India Cements Ltd – an Internal Environment Analysis

INDIA CEMENTS LIMITED- AN INTERNAL ENVIRONMENT ANALYSIS     EXECUTIVE SUMMARY This report analyses how successfully India Cements has been able to leverage its internal environment in order to maintain its No. 1 position in South India. India Cements enjoys a good fraction of the market share of the Indian cement industry. The report begins with a brief introduction of the company and its product offerings. It then briefly describes various forces in the internal environment such as Vision and Mission, Value System, Management Structure and Nature, Human Resource, Brand Equity and finally the Performance of the Enterprise. Using financial ratios, the performance of the enterprise has been analysed in the backdrop of the cement industry. The company has been able to perform well despite being in the news lately for the wrong reasons. Although it suffered some shocks which reflected in its stock prices, the company has still been able to perform decently. The vision and mission and the value system of the company are well in sync with each other thus complementing all the activities the company takes up be it the various CSR projects or ownership of the IPL franchisee Chennai Super Kings. The Shareholding pattern of the company shows a strong holding by foreign investors which indicates that there is good confidence in the market for the company. Its HR practices ensure all employees work towards achieving a common goal of creating sustainable value for the company which is in concurrence with the vision of the company. TABLE OF CONTENTS

Serial No.	Heading	Page No.
1	Introduction	4
About India Cements	4
Product Offerings	4
2	Internal Environment	5
Vision and Mission	5
Value System and CSR	5
3	Management Structure and Nature	6
Board of Directors Composition	6
Shareholding Pattern	7
4	Human Resources	7
Recruitment	8
Performance management	8
5	Brand Equity and Image	8
6	Performance of the Enterprise	9
Liquidity Ratios	9
Turnover Ratios	9
7	References	10

LIST OF ILLUSTRATIONS

Serial No.	Illustration	Page No.
1	Board of Directors, Composition	6
2	Shareholding Pattern	7
3	India Cements, Key Financial Ratios	9
4	Indian Cement Industry Aggregate Financial Ratios	10

INTRODUCTION About India Cements India Cements Limited, founded by S. N. N. Sankaralinga Iyer in 1946, is the 3rd largest cement manufacturing company in India. It is currently headed by N. Srinivasan, Vice chairman and managing director. Mahendra Singh Dhoni, the ODI Captain of the Indian Cricket team was appointed as the Vice President of India Cements in 2013. ICL has close to 7 cement manufacturing plants in Southern India catering to South Indian and Maharashtrian markets. The capacity of these plants is around 9 million tons per annum. ICL markets its products under the brands Sankar Cement, Coramandel CementandRaasi Gold. Product Offerings The 53 grade cements offered by the company find application in RCC works; concrete roads; runways; multi storied buildings and bridges. The company also offers blended cements for marine structure and plastering & finishing works. It also offers sulphate resisting port land cement under the Sankar SRC for underground structures and basements, foundations and piles; sewage and water treatment plants; fertilizers, chemicals and sugar factories; petrochemical projects and food processing industries and coastal area construction works. Its offerings also include ready mix concrete for large, medium and small construction projects, such as dams, bridges, dams and industrial structures. India Cements Ltd. also ownsIndian Premier League'sChennaifranchise,Chennai Super Kings. The idea behind owning an IPL team was promoting their brand, and to providing the company with a corporate image of its own. Currently, its market capitalisation stands at Rs.3,432 crore. It has also reported a standalone sales of Rs. 1,131 crore. Net Profit for the quarter ended Sep 2014 were Rs 7.5 crore. INTERNAL ENVIRONMENT VISION AND MISSION Vision “To create value on a sustained basis for all stakeholders of India Cements through lofty standards of transparency, accountability and responsibility, innovation and leadership in cement manufacture.” The Vision of India Cements Ltd. shows that the company seeks to create value sustainably for its stakeholders and also be accountable and transparent in their conduct. Mission “India Cements will strive to remain a leader in the manufacture of cement and establish itself as a preferred supplier of products and services to its clients and enhance the brand value for all stakeholders. As the organisation grows, as a responsible corporate citizen, India Cements shall be sensitive to the welfare and development needs of the society around it.” The Mission of the company is in line with its vision of creating value for all stakeholders but it also lays emphasis on being responsive to the needs of the society. This can been seen as one of the highly practised value in the company which has given rise to a lot of CSR projects. VALUE SYSTEM AND CSRs The underlying value that has been a part of India Cements since its inception is that of giving back to the society. It is involved in various community developing initiatives such as ENLIVE under which various skill training programmes are organised for youth and women of target villages and VANI-Value Addition and Necessary Improvement in schools under which various educational institutes are run by the company in collaboration with the government. Apart from these, initiatives like using alternative fuels and reduction of power consumption to protect the environment from damage are also a part of India Cements’ value system. Thus the company believes in going beyond cement manufacturing and orienting its activities in a sustainable and environment & community friendly way. MANAGEMENT STRUCTURE AND NATURE Board of Directors Composition The Vice Chairman & M.D. Mr. N Srinivasan is the former President of BCCI and the newly elected ICC Chairman. He is also the owner of the IPL franchisee Chennai Super Kings. He is being investigated in various scams, one of them being betting on IPL cricket matches, where his son-in-law Gurunath Meiyappan has been accused for passing inside information to bookies and has been jailed. Mr. Srinivasan was ordered to resign from the BCCI by the Supreme Court of India due to his ongoing investigations in the betting scam. Immediately after this hearing, the share price of India Cements dropped by 9%. Although financially CSK does not contribute more than 4% to India Cements’ revenue, termination of CSK will definitely impact the company negatively. Chitra Srinivasan and Rupa Gurunath, the Directors of India Cements are N Srinivasan’s wife and daughter respectively. Mr. Srinivasan is also an accused in the Jagan Mohan Reddy scam. It was alleged that India Cements invested Rs.140 crore into Jagan Reddy’s businesses in return for the benefits it received from Y.S. Rajasekhara Reddy’s government who is the father of Jagan Mohan Reddy. Shareholding Pattern As can be seen from the above table, about one-third of the total shares of the company are owned by foreign institutions. This portrays a very positive picture of the company as it shows FII confidence in the company is high. The Directors hold only about 5,500 shares out of the total shares of the company which is a very small number. The Promoters stake is around 28% which can be taken as a positive indicator for the company. It shows that the promoters believe in the company. Holding by mutual funds normally indicates how favoured a stock is. In the case of India Cements Ltd, about 5% of stocks are held by mutual funds and NBFCs. HUMAN RESOURCE India Cements’ Human Resource philosophy revolves around the concept of making a good organization through good people. Known for its solid focus management, leadership qualities enhancement, team building and encouragement of workforce to grow along with the organization, it has built a reputed code of conduct with special focus on ethics and corporate governance. It also focusses on training and development in order to ensure its workforce is well-equipped to face any kind of challenges in a competitive environment. It also believes in continuous up gradation of its employees’ skills and knowledge. The team of 3200 employees includes engineers, chartered accountants, cost accountants, MBAs, CSs, IT specialists and HR professionals. Recruitment Recruitment in India Cements is a fair and transparent process which involves adequate opportunities to seek good candidates from outside as well as internally. Tests of competence are incorporated at every step to make the recruitment process an objective one. A committee of recruitment handles this entire process of recruitment from applications screening to shortlisting to interviews to final selection. Performance management The company’s performance management system or PMS provides great opportunities and incentives to employees to ensure retention of good talent in the company and to also ensure they are rightfully rewarded. These include incentives linked to performance, awards for good work, letter of appreciation, promotions, nomination to training programmes both within India and abroad, public appreciation and felicitation. BRAND EQUITY AND IMAGE Owing to various scams in which the MD of India Cements has been involved, the brand image of India Cements has suffered in the recent years. It is the largest cement manufacturing company in South India. The IPL franchisee owned by India Cements, Chennai Super Kings won two IPLs back to back adding to the brand image of the company. However conviction of Gurunath Meiyappan, the son-in law of N Srinivasan in the IPL betting scam of 2013 has brought India Cements into negative light. India Cements had announced in September 2014, a demerger of CSK into a wholly-owned subsidiary. Mr. Srinivasan wishes to nurture Chennai Super Kings into a billion dollar entity. However Chennai Super Kings might be terminated according to IPL rules. All these factors have affected the image of the company which had appointed MS Dhoni as the Vice President of the company to increase its brand equity. PERFORMANCE OF THE ENTERPRISE The Indian cement industry has an oligopolistic structure. ACC is the market leader and the 5 major players of the industry namely ACC, Grasim, Ultratech, Gujarat Ambuja & India Cements together enjoy 65% market share. An analysis of the financial performance of the company can be done using financial ratios for the company and comparing them with industry’s financial ratios. As can be seen from the tables below, the debt to equity ratio for the financial year 2013-14 for India Cements was 0.87 as compared to the industry aggregate of 1.02 which indicates India Cements finances its operations lesser by debt than industry. Thus, it has lesser burden of interest payment compared to the trend in the industry. Liquidity Ratios: The current ratio for India Cements has been close to 0.5 since the last three years as against the industry’s 1.75. This is because India Cements finances its activities through its assets which reduces interest payment burden. Turnover Ratios: Inventory turnover ratio for India Cements has been pretty high since the last seven years. This shows the company manages its resources well and has had good sales. In contrast, the industry inventory turnover has been lower than Indian Cements. Debtor turnover ratio indicates India Cements has a faster collection period than the industry which indicates a strong liquidity position. Interest Coverage Ratio of India Cements suggests India Cements has been able to meet its interest obligations quite well. Industry trend suggests Interest coverage ratio has been above 2 and the enterprise has been able to maintain its interest payment in line with the industry. Profit before interest and taxes margin (PBIT) has been lower for the enterprise as compared to the industry in 2013-14. This is because of the negative publicity the company received in the IPL betting scam wherein the Chairman Mr. N Srinivasan’s son-in-law Gurunath Meiyappan was convicted. Despite various negative publicity that the company has received, it has been able to perform quite well in comparison to the industry. India Cements commands a good market share in the industry and is the largest cement manufacturer in South India. Table 1: India Cements-Financial Ratios Table 2: Indian Cement Industry- Financial Ratios 1 | Page

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