8/10/2019 ashwin bm

1/93

1

1. INDUSTRIAL PROFILE

1.1 INTRODUCTION

In the last fifty years tyre industry has been saddled with the unviable

reputation of manufacturing a commodity. Not only were the products black and

boring but the industry itself was also considered to be black and boring- with profits

to match this reputation. However, things are changing in the industry, and changing

rapidly. Tyre manufacturing might not be attracting much attention from Wall treet

but it is very different from the industry of a decade ago and in !" years time it will

be different again. The new technology application has a disruptive effect on the

industry

8/10/2019 ashwin bm

2/93

2

8/10/2019 ashwin bm

3/93

3

1.3 FEATURES OF INDIAN TYRE INDUSTRY

It is capital intensive # $ fully modern %reenfield radial plant matchinginternational standards with a production capacity of ".&' million tyres per

annum which is the minimum economically viable si(e would re)uire

investment of around *s.+""" million.

It is ra !aterial intensive # $round " of production cost and '" of

turnover of the industry are accounted for by raw material cost.

onsumption ratio of natural rubber and synthetic rubber is /"#&" in India and

in world it is 0"#1". It is a delicensed industry.

New tyres and raw materials of tyres are under the open general license

23%45i.e. they can be imported and e6ported freely

7loor price mechanism to assess customs duty on used tyres import

ustoms duty paid on true and raw material at &' .

86cise duty on tyre ranges from !1 to &0 and for raw material 2e6cluding

natural rubber5 at !1 . 9omestic ta6es on natural rubber !&.1' purchase ta6 and *s.!.'" a :g

rubber

The fortune of this industry depends on the agricultural and industrial

performance of the economy, the transportation needs and the production of

vehicles.

While the tyre industry is mainly dominated by the organi(ed sector, the

unorgani(ed sector holds way in bicycle tyres

8/10/2019 ashwin bm

4/93

"

Ra#ialisati$n

The technological advancement has increased the usage of *adial Tyres. In; $, " of tyres used are radials. In 8urope, it is estimated at < . 8ven many

developing countries are shifting over to ' of passenger car tyres as radials. The

level of radialisation in light commercial vehicles is !" and in trucks and buses it is

an only & .

EFFECTS OF %UD&ET ON INDUSTRY

%'#(et I!pact

The reduction of customs duty surcharge by !" will benefit those tyre

manufacturers who import rubber and carbon black feed stocks. However it will

negatively impact tyre companies who are facing stiff competition from cheaper

imports from hina, as the removal of surcharge will encourage them more.

In#'str) *is+ Lists

$s imports of tyres are a threat to the growth of the industry, a hike in customs

duties form +/.' currently would be a welcome measure. $s hinese tyre

manufacturers are flooding the market, this will be a welcome measure.

8limination of Import duty on key *aw materials such as =olyester Tyre ord

7abric, teel Tyre ord 7abric and >utyl *ubber?on the grounds that there is

no domestic production of these items.

Import of second hand tyres needs to be restricted by fiscal and physical

checks.

Tyres suffer from a high incidence of e6cise duty. onsidering that various

committees appointed by the %overnment have recommended reduction, a

reduction in the rate of e6cise duty would by very welcome

8/10/2019 ashwin bm

5/93

,

-EY POSITI ES

ince the liberali(ation of the early

8/10/2019 ashwin bm

6/93

being offered at 4I>3*, which is the 4ondon Inter-bank 3ffered *ate. It is the rate of

interest at which banks borrow funds form other banks.

Ot+er Petr$ C+e!ical %ase# aterial Car0$n 0lac45 N)l$n T)re C$r# etc.6

The power of suppliers is high in this category as India is limping back in case

of petro based raw materials like carbon black and chemicals which account low in

)uantity terms but are high cost generators. $lso the price of NT fluctuates in line

with the prices of aprolactam 2a petroleum derivative5 its main raw material. The

prices of these materials are beyond the control of tyre industry.

%ar(ainin( P$ er $/ %')ers

This can be segregated into two parts as follows

OE 7s

The 38@Cs are always in strong position when the bargaining power of

buyers is concerned. The reason behind this is most of them are having contact with

their relative tyre manufacturer under which the prices of tyre remains stable for this

38@ irrespective of market price. The benefits are given to them as they are buying

in bulk and the relation gives the tyre firms thing called brand association.

Replace!ent

The scene in replacement segment is )uite reverse as the bargaining power for

the replacement segment is moderate due to the fact that the buyers are not that strong

as compared to 38@Cs. The demand in buses and truck segment is always high

8/10/2019 ashwin bm

7/93

8

because of Indian poor road conditions apart form this purchase is made in small

units.

1.9.3 T+reats $/ S'0stit'tes

It is moderate or as the industry is facing opposition form retreading sector all

over the globe. This cheaper option, around &"-&' of the original tyre cost, is

present in developed countries since some decade back. $nd this is heading towards

strong position here in India too.

1.9." T+reat $/ Ne Entr)

The threat of new entrant is moderate or can be described as low because the

industry is highly capital intensive and the level of technological e6pertise re)uired is

also highly specific.

>ut if we see from domestic 2Indian5 industryCs point of view, this better can be defined as high. The reason being, global tyre industry is already seeing mergers

and ac)uisitions in order the restructure. $nd as of now India and hina going to be

the hub of activities as far as tyre industry is concerned due to low production cost as

well as other relevant benefits. o for any of the global big shot Indian ompany will

be a good option to go for.

1.9., In#'str) Rival

Industry *ival is High, because gradually the overseas players are e6panding

their wings over Indian tyre industry and also a limited and every player is moving

towards automated technology.

8/10/2019 ashwin bm

8/93

9

4ike 8*= and @

$part from the aforementioned reason, the industry is seeing high competitivescenario at present because of various reasons like rising input costs, low reali(ations

from growing 38@ segment where the vehicle manufacturers are not ready to share

the burden of tyre firms, the portion of replacement pie continuously taken away by

the retreading sector which is slowly but firmly rising its head and that to in high

reali(ation segment of >us-Truck tyres and last but not the least the unorgani(ed

sector is always there to give head ache to these established players like 8$T, D:,

$pollo and @*7 etc.

1.: A;OR PLAYERS IN Toasts of an enviable track

record. The company has continued in the same vein and has been posting e6cellent

results, not withstanding the winds of recession blowing across the economy.

=erformance of the company has been commendable in light of the fact that the user

industry is facing a slowdown. The company has benefited from better productivity

and operational efficiency. The company caters to a host of impressive clients. It has

signed on to be the sole supplier for auto giants like %eneral @otors, 7iat and 7ord in

India. The company is also renowned for its e6ports, which have also been

witnessing positive response. The performance of the company could further

improve with the revival of the auto industry. Thus, @*7 4td. an be e6pected to

retain its position in this segment. However, investors can move out of the scrip,

considering the outlook for the industry as a whole.

8/10/2019 ashwin bm

9/93

:

1.:.2 CEAT

>eing the second largest selling brand in India with a market share of !0.1 percent, eat caters primarily to the replacement market. 9ue to the strong growth in

the 38@ sector, the share of the replacement market in the total revenue of the

company has fallen. However, the production growth in the automobile sector over

the past few years should provide a boost to the replacement market in the coming

years and eat could be a maEor beneficiary thereof. With the advent of

multinationals like %oodyear, @ichelin, >ridgestone and ontinental, a maEor

shakeout in the industry is imminent and the same could result in eat, which is

already operating on thin margins, being hived off as a Eoint venture with %oodyear,

in collaboration with which eat has already promoted outh $sia Tyres for

manufacturing radial Tyres in India. With a modest track record on the financial

front, the forthcoming results may not be encouraging.

1.:.3 Ap$ll$ T)res Lt#. ATL6

$ slow-down in the tyre market and rubber procurement at high prices has putthe brakes on $pollo Tyres limited 2$T45. The company has traditionally been the

market leader in the truck and bus tyres segments. $T4 caters to the replacement

segments of the domestic market. 7ollowing its take over of =remier Tyres, $T4Cs

market share has risen. >esides the core truck and bus tyre business, fairly

considerable part of its turnover comes from automotive tubes and flaps, for which it

has commissioned a plant in =une. 9espite a reversal in the fortune of the automobile

industry, the chief user base of the companyCs products, the demand for truck tyres,

particularly in the replacement market, was not encouraging. 8ven as tyre producers

grapple with over-capacity and high levels of inventory, the government stirred a

hornetCs nest by proposing free imports of used and second-hand tyres. $T4 has

conversion agreements for small tyres with T I4, tallino Tyres and *ado. Its

8/10/2019 ashwin bm

10/93

1=

e6ports are routed through $pollo International to the ; , %ermany, >ra(il, udan,

8gypt, etc.

1.:." ;.-.T)res

D.:. 3rgani(ation founded over !"" years ago ranks within the elite private

groups in India in terms of assets and sales. The %roupFs operations can best be

characteri(ed as multi-business, multi-product and multi-location with head office in

New 9elhi, the apital of India. The %roup has a distinguished record of being

pioneers in introducing several new products and processes into India for the first

time. It comprises of a number of industrial and commercial companies, e6ceeding "

in number, most of them public limited, in which D.:. 3rgani(ation has controlling

interest ranging from +' to " .. In the maEor public limited companies, there are a

large number of public shareholders aggregating over /,"","""

D.:. 3rgani(ation has very diversified manufacturing activities such as

ynthetic 7ibres like# Nylon, =olyester, $crylicB =aper G >oardsB ementB

$utomobile Tyres G TubesB otton, Woollen and Dute Te6tilesB 8ngineeringB =lastic=rocessingB $grochemicalsB Hybrid eedsB osmeticsB $udio G ideo magnetic

tapesB =ower transmission including ->elts and onveyor >eltings, $utomotive

>elts, 3il ealsB ystem 8ngineering, Industrial, 8lectronics and @aterial handling

systems, etc

The %roup is further diversifying in other fields like =etrochemicals, teel,

9rugs G =harmaceuticals, 7ood G 9airy =roducts, 8lectronics, omputer oftware,

=ower generation, *ubber hoses, etc.

8/10/2019 ashwin bm

11/93

11

II. CO PANY PROFILE

2.1

8/10/2019 ashwin bm

12/93

12

recording profits in !off. The ompany carried out one of the most remarkable turnaround in the Indian

corporate history and by !Line

7$4 3N TA*8 4T9, manufacture two and three wheeler Tyres, it also

manufactures tuber for the above said product line. It also manufactures four-wheeler

Tyres that are only for @aruti.

C'st$!ers

7.T.4 classified its market into three segments they are as follows

!. 38@- 3riginal e)uipment market.

8/10/2019 ashwin bm

13/93

13

&. *eplacement @arket

+. 86port @arket

!. 38@ means 7.T.4 directly sell its product to manufacture to two and three

wheeler vehicles.

&. *eplacement market means it sells its product to the whole seller or distributor

through this channel it will reach to the consumer.

=resent status of the company is shown in Table &.!

8/10/2019 ashwin bm

14/93

1"

Ta0le 2.1? Present Stat's $/ t+e C$!pan)

Na!e $/ t+e c$!pan) Falc$n T)res Lt#.Aear of incorporation !< +*egistered 3ffice %olden towers, '", residency road, bangalore-&'.Head 3ffice 7alcon Tyres 4T9, :* *oad, @etagalli @ysore-!17actory 7alcon Tyres 4T9, :* *oad, @etagalli @ysore-!1

Nature of 3rgani(ation =ublic 4td company.4ine of activity @anufacturing of tyres and tubes.

Number of departments !0.Total number of

employees

!"&1.

>ankers

A9I $T8 >$N:,

T$T8 >$N: 37 IN9I$,

=;>D$> N$TI3N$4 >$N:,

>oard of 9irectors

idhya @anahor habbria2chairperson5.

9eepak chaudhuri 286ecutive 9irector5.

:omal . Wa(ir.

@r. @ohan @.Thakur

NiranEan Thakur.

=rakash @. Nene.

*avindra =al >hatia

a@$r C'st$!er OF F.T.L

H8*3 H3N9$.

8 3*T 4T9

8/10/2019 ashwin bm

15/93

1,

>$D$D $;T3 4T9 $N9 >$D$D T8@=3 4T9

:IN8TI 8N%IN88*IN% $N9 @3T3* 4T9

*3A$4 8N7I849 @3T3*

44@ 4T9

A$@$H$ @3T3* IN9I$ 2=5 4T9

:8*$4$ $%*3 @$ HIN8*A 3*=3*$TI3N 4T9

@3NT3 @3T3* 4T9

T TI448* $N9 T*$ T3* 4T9

$ H$ IN9; T*I8 =*I $T8 4T9

E!pl$)ees in F.T.L

There are appro6imately !,""" employees in the company. omprising of

management personnel. taff workers and trainees. @ost of them come from @ysore

village.

*el/are eas'res in F.T.L

7ollowing are the welfare schemes, which are under taken by the company

according to various acts.

a. anteen facility at subsidi(ed rates and )uality foods.

b. 3ccupation health care.

c. @edical assistance for those who have not been under 8 I act.

d. @edi- claim policy to workmen and his family.

Salient Feat'res OF F.T.L ?

1. ECS Facilit)

8 means electric clearing services. It is mode of payment of dividend to the

8/10/2019 ashwin bm

16/93

1

shareholders residing is some selected cities. 9epending on the number of re)uest

received from the shareholders in this respect. hareholders are re)uested to provide

particulars of their bank account details of availing this facility in the form attached.

2. De!ateriali e# S+ares

$bout // of the shareholding of the ompany has been demateriali(ed as on

+! st @arch &""'. Trading in 8)uity hares of the ompany is permitted only in

demateriali(ed form, as per the 8>I ircular dated &< "' &""" with effect from

&1 !& &""".

3. Retire!ent 0ene/its t$ t+e e!pl$)ees

!. =rovision for gratuity is made as determined actuarially under group

gratuity scheme of life insurance corporation of India 24I 5.

&. ontribution to provident and superannuation fund is accounted for an

accrual basis.

Researc+ an# Devel$p!ent

!. $rea in which activities carried out by the company-

9evelopment of new uni-directional pattern Tyres for scooter segment.

New Hi- tech testing instrument for incoming raw material.

$ddition of new pattern and designs for varied customer needs.

*ationali(ation and introduction of cost effective imported raw materials.

9evelopment and production of light commercial vehicle Tyres.

&. >enefits from the above * G 9 effort

3ptimum utili(ation of the installed capacity and increased productivity.

onsistency in )uality of finished goods.

8/10/2019 ashwin bm

17/93

18

*eduction in wastage and degraded material.

$dditional ranges and patterns were available as a better choice for the

customer as the market place.

F'ncti$ns $/ t+e O//icers

r. Deepa4 C+a'#+'ri

He was appointed as 9irector in the casual vacancy arising out of

@r.T. .%oelCs resignation and is designated as 86ecutive 9irector of the ompany

with effect from 1th Dune &""' and having an e6perience of & Aears in various levels.

r. S. %ADRlNARAYAN

He is asst vice president and he is also in charge of finance, accounts, system

and ompany ecretary. He held his employment in T;TI 3*lN =INNIN%

@I44 4T9. $nd have an e6perience of &+ years. He too is a very dynamic, has

taken care in all financial and secretarial aspects of the company, and he managed it

efficiently.

The maEor players in the tyre industry are 4eading manufacturer of tyres is

!. $pollo tyres. 1. T ri hakra

&. D .:. industries ltd. . 7alcon tyres.

+. 8$T ltd. /. @*7

0. @odi rubber ltd.

8/10/2019 ashwin bm

18/93

19

&',/",""" tubes per annum, now the company is manufacturing an average of !+,!!'

tyres and !", '" tubes per day. This includes both & and + wheelers.

The factory is on the threshold of massive e6pansion coupled with

moderni(ation. This e6pansion covers the introduction of additional product range

like tyres and tubes for cars, light truck, tractor front, power tiller, etc.,

T$tal B'alit)

7alcon Tyres meets !'", /!', DI', T G *$ and 8T*T3 standards wherever

applicable. The )uality accreditations are#

93T @arketing for all & and + wheeler si(es for e6port to ;. .$.

8 8 @arking for e6port to 8uropean ountries.

9%' G 9 certification for all & G + wheeler si(es for supply to %overnment

3rgani(ations.

Capital Str'ct're at FTL

7alcon Tyres 4td., was incorporated in !< ' with an authori(ed capital of *s.

&+'"."" lakhs of which *s. '1/."< lakhs had been issued, subscribed and paid up.

E p$rts

7T4 make e6ports of Tyres to outh $merica G >angladesh. It e6ports only

two and three wheeler Tyres. The e6port made as on &""0 is &

8/10/2019 ashwin bm

19/93

1:

Stren(t+

>rand 8)uity or J9;N43=K

Well entrenched 38 I *8=4$ 8@8NT segment

Necessary infrastructure Fcreated to take care of *eplacement

@arketing re)uirement

4owest conversion cost with higher productivity

8conomies of si(e

onsistent )uality and after sales service with full fledged

* G 9 backup.

7le6ibility in =roduction

*ea4nesses

9ependence on F38F ustomers

4oss of fle6ibility in pricing of =roducts due to severe competition

Non-participation in 38@Fs like T , Honda @otors etc., the fast growing

ompanies ery less penetration to other tyre segment.

4ess range of tyre in 0 wheelers. 4ess advertisement campaigns

Opp$rt'nities

7ast growing It @otor ycle 4@ L segments

8ntry of Honda, Dapan, directly in Indian market and our long association with

their Indian counterparts 86pected growth in 7our wheeler segments

9emand for other Tyre Tube related products

8/10/2019 ashwin bm

20/93

2=

T+reats

Tyre G Tube put under L3%4 L

=enetration of %lobal players in our market segment

;n-healthy and cut-throat competition

=resence of unorgani(ed Tyre Tube companies 9uplicate Tubes

%overnment policies and ta6 structures 286port incentives reduced by 1

W.8.7 7eb &""0.

9ecline in 38@ growth, especially in cooter G @oped segments

2.2. CO PANY PROFILE *IT< REFERENCE TO SE EN S ODEL OF

C-INSEY

@c:insey G ompany, a leading international consultancy firm has

developed an approach to value based management, which has been very well

articulated by Tom opeland, Tim :oller G Dack @urrin of @c:insey ompany.

$ccording to them - L=roperly e6ecuted, value based management is an

approach to management where by the companyFs overall aspirations, analytical

techni)ues and management processes are all aligned to help the company to

ma6imi(e its value by focusing decision making key drivers on value.L

The model as shown in 7ig. &.! says that there are seven basic dimensions,

which represent the core of managerial activities. They are as follows#

trategy

tructure

ystems

tyle

taff

kills

hared alues

8/10/2019 ashwin bm

21/93

21

These seven dimensions are popularly known as even Fs of @c:insey

@odel. @any large and comple6 organi(ations apply s model to magnify its value.

This model is also implemented in 7alcon Tyres 4imited., @ysore.

2.2.1. Strate()

$ccording to @c :inseyFs @odel, strategy can be defined as L$ coherent

set of actions aimed at gaining a sustainable advantage over competition, improving

position vis-M-vis customers, and allocating resources.L

In 7T4, orporate level strategy occupies the highest level of strategicdecision-making and covers the actions dealing with the obEectives of the firm,

ac)uisitions, allocation of resources G coordination of strategies of various

departments to achieve optimal performance.

isi$n? Jleadership status in &G + wheeler tyre segment, the company belives in the

philosophy of continuous improvement in all the aspects of its operation.

issi$n? Jto have a turnover of *s. '"" crores in ne6t three yearsK

T+e strate(ies $/ FTL /$c's $n?

S'peri$r B'alit) - 7T4 is committed to deliver superior )uality products to its

customers. 7alcon has been conferred with prestigious I 3 T !1

8/10/2019 ashwin bm

22/93

22

customer satisfaction. E pansi$n - 86pansion of manufacturing facilities leads to cost reduction in the

long term. It facilitates the company to product )ualitative low cost low weightOtyres to win the intense competition within the industry.

Alternative S$'rces - The sustained rise in raw material prices is making the

cost of production more e6pensive and it will adversely impact on the

profitability of the company in this intense competitive scenario. In order to

overcome this competition, 7T4 has framed the strategy that it shall continue to

develop alternative sources of raw material suppliers. Sales Pr$!$ti$n - Introduction of dealer award programs and sales incentive

schemes to boost sales and to ac)uire vital market share in replacement market.5

F't're Plan

To develop wide range of tyres in two, three and four wheelers

segments for e6port market. To develop tubeless tyres in + wheeler segments.

To introduce advanced technology tyres of directional pattern design

G conventional pattern in motorcycle segment.

To develop hitech low profile tyres in scooter segment.

Two significant developments made in this year are

7alcon tyres limited has been conferred with prestigious I 3 T

!1

8/10/2019 ashwin bm

23/93

23

implies centrali(ation of authority at the top departmentali(ation of Eobs hierarchy of

commend, narrow span and intense division of labour ,this type of structure provides

a clear and well defined work setting to its employees.

In simple term, tructure is the pattern in which various parts or components

are integrated or interconnected. The design of the organi(ation structure is a critical

task of the top management of an organi(ation.

Thus, organi(ation structure is the pattern of relationships among various

components or parts of the organi(ation. This prescribes the relationships among

various activities, positions and people in the organi(ation.

2.2.3. S)ste!

ystem refers to organi(ation methods that are used for the flow of

information from one department to other. 7T4 has an ade)uate system of internal

control designed to provide reasonable assurance on the achievement of the

obEectives relating to efficiency and effectiveness .of operations, reliability of

operations, reliability of financial reporting. There is a system compliance to followrules and regulations and for safeguarding of assets.

ome of the systems followed in 7T4 are briefed below-

In/$r!ati$n S)ste!

The implementation of computers has made information flow fast and reliable.

The information is versatile. ince 7T4 has good backup system. The company hasadopted an 8*= package known as $=. 8ven though the implementation is not full,

7T4 is using it for the e6tent possible for the flow of information. The software that

has been developed by 7T4 includes 73P=*3, 7IN$N I$4 =$ :$%8,

@$T8*I$4 $ 3;TIN% =$ :$%8, 7INI H89 %339 =$ :$%8, etc., which

arc used for the processing of the information. The users are well trained at their

8/10/2019 ashwin bm

24/93

2"

appropriate levels to ease the W!derstanding of the information flow.

%'#(etin( S)ste!

L>udgeting is a process of doing the proEection budgeting system braked up

into si6 phases as follows

P+ase 1? @arketing system forecasts for sales

P+ase 2? =roduction department takes the decision regarding the in-house production

and outsourcing.

P+ase 3? =lanning department plans for the resources like machinery, raw materials,

human resources re)uired for the production.

P+ase "? =urchase department decides material sourcing, vendor selection and

development und the time of purchase.

P+ase ,? The final step is done by the finance department that estimates thee6penditure for the budgeted sales.

B'alit) C$ntr$l S)ste!

Quality of the product is proper mi6ture of ram material G accuracy in the

si(e. In 7T4, the accuracy is concerned with the si(e of the tyre is to be maintained. it

conducts various tests that checks the )uality of the product. ' sigma standards have

been achieved and the measures are to be taken to achieve the 1-sigma standard.isual inspection is one of the methods that are used to check the )uality.

In addition to I 3

8/10/2019 ashwin bm

25/93

2,

Recr'it!ent5 Trainin( an# Devel$p!ent S)ste!

*ecruitment process starts with the identification of the vacancies by thedepartment head of the respective department. $ form re)uesting for the Human

*esource is sent from the department to H*9. This will be sent for the approval by

management. If approved, sources are searched. ome sources arc employment

e6change, educational institutions or e6-apprentices. hort-listing of the received

applications is done through interviews. The management does selection and fills the

vacancies.

Trainin( Pr$cess

In 7T4 training is done on the Eob. The selected person will be trained by

immediate supervisor or if needed the appointed trainer. Training is provided at the

user levels. In 7T4 normal training period is + years for both employees and

management staff.

The employeeCs are given opportunities for their development based on their

performance

Per/$r!ance al'ati$n S)ste!

=erformance appraisal is necessary for grading the employees. In 7T4 the

head of the concerned department normally does =erformance appraisal. The

performance appraisal is made through *anking @ethod by allotting out of !""

marks.

The evaluation criteria are as follows#

;pto '" @arks average.'"-1' %ood

1'- ' ery good

'-/' 86cellent

/' and above 86traordinary

$fter these ranking system made by the department heads it will go to

8/10/2019 ashwin bm

26/93

2

incremental committee for the second review. The above said appraisal system is only

for management staffs and operational staff, but the e6ecutive director himself will do

the appraisal.

2.2.". St)le

In 7T4 the shareholdersF grievances committee meets at fre)uent intervals to

consider shareholder investors complaints. The committee deals with grievances

pertaining to transfer of shares, non-receipt of >alance heet, non-receipt of

dividends, demateriali(ation of shares, complaints letters received from stock

e6change etc. 9uring the year, + complaints were received from shareholders. $llcomplaints have been resolved to the satisfaction of the complainers and no transfers

were pending.

The company has a practice of communicating with the stakeholders Quarterly

results of the company are normally published in The New Indian 86press and

=raEavani and are displayed in the companyFs website, apart from providing to stock

e6changes and press.

The company has formed a remuneration committee. The committee decides

on the remuneration of the e6ecutive directors.

2.2.,. Sta//

The company is accommodating various employees, they comprise of

personnel, staff, workers and trainees. @ost of them are from the @ysore city. The

company continues to have cordial and harmonious relations with its employees. The

company has various training programs organi(ed to be in line with changing

business environment. everal training programs structured to the needs of the

individual employees.

*egular audit on safety and environment are done by the competent professional

8/10/2019 ashwin bm

27/93

28

and the recommendations are followed to provide a safe and clear work environment.

*egular training programs on safety are conducted to increase awareness and

commitment for safety. The total number of employees on the roles of the company ason +! Duly is !!+< is distributed in different departments

The company has successfully formali(ed in long-term settlement that is valid

for +< months from ! st $pril &""+. The long-term wage settlements include better

productivity optimi(ation of output and continuing harmonious industrial relation.

The staff in the 7T4 will come under human resource department under the

senior general manager. The department is looking after three sub departments, theyare

Human resource department

=ersonnel and industrial relations department

afety and security department

2.2. . S4ills

kills are considered as J3ne of the most crucial attributes or capabilities

possessed by the organi(ationK. The term skills include those characteristics or

strengths which most of the people use to describe the company.

The capabilities or strengths possessed by 7T4 areB Human *esources,

@anufacturing 7acilities, plant production, *esearch G 9evelopment, market si(e G

segments, >rand 8)uity. ommitted team G %roup upport G 9istributors G 9ealer

network etc. and also to meet the re)uirements of I 3

8/10/2019 ashwin bm

28/93

29

8/10/2019 ashwin bm

29/93

2:

III PRODUCT PROFILE

7T4 manufactures and markets a wide range of nylon bias ply tyres and butyl

tubes for two and three wheelers, passenger cars, Eeep, light commercial vehicles and

farm vehicles. 7T4 markets its products under L9;N43=L brand for the domestic

market and L7$4 3NL for overseas market.

=roduct ariety - &, + and 0 Wheelers

Quality - %ood

9esign - *ip and tid

The wide ranges of products of 7T4 with different kinds are presented in

Table +.! and Tyre building process is shown in 7ig. +.!

Feat'res

It gives upto &",""" kms

%ood road grip

4eading in & and + wheeler tyres It is +rd place among othersO

>rand name

9;N43= 9omestic @arketO

7$4 3N 3verseas @arketO

8/10/2019 ashwin bm

30/93

8/10/2019 ashwin bm

31/93

31

i in( illin(?

*ubber, arbon >lack, $nti 36idant, *atarders are mi6ed as per standards

specification in Intermi6 and sheeted out. uratives and accelerators are added to the

sheeted out compound in the final mi6ing.

Fa0ric C'ttin( an# Slittin( in %anner C'tter?

This is a process of cutting of calendared fabric by banner cutters according to

the re)uired width suitable for beads and Tyre building according to the Type of Tyre.

%an# %'il#in(?

oated and calendared fabric will be supplied in Eoints with or without

s)ueegee and bands for different plies will be made.

%ea# *in#in(?

Wires are coated with e6truded rubber compounds and wound one over other

to make as circular bead.

T)re Trea#?

@i6ed rubber compounds is e6truded through dies for making treads and

cooled in water tanks and cut into re)uired lengths.

8/10/2019 ashwin bm

32/93

32

T)re %'il#in(?

The bands are assembled over tyre building drum, after fi6ing the side beads.

>reakers are placed with pressure. The tread is also applied over the bands to make a

*aw Tyre.

Air %a(s %la##ers?

$ir >ags >ladders are made by moulding the e6truded slugs in a particular

si(e mould and these are used as a shaping tool in the tyre moulding operation.

Air 0a( %a((in(?

>agging is the process of inserting the $ir >ags in *aw Tyres before curing.

T)re C'rin(?

The *aw Tyre is moulded in a specified heated mould and also shaped by

using an $ir >ag or a >ladder through which steam is passed.

Finis+in(?

This is a process of inspection, trimming and buffing of tyres to ensure for

better performance.

T'0e a4in(?

@i6ed rubber compound is milled and sheeted out. This is loaded in an

86truder to e6trude tubes and passed through conveyor in chilled water and then cut

into the re)uired lengths. $fter this valve is fi6ed and the tube ends are spliced.

These *aw Tubes are steam cured in a specified mould placed in the presses. They

are packed in bags and dispatched after inspection.

8/10/2019 ashwin bm

33/93

33

3.1. ALUE C

8/10/2019 ashwin bm

34/93

3"

3.1.1.2. Operati$ns?

3perations with reference to value chain include the activities associated withconverting inputs into final products.

The ompany recorded a turnover of *s.&&0 crores and a net profit of *s.".

8/10/2019 ashwin bm

35/93

3,

In 7T4 all the tyres are kept in separate room in control department checked

and inspected separately, in that process all the parameters of manufactured tyres are

checked whether they are satisfying all the re)uirements of customers.

onsignments of tyres are dispatched to customers through road and rail

transport to customers.

The finished goods processed by 7T4 are wide range of nylon bias ply tyres G

butyl tubes for two G three wheelers, passenger cars, Eeep, light commercial vehicles

G farm vehicles.

3.1.1.". ar4etin( Sales?

@arketing G sales in value chain is related to sale force efforts, advertising G

promotion, market research G planning G dealer distribution support.

In 7T4 there is a separate department for performing the marketing activities.

@anager 2marketing5 heads this department who is under the direct control of general

manager.

The actual work of marketing department starts when they receive en)uiries

from the customerCs .the marketing department sends the checklist of products to

customers produced in the company.

$fter receiving purchase order from the marketing department send customer

customer order to production control department based on this order production

control department first prepares the work order and the bill of material, the bill of

material sent the finance department to fi6 prices and payments terms, them the work

order is sent to the marketing department and production starts.

8/10/2019 ashwin bm

36/93

3

$fter the inspection the product is ready and dispatched to customer along

with the document containing delivery terms and payments conditions.

The prospects of tyre e6ports from India appear healthy, the efforts by Indian

companies to increasingly enter into outsourcing agreements with tyre producers in

outh 8ast $sia, 8astern 8urope, 4atin $merica is proved fruitful, overall tyre

producers in India are likely to top e6port market in future.

3.1.1.,. Service?

7alcon tyres limited maintains good relationship with customers, 7T4 is providing the after sales service to the customers.

The company is also providing replacement facility and spare parts to the customers

when there is any damage. 7alcon tyres limited has dedicated services staff to attend

customers complaint.

The products of 7T4 are marketed G sold through transport facilities G

warranty. The company provides service to its customers in the form of prompt

delivery of goods as per the schedule drawn.

3.1.2. S'pp$rt Activities?

7irm infrastructure.

Human resource management.

Technology development.

=rocurement.

3.1.2.1. Fir! In/rastr'ct're?

7irm infrastructure includes all the activities G costs in general management,

accounting G financing, safety G security G the overhead functions.

8/10/2019 ashwin bm

37/93

38

7T4 is a public limited company with an authori(ed capital of *s. &+'".

4akhs G paid up capital of *s. 1"" lakhs.

The manufacturing unit is located on :.*. road at about 1kms from @ysore

city, The companyCs operations were profitable till !

8/10/2019 ashwin bm

38/93

39

environmental protection and safety of operations, social commitment and employee

relations.

7T4 has been awarded international standard for )uality systems I 3

8/10/2019 ashwin bm

39/93

3:

I . OR&ANIGATION STRUCTURE A RE IE*

3rgani(ation structure refers to the style in which the organi(ation carries out

their business and accompanying baggage that shows whose tasks are divided and

integrated.

=ascal and $thos in their book JThe $rt of Dapanese @anagementK say that

J3rgani(ation structure emphasis that the )uality of management depends on the

goodness of which amongst all those key managerial dimensionsK.

$ccording to them structure in the model which is one of the which will

come as hard , which means decisions made once on these aspects cannot be

changed very often,

In spite of the central importance that organi(ational structure has in shaping

corporate performance and individual satisfaction, it is still a subEect, which is highly

misunderstood. To trace any scientific foundation for the definition of structure, one

would have to resort to the $nthropological approach.

$ccording to 8d. chein, Jthe structure of a group is made visible in the

artifacts and creations, produced like language, technology, art, stratification and thus

system and rules regarding se6 and familyK.

There is a high level of awareness or care taken on these issues. 3rgani(ation

corresponding to things which are visible, which they are using or clearly perceivable

and trustable to the e6tent to which they are working in the both e6ternal as well as

internal.

The 7T4 is having totally !!+< employees as on Duly &""0, but out of them are

$pprentices. o actual 7T4Fs manpower is

8/10/2019 ashwin bm

40/93

"=

7inance department is headed by = finance and company secretary, who isincharge of whole finance department.

The department is sub divided into#

!. ommercial $ccounts

&. $ccounts G 7inance

These are headed by 9%@Fs of respective sub department.

In addition, 7inance department consists of other e6ecutive like 9eputy

@anager osting, $ssistant @anager, and ecretarial @anager - ystems and related

officers and Trainees. $ll are having reporting relationship to = 7inanceO or 9%@

7inanceO.

".1 FUNCTIONS OF ARIOUS DEPART ENTS IN FTL

".1.1 Finance Depart!ent

7inance manager is the head of the departmentB the main functions of 7inancedepartment are to maintain accounting records and to e6ercise 7inance control. $n

accounts officer and other staff members of the department assist the 7inance

manager, budget preparation is another important duty of the department in which the

proper budget needed for the organi(ation is prepared, and the sales budget is

prepared by taking into account.

7inance department has the control over ' maEor areas they are

i. $ccounting and finance

ii. ommercial accounting

iii. osting

iv. ecretarial

v. ystem

8/10/2019 ashwin bm

41/93

8/10/2019 ashwin bm

42/93

"2

".1." Tec+nical Depart!ent

Tyre design and development.

Issuing of processes for manufacturing of compound, fabric, bead tyre tube

Testing of tyres to meet various mandatory re)uirements.

*aw material specification 2rubber, Nylon, arbon black, >ead wire etc5

@aintenance specification of manufacturing process at the shop floor.

=assing of compound of fabric for manufacturing process.

Direct$r7s Resp$nsi0ilities State!ent

=ursuant to the re)uirement under ec. &! 2&$$5 of the ompanies $ct,

!

8/10/2019 ashwin bm

43/93

"3

. ACCOUNTIN& AND FINANCIAL PRACTICES

,.1 SI&NIFICANT ACCOUNTIN& PRACTICES

,.1.1 %asis $/ Acc$'nts

The accounts have been prepared according to historical cost convention,

adEusted by revaluation of fi6ed assets. $ll e6penses and incomes to the e6tent

considered payable and receivable, unless stated otherwise, have been accounted for

on accrual basis.

,.1.2 Use $/ Esti!ates

The preparation of financial statement re)uire management to make estimates

and assumptions that affect the reported amount of assets and liabilities and

disclosures relating to contingent liabilities and assets as at the >alance heet date

and the reported amounts of income and e6penses during the year.

ontingencies are recorded when it is probable that a liability will by incurred

and the amounts can reasonably be estimated. 9ifferences between the actual results

and estimates are recogni(ed in the year in which the results are known materiali(ed.

,.1.3 Sales

ales are accounted for on passing of title to the customers. *eturns and

rebates and discounts against goods sold are recogni(ed as and when ascertained anddeducted from sales. ales include 86cise 9uty.

8/10/2019 ashwin bm

44/93

""

,.1." Fi e# Assets

7i6ed assets are stated at cost of ac)uisition inclusive of duties 2net of @odvat

and other redits5, incidental e6penses, erection commissioning e6penses and

interest etc., upto the date the asset is put to use. In case of revaluation of 7i6ed

$ssets, the original ost as written up by the valuer, is considered in accounts and the

differential amount is transferred to *evaluation *eserve.

,.1., Depreciati$n

a. The classification of plant G machinery into continuous and non-

continuous is carried as per technical certification and depreciation

thereon, is provided accordingly, on straight-line method at the rates

prescribed in schedule PI of the ompanies $ct, !

8/10/2019 ashwin bm

45/93

",

,.1.8 Invest!ents

4ong term investments are considered Jat costK e6cepts where there is a permanent diminution in value thereof in which case, ade)uate provision is made

against such shortfall.

,.1.9 Invent$r)

Inventories are valued ate lower of cost or estimated net reali(able value.

ost in case of raw materials, stores and spares have been computed on weighted

average basis. In case of work in progress and finished goods cost represents

materials, direct labour and appropriate portion of factory overheads. $de)uate

provisions for defective slow non-moving, obsolete stocks are made on the basis of

technical evaluation.

,.1.: Transacti$ns in F$rei(n C'rrenc)

Transaction in foreign urrency is accounted for at the e6change rate

prevailing on the date of the transaction. 7oreign currency monetary assets and

liabilities at the year-end are translated using the closing e6change rates. The loss and

gain thereon and also on the e6change differences on settlement of the foreign

currency transactions during the year are recogni(ed as income or e6pense and are

adEusted to the profit and loss account under respective heads of accounts e6cept in

the cases where fi6ed assets have been ac)uired from a country outside India in which

case, these are adEusted to the cost of respective fi6ed assets.

,.1.1= Retire!ent 0ene/its

a. =rovision for gratuity is made as determined actuarially under group

gratuity scheme of 4ife Insurance orporation of India 24I 5.

8/10/2019 ashwin bm

46/93

"

b. ontribution to =rovident and uper $nnuation fund is accounted for on

accrual basis.

c. =rovision for leave encashment liability to employees as at the year-end is

determined on the basis of actuarial valuation and provided for in the

accounts.

,.1.11 Researc+ an# Devel$p!ent E pen#it're

*esearch and development e6penditure of revenue nature are charged to the

profit and loss account, while capital e6penditure are added to fi6ed assets in the year

in which they are incurred.

,.1.12 C$ntin(encies

4iabilities which are material and whose future outcome cannot be ascertained

with reasonable certainty are treated as contingent and disclosed by way of Notes to

the accounts.

,.1.13 %$rr$ in( C$sts

>orrowing costs incurred in relation to the ac)uisition, construction of assets

are capitali(ed as part of the costs of such assets upto the date when such assets are

ready for intended use. 3ther borrowing costs are charged as an e6pense in the year

in which these are incurred.

,.1.1" Ta es $n Inc$!e

=rovision for urrent income Ta6 is made on the ta6able income using the

applicable ta6 rates and ta6 laws. 9eferred ta6 arising on account of timing

differences and which are capable of reversal in one or more subse)uent periods, is

recogni(ed using the ta6 rates and ta6 laws that have been enacted or subse)uently

enacted. 9eferred ta6 assets are not recogni(ed unless there is sufficient assurance

8/10/2019 ashwin bm

47/93

"8

that future ta6able income will be available against which such deferred ta6 asset can

be reali(ed.

,.1.1, Divi#en#

3n +! st march &""' the company has paid the dividend of *e. !."" per e)uity

share of *s. !" - each. It is !" on share value of the company.

,.1.1 *arranties

Warranty costs are accrued in the year of sale, based on past e6perience.

%. N$tes $n Acc$'nts

!. ontingent liabilities not provided for

>ills discounted with the banks and others *s. 0!.

a. 9isputed 86cise 9uty matters *s. ''. & lakhs 2*s.!&+.1+ lakhs5

b. 3ther claims not acknowledged as debts *s. !

8/10/2019 ashwin bm

48/93

"9

,.2. SU ARY OF PROFIT AND LOSS ACCOUNT AND %ALANCE S

8/10/2019 ashwin bm

49/93

":

Ta0le ,.1? %alance S+eet as $n 31 st arc+ 2==,

Partic'lar Sc+e#'le31 st arc+

2==,Rs.in la4+s6

31 st arc+2=="

Rs. In la4+s6

1. SOURCES OF FUNDS

hare apital*eserves G urplus

ecured 4oan;nsecured 4oan9eferred Ta6ation 2N8T5

2. APPLICATION OF FUNDS

7i6ed $ssetsInvestments

3.C'rrent Assets5 L$ans A#vances

a. Inventories b. undry 9ebtorsc. ash G >ank >alancesd. 4oans G $dvances

".C'rrent Lia0ilities Pr$visi$ns

a. 4iabilities b. =rovisions

NET CURRENT ASSETS

TOTAL

!&+0

'1

/ut D.8 >8%$N states as the portion that circulates from one firm to another firm in the ordinary conduct of business. He thinks in the working capital and current

assets are interchangeable terms.

1.3 NEED FOR *OR-IN& CAPITAL

Working capital is generally re)uired to meet -day -to -day re)uirement like

purchase of raw materials, payment of raw materials, and payment of raw material,

payment of wages and meeting other e6penses. The need for working capital to run

the day - to -day business activities is a must. We will find hardly the business firms,

which do not re)uire any amount of working capital. Therefore every firm re)uires a

certain amount of working capital to meet its obligations.

The basic obEectives of financial management are to ma6imi(e shareholders

wealth. This is possible only when the company earns sufficient profit. The amount of

such profits largely depends upon the magnitude of sales. However sales do not

convert into cash instantaneously. There is always a time gap between the sales of

goods and receipts of cash. Working capital is re)uired for this period in order tosustain the sale activity. In case ade)uate working capital is not available for this

period, the company will not be in a position to sustain the sales since it may not be in

a position to purchase raw material, pay wages and other e6penses for manufacturing

the goods to be sold.

1." SCOPE OF *OR-IN& CAPITAL ANA&E ENT

The scope of working capital management lies in testing of short run solvency

and on the effectiveness with which the business is conducted. Tests of receivable

and inventory should be regarded primarily as relating to solvency rather than to

efficiency. tandards of turnover always be held as tentative for the final test of

effectiveness of business management.

8/10/2019 ashwin bm

54/93

,"

1., O%;ECTI ES?

!. To know the role-played by the working capital management in the

smooth and fast working of 7T4.

&. To know how efficiently working capital management is managed at 7T4.

+. To study the overall financial position of the company over ' years.

0. To have an idea of the practical appreciations of Working apital

@anagement.

1. CO PONENTS OF *OR-IN& CAPITAL ANA&E ENT

1. ana(e!ent $/ Cas+ an# ar4eta0le Sec'rities

ash is the most important current assets for the operation of the business

cash is the basic input needed to deep the business running on a continuous basis. it is

also ultimate output e6pected to be reali(ed by selling the service or product

manufactured by the firm. The management of cash raises similar issues to those

raised in relation to the management of stocks. There are costs involved in holding

too much cash 2e.g. investment opportunities foregone, loss of purchasing power

during a period of rising prices etc5 and also costs in holding too little cash 2e.g.

interest costs, lost goodwill etc5. Thus, there is a need for careful planning and

monitoring of cash flows over time.

2. ana(e!ent $/ Receiva0le

The term receivables mean the amount due from the debtors. They also

include the bills receivables. $s efficient management of these receivable is necessary

because it involves a large amount of investment it current assets. It is fund that ! +rd

of the current assets are nearly !! to !' of total assets are constituted by these

receivables. In order to keep current customers and attracts new ones. @ost

manufacturing firms find it necessary to offer trade credit. Trade credit thus creates

receivables as book debts which the firm accepts to collects in near futures. $

lucrative credit period increases sales and also the debtors

8/10/2019 ashwin bm

55/93

,,

3. Invent$r) ana(e!ent

Inventories are the stocks of the products and the components of those products that a company manufactures for sale. It is one of the maEor current asset, it

has been proved that an average about 1" of current assets are constrained of

inventories in most of the companies in India.

II RE IE* OF LITERATURE

8/10/2019 ashwin bm

56/93

,

2.1. *OR-IN& CAPITAL

The term Lworking capital managementL is the combination of the term, cashmanagement, inventory management and debtorFs management. These sub terms

totally consists the main subEect, are interdependent to each other and finally

management of working capital and the finance policy of the company. Working

capital is part of the >alance heet .Working capital is the money and assets

2e6cluding fi6ed assets i.e. buildings, machinery5 that a business uses to finance the

day-to-day operations that produce the goods or services supplied to customers.

Working capital is also the difference between current liabilities and current assets

and is known as Fnet working capitalC.

S$'rce? .0i +elp 2".c$!.6

2.2 EASURE ENT OF *OR-IN& CAPITAL

Working capital balances are measured from the financial date of corporate

balances. ;sually the working capital balance was positive value but often user of

working capital e6ceeds the sources of working capital in certain periods. In

efficiently managed companies such deficit one soon offset by gains following

periods. $ study of the cause of changes that to be place in the balances from time is

necessary. This involves the basic approach to working capital over a given period.

S$'rce? ./t.c$!6

8/10/2019 ashwin bm

57/93

,8

2.3 ESTI ATIN& OF *OR-IN& CAPITAL

$ number of methods may be used to determine the working capital needs.

The three approaches should illustrate which have been successfully applied

in practice.

3ne common approach in proEecting the working capital re)uirement is to use

ratios developed on the basis of previous year e6periences that relates inventories and

receivables to sales. The second approach is to assume working capital to be related

to sales and calculate it as a percentage of sales. $ third approach is based on the

notion that working capital is related to fi6ed capital investment therefore it is

proEected as percentage of fi6ed capital investment.

S$'rce? .a0a!r$.c$!6

2." AD ANCES IN *OR-IN& CAPITAL ANA&E ENT

@anagement and control of working capital.

i. 9evelop and present rigorous theories of working capital management that are

consistent with observed behaviorB

ii. @ake a substantial contribution to the analytical, planning and or forecasting

approaches for working capital management

iii. 9eal with the integration and application of the e6plosive new information

and computer technology with a view to conceptuali(ing the design and

development of a new generation of support systems intended to advance and

assist managerial decision making in working capitalB

iv. 4ink the various aspects of working capital management with the firmsF

financing decisions and fi6ed asset management

8/10/2019 ashwin bm

58/93

,9

v. =resent useful frameworks for inEecting a strategic working capital

management

vi. 86posit successful implementations of models and support systems in

practiceB

Y$n(

8/10/2019 ashwin bm

59/93

,:

2.8. PER ANENT AND ARIA%LE *OR-IN& CAPITAL

$ccording to I@ =andey 2&""05 there is always a minimum level of currentassets, which is continuously re)uired by the firm to carry on its business operationsB

this minimum level of current assets is referred to as permanent or fi6ed working

capital. 7or all practical purposes this re)uired will have to be met permanent or fi6ed

working capital.

$ny amount over and above permanent level of working capital is temporary,

fluctuating or variable working capital or the e6tra working capital needed to support

the change in the production and the sales activates is called the variable working

capital.

2.9. Te e6perienced by business of

any si(e, it is usually small business faces problems, especially during their startup

phase. The ideal level of working capital will vary from one company to another and

difficult to calculate. Too little working capital is known as over trading and is

coming when a business is in starting period. In starting stage some situations like the

8/10/2019 ashwin bm

60/93

=

business may be profitable on paper but has insufficient funds available to pay debts

as they become due may arise.

S$'rce? .0e(innerinvest$r.c$!6

2.1=. FUND FLO* ANALYSIS OF *OR-IN& CAPITAL

The working capital can be analy(ed through ratios. 7urther, it can be analysis

through fund flow, 7und flows analysis is the study of the sources and application of

the funds in the business. >y the use of this analysis, changes in the working capital

between two dates can be very easily analy(ed by studying the changes in current

assets and current liabilities.

S$'rce? c+'#a at5 2==36

2.12. T

8/10/2019 ashwin bm

61/93

8/10/2019 ashwin bm

62/93

2

2.1,. *OR-IN& CAPITAL ANA&E ENT? AN UR&ENT NEED TO

REFOCUS

@aynard 8. *afuse proposes that improvement of working capital by

delaying payment to creditors is an inefficient and ultimately damaging practice is

counter- productive to individuals and to the economy as a whole. laims that

altering debtor and creditor levels for individual tiers within a value system will

rarely produce and net benefit. =roposes that stock reduction generates system wide

financial improvements and other important benefits. ;rges those organi(ations

seeking concentrated working capital reduction strategies to focus on stock

management strategies base on Jlearn supply- chainK techni)ues.

S$'rce? a)nar#.E.Ra/'se6

2.1 . ESTI ATION OF INI U *OR-IN& CAPITAL FOR

CONSTRUCTION PRO;ECTS IN ALAYSIA

7orecasting cash re)uirements is essential for all contractors during the

tendering stage since cash flow at the beginning of the proEect is a maEor cause of

construction companiesC failure. ;nfortunately, estimating minimum working capital

2@W 5 is not the mainstream practice of the maEority of contactors in @alaysia.

The estimation is based on percentages of variables of contract value based on

the historical data that influence @W B the @W obtained is then e6pressed in terms

of percentage of contract value.

S$'rce? ;$'rnal O/ C$nstr'cti$n En(ineerin( An# ana(e!ent6

8/10/2019 ashwin bm

63/93

3

III. ET

8/10/2019 ashwin bm

64/93

"

3." ANALYSIS

The data collected for the study of working capital management is analy(edthrough general analytical method. *atio analysis is used for the purpose .the analysis

is depicted in tables and graphs.

3., TOOLS AND TEC

8/10/2019 ashwin bm

65/93

,

I . RESULTS AND DISCUSSION

".1. ANALYSIS OF *OR-IN& CAPITAL

The financial management always tries to maintain an ade)uate working

capital at every time, so as to carry on day today operation of the firm successfully

and economically. These are dangers in having too little or too more working capital.

Therefore a through scouting into the current assets and current liabilities is to be

made to control the working capital. The working capital balance of a concern has a

positive value but often due to the intensive user of working capital, if it e6ceeds thesources thus indicating a deficit. These deficits must be detected and set off

immediately. This process is known as analysis of working capital. It is a test of short

time solvency.

The analysis of working capital becomes necessary to know

!. If the management is using the working capital effectively.

&. If the amount of working capital is ade)uate.

+. If the current financial position is improving.

The needs for the analysis are

!. To maintain ade)uate working capital at every time.

&. To minimi(e the cost of short term financing.

+. To choose from the various sources of short term finance and employ them

in times of need.

0. To asses the effectiveness of the management of current assets.'. To study the trends in working capital positions.

1. To ma6imi(e the earning per share of the e)uity share holders.

8/10/2019 ashwin bm

66/93

".2. ANALYSIS OF *OR-IN& CAPITAL AT FTL

$n important function of the management and the prime duty of the financedepartment is to maintain an optimum level of working capital has got such an

important position because of its nature of revealing the clear cut position of the

li)uidity of the firm.

Though there are several tools of analy(ing working capital, the below

mentioned are note worthy.

!. tatement of changes in working capital.&. Working capital ratios.

1. State!ent $/ C+an(es in *$r4in( Capital

tatement of changes in working capital shows the trend to the changes in

working capital. This statement is prepared with the help of current assets and current

liabilities of two periods. It is comparative statement that is used to calculate increase

or decrease in working capital. It also indicates the overall effects of the changes,

which shows the trend in changes of working capital and its components. Table 0.!,

0.&, 0.+, 0.0, shows the statement of changes in working capital.

7ollowing are the features of statement of changes in working capital.

!5 Increase in current assets increases working capital.

&5 9ecrease in current assets decreases working capital.

+5 Increase in current liabilities decreases working capital.

05 9ecrease in current liabilities increases working capital.

8/10/2019 ashwin bm

67/93

8

;nder the net working capital concept. Table 0. . hows the Working capital of

7T4 under Net concept.

i. Net working capital includes other current assets and current liabilities.

ii. ;nlike gross working capita it indicates )ualitative concept by showing the

e6cess of current assets over current liabilities.

iii. It also indicates the li)uidity position of the firm.

;nder the gross working capital concept. Table 0.1. hows the Working capital

of 7T4 under gross concept.

!. %ross concept takes into consideration only the current assets.&. It indicates the gross working capital is a )uantitative concept

+. %ross concept does not indicate the li)uidity position of the firm.

8/10/2019 ashwin bm

68/93

9

Ta0le ".1? State!ent $/ C+an(es in *$r4in( Capital /$r t+e Year 2===>=1 *+en

C$!pare# t$ 2==1>=2.

Partic'lars 2===>=1 2==1>=2 Increase Decrease

CURRENT ASSETS

Inventoriesundry 9ebtors

ash at >ank

4oans G $dvances

TOTAL CURRENT ASSETS A6

CURRENT LIA%ILITIES %6

urrent liabilities

NET *OR-IN& CAPITAL A>%6

Increase in Net Working apital

TOTAL

!&< .1!'!!."1

'!&.

8/10/2019 ashwin bm

69/93

:

Ta0le ".2? State!ent $/ C+an(es in *$r4in( Capital /$r t+e Year 2==1>=2 *+en

C$!pare# t$ 2==2>=3

Partic'lars 2==1>=2 2==2>2==3 Increase Decrease

CURRENT ASSETS

Inventories

undry 9ebtors

ash at >ank

4oans G $dvances

TOTAL CURRENT ASSETS A6

CURRENT LIA%ILITIES %6

urrent liabilities

NET *OR-IN& CAPITAL A>%6

Increase in Net Working apital

!& +.!1

8/10/2019 ashwin bm

70/93

8=

Ta0le ".3? State!ent $/ C+an(es in *$r4in( Capital /$r t+e Year 2==2>=3 +en

C$!pare# t$ 2==3>="

Partic'lars 2==2>=3 2==3>=" Increase Decrease

CURRENT ASSETS

Inventoriesundry 9ebtors

ash at >ank

4oans G $dvances

TOTAL CURRENT ASSETS A6

CURRENT LIA%ILITIES %6

urrent liabilities

NET *OR-IN& CAPITAL A>%6

Increase in Net Working apital

!/00.!1!0&".'/

0'0.01

/

&/ ./"

TOTAL :,9. 9 :,9. 9 :1".12 :1".12

8/10/2019 ashwin bm

71/93

81

Ta0le "."? State!ent $/ C+an(es in *$r4in( Capital /$r t+e Year 2==3>=" +enC$!pare# t$ 2==">=,

Partic'lars 2==3>=" 2==">=, Increase Decrease

CURRENT ASSETS

Inventories

undry 9ebtors

ash at >ank

4oans G $dvances

TOTAL CURRENT ASSETS A6

CURRENT LIA%ILITIES %6

urrent liabilities

NET *OR-IN& CAPITAL A>%6

Increase in Net Working apital

&!"+.!!

!//0.0!

1 !.0+

+

8/10/2019 ashwin bm

72/93

82

Ta0le ".,. Anal)sis $/ Sales

Pr$#'cts 2==3>=" 2==">=,

T)resQuantity In NoO

olume *s. In 4akhsO

T'0esQuantity In NoO

olume *s. In 4akhsO

0&

01"+&. Net working capital $->O0"1 .'

8/10/2019 ashwin bm

73/93

83

$ ratio is a statistical yardstick that measures the relationship between the two

concerned terms. The important of the ratio analysis lies in the fact that it presents

facts on a competitive basis and enables the drawing of influences regarding the

performance of the given terms.

".3. *OR-IN& CAPITAL ANALYSIS T

8/10/2019 ashwin bm

74/93

8"

3. B'ic4 Rati$?

It establishes a relationship between Quick or 4i)uid assets and currentliabilities.

Normally Quick *atioCs standard is !#!B it is more rigorous and penetrating

rest of li)uidity position. The )uick ratio of 7T4 in &""0-"' is ".

8/10/2019 ashwin bm

75/93

8,

The difference between current assets and current liabilities, e6cluding short-

term bank borrowing, Net working capital is sometimes used as a measure of a firms

li)uidity.

This ratio indicates the ability of the organi(ationCs net working capital, which

can be financed by the net assets only. The 7T4 is having ".

working capital ratio as against ".+' previous year.the ratio has increased due to

increasing the current asset

The Net Working apital *atio are shown in Table no 0.!! and fig 0.0

8/10/2019 ashwin bm

76/93

8

Ta0le ".9. C'rrent Rati$

Years C'rrent Assets C'rrent Lia0ilit) Rati$&"""-&""! + " .1 +"

&""&-&""+ & 1/.1& &

8/10/2019 ashwin bm

77/93

88

Ta0le? ".1=.Cas+ Rati$

Years Cas+ C'rrent lia0ilities Rati$&"""-&""! '!&.

".3.2. Levera(e Rati$?

8/10/2019 ashwin bm

78/93

89

4everage ratios are calculated to Eudge the long term financial position of

the firm.

1. T$tal De0t Rati$?

9ebt ratios may be used to analy(e the long term solvency of the firm, The

firm may be interested in knowing the proportion of the interest-bearing debt in the

capital structure.

This ratio indicates percentage of amount with the lender as invested in the

current assetsB 7T4Cs total debt ratio ".// in this year as against ".!! previous year.

This says that the lenders invest only ".// of the net fi6ed assets.

The Total 9ebt *atio are shown in Table no 0.!& and fig 0.'

2. De0t>E 'it) Rati$?

9ebt 8)uity ratio is used to analy(e the long-term solvency of the firm. 9ebt-

8)uity ratio e6presses the relationship between debt and e)uity.

The standard ratio for the debt e)uity mi6 is !, compaired to that of the last

year, the debt e)uity ratio has increased, which implies that the financial structure of

the company is unsound. This ratio indicates the contribution in the business i.e. 0.&+

is the creditorCs contribution in the >usiness of 7T4.

The 9ebt-8)uity *atio are shown in Table no 0.!+ and fig 0.1

8/10/2019 ashwin bm

79/93

8:

Ta0le? ".12 T$tal De0t Rati$

Years T$tal De0t Net Assets Rati$&"""-&""! '!/.!/ &'/

&""!-&""& 1+/.+& 1""."" !."1&""&-&""+ /&1.0& '1/."< !.0'&""+-&""0

8/10/2019 ashwin bm

80/93

9=

3. C$vera(e Rati$

It is used to firmCs debt-servicing capacity, It is computed by dividing earnings

before interest and ta6es by interest charges.

This ratio indicates the coverage of interest payable from the total profit

earned by the company. This year 7T4 has got the profit +./ times with respect to

0.

8/10/2019 ashwin bm

81/93

91

Ta0le? ".1" C$vera(e Rati$

Years E%IT Interest Rati$&"""-&""! 110.++ &/0.&" &.++&""!-&""&

8/10/2019 ashwin bm

82/93

8/10/2019 ashwin bm

83/93

93

This ratio shows the firmCs ability in generating sales from all financial

resources committed to total assets. Total assets include net fi6ed assets and current

assets.

The net asset turnover of 7T4 is /.&! times as against 1.'+ times of previous

year. It indicates that 7T4 is producing /.&! of sales for a rupee of capital employed

in net assets.

The $ssets Turnover *atio are shown in Table no 0.!< and fig 0.!&

8/10/2019 ashwin bm

84/93

9"

Ta0le? ".1 Cas+ T'rn$ver Rati$

Years Sales Cas+ Rati$J&"""-&""! !"+&&.01 '!&.

8/10/2019 ashwin bm

85/93

8/10/2019 ashwin bm

86/93

9

Ta0le? ".2=. *$r4in( Capital T'rn$ver Rati$

Years Sales Net C'rrent Assets Rati$&"""-&""! !"+&&.01 1!&. " !1./' Times&""!-&""& !00/".!' 0 '.&+ +".0 Times&""&-&""+ !/&01.

8/10/2019 ashwin bm

87/93

98

".3.". Pr$/ita0ilit) Rati$?

=rofitability ratios are calculated to measure the operating efficiency of the

company.

1. Net Pr$/it ar(in?

Net profit ratio establishes a relationship between profit after ta6 and sales and

indicates managementCs efficiency in manufacturing, administering and selling the

products.

9uring the year &""0 the ratio was "."! it means 7T4 was under loss and in

the year &""' the ratio is ".""0, it implies that 7T4 has incurred heavy loss in the

year &""'.

The Net =rofit @argin *atio are shown in Table no 0.&+ and fig 0.!1

2. Ret'rn $n E 'it)?

This ratios reflects the efficiency with which a management produces each

unit of a product, this ratios shows that organi(ationCs ability or capacity in using the

resources utmost. 9uring the year &""0 the ratio was "."1and in the year &""' the

ratio is "."+&,7T4 as to increase return on e)uity ratio to satisfy the share holders.

The *eturn on 8)uity are shown in Table no 0.&0 and fig 0.!

3. Earnin( Per S+are Rati$

8arning per hare *atio indicates whether or not the firmCs earnings power on

per share basis as changed over that period. 8arning per share ratio in the year &""0

was &./0 and it changed to !.1+ in &""'. because of more debts .

8/10/2019 ashwin bm

88/93

99

Ta0le? ".23. Net Pr$/it ar(in

Years Pr$/it A/ter Ta Sales Rati$&"""-&""! !1 . / !"'&"./< "."!'&""!-&""& +'&."1 !01&1.!< "."&

&""&-&""+ '!

8/10/2019 ashwin bm

89/93

9:

"." FINDIN&S

ompany is at present using three modules vi( 7inance, $ccounting, materialmanagement G production planning.

The company has better W @B we have seen that the co. has capability to

raise outsiderCs funds easily. The gross W has increased over the years.

W cycle shows the companyCs operating cycle is acceptable.

8ven though the 8= is decreased compared to previous year, the co. is

earning sufficient net profit that is shared by shareholders, and at present 8=

is *s. !.1+.

"., SU&&ESTIONS

The ompany is e6panding day by day to meet the challenges of competitions

in the market. Thus, with a good infrastructure and efficient human forces the

company is moving towards the success rapidly.

$ still better efficient planning of the working capital management can raisemore profits for the company taking it to the heights of prosperity, which make to

reduce the companiesC working capital.

!5 The net working capital has been fluctuating, so this would be beneficial to

the firm to some e6tent.

&5 The debtorCs turnover ratio has been increasing. o this will reduce the

working capital re)uirement to the company, if the trend is continued.

+5 The inventory turnover ratio has been increasing. o this will reduce the

working capital re)uirement to the firm.

05 $s to the company profiles, the company had a capacity to e6tend their

production activity and e6pansion.

'5 The li)uidity position with respect to current assets and current liability is not

satisfactory.

15 urrent ratio and acid test ratio is not up to the standard.

8/10/2019 ashwin bm

90/93

:=

. SU ARY AND CONCLUSION

The primary goal of working capital management in a firm is to manage short

R term funds re)uired for day to day business activities of a firm. The company is

re)uired effective working capital management policy for a smooth, uninterrupted

production and sales activities.

S'!!ar)

7T4 has good working capital position. ompany can meet its short-term

obligations.

The various ratios calculated shows that company has good financial position.

4i)uidity and =rofitability ratios are increasing.

$ctivity ratios show that company is not using its operational efficiency to the

fullest e6tent. >ut in the year &""0-&""' it is showing some signs of

improvement.

The leverage analysis of 7alcon Tyres 4td. gives an impression that it is not a

risky company.

C$ncl'si$n

The study of working capital management at 7.T.4 revealed that the

management of working capital has been greatly responsible for level of profits

earned by the firm along with tremendous e6pansion activities. The turnover of

current assets employed by 7.T.4 efficiently used its working capital funds, which

8/10/2019 ashwin bm

91/93

:1

happens to be most important factor for the running of business enterprise with

normal profits.

The basic obEective of working capital management is to have a balanced

li)uidity position. The company has a positive net working capital during all the

years of its operation. This indicates the companyCs good li)uidity position. This is

also made clear by the current assets ratio, which is greater than one all the years. It

means that the investment in current assets is more sufficient to meet its obligations.

The company is e6panding its operations and need more working capital tosupport the growing needs of the operation. $t present the company has taken up

several e6pansion programs such as production of cycle and farm tyres to cater need

of our rural factors.

8/10/2019 ashwin bm

92/93

:2

I. REFERENCES

$non, 2&""+5, SWorking apitalC, www.bi(help &0.com.

$non, 2&""+5 , @easurement of Working apital, www.ft.com.

$non, 2&""+5,Working apital and 7inancing =roblems of the mall >usiness,

www.ft.com .

$non, 2&""+5, Ways to Improve of Working ash 7lows, www.ft.com .

$non, 2&""+5, =roblems in Working apital, www.biginnerinvestor.com

$non, 2&""+5, 8stimating of Working apital, www.abnamro.com.

$ 8 Duly $ugust &""+, 8stimation of @inimum Working apital for onstruction

=roEects in @alaysia, Dournal of onstruction 8ngineering $nd @anagement,

ol. ', pp '1-1".

hudawat, 2&"""5, 7und 7low $nalysis, 7inancial @anagementK ,8ight 8dition,

ikas =ublication, pp +&-+/.

%eofrey.T.@ills,2&""&5 The Impact of Inflation on apital >udgeting and Working

apital, www.ft.com.

Henry.H.Dorden, 2!

8/10/2019 ashwin bm

93/93

:3