolidation has taken place in the
industry with the top five players controlling almost 50% of the capacity, the balance
capacity still remains pretty fragmented. Despite the fact that the industry has clocked a
production of more than 100 m tonnes for the last four consecutive years, the per capita
consumption of around 125 kgs compares poorly with the world average of over 260 kgs
and more than 450 kgs in China. This, more than anything underlines the tremendous
scope for growth in the industry in the long term. Read more
Budget Measures
• From a differential excise duty levied last year, the budget this year proposed a
flat rate Rs400 per MT bulk cement or 14% ad valorem, whichever is higher and
cement clinkers excise duty at Rs450 per MT.
• A slew of incentives to be doled out for the housing sector particularly in the rural
areas. The interest rate on housing loan has been reduced.
• Allocation for NHDP enhanced to almost Rs13,000 crore in FY09. Special

attention being paid to SARDP-NE; programme devised for the North Eastern
region, apart from the ongoing completion work on Golden Quadrilateral and East
West Corridor.
• Coal regulator to be appointed.
• Parent company allowed to set-off the dividend received from its subsidiary
company against dividend distributed by itself.

Budget Impact
• The government has increased budgetary allocation for roads under NHDP. This
coupled with government's initiatives on the infrastructure and housing sector
fronts would continue to remain the key drivers.
• Increased infrastructure spending has been a key focus area over the last five
years. One would only expect the execution to be monitored closely. Thus from a
near to medium term perspective, till the time capacities come on stream, good
times continue to lie ahead for cement manufacturers.
• Appointing a coal regulator is looked upon as a positive move as it will facilitate

timely and proper allocation of coal (a key raw material) blocks to the core
sectors, cement being one of them.
Company Impact
• The excise duty on bulk cement is proposed at Rs 400 per MT bulk cement or
14% ad valorem, which ever is higher. The impact of hike in excise duty will not
be so prominent in medium term on account of pricing power lying with the
producers.
• With 14% ad valorem duty, incidence of tax increases. Further, once new
capacities come onstream, producers may not be able to pass on the hike and thus
might be forced to absorb the impact, which in turn would negatively impact
profitability. Cement major such as ACC, Ultratech and Grasim will have to bear
the brunt of change in excise duty structure.

• Excise duty on cement clinker has been raised by Rs 100 per MT to Rs 450 per
MT. The move will impact only those who purchase clinker. However, the major
cement manufacturers’, infact most of the cement manufacturers have set up a
grinding unit so they don’t have to source clinker. Hence the impact is neutral.
Key Positives
Infrastructure spending: The ongoing road construction project, airport

privatisation and river linking projects are fundamental long-term growth drivers for the
cement business.
Housing demand support: Cement demand has also remained healthy on

Demand-supply dynamics: Unlike the last decade, the oversupply situation in

the cement sector has reduced, thus bringing along with it some degree of pricing power.
So, the operating profit growth has been faster than the topline growth and the scenario is
likely to continue in till the announced capacities come on stream. The same is expected
to happen starting middle of the year 2008 onwards, the bulk of which will come
onstream from CY09 onwards.
Consolidation trigger: The industry is a lot more consolidated now than it ever
was in the past. Top five players account for almost 50% of capacity. Fragmentation

Key Negatives
Slow progress of reforms: Infrastructure spending, in the recent past has been
adequate impetus, which impacts the overall growth of the economy. Liberalising FDI in
by.
Spiralling input costs: Cement is a commodity business and any company's

ability to maintain margins is dependent on factors like access to coal and stable
transportation cost apart from favorable pricing environment. The rise in input costs like
coal prices and hike in petroleum product prices could pressurise margins.
Rise in interest rates: The impact of high interest rates on housing demand will
play a crucial role on the future prospects of the sector. The importance of the housing
sector in cement demand can be gauged from the fact that it consumes almost 70% of the
country's cement production. If this support wanes, it could tilt the odds against the
cement manufacturers.
Huge capex: Recently, cement demand has surpassed supply, resulting in higher
prices across the country. On account of favorable pricing scenario and growing demand
for the commodity, almost all the players have lined up capacity expansion plans.
However, this scenario is likely to change once the planned capacities come onstream.
The announced capacities are expected to be operational by the end of calendar year 2008
leading to a situation of excess supply and in effect, driving down the current high
realisations.

So for this analysis we have taken the fallowing scripts so that these may depict the
best result as they are the market leaders in india
Table No. 1: Selected scripts.
COMPANIES
Ultratech Cement
Prism Cement
India Cement
JK Lakshmi Cement
Mysore Cement.
Ambuja Cement

Ultratech Cement
UltraTech Cement Limited, a Grasim subsidiary has an annual capacity of 17 million

tonnes. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace
Slag Cement and Portland Pozzollana Cement.UltraTech has five integrated plants, five
grinding units and three terminals — two in India and one in Sri Lanka. These include an
integrated plant and two grinding units of the erstwhile Narmada Cement Company
Limited, a subsidiary, which has been amalgamated with the company in May
2006.UltraTech is the country's largest exporter of cement clinker.
The company exports over 2.5 million tonnes per annum, which is about 30 per cent of
the country's total exports. The export markets span countries around the Indian Ocean,
Africa, Europe and the Middle East. The cement division of L&T was demerged in 2004
after Grasim made the 30 per cent open offer for equity shares, gaining control over the
new company, christened
UltraTech. Besides the long term strategic value in the wake of rising demand for cement,
with the growth of housing and infrastructure sectors in the country, the acquisition
brings significant synergy gains to the parent company. Ready Mix Concrete is likely to
see substantial growth in the coming years. Recognising the opportunities that this
business will offer, UltraTech has commenced setting up of Ready Mix Concrete plants
at various places in the country. UltraTech's subsidiaries are: Dakshin Cements Limited
and UltraTech Ceylinco (Private) Limited.
PRODUCTS
Ultratech’s products include Ordinary Portland cement, Portland Pozzollana

cement and Portland blast furnace slag cement Management initiative with the objective
of creating complete understanding of customer problems and finding solutions jointly.
The company's Retail Value Management addresses the needs of distributors, retailers
and end consumers. The company has also launched India's first steel retail store - steel
junction - for making steel shopping a happy and memorable experience.

Prism Cement
Prism Cement Limited is an ISO 9001:2000 certified company promoted by the

Rajan Raheja Group. It operates one of the largest single kiln cement plants in the
country at Satna, Madhya Pradesh. Equipped with state-of-the-art machinery and
technical support from F.L Smidth & Co A.S Denmark, the world leaders in cement
technology, Prism Cement has successfully created a niche for itself in the Indian cement
industry.
The Company is managed by a focused Board comprising of eminent experts from

diverse fields ably supported by a professional management team. The Management team
ensures high levels of transparency, accountability and equity in all facets of the
company’s operations.
The main objective of Prism Cement is to continuously improve the quality of its
products and services in order to meet customer satisfaction.
Products
Prism Cement manufactures and markets Portland Pozzollana Cement (PPC) with the
brand name ‘Champion’ and the full range of Ordinary Portland Cement (OPC) of 33, 43
and 53 Grades.
‘Champion’ Prism’s largest selling product is a general-purpose cement popular for all
applications during house construction by individuals. Prism Cement’s OPC is in demand
for specialised cement concrete applications like high-rise buildings, bridges,
manufacturing AC sheets, pipes, poles etc.
Rich deposits of high quality limestone, highly automated and sophisticated controls
ensure that the cement manufactured by Prism meets the highest quality standards. All
the cement manufactured by Prism Cement carry the BIS Certification Mark. In fact, the
strength and other characteristics are much higher than the BIS requirements. Excellent
quality has placed Prism Cement in the premium price segment

India Cements Ltd
The India Cements Ltd was established in 1946 and the first plant was setup at
Sankarnagar in Tamilnadu in 1949. Since then it has grown in stature to seven plants
spread over Tamilnadu and Andhra Pradesh. The capacities as on March 2002 have
increased multifold to 9 million tons per annum.The Company is the largest producer of
cement in South India. The Company's plants are well spread with three in Tamilnadu
and four in Andhra Pradesh which cater to all major markets in South India and
Maharashtra.The Company is the market leader with a market share of 28% in the South.
It aims to achieve a 35% market share in the near future. The Company has access to
huge limestone resources and plans to expand capacity by de-bottlenecking and
optimisation of existing plants as well as by acquisitions. The Company has a strong
distribution network with over 10,000 stockists of whom 25% are dedicated.
The Company has well established brands- Sankar Super Power, Coromandel Super
Power and Raasi Super Power.Regional offices in all southern states and Maharasthra
offices/representative in every district
Products
Coromandel King, Sankar Sakthi and Raasi Gold are high strength cements to meet the
needs of the consumer for high strength concrete. As per BIS requirements the minimum
28 days compressive strength of 53 Grade OPC should not be less than 53 Mpa. For
certain specialised works such as prestressed concrete and certain items of precast
concrete requiring consistently high strength concrete, the use of 53 Grade OPC is found
very useful. 53 Grade OPC produces higher-Grade concrete at very economical cement
content. In concrete mix design, for concrete M-20 and above Grades a saving of 8 to
10% of cement may be achieved with the use of above mentioned 53 Grade OPC.

JK Lakshmi
In the year-1982 a remote area in the zero-industry district of Sirohi in Rajasthan.

the story of JK Lakshmi Cement Limited thus began. And today as it completes 25 years
of existence, it is a company that’s renowned for its strength, quality and performance.
One of the established names in the cement industry, JK Lakshmi Cement Ltd has state of
the art plants at Jaykaypuram, distt. Sirohi, Rajasthan having a capacity of more than 3.5
million tonnes. With use of the latest technology from M/s Blue Circle Industries and
Modern equipments from M/s Fuller International of USA, we are going from strength to
strength.
It is also the first grey 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.
Primarily a cement focused company, we have now diversified into a variety of products
including Cement (OPC & PPC), Power Mix (RMC) and Plaster of Paris to meet the
stated needs of our customers. We are also in the midst of finalising certain customer
centric services to provide a much better cement purchasing experience.
Products
Upholding the tradition of JK Organisation for maintaining the highest standards in

quality, JK Lakshmi Cement today is one of the most preferred brands in its marketing
area with a network of about 1500 dealers spread in the states of Rajasthan, Gujarat,
Delhi, Haryana, U.P., Uttaranchal, Punjab, J&K, H. P. and Mumbai. Our endeavor is
always to give our best and maintain the highest standards of customer satisfaction.
No wonder the discernible buyers prefer this cement over other brands owing to its
consistency, higher level of quality and impeccable customer service.

Mysore Cement Limited,
Mysore Cements Ltd. (MCL), a Heidelberg Cement Group Company, was promoted in
1958 by a Karnataka based industrialist in technical and financial collaboration with
Kaisers of USA as a Public Limited Company.
The first one lac ton per annum dry process cement plant with an investment of Rs.220
lacs at Ammasandra Dist. Tumkur, Karnataka was commissioned in 1962. Immediately
thereafter, an expansion was planned which doubled MCL's capacity to 2 lac TPA in
1966 at an investment of Rs.170 lacs Kaisers subsequently took control of the Company.
Late Shri.G.D. Birla became the Chairman of the Company in 1966 and under his
stewardship, the Company again doubled its capacity from 2 lac tpa to 4 lac tpa in 1968
at an investment of Rs.390 lacs MCL made steady progress and increased the capacity at
Ammasandra to 6 Lac tpa with an investment of another Rs.230 lacs in 1978.
MCL, to expand, looked for a location in the North which was then facing acute cement
shortage. Damoh in Madhya Pradesh was selected and a 5 lac tpa green-field cement
plant was set up at an investment of Rs.2950 lacs, which commenced production in 1983.
This was a state of art first 5 stage preheater based technology plant in the Country which
helped in maximising thermal efficiency. Encouraged with its success MCL also
modernised its Ammasandra unit at an investment of Rs.3600 lacs, which was
successfully completed in January, 1989, and helped not only in increasing the efficiency
but also reduced cost of production on account of savings in power and fuel consumption.
The Clinkerisation capacity at Damoh was further increased to 10 lac tpa by installing
another state of art 6 stage preheater Kiln at an investment of Rs.8000 lakhs, which was
commissioned in 1989, which helped not only in improving the operational efficiency but
also in reducing the coal consumption and enhanced productivity.
Pursuant to the Share Subscription and Share Purchase Agreement and Escrow
Agreement Cementrum I B.V.(subsidiary of Heidelberg Cement AG) acquired Equity
Shares from the S.K. Birla Group and its affiliates. In addition, further Equity Shares

were acquired under the Open Offer giving Cementrum I B.V. 54.89% shareholding in
Mysore Cements Limited.
Ambuja Cements
Ambuja Cements was set up in 1986. In the last decade the company has grown
tenfold. The total cement capacity of the company is 16 million tonnes.
Its plants are some of the most efficient in the world. With environment protection
measures that are on par with the finest in the developed world.
The company's most distinctive attribute, however, is its approach to the business.
Ambuja follows a unique homegrown philosophy of giving people the authority to set
their own targets, and the freedom to achieve their goals. This simple vision has created
an environment where there are no limits to excellence, no limits to efficiency. And has
proved to be a powerful engine of growth for the company.
As a result, Ambuja is the most profitable cement company in India, and the lowest cost
producer of cement in the world.
In essence, cement is a simple business. Unlike other industries it does not suffer
rapid technological obsolescence or shifting consumer trends. Therefore, it constantly
attracts new investments. Which results in surplus capacity. This means only the very
efficient players can prosper.
Our people recognize this. And their efforts to constantly raise efficiency has not
only raised the bar at Ambuja. But across the industry as well. Environment protection
measure that conform to the worlds best.The pollution levels at all our cement plants are
even lower than the rigorous Swiss standards of 100 mg/NM3. The air is so clean that a
rose garden flourishes right next to the main plant.
Benchmarking quality standards for the industry.

Ambuja has received the highest quality award - the National Quality Award. The only
cement company to do so. Its also the first to receive the ISO 9002 quality certification.

Reinventing cement transportation.
Almost 90% of cement in India travels by rail or road. And in bags. Our people
realized that the only way to speed up transportation was a completely different approach.
The result: a bulk transporting system via the sea. Making us the first company to
introduce the concept of bulk cement movement by sea in India.
When we started out, we approached the cement business with an open mind.
Some things struck us immediately. To compete with the older, established players who
had already written off their plant cost, it was important to have the lowest capital cost
per ton of cement. Our plants would have to be set up in record time. Our capacity
utilization would have to be above 100%. And our power consumption would have to set
a record low.
Given this line of thinking, empowerment was not just a fashionable term, it was the only
way to achieve our goals.
If costs had to be controlled, it seemed absurd for engineers to check back with their
seniors for every little decision. The time lost would be far more expensive than any
errors they would make. It was the same with controlling power consumption. Who better
than the engineers to suggest ways to cut costs. They knew the plants inside out. It made
sense to listen to them.

Ultratech Cement
Graph no. 2: Trend Movement of Ultratech before and after Budget Announcement
2006-2007.
Trend Movement of Ultratech before and after

Budget Announcement 2006-2007.
650
600
Price
550 Series1
500
450
6
6
06
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis:
The share price of Ultratech, which was Rs. 540-560 before the budget, and was
on the upward trend on the budget day, there after it started to rise steadily and showed an
upward trend. The standard deviation of 10 days coating, before budget was 8.85 but
after the announcement of budget the standard deviation was 17.80.
Interpretation:
This is due to the positive impact on the industry where in the Customs duty on
cement reduced from 15% to 12.5% in line with the reduction in peak customs duty. The
ongoing road construction project, airport privatization and river linking projects are
fundamental long-term growth drivers for the industry. Accelerated spending in
infrastructure is likely to mute the cyclicality aspect of the cement business. The Co-
efficient of correlation between pre budget and post budget is 0.039 and and a very less
of the variation in prices can be explained by the variability in pre budget and post budget
So Alternate hypothesis rejected as P value is more than 5%.

Graph no. 2: Trend Movement of Ultratech Before And After Budget Announcement
2007-2008
Trend Movement of Ultratech Before And After

Budget Announcement 2007-2008
1200
1000
800
Price
600 Series1
400
200
0
07
7
7
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis
The share price of Ultratech was around Rs965 before the day of budget
announcement, and it started decreasing after the budget. Later also it was in decreasing
trend where in it touched Rs760. The standard deviation of 10days pre budget was 26.10
but it is 47.98 after budget
Interpretation
The share prices started declining because Differential excise duties to be levied
on cement. A retail price of less than Rs 190 per bag will attract an excise duty of Rs 350
per tonne while the same will be jacked up to Rs 600, if the retail price exceeds Rs 190
per bag. Dividend distribution tax to be hiked from 12.5% to 15%. The Co-efficient of
correlation between pre budget and post budget is 0.68 and a there is 47% variation in
prices can be explained by the variability in pre budget and post budget
So Alternate hypothesis accepted as P value is less than 5%.

]Graph no. 3: Trend Movement of Ultratech Before and After Budget Announcement
2008-2009.
Trend Movement of Ultratech Before And After

920
900
880
Price
860 Series1
840
820
800
08
8
8
00
00
00
00
20
/2
/2
/2
/2
6/
14
21
28
13
3/
2/
2/
2/
3/
Date
Analysis
The share price of Ultratech has been very volatile before and after the budget
announced. After which there is a decreasing trend and reached to Rs840 on the 5th day of
post budget. The standard deviation was 14.22 for the 10 days before budget
interpretation and 23.91 10 days after budget.
Interpretation
The share price is very volatile and was in decreasing trend because of differential
excise duty levied last year, the budget this year proposed a flat rate Rs 400 per MT bulk
cement or 14% ad valorem, whichever is higher and cement clinkers excise duty at Rs
450 per MT. The Coal regulator to be appointed and Excise duty on cement clinker has
been raised by Rs 100 per MT to Rs 450 per MT. The Co-efficient of correlation between
pre budget and post budget is 0.45 and and a very less of the variation in prices can be
explained by the variability in pre budget and post budget
So Alternate hypothesis rejected as it is more than P value.

Prism Cement Ltd

Graph no. 4: Trend Movement of Prism Before And After Budget Announcement
2006-2007.
2006-2007 Trend Movement of Prism Before And

After Budget Announcement
28
27
26
Price
25 Series1
24
23
22
06
6
6
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis
The closing share price of Prism cement was on almost flat before the budget. The
share price started upward trend after the budget announced. The standard deviation of
Prism cement before the budget was 0.397 and after it was 0.865.
Interpretation
The rise in share price is due to the Customs duty on cement reduced from 15% to
12.5% in line with the reduction in peak customs duty. Unlike the last decade, the
oversupply situation in the cement sector is likely to reduce, thus bringing along with it
some extent of pricing power. So, the operating profit growth is likely to be faster than
the top line growth in the long-term.
The Co-efficient of correlation between pre budget and post budget is 0.27 and a
very less of the variation in prices can be explained by the variability in pre budget and
post budget

Graph no. 5: Trend Movement of Prism Cement Before And After Budget
Announcement 2007-2008.
Trend Movement of Prism Cement Before And

After Budget Announcement 2007-2008.
50
40
30
Price
Series1
20
10
0
07
7
7
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis
The share price before budget was almost flat wherein trading around the Rs40,
But after the budget it was slightly started going towards downward trend. There is
fluctuation in the prices each day but was on the downward trend. The standard deviation,
which was 1.78, has been increased to 1.18.
Interpretation
The prices started going to down because of the Differential excise duties to be
levied on cement. A retail price of less than Rs 190 per bag will attract an excise duty of
Rs 350 per tonne while the same will be jacked up to Rs 600, if the retail price exceeds
Rs 190 per bag and Dividend distribution tax to be hiked from 12.5% to 15%
post budget

Graph no. 6: Trend Movement of Prism Cement Before And After Budget
Trend Movement of Prism Cement Before And

After Budget Announcement 2008-2009
60
50
40
Price
30 Series1
20
10
0
08
08
08
08
8
0
0
0
20
/2
/2
/2
/2
6/
14
21
28
13
3/
2/
2/
2/
3/
Date
Analysis
but after the budget it was slightly started going towards downward trend. There is
.
Interpretation
This is due to negative impact an industry wherein from a differential excise duty
levied last year; the budget this year proposed a flat rate Rs 400 per MT bulk cement or
14% ad valorem, whichever is higher and cement clinkers excise duty at Rs 450 per
MT.And even with 14% ad valorem duty, incidence of tax increases. Further, once new
capacities come on stream, producers may not be able to pass on the hike and thus might
be forced to absorb the impact, which in turn would negatively impact profitability.
The Co-efficient of correlation between pre budget and post budget is 0.512 and
and a very less of the variation in prices can be explained by the variability in pre budget
and post budget

India Cement.
Graph no. 7: Trend Movement of India Cement Before And After Budget
Trend Movement of India Cement Before And

200
150
Price
100 Series1
50
0
6
6
06
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
Date 3/
Analysis
The price of India cement which was almost trading around Rs135 and after the
budget announcement has started increasing and went upto 165.65. After the budget
announcement latter it started showing increasing trend through out the standard
deviation was 2.78 before the budget but after the budget session the standard deviation
was increased to 6.84.
Interpretation
This due to the reduction of Customs duty on cement reduced from 15% to 12.5%
in line with the reduction in peak customs duty. and even Cement demand has remained
healthy also on account of strong support from the housing sector. Considering the steep
shortfall in dwelling units in the country, prospects for the sector are promising.
post budget. So Alternate hypothesis rejected as it is more than P value.


250
200
150
Price
Series1
100
50
0
07
7
7
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis
The price was Rs191.85 which was fallen to Rs178.7 on the day of budget
announcement there is a decrease in the prices of India Cement and later the situation
went much worser for India cement share price with few fluctuation The standard
deviation which was 6.05 before the budget has been raised to 7.44.
Interpretation
The share prices came down due to Differential excise duties to be levied on
cement. A retail price of less than Rs 190 per bag will attract an excise duty of Rs 350 per
tonne while the same will be jacked up to Rs 600, if the retail price exceeds Rs 190 per
bag. And even Dividend distribution tax to be hiked from 12.5% to 15%
post budget
So Alternate hypothesis accepted as it is less than P value.


230
220
210
Price
200
Series1
190
180
170
160
8
8
08
00
00
00
00
20
/2
/2
/2
/2
6/
14
21
28
13
3/
2/
2/
2/
3/
Date
Analysis
The share price of India cements was on a steady price before the Budget but later
on started going on downward trend .The pre budget 10 days Standard deviation was 5.39
and there was a slight change to 8.18 in post budget session.
Interpretation
There is decline in the share price of India cement which is due to negative impact
of budget. From a differential excise duty levied last year, the budget this year proposed a
flat rate Rs 400 per MT bulk cement or 14% ad valorem, whichever is higher and cement
clinkers excise duty at Rs 450 per MT. With 14% ad valorem duty, incidence of tax
increases. Further, once new capacities come onstream, producers may not be able to pass
on the hike and thus might be forced to absorb the impact, which in turn would
negatively impact profitability
The Co-efficient of correlation between pre budget and post budget is 0.70
and and a very less of the variation in prices can be explained by the variability in pre
budget and post budget

JK Lakshmi Cements
2006-2007: Trading was stopped due to corporate Restructure.
2007-2008:
Graph no. 10: Trend Movement of JK Lakshmi Before and After Budget Announcement
2007-2008.
Trend Movement of JK Lakshmi Before and After

160
140
120
Price
100
80 Series1
60
40
20
0
07
07
07
07
7
0
0
0
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis:
The closing price of JK Lakshmi on the day before budget announced was 127.95
which is decreased on the day of budget announcement to Rs138.40 it has gradually
showed a decreased trend. The standard deviation before budget session was 5.76 and
after the announcement of Union Budget the standard deviation was 4.50.
Interpretation
The share prices of JK Lakshmi in the time of union budget announcement has
fallen mainly because of Lower manufacturing cost on account of reduction in freight
rates will lead to minimal increase in operating profits as approximately only 40% of
cement is transported by railways has an direct impact of rise in rate dividend distribution
tax from 12.5% to 15% and also rise in customs duty of iron ore export for Rs. 300 per
metric tonne. The scripts were slightly volatile compared to the pre session due to the
above mentioned factors.
post budget

Graph no. 10: Trend Movement of JK Lakshmi Before and After Budget Announcement
2008-2009.
Trend Movement of JK Lakshmi Before and After

160
140
120
100
Price
80 Series1
60
40
20
0
8
8
08
00
00
00
00
20
/2
/2
/2
/2
6/
14
21
28
13
3/
2/
2/
2/
3/
Date
Analysis:
The share prices of JK Lakshmi before budget announced were slightly on an
upward trend and after budget it has gradually showed a decreased trend. The standard
deviation before budget session was 1.71 and after the announcement of Union Budget
the standard deviation was 8.07.
Interpretation
The share prices of JK Lakshmi in the time of union budget announcement has
fallen mainly because of From a differential excise duty levied last year, the budget this
year proposed a flat rate Rs 400 per MT bulk cement or 14% ad valorem, whichever is
higher and cement clinkers excise duty at Rs 450 per MT and even Infrastructure
spending, in the recent past has been largely restricted to the government. The private
sector has not been provided with adequate impetus, which impacts the overall growth of
the economy. The scripts were slightly volatile compared to the pre session due to the
above mentioned factors.
post budget

Mysore Cements
Graph no. 11: Trend Movement of Mysore cements before and after Budget
Trend Movement of Mysore cements

before and after Budget
50
40
Price
30
Series1
20
10
0
06
06
06
06
6
0
0
0
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis
The price of Mysore Cements overall increased starting from the before budget
announcement and kept the same upward trend. The Standard Deviation of the pre budget
session i.e. for 10 days was 1.34 and there after it had increased to 4.13.
Interpretation
Beside few fluctuations there is an increase in the share price of Mysore Cements
which is because of the positive notions from the budget .The post budget session was
more volatile compared to pre session. The ongoing road construction project, strong
support from the housing sector making it to be profitable.
post budget

Trend Movement of Mysore cements

before and after Budget
Announcement 2007-2008
60
50
40
Price
30 Series1
20
10
0
7
7
07
00
00
00
00
20
/2
/2
/2
/2
7/
14
21
28
14
3/
2/
2/
2/
3/
Date
Analysis
The share price of Mysore Cements was trading at flat before budget but after it
started towards the downward trend. The standard deviation was 1.89 before the
announcement of the Union Budget, but after the announcement, the standard deviation
was 3.31.
Interpretation
This decrease in share price is due to the Differential excise duties to be levied on
cement. A retail price of less than Rs 190 per bag will attract an excise duty of Rs 350 per
tonne while the same will be jacked up to Rs 600, if the retail price exceeds Rs 190 per
bag and even the dividend distribution tax to be hiked from 12.5% to 15%.
The Co-efficient of correlation between pre budget and post budget is 0.67
and a very less of the variation in prices can be explained by the variability in pre budget
and post budget

Announcement 2008-2009
Trend Movement of Mysore cements before and after

45
40
35
30
Price
25 Series1
20
15
10
5
0
8
8
08
00
00
00
00
20
/2
/2
/2
/2
6/
14
21
28
13
3/
2/
2/
2/
3/
Date
Analysis
But after the budget it was slightly started going towards downward trend. There is
Interpretation
This is due to negative impact an industry wherein from a differential excise duty
levied last year; the budget this year proposed a flat rate Rs 400 per MT bulk cement or
14% ad valorem, whichever is higher and cement clinkers excise duty at Rs 450 per
MT.And even with 14% ad valorem duty, incidence of tax increases. Further, once new
capacities come on stream, producers may not be able to pass on the hike and thus might
be forced to absorb the impact, which in turn would negatively impact profitability.
post budget

Ambuja Cements.
Graph no. 14: Trend Movement of Ambuja Cement Before and After Budget
Trend Movement of Ambuja Cement Before And

128
126
124
122
Price
120 Series1
118
116
114
112
110
8
8
08
00
00
00
00
20
/2
/2
/2
/2
6/
14
21
28
13
3/
2/
2/
2/
3/
Date
Analysis
The price of Ambuja Cements was on rolling wherein it started to increase before
the budget and after the budget bit slipped from that run but able to be on a better
platform. The S.D. was 3.16 before budget but after the announcement of budget it had
rose to 2.08.
Interpretation
This movement in share price is due to Cement sales volumes up 11%, to 4.8
million tonnes for ambuja cement and Excise duty on cement clinker ahs been raised. The
move will impact only those who purchase clinker. However, the Ambuja cement has set
up a grinding unit so they don’t have to source clinker. Hence the impact is neutral and
all these helped it without any major weakening of its prices. The Co-efficient of
correlation between pre budget and post budget is 0.310 and 96.33 of the variation in
prices can be explained by the variability in pre budget and post budget.

FINDINGS
Ultratech Cements
06-07: It is found out that the price of Ultratech Cements was on the on steady growth
from pre budget itself and was on upward trend on the budget day, there after it started to
rise steadily and showed an upward trend in pre & post budget due to both favorable and
unfavorable factors in the budget.
07-08: The budget has had negative impact on price of Ultratech as The share prices
started declining because Differential excise duties to be levied on cement and the
dividend distribution tax also hiked
08-09: The budget has had a negative impact on price of Ultratech where in spite of
minor fluctuations there is a down ward trend. Mainly due to increase in dividend
distribution Tax.
Prism Cements
06-07 The budget has a favorable impact on price of Prism cements as pre budget it was
on a steady line and later went on upwards after the budget.
07-08: The budget of 07-08 was negative in nature has affected the price of Prism
Cements wherein the price before budget was on steady run later went on the downward
trend because of differential excise duty levied.
08-09.: The price of Prism cements has fallen down drastically mainly due to unfavorable
factors like increase in dividend distribution tax
India Cements
06-07: The budget had a very favorable impact on India cements due to the reduction of
Customs duty on cement reduced from 15% to 12.5% in line with the reduction in peak

customs duty. And even Cement demand has remained healthy also on account of strong
support from the housing sector
07-08: The unfavorable factor in the budget has led to the fall in price of India Cements
mainly due to the differential excise duties to be levied on cement distribution.
08-09: There is decline in the share price of India cement which is due to negative
impact of budget further, once new capacities come on-stream, producers may not be able
to pass on the hike and thus might be forced to absorb the impact, which in turn would
negatively impact profitability
JK Lakshmi
07-08: The share prices of JK Lakshmi has fallen mainly because of Lower
manufacturing cost on account of reduction in freight rates will lead to minimal increase
in operating profits as approximately only 40% of cement is transported by railways has
an direct impact and rise in rate dividend distribution tax from 12.5% to 15%
08-09: The share prices of JK Lakshmi before budget announced were slightly on an
upward trend and after budget it has gradually showed a decreased trend because of
differential excise duty levied last year and proposed 14% ad valorem.
Mysore Cements
06-07: The budget has had very favorable impact on price of Mysore Cements Beside
few fluctuations there is an increase in the share price of Mysore Cements which is
because of the positive notions from the budget .The post budget session was more
volatile compared to pre session. The ongoing road construction project, strong support
from the housing sector making steady run.

07-08: It is found that the budget has unfavorable factors which had led to decrease in
share price is due to the Differential excise duties to be levied on cement and hike in
dividend distribution tax
08-09: There is a decrease in share prices of Mysore cements due to negative impact an
industry wherein from a differential excise duty levied last year and ad-valorem 14%.
Ambuja Cements
08-09: The price of Ambuja Cements was on rolling wherein it started to increase before
the budget and after the budget bit slipped from that run but able to be on a better
platform. This movement in share price is due to Cement sales volumes up 11%, to 4.8
million tonnes for ambuja cement when compared to the previous year.

CONCLUSION
After analyzing the data in detail, it was found that the pre and post budget of
India is not having significant effect on the share prices so the investors should properly
analyze the various other factors that should affect the share prices and not only consider
the budget for investing decisions.
When T-test was applied, H0 was accepted for the companies in seven times and
H1 was accepted for seven times showing that there is difference in the pre budget and
post budget scenario but not that much significant
SUGGESTION
The most basic suggestion is that an investor in order to be in a safer side should
analyze the factors that affect the share prices and should take up the investing decisions
rather than depending whole on a single factor.
From the study it depicts there is a slight difference when comes to pre budget
and post budget scenario for the share prices but you cannot totally depend upon a single
factor which may in turn lead to you be in loss.

BIBLIOGRAPHY
BOOKS
- Prasanna Chandra, Security Analysis and Portfolio Management, Tata McGraw-Hill
- Charles P. Jones, Investments Analysis & Management, Wiley 3rd Edition
WEBSITES
• www.investopedia.com
• www.nseindia.com
• www.icfaipress.org
• www.google.co.in
• www.wikipedia.com
DATABASES
www.capitaline.com
www.jstor.com

ANNEXURE
Companies selected for the study
1 Ultratech cement Ltd

2 Prism cement ltd
3 India cement ltd
4 JK Lakshmi
5 Mysore cements ltd
6 Ambuja cement ltd

Ultratech Cement ltd
Close Close Close

Date Price Date Price Date Price
14-Feb-06 551.85 14-Feb-07 962 14-Feb-08 866.6
15-Feb-06 551.05 15-Feb-07 966.65 15-Feb-08 901.65
16-Feb-06 544.95 19-Feb-07 964.35 18-Feb-08 891.05
17-Feb-06 541.75 20-Feb-07 955.5 19-Feb-08 900.05
20-Feb-06 535.15 21-Feb-07 957.7 20-Feb-08 880.85
21-Feb-06 534.6 22-Feb-07 960.8 21-Feb-08 890.2
22-Feb-06 538.75 23-Feb-07 896.4 22-Feb-08 892.05
23-Feb-06 531.15 26-Feb-07 906.95 25-Feb-08 901.65
24-Feb-06 549.4 27-Feb-07 946.9 26-Feb-08 912
27-Feb-06 558.2 28-Feb-07 888.05 27-Feb-08 914.05
28-Feb-06 561.45 1-Mar-07 869.85 28-Feb-08 891.05
1-Mar-06 585.2 2-Mar-07 882.25 29-Feb-08 904.5
2-Mar-06 575.3 5-Mar-07 810.55 3-Mar-08 868.25
3-Mar-06 579.55 6-Mar-07 819.65 4-Mar-08 886.6
6-Mar-06 592.85 7-Mar-07 793.15 5-Mar-08 875.55
7-Mar-06 603.05 8-Mar-07 816.7 7-Mar-08 846.15
8-Mar-06 583.1 9-Mar-07 779.65 10-Mar-08 850.8
9-Mar-06 602.3 12-Mar-07 736.65 11-Mar-08 902.55
10-Mar-06 619.65 13-Mar-07 759.95 12-Mar-08 893.25
13-Mar-06 624.65 14-Mar-07 752.4 13-Mar-08 843.05
14-Mar-06 617.05 14-Mar-08 849.45

Prism Cement ltd
Close Close Close

14-Feb-06 24.2 14-Feb-07 40.8 14-Feb-08 47.45
15-Feb-06 24.15 15-Feb-07 40.7 15-Feb-08 48.85
16-Feb-06 25.15 19-Feb-07 40.5 18-Feb-08 49.45
17-Feb-06 24.3 20-Feb-07 40.25 19-Feb-08 49.8
20-Feb-06 24.1 21-Feb-07 39.5 20-Feb-08 48.55
21-Feb-06 24.1 22-Feb-07 37.9 21-Feb-08 48.35
22-Feb-06 24.85 23-Feb-07 36.2 22-Feb-08 48
23-Feb-06 24.2 26-Feb-07 37.5 25-Feb-08 49.4
24-Feb-06 24.75 27-Feb-07 37 26-Feb-08 49.9
27-Feb-06 24.9 28-Feb-07 34.9 27-Feb-08 49.75
28-Feb-06 25.05 1-Mar-07 35.05 28-Feb-08 48.5
1-Mar-06 25.8 2-Mar-07 34.95 29-Feb-08 48.45
2-Mar-06 25.05 5-Mar-07 32.25 3-Mar-08 46.15
3-Mar-06 24.85 6-Mar-07 34.1 4-Mar-08 43.7
6-Mar-06 25.1 7-Mar-07 32.2 5-Mar-08 42.9
7-Mar-06 26.35 8-Mar-07 33 7-Mar-08 40.75
8-Mar-06 25.8 9-Mar-07 32.4 10-Mar-08 39.5
9-Mar-06 27.15 12-Mar-07 31.9 11-Mar-08 42.5
10-Mar-06 27.35 13-Mar-07 32.4 12-Mar-08 42.25
13-Mar-06 26.6 14-Mar-07 32.35 13-Mar-08 38.65
14-Mar-06 26 14-Mar-08 39.45

India cement ltd
Date Closing price Date Closing price Date Closing price

9-Mar-06 132.2 14-Feb-07 191.15 14-Feb-08 205.35
10-Mar-06 129.7 15-Feb-07 204.75 15-Feb-08 208.7
13-Mar-06 137.9 19-Feb-07 199.75 18-Feb-08 206.5
14-Mar-06 131.55 20-Feb-07 194.35 19-Feb-08 207.95
14-Feb-06 134.15 21-Feb-07 196.25 20-Feb-08 203.05
15-Feb-06 137.45 22-Feb-07 190.45 21-Feb-08 201.2
16-Feb-06 137.1 23-Feb-07 184.05 22-Feb-08 200.95
17-Feb-06 135.3 26-Feb-07 189.95 25-Feb-08 209.7
20-Feb-06 136.35 27-Feb-07 191.85 26-Feb-08 219.15
21-Feb-06 136.05 28-Feb-07 178.7 27-Feb-08 211
22-Feb-06 141 1-Mar-07 173.8 28-Feb-08 214.05
23-Feb-06 155.75 2-Mar-07 168.6 29-Feb-08 208.7
24-Feb-06 148.95 5-Mar-07 158.1 3-Mar-08 202.3
27-Feb-06 152.6 6-Mar-07 162.1 4-Mar-08 204.5
28-Feb-06 153.2 7-Mar-07 151.8 5-Mar-08 207.75
1-Mar-06 160.5 8-Mar-07 167.1 7-Mar-08 201.9
2-Mar-06 158.95 9-Mar-07 153.3 10-Mar-08 197.8
3-Mar-06 165.45 12-Mar-07 155.1 11-Mar-08 207
6-Mar-06 168.55 13-Mar-07 153.65 12-Mar-08 202.1
7-Mar-06 165.6 14-Mar-07 159.3 13-Mar-08 183.55
8-Mar-06 166.8 14-Mar-08 189.4

JK Lakshmi
Date Close Price Date Close Price

14-Feb-07 144.9 14-Feb-08 133.8
15-Feb-07 151.35 15-Feb-08 136.2
19-Feb-07 152.1 18-Feb-08 137.4
20-Feb-07 147.75 19-Feb-08 138.4
21-Feb-07 146.9 20-Feb-08 135.05
22-Feb-07 145.45 21-Feb-08 137.8
23-Feb-07 136.5 22-Feb-08 136
26-Feb-07 138 25-Feb-08 136.35
27-Feb-07 138.4 26-Feb-08 138.85
28-Feb-07 127.95 27-Feb-08 139.1
1-Mar-07 121.25 28-Feb-08 138.9
2-Mar-07 118.25 29-Feb-08 136.4
5-Mar-07 109.5 3-Mar-08 130.7
6-Mar-07 112.95 4-Mar-08 125.35
7-Mar-07 106.55 5-Mar-08 126.4
8-Mar-07 115.4 7-Mar-08 117.9
9-Mar-07 111.05 10-Mar-08 115.85
12-Mar-07 108.3 11-Mar-08 116.6
13-Mar-07 113.2 12-Mar-08 116.4
14-Mar-07 111.7 13-Mar-08 112.1
14-Mar-08 113.8

Mysore cements ltd
Close Close Close

14-Feb-06 26.3 14-Feb-07 52.2 14-Feb-08 39.8
15-Feb-06 25.95 15-Feb-07 53.75 15-Feb-08 40.75
16-Feb-06 27.3 19-Feb-07 51.85 18-Feb-08 41.35
17-Feb-06 27.35 20-Feb-07 50.7 19-Feb-08 41.15
20-Feb-06 27.2 21-Feb-07 52.95 20-Feb-08 40.05
21-Feb-06 26.95 22-Feb-07 52.85 21-Feb-08 40.6
22-Feb-06 29.65 23-Feb-07 49.15 22-Feb-08 39.7
23-Feb-06 28.9 26-Feb-07 51.1 25-Feb-08 40.6
24-Feb-06 28.95 27-Feb-07 51.7 26-Feb-08 41.25
27-Feb-06 29.55 28-Feb-07 47.1 27-Feb-08 41.05
28-Feb-06 30.95 1-Mar-07 47.45 28-Feb-08 40.6
1-Mar-06 31.5 2-Mar-07 49.2 29-Feb-08 39.7
2-Mar-06 29.8 5-Mar-07 45.1 3-Mar-08 38.75
3-Mar-06 29.9 6-Mar-07 45.2 4-Mar-08 37.35
6-Mar-06 30.55 7-Mar-07 43.1 5-Mar-08 35.95
7-Mar-06 33.65 8-Mar-07 43.9 7-Mar-08 33.55
8-Mar-06 35.15 9-Mar-07 39.6 10-Mar-08 32.6
9-Mar-06 38.45 12-Mar-07 40.05 11-Mar-08 34.55
10-Mar-06 40.4 13-Mar-07 41.8 12-Mar-08 33.65
13-Mar-06 38.4 14-Mar-07 39.65 13-Mar-08 31.95
14-Mar-06 38.2 14-Mar-08 32.4

Ambuja cement ltd
Date Close Price

14-Feb-08 116.45
15-Feb-08 115.95
18-Feb-08 115.45
19-Feb-08 116
20-Feb-08 116.05
21-Feb-08 119.9
22-Feb-08 118.05
25-Feb-08 122.7
26-Feb-08 123
27-Feb-08 122.75
28-Feb-08 121.2
29-Feb-08 120.95
3-Mar-08 119.1
4-Mar-08 119.9
5-Mar-08 121.05
7-Mar-08 118.5
10-Mar-08 120.95
11-Mar-08 125.35
12-Mar-08 123.8
13-Mar-08 120.75
14-Mar-08 119.95

Eq Research On Cement Industry

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Equity Research On Cement Industry

Submitted in partial fulfillment of the requirements of the MBA

Degree Course of Bangalore University

Prof. Praveen Bhagawan

M.P.BIRLA INSTITUTE OF MANAGEMENT

1 M. P. Birla Institute of Management

I here by declare that the report entitled. “Equity Research on Cement

Industry with respect to Union Budget” is prepared under the guidance of

Prof. Praveen Bhagawan (Faculty, M.P.Birla Institute of Management).I also

Place: Bangalore (O6XQCM6074)

2 M. P. Birla Institute of Management

This is to certify that Mr. SANJAY S bearing the register number

Date: Dr. Nagesh.S.Malavalli

3 M. P. Birla Institute of Management

This is to certify that Mr.SANJAY S a student of M.P.BIRLA

Date: Prof.Praveen Bhagawan

Place: Bangalore (Internal guide)

4 M. P. Birla Institute of Management

I am thankful to Dr. Nagesh malavalli, Principal M.P. Birla Institute of

I am extremely thankful to Prof.Praveen Bhagawan, M.P. Birla Institute

My gratitude will not be complete without thanking God and I am most

5 M. P. Birla Institute of Management

1. Executive Summary 1-2

4. Research Methodology 9-11

6 M. P. Birla Institute of Management

LIST OF GRAPHS AND TABLES

Sl no. PARTICULARS Page no.

03 Trend Movement of Ultratech 07-08 37

04 Trend Movement of Ultratech 08-09 38

11 Trend Movement of JK Lakshmi 07-08 45

12 Trend Movement of JK Lakshmi 08-09 46

16 Trend Movement of Ambuja cements 08-09 50

7 M. P. Birla Institute of Management

8 M. P. Birla Institute of Management

It is widely believed that stock market is related to macroeconomic fundamentals

A central issue in macroeconomics is the question of how financial markets are

9 M. P. Birla Institute of Management

10 M. P. Birla Institute of Management

2.1 THEORETICAL FRAMEWORK

Volatility: Definition and Measurement

11 M. P. Birla Institute of Management

The Stock Market and the Economy

2.2 STATEMENT OF THE PROBLEM:

Volatility of stock market is usually caused by company news, economic factors.

2.3 IMPORTANCE OF THE STUDY

12 M. P. Birla Institute of Management

2.4 SCOPE OF THE STUDY

1. Ultratech Cement ltd.

2.5 OBJECTIVES OF THE STUDY

• To predict the future prices of the shares.

13 M. P. Birla Institute of Management

14 M. P. Birla Institute of Management

The project undertaken (Equity Research in the cement industry) aimed at

• Is it actually any chances of making profits with this relation?

• To study the extent to which Union Budget affect values of shares?

15 M. P. Birla Institute of Management

16 M. P. Birla Institute of Management

4.1 Study Design

4.2 Data Gathering Procedures and Instruments:

17 M. P. Birla Institute of Management

4.3 Testing of hypothesis

Tools used for testing of hypothesis: