CHAPTER 1

INTRODUCTION

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 CHAPTER 1:- INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A dividend is a payment made by a company to its shareholders, usually from its

profits. It represents a share of the company‘s earnings, given periodically to investors
as a reward for their investment and trust in the business. Dividends can be issued in
various forms, such as cash payments, additional shares, or other assets. The decision
to pay dividends depends on the company‘s profitability, growth plans, and dividend
policy. While dividends provide shareholders with regular income, not all companies
issue dividends, as some prefer to reinvest profits to fuel business expansion.
Dividends are often seen as a sign of financial health and stability, making them
attractive to income-focused investors. The company‘s board of directors is
responsible for setting the dividend policy. They decide how profits are distributed to
shareholders or reinvested based on the company‘s financial health, growth goals, and
shareholder expectations. The policy is often approved in board meetings.The board
of directors analyses the company‘s profitability, cash flow needs, and future
investments before setting a dividend policy. They consider factors such as market
conditions, industry trends, and investor preferences. After thorough discussion and
evaluation, the board decides on a suitable dividend payout strategy, which may vary
annually based on financial performance. Final approval often involves a formal vote
by the board and sometimes requires shareholder consent during annual meetings.

 A dividend policy is a company‘s plan for sharing profits with shareholders. It

outlines whether to reinvest earnings or distribute dividends, balancing
shareholder rewards with the company‘s growth goals.
 A dividend is a portion of a company‘s earnings distributed to shareholders as
a reward for their investment. It can be issued as cash, additional shares, or
other assets based on company profits.
 An example of dividend policy is a firm with a 40% payout policy, where 40%
of earnings are paid as dividends to shareholders, and the remaining 60% is
retained for reinvestment and growth.

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  Dividend policy works by determining the portion of profits to be paid out as
dividends and the amount to retain. This approach balances rewarding
shareholders with sustaining company growth and financial stability.
 Types of dividend policies include regular, stable, irregular, and no dividend
policies. Each policy reflects the company‘s approach to dividends, which
depends on financial stability, growth goals, and shareholder expectations.
 The main importance of dividend policies lies in guiding profit distribution.
Effective policies build shareholder trust, support financial stability, and
influence long-term growth by balancing payouts and reinvestment.
 The primary objective of dividend policy is to balance shareholder returns
with retained earnings. This approach supports business growth and builds
investor trust by ensuring consistent returns without compromising the
company‘s financial health.
 The board of directors sets the dividend policy. They decide on profit
distribution after evaluating the company‘s financial health, growth needs, and
shareholder expectations, often finalizing the policy through board approvals.
 Shareholders who own company stock before the ex-dividend date are eligible
for dividends. This includes common shareholders, preferred shareholders,
and sometimes employees who own stock through company stock plans.
 The main factor affecting dividend policy is profitability. Higher profits
enable generous dividends, while lower earnings may reduce payouts to
conserve cash, directly influencing a company‘s ability to maintain consistent
dividends.

Dividend policy works by guiding a company on how much of its profits to distribute
as dividends versus how much to retain for growth. This balance ensures shareholder
returns while supporting future expansion, aligning with the company‘s financial
goals. Here‘s how dividend policy works, step-by-step:

1. Profit Assessment: The company reviews annual profits, identifying funds

available for dividends after covering essential expenses and reserves.

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 2. Retention vs. Distribution Decision: Management determines the portion of
profits to retain for reinvestment and the amount to distribute as dividends,
supporting both growth and investor satisfaction.
3. Choosing Dividend Type: The company selects the dividend form—cash,
shares, or other assets—based on shareholder needs and policy goals.
4. Board Approval: The proposed dividend distribution is presented to the board
for approval, ensuring compliance with corporate governance.
5. Dividend Declaration and Payment: After approval, the dividend is
officially declared and paid to shareholders, reinforcing trust and stability.

DIVIDEND POLICY "Dividend policy determines the ultimate distribution of the

firm's earnings between retention (that is reinvestment) and cash dividend payments
of shareholders." "Dividend policy means the practice that management follows in
making dividend payout decisions, or in other words, the size and pattern of cash
distributions over the time to shareholders." In other words, dividend policy is the
firm's plan of action to be followed when dividend decisions are made. It is the
decision about how much of earnings to pay out as dividends versus retaining and
reinvesting earnings in the firm. Dividend policy must be evaluated in light of the
objective of the firm namely, to choose a policy that will maximize the value of the
firm to its shareholders. The dividend policy of a company reflects how prudent its
financial management is. The future prospects, expansion, diversification mergers are
effected by dividing policies and for a healthy and buoyant capital market, both
dividends and retained earnings are important factors. As we know in corporation,
owners are shareholders but management is done through Board of directors. It is the
Board of Directors to decide whether to pay dividend or retain earnings for future
projects. It is a matter of conflict between shareholders and directors. Shareholders
expect a quick return on their capital. On the other hand, directors have to consider a
number of factors in determining divided policy. Most of the company follows some
kind of dividend policy. The usual policy of a company is to retain a position of net
earnings and distribute the remaining amount to the shareholders. Many factors have
to be evaluated before forming a long term dividend policy.

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TYPES OF DIVIDENDS: Classifications of dividends are based on the form in which
they are paid. Following given below are the different types of dividends:

i. Cash dividend
ii. Bonus Shares referred to as stock dividend
iii. Property dividend interim dividend, annual dividend.
iv. Special- dividend, extra dividend etc.
v. Regular Cash dividend
vi. Scrip dividend
vii. Liquidating dividend
viii. Property dividend

Cash dividend: Companies mostly pay dividends in cash. A Company should have
enough cash in its bank account when cash dividends are declared. If it does not have
enough bank balance, arrangement should be made to borrow funds. When the
Company follows a stable dividend policy, it should prepare a cash budget for the
coming period to indicate the necessary funds, which would be needed to meet the
regular dividend payments of the company. It is relatively difficult to make cash
planning in anticipation of dividend needs when an unstable policy is followed. The
cash account and the reserve account of a company will be reduced when the cash
dividend is paid. Thus, both the total assets and net worth of the company are reduced
when the cash dividend is distributed. The market price of the share drops in most
cases by the amount of the cash dividend distributed.

Bonus Shares: An issue of bonus share is the distribution of shares free of cost to the
existing shareholders, I In India, bonus shares are issued in addition to the cash
dividend and not in lieu of cash dividend. Hence, Companies in India may supplement
cash dividend by bonus issues. Issuing bonus shares increases the number of
outstanding shares of the company. The bonus shares are distributed proportionately
to the existing shareholder. Hence there is no dilution of ownership. The declaration
of the bonus shares will increase the paid-up Share Capital and reduce the reserves
and surplus retained earnings) of the company. The total net-worth (paid up capital
plus reserves and surplus) is not affected by the bonus issue. Infact, a bonus issue
represents a recapitalization of reserves and surplus. It is merely an accounting

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transfer from reserves and surplus to paid up capital. The following are advantages of
the bonus shares to shareholders:

1) Tax benefit: One of the advantages to shareholders in the receipt of bonus shares is
the beneficial treatment of such dividends with regard to income taxes.

2) Indication of higher future profits: The issue of bonus shares is normally

interpreted by shareholders as an indication of higher profitability.

3) Future dividends may increase: if a Company has been following a policy of

paying a fixed amount of dividend per share and continues it after the declaration of
the bonus issue, the total cash dividend of the shareholders will increase in the future.

4) Psychological Value: The declaration of the bonus issue may have a favorable
psychological effect on shareholders. The receipt of bonus shares gives them a chance
sell the shares to make capital gains without impairing their principal investment.
They also associate it with the prosperity of the company.

Special dividend : In special circumstances Company declares Special dividends.

Generally company declares special dividend in case of abnormal profits. Extra-
dividend: An extra dividend is an additional non-recurring dividend paid over and
above the regular dividends by the company. Companies with fluctuating earnings
payout additional dividends when their earnings warrant it, rather than fighting to
keep a higher quantity of regular dividends

Annual dividend: When annually company declares and pay dividend is defined as
annual dividend. Interim dividend: During the year any time company declares a
dividend, it is defined as Interim dividend. Regular cash dividends: They may be paid
quarterly, monthly, semiannually or annually.

Scrip dividends: These are promises to make the payment of dividend at a future date:
Instead of paying the dividend now, the firm elects to pay it at some later date. The
‗scrip‘ issued to stockholders is merely a special form of promissory note or notes
payable.

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Liquidating dividends: These dividends are those which reduce paid-in capital: It is a
prorata distribution of cash or property to stockholders as part of the dissolution of a
business. Property dividends: These dividends are payable in assets of the corporation
other than cash. For example, a firm may distribute samples of its own product or
shares in another company it owns to its stockholders. THE DIVIDEND DECISION
WHO MAKES DIVIDEND DECISION? The company's Board of Directors makes
dividend decisions. They are faced with the decision to pay out dividends or to
reinvest the cash into new projects

Dividend policy is a company‘s strategy for deciding how much of its profits to
distribute to shareholders as dividends and how much to retain for growth, balancing
shareholder rewards with reinvestment needs.The main types of dividends include
cash dividends, stock dividends, property dividends, and special dividends. Each type
varies in how it rewards shareholders, depending on the company‘s profitability and
distribution approach.Dividends are calculated by multiplying the dividend per share
(DPS) by the total number of shares. The formula is Dividends = Dividend per Share
× Total Shares Outstanding, reflecting the total payout to shareholders.A good
dividend policy balances regular payouts to shareholders with enough retained
earnings for growth. It should meet investor expectations, reflect the company‘s
profitability, and support long-term financial stability without limiting business
expansionDividends are paid by the company to its shareholders. The board of
directors decides the amount and timing of dividend payments, which are then
distributed to shareholders on the specified payment date.Dividend policy works by
guiding how profits are split between shareholder dividends and retained earnings. It
aligns with the company‘s growth goals and financial health, balancing immediate
returns with future investments. Shareholders who own company stock before the ex-
dividend date are eligible to receive dividends. This includes common shareholders,
preferred shareholders, and sometimes employees who own company stock.
Eligibility is determined by specific dates set by the company‘s dividend policy.
Eligibility for dividends includes:

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 1. Common Shareholders: Common stockholders who hold shares before the
ex-dividend date are entitled to receive declared dividends. They receive
payments based on the number of shares they own.
2. Preferred Shareholders: Preferred shareholders are typically guaranteed
dividends before common shareholders. They receive fixed dividend
payments, often higher than those for common shareholders, as outlined in
company agreements.
3. Employees with Stock Ownership: Some companies provide stock
ownership to employees. Those holding shares through employee stock
ownership plans (ESOPs) may also receive dividends based on their holdings,
offering them additional income along with their employment.

The company‘s board of directors is responsible for setting the dividend policy. They
decide how profits are distributed to shareholders or reinvested based on the
company‘s financial health, growth goals, and shareholder expectations. The policy is
often approved in board meetings.The board of directors analyses the company‘s
profitability, cash flow needs, and future investments before setting a dividend policy.
They consider factors such as market conditions, industry trends, and investor
preferences. After thorough discussion and evaluation, the board decides on a suitable
dividend payout strategy, which may vary annually based on financial performance.
Final approval often involves a formal vote by the board and sometimes requires
shareholder consent during annual meetings.

1.2 Types of Dividend Policy

There are several types of dividend policies that companies may adopt based on their
financial goals, growth stage, and shareholder expectations. These include regular,
stable, irregular, and no dividend policies, each with unique characteristics and
impacts on shareholder returns. They are discussed below:

1. Regular Dividend Policy

Companies with a regular dividend policy aim to provide consistent payouts to

shareholders, often on a quarterly or annual basis. This approach is common among

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mature, financially stable companies with predictable cash flows. By paying
dividends regularly, companies reassure shareholders of a steady income stream,
which can enhance investor loyalty. This policy is ideal for investors seeking income
stability over long-term growth.

2. Stable Dividend Policy

Under a stable dividend policy, a company pays dividends at a consistent rate,

regardless of its earnings fluctuations. This type of policy is popular with well-
established companies that prioritize shareholder trust and aim to build a reputation
for reliability. For example, if a company sets a dividend rate of ₹5 per share, it will
continue to pay this amount even if profits dip. A stable policy attracts risk-averse
investors, as they can rely on a predictable return even in uncertain market conditions.

4. Irregular Dividend Policy

Companies with an irregular dividend policy distribute dividends only when they
achieve high profits or have excess cash reserves. Since payouts are unpredictable,
this policy suits companies with variable earnings or those in volatile industries. For
instance, companies in technology or startups may choose this policy to retain more
cash during lean periods and reward shareholders only during profitable years. While
it offers flexibility, an irregular policy may deter investors looking for consistent
returns.

4. No Dividend Policy

Companies with a no dividend policy reinvest all profits back into the business rather
than paying dividends. This policy is common among high-growth companies or
startups that need substantial funds for expansion, research, and development. By
retaining earnings, these companies focus on building long-term value and capital
appreciation for shareholders, rather than short-term income. Investors in such
companies expect higher capital gains over time instead of regular payouts.

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1.3 Importance of Dividend Policies

The primary importance of dividend policies is that they guide a company‘s approach
to profit distribution. They help decide how much profit to share with shareholders
and how much to reinvest. Additional reasons why dividend policies are important
include:

 Building Investor Confidence: A clear dividend policy shows the company‘s

financial health. Consistent dividends reassure shareholders and build loyalty
among investors who seek regular returns.
 Balancing Growth and Income: Dividend policies help decide how much
profit to retain versus distribute. This balance lets the company fund growth
while offering income to shareholders, attracting a wider range of investors.
 Enhancing Market Reputation: Companies with strong dividend policies
often gain a better market standing. A reliable payout track record attracts
investors and can improve the company‘s market perception.
 Supporting Cash Flow Management: Dividend policies help companies
manage their cash flow by setting a fixed approach to payouts. This supports
planning for expenses and investments while ensuring resources for dividends.
 Attracting Suitable Investors: Different dividend policies appeal to various
types of investors. For example, regular dividends attract income-focused
investors, while no-dividend policies appeal to growth-oriented investors.

1.4 Objectives of Dividend Policy

The main objective of a dividend policy is to create a balanced approach to profit

distribution. It aims to satisfy shareholders with consistent returns while retaining
enough funds for business growth. Additional objectives of dividend policy include:

 Ensuring Regular Income for Shareholders: A well-planned dividend

policy provides shareholders with consistent income. This regular income
builds trust and attracts investors who rely on steady earnings from their
investments.

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  Supporting Growth and Expansion: Dividend policies ensure that sufficient
funds are retained for business growth. By controlling the payout ratio, the
policy allows companies to reinvest in projects and expansion, contributing to
sustainable development.
 Improving Market Perception: A reliable dividend policy boosts the
company‘s image in the market. It demonstrates financial stability and
commitment to shareholders, which can attract more investors and increase the
company‘s stock value over time.

Factors Affecting a Dividend Policy

The main factor influencing a dividend policy is a company‘s profitability. Higher

profits allow for larger dividends, while lower earnings may reduce the amount
distributed to shareholders. Profitability directly impacts a company‘s ability to offer
consistent dividend payouts. Additional factors affecting dividend policy include:

1. Liquidity Position: The company‘s cash flow determines if dividends can be

paid. Even with high profits, limited liquidity may restrict dividend payments
as cash reserves are essential for covering operational needs.
2. Growth and Expansion Plans: Companies focused on growth tend to retain
more earnings for reinvestment, resulting in lower dividends. Retained profits
fund expansion efforts, helping the company pursue new opportunities and
develop long-term value.
3. Market Conditions: Economic stability and industry trends impact dividend
decisions. During volatile periods, companies may conserve cash rather than
pay dividends, prioritizing financial flexibility to adapt to changing market
conditions.
4. Shareholder Expectations: Companies consider investor preferences when
setting dividend policies. Income-focused investors may expect regular
dividends, while growth-oriented shareholders may prioritize reinvestment,
influencing the policy based on the majority shareholder profile.

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Examples of Dividend Policies

The dividend policy used by a company can affect the value of the enterprise. The
policy chosen must align with the company‘s goals and maximize its value for its
shareholders. While the shareholders are the owners of the company, it is the board of
directors who make the call on whether profits will be distributed or retained.

The directors need to take a lot of factors into consideration when making this
decision, such as the growth prospects of the company and future projects. There are
various dividend policies a company can follow such as:

1. Regular dividend policy

Under the regular dividend policy, the company pays out dividends to its shareholders
every year. If the company makes abnormal profits (very high profits), the excess
profits will not be distributed to the shareholders but are withheld by the company as
retained earnings. If the company makes a loss, the shareholders will still be paid a
dividend under the policy.

The regular dividend policy is used by companies with a steady cash flow and stable
earnings. Companies that pay out dividends this way are considered low-risk
investments because while the dividend payments are regular, they may not be very
high.

2. Stable dividend policy

Under the stable dividend policy, the percentage of profits paid out as dividends is
fixed. For example, if a company sets the payout rate at 6%, it is the percentage of
profits that will be paid out regardless of the amount of profits earned for the financial
year.

Whether a company makes $1 million or $100,000, a fixed dividend will be paid out.
Investing in a company that follows such a policy is risky for investors as the amount
of dividends fluctuates with the level of profits. Shareholders face a lot of uncertainty
as they are not sure of the exact dividend they will receive.

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3. Irregular dividend policy

Under the irregular dividend policy, the company is under no obligation to pay its
shareholders, and the board of directors can decide what to do with the profits. If they
make an abnormal profit in a certain year, they can decide to distribute it to the
shareholders or not pay out any dividends at all and instead keep the profits for
business expansion and future projects.

The irregular dividend policy is used by companies that do not enjoy a steady cash
flow or lack liquidity. Investors who invest in a company that follows the policy face
very high risks as there is a possibility of not receiving any dividends during the
financial year.

4. No dividend policy

Under the no-dividend policy, the company doesn‘t distribute dividends to

shareholders. It is because any profits earned are retained and reinvested into the
business for future growth. Companies that don‘t give out dividends are constantly
growing and expanding, and shareholders invest in them because the value of the
company stock appreciates. For the investor, the share price appreciation is more
valuable than a dividend payout.

1.5 CEMENT SECTOR

In the cement industry, coal quality is very important as it affects both the quality of
the cement and the operation of the plant. The Indian cement industry uses coal
because of its abundant availability and shortage of oil and natural gas. Today the
Indian cement industry has to use coal of high ash content with varying
characteristics. To resolve this problem, the role of coal on cement making and
possible improvements in coal quality and consistency have been explored (Kumar,
1994).
The cement industry is the third largest user of coal after the steel and power
industries and it consumes more than 5% of total coal produced in India. This coal
requirement will go up further with the rapid expansion of the cement industry (for
infrastructure projects). Coal is the principal source of fuel for cement kilns. Its

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consumption per ton of clinker largely depends on the quality and also on how
effectively the cement process technology is being used. Coal consumption varies
from 0.2 to 0.3 tons for every ton of clinker. It is known that the indigenous cement
plants are consuming at least 20%–30% more energy than those of similar plants in
other countries. Technology obsolescence has been one of the major reasons
accounting for the industry‘s poor performance. The high moisture and ash content of
coal make it difficult for the cement units to maintain the quality and quantity of
output. Even today, a good part of the installed capacity is linked to the uneconomical
wet process. Both the pace of modernisation and the introduction of the latest
precalciner technology have to be prioritised and implemented to make this industry
competitive.

1.6 OBJECTIVES OF THE STUDY:-

1. To present the conceptual framework of the Dividend policies

2. To highlight the dividend policies of select cement companies with a view to
identify their approaches towards dividend decisions
3. To test the relationship between Dividend payout ratio, dividend yield and
return on capital employed, return on equity of the select cement companies.

This research aims to provide well rounded understanding of the dividend decision
policy of a company and their performance

1.7 LIMITATIONS OF THE STUDY:-

The key limitations of this study are as follows :-

1. This study focuses only on five years time period, limiting the non term
applicability of its findings and conclusions.
2. Only a sample of two cement companies is selected for the comparison
3. The data used in this research study is collected through secondary sources
and may contain any inaccuracies
4. The data used can affect the results , interpretation and conclusion made

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These limitations highlights factors that may affect the study‘s overall reliability and
scope

1.8 CHAPTER LAYOUT:-

The research study is arranged as follows:-

Chapter 1:- It includes the meaning and introduction of Dividend Decision Policy. It
has also mentioned the importance of the Dividend policy and and how it affects
companies performance

Chapter 2:- Review of Literature on different studies in the Cement sector

Chapter 3:- Research Design explains the nature of study

Chapter 4:- Profile of the company used in the study

Chapter 5:- Data analysis of the company dividend decisions through ratio, test and
their findings included

Chapter 6 :- conclusion of research project

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CHAPTER 2

REVIEW OF
LITERATURE

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 CHAPTER 2:- REVIEW OF LITERATURE

2.1 THEORITICAL VIEW

2.1.1 WALTER MODEL

Walter's Model, developed by economist James E. Walter, focuses on the relationship

between a company's dividend policy and its overall value. Here‘s a breakdown of the
model:

Key Components

1. Retention Ratio (b):

o The proportion of earnings retained in the business rather than paid out
as dividends.
o Calculated as: b=1−Dividend Payout Ratiob = 1 - \text{Dividend
Payout Ratio}b=1−Dividend Payout Ratio
2. Return on Investment (r):
o The rate of return the company earns on its retained earnings.
o High returns indicate efficient use of reinvested profits.
3. Cost of Equity (k):
o The return required by equity investors. It reflects the risk of investing
in the firm.

Core Assumptions

 The model assumes that a firm's investment opportunities and the return on
those investments remain constant over time.
 It posits that the value of the firm is influenced by how well it balances paying
out dividends versus reinvesting earnings.

Implications of the Model

1. High Return on Investment:

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 o If r>kr > kr>k: The firm should retain earnings to maximize value.
Investing retained earnings will yield a return higher than what
shareholders would receive from dividends.
2. Low Return on Investment:
o If r<kr < kr<k: The firm should distribute a higher portion of its
earnings as dividends. This is because reinvesting would yield lower
returns than what shareholders could earn elsewhere.

Value of the Firm

According to Walter, the value of a firm can be expressed as:

V=Dk+b⋅Ek−rV = \frac{D}{k} + \frac{b \cdot E}{k - r}V=kD+k−rb⋅E

Where:

 VVV is the value of the firm.

 DDD is the dividend per share.
 EEE is the earnings per share.

Practical Implications

 The model suggests that firms should adopt a dividend policy aligned with
their investment opportunities:
o Firms with high returns should minimize dividends to reinvest in
growth.
o Firms with lower returns should maximize dividends to provide
shareholder value.

Limitations

 The model assumes constant growth rates and does not account for changing
market conditions or investor preferences.
 It may not apply well to firms in rapidly changing industries or those with
fluctuating returns.

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In summary, Walter's Model provides a framework for understanding how dividend
decisions can impact a firm‘s value based on its investment opportunities and returns.

2.1.2 GORDEN MODEL

The Gordon Growth Model, also known as the Gordon-Shapiro Model, is a method
for valuing a stock based on the present value of its expected future dividends. Here‘s
a detailed overview:

Key Components

1. Dividends (D):
o The cash payments made to shareholders, which are expected to grow
at a constant rate.
2. Growth Rate (g):
o The expected constant rate at which dividends will grow indefinitely.
3. Required Rate of Return (k):
o The minimum return investors expect from an investment in the stock,
reflecting its risk.

Formula

The value of a stock (P) using the Gordon Growth Model is expressed as:

P=D1k−gP = \frac{D_1}{k - g}P=k−gD1

Where:

 PPP = price of the stock

 D1D_1D1 = expected dividend next year (D0 × (1 + g))
 kkk = required rate of return
 ggg = growth rate of dividends

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Key Assumptions

1. Constant Growth: The model assumes that dividends will grow at a constant
rate indefinitely, which may not hold true for all companies.
2. Sustainable Growth: The growth rate (g) must be less than the required rate of
return (k) for the model to work. If ggg is equal to or greater than kkk, the
formula will yield an unrealistic (infinite or negative) stock price.
3. Market Efficiency: The model assumes that the stock market is efficient,
meaning that all available information is reflected in stock prices.

Implications of the Model

 Valuation: The model provides a straightforward way to estimate the intrinsic

value of a stock based on future dividend expectations, making it useful for
income-focused investors.
 Investment Decisions: Investors can compare the calculated intrinsic value to
the current market price to make buy or sell decisions.

Limitations

1. Constant Growth Assumption: Many companies do not have constant growth

rates, especially in volatile or cyclical industries.
2. Estimation of Inputs: Accurately estimating the growth rate (g) and required
rate of return (k) can be challenging, as they rely on subjective judgments and
market conditions.
3. Not Suitable for Non-Dividend Stocks: The model is not applicable to firms
that do not pay dividends or have erratic dividend policies.

Conclusion

The Gordon Growth Model is a widely used tool for valuing dividend-paying stocks
based on expected future cash flows. While it offers a simple and effective
framework, its reliance on constant growth assumptions and the need for accurate
input estimates necessitate careful consideration in practical applications.

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2.1.3 MM APPROACH

The Modigliani-Miller (MM) approach, formulated by Franco Modigliani and Merton

Miller in the 1950s, fundamentally changed the way economists and finance
professionals think about capital structure and dividend policy. Here‘s a detailed
overview:

Core Principles

1. Irrelevance Proposition:
o The central tenet of the MM approach is that, in perfect markets (no
taxes, bankruptcy costs, or asymmetric information), a firm‘s value is
independent of its capital structure and dividend policy.
o This means that whether a company finances itself with debt or equity,
or whether it pays dividends or retains earnings, does not affect its
overall value.
2. Capital Structure:
o The original MM Proposition I states that the value of a firm is
determined by its earning power and risk, not how it is financed.
o If firms can borrow at the same rate as their investors, the total market
value of the firm remains constant regardless of the proportion of debt
and equity.
3. Dividend Policy:
o MM Proposition II suggests that a firm's dividend policy does not
affect its cost of equity. The required return on equity increases as a
company increases its use of debt, reflecting higher risk due to
leverage.
o Investors can create their own "homemade dividends" by selling shares
if they prefer cash over reinvested earnings, implying that dividend
payments are a matter of personal preference rather than corporate
policy.

2.2 FINANCIAL RATIOS

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2.2.1 DIVIDEND PAYOUT RATIO:-

The Dividend Payout Ratio (DPR) is the amount of dividends paid to shareholders in
relation to the total amount of net income the company generates. In other words, the
dividend payout ratio measures the percentage of net income that is distributed
to shareholders in the form of dividends.

There are several formulas for calculating DPR:

1. DPR = Total dividends / Net income

2. DPR = 1 – Retention ratio (the retention ratio, which measures the percentage
of net income that is kept by the company as retained earnings, is the opposite,
or inverse, of the dividend payout ratio)

3. DPR = Dividends per share / Earnings per share

2.2.2 RETURN ON EQUITY:-

Return on equity (ROE) is a measure of a company's financial performance. It is

calculated by dividing net income by shareholders' equity. Because shareholders'
equity is equal to a company‘s assets minus its debt, ROE is a way of showing a
company's return on net assets.

It is considered best practice to calculate ROE based on average equity over a period
because of the mismatch between the income statement and the balance sheet. ROE is
calculated by comparing the proportion of net income against the amount of
shareholder equity. The equation is:

ROE=Net IncomeShareholders/Shareholders

2.2.3 RETURN ON CAPITAL EMPLOYED:-

Return on capital employed (ROCE) is a good baseline measure of a company's

performance. ROCE is a financial ratio that shows if a company is doing a good job

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of generating profits from its capital. Companies have various financial resources
they use to build and grow their businesses.

The formula used to calculate ROCE is as follows:

ROCE=EBIT/Capital Employed

where:

ROCE=Return on capital employed

EBIT=Earnings before interest and tax

2.2.4 DIVIDEND YEILD:-

The dividend yield is a financial ratio that shows how much a company pays out
in dividends each year relative to its stock price. The reciprocal of the dividend yield
is the total dividends paid/net income which is the dividend payout ratio.

The formula for dividend yield is as follows:

Dividend Yield=Annual Dividends Per Share/Price Per Share

2.2.5 EARNINGS PER SHARE

Earnings per share (EPS) is a measure of a company's profitability that indicates how
much profit each outstanding share of common stock has earned. It's calculated by
dividing the company's net income by the total number of outstanding shares.

The numerator of the equation is also more relevant if it is adjusted for continuing
operations.

Earnings per Share=Net Income − Preferred Dividends/End-of-

Period Common Shares OutstandingEarnings per Share

2.3 THEORIES:

23
Dividend policy is a crucial aspect of corporate finance, impacting both the
distribution of profits to shareholders and the firm‘s investment strategies. Various
theories and empirical studies have explored the relationship between dividend
decisions and shareholder wealth maximization.

1. Dividend Relevance Theory

Miller and Modigliani (1961) proposed the dividend irrelevance theory, suggesting
that in perfect markets, dividend policy does not affect a firm's value. However, this
theory assumes no taxes or transaction costs, which may not hold true in real-world
scenarios. Subsequent studies have indicated that dividends do play a significant role
in influencing investor perceptions and firm value.

2. Clientele Effect

Fama and French (1988) introduced the concept of clientele effects, where different
groups of investors have varying preferences for dividends versus capital gains. This
suggests that a company‘s dividend policy may attract specific types of investors,
which can influence its stock price and overall valuation.

3. Signaling Theory

Lintner (1956) emphasized the signaling effect of dividends. Companies may use
dividend announcements as signals of financial health. An increase in dividends often
conveys management‘s confidence in future earnings, positively affecting stock
prices. Conversely, a dividend cut can signal trouble, leading to negative market
reactions.

4. Retained Earnings and Growth

The trade-off between paying dividends and retaining earnings for investment is a
well-documented phenomenon. According to Myers (1984), firms may choose to
retain earnings to finance growth opportunities, particularly when external financing
is costly or when there are profitable investment opportunities that could yield higher
returns than the cost of equity.

24
5. Behavioral Perspectives

Recent literature has also examined behavioral aspects of dividend policy. According
to Baker and Wurgler (2004), managerial preferences and investor sentiment can
significantly influence dividend decisions. This perspective highlights that
psychological factors, rather than strictly financial metrics, can impact how dividends
are viewed and distributed.

6. Impact on Shareholder Wealth

Empirical studies generally support the notion that dividend policy affects shareholder
wealth. A study by Grullon and Michaely (2002) found that firms paying dividends
generally experience a premium in their stock prices. This suggests that, in practice,
firms must balance their dividend policies with the goal of maximizing shareholder
wealth.

2.4 REVIEW OF LITERATURE

1. In this study,‖The effect of Dividend policy and financial performance on the

P/E ratio‖ by Samara Sharin examines the how to investigate the effect of
dividend and financial ratios on the P/E ratio of stocks in the Swedish stock
market. The data is collected with the help of primary report data from 50
companies in the technology & goods and service industry that meet the
selection criteria and collected financial statements, annual reports, and other
relevant documents from the companies' websites and financial databases. The
data were collected for 10 years from 2011 to 2020. The research highlights
that it is important to take dividend distribution into account as a
differentiating element when examining the connection between financial
performance and the P/E ratio and the the study cannot accept or reject the null
hypothesis entirely as the results lack statistical significance.
2. The study titled as ―A study on Determinants of Dividend Policy and its
Impact on Financial Performances: A Panel Data Analysis for Indian Listed
Firms ― by Dr. N Suresh and Pooja M includes Determination of the correct
mix of dividend and retained earnings and its effect on profitability. This study

25
 examines the relationship between dividend pay-out policy and financial
performance of 60 firms listed on the National Stock Exchange between 2009-
2018. The Return on Assets (ROA) served as surrogate for the dependent
variable, profitability, while Dividend Pay-out ratio proxied for dividend
policy and was the only explanatory variable.
3. A study on‖A Study on dividend policy: review of literature‖ by
Mrs.Bhagyalakshmi.K and Dr.N.BabithaThimmaiah.The main aim of this
study is to know the contribution towards the corporate dividend policy
literature. This study is based on secondary source of information in this
regard many journals, reports, books were reviewed and data collected. This
paper surveys the literature on Dividend payout policy. Several discussions
has made major theoretical and empirical contribution to the dividend
literature, It is interesting to note that empirical literature on dividend policy is
very vast and exhaustive at the international level and it is very much sporadic
at the Indian level.
4. The study titled as ―Dividend decisions : A selected BSE-listed firms in the
Indian Corporate Sector‖ by JK Das .This paper studies the overall as well as
industry-wise trend in dividend patlem of Indian firms. It examines the effect
or firm's growth, profitability, investment opponunities and indebtedness on
dividend payout. It also gives the forecasting of growth pattern of DPS in
different sectors. Seventy firms ofBSE-100 listed firms during the period
1996-97 to 2006-07 are selected for the study.
5. The study titled as ―Impact of Capital Structure on Dividend Decisions with
specific reference to select Construction Associated Industries in India‖ by A
Karthika. This research is based on the secondary sources consisting of
similar researches done by researchers. It also includes the new concepts,
ideas and theories framed earlier in the selected research area. A good
literature review helps to identify similar work done within the selected
research area, to identify research gaps that demand further investigation, to
compare previous findings, to criticize existing findings and suggest further
research studies.
6. The study titled as‖ Effect of Dividend Decisions on Market Performance of
Share Prices for Commercial Banks Listed at Nairobi Securities Exchange‖ by

26
 Marcy Nekesa, Ouma Mary Kiveu, Peter Njuguna this study investigated
the effects of dividend decisions on market performance of share prices for
commercial banks listed at Nairobi Stock Exchange. The specific objective is;
To determine the impact of dividend payouts on the stock performance of the
commercial banks listed at Nairobi Stock Exchange The independent variables
in the study is dividend payouts. The dependent variable was the performance
of share prices for commercial banks listed at Nairobi Stock Exchange. The
theoretical review included the bird in hand theory, information signaling
theory, and tax differential theory. The research used a descriptive research
design approach for 12 commercial banks' target population in Kenya. The
study used secondary sources to collect data, which are the bank's annual data
published on the Nairobi Stock Exchange website. The research used the SPSS
software for analyzing the collected data.
7. This study titled as‖ Determinants of dividend policy in the Netherlands‖ by
MARTHA KAHRAMAN examines the determinants of dividend policy of
65 Dutch firms listed on the Euronext Amsterdam from 2016 to 2019. This
study contributes to solving a of the dividend puzzle in a Dutch setting. Both
the probability as well as the intensity of paying dividends are investigated.
This study finds that there are different determinants for the probability of
paying a dividend and for the payout intensity. In this section the measurement
of the two dependent variables used in this study: DPAY and PAYOUT_TA
will be described and independent variable as the return on assets ratio (ROA)
8. The title named as ―The determinants of dividend policy in Chinese Listed
Firms the role of supervisory boards, investor sentiment and stock liquidity‖
by Tan, Huizhu. This thesis investigates a number of inter-related issues
pertaining to the relationship between corporate governance and dividend
policy in China, including how the twotier supervisory board and corporate
ownership structures influence the likelihood of dividend payouts by listed
firms in the Chinese stock market, whilst taking account of the influence of
state-controlled and concentrated (or controlling) shareholder
9. The study titled as‖ Impact of Dividend Policy on the Market Value of the
Company‖ by Ivan Eryomin , Olga Likhacheva, and Lyudmila
Chernikova. The study is based on data from company reports and statistics

27
 from the Moscow Exchange. This paper presents a regression analysis of a
choice consisting of 1) 20 systems of Russian companies and 2) 5 largest
companies in the oil and gas sector for the period 2013-2019. The regression
results show that dividends have a positive effect on capitalization only if the
policy is based on the residual principle.
10. The study titled as ―Dividend policy determinants of firm value in Nigeria‖ by
Edeh Lawrence, Oyekezie Kingsley and Ifurueze Priscilla. This study x-ray
on the fundamental roles of dividend policy acting as a determinant of firm
value. Specifically, this paper aims to explore the determinants of firm value
from the dimension of corporate dividend policy by exploring a sample of
eight-one (81) non-financial firms listed on the floor of the Nigerian stock
exchange market during the period between 2010 and 2018. In this study
includes dividend yield and dividend per share which were also the
independent variables while firm value (dependent variable) is proxied with
firms‘ market to book ratio. In this study, robust least square regression
analyses technique is employed to evaluate the panel data set that were
collated from annual financials reports of the sampled non-financial
companies.

28
 CHAPTER 3

RESEARCH DESIGN

29
 CHAPTER 3:- RESEARCH DESIGN
3.1 NATURE OF RESEARCH

This research study is descriptive in nature

3.2 PURPOSE OF THE STUDY:-

The explanation of the purpose of studying dividend decision policy in points:

The purpose of studying dividend decision policy is to understand how companies

decide on the amount of profit to distribute to shareholders as dividends versus what
to reinvest back into the business. Essentially, it's about figuring out how much of the
company‘s earnings should be paid out to investors and how much should be kept for
future growth or other investments. By studying dividend policies, researchers and
investors can better understand how these decisions influence the company's
performance, stock prices, and overall value in the market. The goal is to find a
balance that satisfies both shareholders (who want returns) and the company (which
needs funds for growth and development)

3.3 SCOPE OF THE STUDY:-

The following cement companies has been selected for this research study The
selection is based on among the other listed companies on the basis of Market
Capitalization of large cap and having history of four financial years 2020-21, 2021-
2022, 2022-2023, 2023-2024. All these companies are listed on the National Stock
Exchange(NSE). List of Sample cement companies are

 Shree cements
 Ambuja cements

Time period selected for an analysis of four financial years are 2020-21, 2021- 2022,
2022-2023, 2023-2024.

The Duration of the research study was conducted from July 2024 to Nov 2024.

3.4 SAMPLING:-

30
The listed cement companies in the NSE form the population of the study. Among
them two cement companies were selected for the purpose of the study making .
Sample size is 2

3.5 DATA COLLECTION:

The collection of data is based on secondary data. Secondary Information has been
collected from Annual Reports of the respective Assets Management Companies from
their websites of respective companies as well as from various journals, articles,
websites and various other records.

3.6 TOOLS FOR ANALYSIS:-

Ratio analysis is the major tool used for data analysis. It is a financial tool that
involves analyzing a company's financial statements to understand its financial health
and performance.

The ratios that have been used in the study are:

 Return on Equity (ROE)

 Return on Capital Employed (ROCE)
 Dividend Payout Ratio(DPO)
 Earnings Per Share(EPS)
 Dividend Yield (DY)

T-Test is applied, as there is a comparison between Companies only and sample size
is also small, i.e. less than 30. Hypothesis testing is done using Excel.

3.7 PRESENTATION :-

Presentation of all data collected has been done through the use of various charts viz.
Line charts & graphs, viz. bar graphs. Data will also be presented in tabular format to
display various ratios and their results. These have been selected as it makes the data
comprehensible and more effective.

3.8 HYPOTHESIS:-

Hypothesis testing

1. H0 :There is no significant difference in Return on Capital employed of

Ambuja cemnts and Shree cements during the Financial year 2020 to 2024

31
 H1 : There is significant difference in Return on Capital Employed of
Ambuja Cements and Shree cements during the Financial year 2020 to
2024
2. H0 :There is no significant difference in Return on Equity of Ambuja cemnts
and Shree cements during the Financial year 2020 to 2024
H1 : There is significant difference in Return on Equity of Ambuja Cements
and Shree cements during the Financial year 2020 to 2024
3. H0 :There is no significant difference in Dividend yield of Ambuja cemnts
and Shree cements during the Financial year 2020 to 2024
H1 : There is significant difference in Dividend yield of Ambuja Cements and
Shree cements during the Financial year 2020 to 2024
4. H0 :There is no significant difference in Dividend payout ratio of Ambuja
cemnts and Shree cements during the Financial year 2020 to 2024

H1 : There is significant differe nce in Dividend payout ratio of Ambuja

Cements

and Shree cements during the Financial year 2020 to 2024

5. H0 :There is no significant difference in Earnings per share of Ambuja

cements and Shree cements during the Financial year 2020 to 2024

H1 : There is significant difference in Earnings per share of Ambuja Cements

and Shree cements during the Financial year 2020 to 2024

3.9 TYPE OF REPORT

This report was made in accordance to the Popular Style of report writing

32
CHAPTER 4

PROFILE OF
COMPANIES

33
 CHAPTER 4:-PROFILE OF THE CEMENT
COMPANIES

AMBUJA CEMENTS:-

Ambuja Cements Limited, a part of the diversified Adani Group, is among Indias
leading cement companies, renowned for its hassle-free, homebuilding solutions. The
company sells cement under the Ambuja brand. Ambuja Cements Ltd (ACL) was
incorporated on 20th October 1981 as Ambuja Cements Pvt. Ltd. The company was
established as a joint venture between the public sector Gujarat Industrial Investment
Corporation (GIIC) and Narottam Sekhsaria & Associates. In May 19, 1983, the
company was rehabilitated into a public limited company. Subsequently, the company
name was changed to Gujarat Ambuja Cements Ltd. Further, the name was changed
to Ambuja Cements Ltd. Ambuja Cements is a major cement producing company in
India. The principal activity of the company is to manufacture and market cement and
clinker for both domestic and export markets. The company has 6 integrated cement
manufacturing plants and 8 strategically cement grinding units and a a network of
more than 50,000 channel partners. Its current manufacturing installed capacity is
31.45 MTPA. It is the first Indian cement manufacturer having a captive port with
three terminals along the countrys western coastline to facilitate timely, cost effective
and environmentally cleaner shipments of bulk cement to its customer. The company

34
has its own fleet of ships. The company subsidiaries include Dang Cement Industries
Private Ltd, M.G.T Cements Private Ltd, Chemical Limes Mundwa Private Ltd and
Dirk India Pvt. Ltd.In the year 1985, the company set up a cement plant in technical
collaboration with Krupp Polysius, Germany, Bakau Wolf and Fuller KCP. During
the year 1988-89, the company commissioned the 12.6 MW diesel-generating sets. In
the year 1991, the company got necessary approvals for setting up another cement
plant with 1 million tonne capacity per annum at Himachal Pradesh. The company
undertook bulk cement transportation, by sea, to the major markets of Mumbai, Surat
and other deficit zones on the West Coast.In the year 1997, the company started
commercial production in Kodinar plant with an enhanced capacity. In the year 1998,
they set up a $20 million clinker Grinding unit in Sri Lanka. In the year 2000, giants
Larsen & Tubro (L&T) and Gujarat Ambuja Cements entered a unique agreement to
reduce transportation costs in dispatching bulk cement in Gujarat. Also, they entered
into an annual contract with a Soinhalese firm, Mahaveli Marine Cement, to supply
around 2.5 lakh tonnes of cement.In the year 2002, the company started commercial
production at Maratha Cement Works plant. In June 2002, they started commercial
production in the new 2-million tonne Greenfield cement plant at Chandrapur,
Maharashtra. In the year 2004, Ambuja Cement Rajasthan was amalgamated with the
company.In February 2005, the company set up a cement mill with a capacity of 80
TPH at Darlaghat and commenced commercial production. They commissioned a
captive thermal power plant with two 12 MW Steam Turbo Generators (STG), with
two boilers of 45 TPH capacity each at a cost of Rs.94 crore. The first STG was
commissioned in February 2005 and the second in May 2005. In July 2005, Indo-
Nippon Special Cements Ltd, a subsidiary company was amalgamated with the
company. The company set up new clinker capacity at Bhatapara in Chattisgarh and
Rauri in Himachal Pradesh, each having a capacity of 2.2 million tonnes per annum at
a cost of Rs. 1600 crore. In 2006, Global Cement Major Holcim acquired
management control of the company.The company commenced commercial
production at two new 2.2 million tonne clinker production lines, at Bhatapara
(Chattisgarh) and Rauri (HP) in December 2009 and January 2010 respectively. In
February 24, 2010, the company inaugurated their cement plant (grinding unit) at
Dadri, Uttar Pradesh with the capacity of 1.5 million tonnes. In March 27, 2010, they
inaugurated their cement plant (grinding unit) at Nalagarh, Himachal Pradesh with the

35
capacity of 1.5 million tonnes. During the year, the company commissioned an
additional 30 MW captive power unit at Ambujanagar (Gujarat). In October 2010, the
company signed an agreement with the Rajasthan State Industrial Development and
Investment Corporation, to set up a 2.2 million tonne clinkerisation unit in Nagaur
district. In December 2010, the Dadri Grinding Unit in its very first year of operation
received the Integrated Management System (IMS) Certification, including ISO
9001:2008, ISO 14001:2004, and OHSAS 18001:2007 by BSI (U.K.).In the year
2011, the company started commercial production in a new cement mill at a cost of
approx Rs. 185 crore at Bhatapara plant. Also, they commissioned a new cement mill
of 0.9 million tonne cement grinding capacity at Maratha Cement Works plant at a
cost of approx Rs 61 crore. The company commissioned a 7.5 MW Wind Mill project
in Kutch, Gujarat at a cost of Rs 46 crore. The company increased the installed
capacity in Bhatinda grinding unit in Punjab by 0.1 million tonne to reach at 0.6
million tonne. Also, they increased the installed capacity in Farraka grinding unit in
West Bengal by 0.25 million tonne to reach at 1.25 million tonnes.In June 2011, the
company made strategic investments in Dang Cement Industries Pvt. Ltd, Nepal and
acquired 85% shareholding for Rs 19.13 crore to help further expansion of capacity in
the northern region of India and Nepal. In September 2011, they acquired 60%
shareholding in Dirk India Pvt Ltd, Maharashtra Rs. 16.51 crore. The company
entered into a joint venture for speciality cement manufacturing facility in Goa with
Counto Microfine Products Pvt Ltd.On 24 July 2013, the Board of Directors of
Ambuja Cements approved a proposal to acquire 50.01% stake in ACC. It was
decided that Ambuja would first acquire from Holderind Investments Ltd., Mauritius
(Holcim), a 24% stake in Holcim India for a cash consideration of Rs. 3500 crore,
followed by a merger of Holcim India into Ambuja. On 10th July, 2015 Holcim Ltd.
Switzerland and Lafarge SA, France announced the completion of their global merger
to create LafargeHolcim Ltd. (LH), a world leader in cement and building material
industry. LH is present in 90 countries with around 1,15,000 employees. LH is the
ultimate holding Company and Ambuja continues to receive all-round support from
them in various facets of the Companys business and support functions.On 24 May
2016, Ambuja Cement announced the completion of its Rs 338-crore expansion
project at its Sankrail grinding unit near Kolkata, thereby raising the capacity of the
unit to 2.4 million tonne per annum from 1.5 million tonne per annum.On 15

36
November 2016, Ambuja Cements overseas parent company LafargeHolcim
announced that its subsidiary Holderind Investments Ltd. has increased its
shareholding in Ambuja Cement Ltd. to 63.11% post the acquisition of additional
3.91 crore shares.During the year, one non-functional subsidiary viz. Kakinada
Cements Ltd. was dissolved and the name of the company has been struck off from
the Registrar of Companies, Gujarat under the easy exit scheme. As reported
elsewhere, with the effectiveness of the Scheme of Amalgamation with Holcim India
Pvt. Ltd., ACC Limited (along with its subsidiaries), has become the subsidiary of the
company with effect from. 12th August 2016.On 29 April 2017, Ambuja Cement
announced the launch of a superior composite cement product for better sustainability
under the brand Ambuja Compocem.Ambuja Cements Board of Directors at its
meeting held on 5 May 2017 approved constitution of a special committee of directors
with majority of independent directors to explore the possibility of a merger of
Ambuja Cement and ACC.During the year 2018, the company allotted 58,44,17,928
equity shares of the face value of Rs.2 each under the Scheme of Amalgamation with
Holcim India Pvt. Ltd. (HIPL) to the shareholders of HIPL. At the same time,
150,670,120 equity shares, which were held by HIPL, were cancelled as cross holding
in terms of the said Scheme. As a result of the allotment of new equity shares and
cancellation of cross holding, the equity share capital has increased from
Rs.3,103,794,842 divided into 1,551,897,421 equity shares of Rs.2 each to
Rs.3,971,290,458 divided into 1,985,645,229 equity shares of Rs.2 each. In FY 2018,
Company acquired a coal block at Gare- Palma sector IV/8 in Chattisgarh at an e-
auction of coal blocks conducted by the Govt. of India. Open cast mining and
commercial production commenced in April & October 2018, respectively. The mines
development-cum-operation (MDO) contract has been finalized and site development
activities are at an advanced stage.To ensure adequate availability of dry fly ash for
the north cluster, the Company has established a fly ash dryer at Ropar at an
investment of Rs. 20 crores and it is under stabilization.In FY19, Company launched
14 new products & services. These products include 8 types of Ready Mix Concrete
(RMX) and plaster application based products (RoofCrete, SuperCrete, FibreCrete,
ColumnCrete, FoundationCrete, FibrePlast, Plazto, BagCrete), 5 decor, leakage-
proofing and tile adhesive application based solution products (Ambuja Tilocol VT,
Ambuja Tilocol MT, Ambuja Tilocol ST, Ambuja SeelanSeal, Ambuja ColorSave

37
Wall Putty) and 1 PPC cement product (Ambuja Kawach) with high strength and
water shielding properties.During 2021, Company commissioned its integrated
greenfield facility at Marwar, in Rajasthan, enhancing the annual clinker capacity by 3
MTPA and the cement capacity by 1.8 MTPA. It has finalised on brownfield
expansion of 1.5 MTPA cement at the existing plant in Ropar, Punjab. It further has
embarked on next phase of capacity expansion with a 3.2 MTPA brownfield clinker
capacity in Bhatapara and cement grinding units with a total capacity of 7 MTPA in
Farakka and Sankrail (existing units), and Barh (new greenfield location). The
estimated capex for these projects is Rs. 3,500 crore. To secure limestone needs of the
Maratha Cement Works plant in Chandrapur, Maharashtra, it acquired a new mining
lease at the Nandgaon Ekodi mine. In FY21, to meet the limestone requirement, the
Company invested Rs. 77 crores to purchase 50 hectares of land in Darlaghat,
Ambujanagar & Bhatapara. To ensure adequate availability of dry fly ash, it is
presently setting up fly ash dryers/hot air generators at Ropar and Bathinda (Punjab),
Nalagarh (Himachal Pradesh), Dadri (Uttar Pradesh), Roorkee (Uttarakhand) and
Rabriyawas (Rajasthan) with an estimated investment of Rs. 140 crore. To secure the
long-term limestone requirement for the Ambujanagar plant in Gujarat, it acquired a
new mining lease at Lodhva. To strengthen logistical capability and enhance customer
outreach, a new railway siding project at Rabriyawas has been commissioned at a
total investment of ~ Rs. 210 crore. Clinker and cement despatch by rail have
commenced their operations from October 2021.During FY21, Company installed
robotic lab for real time quality monitoring and control of cement manufacturing at
Marwar and Cross Belt Analyser for real time quality check of input limestone from
mines. It implemented Technical Information System (TIS) for production and lab
data information. It made use of molecule-based grinding aid to improve the strength
of cement and optimised SO3 across location to improve strength. It made qualitative
and quantitative identification of clinker phases for strength optimisation using X-ray
Defraction Meter (XRD). In 2021, it added six new plants for Ambuja Cool Walls
manufacturing, reaching a total of 18 plants pan-India and started supplying product
from four more plants located at Bhatapara, Dadri, Ropar and Darlaghat.As of 31st
December 2021, the company has 6 direct subsidiaries, 1 joint venture and 1 joint
operation.During the FY 2022-23, the Company became a part of the Adani Group, as

38
Holcim divested their entire shareholding and control in the Company by way of
transfer of 100% shareholding of Holderind

SHREE CEMENTS LTD:-

Shree Cement Limited is one of India‘s largest and most respected cement
manufacturers, known for its consistent growth and high-quality products. Founded in
1979, the company has established a strong presence in the Indian cement industry
with its headquarters in Kolkata, West Bengal. Shree Cement produces a wide range
of cement products, including Ordinary Portland Cement (OPC), Portland Pozzolana
Cement (PPC), and blended cements. The company is also known for its strong
emphasis on sustainability, producing green and eco-friendly cement that helps reduce
the carbon footprint of construction projects. Over the years, Shree Cement has
expanded its operations and is now one of the largest producers of cement in India,
with an extensive network of integrated plants, grinding units, and ready-mix concrete
(RMC) plants spread across key regions of the country.

The company‘s manufacturing facilities are strategically located in regions with easy
access to raw materials, such as limestone, and are equipped with modern technology
to ensure efficient production. Shree Cement's plants are capable of producing a wide
variety of cement products, catering to both urban and rural markets. The company is
also known for its focus on cost-effective and energy-efficient production processes,
including the use of alternative fuels and waste heat recovery systems. Shree Cement
has consistently implemented innovations to improve operational efficiency and
reduce environmental impact, earning a reputation for its commitment to
sustainability and eco-conscious production.

Shree Cement‘s financial performance has been consistently strong, and it is listed on
both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The company‘s growth trajectory has been driven by a combination of capacity
expansion, operational efficiencies, and a robust distribution network. Its products are
well-regarded for their quality and reliability, making Shree Cement a preferred
choice among builders and contractors. In addition to its cement business, Shree

39
Cement has diversified into other sectors, including power generation, and is focused
on maintaining its position as one of India‘s leading infrastructure companies.

The company‘s leadership is known for its strategic foresight, with a focus on long-
term growth and expansion. Shree Cement‘s commitment to innovation,
sustainability, and quality continues to drive its success in an increasingly competitive
market. With a forward-looking approach and continued investments in technology
and infrastructure, Shree Cement is poised for further growth, making it one of the
most prominent players in the Indian cement industry.

40
 CHAPTER 5
DATA ANALYSIS
&
INTERPRETATION

41
 CHAPTER 5:- DATA ANALYSIS AND
INTERPRETATION

5.1 INTRODUCTION

This chapter includes the comparative financial analysis of two listed hospitals using
ratio analysis and T-test. It focuses on critical metrics such as dividend ratios. By
examining the dimensions the analysis evaluates the research hypothesis and uncovers
significant trends or differences between the companies. The findings enhance
fundamental analysis, offering the valuable insights into their dividend decisions of
the firm

RATIO ANALYSIS

1. RETURN ON CAPITAL EMPLOYED (ROCE):-

TABLE 5.1 AMBUJA CEMENTS:-

ROCE
YEAR AMBUJA
2020-2021 11.92
2021-2022 12.89
2022-2023 9.97
2023-2024 11.33
(Source:- Annual reports)

Ambuja‘s return on capital employed fluctuated with highest in 2021-22 at 12.89%

and lowering in year 2022-23 at 9.97%. The year 2023-24 shows a little decrease at
11.33%

TABLE 5.2 SHREE CEMENTS :-

ROCE
YEAR SHREE
2020-21 14.46
2021-22 18.67

42
2022-23 16.69
2023-24 9.50
(Source:- Annual reports)

Shree‘s return on capital employed fluctuated with the highest valu in year 2021-22
with 18.67% and lowering by year 2023-24 with 9.50%

TABLE 5.3 RETURN ON CAPITAL EMPLOYED OF AMBUJA CEMENTS AND

SHREE CEMENTS (PERIOD OF YEAR 2020-2024)

YEAR AMBUJA CEMENT SHREE CEMENT

2020-2021 11.92 14.46
2021-2022 12.89 18.67
2022-2023 9.97 16.69
2023-2024 11.33 9.50
MEAN 11.53 14.83

FIGURE 5.1

RETURN ON CAPITAL EMPLOYED OF AMBUJA CEMENTS AND SHREE

CEMENTS (PERIOD OF YEAR 2020-2024)

35
ROCE
30

25

20
SHREE CEMENT
15 AMBUJA CEMENT

10

0
2020-21 2021-22 2022-23 2023-24 MEAN

43
The above table 5.1 displays the ―Return on capital employed‖ of Ambuja cement and
Shree cements from year 2020 to 2024. Shree cements shows a sharp rise in the year
2021-22 and declines by the year 2023-24. Ambuja cements on the other hand has a
growth in the year 2021-22 and then declines a little by 2022-23 and maintaines a
stability by year 2023-24. Ambuja has more consistent path than Shree cements

Statistical Analysis

 H0 :There is no significant difference in Return on Capital employed of

Ambuja cemnts and Shree cements during the selected period
 H1 : There is significant difference in Return on Capital Employed of Ambuja
Cements and Shree cements during the selected period

Interpretation

The above hypothesis was tested using two sample t-test, we get the calculated p-
value as 0.091862235. Since it is greater than 0.05( level of significance), we accept
H0.

So, we can conclude that there is no significant difference in the Return on Capital
employed of Ambuja cement and Shree cement during the selected period

2. RETURN ON EQUITY

TABLE 5.4 AMBUJA CEMENTS

ROE
YEAR AMBUJA
2020-21 8.81
2021-22 9.36
2022-23 7.32
2023-24 8.95

(Source:- Annual reports)

Ambuja‘s return on equity has fluctuated with a slight decline in the year 2022-23 and
the most recent data shows roe of 8.95%

44
TABLE 5.5 SHREE CEMENTS

ROE
YEAR SHREE
2020-21 12.13
2021-22 15.16
2022-23 13.76
2023-24 7.26
(Source:- Annual reports)

Shree‘s return on equity has fluctuated with a sight increase in year 2021-22, then
decreased in the year 2022-23 and finally to 7.26% in the year 2023-224

TABLE 5.6 RETURN ON EQUITY OF AMBUJA CEMENTS AND SHREE

CEMENTS( PERIOD OF YEAR 2020-24)

YEAR AMBUJA SHREE

2020-21 8.81 12.13
2021-22 9.36 15.16
2022-23 7.32 13.76
2023-24 8.95 7.26
MEAN 8.61 12.08

FIGURE 5.2

RETURN ON EQUITY OF AMBUJA CEMENTS AND SHREE CEMENTS

(PERIOD OF YEAR 2020-2024)

45
 16

14

12

10

8 AMBUJA
SHREE
6

0
2020-21 2021-22 2022-23 2023-24 MEAN

The above table 5.2 displays the ―Return on equity‖ of Ambuja cements and Shree
cements from year 2020 to 2024. Shree cements shows an increase in the year 2021-
22 and decrease in the roe year 2023-24. On the other hand Ambuja cements has
almost slight fluctuations in the roe from the year 2021-22 to year 2023-24.

Statistical Analysis

 H0 :There is no significant difference in Return on Equity of Ambuja cemnts

and Shree cements during the selected period
 H1 : There is significant difference in Return on Equity of Ambuja Cements
and Shree cements during the selected period

Interpretation

The above hypothesis was tested using two sample t-test, we get the calculated p-
value as 0.072356862. Since it is greater than 0.05( level of significance), we accept
H0.

So, we can conclude that there is no significant difference in the Return on Equity of
Ambuja cement and Shree cement during the selected period

3. DIVIDEND YIELD

46
TABLE 5.7 AMBUJA CEMENTS

DIVIDEND YIELD
YEAR AMBUJA
2020-21 0.45
2021-22 0.16
2022-23 0.17
2023-24 0.16
(Source:- Annual reports)

Ambuja‘s dividend yield is highest in the year 2020-21 with 0.45% and is fluctuating
from the year 2021-22 with 0.16 upto year 2023-24.

TABLE 5.8 SHREE CEMENTS

DIVIDEND YIELD
YEAR SHREE

2020-21 0.004
2021-22 0.003

2022-23 0.002
2023-24 0.004

(Source:- Annual reports)

Shree‘s dividend yield is highest in the year 2020-21 and 2023-24 with 0.0004% and
is fluctuating in the year 2021-22 and 2022-23.

TABLE 5.9 DIVIDEND YIELD OF AMBUJA CEMENTS AND SHREE

CEMENTS (PERIOD OF YEAR 2020-2024)

YEAR AMBUJA SHREE

2020-21 0.45 0.004
2021-22 0.16 0.003
2022-23 0.17 0.002
2023-24 0.16 0.004

47
MEAN 0.24 0.003

FIGURE 5.3

DIVIDEND YIELD OF AMBUJA CEMENTS AND SHREE CEMENTS (PERIOD

OF YEAR 2020-2024)

0.5
0.45
0.4
0.35
0.3
0.25 AMBUJA

0.2 SHREE

0.15
0.1
0.05
0
2020-21 2021-22 2022-23 2023-24 MEAN

The above table 5.3 displays the ―Dividend yield‖ of Ambuja cements and Shree
cements from year 2020- 2024. Shree cements show a little fluctuating in the year
2021-22 and 2022-23. Ambuja cements has the highest peak in the year 2020-21 and
then fluctuating from year 2021-22 to 2023-24.

Statistical Analysis

 H0 :There is no significant difference in Dividend yield of Ambuja cemnts and

Shree cements during the selected period
 H1 : There is significant difference in Dividend yield of Ambuja Cements and
Shree cements during the selected period

Interpretation

The above hypothesis was tested using two sample t-test, we get the calculated p-
value as 0.013646239. Since it is less than 0.05( level of significance), we reject H0.

48
So, we can conclude that there is significant difference in the Dividend yield of
Ambuja cement and Shree cement during the selected period

4. DIVIDEND PAYOUT RATIO

TABLE 5.10 AMBUJA CEMENTS

DIVIDEND PAYOUT RATIO

YEAR AMBUJA
2020-21 188.57
2021-22 0.00
2022-23 0.00
2023-24 48.99
Ambuja‘s Dividend payout ratio is highest in the year 2020-21 with 188.57% and is
lowest in the year 2023-24 with 48.99%

TABLE 5.11 SHREE CEMENTS

DIVIDEND PAYPOUT RATIO

YEAR SHREE

2020-21 33.04
2021-22 0.00

2022-23 15.94
2023-24 24.44

Shree‘s dividend payout ratio is highest in the year 2020-21 with 33.04% and is
lowest in the year 2022-23 with 15.94%

Table 5.12 DIVIDEND PAYOUT RATIO OF AMBUJA CEMENTS AND SHREE

CEMENTS (PERIOD OF YEAR 2020-2024)

YEAR AMBUJA SHREE

2020-21 188.57 33.04
2021-22 0.00 0.00

49
2022-23 0.00 15.94
2023-24 48.99 24.44
MEAN 59.39 18.36

FIGURE 5.4

DIVIDEND PAYOUT RATIO OF AMBUJA CEMENTS AND SHREE CEMENTS

(PERIOD OF YEAR 2020-2024)

250

200

150
SHREE

100 AMBUJA

50

0
2020-21 2021-22 2022-23 2023-24 MEAN

The above table 5.4 displays the ―Dividend Payout Ratio‖ of Ambuja cements and
Shree cements from year 2020 to 2024. Ambuja cement has highest in the year 2020-
21 and then decreasing in the coming years. Shree cements has a similar wave to
Ambuja cements

Statistical Analysis

 H0 :There is no significant difference in Dividend payout ratio of Ambuja

cemnts and Shree cements during the selected period
 H1 : There is significant difference in Dividend payout ratio of Ambuja
Cements and Shree cements during the selected period

Interpretation

50
The above hypothesis was tested using two sample t-test, we get the calculated p-
value as 0.246556279. Since it is greater than 0.05( level of significance), we accept
H0.

So, we can conclude that there is no significant difference in the Dividend payout
ratio of Ambuja cement and Shree cement during the selected period

5. EARNINGS PER SHARE:-

TABLE 5.13 AMBUJA CEMENTS

EARNINGS PER SHARE

YEAR AMBUJA

2020-21 9.01
2021-22 10.48

2022-23 10.11
2023-24 12.49

Ambuja‘s earnings per share has highest in the current year 2023-24 with 12.49% and
has fluctuating in the above years.

TABLE 5.14 SHREE CEMENTS

EARNINGS PER SHARE

YEAR SHREE

2020-21 445.08

2021-22 640.77
2022-23 658.69

2023-24 368.10

Shree‘s earnings per share has highest in the year 2022-23 with 658.69 and has
fluctuating the remaining years

TABLE 5.15 EARNINGS PER SHARE OF AMBUJA CEMENTS AND SHREE

CEMENTS (PERIOD OF YEAR 2020-2024)

51
YEAR AMBUJA SHREE
2020-21 9.01 445.08
2021-22 10.48 640.77
2022-23 10.11 658.69
2023-24 12.49 368.10
MEAN 10.52 528.16

FIGURE 5.5

EARNINGS PER SHARE OF AMBUJA CEMENTS AND SHREE CEMENTS

(PERIOD OF YEAR 2020-2024)

700

600

500

400
AMBUJA
300 SHREE

200

100

0
2020-21 2021-22 2022-23 2023-24 MEAN

The above table 5.5 displays the ―Earnings per share‖ of Ambuja cements and Shree
cements from year 2020-2024. Ambuja cements has a increase in year 2021-22 and
2022-23 and then it falls in 2023-24. Shree cements has a stable fluctuating wave
from year 2020 to 2024.

Statistical Analysis

 H0 :There is no significant difference in Earnings per share of Ambuja cements

and Shree cements during the selected period
 H1 : There is significant difference in Earnings per share of Ambuja Cements
and Shree cements during the selected period

52
Interpretation

The above hypothesis was tested using two sample t-test, we get the calculated p-
value as 0.000761997. Since it is less than 0.05( level of significance), we reject H0.

So, we can conclude that there is significant difference in the Earnings per share of
Ambuja cement and Shree cement during the selected period

53
CHAPTER 6
CONCLUSION

54
 CHAPTER 6:- CONCLUSION

The comparative financial analysis of Ambuja Cements and Shree Cements from
2020 to 2024 highlights distinct trends in their financial performance through
numerical metrics. Ambuja Cements exhibited a relatively stable Return on Capital
Employed (ROCE), with a peak of 12.89% in 2021-22 and a low of 9.97% in 2022-
23, averaging 11.53% over the period. In contrast, Shree Cements achieved a higher
average ROCE of 14.83%, peaking at 18.67% in 2021-22 but declining sharply to
9.50% by 2023-24. Statistical tests confirmed no significant difference between their
ROCE values.

For Return on Equity (ROE), Ambuja Cements displayed mild fluctuations, ranging
from 7.32% in 2022-23 to 9.36% in 2021-22, with an average of 8.61%. Shree
Cements had higher but more variable ROE values, peaking at 15.16% in 2021-22
and dropping to 7.26% in 2023-24, averaging 12.08%. Again, statistical analysis
showed no significant difference in ROE.

Dividend Yield reflected Ambuja Cements‘ higher consistency, with values ranging
between 0.16% and 0.45%, compared to Shree Cements‘ much lower yields (0.002%–
0.004%). Statistical tests confirmed a significant difference in Dividend Yield,
favouring Ambuja. Regarding Dividend Payout Ratio, Ambuja's high of 188.57% in
2020-21 dropped to 48.99% in 2023-24, while Shree‘s values ranged between 0.00%
and 33.04%. No significant difference was observed in payout ratios.

Earnings Per Share (EPS) highlighted a significant disparity, with Shree Cements
achieving higher averages (528.16) and peaks (658.69 in 2022-23), despite volatility.
Ambuja, with an EPS range of 9.01 to 12.49, showcased consistent growth.

Overall, Ambuja Cements‘ steady performance in metrics like ROCE, ROE, and
Dividend Yield appeals to risk-averse investors, whereas Shree Cements‘ higher but
more volatile returns in ROCE, ROE, and EPS cater to those seeking growth
potential. These insights provide a comprehensive view for stakeholders to align their
strategies with their risk tolerance and investment goals.

55
The major findings of this study are as follows

 Ambuja cements and Shree cements

1. Return on Capital Employed (ROCE)

 Ambuja Cements' ROCE showed a peak at 12.89% in 2021-22,
followed by a decline to 9.97% in 2022-23 and a slight recovery to
11.33% in 2023-24, reflecting moderate fluctuations in capital
efficiency over the period.
 Shree Cements' ROCE peaked at 18.67% in 2021-22, followed by
a steady decline to 9.50% in 2023-24, indicating a reduction in
capital efficiency over time.

2. Return on Equity ( ROE)

 Ambuja Cements' ROE peaked at 9.36% in 2021-22, dropped to
7.32% in 2022-23, and recovered to 8.95% in 2023-24, reflecting
slight fluctuations in equity returns.
 Shree Cements' ROE peaked at 15.16% in 2021-22 but steadily
declined to 7.26% in 2023-24, indicating a significant drop in equity
returns over the period.
3. Dividend yield (DY)
 Ambuja Cements' dividend yield was highest at 0.45% in 2020-21
but declined and stabilized at around 0.16%-0.17% from 2021-22
to 2023-24, indicating reduced returns to shareholders.
 Shree Cements' dividend yield remained very low throughout the
period, peaking at 0.004% in 2020-21 and 2023-24, with slight
declines in the intervening years, reflecting minimal shareholder
returns.
4. Dividend Payout Ratio (DPO)
 Ambuja Cements' dividend payout ratio was exceptionally high
at 188.57% in 2020-21, dropped to 0% in the following two
years, and partially recovered to 48.99% in 2023-24, indicating
inconsistent dividend distribution.

56
  Shree Cements' dividend payout ratio peaked at 33.04% in
2020-21, dropped to 0% in 2021-22, and then gradually
increased to 24.44% in 2023-24, reflecting fluctuating dividend
policies.
5. Earnings per share (EPS)
 Ambuja's Earnings Per Share (EPS) shows an overall upward
trend from 2020-21 to 2023-24, increasing from 9.01 to 12.49.
Despite a minor decline in 2022-23, the EPS rebounded
strongly in 2023-24.
 Shree's Earnings Per Share (EPS) displayed significant growth
from 2020-21 to 2022-23, peaking at 658.69. However, there
was a sharp decline in 2023-24, dropping to 368.10, indicating
a notable setback.

57
 BIBLIOGRAPHY

https://www.shreecement.com/uploads/investors/Annual_Report.pdf

https://www.ambujacement.com/annual-reports.pdf

www.google.com

www.investopedia.com

58
 ANNEXURE

Formulation and Testing of Hypothesis using two sample T-test:

ROCE ROE

YEAR AMBUJA SHREE YEAR AMBUJA SHREE

2020- 2020-
11.92 14.46 8.81 12.13
21 21
2021- 2021-
12.89 18.67 9.36 15.16
22 22
2022- 2022-
9.97 16.69 7.32 13.76
23 23
2023- 2023-
11.33 9.5 8.95 7.26
24 24
MEAN 11.53 14.83 MEAN 8.61 12.08
P value 0.091862235 P value 0.072356862
Diff. -0.041862235 Diff. -0.022356862

DIVIDEND YIELD DPO

YEAR AMBUJA SHREE YEAR AMBUJA SHREE

2020- 2020-
0.45 0.004 188.57 33.04
21 21
2021- 2021-
0.16 0.003 0 0
22 22
2022- 2022-
0.17 0.002 0 15.94
23 23
2023- 2023-
0.16 0.004 48.99 24.44
24 24
MEAN 0.24 0.003 MEAN 59.39 18.36
P value 0.013646239 P value 0.246556279
Diff. 0.036353761 Diff. -0.196556279

EPS

YEAR AMBUJA SHREE

2020-21 9.01 445.08
2021-22 10.48 640.77
2022-23 10.11 658.69
2023-24 12.49 368.1

59
MEAN 10.52 528.16
P value 0.000761997
Diff. 0.049238003

60