Final Report Internship (Shitiz)

Submitted by:Kshitij S. GorePgdm-B , Roll No. 121SIMSR, Mumbai

ACC Concrete Ltd.

Industry: Cement

Company: ACC Concrete Ltd.

A Project Report on

“Improving the Credit Control by developing a Credit Evaluation Model and reducing the Average Collection

Period at ACC Concrete Ltd.”

Project carried out at ACC Concrete Ltd., Mumbai

Submitted By

Kshitij S. GorePost Graduation Diploma in Management

SIMSR, Mumbai

Under the guidance of

Company Guide Faculty GuideMr. Purnendu Dey Mr. Sunil ParmarRegional Credit Control ProfessorACC Concrete Ltd. SIMSR, Mumbai

ACC Concrete Ltd.

EXECUTIVE SUMMARY

This project is an in depth research about receivables management, average collection period, credit assessment and credit evaluation of ACC Concrete Ltd. The prime objective of the report is to develop a model to evaluate the clients of the company and ascertain a credit limit. The project is included as part of MBA Program and the project is done from 5th May to 30th June.

The study draws attention to the fact that the current average collection period for ACC is increasing over the period of 6 to 7 months, which according to the industry average is very high. This directly and indirectly reflects on the company as well as the creditors of the company by increasing the average payment period to operate at a low working capital.

After data collection regarding client transaction, invoice tracker, etc. it was analyzed with different charts and graph, which is very important to find observation and findings. On the basis of this work, suggestions were made which were very helpful for analyzing project report and apparently a model was developed.

It was observed that the delay in receivables was mainly because of the market scenario of the real estate industry which is more or less stagnant from past couple of years which has reduced either the sales of the real estate developers or has increased their receivables.

To regulate the average collection period and delays regarding the credit period certain internal and external factors were considered and accordingly the scope of improvement was suggested for ACC.

Here are some actions that were suggested for improvement: Focus on top 30 clients who account for 87% of the revenue. Convert complete billing process to work electronically. Form a follow up team in synchronization with the marketing team and credit

control team. Offer discounts for early payments on outstanding invoices.

ACC Concrete Ltd.

CERTIFICATE

This is to certify that the Project Work titled “Improving the Credit Control by developing a Credit Evaluation Model and reducing the Average Collection Period at ACC Concrete Ltd.” has been successfully completed at ACC concrete Ltd. by Kshitij S. Gore under my guidance, in partial fulfillment of the Post Graduate Diploma in Management at K. J. Somaiya Institute of Management Studies and Research, Mumbai.I wish him a bright and prosperous future.

Sunil ParmarProfessor SIMSR, Mumbai

ACC Concrete Ltd.

ACKNOWLEDGEMENT

I take this opportunity to extend my sincere thanks to SIMSR, Mumbai and ACC Concrete Ltd. for offering a unique platform to earn exposure and garner knowledge in cement industry.

During the span of the project period, it was my great fortune to get inducted into Credit Control department, ACC Concrete Ltd. I am especially thankful to my guide Mr. Purnendu Dey, Regional Credit Controller, Mumbai Area Office, ACC Concrete Ltd. for his kind support and guidance; he has been extending me throughout the project. I also express my sincere thanks to Mr. Anurag Yadav, Area Marketing Head for constant encouragement and support at each stage of project. I was fortunate to get Mr. Sameer Raul for helping me with all the information and data required for successful completion of project.

I want to convey my sincere thanks to my college guide Mr. Sunil Parmar, Professor, SIMSR, who has been guiding me throughout my project. He was there to help me out whenever and wherever I needed.

Last but not the least I would like to express my profound gratitude to each and every employee of the organization who contributed in their own ways in successful completion of this project.

Kshitij S. GorePGDM- 121SIMSR, Mumbai

ACC Concrete Ltd.

ContentsEXECUTIVE SUMMARY........................................................................................................3CERTIFICATE..........................................................................................................................4ACKNOWLEDGEMENT.........................................................................................................51. INTRODUCTION..................................................................................................................8

1.1Company Profile...............................................................................................................81.2 Major Milestones:............................................................................................................91.3 About Acc’s RMC Business..........................................................................................111.4 ACC Concrete – A Wide Range....................................................................................131.5 ACC Concrete Vision And Mission:..............................................................................14

2. BACKGROUND OF THE STUDY....................................................................................152.1 Statement Of Problem:...................................................................................................152.2 Need Of Study:...............................................................................................................152.3 Scope Of Study:.............................................................................................................162.4 Objectives Of Study:......................................................................................................16

3. LITERATURE REVIEW:...................................................................................................173.1 Rmc Industry..................................................................................................................17

4. ALL INDIA COMPETITORS INFORMATION................................................................184.1 Ahlcon Ready Mix.........................................................................................................184.2 Ci Concrete India...........................................................................................................184.3 Godrej & Boyce Mfg. Co...............................................................................................194.4 Ijm Concrete Products....................................................................................................194.5 India Cements.................................................................................................................204.6 Lafarge Aggregates & Concrete India...........................................................................214.7 Madras Cements.............................................................................................................214.8 Rdc Concrete (India)......................................................................................................224.9 Rmc Readymix India......................................................................................................224.10 Ultratech Concrete.......................................................................................................234.11 Major Competitors In Mumbai:...................................................................................24

5. RECIPE................................................................................................................................256. COST STRUCTURE...........................................................................................................26

6.1 Production Cost..............................................................................................................266.2 Distribution Cost............................................................................................................27

7. PRODUCTION TO BILLING PROCESS..........................................................................287.1 Plant Wise POD.............................................................................................................297.2 Plant Name:....................................................................................................................30

ACC Concrete Ltd.

7.3 Percentage Of Invoices:.................................................................................................307.4 Number Of Invoices:......................................................................................................31

8. TOP 30 CLIENTS................................................................................................................319. CREDIT EVALUATION MODEL.....................................................................................32

9.1 Interface Of The Model:.................................................................................................339.2 Solvency Parameters:.....................................................................................................339.3 Liquidity Parameters:.....................................................................................................349.4 Profitability Parameters:.................................................................................................35Figure16 Profitability...........................................................................................................369.5 Client Trade History Parameters:...................................................................................369.6 Market Reputation Parameters:......................................................................................36

10. CONCLUSION..................................................................................................................3811. RECOMMENDATIONS TO THE COMPANY...............................................................3912. REFERENCES AND BIBLIOGRAPHY..........................................................................4113. GLOSSARY.......................................................................................................................42

ACC Concrete Ltd.

1. INTRODUCTION

1.1Company Profile

Year of establishment: 1936

Shareholder pattern:

Figure1 Shareholder pattern

Holder's Name No of Shares % Share Holding

Promoters 93888120 50.01%

Foreign Institutions 37035581 19.73%

General Public 23834380 12.70%

Financial Institutions 17818906 9.49%

Other Companies 6851404 3.65%

Banks Mutual Funds 5947011 3.17%

Foreign NRI 772515 0.41%

Others 767724 0.41%

Foreign Promoter 541000 0.29%

Central Govt 287815 0.15%

Foreign Industries 900 0%

ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 17 modern cement factories, more than 40 Ready mix concrete plants, 21 sales offices, and several zonal offices. It has a workforce of about 9,000 persons and a countrywide distribution network of over 9,000 dealers.

Since inception in 1936, the company has been a trendsetter and important benchmark for the cement industry in many areas of cement and concrete technology. ACC has a unique track record of innovative research, product development and specialized consultancy services. The company's various manufacturing units are backed by a central technology support services centre - the only one of its kind in the Indian cement industry.

ACC has rich experience in mining, being the largest user of limestone. As the largest cement producer in India, it is one of the biggest customers of the domestic coal industry, of Indian Railways, and a considerable user of the country’s road transport network services for inward and outward movement of materials and products.

ACC Concrete Ltd.

Among the first companies in India to include commitment to environmental protection as one of its corporate objectives, the company installed sophisticated pollution control equipment as far back as 1966, long before pollution control laws came into existence. Today each of its cement plants has state-of-the art pollution control equipment and devices.

ACC plants, mines and townships visibly demonstrate successful endeavours in quarry rehabilitation, water management techniques and ‘greening’ activities. The company actively promotes the use of alternative fuels and raw materials and offers total solutions for waste management including testing, suggestions for reuse, recycling and co-processing.

ACC has taken purposeful steps in knowledge building. We run two institutes that offer professional technical courses for engineering graduates and diploma holders which are relevant to manufacturing sectors such as cement. The main beneficiaries are youth from remote and backward areas of the country.

ACC has made significant contributions to the nation building process by way of quality products, services and sharing expertise. Its commitment to sustainable development, its high ethical standards in business dealings and its on-going efforts in community welfare programmes have won it acclaim as a responsible corporate citizen. ACC’s brand name is synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer SuperBrands of India.

1.2 Major Milestones:

1936 Incorporation of The Associated Cement Companies Limited on August 1, 1936.

1937 With the transfer of the 10th company to ACC, viz. Dewarkhand Cement Company, the formation of ACC is complete on October 23, 1937.

1947 India’s first entirely indigenous cement plant established at Chaibasa in Bihar

1956 Bulk Cement Depot established at Okhla, Delhi

1961 Blast furnace slag from TISCO used at the Chaibasa Unit to manufacture Portland Slag Cement for the first time in India.

1961 Manufacture of Accocid Cement, which resists the corrosive action of acids and chemicals.

ACC Concrete Ltd.

1961 Manufacture of Hydrophobic (waterproof) cement at ACC Khalari Cement Works in Bihar.

1962 Manufacture of Accoproof, a waterproofing additive.

1965 ACC’s Central Research Station (CRS) established at Thane

1965 Manufacture of Portland Pozzolana Cement.

1968 ACC supplied and commissioned one-million-tone iron ore pelletizing plant ordered by TISCO

1973 Take-over of The Cement Marketing Company of India (CMI)

1979 ACC wins international contract for operation and management of a new one million tone cement plant at Yanbu-Ras Biridi in Saudi Arabia.

1982 Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka.

1992 Incorporation of Bulk Cement Corporation of India, a joint venture with the Government of India.

1993 ACC starts the commercial manufacture of Ready Mixed Concrete at Mumbai.

1999 Tata group sells 7.2% of its stake in ACC to Ambuja Cement Holdings Ltd, a subsidiary of Gujarat Ambuja Cements Ltd. (GACL)

2000 Tata Group sells their remaining stake in ACC to the GACL group, who with 14.45% now emerge as the single largest shareholder of ACC.

2002 ACC wins PHDCCI Good Corporate Citizen Award

2004 ACC named as a Consumer Superbrand by the Superbrands Council of India, becoming the only cement company to get this status.

2004 GreenTech Safety Gold and Silver Awards awarded to Madukkarai Cement Works and Katni Refractory Works by Greentech Foundation for outstanding performance in Safety Management System.

2005 Holcim group of Switzerland enters strategic alliance with Ambuja Group by acquiring a majority stake in Ambuja Cements India Ltd. (ACIL) which

ACC Concrete Ltd.

at the time held 13.8 % of the total equity shares in ACC. Holcim simultaneously makes an open offer to ACC shareholders, through Holdcem Cement Pvt. Limited and ACIL, to acquire a majority shareholding in ACC. Pursuant to the open offer, ACIL’s shareholding in ACC increases to 34.69 % of the Equity share capital of ACC.

2006 Change of name to ACC Limited with effect from September 1, 2006 from The Associated Cement Companies Limited.

2006 ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber of Commerce and Industry

2006 New corporate brand identity and logo adopted from October 15, 2006

2008 Ready mixed concrete business hived off to a new subsidiary called ACC Concrete Limited.

2008 ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate Citizen of the year 2008

2009 ACC received the Jamanalal Bajaj "Uchit Vyavahar Puraskar" of Council for Fair Business Practices

2010 ACC acquires 100 percent of the financial equity of Encore Cements & Additives Private Limited which is a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh. This company became a wholly-owned subsidiary of

1.3 About Acc’s RMC Business

ACC set up India's first commercial Ready Mix Concrete (RMC or RMX) plant in Mumbai in 1994. ACC Concrete is one of the largest manufacturers of RMX in India with over 50 modern plants in major cities such as Mumbai, Bangalore, Kolkata, Chennai, Delhi. Hyderabad, Goa, Pune and Ahmedabad.

ACC's pioneering efforts in introducing RMX coupled with the promotion of bulk cement handling facilities have been responsible for redefining the pace and quality of construction activity in metropolitan cities and in mega infrastructure projects.

ACC Concrete Ltd.

Numerous landmark structures in India's metro cities have been built using ACC Concrete - mega housing projects, townships, commercial complexes, factories, bridges, flyovers, roads and railways. Prestige projects such as the Mumbai-Pune Expressway, the Indore-Dewas bypass, Kolkata and Delhi Metro Rail projects. Most of the new bridge and fly-overs in Mumbai used ACC Concrete and could perhaps not have been completed on schedule without it.Concrete is basically a mixture of Portland Cement, water and aggregates comprising sand and gravel or crushed stone. In traditional construction sites, each of these materials is procured separately and mixed in specified proportions at site to make concrete. Ready Mix Concrete, or RMX as it is popularly called, refers to concrete that is specifically manufactured elsewhere and transported in a Transit Mixer for delivery to the customer's construction site in a ready-to-use freshly mixed state. RMX can be custom-made to suit different applications. Ready Mix Concrete is bought and sold by volume - usually expressed in cubic meters.

Ready Mix Concrete is manufactured under computer-controlled operations and transported and placed at site using sophisticated equipment and methods. RMX assures its customers numerous benefits:

Uniform, consistent and assured quality of concrete Flexibility in concrete design mixes Easier addition of admixtures Faster and speedier construction Reduced inventories, material handling and storage of raw materials at sites Savings in labour requirements, labour costs and supervision of labour Reduced wastage of materials

The use of RMX is an environmental friendly practice that ensures a cleaner work place and causes minimal disturbance to its surroundings. This makes its utility more significant in crowded cities and sensitive localities.In contrast to this, conventional methods of making, transporting and placing concrete at most construction sites are somewhat labour-intensive and suffer from practices which may be erratic and not very systematic.Therefore the use of Ready Mix Concrete can prove to more cost effective in the longer term while ensuring that structures are built faster and using concrete that comes with higher levels of quality assurance.

ACC Concrete is manufactured at modern fully computerized plants which have state-of-the-art machinery and equipment by machinery suppliers of global repute - fully automated Batching Plants, well-equipped laboratories for testing raw materials and fresh concrete, Transit mixers, Mobile and stationary pumps capable of discharging concrete at high elevations and over long distances.

ACC Concrete Ltd.

A large fleet of the latest models of Transit Mixers and Concrete Pumps to suit different terrains and work sites ensures that our customers get timely and uninterrupted supply of premium quality concrete as per their requirement as well as its efficient and timely placement at the work site.ACC Concrete is supplied in a variety of grades and compositions to meet specific demands of customized applications - from simple requirements for small homes to High Performance Concrete to meet the complex needs of mega projects.Each of our plants has a fully equipped laboratory with the latest in testing machines to carry out routine and detailed tests of raw materials as well as fresh finished concrete. These in-plant laboratories are backed by the facilities of ACC's reputed Research centre at Thane which serves as a focal research and testing laboratory centre for cement and concrete.ACC Concrete customers can avail of a range of options in our testing and quality control services - from simple tests and analyses of raw materials and concrete to non-destructive testing of hardened concrete.

1.4 ACC Concrete – A Wide Range

High Strength Concrete High Performance Concrete Self-leveling Concrete Self-compacting Concrete Coloured Concrete Concrete made with binary and ternary blends of cements Early strength Concrete Fibre reinforced Concrete

ACC's fleet of Transit Mixers and Concrete Pumps helps ensure that our customers in cities like Mumbai, Bangalore, Kolkata, Delhi, Chennai, Hyderabad, Goa and Pune now just a phone call away from ACC Concrete - freshly blended premium quality concrete that is door delivered and efficiently placed at site on the day of concreting.For very large constructions or infrastructure works, we can consider dedicating an entire RMX plant catering exclusively to the project sites.

In addition, our marketing team, which includes qualified and experienced engineers and concrete technologists, can assist customers in defining and specifying quality standards, designing specific concrete mixes to meet the most challenging of requirements as well as sourcing reliable supplies of good quality raw materials.If you wish to know more about ACC Ready Mix Concrete or have a specific requirement, please send a mail to any of the following options which is nearest to you.

ACC Concrete Ltd.

1.5 ACC Concrete Vision And Mission:

Figure2 Vision and Mission

ACC Concrete Ltd.

2. BACKGROUND OF THE STUDY

Most firms have to provide their customers with trade credit. The aim of the internship was to ensure that customers do not take advantage of willingness to provide this credit.

We will look at: the problems caused by providing credit, including the consequences of bad

debt and late payments how to assess whether your customers are credit worthy how good credit control routines prevent customers from keeping your money

longer than necessary where debt collection fails, we will see how to claim income tax and VAT relief

on the bad debt.

This unit won’t make you an instant expert at credit control and debt recovery. However, it will give you some useful guidelines to collecting debt efficiently. Good cash flow is essential for business success. We hope that this unit will make the cash flow for you.In later units of the course we will look at how you can supplement your experience and knowledge by using specialist agencies and bodies to enable you to ensure payment from your debtors.

2.1 Statement Of Problem:

To understand the payment behavior of ACC’s clients and exploring the possible verticals for improvement in reducing average collection period.

2.2 Need Of Study:

Staff involved in credit control and credit management at all levels who need to gain a broad overview and understanding.

Staff about to take on more responsibility for credit management. Staff newly appointed to these areas. Anyone in business wanting to improve their cash flow and reduce bad debts Affirmation of good credit control practices, including telephone collection techniques. Appreciation of skills required to work closely with the sales department. Understanding of the different customer trading types and the laws relating to them.

ACC Concrete Ltd.

Ability to select credit reference agencies and interpret the information they supply. Knowledge of how to effectively target and motivate a team to reduce your company

D S O. Knowledge of the laws governing litigation on unpaid debt. Update on legislation in relation to best practice compliance and the Financial Conduct

Authority.

2.3 Scope Of Study:

The study was restricted to the Mumbai area operations of ACC. The study was carried on all the plants of ACC concrete Ltd. in and around Mumbai. Study includes the tracker sheets of clients of ACC in Mumbai. Complete analysis of fundamental and sentimental aspects of ACC’s clients by using their

balance sheets and related news. An additional of cost structure and contribution margin was carried out of personal interest

in the field of cost management.

2.4 Objectives Of Study:

To find the clients who are exceeding the credit period for payment To develop attractive policies for the clients to tempt them to pay early To convert the billing process to electronic means on pilot basis for top 5 customers. To understand the degree of current credit analysis of ACC.

ACC Concrete Ltd.

3. LITERATURE REVIEW:

3.1 Rmc Industry

The Ready Mix Concrete (RMC) industry is growing due to the superior technical properties over normal concrete, but the potential is still huge

The Ready Mix Concrete (RMC) industry in India is in its early stages with cement consumption of just 2-3 per cent of total production. This is evident from the fact that in the West, the RMC consumes 60 per cent of total cement production. However, since the demand for RMC is expected to grow exponentially, cement manufacturers in India such as Ultratech, ACC, Madras Cements, India Cements, Ambuja Cements, among others, have forayed into the business. As the industry grows, it will make aggregate distribution and production more organized as large players are likely to venture into the aggregates business themselves or have a long-term relationship with commercial aggregate companies.

The cement companies are able to leverage the RMC market in a better way since cement is one of the essential ingredients in the manufacture of RMC. Of course, acquiring and operating suitable aggregate quarries in India is a difficult task, but since cement companies possess sufficient experience in limestone quarrying will have technical competency of running such captive operations too.

The use of RMC is growing due to its superior technical properties than normal concrete. The difference between normal concrete and RMC lies in the technology used for production, transportation and placement. In the case of RMC, all the ingredients are proportioned in accordance with the standard codes of practice to get the targeted strength and durability. The quality of concrete depends on the way it is mixed, placed, compacted, finished, cured and protected. RMC used in construction makes it possible to achieve speed with quality

The acceptability of RMC is certainly high in large cities and metros and as many as around 40 cities are currently using RMC for several infrastructure projects. Specifications in tenders by municipal corporations, public works and other government bodies will play a big role in growth of RMC.

ACC Concrete Ltd.

4. ALL INDIA COMPETITORS INFORMATION

4.1 Ahlcon Ready Mix

B-4/205, Safdarjung Enclave, New Delhi- 110029Tel: 011-4600 3600 Fax: 011-26714755 www.ahlconrmc.comVikas Ahluwalia, Managing Director.Ahlcon Ready Mix Concrete (RMC) is amongst the largest RMC the company with a pan India presence. The company was established in the year 2003 and has grown from a humble beginning to one of the most respected RMC brands in India within a short span of time. Its ERP software helps them to manage all the operations at the plant like; production, inventory, finance and customer relationship. Integrated use of technology blended with human values makes it possible to deliver domain specific customization and generic solutions. Ahlcon RMC specialises in producing pavescape concrete, which does not retain water. Ahlcon RMC deploys a variety of systems in order to contribute to a clean environment and recycle natural resources, especially water.

4.2 Ci Concrete India

#214/C, Doddanekkundl Industrlal Area , Whitefleld, Bangalore-560048Phone: 080-4152 1111 Mobile: 9900993333 www.ciconcreteindia.comM Srinivas Reddy, Managing DirectorCI Concrete India has almost a decade experience in the filed of Ready Mix Concrete business. Started four years ago, ICC has produced over three lakh concrete of different grades from M7.5 to M60. The plants are modern and managed by experienced personnel, known for quality and timely deliveries. The company has a host of big clients like BMRCL, Golden Gate Properties, Kumar Urbania, L&T ECC Division, Nagarjuna Construction etc.

ACC Concrete Ltd.

4.3 Godrej & Boyce Mfg. Co.

Pirojsha Nagar, Vikhroli, Mumbai 400079Tel: 022- 6796 2004 www.godrej.comJamshyd N. Godrej, Managing Director Godrej Ready Mix Concrete is a part of the Construction Division of Godrej & Boyce Mfg. Co. It was launched in the year 1997 in Mumbai. The Construction Division has imported high tech concrete batching plant from SIMEM, Italy to cater to its various emergent projects in the industrial as well as in the residential township of Pirojshanagar, Mumbai.With the rising customer’s need, the company began commercial supply of concrete in the year 1999. Today, the company has four plants in Mumbai, one in Navi Mumbai and a couple of them in Pune. The organisation has a wide range of products like High strength Concrete (HSC), temperature controlled concrete (TCC), elf compacting concrete (SCC), dry lean concrete (DLC), pavement quality concrete (PQC), fibre reinforced concrete (FRC), rheodynamic mix concrete (RDC) and high density concrete (HDC).

4.4 Ijm Concrete Products

H No. 1-89/1, Plot No: 42 & 43, 2nd Floor Kavuri Hills, Next to Madhapur Police Station,Hi-Tech City Road, Hyderabad-500 081 Tel: +91 40 43408888 Fax: +91 40 23114669 www.ijmconcrete.comS. M. Wong, Country HeadIJM CPPL which has its roots in Malaysia started operations in Hyderabad in 2004, and later at Bangalore and Chennai. The parent company IJM Corporation Berhad is renowned as one of the largest infrastructure companies in the world. IJM Concrete Products is an IJM group company which specializes in delivering quality concrete, ready-mixed, consistently. IJM CPPL has state-of-the-art infrastructure. Backed by high capacity plants to the tune of 120 m³/hr and computerized delivery management system ensures delivery on time. The company

ACC Concrete Ltd.

has served the Prestige Group, TCS, Hyderabad and Vaswani Group. The company also has an office in Mumbai.

4.5 India Cements

Dhun Bldg, 827, Anna Salai, Chennai-600002. Tel: 044-2859 2476 www.indiacements.co.inN.Srinivasan, Vice Chairman & MDThe India Cements was established in 1946 and the first plant was set up at Sankarnagar in Tamil Nadu in 1949. Since then it has grown in stature to seven plants spread over Tamil Nadu and Andhra Pradesh and has become the largest producer of cement in South India. The capacities as on March 2010 have reached 14.05 mtpa. One of the products of the company is concrete. The Coromandel RMC plant is set up at Thirumudivakkam near Thiruneermalai in the suburbs of Chennai. The plant is equipped with the state-of-the-art technology package comprising of automatic batching plant, transit mixers, concrete pumps and fully equipped laboratory manned by the best in the industry. The company has well established brands- Sankar Super Power, Coromandel Super Power and Raasi Super Power and has its regional offices in all southern states and Maharasthra offices/representative in every district and aims to be one of the largest companies in India.

ACC Concrete Ltd.

4.6 Lafarge Aggregates & Concrete India

1004, B-Wing, Crescenzo, ‘G’ Block Behind MCA, BKC - Bandra (East), Mumbai 400 051.Tel: 022- 6769 2500 www.lafarge.inUday Khanna, Managing DirectorLafarge Aggregates & Concrete India entered the Indian market in 1999, through its cement business, with the acquisition of Tata Steel’s cement activity, followed by purchase of Raymond Cement facility in 2001. Lafarge currently has four cement plants in India: two plants in Chhattisgarh and grinding units in Jharkhand and West Bengal. The organisation has a wide range of concrete products and the mega range of concrete products enables the customer to complete the construction in double quick time. As the world no. 2 in aggregates, Lafarge Aggregates brings international expertise and extensive market knowledge. The aggregates are crushed, screened, graded and blended in completely automated systems to meet the highest standards of consistency and quality for the customers.

4.7 Madras Cements

(Ramco Concrete) Auras Corporate Centre, 4th Floor, 98-A, Dr. Radhakrishnan Road, Mylapore, Chennai- 600004Tel.: 044 – 28478666, 28478656 Fax: 044 – 28478676 www.ramcocement.inP.R.Ramasubrahmaneya Rajha Chairman & MD In 1998, Madras Cements established its RMC unit to cater to the needs of the infrastructure and housing industry. This unit is located in Chennai at Vegaivasal on the Medavvakam-Mambakkam Road. With its expertise and ability to produce concretes of various grades, the

ACC Concrete Ltd.

plant has been producing concrete customized to the unique requirements of its customers. The company produces high performance concrete based on customers’ requirements with various permutations based on concrete grades, workability and site conditions.

4.8 Rdc Concrete (India)

C/8, Sigma, Road No, 22, MIDC Andheri East Mumbai 400093. Tel: 022-6691 0055 www.rdcconcrete.comUday Shankar, Managing DirectorRDC Concrete (India) is the largest standalone ready mixed concrete company in India. The company was established in 1993 by Unitech Constructions Ltd along with RDC Concrete Singapore. It pioneered the concept of Readymix Concrete in India. Subsequently, RDC Singapore acquired majority stake in the company. India Value Fund Advisors (IVFA) acquired 100 per cent equity stake in RDC Concrete (India) Pvt Limited in 2005. The company primarily manufactures and supplies ready mixed concrete. Having started its operations in 1993, RDC Concrete (India) Pvt Ltd is now become the largest non-cement ready mix concrete company in India. Over the years, RDC Concrete has established a reputation for being able to deliver cost-effective and innovative building solutions to meet a variety of requirements. The variety of products included: high performance concrete, self compacting concrete, fibre reinforced concrete, colored concrete, heavy density concrete and RMC readymix.

4.9 Rmc Readymix India

7th Floor, Windsor, CST Road, Kalina, Santa Cruz East, Mumbai- 400098.Tel: 022-2654 7000/2652 6171/2/3/4 www.rmcindia.comVijay Aggarwal, Managing Director.Ready-mixed concrete is one of the main businesses of RMC Readymix (India) Pvt. Ltd. Beginning with 1996 by setting up the first plant in Mumbai; the company expanded its network of state-of-the-art concrete batching and mixing plants to more than 50 locations in

ACC Concrete Ltd.

the country. Today, their operation spreads to all major metropolitan cities in the country and is the producer and supplier of tailor-made concretes to suit differing customer needs. The organisation was set up by the RMC Group, United Kingdom and Hathway Investments (Rajan Raheja Group Company) in the year 1996. Besides ready-mixed concrete, the firm has also entered in the aggregates quarrying and processing business with effect from October 2000. Presently, it is operating seven aggregate manufacturing units in the western and southern regions of the country. The major area where the company dominates is coloured concrete, temperature-controlled concrete, fibre-reinforced concrete and high density concrete.

4.10 Ultratech Concrete

Ahura Centre, 3rd Floor, Mahakali Caves Road, Andheri East, Mumbai 400093.Tel: 022-6691 7274. www.ultratechconcrete.com.Debu Bhattacharya, Managing DirectorIncorporated in the year 1983 with a small cement plant, the company has grown to be the eighth largest manufacturer of cement in the world. Hailing from the famous Aditya Birla Group, it operates in 33 countries including Australia, France, Italy, and Germany. UltraTech Concrete attributes its success to the state- of –the-art technology and innovation. As a part of its value offering it deploys expert quality systems for managing the quality of raw materials, efficient raw mix design and cube test results that help it analyze data statistically. The engineers study the client’s requirements and then recommend the type of concrete to be used. The expert dispatch and tracking system ensures optimum order booking, visibility and tracking of the deliveries being made to the customers. All Transit Mixers are equipped with Vehicle Tracking System which maintains the quality of concrete in transit. The product line of the company includes: colourcon, fibrecon, thermocon, hypercon, rervious, décor, free flow, stainless.

ACC Concrete Ltd.

4.11 Major Competitors In Mumbai:

Lafarge

Ultratech

RMC India

Godrej

Ashoka

Relcon

Figure3 Market share

ACC Concrete Ltd.

10%

17%

17%

10%

47%

1,811

Pan India

13%

5%8%4%

71%

411

11%

8%

25%

24%

9%

35%

311

Mumbai

8%

Chennai

ACCCL

Lafarge

Ultratech

RMC(I)

Others

5%

13%

5%

69%

230

Hyderabad

33%

10%

13%

33%

Delhi

66

Kolkata

6%

15%

13%

13%

54%

133

ACCCL market share across regions for Dec 09Volumes in ‘000 m3

5. RECIPE

There are standard grades that are required in Industry. The composition of various grades is presented below.

Grade M10 M15 M20 M25 M30 M35 M40 M45 M50 M55 M60CEMENT OPC 43 BULK 160 218 240 270 310 360 390 430 470 485 510Fly ash - RMX 100 112 110 110 110 100 100 80 100 80 90RIVER SAND RMX 482 517 540 455 495 511 492 476 510 611 950Manufactured Sand 482 517 540 562 485 510 492 476 340 255 0Aggregate 12 mm down 439 461 320 412 320 504 518 302 426 334 322Aggregate 20 mm down 576 420 500 434 545 297 293 533 425 549 457Admixtures-Adm3 2 3 4 5 4 6 5 7 7 7 8Water 170 167 155 165 160 165 163 160 160 150 145Total 2,411 2,415 2,409 2,413 2,429 2,453 2,453 2,464 2,438 2,471 2,482

Quantity(kg)/m3

Figure4 Recipe

ACC Concrete Ltd.

6. COST STRUCTURE

The cost of supplying RMX is composed of three basic costs.Note: To find out fixed cost per m3, the fixed cost has been divided by the target allocation of supply for that plant.

Total Cost = Raw Material Cost + Production Cost + Distribution Cost

Raw material cost and production cost are plant dependent and are different for each plant.

Distribution cost is different for each plant X site combination and depends upon distance between plant and site.

The production cost and distribution cost was further divided into fixed cost and variable cost.

6.1 Production Cost Fixed cost for production included lease rent and rent of godown and other fixed

production expenses like security and employee charges. The fixed cost for lease rent and rent of godown are not used for calculating total

cost. This is because the lease rents are very different in different areas in Mumbai and cause cost distortion, but presence of plant is necessary in different regions in Mumbai because the service area of a RMX plant is limited and varies in between 10-30 km.

But the other fixed production cost were considered because the plant is movable and some of these cost which are now incurred at plants can be eliminated if plant is located at different location. For e.g. At Deonar plant the cost of watering the raw material whenever any raw material comes in and several times during the day because it is located close to residential areas.

The variable production cost included power usage charges, fuel charges etc.

6.2 Distribution Cost The fixed distribution cost is the fixed charges that ACCCL incurs for hiring a TM

from a third party vendor. The third party vendor charges a fixed cost for deploying a TM.

The variable cost for distribution is dependent upon the distance a TM has to travel. A variable charge per m3 per km was found out. This serves as the variable distribution cost.

ACC Concrete Ltd.

Figure5 Cost according to grade of concreteCost (in Rs. Thousand) v/s Standard Grades

As presented by graph the cost is minimum for Sion plant of the three plants. The solver considers this while making distribution decision.

Figure6 Cost structure for Sion plant

ACC Concrete Ltd.

7. PRODUCTION TO BILLING PROCESS

Figure7 Production to billing process

ACC Concrete Ltd.

7.1 Plant Wise POD

Following is the plant wise chart of the time taken by each plant to send the POD to the area office.

Figure8 Plant wise POD

7.2 Plant Name:

PLANT CODE PLANT NAMENS15 DeonarNS21 Bhayander PadaNS76 BorivaliNS84 SionNS85 NTC Mill (wadala)NS86 AurangabadNS89 Nashik

Figure9 Plant name

The above analysis is obtained from the Invoice tracker maintained by the ACC concrete.further we have analyzed the percentage of invoices reached the area office in the range between 0 to 6 days and BCP ( business continuation process). As well as the number of invoices.

ACC Concrete Ltd.

7.3 Percentage Of Invoices:

Figure10 Percentage of invoices

Percentage of invoices out of total invoices made in the month of April.

7.4 Number Of Invoices:

Figure11 Number of invoices

Number of invoices out of total invoices made in the month of April.

ACC Concrete Ltd.

8. TOP 30 CLIENTS

top 30 clients contribute to the maximum business done by ACC in Mumbai. Following is the graphical representation of the top clients and percentage of business done in a month of April by them.

0-5 Days 5 - 10 Days 10 Days and above0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%82.51%

16.25%

1.23%

Top 30 Clients (Supply - Delivery Timespan)

Figure12 Top 30 clients(supply to delivery time)

Supply to delivery time-span for top 30 clients

ACC Concrete Ltd.

9. CREDIT EVALUATION MODEL

Credit evaluation model is the most flexible model which can be applied to every client and generates a score out of 20 for existing customer and out of 15 for new customers.This model gives a clear picture of the client about his liquidity, solvency, profitability, trade history for existing clients and market reputation.

The ranges provided in the model are industry specific and are computed by the analysis of the existing clients.

9.1 Interface of the Model:

SOLVENCYnet worth more than 500cr 1debt equity ratio less than 1 1.5ICR greater than 20times 0.75sector infrastructure 1class promoter 0.75ownership public ltd listed company 1 6LIQUIDITYcurrent ratio greater than 2 2ACP less than 45 Days 1APP less than 45 Days 1

4PROFITABILITYProfit after tax greater than 200cr 1profit margin greater than 15 1profit growth rate greater than 30% 0.5sales growth rate greater than 30% 0.5sales turnover greater than 1000cr 0.5

3.5CLIENT TRADE HISTORYvalue of monthly business done 10lac to 50 lac 1average DSO less than 45 days 3recent track history always paid 1

5MARKET REPUTATIONiconic projects yes 0.5trade creditors reference always paid 0.25bank reference good 0.5projects in hand more than 5 0.25

1.5Figure13 Evaluation model(The current parameters are selected to obtain a maximum score out of 20 which is unobserved amongst ACC’s clients)

ACC Concrete Ltd.

9.2 Solvency Parameters:

SOLVENCYnetworthmore than 500cr 1250cr to 500cr 0.7550cr to 250cr 0.5less than 50cr 0.25

debt equity ratioless than 1 1.51 to 2 12 to 3 0.5greater than 3 0

ICRgreater than 20times 0.7510 to 20times 0.52 to 10times 0.25less than 2times 0

sectorinfrastructure 1builder and developer commercial 0.75builder and developer resedential 0.5builder and developer industrial 0.25

Classpromoter 0.75contractor 0.5subcontractor 0.25

ownershippublic ltd listed company 1public ltd unlisted company 0.9private ltd sub of listed company 0.8private limited 0.6partnership firm 0.5proprietorship firm 0.3NGO/HUF/others 0.2

Figure14 Solvency

ACC Concrete Ltd.

9.3 Liquidity Parameters:

LIQUIDITYcurrent ratiogreater than 2 2greater than 1.5 1.5greater than 1 1less than 1 0.25

ACP less than 45 Days 1less than 60 days 0.75less than 90 days 0.5greater than 90 days 0

APPless than 45 Days 1less than 60 days 0.75less than 90 days 0.5greater than 90 days 0

Figure15 Liquidity

9.4 Profitability Parameters:

Figure16 Profitability

9.5 Client Trade History Parameters:

Client Trade HistoryValue of Business Done (Monthly)10lac to 50 lac 13lac to 10lac 0.5below 3lac 0.25

Average DSO

ACC Concrete Ltd.

PROFITABILITYProfit after taxgreater than 200cr 1100cr to 200cr 0.750 to 100cr 0.5loss 0

Profit Margingreater than 15 110% to 15% 0.755% to 10% 0.5less than 5% 0

profit growth rategreater than 30% 0.5greater than 10% 0.25less than 10% 0

Sales Growth Rategreater than 30% 0.5greater than 10% 0.25less than 10% 0

Sales Turnovergreater than 1000cr 0.5200cr to 1000cr 0.25less than 200cr 0

less than 45 days 346 to 60 days 260 to 90 days 1greater tha 90 0

recent track historyalways paid 1paid with delays 0.75irregular 0.5problematic 0

Figure17 Client trade history

9.6 Market Reputation Parameters:

Figure18 market reputation parameters

ACC Concrete Ltd.

MARKET REPUTATIONiconic projectsyes 0.5no 0

trade creditors referencealways paid 0.25paid with delays 0.2irregular 0.15problematic 0

bank referencegood 0.5average 0.4neutral 0.3defaulter 0.1

number of projectsmore than 5 0.252 to 4 0.15single 0.5

10. CONCLUSION

We set out to solve the problem of rising DSO. However before solving that, it was required that we understand the RMX business thoroughly. Also understanding the company method of calculation of DSO, its way of accounting for provisions, procedures and formalities involved for authorization of debit notes and credit notes, study of the internal procedure that has to be gone through before invoice is created and delivered to the customer, etc., was equally important.

What initially felt like a problem caused by a loose credit policy turned out to be a compulsory and absolute essential marketing tool employed by all players in the RMX industry to support their topline. Using a loose credit policy as a marketing tool is advantageous as long as it is supported by a sophisticated system of continuous monitoring and rigorous collection efforts of the receivables. It was found that the Company was indeed following a disciplined and well set out receivables collection and monitoring mechanism; sending out regular reminders through e-mails, calls and visits to client locations along with carrying out timely reconciliations with all its top clients for the period ending two months before closing date.

An opportunity of reducing the DSO by improvising the current process being followed internally before an invoice is being delivered to the client was being identified and the suggestion of implementing the same is being incorporated in the recommendations sent to the company.

Finally another very important factor impacting DSO i.e acceptable credit standards for clients and the procedure currently being followed for ascertaining client credit limits presently being done using traditional non-quantitative tools

ACC Concrete Ltd.

was studied in great detail. The potential risks arising out of ignoring the financial position of the clients while arriving at the credit limits were communicated to the company. Thus, a model to assess the financial position of the clients has been provided to the company in order to aid them in making well informed decision on the credit limit.

11. RECOMMENDATIONS TO THE COMPANY

The Company’s regional Credit Control Department handles the Mumbai, Navi Mumbai and Thane area catering to approximately 180 clients including both new and existing customers on an average month on month. A majority of the clients are those who buy RMX concrete from the company on a regular basis and the company gets a major portion of the revenue from them. On detailed analysis it was found that 86% of the revenues was contributed by the top 30 clients, 10% of the revenues from the next 50 clients and only 3% of the revenue from the next 100 clients. This trend is noticed at all times and is true during any part of the year. On the basis of this information and the study of internal billing process it is recommended that –

The Company focus on the top 30 clients and prioritize them while carrying out all pre and post billing activities i.e proof of delivery, invoice creation, invoice delivery.

It is also recommended that the company start e-mailing the invoices to atleast 5 major clients on a pilot basis and then later on migrate other customers onto the same system of invoice e-mailing in order to cut down the DSO which is caused by the current internal time lag between supply and bill delivery. ( Current Average time lag between supply and bill delivery is 7 Days). Moreover there are other issues with hardcopy of Invoice viz. physical damage, loss, misplacement etc. contributing to further delay.

ACC Concrete Ltd.

The company currently uses ‘total volume requirement of the client’, ‘number of projects in hand’, ‘overall reputation in the market’ and other such non-quantitative and non-financial parameters to arrive at a certain specific credit limit for its clients. It is recommended that the company use the model prepared during the course of the internship named ‘Client Report Card’ which assesses the clients on both its financial and non-financial strength before fixing a certain credit limit.

Since the company deals with a lot of clients which are public listed companies it is also recommended that the company monitor the financial performance of these clients which also happen to be contributing to major portion of the revenue and review their credit limit from time to time based on the receivables collection experience and financial position.

ACC Concrete Ltd.

12. REFERENCES AND BIBLIOGRAPHY

www.veda.com.au www.investopedia.com/creditrating www.moodysanalytics.com www.ecccreditcontrol.com www.moodys.com www.standardandpoors.com www.crisil.com www.acclimited.com www.moneycontrol.com en.wikipedia.org www.accconcrete.com

ACC Concrete Ltd.

http://www.accconcrete.com/

http://www.moneycontrol.com/

http://www.acclimited.com/

http://www.crisil.com/

http://www.standardandpoors.com/

http://www.moodys.com/

http://www.ecccreditcontrol.com/

http://www.moodysanalytics.com/

http://www.investopedia.com/creditrating

http://www.veda.com.au/

13. GLOSSARY

ACCCL – ACC concrete Ltd. Batcher – The person at plant who give instruction to batching machine for loading RMX in

TMs. He also updates the TM info on SAP CDS – Concrete Dispatch scheduler. The scheduling department at ACCCL Cycle Time – The time taken between TM arriving and leaving the plant at full capacity Pour – The RMX supplied to a site RMX – Ready Mix Concrete RMC – Ready Mix Concrete TM – Transit Mixture. The vehicle with a rotating drum on back chassis for transporting RMX Unload Time – The time spent at site in arranging, unloading and removing TM from the

pump

ACC Concrete Ltd.

Final Report Internship (Shitiz)

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