PROFITABILITY PERFORMANCE ANALYSIS OF JK TYRE & INDUSTRIES
LIMITED IN INDIA
R.BASKAR
Ph.D. Research Scholar in Commerce,
Annamalai University, Annamalainagar,
Chidambaram, Tamil Nadu-608 002, India.
E-mail:[email protected]
Abstract
The study aims to provide profitability performance analysis of JK tyre & industries
Limited in India. The data has been collected from secondary sources and the period was
covered for ten years from 2008-2009 to 2017-2018 to follow the respected company
published annual reports. The researcher used tools for analysis Profitability ratios, Mean and
Compound Annual Growth Rate (CAGR). Hence, the result of the profitability performance
of JK tyre & Industries limited was show the net profit-earning capacity of the company was
not satisfactory during the study period. At the time operating profit ratio of the company
was more than net profit ratio. So, a company should not be properly managed its non-
operating incomes and non-operating expenses. The profitability of the company was found
to be good in terms of return on assets, return on capital employed and return on equity. The
rate of profitability was more than a normal rate of return. The study also found that packing
and forwarding expenses of the company increased at the rate more than the rate of increase
in sales of the company.
Key words: Ratio analysis, Gross Profit Ratio, Operating Profit Ratio, Net Profit Ratio.
Introduction
The Indian tyre industry has been seeing amazing development for the past presiding
years for the development of auto sectors, particularly in traveller vehicles and motorcycles
sections. Truth is told, accessibility of raw material demand in natural rubber and
ultramodern generation offices to create a demand for the world's most aggressive tyre
markets.
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It is driven by the solid interest in car OEM area and substitution platform. India's
market for radial tyres in commercial vehicles area is still in its outset. The traveller vehicle
fragment changed to radial tyres in a brief timeframe, with outspread tyre entrance level for
the classification achieving 100 per cent. In any case, the infiltration level of the radial tyre
has likewise begun to increment quickly in the light business vehicles, truck and passenger
segments. This portion will be the biggest development region throughout the following
combine of years.
Tyre manufacturing companies are searching for abroad manor of rubbers to make
their raw materials our needs to satisfy demand and supply, which it is encourages the
organizations to secure raw material at less expensive costs Indian markets. Simultaneously,
tubeless tyres are making strides in Indian markets as practically all the car producers are
propelling their vehicles with tubeless tyres. This demonstrates tubeless tyre market has
colossal development opportunity in the coming years. In this time more success tyre
companies in India like MRF tyres, Apollo tyres, JK tyres, CEAT Year it has a solid hold in
the market, anyway they face a tremendous challenge from worldwide tyre companies such
as Bridgestone, Goodyear and so on to sell their items in the Indian markets. The Indian
MNCs to have set up units in different abroad nations and some like Apollo Tyres are
notwithstanding getting business there.
Growth of Indian Tyre Industry
The Indian tyre industry achieving expected growth of 7-8 per cent an Indian
economy during the financial year of 2018. According to Independent and Professional
Investment Information and Credit Rating Agency of India (ICRA), the tyre demand is
estimated to increase to 7 per cent during the financial year 2018; it is supported by growth in
trucks and buses replacement demand after having two years of slumped growth. To a way of
the future demand for the financial year 2019 increase the expected growth at 6.5-7 per cent
and 8-8.5 per cent respectively.
Subrata Ray, Sr. Vice President, Corporate Sector Ratings, ICRA, said that the tyre
volumes across the commercial segments de-grew during the H1 financial year 2018 due to
GST Implementation, which had its impact on the financial year 2018 demand due to de-
Stocking by dealers. But barring this short-term Slump, the domestic market has remained
favourable and is likely to recover during the second half of the financial year 2018.
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The Indian Tyres are Exports various countries in strong demand the world-level
market segment the Second straight year to Product Segments due to the 27.5 per cent growth
in the financial year 2017, The volume of exports has increased by 14.1 per cent during the
first half of the financial year 2018. Tyre exports are estimated to grow by 10 per cent during
the financial year 2018 and it is 8-10 per cent over the next three years lead the Increasing the
stable demand over the global level tyre market. At the same time, the world market available
the Chinese tyres are the low price it is one of the major challenges for the Indian tyre
makers.
Profile of JK tyre and Industries Ltd.
JK tyre is an automotive tyre, tubes and flaps manufacturing company based in Delhi,
India. The name JK is derived from the initials of Kamlapatji (1884–1937) and his father Seth
Juggilal (1857–1922). It was founded that West Bangal the license gets February 1974; the
company was converted in public sector in 1st April 1974. JK Tyre is based in over 80
countries across all 6 continents. It is a part of the JK Organization, is among India’s leading
tyre manufacturers and the top 25 tyre manufacturers in the world. The company offers a
wide range of products catering to diverse business segments in the automobile industry. The
company operates 12 plants, including nine in India and three in Mexico. Currently, the total
capacity of all its plants together is around 32 million tyres per annum. It is listed on major
stock exchanges in India and provides direct and indirect employment to nearly 300,000
people. JK Tyre is the only Indian tyre manufacturer to be included in the list of Superbrands
India in 2017 for the sixth consecutive year.
Review of literature
Puneet Saliya and Parmil Kumar (2012) studied the liquidity and profitability trade
off – a study on Bharti Airtel Limited, the study was taken as last five year data and we will
try to evaluate the relationship between profitability and liquidity. The researcher has to be
tested with a null hypothesis and alternative hypothesis there is a negative relationship
between profitability and liquidity. So every firm needs to maintain equilibrium between
profitability and liquidity
Nisha Rapheal (2013) these study to present an overview of the financial
performance of Indian tyre industry-comparison among leading tyre companies.
The International journal of analytical and experimental modal analysis
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ISSN NO: 0886-9367
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The study based on secondary data period from 2003 – 2004 to 2011 – 2012. The
sample was selected as four companies, to cover major important financial performance
indicators like current ratio, quick ratio; net profit ratios have been analysis. The tyre industry
has been passing through turbulent phases characterized by enhanced debt burden, low
utilization of assets and above all, huge liquidity crunch. The key to success in the industry is
to improve labour productivity, flexibility and capital efficiency.
Sunil. M and Kantesha Sanningammanavara (2014) reported that a study on
financial performance; a comparative analysis of JK tyre and industries ltd and selected tyre
companies in India, it provides a financial statement likely assets, liabilities on specified data,
revenues and expenses and a net result of operation during the study period. This study based
on secondary data, to make useful information to communicate its users. The researcher has
to be made in a descriptive method, statistical tools, tools of ratio analysis and ANOVA test
has been conducted to test the mean returns and it has been covered analysis of the
comparative financial performance of JK tyre and industries ltd and selected tyre companies.
Dharmaraj Arumugam et al, (2016) the study on Automobile sector has emerged as
a sunrise sector. The Indian automobile industry is growing at an average rate of 17 per cent
for the past few years. The financial data and information required for the study were drawn
from the secondary data. The other relevant data were collected from journals, magazines and
websites. The period of the study covered by 15 years from 2000 to 2014 and the essential
data for this period have been collected. It is compelled to restrict the number of sample
companies to 16. The study is based on purposive sampling method, making a study of
sixteen companies in India. The overcapacity problem is hunting many of the players as
demand may not go up significantly. As per the Automotive mission plan 2016 – 26 prepared
jointly by the society of Indian automobile manufacturers (SIAM) and government.
Statement of the problem
Profit is one of the main objectives of any business organization. All the processes in
an organization are planned to achieve a high profit of the organization. Profit is important
tool measuring the performance of a company. It will reveal the overall performance of the
company. Hence studying profitability is very important for a manufacturing company. The
tyre industry is one of the key industries in India. Tyre industry provides goods to the
automobile industry. This industry brings a considerable portion of foreign currency to the
country through the export of tyre products to other countries. During the year 2014-15
86.80 lakh tyres were exported to various countries.
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JK tyres limited are one of the market leaders in the tyre market in the country. This
company stood third in manufacturing tyre products in India. As a major tyre manufacturer,
it is necessary to study the profitability of the company. Hence the project work has been
undertaken to analyse the profitability of JK Tyres Limited.
Objectives of the study
The following objectives are set to study the profitability of the company.
1. To study the growth and development of Indian tyre industry.
2. To study profitability performance of JK Tyre and industries limited in India.
Sources of data
The Profitability analysis calculated based on secondary data. The sources were
collected from profit and loss account and balance sheet of JK tyre and Industry Limited,
which were extracted from the annual report of the company.
Period of Study
The present study has been undertaken for a period of five years from 2008 – 2009 to
2017 – 2018.
Tools used
The study used ratio analysis as financial tools and it also used percentage,
Trend analyses, mean and compounded annual growth rate (CAGR) as statistical tools.
Scope of the study
The study has covered to analyse the profitability of Jk Tyre and Industries Limited.
For this purpose, it considered Net Profit, Operating Profit, Return on Investment, Return on
Equity and selected expenses ratios and another aspect of profitability analysis were
considered out of scope.
Limitation of the study
The study experienced the following limitation while making the project work.
The study is purely based on secondary data and limitation of study using secondary
data will apply to this study also. The period limited in ten years from 2008-09 to 2017-18.
Analysis and Interpretations
This study analyzes the profitability position of JK tyres limited for the period of ten
years from 2008 – 2009 to 2017 – 2018. It primarily used ratio analysis as a financial tool
and it also used a few statistical tools.
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ISSN NO: 0886-9367
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Net Profit
Net profit is an important parameter to analyze the profitability of a manufacturing
company JK Tyre and Industries Limited. The following aspect Table 1 presents the results
of the net profit of the company and its trend during the study period.
Table 1Net Profit of Jk Tyre and Industries Limited
(₹ in crore)
Year Net Profit
₹
Change
₹ % Change
2008-2009 19.05 - -
2009-2010 163.47 144.42 113.19
2010-2011 61.32 -101.68 60.31
2011-2012 11.00 -50.32 21.86
2012-2013 105.54 94.54 111.64
2013-2014 134.68 29.14 462.18
2014-2015 253.30 118.62 213.54
2015-2016 400.96 147.66 272.76
2016-2017 332.13 -68.83 482.53
2017-2018 43.09 -289.04 14.91
Mean (Rs.) 152.45 - -
CAGR (%) 32.81 - -
Source: Computed Annual reports
Table 1 shows that net profit of the JK tyre & industries Ltd. was decrease
during the study period. The profit range was ₹. 19.05 crore and ₹. 43.09 crore, the net profit
was increasing trend during 2011-2012 to 2015-2016 its rage ₹. 11.00 crore to ₹. 400.96
crore. Its mean value of net profit is ₹. 152.45 crore and CAGR report shows 32.81 per cent
rrespectively. It is indicating the moderate level of deviation from the mean value. The
following figure shows that net profit of the JK Tyre & Industries Ltd.
The International journal of analytical and experimental modal analysis
Volume XI, Issue X, October/2019
ISSN NO: 0886-9367
Page No:135
Figure 1Trend of Net Profit of the JK Tyre & Industries Ltd
Net Profit Ratio
The term net profit ratio is called net profit divided net sales multiplication hundred.
The profit margin is indicative of management’s ability to operate the business with sufficient
success not only to recover from revenues of the period, the cost of merchandise or services,
the expenses of operating the business and the cost of borrowed funds, but also to leave a
margin of reasonable compensation to the owners for providing their capital at risk. Higher
the ratio of net operating profit to sales better is the operational efficiency of the concern. The
net Profit Ratio calculated as,
Net Profit Ratio =Net Profit
Net sales× 100
0
50
100
150
200
250
300
350
400
450
Net Profit
The International journal of analytical and experimental modal analysis
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ISSN NO: 0886-9367
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Table 2Net Profit Ratio of JK Tyre and Industries Limited
(₹. in crore)
Year Net Profit
₹
Sales
₹
Net profit ratio
(%)
2008-2009 19.05 4903.61 0.39
2009-2010 163.47 3677.70 4.44
2010-2011 61.32 4810.92 1.27
2011-2012 11.00 5643.71 0.19
2012-2013 105.54 6002.16 1.76
2013-2014 134.68 6560.29 2.05
2014-2015 253.30 6784.37 3.73
2015-2016 400.96 6564.92 6.11
2016-2017 332.13 6607.51 5.03
2017-2018 43.09 6578.50 0.66
Mean (₹.) 152.45 5813.37 2.56
CAGR (%) 8.50 2.98 5.36
Source: Computed Annual Reports
Table 1 show that the net profit of the JK tyre and industries Ltd. was decreased
during the study period except during 2012-13 to 2015-16. The profit range was ₹. 19.05
crore and ₹. 43.09 crore, the mean value of net profit is ₹. 152.45 crore and CAGR report
show 8.50 per cent respectively. It is indicating the moderate level of deviation from the
mean value. The net sales of a company fluctuated during the study period. The net sales
ranged between ₹. 4903.32 crore and ₹. 6578.58 crore respectively. Mean value is ₹. 5813.37
crore and GAGR report that sales growth was 2.98 per cent. Net profit ratio of the company
was not good during the study period.
Operating profit ratio
The operating profit margin ratio is a key indicator for investors and creditors to see
how businesses are supporting their operations. If companies can make enough money from
their operations to support the business, the company is usually considered more stable. On
the other hand, if a company requires both operating and non-operating income to cover the
operation expenses, it shows that the business' operating activities are not sustainable. The
operating Profit Ratio calculated as,
The International journal of analytical and experimental modal analysis
Volume XI, Issue X, October/2019
ISSN NO: 0886-9367
Page No:137
Operating Profit Ratio =Operting Profit
Net sales× 100
Table 3 Operating Profit ratio of JK Tyre and Industries Limited
(₹. in crore)
Year Operating Profit
₹.
Sales
₹.
Operating Profit
ratio
(%)
2008-2009 176.44 4903.61 3.60
2009-2010 251.85 3677.70 6.85
2010-2011 155.42 4810.92 3.23
2011-2012 178.14 5643.71 3.16
2012-2013 298.40 6002.16 4.97
2013-2014 368.58 6560.29 5.62
2014-2015 479.79 6784.37 7.07
2015-2016 626.51 6564.92 9.54
2016-2017 591.68 6607.51 8.95
2017-2018 309.57 6578.50 4.71
Mean (₹.) 343.64 5813.37 5.77
CAGR (%) 5.78 2.98 2.72
Source: Computed Annual Reports
Table 3 shows that the operating profit of the JK tyre and industries Ltd. Was
fluctuated during the study period except during 2011-12 to 2015-16. It is ranged between ₹.
176.44 crore and ₹. 309.57 crore respectively. Mean value of operating profit was ₹. 343.64
crore the result of CAGR was 5.78 per cent. The net sales ranged between ₹. 4903.32 crore
and ₹. 6578.58 crore respectively. Mean value is ₹. 5813.37 crore and GAGR report that
sales growth was 2.98 per cent. The operating profit ratio fluctuated during the overall study
period, the ratio range between 3.60 per cent and 4.71 per cent respectively. The mean value
of ratio was 5.77 per cent and the result of CAGR was 2.72 per cent.
Total Expenses Ratio
The expense ratio is a measure of what it costs and investment of the company to
operate a mutual fund. An expense ratio is determined through an annual calculation, where a
fund's operating expenses are divided by the average dollar value of its assets under
management. Operating expenses are taken out of a fund's assets and lower the return to a
fund's investors. The Total Expenses Ratio calculated as,
The International journal of analytical and experimental modal analysis
Volume XI, Issue X, October/2019
ISSN NO: 0886-9367
Page No:138
Total Expenses Ratio =Total Expenses
Sales× 10
Table 4 Total Expenses Ratio of JK tyre and Industries Ltd
(₹. in crore)
Year Total Expenses
(₹.)
Sales
(₹.)
Expenses Ratio
(%)
2008-2009 4574.44 4903.61 93.29
2009-2010 3199.46 3677.70 87.00
2010-2011 4702.56 4810.92 97.75
2011-2012 5364.24 5643.71 95.05
2012-2013 4943.47 6002.16 82.36
2013-2014 5295.68 6560.29 80.72
2014-2015 5373.50 6784.37 79.20
2015-2016 4889.66 6564.92 74.48
2016-2017 6312.71 6607.51 95.54
2017-2018 6540.41 6578.50 99.42
Mean (₹.) 5119.61 5813.37 88.48
CAGR (%) 3.64 2.98 0.64
Source: Computed Annual Reports
Table 4 shows that the operating profit of the JK tyre and industries Ltd. Was
fluctuated during the study period except during 2011-12 to 2015-16. It is ranged between ₹.
176.44 crore and ₹. 309.57 crore respectively. Mean value of operating profit was ₹. 343.64
crore the result of CAGR was 5.78 per cent. The net sales ranged between ₹. 4903.32 crore
and ₹. 6578.58 crore respectively. Mean value is ₹. 5813.37 crore and GAGR report that
sales growth was 2.98 per cent. The operating profit ratio fluctuated during the overall study
period, the ratio range between 3.60 per cent and 4.71 per cent respectively. The mean value
of ratio was 5.77 per cent and the result of CAGR was 2.72 per cent.
Policy Suggestion and Recommendation
1. Net profit of the JK tyre & industries Ltd. Was not satisfactory during the study
period, but during 2012-13 to 2015-16 their net profit was good but after the 2016-
2017 to 2017-2018 the company net profit was slightly down.
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ISSN NO: 0886-9367
Page No:139
2. Net profit ratio of the company was not satisfied during the study period. The
performance of sales revenue is satisfied comparatively net profit of the company.
3. Operating profit ratio of the company was not satisfied, but during 2010-11 to 2015-
16 operating profit performance is good.
4. Total expenses of the company was high during the study period, the company reduce
expenses.
5. The company try to use natural rubbers and to improve marketing strategies.
Conclusion
Profitability analysis study reveals the performance of a company in all aspects
because efficient management of other aspects will result in profit. JK tyre & industries
Limited is one of the market leaders Indian tyre market. It is also one of the oldest automobile
companies in India. The results of the profitability analysis of the company show that net
profit-earning capacity of the company was not good. But operating profit ratio was more
than net profit ratio; hence the company managed its non-operating expenses and non-
operating incomes poorly. The profitability of the company was found to be good in terms of
return on assets, return on capital employed and return on equity. The rate of profitability
was more than a normal rate of return. The study also found that packing and forwarding
expenses of the company increased at the rate more than the rate of increase in sales of the
company.
Reference
Shashi K Gupta. Sharma R.K. Management Accounting Kalyani Publishers, New
Delhi – 110 002.
Pandey I. M (2011). “Financial Management” Vikash Publishing House Pvt.
Shashi K. Gupta ‘Management Accounting’ Kalyani Publishers, Third Revised
Edition 2014, reprinted 2016.
Journals
Puneet Saluja and Parmil Kumar (2012), “Liquidity and Profitability Trade off ( A
Study Bharti Airtel Ltd),” International Journal of Advanced Research in
Management and Social Sciences, Vol. 1, No. 4, Pp. 74 – 84.
Nisha Rapheal (2013), “An Overview of the Financial Performance of Indian Tyre
Industry- Comparison Among Leading Tyre Companies, Innovative Journal of
Business and Management, Vol. 2, No. 2277 – 4947, Pp. 128 – 130.
The International journal of analytical and experimental modal analysis
Volume XI, Issue X, October/2019
ISSN NO: 0886-9367
Page No:140
Sunil M and Kantesha Sanningammanavara (2014), “A Study on Financial
Performance: A comparative Analysis of JK Tyre & Industries Ltd and Selected Tyre
Companies in India,” ZENITH International Journal of Business Economics and
Management Research, Vol. 4, No. 8, Pp. 21 – 30
Dharmaraj Arumugam, Ashok kumar.M and Preeth.R (2016), “Factors Determining
Profitability in Indian Automobile Industry, Indian Journal of Commerce and
Management Studies, Vol. VII, No. 2, Pp. 64 – 69
Websites
https://www.icra.in/
http://atmaindia.org/
https://www.jktyre.com/
www.moneycontrol.com
www.tyremarket.com
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