automobile industry 01
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INTRODUCTION TO INDUSTRY
An industry is the manufacturing of a good or service within a category. Although
industry is a broad term for any kind of economic production, in economics andurban planning, industry is a synonym for the secondary sector , which is a type of
economic activity involved in the manufacturing of raw materials into goods and
products.
“Industry” means any systematic activity carried on by co-operation between an
employer and his workmen for the production, supply or distribution of goods or
services with a view to satisfy human wants or wishes (not being wants or wishes
which are merely spiritual or religious in nature), whether or not any capital has
been invested for the purpose of carrying on such activity; or such activity is
carried on with a motive to make any gain or profit.
SCOPE OF THE STUDY
There are four key industrial economic sectors: the primary sector,
the secondary sector, the tertiary sector, the quaternary sector, and the quinary
sector. The economy is also broadly separated into public sector and private
sector , with industry generally categorized as private. Industries are also any
business or manufacturing.
Primary sector: These industries are involved in the extraction or production of
raw materials such as mining, farming, fishing, forestry, coal mining, oil drilling,
gold mining etc.
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Secondary sector: The secondary sector of the economy includes those economic
sectors that create a finished, usable product. These industries are involved in the
processing of raw materials such as refining, construction, and manufacturing. This
sector generally takes the output of the primary sector and manufactures finished
goods for export, or sale to domestic consumers.
Tertiary sector: These are the service industries, e.g. Transport, dentists, doctors,
and so on. The capital required for a manufacturing business (secondary sector) is
usually prohibitively large.
Quaternary sector: A relatively new type of knowledge industry focusing on
technological research, design and development such as computer programming,
and biochemistry. It focuses on the latest technology. Examples of ‛Quaternary
Industries‛ are designing new computers/writing computer software, Researching
new medicines and medical equipment.
Quinary sector: The sector comprises of health, education, culture, research,
police, fire service, and other government industries not intended to make a profit.
The quinary sector also includes domestic activities such as those performed by
stay-at-home parents or homemakers. These activities are not measured by
monetary amounts but make a considerable contribution to the economy.
INDUSTRY LIFECYCLE
The stages of evolution through which an industry progresses as it moves from
conception to stabilization and stagnation represent an industry lifecycle. An
industry has a beginning, with technological innovation; a period of rapid growth;
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maturity and consolidation; and finally decline and possibly death. The stages of
industry lifecycle include fragmentation, shake-out, maturity and decline.
Developmental Stage: The first stage of the industry life cycle is developmental or
formative stage. This is the stage when the new industry develops the business. At
this stage, the new industry normally arises when an entrepreneur works out how
to bring the new products or services into the
market. The growth prospects are usually high.
Competition is likely to enhance during the
development of this stage as other entrepreneurs
become acquainted with the market potential. High
risks can be seen in this phase given that there is
insecurity as to whether or not consumers will
generally acknowledge the product, and which firms will continue to exist.
Shake-out or growth stage: Shake-out is the second stage at which a new industry
emerges. Consumer recognition extends the market as the leaders develop the
product more. The risk in this stage reduces because of increased consumer
acceptance and customer loyalty starts to come about. Competitors start to realize
business opportunities in the emerging industry.
Maturity: Maturity is the third stage in the industry lifecycle. This is by and large
the most extended stage in the life cycle and can last for a good number of years.
The competition in the industry is rather aggressive because there are manycompetitors and product substitutes. The growth rate slows down and becomes
stable at a level that is sustainable over a long period of time, as a result of
competition and shrinking profit margins. Some companies may shift some of the
production overseas in order to gain competitive advantage.
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Decline: Decline is the final stage of the industry lifecycle during which a war of
slow destruction between businesses may develop and those with heavy
bureaucracies may fail. In addition, the demand in the market may be fully
satisfied or suppliers may be running out. Some companies may leave the industry
if there is no demand for the products or services they provide, or they may
develop new products or services that meet the demand in the market. In such
cases, this will create a new industry.
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AUTOMOBILE INDUSTRY
The automobile industry in India is the ninth largest in the world with an annual
production of over 2.3 million units in 2008. In 2009, India emerged as Asia's
fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.
Following economic liberalization in India in 1991, the Indian automotive industry
has demonstrated sustained growth as a result of increased competitiveness and
relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors,
Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and
international operations.
Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the
Automobile Industry of India has come a long way. During its early stages the auto
industry was overlooked by the then Government and the policies were also not
favorable. The liberalization policy and various tax relief by the Govt. of India in
recent years has made remarkable impacts on Indian Automobile Industry. Indian
auto industry, which is currently growing at the pace of around 18 % per annum,
has become a hot destination for global auto players like Volvo, General Motors
and Ford.
A well developed transportation system plays a key role in the development of an
economy, and India is no exception to it. With the growth of transportation system
the Automotive Industry of India is also growing at rapid speed, occupying an
important place on the canvas of Indian economy. The face of the Indian
automobile market has changed tremendously since the turn of the millennium and
will change even further since Nano.
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Today Indian automotive industry is fully capable of producing various kinds of
vehicles and can be divided into 03 broad categories: Cars, two-wheelers and
heavy vehicles.
Segment Know-how
Among the two-wheeler segment, motorcycles have major share in the market.
Hero Honda contributes 50% motorcycles to the market. In it Honda holds 46%
share in scooter and TVS makes 82% of the mopeds in the country.
40% of the three-wheelers are used as goods transport purpose. Piaggio holds 40%
of the market share. Among the passenger transport, Bajaj is the leader by making
68% of the three-wheelers.
Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share
in passenger cars and is a complete monopoly in multi purpose vehicles. In utility
vehicles Mahindra holds 42% share.
In commercial vehicle, Tata Motors dominates the market with more than 60%
share. Tata Motors is also the world's fifth largest medium & heavy commercial
vehicle manufacturer.
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INDIAN AUTOMOBILE HISTORY
During the 1920s, cars exhibited design refinements such as balloon tires,
pressed-steel wheels, and four-wheel brakes.
An embryonic automotive industry emerged in India in the 1940s. Following the
independence, in 1953, the Government of India and the private sector launched
efforts to create an automotive component manufacturing industry to supply to the
automobile industry. However, the growth was relatively slow in the 1950s and
1960s due to nationalisation and the license raj which hampered the Indian private
sector. After 1970, the automotive industry started to grow, but the growth was
mainly driven by tractors, commercial vehicles and scooters. Cars were still a
major luxury. Japanese manufacturers entered the Indian market ultimately leading
to the establishment of Maruti Udyog. A number of foreign firms initiated joint
ventures with Indian companies.
In the 1980s, a number of Japanese manufacturers launched joint-ventures for
building motorcycles and light commercial-vehicles. It was at this time that the
Indian government chose Suzuki for its joint-venture to manufacture small cars.
Following the economic liberalisation in 1991 and the gradual weakening of the
license raj, a number of Indian and multi-national car companies launched
operations. Since then, automotive component and
automobile manufacturing growth has accelerated to meet
domestic and export demands
The automobile industry has changed the way people live and
work. The earliest of modern cars was manufactured in the
year 1895. Shortly the first appearance of the car followed in
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India. As the century turned, three cars were imported in Mumbai (India). The
dawn of automobile actually goes back to 4000 years when the first wheel was
used for transportation in India. In the beginning of 15th century Portuguese
arrived in China and the interaction of the two cultures led to a variety of new
technologies, including the creation of a wheel that turned under its own power. By
1600s small steam-powered engine models was developed.
The actual horseless carriage was introduced in the year
1893. One of the highest-rated early luxury automobiles
was the 1909 Rolls-Royce Silver Ghost that featured a
quiet 6-cylinder engine, leather interior, folding
windscreens and hood, and an aluminum body. It was
usually driven by chauffeurs and emphasis was on
comfort and style rather than speed.
The year 1957 brought powerful high-performance cars
such as Mercedes-Benz 300SL. It was built on compact
and stylized lines, and was capable of 230 kmh (144
mph). This was the Indian automobile history, and today
modern cars are generally light, aerodynamically shaped,
and compact.
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GROWTH
In India there are 100 people per vehicle, while this figure is 82 in China. It is
expected that Indian automobile industry will achieve mass motorization status
by 2014. The Indian automobile industry is often described as the sunrise
Industry.
The Automobile Industry is one of the fastest growing sectors in India. The
increase in the demand for cars, and other vehicles, powered by the increase in the
income is the primary growth driver of the automobile industry in India. The
introduction of tailor made finance schemes, easy repayment schemes has also
helped the growth of the automobile sector. India, in auto sector, is turning to be a
sourcing base for the global auto majors. The passenger car and the motorcycle
segment are set to grow by 8-9 per cent in coming couple of years. The industry is
striving to maintain the growth momentum picked up in 2002-03.
India has become one of the international players in the automobile
market
In the year 2006-07, the Indian Automobile Industry produced 2.06
million four wheelers and 9 million two and three wheelers
The four wheelers include passenger cars, multi-utility vehicles, sports
utility vehicles, light, medium and heavy commercial vehicles, etc
The three wheelers include mopeds, motor-cycles, scooters, and three
wheelers
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India ranks 2nd in the global two-wheeler market
India is the 4th biggest commercial vehicle market in the world
India ranks 11th in the international passenger car market
India ranks 5th pertaining to the number of bus and truck sold in the
world
It is expected that the Automobile Industry in India would be the 7th
largest automobile market within the year 2016
Sales incentives, introduction of new models as well as variants coupled with easy
availability of low cost finance with comfortable repayment options continued to
drive demand and sales of automobiles. As the players continue to introduce new
models and variants, the competition may intensify further. It is not only meeting
the growing domestic demands, but also gradually increasing its penetration in the
international markets. It has been continuously restructuring itself and absorbing
newer technologies in order to align itself to the global developments and realize
its potentialities. Among the car companies that are investing in India are US
automakers General Motors and Ford, Germany's BMW and DaimlerChrysler AG,
France's Renault, Japan's Suzuki, Toyota and Honda, and South Korea's Hyundai.
Automobile industry in India also received a boost from stringent government auto
emission regulations over the past few years. This ensured that vehicles produced
in India conformed to the standards of the developed world.
With the growing automotive market, customers are always looking for newer
designs. Automobile designing has, therefore, become as important as fuel
efficiency or the safety and ergonomics of a vehicle. The setting up of indigenous
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auto designing capabilities through a national automobile design institute is,
therefore, essential for the growth of Indian auto Industry
There is also a boom in auto ancillary companies. India is an attractive outsourcing
destination for global auto companies because of its strong engineering skills and
low costs. Sourcing parts from India is 10-20% cheaper for US auto makers and
about 50% cheaper for their European counterparts. The auto component sector has
also posted significant growth of 20 per cent in 2003-04, to achieve a sales
turnover of Rs.30, 640 crore. There is a potential for higher growth due to
outsourcing activities by global automobiles giants. Today, this sector has emerged
as another sunrise sector.
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CONTRIBUTION
In India, automotive is one of the largest industries showing impressive growth
over the years and has been significantly making increasing contribution to overallindustrial development in the country. It plays a pivotal role in country's rapid
economic and industrial development. It caters to the requirement of equipment for
basic industries like steel, non-ferrous metals, fertilizers, refineries,
petrochemicals, shipping, textiles, plastics, glass, rubber, capital equipments,
logistics, paper, cement, sugar, etc. It facilitates the improvement in various
infrastructure facilities like power, rail and road transport.
On the canvas of the Indian economy, auto industry occupies a prominent place.
The automotive industry has a strong multiplier effect and is capable of being the
driver of economic growth. A sound transportation system plays a pivotal role in
the country's rapid economic and industrial development. The well-developed
Indian automotive industry ably fulfils this catalytic role by producing a wide
variety of vehicles: passenger cars, light, medium and heavy commercial vehicles,
multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers,
tractors etc.
Indian automobile industry; manufacturing cars, buses, three wheelers, two
wheelers, commercial vehicles, heavy vehicles, provides employment to a large
number of workforce. The abolition of license raj in 1991 opened the doors for
international automobile manufacturers. A number of leading global automotive
companies entered into joint ventures with domestic manufacturers of India and
thus started the large-scale production of automobiles in India. The automobile
sector is one of the core industries of the Indian economy, whose prospect is
reflective of the economic resilience of the country.
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The automotive industry comprising of the automobile and the auto component
sectors has made rapid strides since delicensing and opening up of the sector to
FDI in 1991. The Auto Component industry is today considered as the sunrise
industry with huge growth prospects. This industry is also expected to drive the
growth of the engineering sector in view of its strong downstream and upstream
linkages with many other segments of the engineering sector like raw materials,
capital goods, intermediate products etc. Government has also liberalized the
norms for import of technology and that appears to have benefited the automobile
sector. The industry had an investment of about Rs. 50,000 crore in 2002-03
which has gone upto Rs. 80,000 crore by the year 2007. The contribution of the
automotive industry to GDP has risen from 2.77% in 1992-93 to 5% in 2006-07.
The industry is also making a contribution of 17% to the kitty of indirect taxes of
the Government.
The Indian automotive industry has already attained a turnover of Rs. 1, 65,000
crore (34 billion USD) and has provided direct and indirect employment to 1.31
crore people in the country. Endowed with several advantages like low cost and
high skill manpower; globally competitive auto-ancillary industry; established
testing and R & D centers; production of steel at lowest cost; etc., the industry
provide immense investment opportunities. This has instilled confidence in auto
manufacturers to face international competition as well as improve quality
standards of vehicles with safety norms in the wake of rapidly increasing traffic.
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PROFILE OF MARUTI SUZUKI
Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), a
subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car
company, accounting for over 50 per cent of the domestic car market. More than
half the numbers of cars sold in India wear a Maruti Suzuki badge. The company
offers full range of cars- from entry level Maruti 800 & Alto to stylish hatchback
Ritz, A star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility
vehicle Grand Vitara. Since inception, it has produced and sold over 7.5 million
vehicles in India and exported over 500,000 units to Europe and other countries.
The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit after Tax
at Rs. 12,187 Million.
The company was born as a government company, with Suzuki as a minor partner,
to make a people's car for middle class India. Over the years, the product range has
widened, ownership has changed hands and the customer has evolved. What
remains unchanged, then and now, is its mission to motorize India.
The parent company, Suzuki Motor Corporation, has been a global leader in mini
and compact cars for three decades. Suzuki's technical superiority lies in its ability
to pack power and performance into a compact, lightweight engine that is clean
and fuel efficient.
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The company takes great pride in sharing that customers have rated Maruti Suzuki
first once again in Customer Satisfaction Survey conducted by independent body,
J.D.Power Asia Pacific. It is 10th time in a row.
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FINANCIAL STATEMENTS
Balance Sheet
Balance Sheet of Maruti
Suzuki India------------------- in Rs. Cr. -------------------
Mar '07 Mar '08 Mar '09Sources Of Funds 12 mths 12 mths 12 mthsTotal Share Capital 144.50 144.50 144.50Equity Share Capital 144.50 144.50 144.50Share Application Money 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00Reserves 6,709.40 8,270.90 9,200.40
Revaluation Reserves 0.00 0.00 0.00Networth 6,853.90 8,415.40 9,344.90Secured Loans 63.50 0.10 0.10Unsecured Loans 567.30 900.10 698.80Total Debt 630.80 900.20 698.90Total Liabilities 7,484.70 9,315.60 10,043.80
Mar '07 Mar '08 Mar '09Application Of Funds 12 mths 12 mths 12 mthsGross Block 6,146.80 7,285.30 8,720.60Less: Accum. Depreciation 3,487.10 3,988.80 4,649.80Net Block 2,659.70 3,296.50 4,070.80
Capital Work in Progress 238.90 736.30 861.30Investments 3,409.20 5,180.70 3,173.30Inventories 713.20 1,038.00 902.30Sundry Debtors 747.40 655.50 918.90Cash and Bank Balance 114.80 324.00 239.00Total Current Assets 1,575.40 2,017.50 2,060.20Loans and Advances 1,072.60 1,173.00 1,809.80Fixed Deposits 1,308.00 0.00 1,700.00Total CA, Loans & Advances 3,956.00 3,190.50 5,570.00Deferred Credit 0.00 0.00 0.00Current Liabilities 2,288.60 2,718.90 3,250.90Provisions 490.50 369.50 380.70Total CL & Provisions 2,779.10 3,088.40 3,631.60Net Current Assets 1,176.90 102.10 1,938.40Miscellaneous Expenses 0.00 0.00 0.00Total Assets 7,484.70 9,315.60 10,043.80Contingent Liabilities 2,094.60 2,734.20 1,901.70Book Value (Rs) 237.23 291.28 323.45
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Profit and loss account (income statement)
Profit & Loss account of Maruti
Suzuki India
------------------- in Rs. Cr.
-------------------Mar '07 Mar '08 Mar '09
IncomeSales Turnover 17,358.40 21,200.40 23,381.50Excise Duty 2,552.00 3,133.60 2,652.10Net Sales 14,806.40 18,066.80 20,729.40Other Income 338.10 494.00 491.70Stock Adjustments -200.70 336.30 -356.60Total Income 14,943.80 18,897.10 20,864.50
Raw Materials 10,863.00 13,958.30 15,983.20Power & Fuel Cost 97.40 147.30 193.60Employee Cost 288.40 356.20 471.10Other Manufacturing Expenses 392.40 523.30 716.10
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Selling and Admin Expenses 483.26 521.48 751.06Miscellaneous Expenses 239.44 287.62 303.44Preoperative Exp Capitalized -14.30 -19.80 -22.30Total Expenses 12,349.60 15,774.40 18,396.20
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mthsOperating Profit 2,256.10 2,628.70 1,976.60PBDIT 2,594.20 3,122.70 2,468.30Interest 37.60 59.60 51.00PBDT 2,556.60 3,063.10 2,417.30Depreciation 271.40 568.20 706.50Other Written Off 0.00 0.00 0.00Profit Before Tax 2,285.20 2,494.90 1,710.80Extra-ordinary items 33.40 76.60 37.90PBT (Post Extra-ord Items) 2,318.60 2,571.50 1,748.70Tax 705.30 763.30 457.10
Reported Net Profit 1,562.00 1,730.80 1,218.70Total Value Addition 1,486.60 1,816.10 2,413.00Preference Dividend 0.00 0.00 0.00Equity Dividend 130.00 144.50 101.10Corporate Dividend Tax 21.90 24.80 17.20Per share data (annualized)Shares in issue (lakhs) 2,889.10 2,889.10 2,889.10Earning Per Share (Rs) 54.07 59.91 42.18
Equity Dividend (%) 90.00 100.00 70.00
Book Value (Rs) 237.23 291.28 323.45
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PROFILE OF TATA MOTORS
Tata Motors Limited is India's largest automobile company, with consolidated
revenues of Rs.70, 938.85 crores (USD 14 billion) in 2008-09. It is the leader in
commercial vehicles in each segment, and among the top three in passenger
vehicles with winning products in the compact, midsize car and utility vehicle
segments. The company is the world's fourth largest truck manufacturer, and the
world's second largest bus manufacturer.
The company's 23,000 employees are guided by the vision to be "best in the
manner in which we operate best in the products we deliver and best in our value
system and ethics."
Established in 1945, Tata Motors' presence indeed cuts across the length and
breadth of India. The company's manufacturing base in India is spread across
Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh),
Pantnagar (Uttarakhand) and Dharwad (Karnataka).
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Tata Motors, the first company from India's engineering sector to be listed in the
New York Stock Exchange (September 2004), has also emerged as an
international automobile company. Through subsidiaries and associate
companies, Tata Motors has operations in the UK, South Korea, Thailand and
Spain. Among them is Jaguar Land Rover, a business comprising the two iconic
British brands that was acquired in 2008.
It was Tata Motors, which developed the first indigenously developed Light
Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata
Indica, India's first fully indigenous passenger car. Within two years of launch,
Tata Indica became India’s largest selling car in its segment. In 2005, Tata
Motors created a new segment by launching the Tata Ace, India's first
indigenously developed mini-truck.
In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which
India and the world have been looking forward to. The Tata Nano has been
subsequently launched, as planned, in India in March 2009 and has won the
prestigious Indian Car of the Year (ICOTY) award.
In May 2009, Tata Motors introduced ushered in a new era in the Indian
automobile industry, in keeping with its pioneering tradition, by unveiling its new
range of world standard trucks called Prima. In June 2009, the exciting new range
of premium luxury vehicles from Jaguar and Land Rover were introduced for the
Indian market.
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FINANCIAL STATEMENTS
Balance Sheet
Balance Sheet of Tata
Motors------------------- in Rs. Cr. -------------------
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 385.41 385.54 514.05
Equity Share Capital 385.41 385.54 514.05
Share Application Money 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 6,458.39 7,428.45 11,855.15
Revaluation Reserves 25.95 25.51 25.07
Networth 6,869.75 7,839.50 12,394.27
Secured Loans 2,022.04 2,461.99 5,251.65
Unsecured Loans 1,987.10 3,818.53 7,913.91
Total Debt 4,009.14 6,280.52 13,165.56
Total Liabilities 10,878.89 14,120.02 25,559.83
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Application Of Funds
Gross Block 8,775.80 10,830.83 13,905.17
Less: Accum.
Depreciation4,894.54 5,443.52 6,259.90
Net Block 3,881.26 5,387.31 7,645.27
Capital Work in Progress 2,513.32 5,064.96 6,954.04
Investments 2,477.00 4,910.27 12,968.13
Inventories 2,500.95 2,421.83 2,229.81
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Sundry Debtors 782.18 1,130.73 1,555.20
Cash and Bank Balance 535.78 750.14 638.17
Total Current Assets 3,818.91 4,302.70 4,423.18
Loans and Advances 6,208.53 4,831.36 5,909.75
Fixed Deposits 290.98 1,647.17 503.65Total CA, Loans &
Advances10,318.42 10,781.23 10,836.58
Deferred Credit 0.00 0.00 0.00
Current Liabilities 6,956.88 10,040.37 10,968.95
Provisions 1,364.32 1,989.43 1,877.26
Total CL & Provisions 8,321.20 12,029.80 12,846.21
Net Current Assets 1,997.22 -1,248.57 -2,009.63
Miscellaneous Expenses 10.09 6.05 2.02
Total Assets 10,878.89 14,120.02 25,559.83Contingent Liabilities 5,196.07 5,590.83 5,433.07
Book Value (Rs) 177.59 202.70 240.64
PROFIT AND LOSS ACCOUNT (INCOME STATEMENT)
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PARTICULARS MAR 07 MAR 08 MAR 09
IncomeSales Turnover 31,089.69 33,123.54 28,538.20Excise Duty 4,425.44 4,355.63 2,877.53
Net Sales 26,664.25 28,767.91 25,660.67
Other Income 1,114.38 734.17 921.29Stock Adjustments 349.68 -40.48 -238.04
Total Income Expenditure 28,128.31 29,461.60 26,343.92
Raw Materials 19,879.56 20,891.33 18,801.37
Power & Fuel Cost 327.41 325.19 304.94
Employee Cost 1,367.83 1,544.57 1,551.39
Other Manufacturing Expenses 872.95 904.95 866.65Selling and Admin Expenses 1,505.23 2,197.49 1,652.31
Miscellaneous Expenses 1,051.49 964.78 1,438.89
Preoperative Exp Capitalized -577.05 -1,131.40 -916.02Total Expenses 24,427.42 25,696.91 23,699.53
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Operating Profit 2,586.51 3,030.52 1,723.10
PBDIT 3,700.89 3,764.69 2,644.39
Interest 455.75 471.56 704.92
PBDT 3,245.14 3,293.13 1,939.47
Depreciation 586.29 652.31 874.54Other Written Off 85.02 64.35 51.17
Profit Before Tax 2,573.83 2,576.47 1,013.76Extra-ordinary items -0.07 0.00 15.29
PBT (Post Extra-ord Items) 2,573.76 2,576.47 1,029.05
Tax 660.37 547.55 12.50
Reported Net Profit 1,913.46 2,028.92 1,001.26
Total Value Addition 4,547.86 4,805.58 4,898.16
Preference Dividend 0.00 0.00 0.00Equity Dividend 578.07 578.43 311.61
Corporate Dividend Tax 98.25 81.25 34.09
Per share data (annualized)Shares in issue (lakhs) 3,853.74 3,855.04 5,140.08
Earning Per Share (Rs) 49.65 52.63 19.48
Equity Dividend (%) 150.00 150.00 125.00
Book Value (Rs) 177.59 202.70 240.64
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COMPARISION OF FINANCIAL ACCOUNT WITH THE HELP
OF RATIOS:
LIQUIDITY RATIOS:
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It measures the ability of the firm to meet its short-term obligations that is capacity
of the firm to pay its current liabilities as and when they fall due. Thus these ratios
reflect the short-term financial solvency of a firm.
1. Current ratio
Current ratio is the relationship between current assets and current liabilities. It is a
measure of general liquidity i.e. analysis of short-term financial position. A current
ratio of 2:1 is the standard ratio of liquidity for a firm.
The higher the current ratio the greater is the margin of safety. The larger the
amount of current assets in relation to current liabilities, the more is the firm’s
ability to meet its current obligations.
Current Ratio = Current Asset
Current Liabilities
Maruti
Suzuki
Mar
'07
Mar
'08
Mar
'09
TATA
Motors
Mar
'07 Mar '08 Mar '09
Total
Current
1575.
4
2017.
5
2060.
2
Total
Current
3818.9
1
4302.7 4423.18
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Assets Assets
Current
Liabilities
2288.
6
2718.
9
3250.
9
Current
Liabilitie
s
6956.8
8
10040.3
7 10968.21Current
Ratio 0.69 0.74 0.63
Current
Ratio 0.55 0.430.40
Interpretation:
The short-term liquidity position of the Maruti and Tata is not sound as the ratio
in all the years is below the standard of 2:1. The current ratio of maruti Suzuki
is higher than tata motors.
2. Quick Ratio
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Quick ratio is the relationship between quick assets and current liabilities. It
measures the firm’s capacity to pay off current obligations immediately and is a
more rigorous test of liquidity.
A high quick ratio indicates that the firm is liquid and has the ability to meet its
current obligations in time and on the other hand a low quick ratio represents that
the firm’s liquidity position is not good.
A standard of 1:1 is considered satisfactory.
Quick Ratio = Quick Assets
Current liabilities
(Quick assets = current assets – inventory)
Maruti Suzuki
Mar
'07 Mar '08
Mar
'09 TATA Motors Mar '07 Mar '08 Mar '09
Total Current
Assets
1575.
4 2017.5
2060.
2
Total Current
Assets 3818.91 4302.7 4423.18
Inventories 713.2
1,038.0
0 902.3 Inventories
2,500.9
5 2,421.83 2,229.81
Current
Liabilities
2288.
6 2718.9
3250.
9
Current
Liabilities 6956.88
10040.3
7 10968.21
Quick Assets 0.38 0.36 0.36 Quick Assets 0.19 0.19 0.20
Interpretation:
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The quick ratio in of both the companies does not reveal good liquidity position
as it is below the standard of 1:1. This means that the liquid assets are not
sufficient to provide a cover to current liabilities. The quick ratio of maruti
Suzuki is hifhe as compared to tata motors.
PROFITABILITY RATIOS
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The primary objective of a business is to earn profits. Profitability ratios are a
test of efficiency and a measurement of control.
1. Gross Profit Ratio
This ratio indicates the extent to which selling prices of goods per unit may decline
without resulting in losses on operations of a firm. It measures profitability of the
firm through the relationship between gross profit and sales. It reflects the
efficiency with which the firm produces its products.
The gross profit ratio should be adequate to cover the operating expenses of the
firm. Higher the ratio better is the profitability.
Gross profit margin or ratio = Gross profit X 100
Net sales
Maruti
suzuki
Mar
'07
Mar
'08
Mar
'09
TATA
Motors Mar '07 Mar '08 Mar '09
Gross Profit
2588.8
2
3130.8
4 2433.4 Gross Profit 3473.89 3511.15 2627.24
Net Sales
14806.
4
18066.
8
20729.
4 Net Sales
26664.2
5
28767.9
1 25660.67
Gross profit
ratio 17.48 17.33 11.74
Gross profit
ratio 13.03 12.21 10.24
Interpretation:
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The gross profit ratio has declined for both the companies in the year 2009
compared to the previous year’s which shows that the profitability of the firms
has declined.
The gross profit declined but as compared to tata motors, maruti Suzuki has
higher gross profit rate.
2. Net Profit Ratio
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It measures the relationship between net profit and sales of a firm. It indicates
management’s efficiency in manufacturing, administrating, and selling the
products.It also indicates the firm’s capacity to face adverse economic conditions such as
price competition, low demand etc.
Higher the ratio better is the profitability.
Net profit margin or ratio = Earning after tax X 100
Net Sales
Maruti
Suzuki
Mar
'07
Mar
'08
Mar
'09 TATA Motors Mar '07 Mar '08 Mar '09
Net Profit
1561.9
8
1739.7
3
1218.7
4 Net Profit 1913.46 2028.92 1001.26
Net Sales
14806.
4
18066.
8
20729.
4 Net Sales
26664.2
5
28767.9
1 25660.67
Net profit
ratio 10.55 9.63 5.88
Net profit
ratio 7.18 7.05 3.90
Interpretation:
The ratios show a steep decline over the 3 years which shows the weak
profitability position of both the companies. As gross profit net profit of maruti
Suzuki is also high compared to tata motors.
3. Operating Profit Ratio
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The operating profit ratio establishes the relationship between the operating profit
and net sales of the firm and is used to measure the operating efficiency of the
firm.
Higher the ratio better is the operating efficiency.
Operating profit ratio = Operating profit X 100
Net sales
Maruti
Suzuki
Mar
'07
Mar
'08
Mar
'09
TATA
Motors Mar '07 Mar '08 Mar '09
Operating
Profit 2256.1 2628.7 1976.6
Operating
Profit 3228.7 3028.02 1701.27
Net Sales
14806.
4
18066.
8
20729.
4 Net Sales
26664.2
5
28767.9
1 25660.67
Operating
profit ratio 15.24 14.55 9.54
Operating
profit ratio 12.11 10.53 6.63
Interpretation:The ratio has fallen down considerably in case of both the firms which show
that the operating efficiency of the firm is not satisfactory. Whereas compared
to tata motors maruti Suzuki has high operating profit.
4. Networth Ratio or Return on investment Ratio(ROI):
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ROI is the relationship between net profits and proprietors funds. It is used to
measure the overall efficiency of a firm. It indicates the extent to which the
earnings of a firm can be maximized.As the ratio reveals how well the resources of a firm are being used, higher the
ratio, better are the results.
ROI= Net Profit after tax X 100
Shareholder funds
Maruti
Suzuki Mar '07 Mar '08 Mar '09
TATA
Motors Mar '07 Mar '08 Mar '09
Net PAT 1562 1730.8 1218.7 Net PAT 1913.46 2028.92 1001.26
Shareholders
funds 6853.9 8415.4 9344.9
Shareholder
s funds 6869.75 7839.5 12394.27
Networth
ratio
22.78994
4
20.56705
6
13.04133
8
Networth
ratio
27.85341
5
25.88073
2 8.0784104
Interpretation:
The efficiency of the firm has deteriorated considerably in the year 2009 as the
ROI has come down from the year 2007.
Due to recession return on investment low down maruti suzuki’s return was high as
compared to tata motors.
5. Return on Capital Employed Ratio(ROCE):
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ROCE establishes the relationship between profits and capital employed. It is the
primary ratio to measure the overall profitability and efficiency of a business. It
represents the long-term funds supplied by creditors and owners of the firm.
A higher percentage of ROCE will satisfy the owners that their money is profitably
used.
Return on capital employed = Profits before Tax X 100
Capital employed
Maruti Suzuki
Mar
'07
Mar
'08
Mar
'09 TATA Motors
Mar
'07
Mar
'08 Mar '09
Profit Before
Tax
2285.
2
2494.
9
1710.
8
Profit Before
Tax
2573.8
3
2576.4
7 1013.76
Networth
6853.
9
8415.
4
9344.
9 Networth
6869.7
5 7839.5 12394.27
ROCE 33.34 29.65 18.31 ROCE 37.47 32.87 8.18
Interpretation:
A very low percentage in the year 2009 as compared to 2007 indicates that there is
a decline in the profitability position of the both the firms.
In 2007 and 2008 tata motors ROCE was high but in 2009it wasow as compared to
maruti Suzuki.
LEVERAGE or CAPITAL STRUCTURE RATIOS
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Financing firm’s assets is a very crucial problem in every business and as general
rule there should be a proper mix of debt and equity capital in financing the firm’s
assets. Leverage ratios are calculated to test the long term financial position of a
firm. These ratios are based on the relationship between borrowed funds and
owner’s capital.
1. Debt-Equity Ratio:
Debt-equity ratio measures the relative claims of outsiders and the owners against
the firm’s assets. It indicates the extent to which debt financing has been used in a business. The purpose is to get an idea of the cushion available to outsiders on the
liquidation of the firm.
A ratio of 1:1 is considered to be satisfactory. A low ratio is considered as
favorable.
Debt equity ratio = Outsider Funds (Total Debts)
Shareholder Funds or Equity
Maruti Suzuki
Mar
'07
Mar
'08
Mar
'09 TATA Motors
Mar
'07
Mar
'08 Mar '09
Total Debt 630.8 900.2 698.9 Total Debt
4009.1
4
6280.5
2 13165.56
Networth
6853.
9
8415.
4
9344.
9 Networth
6869.7
5 7839.5 12394.27
Debt to
Equity Ratio 0.09 0.11 0.07
Debt to
Equity Ratio 0.58 0.80 1.06
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Interpretation:
The debt-equity ratio in all the years is favourable as it is below the standard of
1:1.This shows that the long term solvency position of the firm is satisfactory.
Debt of tata motors is higher than maruti Suzuki.
2. Fixed Assets to Networth Ratio:
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The ratio of fixed assets to Networth indicates the extent to which shareholder’s
funds are sunk into the fixed assets.
If the ratio is more than 100%, it implies that owner’s funds are not sufficient to
finance fixed assets. 60 to 65 per cent is considered to be satisfactory ratio.
Fixed assets to net worth ratio = Fixed Assets X 100
Net Worth
Maruti Suzuki
Mar
'07
Mar
'08
Mar
'09
TATA
Motors
Mar
'07
Mar
'08 Mar '09
Fixed assets
2659.
7
3296.
5
4070.
8
Net Block/
fixed asset
3881.2
6
5387.3
1 7645.27
Networth
6853.
9
8415.
4
9344.
9 Networth
6869.7
5 7839.5 12394.27
Fixed assets
to net worth
ratio 38.81 39.17 43.56
Fixed assets
to net worth
ratio 56.50 68.72 61.68
Interpretations:
In 2009, the ratio has increased which shows that there are sufficient funds for
financing fixed assets as well as working capital for Maruti. Similarly in case of
Tata, the ratio has been below 100% which indicates there are sufficient funds to
finance the fixed assets.
3. Proprietary Ratio:
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This ratio establishes the relationship between shareholder’s funds to total assets
and is used to determine the long-term solvency of a firm.
Higher the ratio or the share of the shareholder’s in the capital of the company
better is the long-term solvency position of the company.
Proprietary ratio = Networth
Total assets
Maruti
Suzuki
Mar
'07
Mar
'08
Mar
'09
TATA
Motors Mar '07 Mar '08 Mar '09
Networth
6853.
9
8415.
4 9344.9 Networth 6869.75 7839.5 12394.27
Total Assets
7484.
7
9315.
6
10043.
8 Total Assets
10878.8
9
14120.0
2 25559.83
Proprietary
ratio 91.57 90.34 93.04
Proprietary
ratio 63.15 55.52 48.49
Interpretations:
In case of Maruti the shareholders funds being 90% of total assets in 2008 has gone
up to 93% of total assets in 2009, it proves that the long-term solvency position of
the firm is satisfactory. Whereas in case of Tata, the ratio has fallen down which
indicates that the long-term solvency position of the firm is deteriorating.
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RESULTS / FINDINGS
• The Indian automotive industry has provided direct employment and
contributed to the GDP.• The short-term solvency position of the companies is not sound and is
deteriorating at a constant rate.
• The long-term position of the companies is quite satisfactory. The firms are
making losses in the core activities of the business. So they should try to
increase the sales.
• The funds of shareholders are employed efficiently.
• The efforts to maximize earnings seem to be unproductive. The overall
efficiency of the companies has deteriorated considerably.
• The firms are witnessing sharp decline in profitability and are also facing
severe problem of non-availability of working capital.
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CONCLUSION
The face of the Indian automobile market has changed tremendously since the turn
of the millennium and will change even further since Nano.
De-licensing in 1991 has put the Indian
automobile industry on a new growth track,
attracting foreign auto giants to set up their
production facilities in the country to take advantage of various benefits it offers.
The industry has progressively witnessed the formation of global alliances seeking
the benefits of scale, market access and technology which is strengthening the
evolution of the Industry in our country.
IT plays an important role in reducing the cost of developing a vehicle, and India is
emerging as a research and development (R&D) hub for the auto industry.
Amid the economic crisis, the Indian auto industry managed to stay positive. Even
as global auto majors went into reverse gear in 2009, the Indian industry largely
bucked the trend, launching new models for the domestic market and registering
significant growth in exports.
With the Nano, Tata has challenged the global auto industry and created an
absolutely new segment with this car . Low cost, design innovation and economies
of scale are now becoming the hallmark of the Indian automobile industry.
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SUGGESTIONS
• The firms need to improve their short-term financial position.
• The borrowed debt should be invested properly so as to maximize the
earning capacity.
• The firms have sufficient funds to finance the fixed assets. They can use
these funds to finance working capital also so as to improve the short-term
financial position.
• Instead on depending on the debt financing, the company should focus on
internal equities.
• Like Nano, the firms shall try to introduce such products at lower price
ranges which will be a good sign of growing competition.
• A healthy competition is prevailing in the automobile industry. Maruti and
Tata are facing tough competition from others companies like Toyota,
Hindustan Motors, and Mahindra etc. The firms should try to make
competitive strategies to increase the sales and profits.
• Modern-age design tools should be used by automobile manufacturers to
develop better products in a shorter timeframe, as well as further reduce
overall costs.
• The Indian auto component industry which is the supply chain for the
automobile vehicle manufactures in India needs to be supported especially
the Small and Medium Enterprises, (SME).
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