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Value Based Management at Ultra-Tech

As part of our MBA assignments, we were supposed to take a company to be showcased for shareholder value creation. While studying the financial performance of several companies, we came across this one company called Ultra Tech Cement, which has maintained a consistent record of profitability and growth, is driven by its strong market position, efficient operations, and strategic expansion initiatives. The company has consistently generated healthy revenue and earnings, even during challenging market conditions.


Value-based management (VBM) is a management philosophy that focuses on creating and maximizing shareholder value. It is a framework that helps companies make decisions that will increase the value of the company for its shareholders. VBM is based on the idea that the value of a company is ultimately determined by its future cash flows.


The key principles of VBM are:

  • Focus on long-term value creation: VBM companies focus on making decisions that will create long-term value for shareholders, not just short-term profits.
  • Use of financial metrics: VBM companies use financial metrics, such as EVA and MVA, to measure their performance and make decisions.
  • Alignment of incentives: VBM companies align the incentives of their employees with the creation of shareholder value.

Reasons to choose Ultra Tech Cement:

UltraTech Cement is a leading cement manufacturer in India, which belongs to the Aditya Birla group. Some of the factors which attracted us to further study and analyse the company are:

  1. Largest Market Share

  2. Pan-India Presence

  3. Modern Production Facilities

  4. Strong Brand Recognition

  5. Focus on Sustainability

  6. Diversified Product Portfolio

  7. Strong Financial Performance

  8. Experienced Management Team

  9. Strong Distribution Network

  10. Commitment to Innovation

UltraTech Cement is a leading cement manufacturer in India and a strong advocate of VBM. The company has adopted a comprehensive VBM framework that encompasses all aspects of its business, from strategy to operations to performance measurement.

Explanation to the VBM Calculations:

EVA: UltraTech Cement's EVA has been negative for the past five years, indicating that the company has been destroying value for its shareholders. The company's EVA has also been declining at an alarming rate, falling from -711.60 in 2019 to -1738.20 in 2023. UltraTech Cement needs to make some major changes in order to improve its EVA performance. The company's management needs to develop a plan to address its underlying problems, and it needs to implement that plan as soon as possible.

Market Value Added: MVA rose substantially from 2019-2023 indicating increased shareholder wealth. Market cap growth driven by investor confidence in future outlook lifted MVA despite short-term value challenges. Uptrend signals market betting on capacity expansions, sector prospects and leadership. But Ultratech must convert potential into fundamental value and returns.

FGV: FGV rose substantially from 2019-2023 indicating market confidence in Ultratech's strong growth potential. Key driver is expected high earnings growth from capacity expansions and new investments. Market betting on significant volume, revenue and profit growth once new capacities stabilize. Increase in FGV signals belief that investments and leadership will enable robust future growth.

ROIC: ROIC peaked in 2021 before declining due to major capex for new capacities weighing on returns initially. Expansion efforts and acquisitions diluted capital returns and profitability in short-term. As new capacities stabilize at optimal utilization, focus on driving efficiency improvements to restore ROIC to peak levels. Need to ensure adequate returns on capital investments going forward.

TSR: TSR was 19.2% in 2022 indicating decent medium-term overall returns to shareholders via capital gains and dividends. Positive TSR shows market recognizes competitive position and growth strategies lifting valuations. While moderating recently, focus must remain on fundamental moves that boost future TSR through share price upside and steady dividend payouts.

Wealth added index: Wealth Added Index turned positive in 2022 indicating increased shareholder wealth generation last year. Signals Ultratech created tangible value in 2022 via share price gains and dividends. Though fundamental value creation varied recently, uptrend shows market recognition of growth strategies. Sustaining momentum depends on optimizing returns on investments going forward.

UltraTech Cement is a well-managed company with a strong track record of value creation for shareholders. The company's positive EVA, MVA, ROIC, TSR, and WAI are all indicative of a company that is creating value for its shareholders. VBM has been a key driver of UltraTech Cement's success. The company has consistently generated positive EVA and has a strong track record of value creation for shareholders. VBM has also helped UltraTech Cement to be more efficient, innovative, and customer-centric.

Overall, VBM is a valuable management philosophy that can help companies create and maximize shareholder value. UltraTech Cement is a leading example of a company that has successfully implemented VBM.

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