Sanjeev Roll No. 34

8/8/2019 Sanjeev Roll No. 34

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LOVELY SCHOOL OF BUSINESS (LSM)

Term PAPER

OF

Financial Management

TOPIC: -J K Lakshmi Cement Ltd. & Ultratech

Cemrnt Ltd.

( Comparative analysis of Cost of Capital)

SUBMITTED TO: SUBMITTED BY:

Ashu, Maam NAME: Sanjeev kumar

REG. NO: 10907431

ROLL NO: RS1905A34

Section: 1905


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In eighteenth century England, John Smeaton, a British engineer, was

assigned the task of re-constructing the Eddystone Lighthouse, a structure

that had witnessed repeated structural failure. In 1756, Smeaton conducted

a number of experiments that led to the discovery that cement made from

limestone containing a considerable proportion of clay would harden under

water. Based on this discovery, Smeaton rebuilt this lighthouse in 1759 and

this time, it stood strong for 126 years.

Subsequently, until the early part of the nineteenth century, large quantities

of natural cement was used, that was made with a combination of naturally

occurring lime and clay.

The first patent for cement...

In 1824, Joseph Aspdin, a British mason obtained a patent on his hydraulic

cement formula that closely resembled the modern cement as we know

today. He called this cement Portland Cement, and it was made through the

proportionate mixing, burning and the subsequent grinding of a combination

of clay and limestone.

Cement as we know today...

Cement went through many more improvements and developments in the

nineteenth and twentieth centuries. The industrial revolution and the

subsequent development of the rotary kiln paved the way for huge and

sophisticated cement manufacturing plants. These plants possess the

capability of a homogenous mixing and intense heating of the raw material

thus vastly improving the quality of the cement produced. The sophisticated

quality-testing equipment employed by modern cement plants further helps

in ensuring the quality of the cement produced.

J K Lakshmi Cement Ltd.


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One of the established names in the cement industry, JK Lakshmi Cement Ltd

has state-of-the-art plant at Jaykaypuram, dist. Sirohi, Rajasthan. With the

capacity expansion and further commissioning of a split location grinding

unit at Motibhoyan, Kalol (Gujarat), the combined capacity of the Company

today stands at 4.75 Mn. MT per annum. With the use of the latest

technology from M/s Blue Circle Industries and modern equipments from M/s

Fuller International of USA, the Company is going from strength to strength.

It is also the first cement producer of Northern India to be awarded an ISO

9002 certificate and be accredited by NABL (Department of Science &

Technology, Government of India) for its Lab Quality Management systems.

JK Lakshmi Cement manufacturing facility has been rated amongst Greenest

Cement Plant of India by CSE GRP 2005 thus highlighting our commitment to

the environment even while ensuring the highest standards of quality for our

products. We have also won the Productivity Excellence Award 2007-08,

Energy Conservation Award 2008, NCB award 2007, Building Leadership

Award 2007, National Award for Environmental Excellence & Energy

Management 2007, Golden Peacock Award for Corporate Social

Responsibility 2007, ICWAI National Award 2007 for Excellence in CostManagement, The Pinnacle Cement 2006 award by MTech Zee TV, Green

Tech Safety Award and a place of pride amongst the top ten companies in

India in HR practices. (as per the Business Today- TNS Mercer survey).

Its wide network of 70 cement dumps and over 2200 dealers spread across

the states of Rajasthan, Gujarat, Delhi, Haryana, U.P., Uttaranchal, Punjab,

J&K, Mumbai & Pune and the vast pool of highly trained & dedicated

marketing and technical service team helps the Company to service it's

customers at their doorstep.

The First Cement Manufacturer in Northern India to introduce coloured bags,

JK Lakshmi Cements Technical Service Cell provides construction solutions

to its customers & carries out regular & innovative contact programmes with


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Individual House Builders, Masons and Business Associates to keep in tune

with their needs and requirements.

Keeping in touch with the global construction trends & changing needs of

customers, the company has introduced state-of-the-art Ready Mix Concrete

(RMC) with the brand name JK Lakshmi Power Mix. Currently, the company

has 10 fully operational plants in Western & Northern regions of the country

and is further expanding in this area. JK Lakshmiplast the first premium

branded Plaster of Paris (POP) in Northern India is another value added

product launched by the Company for discerning customers.

An integral part of Major Projects like IGNP, Sardar Sarovar Dam, Golden

Quadrilateral and major corporations like L&T, Reliance, NTPC, Essar and

Airport Authority of India, JK Lakshmi Cement has become the preferred

choice among the customers because of its consistency, high level of quality

and impeccable customer service.

A true showcase of 'Mazbooti Guaranteed', the Company has been able to

connect very strongly with its customers at an emotional level. With this

thought as a constant reminder of companys values, everyone at JK Lakshmi

strive to keep up the standards and continue with the good work for many

years to come

JK Lakshmi's journey towards excellence is being spearheaded by our

Chairman Shri. Hari Shankar Singhania closely supported by his Board of

Directors. They are the pillars of strength leading the company towards its

mission of being one of the most efficient, competitive and premium Cement

Brands of our region.

MANAGEMENT

Hari Shankar Singhania, Chairman

- Bharat Hari Singhania, Vice Chairman & Managing Director


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- B.V. Bhargava, Director

- Nand Gopal Khaitan, Director

Pradip Roy, Director (Nominee of IDBI)

- Pravinchandra V. Gandhi, Director

- Raghupati Singhania, Director

- P. Narasimharamulu, Director (Nominee of ICICI)

- V.K. Guruswamy, Director (Nominee of LIC)

- Vinita Singhania, Managing Director

- Shailendra Chouksey, Whole-time Director

- S.K. Wali, Whole-time Director

About Aditya Birla Group

A US $24 billion corporation with a market capital of US $23 billion and in

the League of Fortune 500, the Aditya Birla Group is anchored by an

extraordinary force of 100,000 employees, belonging to 25 different

nationalities. Over 50 per cent of its revenues flow from its operations across

the world.

The Aditya Birla Groups products and services offer distinctive customer

solutions worldwide. The Group has operations in 20 countries - India,

Thailand, Laos, Indonesia, Philippines, Egypt, China, Canada, Australia, USA,

UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland,

Malaysia and Korea.


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In India, the Group has been adjudged The Best Employer in India and

among the top 20 in Asia by the Hewitt-Economic Times and Wall Street

Journal Study 2007.

Globally the Aditya Birla Group is : A metals powerhouse, among the worlds

most cost-efficient aluminium and copper producers. Hindalco, from its fold,

is a Fortune 500 Company. It is also the largest aluminium rolling company

and one of the 3 biggest producers of primary aluminium in Asia, with the

largest single location copper smelter No. 1 in viscose staple fibre The 3rd

largest producer of insulators. The 4th largest producer of carbon black. The

11th largest cement producer globally and the 2nd largest in India Among

the worlds top 15 BPO companies and among Indias top 3 Among the bestenergy efficient fertilisers plants.

In India :

A premier branded garments player. The 2nd largest player in viscose

filament yarn

The 2nd largest in the Chlor-alkali sector. Among the top 5 mobile telephony

companies

A leading player in Life Insurance and Asset Management. Rock solid in

fundamentals, the Aditya Birla Group nurtures a culture where success does

not come in the way of the need to keep learning afresh, to keep

experimenting.

Ultratech Cement Ltd.

UltraTech Cement Limited is an India-based company engaged in the

production of cement. UltraTech Cement Limited has an annual capacity of

18.2 million tons. It manufactures and markets ordinary Portland cement,

Portland blast furnace slag cement and Portland Pozzalana cement. It also

manufactures ready mix concrete (RMC). UltraTech Cement Limited has five


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integrated plants, six grinding units and three terminals, two in India and one

in Sri Lanka. The Company is also an exporter of cement clinker. The export

market comprises of countries around the Indian Ocean, Africa, Europe and

the Middle East. The Companys subsidiaries include Dakshin Cements

Limited and UltraTech Ceylinco (Private) Limited.Quick Financial Synopsis

BRIEF: For the fiscal year ended 31 March 2009, UltraTech Cement Limited's

revenues increased 16% to RS66.64B. Net income decreased 3% to RS9.78B.

Revenues reflect an increase in demand for Company's products & services.

Net was offset by an increase in consumption of raw materials, a rise in

employee costs, increased depreciation & amortization expenses, an

increase in freight & handling expenses and higher other expenditure.

UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It

manufactures and markets Ordinary Portland Cement, Portland Blast

Furnace Slag Cement and Portland Pozzalana Cement. It also manufactures

ready mix concrete (RMC).

UltraTech Cement Limited has five integrated plants, six grinding units and

three terminals two in India and one in Sri Lanka.

UltraTech Cement is the countrys largest exporter of cement clinker. The

export markets span countries around the Indian Ocean, Africa, Europe and

the Middle East.

UltraTechs subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco

(P) Limited.

Board of Directors

:: Mr. Kumar Mangalam Birla, Chairman

:: Mrs. Rajashree Birla

:: Mr. R. C. Bhargava


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:: Mr. G. M. Dave

:: Mr. N. J. Jhaveri

:: Mr. S. B. Mathur

:: Mr. V. T. Moorthy

:: Mr. S. Rajgopal

:: Mr. D. D. Rathi

Mr. O. P. Puranmalka, Wholetime Director

Executive President & Chief Financial Officer

:: Mr. K. C.Chief Manufacturing Officer

:: Mr. R.K. Shah

Chief Marketing Officer

:: Mr. S.N.Jajoo

Chief People Officer

:: Mr. C. B. Tiwari

Company Secretary

:: Mr. S. K. Chatterjee

Milestones

As part of the eighth biggest cement manufacturer in the world, UltraTech

Cement has five integrated plants, five grinding units as well as three

terminals of its own (one overseas, in Colombo, Sri Lanka). These facilities

gradually came up over the years, as indicated below:


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2006:: Narmada Cement Company Limited amalgamated with UltraTech

pursuant to a Scheme of Amalgamation being approved by the Board for

Industrial & Financial Reconstruction (BIFR) in terms of the provision of Sick

Industrial Companies Act (Special Provisions)

2004 :: Completion of the implementation process to demerge the cement

business of L&T and completion of open offer by Grasim, with the latter

acquiring controlling stake in the newly formed company UltraTech

2003:: The board of Larsen & Toubro Ltd (L&T) decides to demerge its

cement business into a separate cement company (CemCo). Grasim decides

to acquire an 8.5 per cent equity stake from L&T and then make an open

offer for 30 per cent of the equity of CemCo, to acquire management control

of the company.

2002 :: The Grasim Board approves an open offer for purchase of up to 20

per cent of the equity shares of Larsen & Toubro Ltd (L&T), in accordance

with the provisions and guidelines issued by the Securities & Exchange

Board of India (SEBI) Regulations, 1997.

:: Grasim increases its stake in L&T to 14.15 per cent

:: Arakkonam grinding unit

2001 :: Grasim acquires 10 per cent stake in L&T. Subsequently increases

stake to 15.3 per cent by October 2002

:: Durgapur grinding unit

1998-2000:: Bulk cement terminals at Mangalore, Navi Mumbai and Colombo

1999 :: Narmada Cement Company Limited acquired

:: Ratnagiri Cement Works


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Cost of capital Analysis

Of

J k Lakshmi Cement

Year 2005

1. Cost of Debt:-

Kd = Interest / face value of debt

Interest = 7.2 crore ,Total debt = 6.88 crore

So Kd = 7.2*100/688.87

= 720/688.87

= 1.04 %

Cost of debt = 1.04 %

2 Cost of Equity:-

Ke = EPS/Market price

Note Market price is not given so we are considering Book Value of the

firm.

EPS = Rs. 4.71 , B V = Rs. 22.83 ,

Ke = 4.71*100/22.83

= 471/22.83

= 20.63 %

Cost of Equity = 20.63 %


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3 Cost of Preference Share

Note- Company has not issued preference share.

4 Cost of Retained Earning:-

PBT = 26.24 crore ,Total tax = - 0.43 crore

Tax rate = - 0.43*100/26.24

= - 1.63 %

Kr = Ke (1-t) (1-b)

Blockage cost is not given

Tax rate = -1.63 % , Ke = 20.63 %

Kr = 20.63 [1 ( -.01)]

=20.63*1.01

= 20.83%

Cost of retained earning = 20.42%

5 weighted Average Cost of Capital

Weighted Average Cost of Capital =

Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W

Debt 688.87 84.51 1.04 1.05 88.73

Equity 55.29 6.78 20.63 20.63 139.81

Retained

earning

70.97 8.7 54.25 54.25 471.97

total 815.13 W=100 X*W

=700.67


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Weighted Average Cost of Capital = X*W/ W

= 700.57/100

= 7 %

So WACC = 7 %

Work note- cost of debt after tax = Kd(before tax) (1- tax rate)

= 1.04[1 ( -0.01)]

= 1.04*1.o1

=1.05%ageNote:- Retained Earning is not given so we are considering reserves.

Year 2006

1. Cost of Debt:-



So Kd = 22.31*100/681.79

= 2231/681.79

= 3.27 %

Cost of debt = 3.27%

2 Cost of Equity:-


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firm.

EPS = Rs. 11.14 , B V = Rs.36.07 ,

Ke = 11.14*100/36.07

= 30.88%






Tax rate = - 0.80*100/56.24

= 1.42 %

Kr = Ke (1-t) (1-b)


Tax rate = 1.42 % ,Ke = 20.63 %

Kr = 30.88 (1 .014)

=30.88*.986

= 30.84%


5. weighted Average Cost of Capital


15/35


Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W

Debt 681.79 84.37 3.27 3.23 272.51Equity 55.29 6.84 30.88 30.88 267.26Retained

earning

70.97 8.73 30.44 30.44 211.21

total 815.13 W=100 X*W=750.98


= 750.98/100

= 7.5 %age

So WACC = 7 .5%


= 3.27(1 .01)

= 3.27*0.99

=3.23%ageNote:- Retained earning is not given so we are considering reserves.

Year 2007

1. Cost of Debt:-



So Kd = 43.89*100/717.67


16/35

= 6.11 %


2 Cost of Equity:-



firm.

EPS = Rs. 31.21 , B V = Rs.68.17 ,

Ke = 31.21*100/68.27

= 45.78%






Tax rate = - 0.71*100/178.81

= 0.39 %

Kr = Ke (1-t) (1-b)


Tax rate = 0.39 % ,Ke = 45.78 %

Kr = 45.78 (1 0.0039)


17/35

=45.78*0.996

= 45.60


4 . weighted Average Cost of Capital


Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W

Debt 717.67 64.84 6.11 6.01 394.22

Equity 57.09 5.15 45.78 45.78 235.76Retained

earning

331.98 29.99 45.6 45.6 1367.54

Total 1106.74 W=100 X*W=1997.52


= 1997.52/100

= 19.97 %age

So WACC = 19.97%

Year 2008

1. Cost of Debt:-



So Kd = 53.96*100/694.84

= 7.76


18/35


2 Cost of Equity:-



firm.

EPS = Rs. 36.56 , B V = Rs.103.74 ,

Ke = 36.56*100/103.74

= 35.22%






Tax rate = - 26.93*100/250.59

= 10.74 %

Kr = Ke (1-t) (1-b)


Tax rate = 10.74 % ,Ke = 35.22 %

Kr = 35.72 (1 0.10)

=35.72*0.9


19/35

= 31.69%




Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W


earning

573.43 43.13 31.69 31.69 1366.78

Total 1329.56 W=100 X*W=1893.56


= 1893.56/100

= 18.93 %age

So WACC = 18.93%

Year 2009

1. Cost of Debt:-



So Kd = 49.51*100/686.74

= 7.2%

Cost of debt = 7.2%


20/35

2 Cost of Equity:-



firm.

EPS = Rs. 29.19 , B V = Rs.128.75 ,

Ke = 29.19*100/128.75

= 22.76%






Tax rate = - 28.09*100/266.68

= 21.21 %

Kr = Ke (1-t) (1-b)


Tax rate = 21.21 % ,Ke = 22.76 %

Kr = 22.76 (1 0.21)

=22.76*0.79

= 17.98%


21/35




Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W


earning

723.44 49.16 17.98 17.98 883.89

Total 1471.37 W=100 X*W=1242.85


= 1242.85/100

= 12.42 %age

So WACC = 12.42%

Cost of Capital Analysis

Of

Ultratech Cement

Year 2005

1. Cost of Debt:-




22/35

So Kd = 128.05*100/1531.38

= 8.36%


2 Cost of Equity:-



firm.

EPS = Rs. 0.23 , B V = Rs.85.78 ,

Ke = 0.23*100/85.78

= 3.97%





PBT = -33.6 crore ,Total tax = - -36.45 crore

Tax rate = - 36.45*100/-33.6

= 108.4 %

Kr = Ke (1-t) (1-b)


Tax rate = 108.4 % ,Ke = 3.97 %


23/35

Kr = 3.97 (1 1.08)

=3.97*-0.08

= -0.31%

Cost of retained earning = -0.31%



Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W

Debt 1531.38 58.92 8.36 -0.66 -38.88Equity 124.4 4.78 3.99 3.97 18.97Retained

earning

942.73 36.27 -0.31 -o.31 -11.24

Total 2598.51 W=100 X*W=-31.15


= = -31.15/100

= -0.31 %age

So WACC = - 0.31%

Year 2006

1. Cost of Debt:-



So Kd = 96.99*100/1451.33


24/35

= 6.68 %


2 Cost of Equity:-



firm.

EPS = Rs. 18.47 , B V = Rs.83.47 ,

Ke = 18.47*100/83.47

= 22.17%





PBT = 285.59 crore ,Total tax = 55.83 crore

Tax rate = 55.83*100/285.89

= 19.54 %

Kr = Ke (1-t) (1-b)


Tax rate = 19.54 % ,Ke = 22.17 %

Kr = 22.17 (1 0.19)


25/35

=30.88*0.81

= 17.95%




Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W

Debt 1451.83 58.3 6.68 5.54 322.98

Equity 124.4 4.99 22.17 22.17 110.62Retained

earning

913.78 36.69 17.95 17.95 658.58

Total 2490.01 W=100 X*W=1092.18


= 1092.18/100

= 10.92 %age

So WACC = 10.92%


= 6.68(1 0.17)= 6.68*0.83


Year 2007


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1. Cost of Debt:-



So Kd = 92.61*100/1578.63

= 5.68 %


2 Cost of Equity:-



firm.

EPS = Rs. 62.84 , B V = Rs.141.69 ,

Ke = 62.84*100/141.69

= 44.35%






Tax rate = 383.91*100/1166.19

= 32.92 %


27/35

Kr = Ke (1-t) (1-b)


Tax rate = 32.92 % ,Ke = 44.35 %

Kr = 44.35 (1 0.32)

=30.88*0.68

= 30.15%




Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W


earning

1639.29 49.04 30.15 30.15 1478.55

Total 3342.41 W=100 X*W=1831.15


= 1831.15/100

= 18.31 %age

So WACC = 18.31%

Year 2008

1. Cost of Debt:-


28/35



So Kd = 8193*100/1740.5

= 4.7 %

Cost of debt = 4.7%

2 Cost of Equity:-



firm.

EPS = Rs. 80.94 , B V = Rs.216.58 ,

Ke = 80.94*100/216.58

= 37.2%






Tax rate = 499.4*100/1507.01

= 33.13 %

Kr = Ke (1-t) (1-b)


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Tax rate = 33.13 % ,Ke = 37.2 %

Kr = 37.2 (1 0.33)

=37.2*0.67

= 24.92%




Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W


earning

2571.73 36.05 24.92 24.92 898.36

Total 7133.71 W=100 X*W=1158.38


= 1158.38/100

= 11.58 %age

So WACC = 11.56%

Year 2009


30/35

1. Cost of Debt:-


Interest = 134.09 crore ,Total debt = 2141.63crore

So Kd = 134.09*100/2141.63

= 6.26 %


2 Cost of Equity:-



firm.

EPS = Rs. 78.48 , B V = Rs.289.22 ,

Ke = 78.48*100/289.22

= 27.13%






Tax rate = 384.44*100/1361.46

= 28.23 %


31/35

Kr = Ke (1-t) (1-b)


Tax rate = 28.23 % ,Ke = 27.13 %

Kr = 27.13(1 0.28)

=27.13*0.72

= 19.53%




Source of

fund

Amount (in

crore)

Proportion

%age (W)

Before tax

cost %age

After tax

cost

%age(X)

X*W


earning

3475.93 60.02 19.63 19.63 1172.19

total 5790,56 W=100 X*W=1396.92


= 1396.92/100

= 13.96 %age

So WACC = 13.96%


= 6.26(1 0.28)


32/35

= 6.26*0.72


Comparative Analysis of Cost of Capital of J K Lakshmi Cement

and Ultratech Cement Ltd:-

Cost of capital is a central concept in financial management. Cost of capital

from the firms point of view, is the minimum required rate of return that a

firm must pay to the fund suppliers, who have provide the capital. In the

other words, cost of capital is the weighted average cost of various sources

of finance used by the firm. These source are equity, preference share, long

tern debts , shout term permanent debt. The concept of cost of capital is

useful in determining optimal capital structure, investment evaluation, and

financial performance appraisal. It is an important concept in formulating a

firms capital structure , the part of financial structure that represents long

term sources, is generally defined to include only long term debt and total

stockholder investment. it may consist of single class of stock or several

issues may complicate it. The inherent

financial stability of an enterprise and risk of insolvency to which it is

exposed, primarily depends on the source of its funds as well as the type of

assets it holds and relative magnitude of such assets categories. To quote

Ezra optimum leverage is the mix of debt and equity that maximizes market

value of the firm and minimizes the firms overall cost of capital in the

optimum capital structure, the marginal real cost of each available financing

is the same. The capital structure balances the financing, so as to achieve

the lowest average cost of long-term funds. capital structure involves a study


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of the debt-equity mix with the object of lowering the overall cost of capital

and with a view to maximizing the market value of the firms securities.

capital structure involves a study of the debt-equity mix with the object of

lowering the overall cost of capital and with a view to maximizing the market

value of the firms securities

We are going to analyzing the cost of capital of J K Lakshmi Cement and

ultratech Cement Ltd.

Cost of Equity:-

When we see the cost of equity of both the companies, the following

interpretations can be done. In the initial year as 2005 J K Lakshmi has more

cost of equity than the Ultratech Cement Ltd. Ke in 2005 20.63% and 3.97%

respectively in J K Lakshmi and Ultrateck. But in the next year Ultratech

earns more profit than J K Lakshmi and its Ke reached 36.07 % and 44.35 %

in 2007 so Ultratech has made profit quickly than the j k Lakshmi but

because Ke of Ultratech is more so it is dividing its profit among its share

holders. Both the companies are increasing their profits .These figures from

the point of view of shareholders are good and their rate of interest is

increasing but from the companys point of view it is not beneficial because

it is paying more from their profit or we can say that it is dividing its profits

among share holders. But In 2008 -09 the Ke of both companies decreasing

comparatively to its last year cost of equity. It is good sign for companies

that they are earning more profits in 2008 and 2009 but the cost of capital

is less in both companies from the last year. So it is indication that they are

dividing less their profit among share holder. A similar thing in both

companies is that profit in 2009 are decreasing and in this way the cost of

equity is also less.

Cost of Debt:-


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company but J K Lakshmi is believing in retaining the profit. In this case

Ultratech is more beneficial as they are paying less amount for retained

earning.

Weighted Average Cost of Capital:-

A firm obtains capital from various sources. As explained earlier, because of

the risk differences and the contractual agreements between the firm and

the investors, the cost of capital of each sources of capital differs. The cost

of capital of each source of capital is known as component cost of capital.

The combined cost of all source of capital is called average cost of capital.

The component costs are combined according to the weight of each

component capital to obtain the average costs of capital.

The figures of WACC from 2005 to 2009 are as given

WACC in J K Lakshmi Cement Ltd. 6.85% , 7.5% , 19.97% , 18.93% , 12.42% ,

In Ultratech Cement Ltd. 0.32% , 10.92% , 18.31% , 11.58% ,

13.96%

Weighted Average Cost of Capital in J K Lakshmi is increasing for three years

but later it is decreasing. It shows that later when they increasing the debt

their WACC started to decline because in the later year they are making

profit more. On the other hand Ultratech is also increasing its profit year by

year but they are not more reliable on debt so their WACC is increasing.

Although in 2008 it decrease but next year it went to upward. The figure

show that the WACC bearded by J K Lakshmi is decreasing but in Ultratech it

is Increasing so it is not good sign for Ultratech.

Documents

Sanjeev Roll No. 34