Ambuja Cements: Capital Structure

AMBUJA CEMENTS
Ambuja Cements Limited, formerly known as Gujarat Ambuja Cement Limited, is an Indian major
cement producing company. The parent organization is Lafarge Holcim Ltd, founded in the year
1983. The Group's market cement and clinker for both domestic and export markets. Founders
are Narotam Sekhsaria and Suresh Kumar Neotia. Headquarters situated in Mumbai. The current
CEO is Neeraj Akhoury.
Industry Type: Cement Industry
Key products: Ambuja cement, Ambuja rood specials, Ambuja cool walls, Ambuja rail cem,
Ambuja micromaterials, etc.
CAPITAL STRUCTURE
TREND ANALYSIS DEBT TO EQUITY RATIO
EARNING PER SHARE (EPS) RETURN ON EQUITY (%)
INTERPRETATION
Ambuja Cement's Capital Structure is a positive sign of investment quality because the
capital structure reflects a low level of debt and a high amount of equity over a period
of 5 years. Here, equity capital initially increased in the year 2016 then it was stable
over 4 years till 2020.
The debt to equity ratio is low which indicates a lower amount of financing by debt via
lenders, versus high funding through equity via shareholders. Since debt levels are not
very high, Ambuja Cement is not subject to any potential risk. Due to the less potential
risk, there are fewer chances of bankruptcy in case of bad financing situations.
ROE (Return on Equity) is more than a measure of profit: It's also a measure of
efficiency. In 2016, ROE was the highest and gradually declined over the next two years
and then it increased in the year 2019 and 2020. ROE is declining despite the increase in
PAT value. Declining ROE suggests the company has more retained earnings, thereby
increasing shareholder value.
The earnings per share ratio (EPS ratio) has increased from 2016 to 2020, The
increasing trend can signal to investors that a company is efficient, which led to
increasing in the stock price. It also indicates that investors of Ambuja Cement are
having higher benefits and it also increases the investors' price.
DIVIDEND POLICY
A company's dividend policy dictates the amount of dividends paid out by the company to its
shareholders and the frequency with which the dividends are paid out. It is concerned with financial
policies regarding paying a cash dividend in the present or paying an increased dividend at a later stage.
Ambuja Cements has declared an equity dividend of 75% amounting to Rs 1.5 per share. At the current share
price of Rs 237.60 this results in a dividend yield of 0.63%. Ambuja declares dividend on an annual basis
every year on the month of December.
The company has a good dividend track report and has consistently declared dividends for the last 5 years.
DIVIDEND PAY-OUT RATIO (%)
DIVIDEND YIELD RATIO(%)
INTERPRETATION
It can be observed that from the above table and graph that the dividend pay-out
ratio of Ambuja Cements have depleted during the years. In 2016, DPR is more than
the DPR given in 2020 and it has fallen over the course of 5 years. This is an indication
that the company is reinvesting more money back into the business. Reinvesting more
money in the business growth will help the organization in generating higher levels of
capital gains for the investors in the future. So we can say that Ambuja Cements is
more likely to be more attractable to investors who are more interested in more
potential profits from a significant rise in share price, and less interested in dividend
income.
The dividend yield ratio of Ambuja Cements has fallen after 2016 and has increased a
little after 2019 from 0.67 to 0.76. The reason for the fall of dividend yield in Ambuja
Cements is that because a lesser dividend yield will allow the company to keep some
of the profits the Ambuja Cements company to reinvest in for the growth of the
company rather than paying it out to the shareholders. Ambuja Cements decision of
investing in the expansion of the business will be beneficial to the shareholders in the
future as they will be able to receive higher capital gain. Ambuja Cements will be more
likely to attract investors who are interested in increasing their pay-outs in the long
run. This results in a rise in the share price by 2020. and it will be beneficial for Ambuja
Cements as more investors in the market will be willing to pay more for the stock as
they see the company increasing in value.
WORLDCOM SCANDAL
2002
THE COMPANY THAT

MADE $3.8 BILLION
DISAPPEAR
In 2002, WorldCom one of the largest telecommunication
companies attempted to falsely inflate the earnings on its
profit and loss statement by nearly $4Billion
Company Profile
.
WORLDCOM COMMONLY KNOWN AS MCI WAS

A TELECOMMUNICATION COMPANY WHICH
WAS AT ONE TIME ONE OF THE LARGEST
LONG DISTANCE PHONE COMPANY IN U.S.
TODAY, IT IS PERHAPS BEST KNOWN FOR A
MASSIVE ACCOUNTING SCANDAL THAT LED
TO THE COMPANY FILLING BANKRUPCY
PROTECTION IN 2002.
How did the fraud happen How it was discovered

THE INTERNAL AUDIT TEAM HAD
WORLDCOM'S CFO FRAUDULENTLY NOTICED ACCOUNTING
TOOK BILLIONS OF DOLLARS IN IRREGULARITIES IN MCI'S BOOKS,
OPERATING EXPENSES AND THE SEC REQUESTED THAT
SPREAD THEM OUT ACROSS SO WORLDCOM PROVIDE MORE
CALLED PROPERTY ACCOUNTS- A INFORMATION. FAILURE ON
TYPE OF CAPITAL ACCOUNT WORLDCOM'S PART ON
EXPENSE. THIS ALLOWED PROVIDING THE CORRECT
WORLDCOM TO SHOW THE INFORMATION, IT HAD FILED FOR
EXPENSES IN SMALLER AMOUNTS BANKRUPCY LITTLE OVER A
OVER A SPAN OF YEARS, INSTEAD MONTH AFTER THE INTERNAL
OF REPORTING THEM AUDIT BEGAN
IMMEDIATELY TO INVESTORS.
The Sarbanes-Oxley Act(SOX) was implemented by the
government to protect the interest of common people against
frauds made by big corporate companies. The act bridged
various loopholes that were earlier existant in the financial
market.
Abhijit Deb Tanishq Surana Kuldeep Dalal Shubham Shubankar

2027701 2027702 2027703 2027709

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AMBUJA CEMENTS

TREND ANALYSIS DEBT TO EQUITY RATIO

EARNING PER SHARE (EPS) RETURN ON EQUITY (%)

DIVIDEND PAY-OUT RATIO (%)

DIVIDEND YIELD RATIO(%)

THE COMPANY THAT

WORLDCOM COMMONLY KNOWN AS MCI WAS

How did the fraud happen How it was discovered

Abhijit Deb Tanishq Surana Kuldeep Dalal Shubham Shubankar

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