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MADRAS CEMENTS Ltd.

Corporate Valuation Report

Submitted By~

Manish Kumar

PGDM2008-36

Kirloskar Institute of Advanced Management Studies

(2008-10)

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TABLE OF CONTENTS

Page No.

Industry Overview__________________________________________ 3-6

SWOT Analysis____________________________________________ 7

Porter’s five forces Model ____________________________________ 8

Company Overview__________________________________________ 9-10

Valuation of the Firm

Discounted Cash Flow Method___________________________ 11-13

Relative Valuation_____________________________________ 14

Synergy of the Merger__________________________________ 15

EVA________________________________________________ 16

Conclusion________________________________________________ 16

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INDUSTRY OVERVIEW

Cement production commenced in India as early as 1914. The first cement unit was set up at Porbandar in

1914 with a capacity of 1,000 tons per annum. Cement is the preferred building material in India. It is used

extensively in household and industrial construction. Earlier, government sector used to consume over 50%

of the total cement sold in India, but in the last decade, its share has come down to 35%. Rural areas

consume less than 23% of the total cement. Availability of cheaper building materials for non-permanent

structures affects the rural demand.

Demand for cement is linked to the economic activity in any country. Broadly, it can be categorized into

demand for housing construction (homes, offices etc.) and infrastructure creation (ports, roads, power plants

etc). The real driver of cement demand is creation of infrastructure; hence cement demand in emerging

economies is much higher than developed countries where the demand has reached a plateau. In India too,

the demand for cement will be affected by spending on infrastructure (including housing).

With the boost given by the government to various infrastructure projects, road network and housing

facilities, growth in the cement consumption is anticipated in the coming year. The increase in infrastructure

projects by the government coupled with the construction of the Golden Quadrilateral and the North-South

and East-West corridor projects have led to an increase in consumption of cement. This increase is expected

to continue in the future. The reduction in import duties is not likely to affect the industry as the cement

produced is at par with the international standards and the prices are lower than those prevailing in

international markets.

Leading players include GACL, Aditya Birla group, India Cements, Jaypee group, Century Textiles, Madras

Cements, Lafarge, and Birla Corp etc.

The cement industry is dependent on three major infrastructural sectors of the economy: coal, power and

transport. The inputs from these three sectors account for roughly 50% of the cost of cement. Both the

availability and the cost of these inputs have a vital bearing on the fortunes of the cement players.

Power and Fuel cost form the largest proportion of the cost structure. This reflects the effects of the trend in

rising global oil and fuel prices. On the other hand Employee costs form the smallest proportion of overall

cost. This is essentially because cement industry is a very capital intensive industry. This also accounts for

the huge depreciation and interest costs which accrue on the plant and machinery. Moreover, the labour

employed is essentially semi-skilled excluding the top management which brings down labour costs.

Cement, being a bulk commodity, is a freight intensive industry and transporting cement over long distances

can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry

divided into five main regions viz. north, south, west, east and the central region.

While the southern region always had excess capacity in the past owing to abundant availability of

limestone, the western and northern regions are the most lucrative markets on account of higher income

levels. However, with capacity addition taking place at a slower rate as compared to growth in demand,

recently the demand supply parity had also been restored to some extent in the Southern region.

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Considering the pace at which infrastructural activity is taking place in different regions, the players have

lined up expansion plans accordingly.

The Indian cement industry with a total capacity of about 200 m tonnes (MT) in FY09 is the second largest

market after China. Although consolidation has taken place in the Indian cement industry with the top five

players controlling almost 60% of the capacity, the balance capacity still remains pretty fragmented.

Despite the fact that the Indian cement industry has clocked production of more than 100 MT for the last

five years, registering a growth of nearly 9% to 10%, the per capita consumption of around 134 kgs

compares poorly with the world average of over 263 kgs, and more than 950 kgs in China. This, more than

anything, underlines the tremendous scope for growth in the Indian cement industry in the long term.

Given the high potential for growth, quite a few foreign transnationals have been eyeing the Indian markets

and are planning to acquire domestic companies. Already, while companies like Lafarge, Heidelberg and

Italicementi have made a couple of acquisitions, Holcim has acquired stake in domestic companies Ambuja

Cements and ACC and has increased its stake gradually to gain full control. After acquiring stake in big

companies, transnationals eyed median capacity producers. Italcementi acquired 100% stake in Zuari

Cement and 95% stake in Shree Vishnu. Cimpor, the Portugese cement manufacturer, acquired Grasim’s

stake (53.63%) in Shree Dig Vijay.

However, it must be noted that the transnationals will find the going tough since cement is a game of

volumes and with the median capacity of fragmented players, the transnationals will have to acquire

capacities piecemeal and this route is fraught with a lot of uncertainties. The global players put together

account of quarter share of the domestic market. Further, turning around few of the companies at a time

when the cycle is at its peak would be a difficult task. Considering the long term growth story, fair

valuations, fragmented structure of the industry and low gearing, an another wave of consolidation would

not come as a surprise.

Major Consolidations

Some examples of the consolidation witnessed during the recent past include:

Gujarat Ambuja taking over DLF Cements and Modi Cement;

India Cement taking over Raasi Cement and Sri Vishnu Cement;

Grasim's acquisition of the cement business of L&T; Indian Rayon's cement division merging with Grasim;

Grasim taking over Sri Dig Vijay Cements; L&T taking over Narmada Cements; ACC taking over IDCOL.

Multinational cement companies have also initiated the acquisition process in the Indian cement market.

Swiss cement major Holcim has picked up 14.8% of the promoters stake in Gujarat Ambuja Cements

(GACL). It hasd entered into a strategic alliance with GACL, and acquired a 67% controlling stake in

Ambuja Cement India. Through this holding company, Holcim acquired a majority in Ambuja Cement

Eastern and a substantial stake in ACC as Gujarat Ambuja has 14% stake in ACC.

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Holcim's acquisition has led to the emergence of two major groups in the Indian cement industry, the

Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla group through Grasim Industries and

Ultratech Cement.

Reasons behind these consolidations: ~

As witnessed above, the cement industry is going through a number of Mergers & Acquisitions (M&A). The

extent of concentration in the industry has increased over the years. This concentration is mainly because of

the focus of the larger and the more efficient units to consolidate their operations by restructuring their

business and taking over relatively weaker units. The relatively smaller and weaker units are finding it

difficult to withstand the cyclical pressure of the cement industry. Some of the key benefits accruing to the

acquiring companies from these acquisition deals include:

❑ Economies of scale resulting from the larger size of operations

❑ Savings in the time and cost required to set up a new unit

❑ Access to new markets

❑ Access to special facilities / features of the acquired company

❑ Benefits of tax shelter.

Cement Industry After Recession

During FY09, the industry maintained volume growth of around 10% YoY. The industry added nearly 30

MT in FY09 over the previous year taking the total capacity to nearly 212 MTPA. India owing to its

location advantage has been catering to the cement requirements of the Middle East and the South East

Asian nations. However, the exports were curtailed in FY09 in order to satisfy the domestic demand and

contain inflation. While demand growth stood at 10% YoY, average industry cement realisations (average

of price per bag of cement) were higher by about 5% YoY. The growth in realisations slowed down as

additional capacities coming on stream eased the supply pressures.

The overheated real estate sector has cooled off now. Considering the financial turmoil witnessed globally,

financial institutions have tightened their credit norms. This cautious stance has led to a credit crunch and

the same has impacted upcoming projects.

On account of general economic slowdown and these issues, the demand for cement has moderated.

However, stimulus packages announced by the government and agricultural income gave a fillip to the

demand for the commodity.

The industry volumes and realisations were higher during FY09 that boosted top line growth. However, cost

of operation did also witnessed northward movement that exerted pressure on margins.

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The cement industry on an average maintains two months inventory of fuel and such costs. The players

either have to purchase raw materials from open market or import it. This has increased cost of operation.

The industry had lined up huge capex plans with that depreciation costs have moved up. All of this has

dented profitability.

Industry’s Future Prospects

The industry is likely to maintain its growth momentum and continue growing at around 8% to 9% in the

medium to long term. Government initiatives in the infrastructure sector and the housing sector are likely to

be the main drivers of growth for the industry.

In the recent past, demand has surpassed supply, resulting in healthy cement prices across the country.

However, this scenario is likely to reverse as the industry has lined up huge capacity expansion plans. With

the growth in the sector and waning demand supply gap, cement producers have lined up capacity expansion

plans either by Brownfield or Greenfield expansion route. As the capacities become operational, which has

started taking place, supply may once again outstrip demand putting downward pressure on margins. Having

said that, temporary relief may be provided if there are delays in any of the proposed expansion plans.

In the budget, while the government refrained from cutting lowering the burden of taxes and duties on

cement, it imposed customs duty of 7.5% on RMC cement. Imposition of 7.5% customs duty on concrete

batching plants is likely to negatively impact the ready mix concrete manufacturers. However, it won’t have

a severe impact as RMC constitutes not more than 5% of total cement consumption. Further, with more

incentives being spelled out for the infrastructure and housing sector, cement manufacturers will continue to

benefit. The budget measures such as increasing excise duties have proved to be futile and in the future too,

we believe that it is the market dynamics that will determine these variables.

Good agricultural income has supported demand for the commodity despite slowdown in real estate sector.

Going forward, we believe the government’s initiatives in the infrastructure and housing sectors are likely to

be the main drivers of growth for the industry in the long run.

The speedy implementation of the series of development efforts initiated by the government during the

budget will augur well to easily absorb the additional cement capacity that would come on stream during the

second quarter of the current fiscal. The underlying demand continues to be strong and the cement players

will enjoy good dispatch growth with excellent capacity utilization at least for the next 2 quarters.

The commodity prices have also started hardening, as there are signs of global economy improving. Now

this could increase the input prices for cement as well. However in the absence of further incremental

demand creation, there could be problems ahead for the cement industry in FY 2011.

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SWOT ANALYSIS

Strengths: Double digit growth rate

Cement demand has grown in tandem with strong economic growth; derived from:

-Growth in housing sector (over 30%) key demand driver;

-Infrastructure projects like ports, airports, power projects, and dam & irrigation projects

-National Highway Development Programme & Bharat Nirman Yojana for rural infrastructure

-Rise in industrial projects

-Export potential also act as demand driver

Capacity utilization over 90%

Weakness: Low value commodity

Cement Industry is highly fragmented

Industry is also highly regionalized

Low – value commodity makes transportation over long distances un-economical

Opportunities: Demand–supply gap

Substantially lower per capita cement consumption as compared to developing countries (1/3 rd of world

average). Per capita cement consumption in India is 82 kg against a global average of 255 kg and Asian

average of 200 kg.

Additional capacity of 20 million tons per annum will be required to match the demand

Limited green field capacity addition in pipeline for next two years, leading to favorable demand – supply

scenario

Threats: Rising input costs

Government intervention to adjust cement prices

Possibility of over bunching of capacities in the long term as some of the players have already announced

new capacities

Transportation cost is scaling high; bottleneck due to loading restrictions

Coal prices climbing up; industry players say current shortage of coal in the country is estimated to be over

10 million tones.

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PORTER’S FIVE FORCES MODEL (CEMENT INDUSTRY)

When compared to the general environment, the industry environment often has a direct effect on the firm’s

strategic actions. And Porter’s Model helps a lot in understanding the market you operate. The model tends

to examine the industry at a given state.

Threat of entry

It involves high capital costs and has long gestation periods. Access to limestone reserves (principal raw

material for the manufacture of cement) also acts as a significant entry barrier.

Bargaining power of suppliers

Licensing of coal and limestone reserves, supply of power from the state grid and availability of railways for

transport are all controlled by a single entity, which is the government. However, nowadays producers are

relying more on captive power, but the shortage of coal and volatile fuel prices remain a concern.

Bargaining power of buyers

Cement is a commodity business and sales volumes mostly depend upon the distribution reach of the

company. However, things are changing and few brands have started commanding a premium on account of

better quality perception.

Rivalry among existing competitors

Due to large number of players in the industry and very little brand differentiation to speak of, the

competition is intense with players resorting to expanding reach and achieving pan India presence.

Threat of entry

Strong

LOW Industry Competitors rivalry

among Existing Firms

Strong

Threat of Substitute Products

Weak

Bargaining power of

Supplier’s

Weak

Bargaining power of

Buyers

Strong

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COMPANY OVERVIEW

Madras Cements Ltd. is the most reputed company belonging to the Ramco Group. The company was

established in the year 1987 at Vijayawada, Andhra Pradesh. It is a completely computerized cement-

producing company and has a captive power plant which is run on gas and a 20 megawatt generator. Madras

Cements is among the major cement producers in India and has become successful in producing cement at

an economical rate. It is the proud possessor & operator of one of the largest wind-farm in India.

The cement capacity is 10 million tons per annum. The company is the fifth largest cement producer in the

country. Madras Cements has developed 3 plants producing 6 million tons of cement. The products of the

company comprise OPC or Ordinary Portland Cement, Portland Slag Cement (PSC), Pozzalana Portland

Cement (PPC). Ramco Supergrade is the most popular cement brand in South India.

Madras Cements Company is showing consistent growth in terms of profit and production. The Company’s

shares are listed in Madras Stock Exchange Limited, Bombay Stock Exchange Limited and National Stock

Exchange of India Limited.

Madras Cements Ltd is managed by a board of directors comprising of eminent personalities as its

members. The chairman of the board is Shri P R Ramasubrahmaneya Rajha, under whose dynamic

leadership the company has grown into a massive organization.

The company board brings together a team of business, administrative, financial and cement technology

professionals who provide guidance and direction to the company's operations in a competitive business

environment.

Madras Cements Ltd has been a pioneer in adopting its corporate governance practices comparable to the

best in the country.

MCL operates five plants with a total capacity of 10 MTPA.

1. R R Nagar, Tamil Nadu (1.2 MTPA)

2. Jayanthipuram, Andra Pradesh (3.6 MTPA)

3. Alathiyur, Tamil Nadu (3.0 MTPA)

4. Ariyalur, Tamil Nadu (2.0 MTPA)

5. Mathod, Karnataka (0.2 MTPA)

Development Plans of Madras Cements:

The concrete of ready-mix variety called Ramco Ready Mix Concrete is produced by Madras Cements

which is manufactured at its Vengaivasal plant, close to Chennai. This cement is easy to use and requires a

boom-placer fitted in a truck to facilitate the construction of sky-scrapers. There are plans to establish more

ready-mix plants in the near future to cater to the needs of south-India.

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Recent Developments Plans of Madras Cements:

Madras Cements is considering plans to increase its production from 60 lakh tons to 100 lakh tons and is on

its way to increase the capacity of generation of wind power to 120 megawatt, to reduce the costs on energy.

Madras Cements is also going to set up a kiln at its Jayanthipuram unit, which will enable the production of

4,000 tons of cement on a daily basis. Another plant will soon be started by Madras Cements at Ariyalur,

Tamil Nadu to produce 20 lakh tons cement more on a yearly basis.

A sum of Rs. 967 crore is supposed to be invested for the plant which will include a 56.7 megawatt

generator run on electrical energy. The availability of fly ash in the states such as West Bengal, Andhra

Pradesh, and Tamil Nadu is attracting Madras Cements to establish grinding units to cut down the costs of

transportation.

At present the Company is facing difficulties in serving urban markets due to restrictions in movement of

heavy vehicles during peak hours and in ensuring timely delivery of cement to markets which are far off

from the manufacturing facilities. To overcome these, the Company is proposing to establish dedicated

packing plants. Accordingly, the Company is establishing packing plants at Hyderabad and Nagercoil, each

with a capacity of 120 tonnes per hour (TPH). The packing plants would help the Company in effectively

serving the market.

Latest Technical Equipments in Madras Cements:

Madras Cements is making use of the advanced technological developments and is yet to incorporate more

improvisations to the existing structure in the near future. The latest technologies which are used in Madras

Cements Company are vertical mills to facilitate the grounding of cement, latest X-ray technology to ensure

good quality cement, surface mining technology, softwares to control the varied processes inside the

manufacturing units, bag filters, and advanced ESPs.

INDUSTRIAL RELATIONS & PERSONNEL

The Company has 2447 employees as on 31.3.2009. Industrial relations in all the Units continue to be

cordial and healthy. Employees at all levels are extending their full support and are actively participating in

the various programmes for energy conservation and cost reduction. There is a special thrust on Human

Resources Development with a view to promoting creative and Group effort.

PROSPECTS FOR 2009-2010

Demand for cement is expected to grow at 10% in the coming year due to the continued fillips given for the

infrastructure projects. The Company expects to sustain and improve the output levels of all the units during

the year. Also, the Company will have the benefit of increased production from its new projects, which will

enable the Company to meet the increased market demand for cement. The Company continues its endeavor

for the sale of Blended Cement. The Company also continues to concentrate on cost reduction measures in

areas of production and distribution to protect and improve its profitability.

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VALUATION OF THE FIRM

DISCOUNTED CASH FLOW VALUATION METHOD~

As per the Model chooser, Madras Cement falls under three stage growth Model and requires calculation of

Free Cash Flow to the firm. The DCF Method is used for the firms which do not have negative earnings and

low amount of debt in their capital.

These are the Tools required for using the DCF Valuation Method:

Free cash Flow to firm – The Company is a highly leveraged company. Almost 91% of its capital comes

from the debts. Also, the debt ratio has kept on changing over a period of time. So, the FCFF technique

would be most suited for it.

Growth Rate- The Industry is expected to grow by above 10%in the coming financial year which has

increased the expectations. Since the economy has started getting stable, there are high chances of real estate

and manufacturing demand going up, which invariably affects the demand for cements. There might be a

higher spending from the government’s side also. The GDP growth rate for this year is 6.7% and it is

expected to grow at the rate of around 8%.

Length of Growth Period and Appropriate Growth pattern:-This output is fully dependent on the

Inflation Rate (country), GDP (country) and the expected growth rate in the Revenue of the company.

If, (Inflation Rate + Real GDP + 1%) > the expected growth rate in the Revenue of the company. Then

Stable Growth Rate will come.

If, (Inflation Rate + Real GDP + 6%) > the expected growth rate in the Revenue of the company. Then

three stage Growth Rate will come.

Keeping all these aspects in mind we can say that the road ahead for this industry looks good. The Industry

has shown fluctuation in demand owing to recession and Madras Cements too has been affected by it. But as

the next year brings some hope, we calculated the average growth over five years and took it as growth rate

for High growth Rate Phase and accordingly for the transition phase & stable phase.

Growth Model- Since, the growth remains highly unstable the model is “Three Stage Growth rate

model”. It is the model suggested by the model chooser as well.

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Type of Model (DCF Model, Option Pricing Model): Discounted CF

Model

Level of Earnings to use in model (Current, Normalized): Current

Earnings

Cashflows that should be discounted (Dividends, FCFE, FCFF) : FCFF (Value

firm)

Length of Growth Period (10 or more, 5 to 10, less than 5) 5 to 10 years

Appropriate Growth Pattern (Stable, 2 stage, 3 stage): Three-stage

Growth

Cost of Capital

Cost of debt = Interest/ Total Debt

Debt Interest Tax

2,463.45 110.73 35%

Cost of Equity = {rf +β (km – rf)}

Risk Free Market return Beta Cost of Equity

7% 15% 0.0753 13%

Total Cost of Capital

Cost of Capital

Weight Product

Debt- 2.92% 0.65 0.01898

Equity- 13% 0.35 0.0455

Total 6.5%

Rf- Risk free Rate, km- market Return

Tax rate- 35%

Kd=2.92%

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Calculation of FCFF~

HIGH GROWTH PHASE TRANSITION PHASE

STABLE

PHASE

Growth rate = 30.5 % 25.50% 20.50% 15.50% 10.50%

G.R =

7%

Base

year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year 0 1 2 3 4 5 6 7 8 9 10

EBIT(1-t) @ 35% 656.14 856.26 1117.42 1458.24 1903.00 2483.41 3116.68 3755.60 4337.72 4793.18 5128.71

Dep 137.72 179.72 234.5406 306.08 399.429 521.25 680.24 887.71 1158.46 1511.79 1972.89

Capx 1284.29 728.69 950.95 1240.99 1619.49 2113.43 2758.03 3599.22 4696.99 6129.57 6129.57

Change in WC -16.48 1.98 1.74 1.53 1.35 1.19 1.04 0.92 0.81 0.71 0.63

New debt-issue proceeds 827.81

FCFF 353.86 305.31 399.28 521.80 681.59 890.05 1037.85 1043.17 798.39 174.70 971.40

Terminal Value(Pn) 7472

PV 286.68 352.03 431.97 529.82 649.63 711.27 671.29 482.41 99.11 4498.14

Assumptions:

The expected growth rate in operating profits is 30.5% for next 5 yrs & than moves into Transition

phase with decreasing growth rate and attains stable growth rate of 7%.

The working capital being negative increase with average rate of 12%.

Depreciation has changed as per the change in growth rate. The company uses fix line method for

depreciation.

The Company is making huge Capital Expenditure this year & its future Capx has been shown

growth accordingly in the long term.

Terminal Value of Firm

FCFF/ (Ke – growth rate)

= 971.40/ (0.13- .07)

= 7472 cr.

Total Value of Firm

= Rs. 4498 Cr

Value Per share

Number of Shares- 237969380

Per share = 44980000/237969380

= Rs. 189.02

n=t

1=tt

t

WACC)+(1

Firm toCF =Firm of Value

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RELATIVE VALUATION~

Ratio Madras

Cements

India

Cements

Dalmia

Cements

Price Earning (P/E) 4.78 7.08 4.1

Price to Book Value ( P/BV) 1.35 1.01 0.53

Price/Cash EPS (P/CEPS) 3.45 4.78 2.62

EV/EBIDTA 5.2 5.08 5.96

Market Cap/Sales 0.58 0.78 0.32

In relative valuation I have chosen India Cements and Dalmia Cements to compare with Madras Cements.

In this we will one by one look at these ratios and comment will comment on the performance and market

price of the company’s shares.

On comparing the Market Cap/ Sales ratio, which is high for this company in the market, though

some of the players in market have better score than it. This shows that the investor sentiments are

still with this company and the investors hope this company to do well.

Madras cement has reasonably good growth prospects in the future and hence the investors are

expecting higher earnings in the future.

The P/B ratio of Madras Cement is not too low and hence the stock is not undervalued. The

company is fundamentally strong than other players. This figure is influenced by the recession of last

year.

EV/EBIDTA or the Enterprise multiple suggests that the company is on growth phase. It also says

that it is not the right candidate for takeover. The ratio varies with the industry and depends on

Industry growth rate.

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SYNERGY VALUE~

YEAR FCF (A) Term Val (A) FCF (B)

Term. Val

(B) FCF (A+B) TV (A+B)

FCF

(A+B:S) TV (A+B:S)

1 $864.86 ($888.41) ($23.54) $27.81

2 $1,055.13 ($1,154.93) ($99.79) $30.31

3 $1,287.26 ($1,501.40) ($214.14) $33.04

4 $1,570.46 ($1,951.83) ($381.37) $36.02

5 $1,915.96 ($35,772.67) ($2,537.37) $24,165.47 ($621.41) ($11,607.20) $39.26 940.2259034

PRESENT

VALUE ($15,933.95)

$8,305.98

($7,609.21)

$665.72

Gains from synergy = $8,274.93

Most that bidder firm can bid for target = $16,580.91

% Premium over the market price = 99.63%

Here the Bidding Company is ACC ltd. & the Target Firm is Madras Cements. The Bidding company has

less growth rate in the revenue comparing it with the Target company. So the merger will generate some

synergy and it would also help in growth of the firm. And if we think at strategic point of view, the

distribution channel and capacity matters in the cement Industry. The market would also expand. As far as

Gains from the synergy is concerned it is clearly mentioned in the above table that it is Rs. 8275 cr. That is

near to the revenue of bidding company it means that is lucrative opportunity for Bidder Company.

Bidder Target

A+B: No

synergy

A+B

(Synergy)

Free Cash flow to Equity $708.90 ($683.39) $25.52 $25.52

Growth rate for first 5 years 22% 30% -192.27% 9.00%

Growth rate after five years 18% 25% 46.58% 7.00%

Beta

0.72 0.75 0.69 0.69

Req. rate of return 11.68% 11.88% 11.47% 11.47%

Risk free

Rate

7.00%

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ECONOMIC VALUE ADDED~

EVA= NOPAT –C* Cost of Capital

*NOPAT (Net Operating Profit after Tax) = Operating Profit * (1-t)

Operating profit: Rs793.5 Cr. Tax: 35% C*Cost of capital- 3723Cr*0.065.

EVA= {(793.5*.65) –242Cr}

= 515.7-242

= 273.7cr.

So, the company has added Rs.273.7Cr value to the wealth of the shareholders.

CONCLUSION

Though the scenario looks good in future, but the company also has to make some improvements in

themselves if they want to survive in the future. The company has tried expanding its horizon and scope by

involving themselves in many projects. The high degree of leverage and the high operating cost makes it a

very vulnerable company to handle. If the company merges or get acquired then the biggest challenge in

front of management will be working Capital management as it is posing quite a lot of problems now. The

Company has shown steady growth in terms of Sales turnover and has good Growth rate of about 25%.

Instead of recession hitting the industry the company has made profit of about 363.5 Cr. The company is

bound to grow in next few years and will result in growth if acquired or merged.