Capital Structure Analysis

CAPITAL STRUCTURE
INTRODUTION:
Every organization
requires funds to run and maintain its business the
required funds may be raised from short term sources or long term sources or a combination
both the sources of funds, so as to equip it self with an appropriate combination of fixed
assets and current assets. Current assets to a considerable extent are financed with the help of
short term sources. Normally, firms are expected to follow a prudent financial policy, as
revealed in the maintenance of net current assets. These net positive current assets must be
financed by long term sources. Hence long term sources of funds are required to finance for
both.
Long term assets (fixed assets)
Net working capital (Positive Current assets).

A firm can easily estimate the required funds by a detailed study of the investment
decision. In other words, anticipation of the require funds may be estimated analyzing the
investments decision. Once anticipation of require funds is completed then the next step is
financial for the manager to make decisions related to the finance or the selected investment
decisions. Generally capital is raised from the prime source are
Equity
Debt
As the objective of a firm should be directed towards the maximization of the value of
the firm, the capital structure decision should be examined from the point of its impact on the
firm. If the value of the firm can be affected by capital structure, a firm would like to have a
capital structure, which maximizes the market value of the firm. There exist conflicting
theories on the relationship between capital structure and the value of the firm.
Capital structure decisions are significant finance of the corporate firm in that they
influence the return as the risk of equity shareholders.
That there exist close Nexus between optimum judicious debt and the market
value/valuation of the firm is well recognized in literature of finance. While the excessive use
of debt may endanger the every survival of the corporate firms, the conservative policy may
deprive its equity-holders the advantage of debt as a cheaper source of finance to magnify
MBA Department,Aizza College of Engineering & Technology
their rate of return. Following such an over-conservative policy runs counter the basic
objective of financial decision making to maximize the wealth of equity holder.
Apart from financial risk return consideration, non-financial factors are also likely to
be very decisive in designing capital structure of the corporate famous for instance use of
debt, unlike equity doesnt dilute the controlling power of existing owners in brief, debt is not
an unmixed blessing and, hence a dilemma for the corporate finance manager.
OBJECTIVE OF THE STUDY:

The study is conducted to evaluated capital structure analysis performance of
KESORAM CEMENT.
To know over all the cost capital (KO) and the value of the firm (V).
To know the capitalization rate of an equity and premium for financial risk.
To know cut off rate for investment purposes is completely independent of the way in
which an investment is financed.
To make the impact of Capital on work in financial performance.
NEED & SCOPE OF THE STUDY:

The corporate and personal income taxes do not exist. The business risk is constant
over time and is assumed to be independent of its capital structure. The given the assumptions
of perfect information and rationality. The business risk is equal among all firms with in
similar operating environment.
Since it will not be possible to conduct a micro level of all cement industries in
Andhra Pradesh, the study is restricted to KESORAM CEMENT only.
RESEARCH METHODOLOGY:
Methodology is a systematic procedure of collecting information in order to analyze
and verify a phenomenon. The collection of data through two principle sources viz.
(1) Primary data
(2) Secondary data
PRIMARY DATA:
I have collected the information by interacting with the finance manager & concerned
executives at the administrative office.
SECONDARY DATA:
The secondary data was collected from already published sources such as pamphlets
annual reports, reports and internal records books and company website.
LIMITATIONS OF THE STUDY:

The study is limited up to the data and information provided by KESORAM
CEMENT and is annual reports.
It is dipped to judge the results-valve due to the change market valves of the firm.
The time period of this project is limited to 45 days only.
The data is related to past 5 years.
Due to confidential financial records the data is not exposing.
ABOUT CEMENT INDUSTRY:

History:
Cement is the essential commodity on which our standard of living is greatly
dependent. It is a fine ground powder, which when mixed with water sets to a hard mass.
Cement was invented by JOSEPH ASPIDIN a leading builder and brick layer. Cement was
patented in the year 1824 in England.
German standard comities: DEF

Binding agents consisting essentially of compounds of oxide, with silica, alumina and
iron oxides, this can be harden in air and water and are stable in water after they harden and
which further more satisfy the conditions to strength.
All the raw materials consisting of:
Lime (CAO)
: 60-67%
Silica (SIO2)
: 17-25%
ALUMINIA
: 3-8%
IRONOXIDE
: 0.5-6%
MAGNESIUM
: 1-4%
Are finely grounded on the raw mills and heated to the temperature of about 1500c in
the Rotary kiln resulting in the formation of CLINKER. The clinker is ground to the fine
powder. The clinker is containing the following components.
C2S - tricalcium silicate (About 45%)
C2s - Dicalcium silicate (About 25%)
C2S - Tricalcium aluminate (About 7-10%)
Indian Cement Industry Background:

The history of the cement industry in India dates back to the 1889 when a Kolkatabased company started manufacturing cement from Argillaceous. But the industry started
getting the organized shape in the early 1900s. In 1914, India Cement Company Ltd was
established in Porbandar with a capacity of 10,000 tons and production of 1000 installed. The
World War I gave the first initial thrust to the cement industry in India and the industry
started growing at a fast rate in terms of production, manufacturing units, and installed
capacity. This stage was referred to as the Nascent Stage of Indian Cement Company.
In 1927, Concrete Association of India was set up to create public awareness on the
utility of cement as well as to propagate cement consumption.
India, being the second largest cement producer in the world after China with a total
capacity of 151.2 Million Tones (MT), has got a huge Cement Company. With the
government of India giving boost to various infrastructure projects, housing facilities and
road networks, the cement industry in India is currently growing at an enviable pace. .
The cement industry in India is dominated by around 20 companies, which account
for almost 70% of the total cement production in India. In the present year, the Indian cement
companies have produced 11 MT cement during April-September 2009. It took the total
cement production in FY09 to 231 MT.
TECHNOLOGY:
Cement may be manufactured employing three alternative technologies.
1. The largely out molded well process technology.
2. The more modern dry process that required only 19% coal unitization.
3. The latest percallinator technology through which optimum utilization may be
achieved.
Here the calcinatory or raw materials is partly or completed carried out before the
feud enters the rotator kin besides saving power, the adoption of this technology enable in
increase in installed capacity by 30-35% the 30,000 tons per day plants being set up in the
country use this technology.
DISTRIBUTION SYSTEM:
Distribution of cement was entirely under government control until 1982. at present
the industry has to make an agreement towards the levy quota which is to be sold
compulsorily to the government the rest of the output or open market quota may be sold in
the open market evolved prices the output lifted by the government is allocated state wise.
NEED AND IMPORTANCE:

In India we see raped industrial development in the last few centuries. Indian industry
is growing at considerable ratio, which reveals India is a developing country. And there are
different industrial sectors are playing a vital role for the economys development. They are
steel cement SOF information Technology Medical Science etc.
One among them was CEMENT INDUSTRY which plays a vital role for the
countrys development. In India cement industry is growing rationally and marketing is the
king pin of all activities particularly to the business because of the changes in the external
environment i.e., social, political, legal, technical and international environment and changes
in marketing.
There is increase in the salaries in all most in every market leading to competition in
aspects of price, promotion etc. which help to increase the standard of living of people.
The manufacturers of cement like; Kesoram Cement, India Limited, Orient Limited,
Ultratech etc. are providing cement and they are distributing cement through wide network of
dealers.
Kesoram cements are doing its business from decades and it is continuously
contributing to the national economy. In even industry now days there is no special interest
for particularly department like production or manufacturing but now a days total quality
management plays a vital for the companys success.
Distribution channel plays a vital role for the companys success. Distribution
channels are link between the company and consumers.
INTRODUCTION OF CEMENT:
The basic need of human being is food, clothing and shelter love and
affection/possession is on never ending process for a human being. As the time passes on
human beings their wants and wishes also changed from ancient times to modern times and
among them the living pattern and construction works also have changed from temporary
construction of house to permanent construction and the basic material used in construction
and the basic material used in construction is Cement.
Cement the word derived from a Latin word CEMENTTUM means stone chipping
such as we used in roman.
Cement the word as per oxford; it is commonly used in any substance applied for soft
stocking things. But cement means is most vital and important material for modern
constructions. It is a material which sets and hardness when mixed with water. Cement is
basically used in construction as a building agent. In ancient times clay bricks and stones
have been used for construction works.
The Romans were using a binding or a cementing material that would harden and
water. The first systematic effort was made by SMEATON who undertook the execution of
a new light house in 1756. He observed that production obtained by during lime stone was
the best cementing material for work under water.
The construction is lost centuries was with lime that was the main equipment used for
construction work. The ancient constructions like; Tajmahal, Qutubminar, Mysore Palace,
Red Fort, Charminar etc. and the evidence of lime construction
The raw materials used for manufacturing cement.
1. Lime Stone
2. Bauxite
3. Hematite
4. Gypsum
1. LIME STONE:
Depending upon the percentage of CaCo3 Lime Stone is classified in two grades namely
high grade material (contains more than 79.5 CaCo3 and low grade material (contains less
than 79.57 CaCo3) Lime stone is excavated at Quarry (Mines), which is 4 Kms away from
plant. Then the lime stone is transported form mines to the crushers at plant side by dumpers
having capacity of 20 tonnes each.
2. BAUXITE:
Bauxite is used a flux fore a suborning / clinkerisation and it will improve the workability
of cement. Bauxite is available at Kolhapur, Goa and Mallapally in Warangal district. From
there, it will be transported by road.
3. GYPSUM:
Gypsum is used in manufacturing of cement to control setting time. It is available at EID
parry Madras and Coromandal Fertilizers at Vishakapatnam.
Classification of cement:
Cement is three types. They are as follows:
a) puzzolantic cement
b) natural cement
c) portlant cement
a) puzzolantic cement:
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It consists of silicates calcium and aluminum. It shows the hydraulic properties. When
it is in the form of powder and being mixed with suitable proportion of lime. The rate of
hardening is much slower and the comprehensive strength developed is about a half of
Portland cement. It is found more resistant to the chemical action that others.
b) natural cement:
This is natural occurring material. It is obtained form cement rocks. The cement rocks
are claying lime stones containing silicates aluminates of calcium. The selling property of
this cement is more than the Portland cement but is comprehensive strength is half of its.
c) Portland cement:
Portland cement is the most common type of cement in general use around the world
because it is a basic ingredient of concrete, mortar, stucco and most non-specialty grout. It
is a fine power produced by grinding Portland cement clinker (more than 90%) a limited
amount of calcium surface (which controls the set time) and up to 5% minor constituents
as allowed by various standards.
Types of Portland cement:

Ordinary Portland cement.
Rapid hardening Portland cement.
Low heat cement.
White or colored cement.
Water proof Portland cement.
Portland slag cement.
Sulphate resisting cement.
Oil well cement.
TYPES OF CEMENT:
We are manufacturing following types of cement.
1. Ordinary Portland cement (OPC)-43 Grade.
2. Ordinary Portland cement (OPC)-53 Grade.
3. Pozzalana Portland cements (PPC).
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4. Sulphate Resistant Portland cement (SRPC).

Presently they are manufacturing Brila Shakthi PPC, Birla Supreme the 43 Grade cement
is a widely accepted and popular brand in the market, commanding a premium. However, to
meet the specific demands of the consumers, kesoram brought out the 53 Grade Birla
Supreme Gold, which has special qualities like higher fineness, quick setting, high
comprehensive strength and durability.
Recent Investments in the Indian Cement Industry:

In a recent announcement, the second largest cement company in South India, Dalmia
Cement declared that it's going to invest more than US$ 652.6 million in the next 2-3 years to
add 10 MT capacity.
Anil Ambani-led Reliance Infrastructure is going to build up cement plants with a
total capacity of yearly 20 MT in the next 5 years. For this, the company will invest US$ 2.1
billion. India Cements is going to set up 2 thermal power plants in Andhra Pradesh and Tamil
Nadu at a cost of US$ 104 billion.
Anil Ambani-led Reliance Cementation is also going to set up a 5 MT integrated
cement plant in Maharashtra. It will invest US$ 463.2 million for that. Jaiprakash Associates
Ltd has signed a MoU with Assam Mineral Development Corporation Limited to set up a 2
MT cement plant. The estimated project cost is US$ 221.36 million.
Rungta Mines (RML) is also planning to invest US$ 123 million for setting up a 1 MT
cement plant in Orissa.
STATE WISE CEMENT PLANTS:

S.no
State
01
Assam
No. of cement
plants(large)
12
02
Andhra Pradesh
19
03
Bihar
04
Delhi
07
Gujarat
13
08
Haryana
09
Himachal Pradesh
10
Jammu and Kashmir
09
Karnataka
10
Kerala
11
Meghalaya
12
Maharastra
13
Madhya Pradesh
23
14
Orissa
15
Rajasthan
15
16
Tamilnadu
17
Uttar Pradesh
18
West Bengal
Total
123
CEMENT PRODUCTION WORLDWIDE (2006-2007):

(In Million Tones)
13
COUNTRY
2006
2007
China
530.26
550.00
India
123.26
150.33
Japan
115.58
125.50
USA
132.10
145.00
Italy
65.09
80.09
Other countries
855.04
850.65
TOTAL WORLD
1821.15
1902.07
ORGANIZATION PROFILE
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INTRODUCTION:
This chapter examines a profile of Kesoram Cement. i.e., its history, location,
organization structure etc.
LOCATION:
Kesoram Cement Industry is one of the leading manufacturers of cement of India. It is
day process cement plant. The plant capacity is 8.26 lakh tones per annum. It is located at
Basanth Nagar is 8kms away from Ramagundam Railway Station linking Madras to New
Delhi. The Chairman of the Company is Sri.B.K.Birla.
HISTORY:
The first unit at Basanth Nagar with capacity of 2.5 lakh tons per annum incorporating
suspension preheated system was commissioned during the year 1969. The second unit was
setup in year 1971 with a capacity of 2.1 tons per annum and the third unit with a capacity of
2.5 lakh tons per annum went on stream in the year 1978. the coal from this company is being
supplied from Singareni Collieries and the power is obtained from APGENCO. The power
demand for the factory is about 21MW. Kesoram has got 2DG sets of 4MW each installed in
the year 1987.
Kesoram Cement has set up a 15KW capacity power plant to facilitate for
uninterrupted power supply for manufacturing of cement starts at 24 th August 206 per hour
12MW, actual power is 15MW.Birla Supreme is popular brand of Kesoram cement from its
prestigious plant of Basanth nagar in A.P. which has outstanding track record in performance
and productivity serving the nation for the lat two and half decades. It has proved its
distinction by bagging several national awards. It also has the distinction of achieving
optimum capacity utilization.
Kesoram offers a choice of top quality portioned cement for light, heavy constructions
and allied applications. Quality is built every fact of the operations.
The plant layout is rational to begin with. The limestone is rich in calcium carbonate a
key factor that influences the quality of final product. The day process technology used in the
latest computerized monitoring overseas the manufacturing process.
Samples are sent regularly to the bureau of India Standards, National Council of
construction and building material for certification of derived quality norms.
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The company has vigorously undertaking different measures for promoting their
product through different media which includes the use of newspapers, magazines, hording
etc
Kesoram cement industry distinguished itself among all the cement factories in India
by bagging the National Productivity Award consecutively for two years i.e., for the year
1985-1987. the federation of Andhra Pradesh Chamber of Commerce & industries (FAPCCI)
also conferred on Kesoram Cement, and award for the best industrial promotion expansion
efforts in the State for the year 1984. Kesoram also bagged FAPCCI award for Best Family
Planning effort in the State for the year 1987-1988.
One among the industrial giants in the country today, serving the nation on the
industrial front. Kesoram Industries Ltd. has a chequered and eventful history dating back to
the twenties when the industrial House of Birlas acquired it. With only a textile mill under its
banner in 1924, it grew from strength to strength and spread its activities to newer fields like;
Rayon, Pulp, and Transparent paper, spun pipes, refractoriness, tires and other products.
Looking to the wide gap between the demand and supply of a vital commodity
cement, which plays an important role in National building activity the Government of India
had de-licensed the cement industry in the year 1966 with a view to attract private
entrepreneurs to augment the cement production. Kesoram rose to the occasion and divided to
setup a few cement plants in the country.
Kesoram cement undertaking marketing activities extensively in the States of Andhra
Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In A.P. Sales Depots are
located in different areas like; Karimnagar, Warangal, Nizamabad, Vijayawada and Nellore.
In other states it has opened around 10 depots.
Many a site in different parts of the country was considered but the final choice fell on
Andhra Pradesh a site in the Godvari river valley at thakkallapalli reserver has been selected
for putting up the first cement plant. It has got natural advantages like power station, coal
mines and all head are located with in radius of 15 kilometers from the site.
Having located a site kesoram lost no time in drawing up a blue print for a modern
cement plant with an ultimate aim to make it the biggest cement plant in the country with the
necessary resources men and materials at its commands, it did not take much time to execute
the project.
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The market share of Kesoram Cement in A.P. is 7..05%. The market share of the
company in various states is shown as under.
STATES
Karnataka
Tamilnadu
Kerala
Maharashtra
Andhra Pradesh
Gujarath
MARKET SHARE
4.09%
0..94%
0.29%
2.81%
7.05%
3.64%
VISSION:
To be premium global conglomerate with a clear focus.
MISSION:
To deliver superior value to our customers, shareholders,employees and society at
large.
VALUES:
Integrity
Commitment
Passion
Seamlessness
SOCIAL CAUSES:
Widow / dowry-less mass marriages
Women empowerment
Awareness drives on knowledge
attitude and practices
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HEALTH AND FAMILY WELFARE:

Mobile clinics - doctors visit once a week
Medical camps - general and issue-based
Health training and awareness
Sanitation - toilets, training, smokeless chullahs biogas
Safe drinking water
Mother and child health
KESORAM PRODUCTS:
1. Ordinary Portland cement (opc)
43 grade-known as Birla supreme
53 grade-known as Birla supreme gold
2. Portland pozzoland cement (ppc)
3. sulphate resistant Portland cement(srpc).
Power :
Sing Reni collieries make the supply of coal for this industry and the power was
obtained from AP TRANSCO. The power demand for the factory is about 21 MW. Kesoram
has got 2 diesel generator sets of 4 MW each installed in the year 1987.
Kesoram cement now has a 15 kW capacity plant to facilitate for uninterrupted power
supply for manufactured of cement.
Electricity:
The power consumption per ton for cement has come down to 108 units against 113
units last year, due to implementation of various energy saving measures. The performance of
captive power plant of this section continues to be satisfactory. Total power generation during
the years was 84 million units last year. This captive power plant is playing a major role in
keeping power costs with in economic levels.
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The management has introduced various HRD programs for training and development
and has taken various other measures for the betterment of employees efficiency /
performance.
The section has installed adequate air pollution control system and equipment and is
ISO 14001 such as Environment Management System is under implementation.
Production: Last 23 years production of Kesoram cements industry, Basanth Nagar.

Year
1985-86
1986-87
1987-88
1988-89
1989-1990
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2005-06
2006-07
2007-08
2008-09
2009-10
Production in tones
805921
760708
550254
601453
643307
643663
748258
685596
731177
784555
782383
731049
746474
688305
777092
692424
727447
735012
1046166
1056742
1199445
1267554
1374645
Kesoram Industries limited its various sections, offices and factories under names.
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Sections
City Offices
Mills & Factories
Run under Name
Textile
Calcutta
Calcutta
Kesoram Industries
Ltd
Rayon and Industrial

Transport
Calcutta
Spun Pipes Industrial

and
House Tribeni
Kesoram Rayon
(Dist.Hoogly)
House Bansberia
Kesoram Spun Pipes
Calcutta
(Dist.Hoogly)
and Foundries
a) Massab Tank, Hyd.
Basantnagar
Kesoram cement
b) Massab Tank, Hyd.
(Dist.karimnagar)
Foundries
Cement
Sedam
Vasadatta Cement
(Dist.Gulbarga)
Refectory
Industry House
Karnataka
Kulti (Dist.Burdan)
Kesoram Refectories
Kesorem cement is one of the prestigious units of renowned kesoram group of

industry which is one of the Indias leading industrial conglomerates under the stewardship of
SYT.B.K Birla, the doney of Indian industries. It is one of the leading manufactures of
cement in India. It is dry process cement plant with capacity of 9.00 lakhs per annum.
SUPREME PERFORMANCE:
Birla supreme, the 43-grade cement is widely accepted popular brand in the market
commanding a premium. However need the specific demands of the consumers kesoram
20
brand out the 53-grade-known as Birla supreme gold which is special quality like higher
fineness, quick setting, durability etc
Ppc is known as Birla Shakti which attracted by people its qualities and rate margin
compared to opc.All quality system of kesoram have been certified under INTERNATIONAL
STANDARD ORGANISATION which proves the world wide acceptance.
SUPREME STRENGTH:
Kesoram cement has huge captive limestone deposits which make it possible to
feed high grade limestone consistently. Its natural grey color is in-born ingredient and gives
good shade.
Both the products offered by kesoram i.e. Birla supreme-43 Grade and Birla supreme53 grade cement are outstanding with much higher compressive strength and durability. The
following characteristics show there distinctive qualities.
Compressive
OPC 43 Gr IS
Birla supreme
OPC 53 Gr IS
Birla supreme
strength
8112-1989
43 grade
12269-87
OLD 53 Grade
3 days Mpa
Min 23
31+
Min 27
38+
7 days Mpa
Min 3
42+
Min 37
48+
28 days Mpa
Min 43
50+
Min 53
60+
PROCESS AND QUALITY CONTROL:

It has been the endeavor of kesoram to incorporate the worlds latest technology in
the plant and today the plant has the most sophisticated, state- of the art technology in its
process.
X-RAY ANALYSERS:
Fully computerized XRF, XRD and X-RAY analyzers keep a constant round the clock
vigil on quality.
DCS SYSTEMS:
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DCS (Distributed controlled System) is installed in clinker making process of kesoram

cements since it is key step in the overall cement making process. In the case of birla supreme
/gold, the clinker making process is totally computer controlled. The DCS is constantly
monitors the process and ensures operating efficiency. This eliminates variations and ensures
consistency in the quality of clinker
DEPOT SALES:
Kesoram cement is maintaining marketing depots as head quarters in different
places in Andhra Pradesh, Maharashtra, tamilnadu, Karnataka and Orissa states.
1. ANDHRA PRADESH:
Hyderabad
Warangal
Karimnagar
Nizamabad
Vijay Wada
Nell lore
2. MAHARASHTRA
Amoretti
Akolo
Jalgoan
Nagpur
Nanded
Chandrapur
Wardha
3. Tamil Nadu
Madras
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4. Karnataka
Bangalore
5. Orissa
Berhampur
Sales will take place from depot to:
Dealers/stockiest
Builders/contractors
Pipe factories-Industries
Direct consumers
Government and semi government Bodies
FEATHERS IN KESORAMS CAP:

Kesoram has out standing track record, achieving over 100% capacity utilization in
productivity and energy conservation. It has provided its designation by bagging several
national and state awards, noteworthy being.
KESORAM CEMENT ADVANTAGES:
1. Helps in designing sleeker and more elegant structures giving greater flexibility in
design concept.
2. Due to its fine quality super fine construction can be achieved.
3. It gives maximum strength at minimum use of cement with water in the water cement
ratio, especially the 53 grade Birla supreme gold.
4. Improved durability is achieved, the permeability reduces and the volumetric changes
are also reduced.
5. Better water proofing is achieved due to low heat of hydration as the shrinkage will be
less which means fewer cracks.
6. Better finish is achieved due to fitness and hence better workability. Thus plastering
becomes easier with better finish.
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7. Faster construction possible at both Birla supreme gold achieves their high early
strength in just 24 hours, and hence the from work can easily be removed.
WELFARE AND RECREATION FACILITIES AT A GLANCE

1) Recreation club:
For the purpose of recreation facilities two auditors are provided for the employees to
indoor games like shuttle, chess, caroms and for organizing culture functions and activities
like drama, music, and dance concert etc,
2) Libraries and reading rooms:
The company has provided libraries and reading rooms for the benefit of the
employee. About 5000 books are available in read the libraries. All kinds of news papers
and magazines are made available in reading rooms for the daily reading of the employees
and their families.
3) Canteen:
Canteen is provided to cater to the needs of the employees for the supply of snacks,
Tea, Coffee and meals.
4) Schools:
One English medium school and Telugu medium school are provided to meet the
education requirement of the employees children.
5) Dispensary:
The company has provided a dispensary with a qualified medical officer and Para
medical staff for the benefit or the employee. The employees covered under ESI scheme has
to avail the medical Facilities from the ESI hospital.
6) House Jornal:
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A house journal in the name of Basantnagar Samachar is brought out quarterly where in
all the important activities of the plant are published.
7) Kesoram consumer co-op, Store:
Consumer co-op, stores is available to meet the needs of the employees for supply of
essential commodities like rice, wheat, sugar, Kerosene etc., on cash / credit basis.
8) Sport And Games:
Competitors in sport and games are conducted every year for Aug 15 and Jan 26
among the employees.
BRANDS:
Kesoram brands with namely Birla Supreme and Birla Supreme Gold (53 grade) has
made a niche with outstanding quality and commands a premium in the market. The latest
offering, Birla Shakthi is also very will received and is the most sought offer brand now.
KESORAMS CAREER:
Kesoram has an outstanding track record achieving 100% capacity utilization in
productivity and energy conservation. It has provided its distinctions by bagging several
awards of national and state level are worthy.
AIMS:
Continuous efforts too improving productivity
Evaluating individual skill through training and motivations
Total involvement through participants management activities
Creating healthy and safe environment
Social development
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Awards
National productivity award for 1985-86.
National productivity award for 1986-87.
National award for energy conservation for 1989-90.
National award for miens safety 71985-86, 1986-87.
Prestigious state award Yajamanya Ratna and Best Management award for the year
1980.
FAPCCI award for Best Family Planning effort in the 1987-88.
FAPCCI award for Best workers welfare 1995-96.
Best management award of State Government for 1993.
It has got Vanamitra award from the Government of Andhra Pradesh.
Best labour welfare award for 2010
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CAPITAL STRUCTURE
DEFINATION:
Capital structure represents the relationship among different kinds of long term
capital. Normally, a firm raises long term capital through the issue of shares, sometimes
accompanied by preference shares. The share capital is often supplemented by debenture
capital and others long-term borrowed capital.
capital structure of a company refers to the
composition or make-up of its
capitalization and it includes all long-term capital resources viz: loans, reserves, shares and
bonds.
TYPES OF CAPITAL STRUCTURE:

The capital structure of any concern may be simple, compound or complex.
The capital structure may consist of a single class of stock or it may be complicated
by several issues of bonds and preferred stock, the characteristics of which may vary
considerably. A newly formed company may adopt any of the following capital structures.
1) simple capital structure:
A single capital structure consists of single security base as a source of fund to finance
the activities of a concern, e.g., equity share capital issued by a concern. It is safe to use such
type of capital structure when the prospects of earnings are unpredictable and uncertain.
2) compound capital structure:
In compound capital structure a combination of two security bases in the form of
equity and preference capital or equity share capital and debenture are used as a source of
funds. It is advisable to use such type of capital structure when annual earnings of a concern
are uncertain but average earnings are rather good.
3) complex capital structure:
A complex capital structure is made up of multi-security base, consisting of equity
share capital, preference share capital, debentures and loans from financial institutions. This
type of capital structure is advisable where there is certainty of stable and adequate income
to pay-off fixed financial charges.
27
CAPITAL STRUCTURE PLANNING AND POLICY:

Introduction:
Capital structures refer to the mix of long-term of sources of the funds, such as
debentures, long-term debt and preference shares. Some companies do not plan there capital
structure they may face considerable difficulties in raising funds to finance there activities.
May also fail to economize the use of their funds.
Features of an appropriate capital structure: The capital should be planned
generally keeping in view the interest of the equity shareholders, being the owners of the
owners of the company. An appropriate capital structures should have the following features:
Return
Risk
Flexibility
Capacity
Control
Approach to establish capital structure:

There are 3 most common approaches to decide about a firms capital structures.
1. EBIT-EPS APPROACH:
For analyzing the impact of debt on EPS.
2. VALUATION APPROACH: To know value of the company.

3. CASH FLOW APPROACH: For analyzing the firms ability to
Serve debt.
Practical Considerations in determining capital structures:
Concern for dilution of control
Desire to maintain operating flexibility.
Ease of marketing capital inexpensively.
Capital for economics of scale.
Agency costs.
28
DEFINITION AND SYMBOLS:

BASIC SYSMBOLS:
S=Total market value of money.
B= Total market value of debt.
I= Total interest payments.
V= Total market value of the firm.(VS+B).
NI=Net income available to equity holders.
BASIC DEFINITION:
1. Cost of debt:
The effective rate that a company company pays on its current debt. It can be
measured as either before tax retunes. However because interest expense is deductible, the
after tax cost is seen most often. This is one part of the companys capital structure, which
also include the cost of equity.
Companies use bonds, loans and other forms of debt for capital. This measure is
useful because it indicates the overall fate being used for debt financing. It also gives
investors an idea of how risky a company can be. Riskier companies generally have a higher
cost of debt. To get the after-tax rate, multiply the before tax rate by 1 minus the marginal tax
rate(before tax rate*(1-margilnal tax)
Cost of debt(Kd)= (interest/market value debt)x100
Value of debt (B) =I/K1
2. Cost of equity:
A firms cist of equity represents the compensation that the market demands in
exchange for owning the asset and bearing the risk of ownership.
The cost of equity is the minimum to offset their wait for a return on investment and for
assuming some level of risk. The expenses of equity douse not show up on companys
income statement. Bonds and any other long-tem debt are included in a WACC of a firm
increases as the beta and rate of return on equity increases, as an incase in valuation and a
29
higher risk. The WACC equation the cost of rich capital component multiplied by its
proportional weight and then summing.
Cost of equity (Ke) = (DI/po) + g (there is income tax)
Where
DI= net divided;
Po= current market price of shares.
g = br (r=rate of return)
Overall cost of= EBIT:

Earnings before interest and taxes and income tax expenses. To calculate EBIT,
expenses (cost of goods sold and administrative expensive).
(if there is no IT) ke= (E 1(x) N) = (EBIT-I Or NI)/s
Pre share basis (po) = E1/K
Total basis (s) = PON = (EBIT-1)/ke
Weighted average cost of capital:

A calculation of a firms cost of capital in which each category of capital is
proportionately weighted.
K0=W1K1=W2K2 (w1, w2 are relative weight) or
K0= (I-NJ)/ (v=EBJT/V
Where V=EBIT/K0
DETERMINANTS OF CAPITAL STRUCTURE:

1. Financial leverage or trading on equity:
The use of long-term fixed interest bearing debt and preference share capital along
with equity share capital is called financial leverage or trading on equity. Effects of leverage on
the shareholders return or earning per share have already been discussed in this chapter. The use
of long-term debt increases magnifies the earnings per share if the firm yields a return higher
than the cost of debt. The earnings per share also increase with the use of preference share
30
capital but due to the fact that interest is allowed to de deducted while computing tax, the
leverage impact of debt is much more.
2. Growth and stability of sales:

The capital structure of a firm is highly influenced by the growth and stability of its
sale. If the sales of a firm are expected to remain fairly stable , it can raise a higher level of debt.
Stability of sales ensures that the firm will not face may difficulty in meeting its fixed
commitments of interest repayment of debt. Similarly, the rate of growth in sales also affects the
capital structure decision. Usually greater the rate of growth of a sale, greater can be the use of
debt in the financing of firm.
3. Nature and size of a firm:

Nature and size of a firm also influence its capital structure. A public utility concern
has different capital structure as compared to other manufacturing concern. Public utility
concerns may employ more of debt because of stability and regularity of their earnings. On the
other hand, a concern which cannot provide stable earnings due to the nature of its business will
have to rely mainly on equity capital.
4. Flexibility:
Capital structure of a firm should be flexible. It should be possible to raise additional
fund, whenever the need be, without much of difficulty and delay. A firm should arrange its
capital structure in such a manner that it can substitute one form of financing by another.
5. Operating leverage:
This leverage depends on the operating fixed cost of the firm. If higher percentage of a
firms total costs is fixed operating costs is fixed operating costs, the firm is said to have a high
degree of operating leverage. Operating leverage measures the operating risk of a firm.
operating risk is the variability of operating profit or EBIT. There is some relationship between
operating leverage and financial leverage. If operating risk is very high, financial leverage
should be kept low. It is not in the interest of a firm to have both the leverages at a high level. A
financial manager should attempt only harmonious combinations of the two leverages.
6. EBIT/EPS Analysis:
This analysis is an important tool of measuring a companys performance. Normally a
financial plan that will give maximum value of EPS will be selected as the most desirable mix.
31
The greater the level of EBIT, the more beneficial it is to employ debt capital in capital structure.
One of the glaring structuring of EPS analysis is that it ignores risk. The argument that investors
are just concerned with the expected EPS is not well founded. Rational investors consider in
investment analysis, both the expected value and variability. An obvious objection leveled
against the use of EBIT/EPS analysis is that it is a useful performance criterion but not a
decision criterion.
7. Cost of capital:
It is necessary for the company to determine the cost of various sources of finance to
establish the desirability of one source over the other. The impact of a financial decision is
measured in term of its overall cost of capital. The effort of financial manager remains to select a
combination of debt and equity that maximizes the value of the firm and minimizes the overall
cost of capital. It should always be borne in mind that overall cost of capital is an important
variable in the decision-making relating to selection of debt-equity mix.
8. Cash flow analysis:

The capital structure of a firm should be so planned that it should be able to service its
fixed charges under any reasonable predictable adverse circumstances. The companies expecting
larger and stable cash inflows in future can employ a large amount of debt in their capital
structure. If companies with unstable or unpredictable cash inflows employ source of finance
with fixed charges, it will be risky. In planning the capital structure, financial manager must
consider ratio of net cash inflows to fixed chargers. Donaldson has suggested cash flow analysis
for analysis for this purpose. In order to determine the debt capital, the firm should evaluate its
cash flows under adverse circumstances. The ratio of net cash flow to fixed charges serves as a
useful guide in selecting proper balance between debt and equity. The ratio indicates the number
of times the fixed charger are covered by the expected cash flows. This is known as the coverage
ratio.
9. Control:
Ordinary or equity shareholders have the legal right to vote. In fact, they are real
owners and they can exercise the control over the overall affairs. In the event of issuing fresh
equity shares, there remains a risk of loss of control. When a choice is made between debt and
equity to raise additional funds, normally debt is preferred to equity in order to avoid loss of
control. These days providers of debt capital like to introduce a lot of restrictions in the loan
agreement to protect their interest. At times, the loan agreement includes the right to nominate a
32
director to oversee the activities of the firm. The presence of this type of classes entails the
freedom of action pf the firm. It should also be kept in mind that too much of debt also increases
financial risk and may lead to bankruptcy. Therefore it is in the interest of the firm to try to select
an appropriate mix of debt and equity in the overall interest of the firm.
10. Marketability:
The conditions in capital market are continuously changing. At one time the capital
market favors the debenture issue and at other time it readily accepts common share issues.
Based on the changing market sentiments, decision should be taken regarding raising the funds
through debt or equity. The available alternatives should be viewed in the light of both general
capital market conditions and internal conditions of the company.
11. Floatation costs:

Floatation cost are incurred only when the funds are raised. Normally cost of floating
a debt is less than the cost of floating an equity issue. It is not a very significant factor, but it
should be considered in designing a capital structure.
12. Legal constraints:

In a regulated economy, a firm has to comply with legal requirement in this respect.
13. Capital market conditions:

Marketability means the ability of the firm to sell or market a particular type of
security in a particular period of time. Marketability is considerably influenced by the
constraints prevailing in the capital market.
14. Asset structure:

The liquidity and the composition of assets should be kept in mind while selecting the
capital structure. If fixed asset constitute a major portion of the total assets of the company, it
may be possible for the company to raise more of long term debts.
15. Purpose of financing:

If funds are required for a productive purpose, debt financing is suitable and the
company should issue debenture as interest can be paid out of the profit generated from the
investment. However, if the funds are required for unproductive purposes or general
development on permanent basis, we should prefer equity capital.
16. Period of finance:
33
The period for which the finances are required is also an important factor to be kept in
the mind while selection inappropriate capital mixes. If the finances for a limited period of, say,
seven years, debentures should be preferred to shares. In case funds are needed on permanent
basis, equity share capital is more appropriate.
THEORIES OF CAPITAL STRUCTURE:

Different kinds of theories are have been
1. Net Income Approach(NI)
2. Net Operating Income Approach(NOI)
3. The Traditional Approach
4. Modigliani and Millar Approach(MM)
1.Net Income Approach (NI):

This approach introduced by Durand. A firm can minimize weighted average cost of
capital and increase the valve of the firm and share valve in the market.
This approach is based upon the following assumptions:
(I) The cost of debt is less than the equity.
(ii) There are no taxes.
(iii) The risk percentages of inversion are not changed by The use of the debt.
Y
0.1
Cost of Capital 0.05
Ke
Ko
O
X
Degree of leverage:
The reasons for assuming cost of debt is less than the cost of equity are the interest
rates are lower than dividend rates due to elements of risk and benefit of tax as the interest is a
deductible expenses.
34
The total market value of firm on the basis of NI is:

V = S+D
V = Total market value of firm
S= Total market value of equity share (or)
NI/Equity capitalization
rate
D=Market value of debt.

Weighted average cost of capital can be calculated as KO = EBIT/V
35
2. Net Operating Income Approach:

This theory suggested byDurand. It is opposite to the NI approach .Here Change
in the capital structure of a company does not effect in the market valve of the firm and the
weighted cost of capital remains constant whether the debt-equity mix is 50:50 or 20:80 or
0:100. This theory presumes that:
(i) The market capitalizes the value of the firm as a whole.
(ii) The business risk remains constant.
(iii)
There are no corporate taxes.

The valve of the firm can be determined as:
V=EBIT/KO
KO=Overall cost of capital
Y
Ke(0/0)
Ko(0/0)
Ki(0/0)
O
X
Leverage and cost of
capital(NOI)
The market valve of equity is:
S=V-D
S=Market value of equity shares
V=Total market value of firm
D=Total market value of debt
Assumptions:
The overall cost of capital (k) remains constant for all degrees of debt-equity mix or
leverage.
The market capitalizes the value the value of the firm as a whole and, therefore, the split
between debt and equity
is not relevant.
There are no corporate taxes.
36
3. The Traditional Approach:

The traditional approach also known, as Intermediate Approach is a compromise
between the two extremes of income approach and net operating Income approach. According to
this theory, the valve of the firm can increase initially or the cost of capital can be decreased by
use more debt is a cheaper sources of funds than equity. Thus, a proper debt-equity mix can
reach the capital structure When the increased cost of equity cant be offset by the advantage of
low cost debt.
While the NI approach takes the position that uses of debt in the capital structure will
always affect the overall cost of capital and total valuation, the NOI approach argues that capital
structure is totally irrelevant.
Thus the overall cost of capital according to this theory, decrease up to a certain
point, remains more are less unhinged for moderate increase in debt thereafter, and increase or
rise beyond a certain point.
Ke
Ko
Kd
Traditional Approach
4. Modigliani
-Miller (MM)
Approach:
37
The MM thesis relating to the relationship between capital structures, cost structures,
cost of capital and valuation is a kin to the NOT approach, in other words, does not provide
operational justification for the irrelevance of the Capital Structures. The MM proportion
supports the NOT approach relating to the independence of the independence of the capital of
the degree of leverage level of debt-equity ratio.
(0/0)Ko
In (Rs)
Vo
Degree of Leverage (B/V)
Basis Proportions:
1) The overall cost of capital (KO) and the valve of the firm (V) are independent of the
capital structure.
2) Ke is equal to the capitalization rate of a pure equity stream plus premium for financial
risk\to the difference to the pure equity capitalization (Ke) time the ratio of debt to
equity.
3) The cut off rate for investment purposes is completely independent of the way in which
an investment is financed.
Assumption:
a) Perfect capital market the implication of a perfect capital market is that.
Securities are infinitely divisible.
Investors are free to busy/sell securities.
Investors can borrow without restrictions.
There is no transaction cost.
Investors are rational.
b) Given the assumption of perfect information and rationally.

c) Business risk is equal among all firms with in similar Operating environments.
38
FEATURES OF CAPITAL STRUCTURE:

1. Profitability:
The capital structure of the company should be most profitable. The most
profitable capital structure is one that tends to minimize cost of financing and maximize earning
per equity share.
2. Solvency:
The use of excessive debt threatens the solvency of the company. In a high
interest rate environment, Indian companies are beginning to realize the advantage of
low debt.
Company are now launching public issues with the sole purpose of reducing debt. The recent
equity issue of more than Rs.30 Crores by Ballarpur industries was purely aimed at repaying
term loans and retiring debentures.
3. Flexibility:
The capital structure should be such that it can be easily maneuvered to meet the
requirements of changing conditions.
4. Conservatism:
The capital structure should be conservative in the sense that the debt content in
the total capital structure does not exceed the limit which the company can bear.
5. Control:
The capital structure should be so devised that it involves minimum risk of loss
of control of the company.
CAPITAL
STRUCTURE
RATIOS
(OR
SOLVENCY
RATIOS
OR
LEVERAGE RATIOS) :
The term solvency refers to the ability of a concern to meet its long term
obligations. The long-term indebtedness of a firm includes debenture holders, financial
institutions providing medium and long-term loans and other creditors selling goods on
installment basis. The long-term creditors of a firm are primarily interested in knowing the
firms ability to pay regularly interest on long-term borrowings, repayment of the principal
amount at the maturity and the security of their loans. Accordingly, long-term solvency ratios
39
indicate a firms ability to meet the fixed interest and costs and repayment schedules associated
with its long-term borrowings.
The following ratios serve the purpose of determining the solvency of the concern.
1. Debt-Equity ratio
2. Proprietary ratio or Equity ratio
3. Capital gearing ratio
4. Interest coverage ratio
1. Debt-Equity Ratio:
Meaning: This ratio established a relationship between long-term debts and share-holders
funds.
Objective: The objective of computing this ratio is to measure the relative proportion of debt
and equity in financing the assets of a firm.
Components: There are two components of this ratio which are as under:
I. Long-term Debts: which mean long-term loans whether secured or unsecured (e.g.,
debentures, bonds, loans from financial institutions).
II. Shareholders funds: which mean equity share capital plus preference share capital plus
reserves and surplus minus fictitious assets (e.g., preliminary expenses)
Computation: This ratio is computed by dividing the long-term debts by the shareholders
funds. This ratio is usually expressed as a pure ratio e.g., 2 : 1 in the form of a formula, this ratio
may be expressed as under:
Long term debt
Debt equity ratio =
--------------------------Shareholders Equity
Or
External equities
Debt to equity ratio = --------------------Internal Equity
40
Interpretation: It indicates the margin of safety to long-term creditors. A low debt-equity ratio
implies the use of more equity than debt which means a larger safety margin for creditors since
owners equity is treated as a margin of safety by creditors and vice versa.
2. Proprietary ratio/Equity ratio:

Meaning: This ratio measures a relationship between proprietors funds and the total assets.
Objective: The objective of computing this ratio is to find out how the proprietors have
financed the assets.
I. Proprietors funds (excluding fictitious assets like preliminary exp.)
II. Total assets
Computation: This ratio is computed by dividing the proprietors funds by total assets. The ratio
can be calculated as under:
Net worth
Proprietary Ratio = --------------Total Assets
Interpretation of equity ratio: As equity ratio represents the relationship of owners funds to
total assets, higher the ratio or the share of the shareholders in the total capital of the company,
better is the long-term solvency position of the company. This ratio indicates the extent to which
the assets of the company can be lost without affecting the interest of creditors of the company.
3. Capital Gearing Ratio:

Meaning: The term capital gearing is used to describe the relationship between equity share
capital including reserves and surpluses to preference share capital and other fixed interest
bearing loans.
Computation: This ratio can be calculated as under:
Preference Share Capital + long term borrowings
Capital gearing ratio = -----------------------------------------------------------
41
Equity Share Capital

Interpretation: If preference share capital and other fixed interest bearing loans exceed the
equity share capital including reserves, the firm said to be highly geared. The firm is said to be in
low gear if preference share capital and other fixed interest-bearing loans are less than equity
capital and reserves.
4. Interest coverage ratio/ Debt-service ratio:

Meaning: This ratio establishes a relationship between net profits before interest and taxes and
interest on long-term debt.
Objective: The objective of computing this ratio is to measure the debt-servicing capacity of a
firm so far as fixed interest on long-term debt is concerned.
I. Net profits before interest and taxes
II. Interest on long-term debts.
Computation: This ratio is computed by dividing the net profits before interest and taxes by
interest on long-term debt. This ratio is usually expressed as x number of times. In the form of
a formula, this ratio may be expressed as under:
Interest coverage Ratio =
Earning before interest & Tax

--------------------------------Fixed interest charges
42
2010-11 FINANCIAL YEARS

A. CAPITAL STRUCTURE ANALYSIS
1. Capitalization Information:
PARTICULARS
A.
Debt:
a).secured loans
2371.83
b).un secured loans
1627.44
Total debt
B.
a).Equity share capital
45.74
b).Reserves and surplus
1254.51
1300.25
Total value:
a).Capital Employed
Total Value of the Company

D.
3999.27
Equity Capital:
Total Equity Capital

c.
Rs.In crore
Debt/Equity ratio
52993.52
52993.52
3.075
43
Overall cost of Capital =(EBIT/value of the company)X100

Ko=(120.24/52993.52)x100
=0.22%
Cost of debt=(Interest/Market value Debt)X100
Kd=(233.50/3999.27)x100
=5.83%
Interpretation:.
Total value of KESORAM INDUSTRIES LIMITED is increased in the year
20010-11 from 4881.16 to 52993.52
Equity capital of the KESORAM INDUSTRIES LIMITED same as the
previous year, the value is 45.74 crore.
Debt Equity ratio is recorded as 3.072 in the year 2010-11.
The overall cost of capital 0.22%
The cost of debt 5.83%
44

PARTICULARS
A.
Debt:
a).secured loans
1863.72
b).un secured loans
1477.20
Total debt
B.
45.74
1494.50
1540.24
Total value:
a).Capital Employed

D.
3340.92
Equity Capital:

c.
Rs.In crore
Debt/Equity ratio
4881.16
4881.16
2.16
45
Overall cost of capital (Ko) = (EBIT/value of the company)X100

Ko = (648.29/4881.16)X100
= 13.28%
Cost of debt (Kd) = (Interest / Market value Debt)X100
Kd = (103.00/3340.92)X100
=3.08%
Interpretation:
2009-10 from3472.02 to4881.16
Equity capital of the KESORAM INDUSTRIES LIMITED same as the previous
year, the value is 45.74 crore.
46

47
PARTICULARS
A.
Debt:
a).secured loans
1536.27
b).un secured loans
605.65
Total debt
B.
D.
2141.92
Equity Capital:
45.74
1284.36

c.
Rs. In crore
1330.1
Total value:
a).Capital Employed
3472.02
3472.02
Debt/Equity ratio
1.61

Ko = (520.99/3472.02)X100
= 15%
48
Cost of debt (Kd) = (Interest / Market value Debt) X100

Kd = (112.85/2141.92)X100
=5.26%
Interpretation:
2008-09 from 2196.73to 3472.02
The overall cost of capital 15%
49

1.Capitalization Information:
PARTICULARS
A.
Rs.In crore
Debt:
971.06
a).secured loans
243.75
b).un secured loans
Total debt
B.
c.
D.
1214.81
Equity Capital:
45.74
936.18
981.92
Total value:
a).Capital Employed
2196.73
2196.73
Debt/Equity ratio
1.23
50

Ko = (641.80/2196.73)X100
= 29.22%
Cost of debt (Kd ) = (Interest / Market value Debt)X100
Kd = (52.11/1214.81)X100
= 4.28%
Interpretation:
2007-08 from 1530.23 to 2196.73
year, the value is 45.74 crores.
51

PARTICULARS
A.
B.
c.
D.
Rs.In crore
Debt:
a).secured loans
643.20
b).un secured loans
229.60
Total debt
872.80
Equity Capital:
45.74
608.69
654.43
Total value:
a).Capital Employed
1530.23
1530.23
Debt/Equity ratio
1.33
52
Overall cost of capital(Ko) = (EBIT/value of the company)X100

Ko = (400.09/1530.23)X100
= 26.14%
Cost of debt(Kd) = (Interest / Market value Debt)X100
Kd = (29.91/872.80)X100
= 3.42%
Interpretation:
2006-07
53
Overall cost of capital(ko) percentages:

years
Cost of capital in (%)
2006-07
26.14
2007-08
29.22
2008-09
15.00
2009-10
13.28
2010-11
2.26
Interpretation:
54
The cost of capital decreasing to 2008-2011

2007-08 the cost of capital is high.
It was increasing in the 2007-08 against the previous year 2006-2007
B. RATIO ANALYSIS
B.1 CALCULATION OF DEBT EQUITY:
Rs in crore
Yrs
2006-07
Debt
Secured Unsecured
Loans
Loans
643.20 229.60
Total Debt
872.80
Equity
Total
Equity
Reserve
Equity
Capital and surplus
45.74
608.69
654.43
2007-08
971.06
243.75
1214.81
45.74
2008-09
1536.27
605.65
2141.92
45.74
2009-10
1863.72
1477.20
3340.92
45.74
1494.50
1540.24
2010-11
2371.83
1627.44
3999.27
45.74
1254.51
1300.25
936.18
1284.36
981.92
1330.10
55
B. 2. DEBT EQUITY RATIO:

Debt equity ratio =
Long term debt

----------------------------Shareholders Equity
(Rs. In crore)
Year
Long term debt
2006-07
872.80
2007-08
1214.81
2008-09
2141.92
2009-10
3340.92
2010-11
3999.27
Average
2313.94
Shareholders,Equity
654.43
981.92
1330.10
1540.24
1300.25
1161.38
Ratio
1.33
1.23
1.61
2.16
3.07
1.88
Interpretation:
The debt equity ratio is increasing in trend
56
2007-08 the ratio was decreasing against the last year

It was increasing in the 2008-09 against the previous year 2007-08
The average debt equity ratio is 1.88 during the study period.
B. 3. PROPRIETARY RATIO:
Net worth
Proprietary Ratio = --------------Total Assets
(Rs. In crore)
Year
2006-07
2007-08
2008-09
2009-10
2010-11
Average
Net worth
654.43
941.92
1330.10
1540.24
1300.25
1153.38
Total assets
245.28
491.01
3992.67
5753.21
6453.48
3387.13
Ratio
2.66
1.91
0.33
0.26
0.20
1.07
Interpretation:
The proprietary ratio is random decreasing from 2006-11
The ratio is decreasing from 2006-2011
57
The average proprietary ratio is 1.07

In 2006-07 the proprietary ratio is high 2.66
B. 4. CAPITAL GEARING RATIO:
Preference Share Capital + long term borrowings
Capital gearing ratio = ----------------------------------------------------------Equity Share Capital
(Rs. In crore)
Preference
sharecapital + long
Year
term borrowings
2006-07
643.20
2007-08
971.06
2008-09
1536.27
2009-10
1863.72
2010-11
2371.83
Average
1477.21
Equity share
capitalEquity
45.74
45.74
45.74
45.74
45.74
45.74
Ratio
14.06
21.22
33.58
40.74
51.85
32.29
Interpretation:
The capital gearing ratio is increasing from 2006-11
The average capital gearing ratio is 32.29 during the study period
In 2010-11 the ratio is high 51.85
58
In 2006-07 the ratio is low 14.06

B. 5. INTEREST COVERAGE RATIO:
Interest coverage Ratio =
Earning before interest & Tax

--------------------------------Fixed interest charges
(Rs. In crore)
Year
2006-07
2007-08
2008-09
2009-10
2010-11
Average
EBIT
400.09
641.80
520.99
648.29
120.24
466.28
Fixed interest charges

29.91
52.11
112.85
103.00
233.50
106.27
Ratio
13.37
12.31
4.61
6.29
0.51
7.61
Interpretation:
The interest coverage ratio is continuous decreased to 2006-2011.
The average ICR is 7.61 during the study period
In 2006-07 the ratio is high 13.37
In 2010-11 the ratio is low 0.51
59
FINDINGS
The interest coverage ratio is highest in the year 2006-2007 i.e,13.37 and very
low in year 2010-2011 0.5.
The capital grading ratio is gradually increasing in between 2006-2011 years.
The Proprietary ratio is gradually decreasing in between 2006-2011 years.
The total assets of the company increasing gradually, this indicates the growth of
the company.
The debt equity ratio is decreased in the year 2007 to 2008 and again increasing
gradually.
60
CONCLUSION
After analyzing the financial position of KESORAM INDUSTRIES LIMITED

and evaluating its Capital Structure Analysis in respect of Ratio Analysis and source and
utilization of founds. The following conclusions are drawn from the project preparation.
Equity Capital was constant from 2006-07 to 2010-11 and total Debt Value
increased from 872.80 to 3999.27 crores during the year.
Debt equity ratio was increased from 1.33 to 3.07 during the study period.
Proprietary ratio was decreased from 2.66 to 0.20 during the study period
Capital gearing ratio was increased from 14.06 to 51.85 during the study period.
Interest average ratio was decreased from 13.37 to 0.51 during the study period.
61
SUGGESTIONS
The KESORAM INDUSTRIES LIMITED is one of the private sector cement
Company in India. It is a profitable Company.
Now-a-days the cement industry playing a major and important role in the
construction field, these are for construct Homes, Flyovers, Industries etc. Now-a-days
cement industry facing of challenge like
Regional requirements
Regional cement demands
Lack of resources
With all the above problems cement industry has to produce the Cement with
profits.
I want to express my views with few points, they are
1) KESORAM INDUSTRIES LIMITED has been maintaining Constant Equity
Share Capital Since 2006, this has to improve.
2) Offer additional shares to investors from profits instead of giving Dividend. With
this, there is a chance to increase reserves and surplus.
3)
Debt/Equity Ratio in KESORAM INDUSTRIES LIMITED is 3.07% this is

more than the idle ratio of debt. But if the proportion of Debt/Equity (0.5 and not
less than 0.5) will increase from 1.33 to 3.07. It would decrease the
responsibility.
4) Investments through Equity from rural people i.e. rural investments are
important.
62
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CAPITAL STRUCTURE

requires funds to run and maintain its business the

Long term assets (fixed assets)

Net working capital (Positive Current assets).

MBA Department,Aizza College of Engineering & Technology

OBJECTIVE OF THE STUDY:

MBA Department,Aizza College of Engineering & Technology

NEED & SCOPE OF THE STUDY:

MBA Department,Aizza College of Engineering & Technology

MBA Department,Aizza College of Engineering & Technology

LIMITATIONS OF THE STUDY:

MBA Department,Aizza College of Engineering & Technology

ABOUT CEMENT INDUSTRY:

German standard comities: DEF

MBA Department,Aizza College of Engineering & Technology

Indian Cement Industry Background:

NEED AND IMPORTANCE:

MBA Department,Aizza College of Engineering & Technology

MBA Department,Aizza College of Engineering & Technology

MBA Department,Aizza College of Engineering & Technology

Types of Portland cement:

MBA Department,Aizza College of Engineering & Technology

4. Sulphate Resistant Portland cement (SRPC).

Recent Investments in the Indian Cement Industry:

STATE WISE CEMENT PLANTS:

MBA Department,Aizza College of Engineering & Technology

Jammu and Kashmir

CEMENT PRODUCTION WORLDWIDE (2006-2007):

MBA Department,Aizza College of Engineering & Technology

MBA Department,Aizza College of Engineering & Technology

MBA Department,Aizza College of Engineering & Technology

MBA Department,Aizza College of Engineering & Technology

Widow / dowry-less mass marriages

Awareness drives on knowledge

attitude and practices

MBA Department,Aizza College of Engineering & Technology

HEALTH AND FAMILY WELFARE:

Medical camps - general and issue-based

Health training and awareness

Sanitation - toilets, training, smokeless chullahs biogas

Safe drinking water

Mother and child health

MBA Department,Aizza College of Engineering & Technology

Production: Last 23 years production of Kesoram cements industry, Basanth Nagar.

MBA Department,Aizza College of Engineering & Technology

Mills & Factories

Run under Name

Rayon and Industrial

Spun Pipes Industrial

Kesoram Spun Pipes

a) Massab Tank, Hyd.

b) Massab Tank, Hyd.

Kesorem cement is one of the prestigious units of renowned kesoram group of

MBA Department,Aizza College of Engineering & Technology

PROCESS AND QUALITY CONTROL:

DCS (Distributed controlled System) is installed in clinker making process of kesoram

MBA Department,Aizza College of Engineering & Technology

Sales will take place from depot to:

Government and semi government Bodies