Report of Mcs Project

1

A

Project Report on

Management control System

Submitted To: -

Prof. sidhharth Mehta

Submitted By:-

Bhanu Pratap (M00151)

Rashika Gupta (M00111)

Shaiva Shah (M00153)

Ravi Mistry (M00146)

Akshita Paliwal (M00112)

Hardik Joshi (M00122)

2

TABLE OF CONTENT

Particulars Page

No.

Chapter: 1 Strategic Planning For Ambuja Cement 3

1.1 Company Profile: 4

1.2 SWOT analysis: 5

1.3 BCG Matrix Analysis 8

1.4 Strategic plan: (Current and upcoming projects) 9

Chapter: 2Budgets (Capital Budgets, Revenue Budget, Expenses budget

for 1 year)

11

2.1 Capital Budget 12

2.2 Revenue Budget: 12

2.3 Expense Budget: 13

2.4 Budgeted Figures for year 2013-14 14

Chapter: 3Variance Analysis (Comparison between Actual and Budget

figures)

16

3.1 Actual Budget of Ambuja Cement for 2013-14 17

3.2 Variance Analysis: 19

References: 22

3

Chapter: 1

Strategic Planning For

Ambuja Cement

4

Ambuja Cement:

1.1 Company Profile:

Ambuja Cements Ltd, a part of a global conglomerate Holcim, is one of India’s

leading cement manufacturers and has completed over 25 years of operations.

The company, initially called Gujarat Ambuja Cements Ltd, was founded by

Narotam Sekhsaria in 1983 in partnership with Suresh Neotia. Global cement

major Holcim acquired management control of Ambuja in 2006. The Company has

also made strategic investments in ACC Limited.

Ambuja Cement is an established brand in India for Ordinary Portland Cement

(OPC) and Pozzolana Portland Cement (PPC), with significant footprints across

western, eastern and northern markets of India.

Its current cement capacity is 27.25 million tons. The Company has five integrated

cement manufacturing plants and eight cement grinding units across the country. It

is the first Indian cement manufacturer to build a captive port with three terminals

along the country’s western coastline to facilitate timely, cost effective and

environmentally cleaner shipments of bulk cement to its customers. The Company

has its own fleet of ships.

It is one of the most profitable and innovative cement companies in India. The

Company has also pioneered the development of multiple bio-mass co-fired

technologies for generating greener power in its captive plants.

About Holcim

Founded in Switzerland in 1912, Holcim is one of the world’s leading suppliers of

cement and aggregates employing some 80,000 people, with production sites in

around 70 countries. Holcim’s core businesses include the manufacture and

distribution of cement, and the production, processing and distribution of

aggregates (crushed stone, gravel and sand), ready-mix concrete and asphalt. The

Company also offers consulting, research, trading, engineering and other services.

5

Vision:

To be the most sustainable and competitive company in our industry.

Mission - Create Value for all

Delighted Customers

Inspired Employees

Enlightened Partners

Energized Society

Loyal Shareholders

Healthy Environment

Our Reach

We have a nationwide reach with strong footprints in the West, North and East

India. Our cement plants cover strategic locations in all these regions. A wide

dealer network of over 26000 dealers and retailers nurtured on empowered

partnership enables our cement to reach even the tiniest village.

1.2 SWOT analysis:

Strengths

Third largest cement producer in India.

Lowest cost cement producer in India as well as in world

AMBUJA cement profit is highest and most deleveraged balance sheet in

industry.

Logistic management

Market leader in northern India as AMBUJA BRAND.

Presence in prime market

Pioneer in sea transport

First cement company to receive the ISO 9002 quality certification & the

only to be awarded, the National Quality Award

6

Well diversified fuel mix and efficient operation.

Largest cement exporter in India.

Geographically positioned, which gives flexibility to choose both domestic

as well as export market.

No1 in northern and no #2 in western market.

It has strong presence in high growth market like west, east, north, which

does not suffer from oversupply.

It has extensive dealership network of 7000 dealers and 25000 retailers

network.

Captive logistic and transport management for efficient delivery and optimal

cost.

Weaknesses

Its cyclical industry

High transport cost.

Highly regionalized and localized market.

Limited presence in southern market.

Capacity constraints to limit sales.

Lack of timely capacity addition to restrict sales.

Dependent on govt. for license of mines.

High excise duty creates cost high.

Levy of royalty over and above the technical services fees.

7

Opportunities

Huge govt. expenditure in infrastructure development to boosts the cement

demand high.

Low cost housing loan increased the real estate and individual housing also.

Rising population works as a catalyst for housing boom.

As per govt. budget, tax free income increased to Rs. 200000/- which create

saving and boost up the housing.

Low per capita consumption as 176kg where as 256kg on developed

country.

Long term growth for cement industries are favorable and it may grow at the

rate of 7% to 8%

Threats

Rising input cost of material like limestone, gypsum, and mart. Due to high

duty and high mining cost.

Gypsum are imported, due to low quality of gypsum in India, which impact

on price of production by paying the import duty.

Rising cost of logistics.

Rising cost of power.

Currency risk

Increasing diesel price are the another threat which increase the

transportation cost, which may create a material effect in freight and

forwarding cost.

Penalty threats of cartel by competition commission of India.

New entrant threats due to high potential market.

8

1.3 BCG Matrix Analysis

ACL acquires Holcim’s 50.01% equity stake in ACC

Holcim India value of INR 14,584 crore (USD ~2.4 bn) consists of 50.01% stake

in ACC for INR 11,727 crore (USD ~2.0 bn) and 9.76% stake in ACL for INR

2,857 crore (USD ~0.4 bn)

Ambuja cement enjoys

STAR Position

9

1.4 Strategic plan: (Current and upcoming projects)

Capacity Expansion projects:

The new Bulk Cement Terminal (BCT) at Mangalore commissioned in 2013 will

help the Company expand its footprint in the southern markets of India the efforts

by the Company for the usage of cost efficient fuel mix are part of the ‘GEO 20’

project which will be operational in the first half of year 2014. Here, as a result of

handling, storing and processing of waste materials, the Company will be able to

ensure more usage of Greener Fuels thereby reducing energy cost.

Upcoming Capacities and Investments

A new brown-field expansion project was announced in 2011 at Sank rail grinding

unit in the eastern region comprising a roller press and related logistics. The

project is underway, with extended scope to include advanced technical

specifications. It is slated to cost `325 crore and aimed for completion by 2016.

So far, equipment orders have been placed and civil work is in progress. This

project would add 0.80 million tonne grinding capacity to the unit, along with

Significant cement capacity addition of approximately 4.50 million tonnes with

associated clinkerisation capacity of 2.17 million tonnes is coming up at the

proposed integrated plant at Marwar Mundwa, Nagaur district in Rajasthan with

cement capacity of 1.5 MTPA.

Similar capacity grinding units at Osara (M.P.) and Dadri (U.P.), the total project

cost is estimated at `3500 crores.Part of the mining land is already in possession

and the rest is under an advanced stage of acquisition The Company is also in the

process of tying-up water sources required for construction and operations. Full-

fledged construction work is expected to commence in the latter part of 2014.

A new brown-field expansion project to set up a roller press at a cost of `70 crore

at the

Rabriyawas unit in Rajasthan, will add 0.80 million tonne grinding capacity in the

first

Half of 2014.

The year 2014 will see capital expenditure worth `802 crores, over and above the

`725 crores investment mad

10

Ambuja Cement to set up three new plants :( Main 5 years Strategic Plan)

Ambuja Cements will invest US$133m in 2014 from internal funds in order to

partially finance its on-going capacity expansion projects.

"2014 will see capital expenditure worth US$133m, over and above the US$120m

investment made in 2013. The entire proposed expenditure will be financed by

internal funds,

At present, Ambuja Cements has a cement production capacity of 27.25Mt/yr. It is

setting up three 1.5Mt/yr capacity Greenfield cement plants in Rajasthan, Madhya

Pradesh and Uttar Pradesh. Ambuja Cements is investing US$581m for setting up

the three new plants.

In first 5 year we will be completed our Madhya Pradesh plan

MAJOR COST MOVEMENTS:

1) Cost of major raw material, fly ash, increased by 7% on per tonne basis.

However, strategy to change in mix of gypsum results in cost decrease by 2% on

per tonne basis.

Overall, the absolute raw material cost decreased by approx. 6% over the 2013

2) Power and fuel costs account for approximately 26% of the total operating cost

of the Company.

3) Coal cost for kiln and captive power plants reduced by 8% and 10%

respectively, due to reduced usage of imported coal and also substitution of high

cost coal by pet coke usage.

4) The cost of packing bags went: around 14%, driven by increase in PP granule

prices.

5) Freight and forwarding cost works out to 30% of total operating costs the same

hardened by 6% on per tonne basis (due to an increase in diesel prices)

11

Chapter: 2

Budgets (Capital Budgets, Revenue Budget,

Expenses budget for 1 year)

12

2.1 Capital Budget

Capital Expenditures is referred as amount of money needed to spend on capital

items or fixed assets such as land, buildings, roads, equipment, etc. that are

projected to generate income in the future.

2.2 Revenue Budget:

Revenue Budget for Ambuja cement 2013-14

Particulars Amount(Rs)

income from sales 1000000

Other income 7000

Total Revenue: 1007000

Sources of Fund

Internal

fund 10000,00,000

Capital Budget of Ambuja cement for year 2013-14

Particular Amount (Rs)

Leasehold Land 5000,00,000

Buildings 10,00,000

Construction &

Survey Equipments 320 971

Vehicles* 11828569

Furniture &

Fixtures 11296329

Computers 9699912

Audio & Visual

Equipments 2415227

Office

Equipments 5681112

Technical &

Sports Equipments 804829

Total 5427,25,978

The cost of project Specify in the strategy planning that $ 133 US

Dollar but it’s for 3 project so we taken part of that for our

particular year

13

2.3 Expense Budget:

Expense Budget for Ambuja cement 2013-14

Particulars Amount (Rs)

Cost of Material Consumed 73499

b) Change in inventories of finished

goods,

work-in-progress and stock-in-trade 13689

c) Employee benefits expense 65000

d) Depreciation and amortisation

expense 48703

e) Power and fuel 350000

f) Freight and forwarding:

On finished goods 215698

On Internal material 120569

g) Other Expenses 300000

Total Expenses 1187158

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2.4 Budgeted Figures for year 2013-14

Budgeted AMBUJA CEMENTS LIMITED YEARLY PERFORMANCE

OF THE YEAR 2013-14

Particulars

Income from Operations

a) Net sales/ income from

operations(Net of excise duty) 1000000

b) Other operating income 7000

Total income from operations

(Net)

1007000

Expenses

a) Cost of Material Consumed 73499

b) Change in inventories of

finished goods,

work-in-progress and stock-in-

trade

13689

c) Employee benefits expense 65000


expense 48703

e) Power and fuel 350000


On finished goods 215698

On Internal material 120569

g) Other Expenses 300000

Total Expenses 1187158

Profit from operations before

other income, 7484614

Other income

a) Interest income 46355

b) Others 35489

Total other income 7566458

Profit before finance costs but

before exceptional item 265984

Finance costs 7529

15

Profit after finance costs but

before exceptional item 258455

Exceptional Item

Profit before tax 258455

Tax expense 43698

Net profit for the period 214757

Paid- up- equity share capital

( Face value Rs 2 each) 123057

Reserves excluding Revaluation

Reserves as

per balance sheet of previous

accounting year

Earnings per share (in Rs):

(of Ts 2 each) (not annualised)

a) Basic 11.08

b)Diluted 11.08

Data as per assumption

16

Chapter: 3

Variance Analysis (Comparison between

Actual and Budget figures)

17

3.1 Actual Budget of Ambuja Cement for 2013-14

AMBUJA CEMENTS LIMITED YEARLY PERFORMANCE OF THE YEAR 2013-14

Sr.

NO

Q4 Q3 Q2 Q1 Annual

Figures

as

on

31.3.2014

Three

months

ended

Three

months

ended

Three

months

ended

Three

months

ended

Particulars

1) Income from Operations

a) Net sales/ income

from operations(Net of excise duty)

263980 200494 234573 254483 953530

b) Other operating income 952 1251 3077 1219 6499

Total income from operations (Net) 264932 201745 237650 255702 960029

2) Expenses

a) Cost of Material Consumed 20168 14342 16554 17627 68691


goods,

work-in-progress and stock-in-trade

5347 5959 -6257 6797 11846

c) Employee benefits expense 12908 13003 13179 12076 51166


expense

11974 12456 12233 12040 48703

e) Power and fuel 57832 45682 55597 54945 214056


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On finished goods 51416 40078 45258 49827 186579

On Internal material 57179 12388 16160 14659 100386

g) Other Expenses 43290 43507 44854 44462 176113

Total Expenses 218191 187415 197603 212427 815636

3) Profit from operations before other

income,

finance costs and exceptional item

46741 14330 40047 43275 144393

4) Other income

a) Interest income 6224 5579 5804 6037 23644

b) Others 6965 2570 1633 8915 20083

Total other income 13189 8149 7437 14952 43727

5) Profit before finance costs but before

exceptional item

59930 22479 47484 58227 188120

6) Finance costs 1610 1783 1708 1324 6425

7) Profit after finance costs but before

exceptional item

58320 20696 45776 56903 181695

8) Exceptional Item 2482 2482

9) Profit before tax 58320 23178 4576 56903 142977

10) Tax expense 6319 6581 13356 8113 34369

11) Net profit for the period 52001 16597 32420 48790 149808

12) Paid- up- equity share capital

( Face value Rs 2 each)

30925 30898 30385 30849 123057

13) Earnings per share (in Rs):(of Ts 2 each)

(not annualised)

a) Basic 3.36 1.07 2.08 3.16 9.67

b)Diluted 3.36 1.07 2.07 3.15 9.65

19

3.2 Variance Analysis:

Variance Analysis

Particulars Actual

Annual

Figures

as

on

31.3.2014

Budgeted

Annual

Figures as

on

31.3.2014

Variance A/F

Income from Operations

a) Net sales/ income from

operations(Net of excise duty)

953530 1000000 -46470 A

b) Other operating income 6499 7000 -501 A

Total income from operations (Net) 960029 1007000 -46971 A

0

Expenses 0

a) Cost of Material Consumed 68691 73499 -4808 F


goods,

work-in-progress and stock-in-trade

11846 13689 -1843 F

c) Employee benefits expense 51166 65000 -13834 F


expense

48703 48703 0

e) Power and fuel 214056 350000 -135944

f) Freight and forwarding: 0

On finished goods 186579 215698 -29119

On Internal material 100386 120569 -20183

0

g) Other Expenses 176113 300000 -123887

Total Expenses 815636 1187158 -371522 F

Profit from operations before other

income,

finance costs and exceptional item

144393 7484614 -7340221 F

Other income 0

a) Interest income 23644 46355 -22711

b) Others 20083 35489 -15406

Total other income 43727 7566458 -7522731

Profit before finance costs but

before exceptional item

188120 265984 -77864

20

Finance costs 6425 7529 -1104

Profit after finance costs but

before exceptional item

181695 258455 -76760

Exceptional Item 2482 2482

Profit before tax 142977 258455 -115478

Tax expense 34369 43698 -9329

Net profit for the period 149808 214757 -64949

Paid- up- equity share capital

( Face value Rs 2 each)

123057 123057 0

Reserves excluding Revaluation

Reserves as

per balance sheet of previous

accounting year

0

Earnings per share (in Rs):

(of Ts 2 each) (not annualised)

0

a) Basic 9.67 11.08 -1.41

b)Diluted 9.65 11.08 -1.43

Data as per assumption

Sales Variance:

Actual sales – Budgeted sales

953530 1000000 -46470 A(Adverse)

Interpretation: - This is negative variance. The sales goes down as per the pre

decided budgeted

21

Revenue variance:

Actual revenue – Budgeted revenue (revenue include other income of the

firm)

960029 1007000 -46971 A(Adverse)

Interpretation: - This is negative variance. The revenue is also getting affected.

The company incurred loss in the Revenue.

Expense Variance:

Total Expense:

Actual Expenses – Budgeted Expenses

815636 1187158 -371522

F(Favourable)

Interpretation: - The positive thing is that there is control in the overall expenses

of the company. The variance is favorable for the company.

Employee benefits expenses:

Actual Expenses – Budgeted Expenses

51166 65000 -

13834 F(Favourable)

Interpretation: - The positive thing is that there is control in the overall expenses

in the employee’s benefits of the company. The variance is favorable for the

company.

Conclusion: - Sales and Revenue are in negative side for the company but on

another hand Expense and Employee benefits are in the favorable for the company.

The company must have to look after the strategy and the control mechanism to

secure competitive advantage in the market.

22

References:

1) http://www.ambujacement.com/investor-relations/annual-reports/

2) http://www.ambujacement.com/wp-

content/uploads/Ambuja%20Cement%20Annual%20Report_2013.pdf_0.pdf

3) http://www.globalcement.com/news/item/2422-ambuja-cements-to-set-up-

three-new-plants

4) http://www.moneycontrol.com/annual-report/ambujacements/directors-

report/AC18#AC18

5) http://www.ambujacement.com/wp-

content/themes/ambuja/downloads/investor-

presentations/Investor_Presentation7thSept2013.pdf

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Report of Mcs Project