report of mcs project
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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
14
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
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
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
b) Change in inventories of finished
goods,
work-in-progress and stock-in-trade
5347 5959 -6257 6797 11846
c) Employee benefits expense 12908 13003 13179 12076 51166
d) Depreciation and amortisation
expense
11974 12456 12233 12040 48703
e) Power and fuel 57832 45682 55597 54945 214056
f) Freight and forwarding:
18
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
b) Change in inventories of finished
goods,
work-in-progress and stock-in-trade
11846 13689 -1843 F
c) Employee benefits expense 51166 65000 -13834 F
d) Depreciation and amortisation
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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