Academic journal article South Asian Journal of Management

Impact of Investors' Ratios on Dividend Decisions with Special Reference to Select Cement Companies in India: An Analytical Study

Academic journal article South Asian Journal of Management

Impact of Investors' Ratios on Dividend Decisions with Special Reference to Select Cement Companies in India: An Analytical Study

Article excerpt

Cement industry has been considered as a road map for the development of a nation. As far as Indian cement industry is concerned, it was under price control regime until the year 1990 and after the economic reforms initiated by the Government of India. It took a breathe of relief from full control and rigid supervision, yet in the pricing aspect, is still under the interference of government. Though India stands at the second largest manufacturer of the cement in the international arena, it is surprised to note that, the consumption does not witness a substantial improvement due to the inability of poor people to construct concrete houses leaving them to dwell in huts and mud houses. Besides the truth, India takes an advantage of enhancing demand by the way of constructing bridges, hying cement roads to raise her status as a developing nation in the process of globalization. As far as domestic demand of the commodity is concerned, the industry faces consistent demand and with the high market demand, nearly 80% of the total production of the cement is controlled by major 15 firms in the industry so as to contribute 8% in India's economic development. By keeping the above fact in view, this paper has made an attempt to study the trend and progress of corporate dividend to the share holders so as to highlight the importance of dividend decision to make use of the available resources at the firm's disposal for future growth and perhaps the wealth of the shareholders.


The Indian cement industry has shown recently a consolidation effect with top five players in controlling the capacity of the production to the extent of 60% of the total output and the remaining percentage of output is quiet fragmented. The industry has witnessed a growth rate of 10-12% during the last five years by way of improving the production capacity more than 1 20 million tones. Since the per capita consumption of cement has registered a lower intake with respect to our population, this underlies an opportunity for the companies to capture the untapped potential market in the years to come. By taking into account of emerging growth in industry in the ensuing years, the multinational companies have planned to setup their plants by the way of acquisition mode. For instance domestic companies like Ambuja cements and ACC's Stake has been increased in the hands of Holicim, a multinational, to take an advantage of full control. Now the industry is slowly penetrated with foreign players in such a way to capture the 25% of market share in the domestic market. In terms of long term view, consolidation may emerge as a possible outcome in enhancing the production capacity to meet the required demand in near future and maintaining sustainability in the fray.


Industry analysis has become an indispensible area in predicting the corporate performance in term of its future activities. This study has adopted Michael porter's model to analyze the Indian cement industry in the following aspects:


As far as supply is concerned, the industry faces a balanced position in terms of supply towards the fulfillment of demand, i.e., the total demand is correctly met out by actual supply and there is no excess of supply.


Since, India has witnessed a drastic development in terms of industrial and infrastructural sectors, the industry receives a good response towards the demand of the commodity over the past 10 years and the same is likely to increase in the future.


Installation cost acts as a deterrent in attracting the firms to operate in the industry. In addition to that cost recovery period also adds the fuel for the firms to reap the benefit within a short period.


Even if the firm wants to exit from the operation it is quiet difficult in terms of heavy investment made in the initial years.


Since the industry requires an ample amount of investment to run the show, only few firms compete with each other to survive in the long run. …

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