BUDGETARY CONTROL at Maruti Suzuki India Ltd.

SUBMITTED BY: SUPERNVISED BY: ANITA NANDI BARMANDEBASISH SAHABBA(H)NSHM COLLEGE OF MANAGEMENT AND TECHNOLOGY DURGAPURREG NO. 121492010231

Department of Management StudiesThis is to Certify that the Study Paper entitled is BUDGETARY CONTROL at Maruti Suzuki India Ltd. a bonfire work carried out by DEBASISH SAHA holding W.B.U.T. registration number as 121492010231 and college registration number as 1272069 is a student of NSHM College of Management and Technology, Durgapur, in fulfilment for the award of Degree of Bachelor in Business Administration (BBA) under West Bengal University of Technology. This Study Paper has been approved as it satisfies the academic requirement in respect of project work prescribed for the BBA (H) degree.He has adhered to the guidelines chalked out during our consultation while preparing this study paper.The study paper has been found highly satisfactory.I wish him all the best in future.

SOUMEN CHATTERJEEANITA NANDI BARMANHOD OF MANAGEMENT STUDIES STUDY PAPER GUIDE

MAY 2, 2015

Declaration Of originality DECLARATIONI DEBASISH SAHA student of NSHM College of Management & Technology, Durgapur BBA (H) 3rdyear, batch-012, roll no.-14905012010 under WBUT hereby declare that the project entitled BUDGETARY CONTROL at Maruti Suzuki India Ltd.. Is an original work and same has not been submitted to any other institution for the award of my any other degree...

DEBASISH SAHA

(Name and signature)

ACKNOWLEDGEMENTI am sincerely thankful to Professor Anita Nandi Barman (Project Faculty Guide); under whose guidance I have successfully completed this project and time spent with them had been a great learning experience. I think their constant encouragement, warm responses and for filling every gap with valuable ideas has made this project successful. They made it possible for me to put all my theoretical knowledge to work out on the topic: BUDGETARY CONTROL at Maruti Suzuki India Ltd.A special thanks to the Head Of The Department , Mr. Soumen Chatterjee, who has given his full effort in guiding as well as encouraging me to go that extra mile and maintain my progress in track.Last but not the least I would like to thank my friends & Google-The search engine which has helped me a lot to assemble the journals and give suggestions about the different analysis.

Abstract The first project - BUDGETARY CONTROL FOLLOWED IN MARUTI SUZUKI INDIA LIMITED involves the reviewing the whole process of budget preparation and budgetary control followed in Maruti Suzuki India limited. The budgetary system followed in Maruti Suzuki India limited is very unique and is based upon a similar system followed in its parent company from Suzuki Motor Corporation Japan. Annual budgeting exercise for Maruti Suzuki India limited starts in December every year for next accounting year and gets finalized by February end. This budgetary process followed by Maruti ensures proper utilizations of funds by different departments of the company. There are over 350 + departments in the company. So without effective budgetary control system in place, it would be impossible for the company to ensure proper utilization of the funds in the company. The first step of this project is to understand and review how the different departments prepare their budgets and how the budgeted balance sheet and budgeted profit and loss account for the whole company is prepared. Every year each department prepares a budget for their department on the basis of their projected expenses. These budgets are sent to the budgeting and costing department of the company, which on the basis of these budgets prepares budgeted balance sheet and budgeted profit and loss account. After preparing budgeted balance sheet and budgeted profit and loss account, budgeting department presents these accounts in front of board of directors for their approval.The second step of this project is to understand and review the process of budgetary control followed in Maruti Suzuki India limited. In Maruti Suzuki budgetary control and budget monitoring is a continuous process, which involves monitoring of the budgets of different departments by comparing the actual expenses of the respective departments with their projected expenses and finding out reasons for any deviations if any. The final step of this project is to suggest measures to make this whole process more effective, less time consuming and error proof.

CONTENTS SERIAL NO CHAPTERSPAGE NO

1.INTRODUCTION 6-18

2.REVIEW OF LITERATURE 19-25

3.OBJECTIVES OF THE SRUDY 26

4.RESEARCH OF METHODOLOGY 27-28

5.SWOT ANALYSIS 29-32

6.BUDGET PREPARATION PROCESS FOLLOWED IN MARUTI SUZUKI INDIA LIMITED

33-36

7.BUDGETORY CONTROL PROCESS 37-40

8.RATIO ANALYSIS 41-49

9.RECOMMENDATION 50

10.

CONCLUSION 51

11.BIBLIOGRAPHY 52

MARUTI SUZUKI INDIA LIMITED

INTRODUCTION

Maruti Suzuki is one of indias leading automobile manufacturers and the market leader in the passenger car segment, both in terms of volume of vehicles sold and revenue earned. It is largely credited for bringing an automobile revolution to india. Maruti Udyog Limited was established in Feb 1981 through an act of parliament, as a government company with Suzuki Motor Corporation of japan holding 26 per cent stake.The joint venture agreement was signed between Goverment of India and Suzuki Motor Company (now Suzuki Motor Corporation of Japan) on oct 1982. Suzuki Motor Company was chosen from seven prospective patners worldwide.This was because of their undisputed leadership in small cars and also because of their commitment to actively bring to MUL contemporary technology and Japanese management practice (which had catapulted japan over USA to the status of the top auto manufacturing country in the world). Maruti udyog limited was renamed to Maruti Suzuki India limited(MSIL) on 17 september, 2007.

Until recently, 18.28% share of Maruti Suzuki, a subsidiary of Suzuki Motor Corporation Japan, was owned by the Indian Goverment, and 54.2% by Suzuki of Japan. On May 10, 2007 Govt. Of India sold its complete share to Indian financial institutions. With this, Govt. Of India no longer has stake in Maruti Suzuki India Limited. The company went into production in a record time of 13 months and the firsts car was rolled out from Maruti Suzuki India Limited Gurgaon in December, 1983. 1 The company went into production in a record time of 13 months and first car was rolled out from Maruti Suzuki India limited Gurgaon in December 1983. In 2001, Maruti Suzuki india ltd became one of the first automobile companies anywhere in the world to get an ISO 9001:2000 certificate. A V Belgium has rated the companys quality system and practices as a BENCMARK FOR THE AUTOMOTIVE INDUSTRY WORLD WIDE, global auditors For International organization for standardization. Since Inception , Maruti Suzuki produced and sold over 7.5 million vehicles, including almost 500,000 units in Europe and other export market. In facts, every 22 seconds a car is rolled out of Maruti Suzuki .It is Suzukis largest manufacturing facility, outside Japan offering 11 models in over 100 variants.MANUFACTURING FACILITIES Maruti Suzuki have two manufacturing facilities in India, one in Gurgaon and other in Manesar , North India.

Gurgaon plant- Maruti Suzukis Gurgaon plant houses three fully integrated plants. While the three plants have a total installed capacity of 350,000 cars per year, several productivity improvements or shop floors kaizens over the year have anabled the company to manufacture nearly 650,000 cars per tear at the Gurgaon facilities. The entire facility is equipped with more than 150 robots,out of which 71 have been developed in house. More than 50 per cent of shop employee have been trained in japan.

Manesar plant- Maruti Suzukis Manesar plant has been made to suit Suzuki Motor corporation(SMC) and Maruti Suzuki india limiteds(MSIL) global ambitious. It is rated high among Suzukis best plant worldwide the plant was inaugurated in February 2007.

The plant has several in-built system and mechanisms to ansure that cars being manufactured here are of good quality. There is a high degree of automation and robotic control in the press shop , weld shop to carry on manufacturing work with acute precision and high quality. In particular , areas where manual operations are hazardous or unsafe have been equipped with robots.The plant is designed to be flexibile: diverse car model can be made here conveniently owing to automatic tools changers, centralized weld control system and numerical control machines that ensure high quality.

The plant at Manesar is the companys fourth car assembly plant and has started with an initial capacity of 100,000 cars per year. This will be scalled up to 300,000 cars per year. A total investment of Rs 2,500 crore is invested in this car plant in 2010.

Diesel engine plant- Suzuki powertrain india limited the diesel engine plant at Manesar is Suzuki & Marutis first and perhaps the only plant designed to produced world class diesel engine and transmissions for cars. 3This plant is under joint venture company, called Suzuki powertrain india limited(SPIL) in which SMC holds 70 per cent equity with the rest held by Maruti Suzuki. The diesel engines manufactured at this plant will also be exported to SMC companies across the world.

This facility , too, has a high level of automation. Final insoection of components is done through automatic measuring and making machines, which led to a uniform and error free production.

Maruti Suzukis contribute as the engine of growth of the Indian auto industry, indeed its impact on the lifestyle and psyche of an entire generation of Indian middle class, widely acknowledged.

......Our Vision...................................................................................................The Leader in The Automobile Industry,Creating Customer Delight and Shareholders Wealth; A Pride of India.

.........Our Core Value......................................................................................................................

Customer Obsession Fast, Flexible and First Mover Innovations and Creativity Networking and Patnership Openness and Learning.

Udyog limited, a subsidiary of Suzuki Motors Corporation of Japan, has been the leader of the Indian car market for about two decades Maruti. Its manufacturing plant, lacated some 25 km of New delhi in Gurgaon, has an installed capacity of 3,50,000 units per annum, with a capacity to produce about a half a million vehicles. The company has a portfolio of 11 brands , including Maruti 800, omni, premium small car Zen, international brands Alto and WagnoR, off-roader Gypsy, mid size Esteem, luxury car baleno, the MPV, Versa, Swift and Luxury SUV Grand VitaraXL7. In recent years, Maruti has made recent strides towards its goal of becoming Suzuki Motor Corporations R and D hub for asia. It has introduced upgraded version of Wagon-R Zen and Esteem, completely designed and styled in-house. Marutis contribution as the engine of growth of the Indian auto industry, indeed its impact on the lifestyle and psyche of an entire generation of Indian middle class, is widely acknowledged. Its emotional connect with the customer continues.

Maruti tops customer satisfaction again for sixth year in arrow according to the J.D power asia pacific 2005 India Customer Satisfaction Index (CSI) study. The company has also ranked highest in sales satisfaction study. The companys quality systems and practices have been rated as a benchmark for the automotive industry world wide by A V Belgium, global auditors for international Organization for standardization.Year of establishedmentFebruary 1981

VisionThe Leader in the Indian Automobile Industry, creating Customer Delight and Shareholders Wealth; A pride of india.

IndustryAutomotive- Four wheelers

Listing & its codesBSE- Code: 532500NSE- Code: MarutiBloomberg: MUL@INReuters: MRTI.BO

Joint VenturesWith Suzuki Motor company, now Suzuki Motor Corporation , of Japan in October 1982.

Registered & Corporation Office11 Floor, jeevan prakash 25, Kasturba Gandhi Marg New Delhi- 110001, India

WorksPalam Gurgaon RoadGurgaon-122015Haryana, India

Websitewww.marutiudyog.com

QUICK FACTS

In keeping with its leadership position , Maruti supports safe driving and traffic management through mass media message and a state-of the art driving training.institute that it manages for the Delhi government. 7 The companys servise businesses including sale and purchases of pre owned cars (True Value), lease and fleet management service for corporate(N2N), Maruti Insurance and maruti Finance are now fully operational.These initiatives, besides providing total mobility to customer in a convenient and transparent manner, have helped improved economic viability of the companys dealership.

The company is listed on Bombay stock exchanged and National stock exchanged.

EXPORT OF MARUTI SUZUKI INDIA LIMITED

In march 2007 Maruti Suzuki India limited crossed cumulative export figure of 450,000 vehicles since its firsts export in 1986. It is Indias largest passenger car manufacturer and has a global presence with a well established network in several countries across asia, Europe, Africa, south and latin aamerica. Europe has been the largest market wiyh export of over 280000 units. Even in the highly developed markets of neitherland, UK, Germany, France & Itly , Maruti has made a mark. The top ten destination of the cumulative exports have been Neitherland, Itly, UK, Germany,Algeria, Chile, Hungary,Srilanka, Nepal and Denmark in that order.

Maruti has also entered some unconventional market like Anglo, Benin,Djibouti, Ethiopia, Morocco, Uganda, Algeria and costa rica and witnessed sizeable growth. The Middle-east region has also opened up and is showing good potential for growth. Some market in the region where Maruti ha a good presence are Saudi Arabia, Jordan, Kuwait, Bahrain, Qatar, and UAE. In Europe the number of unit sold is 280000 in 34 countries, in Africa it is 45000 units, in Latin America it is 29000 units and Oceania the number of units sold is 6300 units.

PRODUCT PORTFOLIO The company has a product portfolio of 11 brands with over 100 variants, including Maruti 800, Alto,WagnoR, Maruti Swift, Zen Estilo, Gypsy, DZire, Versa, SX4, Ritz, A- star and Grand Vitara. Three Maruti Suzukis cars namely Maruti Zen Estilo, Maruti Swift and Maruti SX4 walked away with 2007- India Automotive performance, Execution and layput study awards in their respective categories. In 2007 initial Quality study also, Maruti swift walked away with the highest IQS in the premium compact car segments.

PRODUCTS OF MARUTHI SUZUKI :

Available Car Models Starting Price(Ex-showroom, Mumbai)

Maruti Suzuki 800 Rs. 1,97,214

Maruti Suzuki Omni Rs. 2,03,565

Maruti Suzuki Alto Rs. 2,36,843

Maruti Suzuki Zen Estilo Rs. 3,13,085

Maruti Suzuki Wagon R Rs. 3,22,157

Maruti Suzuki Wagon R Duo Rs. 3,39,532

MILE STONES

1981 Maruti Udyog Ltd. was incorporated.

1982 Steped into a JV with SMC of Japan.

1983 Maruti 800, a 796 cc hatchback, India's first affordable car was produced.

1984 Installed capacity reached 40,000 units. Omni, a 796 cc MUV was in production.

1985 Launch of Maruti Gypsy (970cc, 4WD off-road vehicle).

1986 Produced 100,000 vehicles (cumulative production).

1987 Exported first lot of 500 cars to Hungary.

1988 Installed capacity increased to 100,000 units.

1992 SMC increases its stake to 50 per cent.

1994 Produced the 1 millionth vehicle since the commencement of production.

1995 Second plant launched, the installed capacity reached 200,000 units.

1996 Launch of 24-hour emergency on-road vehicle service.

1997 Produced the 2 millionth vehicle since the commencement of production.

1998 Launch of website as part of CRM initiatives.

1999 Launch of Maruti - Suzuki innovative traffic beat in Delhi and Chennai as social initiatives.

2000 IDTR (Institute of Driving Training and Research) launched jointly with Delhi government to promote safe driving habits.

2001 Launch of customer information centers in Hyderabad, Bangalore, and Chennai.

2002 SMC increases its stake to 54.2 per cent. Launch of Maruti Finance with 10 finance companies in Mumbai. Start of Maruti True value in Mumbai.

2003 Production of 4 millionth vehicle. Listed on BSE and NSE after a public issue oversubscribed 10 times.

2004 Maruti closed the financial year 2003-04 with an annual sale of 472122 units, the highest ever since the company began operations 20 years ago.

2005 The fiftieth lakh car rolls out in April, 2005.

2007 Swift diesel launched.

2008 World premier of concept A-star at 9th expo.

2009 Ritz has launched.

ACCOLADES 2008-2009 Maruti Suzuki was ranked first in customer satisfaction in an annual survey conducted by JD Power for the seventh time in a row. The company was ranked first in India for sales satisfaction for the third time in a row by JD Power Asia Pacific. The company won the Avaya Global Connect Customer Responsiveness award 2006. The company was ranked 91among world`s most reputed companies reported by Forbes magazine. Among automobile players, it ranked 5th in the world, ahead of many global giants. Business World ranked Maruti as Indias most respected automobile company. Business today listed the company among Indias 10 best marketers. Maruti Suzuki won the Asia Pacific PLM excellence award for 2006 from UGC Corp, leading global provider of product life cycle management (PLM) software and services. TNS Automotive ranked Maruti Suzuki first for Corporate Social Responsibility. Manesar car assembly plant is ranked amongst the top two Japanese subsidiaries overseas, by Nikkei (Nihon Keizai Shimbun), for the year 2007.

BUDGET: A budget is a detailed plan expressed in quantitative terms that specifieshow an organization will acquire and use resources during a particular period of time.In other words a budget is a systematic plan for the efficient utilization of resources.Budget serves as a benchmark against which actual results can be compared.What are the Key Purposes of Budget?

Planning: Preparing budgets forces organization to plan ahead.Facilitate Co-ordination: To be effective, each department throughout the organization must be aware of plans made by other departments. Allocating Resources:As resources are limited, budget provides one means of allocating resources among competing uses. So, that resources can be used in a bestpossible manner.Exercising control:Budgets helps in managing financial and operational performance,by comparing actual performance against the planned performance.In a business organization, a budget represents an estimate of future costs andrevenues. Budgets may be divided into two basic categories:1) Capital Budgets2) Revenue Budgets

Capital budgets: are directed towards proposed expenditures for new projects and oftenrequire special financing. For example ? installing a new plant or expanding the productioncapacity.Revenue budgets: are directed towards achieving short-term operational goals of theorganization, for instance, production or profit goals in a business firm. Operating budgetsmay be sub-divided into various departmental of functional budgets.Budgetary control:No system of planning can be successful without having an effectiveand efficient system of control. Budgeting is closely connected with control. The exercise of control in the organization with the help of budgets is known as budgetary control. The process of budgetary control includes:1. Preparation of various budgets.. 2. Continuous comparison of actual performance with budgetary performance.. 3. Revision of budgets in the light of changed circumstances.

REVIEW OF LITERATURE

Although there was an earlier intention to produce light commercial vehicles andmedium sized-cars, the idea of producing a fuel efficient small car prevailed. In 1981, Marutis board of directors decided that the vehicle to be manufactured would be a small car and that the engine size should be kept below one liter (Venkataramani, 1990). The decision was driven by the rationale that the Maruti project could only succeed if mass production was realized. This, in turn, was tightly linked to the cars affordability and cost of operation. The decision was further supported by market research findings as listed below. The survey of potential purchasers drawn from nine cities which then accounted for 60% -70% of the country's car owning population revealed that 90% of car use was within a city, the individual car owner travels 800 km a month on an average and that the average number of passengers in a car was four because cars were largely used for office-going purposes. Also, only 20%-30% of the respondents indicated a desire to purchase a car in the next two years at the existing prices, but for a new price range of between Rs.40.000 to Rs.55,000 the proportion of likely buyers went up to 43%-45%. Finally, the survey revealed that the two most important factors considered while purchasing a car were fuel efficiency and initial capital cost. Of the total sample, 37% preferred a small car and only 18% preferred a medium-sized car. "This strengthened our belief that the earlier decision to go in for a medium-sized family car was wrong.So we decided to manufacture a small car," says Bhargava. In the light of these requirements, Japanese manufacturers turned out to be the more attractive partners: Once the Japanese entered the race, the Europeans were almost automatically eliminated. The Peugeot and Volkswagen offers were reportedly over 50% more expensive than the Japanese offers. Apart from the obvious Japanese superiority in small-car technology, a related reason for the Maruti Udyog team concentrating on Japanese offers was that they had derivatives such as vans, a pick-up truck and a four-wheel drive jeep all using the same engine and transmission as the car. This offered Maruti Udyog the prospect of catering to a larger market and made possible mass production and economies of scale since the cars and derivatives could be made with the same engine. But the factor which decisively swung the balance in favor of the Japanese was the promise that Indo-Japanese collaboration offered achance to introduce the work culture and management. (Shirali, 1984: p.5).Ultimately, the Indian Government selected Suzuki as a partner because the company convinced with its small car experience and product portfolio particularly Suzuki's 796cc, SS80F model (see table given below) the projected manufacturing cost and product price, and its flexible approach in the negotiations.For Maruti-Suzuki, this situation created a particularly protective and conducive environment. On the one hand, the company could, with the help of international cooperation, adopt state-of-the-art small car technology and out compete, its domestic rivals. On the other hand, the company was shielded from international competition through the licensing system and protectionism that remained in place (Becker-Ritterspach, 2007).Although the deregulation of the Indian economy marked the beginning of a new policy for passenger car production and foreign involvement, core themes remained unchanged and also benefited the emergence of a small car path. One important aspect was the continued balance of payment problem of the Indian economy. As the Indian economy was fully dependent on oil imports, the fuel efficiency of cars directly impacted Indias balance of payments. It was, therefore, an ongoing national goal to keep fuel consumption low by promoting small car production. The factor explaining the successful establishment of the small car was probably related to the political will to render Sanjay Gandhis brain child of a peoples car a success. Not only did the company benefit from the limited market reforms, but it also profited from preferential treatment by the Indian Government who held a majority stake in the company. A range of policy measures were specifically drafted to support the company. For example, in 1983 the Indian Government issued a special notification extending substantial reduction in customs and excise duties to automobiles that had a capacity of no more than 1000cc . While this notification strongly benefited Maruti-Suzuki, which was about to produce an 800cc vehicle, the other two main competitors were put at a disadvantage by this measure. Maruti-Suzuki clearly became a national champion whose development Indira Gandhi vowed in 1983 at the factory inauguration would be her personal interest. It is probably precisely the politicized origin that also allowed Maruti-Suzuki to develop without too much direct political interference in its operations. Although Maruti-Suzuki benefited from economic reforms and preferential treatment as a public sector company, its relation to the government diverged from earlier modes Government government largely abstained from influencing operative decisions in the company to render the project a success . Thus, it was essentially this interplay of an emerging market demand for small, fuel efficient cars, economic deregulation and political support that shaped the emergence of Indias small car path. Its emergence was inextricably linked with the Government Company Maruti Udydog and players Hindustan Motors (HM) and Premier Automotive Limited (PAL) lost their market share and were outperformed by Maruti. From the 1980s onward, Indian passenger car sales were dominated by Maruti cars I of its introduction, the Maruti 800 not only offered superior product technology, but also sold at a substantially lower price than the cars of the main competitors HM and PAL. Until the market liberalization in the 1990s ,Maruti that absorbed in the early 1990s about 62.4 % of the market share. Remaining market share was shared by Premier Automobiles Limited Motors with 13.9% share. The Emergence of India as a Worldwide Research and Production Hub for Small Cars. Economically, the small car path in India has reached a sustainable level. In the past this sustainability was largely driven by the nature of domestic demand. However, the Indian government envisions this path growing even stronger by turning India into a worldwide R&D and production hub. The Automobile Mission Plan states in this context that- Export opportunities for four wheelers would lie primarily in the small car segment as Indian companies have gained expertise in manufacturing vehicles in this segment and enjoy an advantage over other low cost countries. India should capitalize on this expertise and target becoming a manufacturing hub for A/B class vehicles. This is already being leveraged by OEMs like Hyundai with Santro, Suzuki with Maruti 800/Alto and TATA Motors with Indica. (Ministry of Heavy Industries & Public Enterprises, 2006. Concrete measures recommended or in the process of being implemented included the following-1. Investment support (deduction on R&D expenditure,2. Excise duty concessions, tax/levy exemption, research grants)3. Introduction of stiffer emission standards; infrastructure investment (ports, roads, rail, energy/power)4. Setting up of testing-, certification and homologation facilities.5. Development of centers of excellence in the area of: noise (at Mansear), vibration& harshness, auto components (at Mansear); engine and material testing (at Pune); automotive safety and crash testing (at Chennai); testing track and vehicle dynamics (at Indore) development of focused lab facilities at the Indian Institutes of Technology and Management (Ministry of Heavy Industries & Public Enterprises, 2006). While the National Automotive Testing and R&D Implementation Project (NATRIP) ,is envisioned to play a coordinating role, different States have also taken individual initiatives with regard to providing R&D facilities. The government of Maharashtra, for example, has set up what it calls an Auto Cluster providing testing facilities for OEM and their suppliers (Interview MCCI). While the political initiative is there, the question is to what extent the Indian automobile industry actually moves beyond being a mere technology adopter and producer for the domestic markets? In terms of exports, the 2000s show a new trend pointing towards rising exports in the passenger car sector. What is more, most of the vehicle exports do focus on the lower market segments with Hyundai being the dominant exporter. With regard to R&D there was an emerging trend of using and developing local capability. On the one hand there is a general development of increasing R&D expenditure in the Indian automobile industry, which has also been stimulated recently by more stringent emission regulations (Shastry, 2004). On the other hand, there is an increasing small car R&D focus among some manufacturers, who seek to develop India into their corporate hub for car R&D. A case in point is Maruti-Suzuki that is in the process of developing the Indian operation into a R&D hub for small cars. Similarly, Tata has invested substantially in small car R&D in recent years (Venugopal, 2005) and Hyundai and Fiat have also established regional R&D centers in India (The Economist Intelligence Unit Limited, 2006). The Tata Nano is probably the most recent and prominent example of Indias rising local R&D capability in the small car segment. While Tata strongly relies on local partners/suppliers (most of which have international involvement like Bosch, Freudenberg, Continental, Johnson 103 Controls, Denso, Delphi, Ficosa, EDAG, Taco Visteon, INA, FAG, Mahle, Tenneco (Lamparter, 2008; Lang, 2008)) to develop the Nano and its components, it is to a large degree Indian engineers who has done the actual development. Interviews held in May 2008 underline that it is not only the low cost of engineers that make India a highly attractive location for small car development. More important than this is the Indian engineers intimate understanding as to what is essential and what is not with regard to building a vehicle that has to satisfy developing country requirements and conditions (Interview with Managing Director Mercedes-Benz India). 3.6 Conclusion: Challenges to the Sustainability of the Small Cars in Future Looking at a host of factors including Indias demographic development (a young and fast growing population), upwards social mobility (rising per capita income from a low level), low vehicle density (8 per 1000 in 2004 (Statistisches Bundesamt, 2006)), rising oil prices, infrastructure bottlenecks and pollution problems, a small car path seems to be only economically a sustainable path for Indias future auto-mobilization.At least, it appears to be the most sustainable path within the traditional ambit of mass-motorization. Yet, the same conditions that suggest a small car path also pose limitations. For example, rising oil prices and Indias dependence on oil pose a threat, as small car demand may be more vulnerable in the face of financial crises than othersegments. This situation may not only apply to domestic demand but also to exports. Another threat to the socio-economic sustainability of the small car path is the poor road infrastructure in India (Haldea, 2008).Clearly, small cars need less road space than large cars. However, as an interviewepointed out, if two wheeler owners migrate at a sudden and substantial rate to small car segments, traffic will come to a virtual standstill. The current infrastructure development is already now unable to keep pace with vehicle growth on Indias roads. This is also why the new mini car producers (e.g. Tata Nano target markets) strongly eye rural areas, where road traffic is still moderate. While rising oil prices 104 and infrastructural problems pose a threat to Indias small car path in socio-economic terms, there are other problems of sustainability. The high pollution in Indian cities poses already now a serious threat to air quality and human health. An extensive growth of small car demand (replacing two wheelers) is, therefore, in environmental terms not sustainable. It is the dependence on oil and the recognition of environmental problems that has also pushed the Indian government towards creating incentives for alternative fuels and engine technology (Ministry of Heavy Industries & Public Enterprises, 2002 and 2006). There is finally the question of whether India can develop its automobile industry into a small car production and research hub for the world. There are certainly some indications that India may have a competitive edge in this segment, owing to its own national demand scenario, its past experience and policy measures supporting such an end. At the same time, there are factors that work against the economic sustainability of such a path. Small car production relies above all on low cost. India, however, has seen sharp rises in labour cost in the automobile industry and suffered from low productivity, rigid labor laws and high infrastructure cost, despite some improvements in this regard (Belzowski et al., 2007). A cost comparison study comparing the Indian and Chinese industry found, for example, the cost of manufacture of passenger vehicles in China is 23% lower than in India with the principle difference due to higher taxes and the cascading impact in India (Ministry of Heavy Industries & Public Enterprises, 2006: p. 12). Clearly, China has also seen increases in labor cost in recent years. However, there may be other emerging economies that are more competitive than India and China in this regard. With regard to R&D the situation may be slightly different. After all, India offers one of the largest pools of well trained engineers in the world and the national and State governments are investing in R&D facilities as well as human resource development that is specifically geared towards the automobile Industry (Ministry of Heavy Industries & Public Enterprises, 2006). Here, it remains to be seen if the Tata Nano is more than a one-off in setting the pace for global automobile development.

OB JECTIVES OF THE STUDYThe objectives of the study are:

1) To narrate the profile of the company Overview of Maruti and Suzuki Building understanding of the car market in India and various segments

2) To gain experience & knowledge that how a company prepares budget & control it. 3) The budget forms a base for a companys operations & working. 4) To study the financial position of the company Role of financing as a sales tool and the various financing options available Ensuring Company effectiveness in implementing accounting standards Analyzing companies financial statements . 5) To convert my theoretical knowledge into practical knowledge.

RESEARCH METHODOLOGYRESEARCH DESIGN The research method selected for the study is a combination of a survey and an industrial study. The survey research method is described here under that:(i) It is a design in which primary data is gathered from members of the sample that represents a specific population(ii) It is a design in which a structure and systematic research instrument like a questionnaire or an interview schedule is utilized together with the primary data(ii) It is a method in which the researcher manipulates no explanatory variables because they have already occured and so they cannot be manipulated (iii) Data are got directly from the subjects .The subjects give the data in the natural settings of their workplacesObservations In addition to questionnaire and face-to face interviews, observation was also carried out. This was to enable the researcher to witness by the officers of this firm and to interact with these people.Secondary data: (1) Annual reports ANNUAL REPORTS(2) Company databases(3) Auto journals(4) Industry analysis reports(5) Company websites

Budget preparation process followed in MARUTI SUZUKI INDIA LIMITED

Production / sales target finalized by top management

Detailed production plan

Revenue expenditure budget from departmentsCapital investment planIndigenization planSales budget From M&SDomestic salesExport salesSpare parts salesManpower budget

Material cost budgetImported componentsIndigenous componentsRaw materialsPaints and direct consumables

Consolidation of divisional budget

Preparation of model wise and month wise unit standard statement and consolidationDiscussion between finance & other departments

Consolidation of divisional budget to company budget

Budget presentation by divisional heads to MD & directors. Budgetary targets for each division set by directors.

Whether budget target acceptable?

NO

REVIEW

Preparation of cash budget, projected profit & loss a/c and balance sheetYES

This chart shows the unique process of budget preparation followed in Maruti Suzuki, which is based upon a similar process followed in its parent company Suzuki Motor Corporation Japan.Annual Budgeting exercise in Maruti Suzuki starts from December and gets finalized during February. Every year top management decides the total number of cars to be sold or produced on the basis of past trends, industry growth rate, feedback from marketing and selling department and various other factors which effect the demand of cars. On the basis of the number of cars to be produced, a detailed production plan is prepared. This production plan indicates the resources required to produce the desired number of cars. On the basis this production plan every department plans their expected requirements of funds for the next financial year. These departments enter their respective requirements of funds in an online form sent by finance department, on a monthly basis along with the purpose for which funds are required. When the save button on this form is clicked this data gets stored in a central database. Similar expenses of all the departments are stored in one place for example training expenses of all the departments are stored in one and stationary expenses of all the departments are saved in one database. Budgeting department prepares a master budget on the basis of these databases, which represents an overall plan of the organization. Annual Budget is divided into quarterly budgets i.e. Q1, Q2, Q3 and Q4. Budget for Q3 and Q4 is revised based on actual expenditure up to July and expected trends for the remaining year. This exercise starts on July and revised budget is finalized by August.Budgeting department also prepares projected profit & loss account and balance sheet of the company. This projected profit & loss account and balance sheet is presented before board of directors for their approval. If the Board of directors are satisfied with the expected profit and sales, then the budget is approved if not then the respective departments are told to reduce their budget and the whole process is repeated.

Zero-based budgeting In Maruti Suzuki, a zero based budgeting (ZBB) system is followed. ZBB is a top-down budgeting system where resource allocation decisions are made through a function-by-function assessment. No function is assumed to be necessary. The criteria for evaluation are passed down from higher levels, enhanced and made more appropriate for each area as the criteria are passed down to office and department heads. Department and office heads develop justifications within these evaluation guidelines for each function and justifications for increased resources. These pass back up through the organization with each level setting priorities for resource allocations to individual functions from the levels below.

Budgetary control process followed in MARUTI SUZUKI INDIA LIMITED Maruti Suzuki follows a unique process of budgetary control, which ensures proper utilizations of funds by different departments of the company. There are over 350 + departments in the company. So without effective budgetary control system in place, it would be impossible for the company to ensure proper utilization of the funds in the company.Monitoring of the budget is done on the monthly basis by budgeting department, in which it compares the actual expenses of the respective departments with the projected expenses and finds out reasons for any deviations if any and presents the report to the board of the directors at the beginning of each month. Budget controlling is done on a quarterly basis at Maruti Suzuki India limited. For effective control of the funds all the expenses are divided into 3 categories, according to their relative importance. A category expenses are very tightly controlled and monitored because of their relative high degree of controllability. For example- Consultancy fees, Gifts, Seminar / Conference Exp, etc.B category expenses are less closely monitored and controlled, because of their low degree of controllability B category expenses can be controlled to a extent only. For example Travel, Journals, Stationary, Phone, Conveyance, etc. and no control is exercised over C i.e. Their payment is not stopped even they shoot over their budget but for A and B category expenses payment is allowed to the level of budget approved.A Category Items of similar nature are grouped together (have same first 5 digit a/c code), and control is exercised over the group budget. Budget control exists at a parent level or 5 digit account code level.For example- A-P2110701-COMPUTER CONSUMABLESA-P2110702- SOFTWARE PURCHASE EXPENSESA-P2110703- SOFTWARE DEVELOPMENT EXPENSESA-P21107- SOFTWARE RELATED EXPENSES

AccountBudgetActualBalance

A-P21229 01500,000500,000

A-P2122902100,000400,000(300,000)

A-P2122903200,000(200,000)

Total600,000600,000Nil

These A category expenses are monitored or controlled at 5 digit code (A-P21229) and not at individual 7 digit item code level ie 2122901, which basically means that respective department cannot spend more on SOFTWARE RELATED EXPENSES then the budgeted amount but it can spend the whole amount on any of its components.

B category expenses are general expenses and are monitored at cost center level i.e. expenses related to a particular department.For example B-P2111501- SNACKS EXPENSESB-P2111501-LUNCH EXPENSESB-P21115- SNACKS EXPENSES

B-P2113201-POSTAL STAMPSB-P2113202-POSTAL EXPENSESB-P2113203-COURIER CHARGES

B-P21132-POSTAL EXPENSESAccountBudgetActualBalance

B-P212340150,0005,00045,000

B-P212340240,00040,000

B-P214566540,000(40,000)

B-P264587245,000(45,000)

Total90,00090,000Nil

These B category expenses are monitored and controlled at a cost center or departmental level which means that expenses are not monitored on B-P21234-POSTAL EXPENSES or B-P21115- SNACKS EXPENSES level but on total of all these expenses of that particular department. For example in the above table expenses will not be monitored at individual account code level but at a departmental level.Maruti Suzuki India limited is using a financial module of Oracle for its financial function. Special codes are assigned to all the entries that come in profit & loss account and balance sheet (7 digit code), cost centers (every department is a cost center) 4 digit code and companies (2 digit code). Booking of expenses can only be done by entering specific codes. My project in maruti Suzuki India limited involves understanding and analyzing this whole process and to suggest ways to make this unique process more effective and free from any faults.

RATIO ANALYSISMeaning of Ratio Analysis:Analysis can be defined as the study and interpretation of relationships between Ratio various financial variables, by investors or lenders. It is a quantitative investment technique used for comparing a company's financial performance to the market in general. A change in these ratios helps to bring about a change in the way a company works. It helps to identify areas where the management needs to change.Steps in Ratio Analysis:The firs task of the financial analyst is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.The second step is to compare the calculated ratio with the ratios of the same firm relating to past or with the industry ratios. This step facilitates in assessing success or failure of the firm.The third step involves interpretation, drawing of inferences and report-writing. Conclusions are drawn after comparison in the shape of report or recommended course of action.Importance: Ratios are useful for the following reasons: The ratios can be used by financial managers for future financial planning. Ratios calculated for a number of years work as a guide for the future.

Ratios are useful in co-ordination which is very needed in business. The efficiency and weakness of an enterprise if communicated properly will establish a better co-ordination among areas of appreciation and control. Ratios are used for communication of weak and good points to the concerned parties. Ratios should be shown the better financial position of the firm. For example, better solvency ratio speaks out good financial position.

The ratios are economic barometer useful to all mentioned above as they can know the good and bad position of a company by making a comparative study of financial statement.

PER SHARE RATIOS:EPS is measured by dividing the net profits after taxes and preference dividend by the total number of equity shares.EPS = net profit after tax- preference dividendPer share ratios20082008200720062005

Adjusted EPS (Rs)55.9453.6943.8728.8521.16

Adjusted cash EPS (Rs)75.6163.0953.7545.2340.80

Reported EPS (Rs)59.9154.0741.1629.5518.76

Reported cash EPS (Rs)79.5763.4651.0445.9238.40

Dividend per share 5.00 4.50 3.50 2.00 1.50

Operating profit per share (Rs) 88.31 76.30 64.59 54.35 43.35

Book value (excl rev res) per share (Rs)291.28237.23188.73151.56123.74

Book value (incl rev res) per share (Rs.) 291.28 237.23 188.73 151.56 123.74

Net operating income per share (Rs)625.34512.49422.20382.34327.07

Free reserves per share (Rs) 286.28 231.89 183.18 144.13 116.91

Interpretation: Due To Incresing Profits And Market Sustainability The Per Share Value Of Maruthi Suzuki Had Been In Incresing Trend From 2004-2009.Analysis: As a result of that the per share value in the market is above 1100rs.

PROFITABILITY RATIOS:Profitability is a ratio. Being a ratio profitability is a meaningful measure and reveals the relation of different individuals items with sales of the concern. Profitability of a concern can be known through the analysis of general and overall profitability.Gross profit ratio=Gross profit (100) /Net salesGross profit ratio= net sales-cost of goods sold (100) / Net sales

Profitability ratios20082008200720062005

Operating margin (%) 14.12 14.88 15.29 14.21 13.25

Gross profit margin (%) 10.97 13.05 12.95 10.08 8.01

Net profit margin (%) 9.34 10.29 9.53 7.57 5.61

Adjusted cash margin (%) 11.79 12.01 12.45 11.59 12.21

Adjusted return on net worth (%) 19.20 22.63 23.24 19.03 17.10

Reported return on net worth (%) 20.56 22.78 21.80 19.49 15.16

Return on long term funds (%) 27.35 30.74 33.47 28.12 22.71

Interpretation: The gross profit and net profit had increased initially from the year 2004-2007 from 8.01-13.05,5.61-10.29 and decreased in the year 2008 as 10.95 and 9.34.Analysis: Due to the implementation latest organisational aspects company increased its expenses in the year 2008.

LEVERAGE RATIOS:Leverage ratios can be computed from the balance sheet items to determine the proportions of debt in total financing. Leverage ratios can also be calculated from the income statement items by determining the exact to which operating profits are sufficient to cover the fixed charges.Debt equity ratio = Long term debit / Shareholders EquityLeverage ratios20082008200720062005

Long term debt / Equity 0.05 0.08 0.01 0.06 0.08

Total debt/equity 0.10 0.09 0.01 0.07 0.08

Owners fund as % of total source 90.33 91.57 98.70 93.43 92.00

Fixed assets turnover ratio 2.48 2.41 2.46 2.19 2.07

Interpretation: The Debt Equity Ratio Is Expected To Be 2:1 Ratio But It Is In 1:2 Ratio Analysis: This Situation Creates Insecurity To Creditors.

LIQUIDITY RATIOS:Liquidity means the ability of a concern to meet its current obligations as and when these become due. Thus the liquidity ratios indicate the ability of a concern to meet its short-term obligations.Quick ratio= Quick assets / Current liabilitiesCurrent ratio = Current assets / Current liabilitiesLiquidity ratios20082007200620052004

Current ratio 1.03 1.42 1.77 1.68 1.17

Current ratio (inc. st loans) 0.91 1.40 1.77 1.67 1.15

Quick ratio 0.66 1.13 1.31 1.25 0.85

Inventory turnover ratio 22.93 28.76 18.78 22.97 30.43

Interpretation: The current ratio is in between 2:1 ratio, this is in increasing trend from initial stage. From 2004-2007 and decreased in the year 2008 as 1.03.Analysis: One way this trend shows the, balancing of current assets and liabilities. This trend is continued even in quick ratio and liquid ratios.

PAYOUT RATIO:This is the relationship between the returns belonging to the equity shareholders and the dividend paid to them. Thus is calculated as: Pay out ratio = dividend per share / Earning per share

Payout ratios20082008200720062005

Dividend payout ratio (net profit) 9.78 9.72 9.69 7.73 9.02

Dividend payout ratio (cash profit) 7.36 8.28 7.81 4.97 4.40

Earning retention ratio 89.53 90.21 90.91 92.09 92.01

Cash earnings retention ratio 92.25 91.67 92.58 94.95 95.86

Interpretation: The Dividend Pay Out Ratio And Retention Ratio Is Increasing From The Year 2004-2008.Analysis: This Is Proseperous Trend To Share Holders And Company.

COVERAGE RATIOSThis ratio indicates the times-interest-earned. It is used to examine the firms debt-servicing capacity. The interest coverage ratio is the sum of net profit before interest and taxes dividend interest charges.Coverage Ratio = sum of net profit before interest / Taxes dividend by interest chargesCOVERAGE RATIOS20082007200620052004

Adjusted cash flow time total debt 0.41 0.34 0.04 0.23 0.26

Financial charges coverage ratio 50.46 68.23 104.61 49.70 32.32

Fin. charges cov.ratio (post tax) 39.57 49.76 73.28 37.85 25.71

Interpretation: The Cash Balance Is Being Adjusted From 2004-2008 Between Creditors, Debtors And Shareholders Dividend .Analysis: This Is In Incresing Trend From 2004-2008.This Is Prosperous To Company And Its Stake Holders

COMPONENT RATIOS:This ratio ensures whether the capital employed has been effectively used or not. This is also the test of managerial efficiency and business performance. High total capital ratio is always required in the interest of the company.Long term assets Turnover Ratio = Sales(net) / Capital employedComponent ratios20082007200620052004

Material cost component (% earnings) 77.25 73.36 77.25 78.30 74.47

Selling cost Component 3.10 3.37 2.91 3.34 7.05

Exports as percent of total sales 4.10 3.90 4.78 8.89 9.96

Import comp. in raw mat. consumed 10.84 12.62 18.75 19.69 20.40

Long term assets / total Assets 0.74 0.61 0.49 0.52 0.62

Bonus component in equity capital (%) - - - - -

Interpretation: The Material Cost Component Ratio Is Increasing From 2004-2008. Analysis: As the Productivity is increasing simultaneously but the selling cost component ratio decreased gradually from the year 2004-2008,which can decline the sales percentage of company. SWOT ANALYSIS OF MARUTI SUZUKI

MAJOR STRENGHTS OF MARUTI SUZUKI INDIA LIMITED 1) low labor cost - Maruti Suzuki India limited is operating in a country in which cost of labor is very low as compared to other developing and developed countries. This is a major strength for Maruti Suzuki.2) STRONG Distribution and Service Network - maruti Suzuki has the largest Distribution and Service Network in India 600 showrooms covering 393 cities 150 rural format sales outlets in 143 cities 620 dealer service stations &1900 Maruti Authorized Service Stations

Over 1190 cities covered by Service Network

3) STRONG PRODUCT PORTFOLIO - Maruti Suzuki has a large and strong product portfolio - Maruti Suzukis overall portfolio consists of 11 basic models & over 150 variants spanning across all segments of the industry. It has widest product range in India

Majority of new showrooms & workshops coming from existing dealers

Maruti Suzuki is Present in Gasoline, Diesel and LPG

6 models launched in last 30 months including Swift Diesel & Wagon R Duo. 4) EXCLUSIVE tie ups with auto finance companies - In India, a large proportion of cars about 75% are sold via finance. Company`s exclusive tie ups with financers helps the customers to get their vehicles financed easily.MAJOR WEAKNESSES FOR MARUTI SUZUKI INDIA LIMITED -

Diesel Segment A3 Perceived as entry level car only

MAJOR OPPURTINITIES FOR MARUTI SUZUKI INDIA LIMITED -1) India is among the few countries that are showing a growth rate of 30% in demand for passenger cars as domestic automobile market is growing at a high rate. Automobile industry expert predicts that by 2050 every sixth car in the world will be for Indians

2) There are about 700 million vehicles on road in the world today. It is estimated that this vehicle population would grow to about 1.3 billion in the year 2030. Most of this increase of 600 million will come from developing countries.These markets will look for low-cost automobiles.India has the opportunity to meet this need.And, in the process create a huge export market. This presents a major opportunity for Maruti Suzuki as it is a major player in Indian automobile sector.

3) By 2010, India is expected to witness over Rs 30,000 crore of investment.

4) According to estimation the compound annual growth rate (CAGR) of Indian automobile sales will grow at 9.5% and will touch a mark of 13,008 million by 2010.

5) About 77 % of the Indian automobile sector is still owned by 2 wheeler manufacturers, which can be a potential market for small car manufacturers.

6) Maruti Suzuki believes that there are millions of Indians who can afford a car but for various reasons are not buying one. With focused marketing efforts, many of these people can be persuaded to buy a car. This is a major opportunity for the company. The company also took several initiatives like Special Schemes for certain sections of society like government employees etc., Employee referral scheme where each employee was veiled as sales man. Dealer and vendor scheme are some other examples of these initiatives.

7)

The above graph shows the positive correlation between GDP and the no. of cars per 1000 people. GDP of India is growing at a very healthy rate and is expected to grow between 6 to 8 %. Indias fast paced GDP growth and pent up demand are expected to fuel growth in automotive sales. This presents a great opportunity for automobile manufacturers.

8) Low car penetration, about 8 cars per 1000 Population in India.

9) By 2020 more than half of Indias population is expected to live in urban areas this will bring about a dramatic growth in demand of passenger cars.

10) Indian rural market is on the verge of opening up, this will present a huge growth opportunity for automobiles manufacturers.

MAJOR THREATS FOR MARUTI SUZUKI INDIA LIMITED -

1) TATA`S one lakh car NANO is a big threat to Maruti Suzuki as Maruti Suzuki is a small car manufacturing company and its smallest and cheapest car Maruti 800 is of approx 2 lakhs . Maruti 800 is also the smallest and cheapest car in India right now. After the final launch of TATA`S NANO it will become the cheapest car in the Indian automobile sector2) Wage rates in India are increasing at a very fast pace, this can be a potential threat to the company.

CONCLUSION

When summarizing the financial results of MARUTI UDYOG LIMITED. I have observed that their working is quite reasonable financial. It is very good company. There are no any debts of long term liabilities of the company. To conclude, from of the overall analysis of financial management of the company, I can say that it is financial sound and well managed three consecutive years shows and applauding position. I was also able to well understand my financial concepts.The formal budgeting system has the following major benefits. 1. Budgeting due to its formal time table or schedule compels managers to think ahead apart from taking care of their current activities. 2. Budgeting, due to its approval and authorizationby thesuperiors, provides definite expectations that are the bestframework for judging subsequent performance.3. Budgeting helps in coordinating the various departmentsof the organization. The budget harmonizes the goals(objectives) of the individual departments into theorganization wide goals (objectives).

RECOMMENDATIONWe need to know that many financial reporting frauds havetheir genesis in overly optimistic budgets that subsequentlylead to an environment of "cooking the books" to reachunrealistic goals.These events usually start small, with theexpectation that time will make up for a temporary problem.To maintain organizational integrity, senior-level managersneed to be careful to provide realistic budget directives.Lower-level managers need to be truthful in reporting "badnews" relative to performance against a budget, even if theyfind fault with the budget guidelines.

BIBLIOGRAPHY

(1) Annual reports ANNUAL REPORTS(2) Company databases(3) Auto journals(4) Industry analysis reports(5) Company websites(6) Articles published by Society of Indian Automobile Manufacturers(7) www.siam.in(8) www.ibef.org(9) www.google.com

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