INTERNSHIP REPORT

ULTRATECH CEMENT LTD

(UNIT-RAJASHREE CEMENT WORKS)
MALKHED, GULBARGA

Submitted By
SHILPA
2216187

Submitted to
ST. ALOYSIUS COLLEGE (AUTONOMOUS)
INSTITUTE OF MANAGEMENT AND IT – AIMIT

In partial fulfilment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

BEERI, MANGALORE-575022

BATCH 2022-2024
 REPORT

Declaration
I Shilpa, a master’s student in Business Administration at St Aloysius (Autonomous) college,
Mangalore successfully completed a one-month internship at Ultratech cement Ltd. Unit:
Rajashree cement works. I hereby declare that the internship report is solely my original work
and it is the result of my own efforts and experience.
I confirm that all the information presented in this report is authentic and based on my personal
observations and learnings during the internship period.
By signing below, I verify the accuracy and authenticity of the information provided in this
declaration page.

Signature Signature of HOD

Date:
 Acknowledgement

I would like to express my sincere gratitude to the HR Function Head, Mr. KVVYS Narayana,
internship supervisor Mr. Rajesh Mishra and Mr. Saurabh Agar for their guidance and support
throughout the internship. I also thank the team Ultratech Cement Ltd. Rajshree cement works
for their cooperations and valuable insights. Lastly, I acknowledge the support of my family
and friends for their encouragement during this journey.

Shilpa
2216187
Date:
Table Contents
Sr. No. Chapters Page no.

1. Executive summary

2. Industry sector profile

3. Company Profile

4. Study of working capital requirement

5. Need for the study

6. Significance of working capital

7. Objectives of the study

8. Literature Review

9. Hypothesis development

10. Research methodology

11. Summary and Conclusion

12. References
 Executive Summary

UltraTech Cement, a part of the Aditya Birla Group, is one of India's leading cement
manufacturers. The Rajshree Cement unit is a vital component of UltraTech's extensive cement
production network. Effective working capital management is crucial for the unit's operational
efficiency and overall financial health.
Working capital refers to the funds necessary for day-to-day operations, including the
acquisition of raw materials, payment of salaries, and the maintenance of current assets and
liabilities. Efficient working capital management ensures that a company can meet its short-
term financial obligations and seize growth opportunities.
In the context of the Rajshree Cement unit, optimizing working capital involves balancing the
need for liquidity to support operations with the desire to minimize excess funds tied up in non-
productive assets.
This executive summary will delve into various aspects of working capital management at the
Rajshree Cement unit, including the assessment of current assets and liabilities, strategies for
efficient capital deployment, and the importance of maintaining liquidity to navigate economic
fluctuations. Effective working capital management is not only essential for the unit's day-to-
day operations but also plays a pivotal role in achieving long-term financial sustainability and
growth.
In the subsequent sections, we will explore in detail how the Rajshree Cement unit manages its
working capital, the challenges it faces, and potential opportunities for improvement.
The study gives brief introduction to entire project work by providing information about the
industry profile, Company profile and introduction to the study. The top cement manufacturing
companies, including Ultratech Cement, are identified along with an overview of key
competitors in the market.
The report further explores the growth prospects and opportunities prevailing in the cement
industry. It examines factors such as infrastructure development, urbanisation, government
policies and technological advancements that can drive the industry’s expansion. Additionally,
potential areas of growth and investment are highlighted, allowing Ultratech Cement to
strategically position itself for future success.
In the subsequent sections, the focus shifts to Ultratech Cement Ltd. Starting with a
comprehensive company profile. The background of the company, including its establishment,
growth trajectory and milestones, is presented. Moreover, the corporate vision, mission, and
core values of Ultratech Cement are outlined, demonstrating the company’s guiding principles.
To assess Ultratech Cement’s internal capabilities and challenges, a SWOT analysis is
conducted. This analysis examines the company’s strengths, weakness, opportunities and
threats, enabling a comprehensive understanding of its competitive position and area for
improvement.

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The report is supplemented with references , providing a comprehensive list of sources
consulted during the research process and any additional supporting information or data used
in the report.
Overall, this internship report offers valuable insights into the cement industry and Ultratech
Cement Ltd. Making valuable resources for stakeholders, industry professionals, and decision
makers seeking a deeper understanding of the sector and the company’s performance. The
findings and recommendations presented in the report can guide the strategic decision-making
and potential area of improvement for Ultratech Cement in the competitive cement industry.

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 Industry sector profile

India is the second-largest producer of cement in the world. It accounts for more than 8% of
the global installed capacity. India has a lot of potential for development in the infrastructure
and construction sector and the cement sector is expected to largely benefit from it.
Furthermore, on the back of rising rural housing demand, the consumption of cement in India
has been growing consistently as it is one of the cheapest products to buy in terms of Rs./kg.
Strong expansion of the industrial sector, which has fully recovered from the COVID-19
pandemic shock, is one of the main demand drivers for the cement industry. As a result, there
is a strong potential for an increase in the long-term demand for the cement industry. Some of
the recent initiatives, such as the development of 98 smart cities, are expected to significantly
boost the sector.
Aided by suitable Government foreign policies, several foreign players such as Lafarge-
Holcim, Heidelberg Cement, and Vicat have invested in the country in the recent past. A
significant factor which aids the growth of this sector is the ready availability of raw materials
for making cement, such as limestone and coal.
Currently, the installed cement capacity in India is 553 MTPA with a production of 298 MTPA.
In 2022, the market size of India’s cement industry reached 3.64 billion tonnes and is expected
to touch 4.83 billion tonnes by 2028, exhibiting a CAGR of 4.94% during 2023-28. India's
cement production is expected to increase at a CAGR of 5.65% between 2016-22, driven by
demands in roads, urban infrastructure and commercial real estate. The consumption of cement
in India is expected to grow at a CAGR of 5.68% from 2016 to 2022.
The Indian cement sector's capacity is expected to expand at a compound annual growth rate
(CAGR) of 4-5% over the four-year period up to the end of FY27. It would thus begin the 2028
financial year at 715-725 MT/ year in installed capacity.
At present, the Installed capacity of cement in India is 570 MTPA with a production of 298
MTPA.
Cement production increased by 7.3% in February, 2023 over February, 2022. Its cumulative
index increased by 9.7% during April-February, 2022-23 over the corresponding period of the
previous year.
The Cement sector has received good investments and support from the Government in the
recent past.
Real estate sector received the highest value of PE/VC investments in Q1 (January-March) of
2023 at US$5 billion, registering a year-over-year 123% growth.
In 2022, PE/VC investments in real estate and infrastructure stood at US$ 5.81 billion across
71 deals and US$ 7.9 billion across 47 deals respectively.
PE/VC investments in real estate and infrastructure witnessed a sharp growth of 27%, at US$
13.7 billion in December 2022 as compared to US$ 10.7 billion in December 2021

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FDI inflows in the industry, related to the manufacturing of cement and gypsum products,
reached US$ 5.49 billion between April 2000- September 2022.
In June 2022, UltraTech Cement approved Rs. 12,886 crore (US$ 1.65 billion) capital
expenditure to increase capacity by 22.6 million tonnes per annum (MTPA) through brownfield
and greenfield projects.
PE/VC investments in real estate and infrastructure stood at US$ 338 million and US$ 795
million respectively in September 2022.
India's cement production was expected to range between 380-390 million tonnes in FY23, a
growth rate of 8-9% year-on-year (yoy).
Cement production in India increased by 12.1% in September 2022 compared to September
2021.
Adani group will set up two new cement manufacturing plants, 15,000 MW of renewable power
projects, and a data centre in Andhra Pradesh.
In October 2022, UltraTech announced that it has been granted Environmental Product
Declaration (EPD) certificates for four of its cement products, which are Ordinary Portland
Cement (OPC), Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC) and PCC
(Portland Composite Cement).
As per the Union Budget 2022-23, there was a higher allocation for infrastructure to the tune
of US$ 26.74 billion in roads and US$ 18.84 billion in railways is likely to boost demand for
cement.
Under the housing for all segment, 8 million households will be identified according Rs. 48,000
crore (US$ 6.44 billion) set aside for PM Awas Yojana.
The government approved an outlay of Rs. 199,107 crore (US$ 26.74 billion) for the Ministry
of Road Transport and Highways, and this step is likely to boost the demand for cement.
Several government schemes such as MGNREGA, PM Garib Kalyan Rozgar Abhiyan and
state-level schemes such as Matir Srisht (West Bengal) and public work schemes (Jharkhand)
have aided demand
In October 2021, Prime Minister, Mr. Narendra Modi, launched the ‘PM Gati Shakti - National
Master Plan (NMP)’ for multimodal connectivity. Gati Shakti will bring synergy to create a
world-class, seamless multimodal transport network in India. This will boost the demand for
cement in the future.
Growth in Infrastructure and real estate sector, post-COVID-19 pandemic, is likely to augment
the demand for cement in 2022. The industry is likely to add an ~8 MTPA capacity in cement
production.
As per DGCIS, India’s export of Portland cement, aluminous cement, slag cement, super
sulphate cement and similar hydraulic cements stood at US$ 118.15 million in FY21. India
exported cement to countries such as Sri Lanka, Nepal, the US, the UAE and Bangladesh.
The Government of India is strongly focused on infrastructure development to boost economic
growth and is aiming for 100 smart cities. The Government also intends to expand the capacity

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of railways and the facilities for handling and storage to ease the transportation of cement and
reduce transportation cost. These measures would lead to an increased construction activity,
thereby boosting cement demand.
The future outlook of the cement sector looks on track with pandemic easing out.
In the next 10 years, India could become the main exporter of clinker and Gray cement to the
Middle East, Africa, and other developing nations of the world. Cement plants near the ports,
for instance the plants in Gujarat and Visakhapatnam, will have an added advantage for export
and will logistically be well armed to face stiff competition from cement plants in the interior
of the country. India’s cement production capacity is expected to reach 550 MT by 2025. The
cement demand in India is estimated to touch 419.92 MT by FY27 driven by the expanding
demand of different sectors, i.e., housing, commercial construction, and industrial construction.

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 Company Profile

3.1 Background
UltraTech Cement Limited is the cement flagship company of the Aditya Birla Group. A USD
7.9 billion building solutions powerhouse, UltraTech is the largest manufacturer of grey cement
and ready-mix concrete (RMC) in India. It is also one of the leading players in the white cement
segment in India. It is the third largest cement producer in the world, excluding China.
UltraTech is the only cement company globally (outside of China) to have 100+ MTPA of
cement manufacturing capacity in a single country. The Company’s business operations span
UAE, Bahrain, Sri Lanka and India.
UltraTech has a consolidated capacity of 137.85 Million Tonnes Per Annum (MTPA) of grey
cement. UltraTech has 23 integrated manufacturing units, 29 grinding units, one Clinkerisation
unit and 8 Bulk Packaging Terminals. In the white cement segment, UltraTech goes to market
under the brand name of Birla White. It has one White Cement unit and three Wall Care putty
unit, with a current capacity of 1.98 MTPA. With 230+ Ready Mix Concrete (RMC) plants in
100+ cities, UltraTech is the largest manufacturer of concrete in India. It also has a slew of
speciality concretes that meet specific needs of discerning customers. The Building Products
business is an innovation hub that offers an array of scientifically engineered products to cater
to new-age constructions.
UltraTech pioneered the UltraTech Building Solutions (UBS) concept to provide individual
home builders with a one-stop-shop solution for building their homes. This is the first pan-
India multi-category retail chain catering to the needs of individual home builders (IHBs). The
purpose of this initiative is to engage with home builders at all stages of the construction cycle,
empower them with quality construction products and services, and assist in the completion of
their dream homes.
UltraTech is a founding member of Global Cement and Concrete Association (GCCA). It is a
signatory to the GCCA Climate Ambition 2050 and has committed to the Net Zero Concrete
Roadmap announced by GCCA. UltraTech is focused on accelerating the decarbonisation of
its operations. It has adopted new age tools like the Science Based Targets Initiative (SBTi) and
Internal Carbon Price as well as set ambitious environmental targets through both EP100 and
RE100. UltraTech is the first company in India and the second company in Asia to issue dollar-
based sustainability linked bonds.
UltraTech works to actively contribute to the social and economic development of the
communities in which it operates in. The Company’s social initiatives focus on education,
healthcare, sustainable livelihoods, community infrastructure and social causes. UltraTech
reaches out to more than 1.6 million beneficiaries in over 507 villages in 16 states across India.

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3.2 Values Framework
Integrity-
Acting and taking decisions in a manner that is fair and honest. Following the highest standards
of professionalism and being recognised for doing so. Integrity for us means not only financial
and intellectual integrity, but encompasses all other forms as are generally understood.
Commitment-
On the foundation of Integrity, doing all that is needed to deliver value to all stakeholders. In
the process, being accountable for our own actions and decisions, those of our team and those
on the part of the organisation for which we are responsible.
Passion-
An energetic, intuitive zeal that arises from emotional engagement with the organisation that
makes work joyful and inspires each one to give his or her best. A voluntary, spontaneous and
relentless pursuit of goals and objectives with the highest level of energy and enthusiasm.
Seamlessness-
Thinking and working together across functional groups, hierarchies, businesses and
geographies. Leveraging diverse competencies and perspectives to garner the benefits of
synergy while promoting organisational unity through sharing and collaborative efforts.
Speed-
Responding to internal and external customers with a sense of urgency. Continuously striving
to finish before deadlines and choosing the best rhythm to optimise organisational efficiencies.

3.3 Mission and Vision

Vision statement-
“To be leader in cement manufacturing with clear focus on Safety, Quality and Cost.”
Mission statement-
“To deliver superior value to stakeholders on the four pillars of
- Sustainability
- Innovation
- Customer Centricity
- Team Empowerment”

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3.4 SWOT Analysis
SWOT Analysis / Matrix of UltraTech Cement by EMBA PRO includes the four key elements
- Strengths, Weaknesses, Opportunities, & Threats. The strengths and weaknesses address the
internal factors of the company, opportunities and threats are the macro challenges that
UltraTech Cement is facing in India and other international markets that it operates in.
Strengths of UltraTech Cement
Strengths are the firm's capabilities and resources that it can use to design, develop, and sustain
competitive advantage in the marketplace
- Brands catering to different customers segments within Construction - Raw Materials
segment - UltraTech Cement extensive product offerings have helped the company to penetrate
different customer segments in Construction - Raw Materials segment. It has also helped the
organization to diversify revenue streams.
- Diverse Revenue models - Over the years UltraTech Cement has ventured into various
businesses outside the Capital Goods sector. This has enabled the company do develop a
diversified revenue stream beyond Capital Goods sector and Construction - Raw Materials
segment.
- High margins compare to Construction - Raw Materials industry's competitors - Even though
UltraTech Cement is facing downward pressure on profitability, compare to competitors it is
still racking in higher profit margins.
- Talent management at UltraTech Cement and skill development of the employees - Human
resources are integral to the success of UltraTech Cement in Construction - Raw Materials
industry.
- Track record of innovation - Even though most players in the Capital Goods strive to innovate,
UltraTech Cement has successful record at consumer driven innovation.
- Wide geographic presence - UltraTech Cement has extensive dealer network and associates
network that not only help in delivering efficient services to the customers but also help in
managing competitive challenges in Construction - Raw Materials industry.

Weaknesses of UltraTech Cement

Weaknesses of UltraTech Cement can either be absence of strengths or resources of capabilities
that are required but at present the organization doesn't have. Leaders have to be certain if the
weakness is present because of lack of strategic planning or as a result of strategic choice.
- Declining per unit revenue for UltraTech Cement - competitiveness in the Construction - Raw
Materials industry is putting downward pressure on the profitability. A starting guide to manage
this situation for company name is – objectively assessing the present value propositions of the
various products.

8
- Gross Margins and Operating Margins which could be improved and going forward may put
pressure on the UltraTech Cement financial statement.
- Business Model of UltraTech Cement can be easily imitated by the competitors in the
Construction - Raw Materials industry. To overcome these challenges company name needs to
build a platform model that can integrate suppliers, vendors and end users.
- Extra cost of building new supply chain and logistics network - Internet and Artificial
Intelligence has significantly altered the business model in the Capital Goods industry and
given the decreasing significance of the dealer network UltraTech Cement has to build a new
robust supply chain network. That can be extremely expensive.
- High cost of replacing existing experts within the UltraTech Cement. Few employees are
responsible for the UltraTech Cement's knowledge base and replacing them will be extremely
difficult in the present conditions.
- Loyalty among suppliers is low - Given the history of UltraTech Cement coming up with new
innovations to drive down prices in the supply chain.

Opportunities for UltraTech Cement

Opportunities are potential areas where the firm chain identify potential for - growth, profits,
and market share.
- Increasing customer base in lower segments - As customers have to migrate from un-
organized operators in the Capital Goods industry to licensed players. It will provide UltraTech
Cement an opportunity to penetrate entry level market with a no-frill offering.
- Trend of customers migrating to higher end products - It represents great opportunity for
UltraTech Cement, as the firm has strong brand recognition in the premium segment, customers
have experience with excellent customer services provided by UltraTech Cement brands in the
lower segment. It can be a win-win for the company and provides an opportunity to increase
the profitability.
- Increasing government regulations are making it difficult for un-organized players to operate
in the Construction - Raw Materials industry. This can provide UltraTech Cement an
opportunity to increase the customer base.
- Lower inflation rate - The low inflation rate brings more stability in the market, enable credit
at lower interest rate to the customers of UltraTech Cement. This will increase the consumption
of UltraTech Cement products.
- Accelerated technological innovations and advances are improving industrial productivity,
allowing suppliers to manufacture vast array of products and services. This can help UltraTech
Cement to significantly venture into adjacent products.
- Rapid Expansion of Economy As the US economy is improving faster than any other
developed economy, it will provide UltraTech Cement an opportunity to expand into the US
market. UltraTech Cement already have know-how to operate into the competitive US market.

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Threats to UltraTech Cement
Threats are factors that can be potential dangers to the firm's business models because of
changes in macroeconomic factors and changing consumer perceptions. Threats can be
managed but not controlled.
- Competitors catching up with the product development - Even though at present the UltraTech
Cement is still leader in product innovation in the Construction - Raw Materials segment. It is
facing stiff challenges from international and local competitors.
- Saturation in urban market and stagnation in the rural markets - For UltraTech Cement this
trend is an ongoing challenge in the Construction - Raw Materials segment. One of the reasons
is that the adoption of products is slow in rural market. Secondly it is more costly for UltraTech
Cement to serve the rural customers than urban customers given the vast distances and lack of
infrastructure.
- Commoditization of the product segment - The biggest challenge for UltraTech Cement and
other players in the industry is the increasing commoditization of the products in Capital Goods
industry.
- Growing technological expertise of local players in the export market - One of the biggest
threats of tie-up with the local players in the export market for UltraTech Cement is threat of
losing IPR. The intellectual property rights framework is not very strong in emerging markets
especially in China.
- Distrust of institutions and increasing threat of legal actions for UltraTech Cement - As the
WTO regulations and laws are difficult to enforce in various markets. Legal procedures have
become expensive and long drawn process. It can lead to less investment into emerging markets
by UltraTech Cement thus resulting in slower growth.
- Changing political environment with US and China trade war, Brexit impacting European
Union, and overall instability in the middle east can impact UltraTech Cement business both in
local market and in international market.

3.5 PESTEL Analysis of UltraTech Cement

The PESTEL / PEST Analysis of UltraTech Cement will cover all macro environment factors
that impact Construction - Raw Materials - political factors, economic factors, social factors,
technological factors, environmental factors and legal factors.
UltraTech Cement operates in a dynamic environment where it is influenced by – collective
social trends, technological changes, increasing regulatory framework for environmental
factors, consumer spending behaviour, regulatory framework, increasing environmental
activism among consumers, government decisions, and ever evolving legal system.

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Political Factors
Political factors are often related to the level of intervention and nature of intervention of the
local and national government in the business and economic environment. Government policies
and governance system plays a huge role in nature and objectives of the policies.
- Political stability in the existing markets – UltraTech Cement operates in numerous countries
so it has to make policies each country based on the Construction - Raw Materials industry
specific requirements. Given the recent rise in populism across the world I believe that India
can see similar trends and may lead to greater instability in the India market.
- Governance System – The present governance system in India has served its purpose for the
long time and I don’t think much will change in the process even though it may throw up
leaders that can lead divergent policy making from the historical norm. UltraTech Cement has
to keep a close eye on the industry wide government priorities to predict trends.
- Other stakeholders such as non-government organizations, protest & pressure groups, activist
movements play critical role in policy making in India. UltraTech Cement should closely
collaborate with these organizations so that it can contribute better to the community goals as
well as with corporate goals.
- Armed Conflict – There are no imminent threats to India from the disruption in the business
environment because of military policies, terrorist threats and other political instability.
UltraTech Cement has experience of handling operations in difficult circumstances.
- Importance of local governments in India – Unlike in most other countries, local governments
play critical role in policy making and regulations in India. UltraTech Cement has to closely
follow the states and territories it has presence in rather than devising nation-wide policies in
India.
- Changing policies with new government – Studying the current trends it seems that there can
be a transition of government in India in next election. UltraTech Cement has to prepare for
this eventuality as it will lead to change in governance priorities of Capital Goods sector.

Economic Factors
Economic factors include – consumer disposable income, the stage of economy of country
name, taxation rate, interest rate, exchange rate, inflation rate, economic performance of
country name, labour market conditions etc.
- Economic Cycles – The performance of UltraTech Cement in India is closely correlated to
the economic performance of the India's economy. The growth in last two decades is built upon
increasing globalization and utilizing local resources to cater to global markets.
- Efficiency of financial markets in India – UltraTech Cement can access vibrant financial
markets and easy availability of liquidity in the equity market of India to expand further
globally.

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- Downward pressure on consumer spending – Even though the consumer disposable income
has remained stable, the growing inequality in the society will negatively impact consumer
sentiment and thus impact consumer spending behaviour.
- Skill level of workforce in India market – The skill level of human resources in India is
moderate to high in the Capital Goods sector. UltraTech Cement can leverage it to not only
improve services in India but also can leverage the skilled workforce to create global
opportunities.
- Increasing liberalization of trade policy of India can help UltraTech Cement to invest further
into the regions which are so far off-limits to the firm.
- Inflation rate – The easy liquidity in the market posts the great recession of 2018 will lead to
increasing inflation in the India economy.

Social Factors
Each society and culture have its own way of doing business. These social factors can not only
help companies like company name to better understand the way of doing business but also in
understanding the customer preferences in Capital Goods sector of country name. Social factors
include – traditions, gender roles, acceptance of entrepreneurial spirit, culture, attitude towards
certain products and services, health & safety attitudes, demographics, societal roles and
norms, and leisure interests.
- Media outlets play a critical role in influencing the public opinion, India. Both traditional
media and social media are rapidly growing in India. UltraTech Cement can leverage this trend
to better market and position its products.
- Access to essential services – By and large over the last decade and half the wider population
in getting access to essential services in India. This has been a result of increasing investment
in public services.
- Gender roles – The gender roles are evolving in India. UltraTech Cement can test various
concepts to cater to and support these evolving gender roles in India society.
- Education level – The education level is high in India especially in the UltraTech Cement
sector. UltraTech Cement can leverage it to expand its presence in India.
- Societal norms and hierarchy – the society of India is different from the home market of
UltraTech Cement. It should strive to build a local team that understands the societal norms
and attitudes better to serve the customers in India.
- Migration – The broader attitude towards migration is negative in India. This can impact
UltraTech Cement ability to bring international leaders and managers to manage operations in
the country.

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Technological Factors
Technology is fast disrupting various industries and Capital Goods is no different. There are
numerous ways technological factors are impacting the UltraTech Cement & Construction -
Raw Materials in India. Some of the technological factors are – rate of technology driven
change, population access to technology, access to greater information, supply chain disruption
because of technology, innovation in product offerings, innovation in customer services, access
to mobile phones driving empowerment etc.
- Intellectual property rights and patents protection – If India have higher safeguards for IPR
and other intellectual property rights then more and more players are likely to invest into
research and development.
- Technological innovation is fast disrupting the supply chain as it is providing greater access
to information to not only supply chain partners but also to wider players in the Capital Goods
industry.
- Maturity of technology – The technology in the Construction - Raw Materials sector is still
not reached maturity and most players are vying for new innovations that can enable them to
garner higher market share in India.
- Latest technology-based innovations implemented by competitors of UltraTech Cement –
This can provide a good insight into what the competitors are thinking and where Construction
- Raw Materials business model future is.
- Lowering cost of production – The latest technology is fast lowering production and servicing
cost in the Capital Goods sector. UltraTech Cement has to restructure its supply chain to bring
in more flexibility to meet both customer needs and cost structures.
- Developments and dissemination of mobile technology has transformed customer
expectations in the Capital Goods sector. UltraTech Cement has to not only meet and manage
these expectations but also have to innovate to stay ahead of the competition.

Environmental Factors
Over the last decade sustainability and environmental factors are becoming critical for
businesses. Government and pressure groups are fast asking organizations to adhere to
environmental standards. Some of the environmental factors are – safe disposal of hazardous
material, limiting carbon footprints, climate change, safe water treatment, safe waste disposal,
insurance policies, laws regulating pollution, increasing focus on sustainability etc.
- Waste management especially for units close to the urban cities has taken increasing
importance for players such as UltraTech Cement. India government has come up with strict
norms for waste management in the urban areas.
- Extreme weather is also adding to the cost of operations of the UltraTech Cement as it has to
invest in making its supply chain more flexible.

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- Environmental norms are also altering the priorities of product innovation. In many cases
products are designed based on environmental standards and expectations rather than catering
to traditional value propositions.
- Renewable technology is also another interesting area for UltraTech Cement. It can leverage
the trends in this sector. India is providing subsidies to invest in the renewable sector.
- Customer activism – Greater awareness among customers have also put environmental factors
at the centre of UltraTech Cement strategy. Customers expects UltraTech Cement to adhere to
not only legal standards but also to exceed them to become responsible stakeholder in the
community.
- Paris Climate Agreement has put real targets for the national government of India to adhere
to. This can result in greater scrutiny of environmental standards for UltraTech Cement in India.

Legal Factors
Legal plays an important role in the development of Construction - Raw Materials sector in
any economy. UltraTech Cement management has to consider following legal factors before
entering international market – copyrights law, data protection laws, intellectual property rights
protection, time taken to deliver justice, system of justice, discrimination laws, biasedness
toward home players etc.
- Time taken for business cases in court – some countries even though follow international
norms but the time for resolution often run in years. UltraTech Cement has to carefully consider
average time of specific cases before entering an international market.
- Data protection laws – Over the last decade data protection has emerged as critical part of not
only privacy issues but also intellectual property rights. UltraTech Cement has to consider
whether India have a robust mechanism to protect against data breaches or not.
- Health and safety norms in the India and what UltraTech Cement needs to do to meet those
norms and what will be the cost of meeting those norms.
- Business Laws – The business laws procedure that India follows. Are these norms consistent
with international institutions such as World Trading Organization, European Union etc.
- Environment Laws and guides – The level of environmental laws in the India and what
UltraTech Cement needs to do to meet those laws and regulations.
- Legal protection of intellectual property, patents, copyrights, and other IPR rights in India.
How UltraTech Cement will be impacted if there are not enough protection.

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3.6 Workflow of Cement manufacturing at Ultratech cement Ltd.
Step 1: Mining
The cement manufacturing process starts from the mining of raw materials that are used in
cement manufacturing, mainly limestone and clays. A limestone quarry is inside the plant area
and a clays quarry is as far from the plant area as 25 km. The limestone is excavated from open
cast mines after drilling and blasting and loaded onto dumpers which transport the materials
and unload into hoppers of limestone crushers. The clays are excavated from open cast mines
and loaded onto dumpers which transport the materials and unload into open yard storage. Then
it is transported by trucks and unloaded into the hopper of a clay crusher. They are three types
of clay used in cement manufacturing, namely silty clay, Zafarana clay, and Kaolin.
Other raw materials are used to control the kiln feed mix design, namely sand, and iron ore.
The sand and iron ore are transport from outside the plant (from different suppliers) by trucks
and unloaded into open yard piles, called sand and iron ore piles.

Step 2: Crushing, stacking, and reclaiming of raw materials

The limestone is crushed in the first crusher called a jaw crusher and then fed into the second
crusher called an impact crusher with mixing of clays to reduce particle size below 50mm. The
discharged raw mix (limestone 70&percent; clays 30&percent;) is fed onto a belt conveyor and
passed across a bulk material analyzer. The raw mix is fed into a circular storage unit called a
raw mix storage. Then, the mix is extracted transversely from the stockpile by reclaimers and
conveyed to a raw mill bin called the raw mix bin for grinding.
The other raw materials that are used in cement manufacturing, called additives, are high purity
limestone, sand and iron ore. The high purity limestone is crushed in a lone in jaw crusher and
then crushed more in a secondary crusher to reduce the size to completely pass through a 50mm
sieve. Then, it is stacked by a limestone stacker into a longitudinal storage unit called the
limestone storage stockpile. Finally, the limestone is extracted transversely from the stockpile
by reclaimer and conveyed to a raw mill bin, called the limestone bin, for grinding.

Step 3: Raw meal drying, grinding, and homogenization

The raw mix, high grade limestone, sand, and iron ore are fed from their bins to raw mills,
called air swept mills, for drying and fine grinding. The raw mill contains two chambers,
separated by diaphragm, namely a drying chamber and a grinding chamber. The hot gases
coming from a preheater (preheater / kiln system) enter the mill and are used in raw mills for
drying. Then the drying materials enter the grinding chamber of raw mills for fine grinding.
The grinding chamber contains a certain quantity of ball charge in a different size ranging from
30mm to 90mm. The hot gas and grinding materials mill outlet feeds to a separator which
separates fine and course product. The latter, called reject, is sent to the mill inlet via an air
slide for regrinding. The hot gas and fine materials enter a multistage "cyclone" to separate a
fine materials and gases. The fine material, called raw meal, is collected from the multi-cyclone
and then fed into an air slide for lifting called an Aeropol. The hot gases with very fine materials
enter an electrostatic precipitator to separate the fine materials from gases. The very fine

15
materials called preheater dust or electrostatic separator dust is collected from filters and fed
into screw conveyors and are then mixed with the fine material in an air slide and transported
to an air lift vessel via air slide. In the air lift, the raw meal is lifted to the silo by compressed
air to the air slide and then stored and homogenized in a concrete silo. Raw meal extracted
from the silo, now called kiln feed, is fed to the top of the preheater via an air lift called the
Poldos for pyro-processing.

Step 4: Clinkerization
Cement clinker is made by pyro processing of kiln feed into the preheater-kiln system. The
preheater-kiln system consists of a multi-stage cyclone preheater with five stages, combustion
chamber, riser duct, rotary kiln, and grate cooler. In the preheater, the kiln feed is preheated by
hot gas coming from the combustion chamber and rotary kiln. Then the preheated kiln feed is
partially calcined (made powdery) in a combustion chamber and riser duct and then completely
calcined in a rotary kiln as well as heated to approximately 1400 C to form clinker components
C3A, C4AF, C2S, and C3S. The main source of heat is natural gas. Natural gas is fired as a
main fuel (100 &percent;) in the main burner rotary kiln and a 95% natural gas and
5.0% heavy oil combination in the combustion chamber. The fuel is used to provide the
heat required to convert the kiln feed into clinker. Hot clinker discharge from the kiln drops
onto the grate cooler for cooling from approximately 1350-1450 C to approximately 120 C. In
the cooler, the quantity of cooling air required for clinker cooling is extracted from the
atmosphere by different cooling fans and fed into the cooler chambers and pressurized through
the cooler plate and clinker bed. The cooled clinker discharges from the cooler into the pan
conveyor and it is transported to the clinker storage. The clinker is taken from the clinker
storage to cement ball mill hoppers for cement grinding. Part of the hot air extracted from the
cooler is utilized as a secondary and tertiary air for combustion in rotary kiln and combustion
chamber, respectively.

Step 5: Cement grinding and storage

Clinker and gypsum for OPC, limestone for limestone cement, and slag for slag cement are all
extracted from their respective hoppers and fed to the cement mills. The ball mill grinds the
feed to a fine powder in two chambers, namely the first and second chambers. The two
chambers have a certain quantity of ball charge of different sizes from 17mm to 90 mm. The
mill discharge is fed to a bucket elevator which takes the material to a separator which separates
fine and coarse product. The latter is sent to the mill inlet for regrinding and the final product
is stored in concrete silos.

Step 6: Packing
Cement extracted from silos is conveyed to the automatic electronic packers where it is packed
in 50 kg bags and dispatched in trucks.

16
3.7 The Adity Birla group
The Aditya Birla Group is a worldwide company with its headquarters in the city of Mumbai
in India. It has operations in 35 different countries and employs more than 120000 people
throughout the globe. This organization was established in 1857 by Send Narayan Birla;
prominent people associated with it include Kumar Mangalam Birla and
Dr. Santrupt Misra, who serves as CEO (CEO). The company has investments in viscose staple
fiber, metals, cement (the biggest producer in India), viscose, filament services,
telecommunications, business process outsourcing, and information technology. In 2019, the
company had revenues of around $44.3 billion US dollars.
It is the third- largest Indian private sector firm after the Tata group, which has sales of just a
little more than US$ 100 billion, and RIL, which has sales of US$ 74 billion.

3.8 Following are different business run by ABG

1. Aditya Birla capital Ltd
2. Aditya Birla fashion & retail Ltd
3. Aditya Birla grasun chemical Ltd
4. Aditya Birla Idea payment bank Ltd
5. Aditya Birla science & technology company pvt. Ltd
6. AV group NBINC
7. Birla carbon
8. Lameroon aluminum
9. Itindalko Alumax Aerospace ltd
10. Indo Phil cotton mills
11. Indo Thai synthetics
12. Birla sun life distribution company ltd
13. PSI data system, etc,

3.9 Infrastructure Facilities

Roads
Dams
Community centre’s
Houses

17
Electricity
Health centre’s
Water channels
School

3.10 Future Growth and Prospectus

• This company Aspire to become the top manufacturer in the cement and concrete industry.
• This cement company wants to become the leader in the cement market.
• This company plans to bring in value added programs and services for constructions industry.
• Aggressive apex to expand improve efficiency.

Financial statements of Rajashree Cement Unit Ltd.

18
19
 Working Capital

4.1 Abstract:
This research report aims to investigate the relationship between working capital management
and profitability in the context of business operations. Effective working capital management
is crucial for sustaining and improving a company's profitability. By analysing various financial
metrics and case studies, this report provides insights into how efficient working capital
management practices can positively impact a firm's bottom line. The report also highlights the
potential risks associated with poor working capital management.

4.2 Introduction
Working capital management refers to the management of a company's short-term assets and
liabilities. It plays a pivotal role in a firm's financial health and overall profitability. Effective
working capital management ensures that a company has enough liquidity to meet its short-
term obligations while optimizing its use of resources. This research report aims to explore the
impact of working capital management on a company's profitability.

4.3 Working capital components

Working capital is a crucial aspect of a company's financial management, including Ultratech
Cement. Working capital represents the capital a company needs to cover its day-to-day
operational expenses and short-term obligations. The working capital components for Ultratech
Cement or any manufacturing company typically include the following:

Current Assets:
Cash and Cash Equivalents: This includes cash on hand and highly liquid investments that can
be quickly converted to cash.
Accounts Receivable: Money owed to Ultratech Cement by customers for goods delivered but
not yet paid for.
Inventories: Raw materials, work-in-progress, and finished goods that are ready for sale or in
the production process.

20
Current Liabilities:
Accounts Payable: Money that Ultratech Cement owes to suppliers for raw materials, services,
or other expenses.
Short-Term Debt: Any short-term loans or credit lines that need to be repaid within a year.
Accrued Liabilities: Unpaid expenses such as salaries, utilities, and taxes that have accrued but
have not been paid yet.
Operating Cash Flow: The cash generated or used by Ultratech Cement's core operating
activities, including revenue from cement sales, operating expenses, and taxes.
Working Capital Ratio: This is a financial metric that compares current assets to current
liabilities and indicates the company's ability to meet its short-term obligations. A healthy
working capital ratio suggests that the company can comfortably cover its short-term debts.
Working Capital Management: Efficient management of working capital involves strategies to
optimize cash flows. This may include managing accounts receivable (e.g., ensuring timely
collections from customers), controlling inventory levels (avoiding overstocking or stockouts),
and negotiating favourable credit terms with suppliers.
Cash Flow Forecasting: Ultratech Cement would likely engage in cash flow forecasting to
predict future cash needs and ensure that it has sufficient working capital to meet operational
requirements.

4.4 Process of capitalization of assets

1. Block proposal
2. Block sanction
3. Project department
4. Concern department
5. Purchas order
6. Vendor acceptance
7. Material supply
8. Store department
9. GRN (goods receipt note)
10. Account dept.
11. Bill passing
12. Payment Block proposal

21
4.4.1 Block proposal
Whenever company thinks about the new project first it will go for the observation, what is the
need of the department? Which type of assets is required? Is it urgent or we can postpone? If
the project is not new, then the concern department will check there is necessary of addition or
improvement in the existing project or the assets? Once, after getting answer for the above the
department will take next step: Department will go for preparing working, working include.
Plan of the new project: it means how much amount we need for the project and allocation of
the amount in the different section etc. Information of different vendors (3 to 4) to compare the
price, quality, mode of delivery, other charges, safety etc. (quotation of different venders)
concern department will check.
The end compares the quotation each other and finalized which is flexible. Once the final
proposal is prepared it will be checked and signed by all the authorities of the local management
and later it will send to the Mumbai head office for the approval. Head office will check all the
details send by the local management and analysis it whether it is in the benefit of the company
or not then it approved most of the time head office approved because in local also Ultra Tech
is not a small company it may not go for the unnecessary requirement and all the project or in
the benefit of the company, so head office will sanction the amount but the company should
submit its day to day about the new project and their improvements and benefits. Once the
sanction amount came company will go for the project implementation All the backing related
aspects it may be payment, amount sanction, bill passing act, done through HDFC bank.

4.4.2 Block sanction

This is the second step of the proses of capitalization of the assets In second step the block
proposal will become block section after getting the approval from the head office. Department
will prepare WBS (work breakdown structure). In simple WBS means giving a number to new
project and also existing project may involve any addition or improvisation. For example: GIL-
22-RC-I-M OR E (N-R-D this letter also comes in the place of me) Where: GIL is the company
code 22 is the 2022 (year in which project is carrying out) RC is the unit Rajshree Cement I is
the investable (investing the amount in new Project) N is the Non return (it is necessary for the
company but It does not give any profit)
R is the Return: return may not be always in the form of amount it may be
 Man power saving
 Energy saving
 Cost saving etc.
All the above are WBS code for the project after that main code will be given means project
is related to which department for the M is the mechanical. C is the Civil. E is the electronic
Code sub code will be given like A and B where A means customers B means suppliers.

22
4.4.3 Project department
It is a department in which new project will be carried out. In this department karomi is used.
Karomi is a software used by Ultratech in which head office will prepare project plan means
how much amount is sanctioned for which project etc. till the main code and send to account
department, account will prepare sub code its performance, target etc.

4.4.4 Concern department

Concern department may be Mechanical, Electrical, Civil, instrument etc. it will check the
project format sent by account Whether the amount is sufficient for the project and dividend
amount forthe different month’s etc. if requires any changes it approaches to concerned
authority.

4.4.5 Purchase requisition

This department time of placing the order. This department will make the life of the list of
material required for the project, how much is required (quantity), quality of the material on
which date it is needed everything will check by this department.

4.4.6 Purchase order

It is the actual time of the placing the order. This department will place the order to the vender
which is finalized at the time of block proposal and department will clearly talk about the mode
of supply of material and about the terms and conditions for making the payment and what are
the document required along with supply of material like warranty certificate etc followings
are the terms and conditions.

Payment terms and conditions

PO: xxxxxx
Delivery Address: Aditya Nagar malkhed road
Rajshree cement worker

Taxes
GST on supply will be paid extra as applicable against documentary proofs. Taxes variation
within contractual delivery period arising out of change in other statutory taxed shall be in
purchaser’s scope against the documentary evidence.

23
Delivery
On FOR site basis within 10 weeks (for ex.) from the date of order placed
As material dispatch is on FOR site basis, supplier to ensure that proper safety measures are to
be taken care by the transporter, such as vehicle’s reverse horn, head and tail lights are in
working condition Strict time bound delivery is the essence of the order. Vender must deliver
the material etc.

Please arrange to dispatch the material to our site at the following address:
Ultra Tech cement limited
(Unit: Rajshree cement works)
Aditya Nagar Malkhed Road
Kalaburagi

LIQUIDATED DAMAGES FOR LATE DELIVERY

• In the event of a delivery delay that goes beyond the agreed upon deadline, the supplier is
responsible for paying liquidated damages of 1% of the order value up to a maximum of 10%
of the order value. LD and any relevant tax will be added to the supplier's account in addition
to the LD itself.
• In simple LD means if supplier made late delivery of material for that company has right to
cut 1% in total order value because of the late deliver company may occur loss and supplier
need to bear all the extra taxes along with LD.
• The above LD is applicable only when it is clearly mentioned in contract otherwise not.

PAYMENT TERMES FOR SUPPLY

• Within 30 days on the date of delivery of the materials at the site, 90 percent on a pro-rata
basis, plus taxes
• The remaining 10% of the order amount will be issued after 30 days of receiving the materials
on site and submitting a PBG (performance bank guarantee). There should be no expiration
date on PBG. In accordance with annexure2, PBG should be delivered in the format specified
by UTCL (ultra tech cement ltd).
• Hard copy of PBG should be directly submitted at our site with kind attn. to HOD materials
department

24
WARRANTY
• You, or your sub-supplier, or any other source from which you purchased the equipment/parts
and supplied them to us, shall warrant that all items supplied by you will be new and of first-
class workmanship and suitable design free of defects resulting from the use of any defective
material, or defects in manufacturing or design. If a component or portions of machinery or
equipment are discovered to be faulty within 18 months (for example) from the date of
commissioning OR 24 hours from the date of delivery at site of the material, you are
responsible for free repair/replacement at any of your or your sub- supplier work.
• In case of any parts to be supplied, the new or replacement parts shall be sent first. The
defective component or parts of equipment so replaced shall be properly and will be sent back
to you on “fright to pay bases”.
• If you do not carry out the repair work within the time mutually agreed by both of us from
the date of our complaint, we shall undertake the work ourselves and debt the actual expenses
to your account. If any component or parts of parts of equipment fails within warranty period,
the same shall be repaired or replaced free of cost on FOR site.

PRICE BASIS
• All the price are FOR site basis including packing and forwarding and inland freight, but
excluding taxes which will be paid extra against document proof.
• Transit insurance will be company scope.
• Price will be from till the completion of supplies and escalation on whatsoever account shall
not be considered.

ARBITATION
If a question, dispute, or disagreement arises between us about the proper observance of the
order's terms and conditions or about the rights, duties, or obligations of the parties, the matter
will be referred to arbitration in Mumbai by three arbitrators, one chosen by each party and a
third arbitrator appointed by such appointed arbitrator before proceedings on the reference in
accordance.

TERMINATION OF CONTRACT
• The contract may be terminated by either party at any time by written notice of 30 days to
the other party (the receiving party).
• If the receiving party shall be declared bankrupt or make any arrangement or composition
with his creditors or shall enter into liquidation or shall suffer the appointment of a receiver or
anything equivalent in accordance with the laws of the country where the receiving party is
incorporated.

25
• In case of material breach of contract, by the receiving party of such obligations under this
contract, which are not subject to another right or remedy of the other party?
• Any time a contract is transferred to another party without the written permission of both
parties. Unless the receiving party responds and cures the default within 30 days of receiving
the termination notice, the event that triggered the notification will no longer be valid.
Alternatively, the contract will be ended after 30 days.
• The party alleging breach of contract may terminate the contract forthwith with or without
prejudice to any rights that may have accrued there under to either party previous to termination
if the other party commits a material breach. Damages for pre-mature termination of the
contract, such as additional costs for finishing the balance work, dues if any, etc., may be
claimed by any party.

LEGAL MATTER
The order shall be subject to the jurisdiction of the state court in Gulbarga, Karnataka. This
order will be considered to have originated in Gulbarga, Karnataka, and will be subject to the
jurisdiction of the Gulbarga, Karnataka court.

THE TEST CERTIFICATE

Supply should ensure that material is accompanied by all relevant certificates, failing which
the material may be liable for rejection.

4.4.7 VENDOR ACCEPTANCE

Once all the terms and condition accepted by the party then order will be placed. After pacing
the order if party is on need of advance payment, then he should make the request of advance
payment through giving ABG (advance bank guarantee). Ultra Tech is maintaining a standard
format for ABG all the party must follow That
Following is the format of ABG
M/S. Ultra Tech cement limited
(Unit: Rajshree cement works)
Address
Dear Sirs,
1. M/S. ————- has received an advance payment of Rs———— (Rupees——— —)
from the purchaser, a company registered under the Companies Act, 1956, with its
registered office at "B" wing, 2nd floor, Ahura centre Mahakali caves Road Andheri (East),
Mumbai (hereinafter referred to as "the purchaser," which expression shall repugnant to the
context and meaning thereof include its successors, representatives, and assigns).

26
2. In the event of any breach by the parties under the purchase order/contract for which
advance is being given, we —————(name of the bank) hereby unconditionally and
irrevocably undertake and guarantee to pay on demand, without demur and without any
reference to the supplier, an amount not exceeding ——— (BG value) against any loss or
damage caused to or suffered by or suffered by the purchaser. The buyer's demand is final
and irrevocable, regardless of whether a dispute has arisen or is now proceeding before a
court, tribunal, arbitrator, or any other body.

3. It will take effect after the provider has received an advance payment of as specified in the
purchase order/contract terms and conditions.

4. On demand, the bank guarantee will be repaid at the following locations: —— (issuing
branch name and address) or —————————- (operating branch in Mumbai- name
and address). Within 24 hours of receipt of a written demand from the purchaser or any of
its authorized officers on its behalf, we agree to pay at ———- issuing branch – name and
address) or ———- operating branch in Mumbai – name and address) a sum of _ (BG
amount) to the purchaser in full, covered by this bank guarantee, without any demur or
reservation. On receipt of notice of claim sent to our Mumbai branch or issuing bank branch
and delivered to us, which shall be considered properly authorized to accept notice of claim,
we, ——— (name of bank), guarantee to make payment.

5. As part of our agreement, we ————- (name of bank) further agree that the guarantee
herein contained shall remain in full and effect until the purchaser certifies that all materials
for the entire supply have been received at site to their satisfaction, the advance given has
been adjusted, and thus discharges the guarantee, as stated in clause 8 here below.

Signature and Rubber Stamp of the bank

NOTE

First-class foreign banks, such as city bank, CALYON BANK, HSBC bank, standard
chartered bank, Deutsch bank, may offer a guarantee on behalf of an Indian nationalized
bank. For any bank not listed above, the purchaser will need to provide prior clearance
before the bank guarantee may be submitted.

4.4.8 Material supply

Order will be placed after accepting all the terms and conditions by vendor. Supplier will supply
the material according to the mode mentioned in the terms with full care and safety. At the time
of transportation charges like freight, carriage inward, carriage outward, will also pay
according to the payment terms.

27
4.4.9 Store department
It is the department in which all the materials are stored safely. When material is supplied by
the vendor before entering into the gate it allows for weight checking along with goods and
make entry pass send to the store department. In store department person called inspector will
check all the goods with po (purchase order) he will check any damages are there and goods
are matching with the quantity and quality of the order if everything is right, he will prepare an
invoice and send to account department if goods for not matched he will prepare a remark note
and send to concern department. Lastly the truck which supplies the material sent for weight
checking after receiving the goods to check the weight of the goods to check the weight of the
goods and this weight checking copy also send to the account department.

4.4.10 GRN (goods receipt note)

GRN is a number given to every asset or material which we received before entering and after
entering into the books of account. Before enter into the books all the material are in the form
of 103 movement type once the material is entered Into the books of account it will become it
will become 105 movement types.
GRN will send to the account department for making the payment. Account department
requires following document for making the payment they are; 1. Goods receipt note [GRN] 2.
Invoice copy 3. Transportation copy [Link] and Guarantee certificate etc. Following is the
check list; it is a method of checking about all the details of vendor; about GST, delivery etc it
is useful at the time of bill passing and it is the duty of accounting department.

4.4.11 Bill passing

After completing the entire above steps account department passes the bill, while bill passing
it will check any advance payment is there or not if yes it will deduct and then passes the further
amount. It is the only stage of passing the bill not the payment. Bill passing also has various
stages like:
1. Checking all the document sent by the store department
2. Capitalizing the goods
3. Making GST entry
4. Making freight entry
5. It also includes labour bill passing
6. Making revenue entry
7. Signature of all the concerned authorities etc.
after that it will go for payment stage through only internet payment not in head cash.

28
4.4.12 Payment
It is the time of making payment to vendor but account will not be making all the payment at
a time it holds some amount till the machine is successfully commissioning after that balance
amount is paid.
If the supplier is in urgent need of money, then he will bring the performance Bank Guarantee
(PBG) it is a document given by the supplier to the company with the acceptance of bank that
bank will pay the amount whenever supplier fails to fulfil his promise.
For company this document is like a hard cash and it also include expiry and claim period.
Company can covert this document into cash.
Ultra tech cement ltd is maintaining one standard format for PBG every supplier needs to give
according to that only. The following is the format for PBG:
M/S Ultra tech cement ltd
(Unit: Rajshree Cement Works)
Address:
Dear Sirs,
1. In consideration of M/S Ultra Tech cement ltd (unit: Rajshree cement woks), a company
registered under the Companies Act, 1956 and having its registered office at "B" wing,
2nd floor, Ahura centre Mahakali caves road Andheri (East), Mumbai (here in after
referred to as the "purchaser," which expression shall unless repugnant to the context
or meaning thereof includes its successors, representatives, and assigns) and having
placed the purchase order number.

2. In the event that the supplier breaches any of the terms and conditions mutually agreed
upon between the parties, we hereby promise to pay the purchase on first demand an
amount not exceeding (BG value) being ——— Percent of the total purchase order
amount.

3. Within 24 hours of receipt of a written demand from the purchase or any of its Purchase
in full covered by this bank guarantee without any demur, reservation, contest, recourse
or protest. When we receive the notice of claim from the issuing bank, we will make
the payment, provided that the notice of claim is addressed to a Mumbai branch of the
issuing bank and delivered to us.

4. As long as the purchaser verifies that all requirements have been met to the satisfaction
of purchase, and thereby discharges the guarantee, the bank guarantee will continue in
full force and effect.

5. In addition, we promise that the buyer will be able to encapsulate this bank guarantee
without any reference or recourse to the supplier and wit out having to notify the
supplier in this regard. Any examination and/or authorization by.

29
 6. This warranty will not be affected or reduced in any way by the purchase of the products
delivered under the purchase order in question.

7. There will be no change in the guarantor bank or the supplier's constitution that would
alter this bank guarantee in any way whatsoever.

8. This guarantee bond must be returned to us upon the expiration of the guarantee unless
the validity of this is mutually extended.

9. "We" are """""" If (name of bank) is ever forced to change its currency, it will do so
only after receiving written permission from the original buyer.

Yours faithfully
Place:
NOTE:

The bank guarantee may be granted by Indian nationalized banks HDFC bank, ICICI bank,
Axis bank, Kotak Mahindra bank, and IDBI bank, as well as by HSBC bank and the Standard
Chartered bank. Yes, ben/first class international bank can offer the bank guarantee.
Prior clearance from the purchaser is required before submitting bank guarantee from a bank
other than the above-mentioned city Deutsch bank. Bank guarantee should be prepared strictly
as per this format.
After checking the PBG Payment will do, following is the step of making payment.

Payment
Payment is one of the important parts in capitalization. While making the payment we need to
open vendor account and check PO about R, Q, S, and G these are the code we need to enter
while making the payment.
R means retention money: checking whether amount is hold or not to make payment.
Q means code of liquidity damage (LD) it is cutting the amount for late delivery of goods.
S is code of security deposit y (SD)
G is the code of bank guarantee (BG) it helps to check whether vendor gave any bank guarantee
or not if yes, we need to enter it is in system. Following is the procedure of entering BG in SAP

30
Document date:
Reference number,--------- (BG number)
Document header text ---------- (narration)
PO number----------- (10 digits)

SP. GL---------- (G)

Account------------(vender code)
Amount-------------- (BG amount)
Due-------------- (claim date)

Capitalization
When goods are inspection and enter into books of account it will become 105 (GRN) then
following 3 important entries came out:

Sr no. Particulars

1. CWP A/c

To GR/IR A/c
2. GR/IR A/C

To vender A/c
3. Vender A/c

To Bank A/c
4. Assets A/c

To CWO A/c

31
For doing capitalization we need to open asset number for that 4 step are there:
1. In respect of work completion
2. Location
3. Capitalization date
4. Nature: asset class it may be plant and machinery energy saving mining etc.
5. PO number (new or existing)

32
5. Need for the study
 In contemporary financial accounting, capitalizing assets is a critical component of running
a firm.
 When a cost is capitalized, it may be reported as an asset instead of expenditure.
 By adding additional assets to the company's balance sheet, capitalization of assets increases
its worth.
 In addition to increasing profits, the reduction of costs is another benefit of asset
capitalization for a business.
 Companies invest in long-term projects like business software design in order to lower
operational costs.
 Capitalization of assets is also goodwill improvement and patent filings.

6. Significance of Working capital management for profitability 10 points

[Link] capital management is crucial for a company's profitability as it directly impacts its
financial health and operational efficiency. Here are the points highlighting the significance of
working capital management for profitability:
[Link] Maintenance: Effective working capital management ensures that a company has
enough short-term assets to cover its short-term liabilities, reducing the risk of insolvency and
financial distress.
[Link] Flow Management: Proper working capital management helps in maintaining a steady
cash flow, ensuring the company can meet its day-to-day expenses, pay bills, and invest in
growth opportunities.
[Link] Reduction: Efficient management of working capital reduces the need for costly short-
term borrowing, saving on interest expenses and increasing profitability.
[Link] Control: Optimizing inventory levels prevents overstocking and understocking,
reducing storage costs and the risk of obsolete goods, ultimately improving profitability.
[Link] Receivable Management: Timely collection of accounts receivable reduces the
need for financing and interest expenses, improving cash flow and profitability.
[Link] Negotiations: A strong working capital position allows a company to negotiate better
terms with suppliers, such as discounts for early payment, which can directly impact
profitability.
[Link] in Growth: Adequate working capital provides the flexibility to invest in growth
opportunities, such as expansion, research and development, and marketing, which can drive
higher profits in the long run.
[Link] Mitigation: Effective working capital management minimizes the risk of financial
instability during economic downturns, ensuring the company can weather tough times and
remain profitable.

33
[Link] Advantage: Companies with well-managed working capital are better equipped
to respond to market changes, seize opportunities, and outperform competitors.
[Link] Value: Profitability is a key driver of shareholder value. When a company
efficiently manages its working capital and improves profitability, it can enhance shareholder
returns through dividends and stock price appreciation.

7. Objectives of the study

[Link] the current working capital levels of the selected companies or industries to
establish a baseline for analysis.
[Link] the different components of working capital, such as accounts receivable, accounts
payable, inventory, and cash, to understand their impact on profitability.
[Link] historical working capital trends to identify patterns or changes over time that
may have affected profitability.
[Link] the liquidity and solvency of organizations by analysing their ability to meet short-
term and long-term financial obligations.
[Link] the working capital management practices and profitability of the target companies
or industries with industry benchmarks to identify strengths and weaknesses.
[Link] how different working capital management policies, such as aggressive or
conservative approaches, affect profitability.
[Link] how efficient cash flow management practices, including cash conversion cycles,
impact profitability.
[Link] how working capital management strategies contribute to risk mitigation and
financial stability, potentially affecting profitability.
[Link] the sources of financing used to support working capital and their impact on
profitability, including the cost of financing.
[Link] on the research findings, provide recommendations for improving working capital
management practices to enhance profitability for businesses or industries under study.

8. Review of literature
Working capital management and profitability [4]: This study aims to find out the impact of
working capital management on profitability. Return on assets, Current ratio, debt to equity
ratio, operating profit to debt ratio, and inventory turnover ratios of the firms are the variables
that are used in this study carried out for electrical equipment firms listed on Karachi stock
exchange for a period of six years i.e., 2007–2012. Regression analysis was applied to the data.
Normality and linearity test was also applied. Results showed significant positive results. T-
test is applied to see for individual variable significance, it tells that each variable is significant.
It is concluded that working capital management has positive significant impact on profitability
of the firms.

34
The relationship between working capital management and profitability [5]: A sample of 67
companies is used for a period of ten years (2007–2016). Quantitative method using multiple
linear regression and pooled data set is used for analysis. The study investigates the relationship
between working capital management and profitability in non-financial companies listed in the
Saudi Stock Exchange. The results indicate a positive relationship between working capital
management and profitability. The results indicate a weak linear relationship between WCM
and profitability, indicating that no single constant practice or strategy would suit every
company, managers should identify the optimal level of working capital that suits their
company’s situation. The results showed a statistically positive relationship between WCM,
measured by CR, RCP, APP, INP, and profitability; however, there was a weak linear
relationship.

Working capital management and firms’ profitability: Dynamic panel data analysis of
manufactured firms [6]: This paper examines the impact of working capital management on
firm’s profitability performance of manufacturing firms by using not only static models such
as ordinary least square (OLS), fixed and random effects but also dynamic models difference
generalized method of moments (GMM) and system generalized method of moments (SGMM)
over the period from 2007 to 2018. The results show that inventory conversion period (ICP)
and payable deferral period (PDP) have a positive relationship with return on asset while the
cash conversion cycle (CCC) has a negative effect on return on assets.

Working capital management and profitability: Empirical evidence [7]: Empirical findings
suggest that granting longer extensions to customers does not affect profitability. The results
of the other variables showed a negative relationship with the profitability of the companies,
suggesting that the investment in inventories and the obtaining of extensions from suppliers
determine additional costs that negatively impact profitability. This paper examines the
working capital management policies in 105 manufacturing companies in the Czech Republic
for five years, from 2014 to 2018.

The relationship between working capital management and profitability: A case study of
cement industry in Pakistan [8]: Ikram ul Haqq, Muhammad Sohail, Khalid Zaman and Zaheer
Alam examines the effect of working capital on profitability for the period of six years from
2004 to 2009 by using the data of fourteen companies in the cement industry. The ratios relating
to capital management have been selected and computed for the study. The main objective of
the study was to find whether financial ratios affect the performance of the firm in the special
context of cement industry in Pakistan. They found that the ROI is negatively correlated with
the current assets to sales ratios and cash turnover ratio while ROI is positively correlated with
the current ratio, liquid ratio current assets to total assets ratio, debtors turnover ratio, inventory
turnover ratio, and credit turnover ratio.

Relationship between inventory management and profitability: An empirical analysis of Indian

cement companies [9]: Dr. Ashok Kumar Panigrahi has discussed the importance of inventory

35
management practices of Indian Cement Companies and their impact on working capital
efficiency over a period of ten years from 2001 to 2010. The study uses Regression analysis.
The findings indicate that there exists a significant negative linear relationship between
inventory conversion period and profitability. It was also found that when profitability
increases with the decrease in the financial debt ratio. Further, it showed a positive relationship
between profitability and firm size, as the profitability increases with an increase in firm size.
Lastly, the relationship between the current ratio and profitability was negative.

Effects of working capital management on profitability: The case for selected companies in
Istanbul stock exchange (2005–2008) [10]: The study was carried out by Hasan Ajan
Karaduman, Halil Emre Akbas, Arzu Ozsozgun, and Salih Durer with the aim to provide some
empirical evidence on the effects of working capital management on profitability for a sample
of 140 selected companies listed in the Istanbul Stock Exchange (ISE) for the period of 2005–
2008. The return on assets of the sample companies increases with a decrease in the number of
days accounts receivable, accounts payable, and a number of days of inventory. Also, the
reduction in the cash conversion cycle results in higher returns on assets. Furthermore, the
results of control variables like the size have a positive effect on profitability while the debt
ratio negatively affects the profitability.

Effect of working capital management on profitability by Asif Iqbala and Zhuquan Wang [13]:
They found a diverging effect of working capital management on the profitability of
manufacturing firms of Pakistan. They suggest that “paying full attention to the cash
conversion cycle” has enormous effect on working capital. Minimizing the inventory level
frees the capital for other use.

Relationship between working capital management and profitability by Puteri Shahirah Binti
Ghazal [14]: This paper is evidence from the UAE market focusing on real estates and
construction companies from the Abu Dhabi market. The finding of this study presented that
there is a negative relationship between cash conversion cycle and profitability; longer the
CCC, the profitability decreases. Another finding showed that the number of payable days is
negatively related to profitability.

The effect of working capital management on profitability [15]: A sample of three (3)
manufacturing companies listed on the Dar es Salaam Stock Exchange (DSE) is used for a
period of ten years (2002–2012). They found negative relationship between liquidity and
profitability showing that as liquidity decreases, the profitability increases, average collection
period and profitability indicating that a decrease in the number of days a firm receives payment
from sales affects the profitability of the firm positively.

To analyze relationship between working capital management and profitability [16]: This paper
basically analysis the relationship between working capital and profitability of the Indian IT

36
Company (TCS). This Study shows negative relationship of inventory turnover ratio with ROA
excluding and including Revaluation which shows that with the inventory turnover the firm
should increase its return on assets. And also, study shows negative relationship of debtor
turnover ratio with Return on Capital Employed.

9. Hypotheses development
Working capital is an important issue during financial decision making. The crucial part in
managing working capital is required to maintain its liquidity in day-to-day operation for the
smooth running of business and meeting its obligations in time. Thus, working capital is
selected as one of the independent variables to know that how it effects profitability.

H1: There is a significant relationship between Working Capital Management and profitability.

H2: Working capital management has strong impact on profitability.

10. Research Methodology

The choice of the variables for the present study is influenced by the studies on working capital
management. They include dependent, independent and some control variables. The
profitability in terms of Return on assets, Gross profit ratio, Operating profit and Net income
are taken as dependent variable in previous studies.
The dependent variable is the one which is affected during the experiment, for the present study
profitability is taken as dependent variable i.e., in terms of Net Income. The independent
variable is the one which effects the dependent variable. Average collection period, cash
conversion cycle, average payment period, inventory turnover ratio, current ratio, liquid ratio,
etc. were taken as independent variables in previous studies. For this study the independent
variables are the average collection period, average payment period, inventory turnover days
and cash conversion cycle. The study aims at to find out the association between the variables
through different statistical analysis.

37
 Variables Type Measured Abbreviations used

Net income Dependent variable Net Income/Net NI

sales*100
Average collection period Independent variable Account receivable/net ACP
sales*365
Average payment period Independent variable Account payable/Cost of APP
goods sold*365
Inventory turnover Independent variable Inventory/Cost of ITD
days goods sold* 365

Cash conversion cycle Independent variable ACP+ITD-APP CCC

11. Summary and conclusions

This study examined the relationship between Net Profitability and several variables of
working capital management such as average collection period, average inventory turnover in
days, average payment period and cash conversion cycle. The results showed that there exists
a negative relationship between the profitability and the average collection period, the lower
the average collection period higher will be the profitability. The correlation between average
payment period and profitability is 0.127 which shows a positive relationship if there is an
increase in payment period it leads to an increase in profitability. It is found that the cash
conversion cycle decreases it will lead to an increase in profitability of the firm, and managers
can create a positive value for the shareholders which indicates that it has been maintained.
The results of this study show that there is a strong relationship between the working capital
and profitability of the firms. It means if the financial managers keep an eye on the liquidity it
will lead to profitability. So, it is recommended that Companies should always maintain a sound
collection policy and it is further suggested that managers can create value for their
shareholders by reducing the number of days accounts receivable, increasing the number of
days accounts payable and inventories to a reasonable minimum.
The hypotheses are accepted for working capital management that it has strong impact on
profitability. There is a significance relationship between Working Capital Management and
profitability. The study has examined the impact in terms of average collection period, average
payment period, inventory turnover days and cash conversion cycle on profitability.
Furthermore, On the basis of the above analysis the results can be further strengthened if the
firms manage their working capital in more efficient ways. Management of Working capital
means the management of current assets and current liabilities. If these firms efficiently manage
their cash, accounts receivables, accounts payables, and inventories, this will ultimately
increase profitability of these companies.

38
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