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A PROJECT REPORT ON
WORKING CAPITAL MANAGEMENT IN SWARAJ 1MAZDA LIMITED (AN INDO-JAPANESE LCVS)
Submitted in partial fulfillment of the Requirement for the Award of the degree of Master of Business Administration (2010-2012) Submitted to:
Miss. Ramanpreet Kaur Faculty Member CTIMIT Jalandhar
Submitted by:
Jyoti Bala MBA- 3rd (B) Roll No. 104372247679
GUIDE CERTIFICATE
This is to certify that the project entitled, WORKING CAPITAL MANAGEMENT is done by jyoti bala, student of CT INSTITUTE OF MANAGEMENT AND IT under my guidance and supervision for partial fulfillment of the requirement for the award of degree MBA of PUNJAB TECHNICAL UNIVERSITY, JALANDHAR.
PREFACE
Practical training is an important part of the theoretical studies. It is of an immense importance in the field of management. It offers the student to explore the valuable treasure of experience and an exposure to real work culture followed by the industries and there by helping the students to bridge gap between the theories explained in the books and their practical implementations. Training plays an important role in future building of an individual so that he/she can better understand the real world in which he has to work in future. The theory greatly enhances our knowledge and provides opportunities to blend theoretical with the practical knowledge where trainees get familiar with certain aspects of industries. I feel proud to get myself trained at SWARAJ MAZDA that is one of the top most light commercial vehicle industries in India. I have taken up training in finance department and have studied and explained the need for working capital as well as its management and financing. I am sure I could encash this opportunity to the best of my incompetence, zeal , perfection and academic knowledge & I am keen to make it on going journey throughout my life as I strongly believe that learning is a journey not a destination.
ACKNOWLEDGEMENT
The project management of working capital contained the culmination of six weeks of my own search, study and practice in the office of swaraj mazda limited. I present this project to all those who instructed me to write the project report during summer vacation training programmed at swaraj mazda limited(an indojapanese joint venture LCVs) I am thankful to Mr. Ashok Verma(chief manager-finance) who was not only my trainer but my mentor and my guide. He has given me chance to have training in this esteemed organization & for their full cooperation at every sphere to successfully accomplish my task. He is not only imparted me summer training but he also cultivated seeds of discipline. He made me realized the importance of time. He not only tried in making me a good manager but also a good human being. I thank Mr. Gopal Bansal( vice-president-finance & company secretary) and his team who has given me this great opportunity to work in SML. I also thank Mr. Arun and all the members of the finance department for co-operating with me in completion of this project. Last but not the least I am thankful to all my friends and family members, particularly Mr. Sanjeev, my ideal, who always guided me on the way whenever I felt myself in trouble. This project made possible the effective presentation of ideas, and analysis which brought remarkable response from the company.
Declaration
I hereby declare that the project Report entitled A study of Working Capital submitted in partial fulfillment of requirement for degree of Masters of Business Administration is to CT. Institute is my original work & reference have duly been acknowledge.
Submitted by: JYOTI BALA Roll no: 10437224679 MBA 3rd Sem.(B)
Table of contents
Chapter-1 Introduction -Swaraz mazda-introduction -History of Swaraz mazda -Corporate Profile -Objectives -What is Working Capital -Concept of Working Capital -Nature of Working Capital .. .. .. .. . . 7-14 8-9 9-11 11-13 14 15-31 16 16 17 17-18 18-20 21-31 32-50 33 34-35 36-37 38-39 40-41 42-44 45-46 47-49
-Deficiencies of Excessive Working capital -Advantage of Adequate Working Capital -Factors affecting Working Capital Chapter-3 Research Study -Research methodology . -Production and sales Swaraz mazda . -Sales comparison of Swaraz mazda . -Markets share of different companies -Share holding pattern of Swaraz mazda LTD. ......................... -EPS of Swaraz mazda -Dividend Rate . -Technical & financial agreements of Swaraz Mazda . Chapter-4
-Findings and Suggestion . 51-52 Chapter-5 -conclusion 53-54 Chapter-6 -Limitations . 55-56 6
CHAPTER-1
INTRODUCTION
The factory Swaraj Mazda Limited is located at Village Asron district Nawanshahar (Punjab) near the city of Ropar and at a distance of 45 km from the capital city of Chandigarh. The plant has captivating site. It spreads over a quaint, sprawling 100 acres of land ringed by Shivalik Hills on three of its sides and river Satluj on the other. The desolate slit hill has been leveled for construction. Work at the plant began at a great tempo and the first vehicle rolled out of the production line in a record time of one year of laying the foundation stone.
Prominent among the load carriers Swaraj Mazda is also manufacturing:1. 4 wheel drives; 2. Extended wheel- base long- chassis Mini Buses which carry up to 44 pas 3. Deluxe Buses carrying to 40 passengers; 4. Ambulances 5. Mobile Reverse- Osmosis and Electro dialysis Units for the Central Salt and Mineral Chemical Research Institute. 6. CNG Buses with Safety & Eco grades. 7. Integrated Garbage collection and disposal system for urban centers; 8. Hydraulically operated dumpers; 9. Mobile fair priced vans; 10. Sky Lift Vehicles Swaraj Mazda gives due attention to the marketing part and the employees are highly qualified and trained to fit the job. Swaraj Mazda has a vast network of 150 dealers spread throughout the country including A&N Islands. Zonal offices have been opened in Chandigarh, Lucknow, Ahmedabad, Mumbai, and Chennai. This helps substantially in sales promotion, Export promotion, especially for Hi-tech products, is also being emphasized. Discipline and its rigid enforcement without discrimination is an important Hallmark of Swaraj Mazda. It is of great significance in evolving work culture. All the employees, irrespective of their position and status have to punch their cards when they report for duty. As a result, strict punctuality has become a way of life and work with them. To ensure Industrial peace, i.e. absence of strikes and lockouts, Swaraj Mazda believes in making a contended labour force with a very low rate of absenteeism and turnover. Reasonably fair wages and various 9
perks like subsides uniform and transport, mess facilities go a long way in creating identification with the job. Earnestness, Sincerity and Spirit of corporation pervades the entire atmosphere of the company. The happy absence of Industrial dispute in the enterprise speaks volume for the success of the firm and cultivation of work culture. Work culture or work ethos is given very high precedence. It id fully recognized that the objectives of the concern- higher and higher production, productivity and indigenization can be attained through commitment into commonness of GOAL in each and every member of the Swaraj family. The entire planning is undertaken in such a way so as to inculcate the spirit of dedication in each member, whether he is skilled or semi-skilled worker or belongs to the managerial cadre. Many effective steps are taken to bring this about. Important amongst them are: 1. Common canteen and mess for all. Same meals are served to all and in identical utensils. Everybody has to stand in a queue to get his or her meals. 2. Common uniform is there for all the members irrespective of their status. 3. No separate cabins for the members of higher hierarchy. All the members of a department or a section therefore sit and work in one hall with the Manger facing the staff. Every employee carries his or her files, thus inculcating the spirit of dignity of labour in the staff.
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It was in this background that PTL entrusted with the responsibility for the LCV project, went ahead promotion of Swaraj Vehicles Limited in July, 1983. Punjab Tractors Limited and its brand name Swaraj were well known on the Indian corporate and engineering horizon. They were proven symbols of Indian Engineering fully competitive against collaboration based technology and foreign brand names. PTL track record during the period of its existence is often cited as an example of dedicated and sustained corporate endeavor and organisation value system, financial performance and systematic growth, team building perception and response to changing market needs and resilience against difficulty. The project in its concept, aims at breaking new ground not only in terms of product and production technology, but also in building a new culture and value system in the organisation, which enables it to move forward with confidence into the era of competitive markets. This guiding philosophy is dictating every facet of project implementation both in physical facilities and the human side.
CORPORATE PROFILE
The best way to predict the future is to invest it. Alan Key
SWARAJ GROUP CONSTITUENTS
COMPANY DIVISION
SWARAJ TRACTORS DIVISION SWARAJ COMBINE DIVISION SWARAJ FOUNDRY DIVISION SWARAJ R&D DIVISION
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MILESTONES
1983 Swaraj Vehicles Ltd. (SVL) incorporated (in July) 1984 Joint Venture and Technical Assistance Agreement between Punjab Tractors Ltd., Mazda Motor Corporation & Sumitomo Corporation concluded. SVL renamed Swaraj Mazda Ltd. (SML) 1985 LCV Project capacity - 5,000 vehicles on single shift basis Capital Outlay Equity Capital 1985 Bus. 1986 1987 1990 Commencement of Commercial operations. Launch of Indigenously developed 26 seater Bus Launch of Second Truck Model - Super - Rs. 220 Million - Rs. 105 Million
Commencement of Trial production and test marketing of (August) Swaraj Mazda Trucks and
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Launch of Third Truck Model Premium Launch of 4-Wheel Drive Truck Bharat Stage-I Emission Norms complied Bharat Stage-II Emission Norms complied
2001
- Launch of 4 Wheel Drive Ambulance - Launch of Economy Truck - SARTAJ Launch of CNG Buses
2004
Launch of Cargo Truck Model SAMRAT with Air brakes (GVW 10250 Kg)
2006 June July August December 2007 Entry of Isuzu through swaraj mazda Commercial production of buses (LT 134) Commencement of construction of Buildings for vehicle expansion and new Bus Body Plant. Signing of Second Technical Assistance Agreement with Isuzu Motors Ltd. Aggregate vehicles sales reach 1, 10,000 Vehicles (March) In its journey of 23 years, Commercial Vehicle Industry has scaled new heights from a level of 105000 units in 1986-87, industry volume have peaked to 518000 in fiscal 2006-07. The last 6 years in particular have witnessed spectacular growth for the commercial vehicles industry as a whole volumes have more than tripled from 2001-02 level of 158000 to 518000 in 2006-07. Segment growth has, however, been uneven as will be evident from : Up to 3.5 Ton GVW Up to 10 Ton GVW Plus 10 Ton GVW Total 2001-02 36300 36800 85400 158500 2006-07 175700 73000 269000 517700 13 Growth (+) 139400 (+) 36100 (+) 183600 (+) 358200
OBJECTIVES
The main objectives of my research on management of working capital of swaraj mazda limited are:1) To study & evaluate the working capital management system of swaraj mazda limited. 2) To determine the adequate or optimum quantum of investment in working capitalof swaraj mazda limited. 3) To determine the composition or structure of current assets. 4) To maintain a proper balance between liquidity & profitability. 5) To maintain a proper the policy or means of finance for current assets.
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SYNOPSIS
INTRODUCTION TO WORKING CAPITAL
Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet capital requirements and payments. Understanding a company's cash flow health is essential to making investment decisions. A good way to judge a company's cash flow prospects is to look at its working capital management (WCM).
capital will arise when Current Assets increase current liabilities. A negative net working capital will occur when Current Liabilities are in excess of Current Assets.
EXCESSIVE AND INADEQUATE WORKING CAPITAL: A business enterprise should maintain adequate working capital according to the needs of its business of its business operations. The amount of working capital should neither be excessive nor adequate. If the working capital is excess of its requirements it means idle funds adding to the cost of capital is short of its requirements, it will result in production interruptions and reduction of sales and, in turn , will affect the profitability of the business adversely.
FULL UTILISATION OF FIXED ASSETS NOT POSSIBLE: Due to the frequent interruption in supply of raw materials and paucity of stock, the firm cant make full utilization of its machines etc. DIFFICULTY IN THE MAINTAINENCE OF MACHINERY: Due to the shortage of working capital, machines are not cared and maintained properly which results in the closure of production of on many occasions.
DECRAESE IN CREDIT RATING: Because of inadequacy of working capital, firm is unable to pay its short term obligations on time. It decays the firms relation with its bankers and it becomes difficult for the firm to borrow in case of need.
Conversion of cash into raw material. Conversion of raw material into work-in-progress. Conversion of work-in-progress into finished goods. Conversion of finished goods into debtors by credit sales. Conversion of debtors into cash by realizing cash from them.
Thus,the operating cycle starts from cash and then again restarts from cash. Need for working capital depends upon period of operating cycle. Greater the period, more will be the need of working capital. Period of operating cycle in a manufacturing concern is greater than a period of operating cycle in a trading concern because in trading units cash is directly converted into finished goods.
CASH
DEBTORS & BILLS RECEIVABLES
RAW MATERIAL
FINISHED GOODS
WORK-INPROGRESS
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Because of the time involved in a operating cycle, there is a need of working capital in the form of current assets. Firms have to keep adequate stock of raw-material to avoid risk of non-avaliabilty of raw materials. Similarly, concerns must have adequate stock of finished goods to meet the demand in market on continuous basis and to avoid competition which necessitates the money tied up in debtors and bills receivables. In addition to al these, concerns have to necessarily keep cash to pay the manufacturing expenses etc. and to meet the contingencies.
A firm should have neither too much or too little working capital. The working capital requirements is determined by a large number of factors but, in general, the following factors influence the need of working capital needs of an enterprise:
1)
NATURE OF THE BUSINESS: working capital requirements of an enterprise are largely influenced by the nature of the business. For eg. Public utilities such as railways, transport ,water and electricity etc. have very limited need of working capital because they have to invest fairly large amount in fixed assets. Their working capital need is minimal because they get immediate payment for their services and do not have to maintain big inventories. On the other extreme are the trading and financial enterprises which have to invest less amount in fixed assets and a large amount in working capital. This is so because the nature of the business is such that they have to maintain a sufficient amount of cash, inventories and debtors. Working capital needs of most of the manufacturing enterprise fall between these two extremes, that is between public utilities and trading concerns.
2)
SIZE OF THE BUSINESS: larger the size of business enterprise, greater would be the need for working capital. The size of a business may be measured in terms of scale of its business operation.
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3) GROWTH AND EXPANSION: as business enterprise grows, it is logical to expect that a larger amount of working capital will be required. Growing industries require more working capital than those that are static 4) PRODUCTION CYCLE: production cycle means the time span between the purchase of raw material and its conversion into finished goods. The longer the production cycle the larger will be the need of working capital because the funds will be tied up for longer period in work in progress. 5) BUSINESS FLUCTUATIONS: business fluctuations may be in the direction of boom and depression. During boom period the firm will have to operate at full capacity to meet the increased demand which in turn, leads to increase in level of inventories and book debts. Hence, the need for working capital in boom conditions is bound to increase. The depression phase of business fluctuations has exactly an opposite effect on the level of working capital requirement . 6) CREDIT POLICY RELATING TO SALES: if a firm adopts liberal credit policy in respect of sales, the amount tied up in debtors will also be higher. Obviously, higher book debts mean more working capital. On the other hand, if the firms follows tight credit policy, the magnitude of working capital will decrease. 7) CREDIT POLICY RELATING TO PURCHASE: if a firm purchases more goods on credit, the requirement for working capital will be less. In other words, if liberal credit terms are available from the suppliers of goods, the requirement for working capital will be reduced and vice-versa .8) AVAILABILITY OF RAW-MATERIAL: If the raw material required by the firm is available easily on a continuous basis, there will be no need to keep a large inventory of such materials and hence the requirement of working capital will be less. On the other hand, if the supply of raw material is irregular, the firm will be compelled to keep an excessive inventory of such material which will result in high level of working capital.
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9) AVAILABILITY OF CREDIT FROM BANKS: if the firm can get bank credit facility in case of need, it will operate with less working capital. On the other hand, if such facility is not available, it will have to keep large amount of working capital.
Less: current liabilities: (i)trade creditors: Credit period allowed by creditors Cost of yearly consumption Of raw material (ii)wages: Average time lag in payment of wages Yearly wages x (weeks/months) 52 weeks/12months If wages are paid at the end of each month, the average time lag in the payment of wages will approximate to half a month. This is so because 1st days wages are paid on the 30th day of each month, extending credit for 29 days, the 2nd days wages are, again paid on the 30th, extending credit for 28 days, and so on. Thus, average time lag will approximate to half a month. (iii)overheads: Yearly overheads (other than dep.) x average time lag in payment of overheads (weeks/months) 52 weeks/12months WORKING CAPITAL=CURRENT ASSETS-CURRENY LIABILITIES ADD: PROVISION FOR CONTINGENCIES REQUIREMENTS 2)FORECASTING OF CURRENT ASSETS AND CURRENT LIABILITIES METHOD: according to this method, an estimate is made of forthcoming periods current assets and current liabilities on the basis of factors like past experience, credit policy, and payment policy of the previous year. First of all, such estimate is made for each current assets on the basis of each month and then monthly requirements are converted into yearly requirements of current assets. The estimated amount of current liabilities is deducted from this amount in order to estimate the requirement of working capital. A certain percentage of contingencies may also be added to this amount. x (weeks/months) 52 weeks/12 month
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3)
CASH FORECASTING METHOD: under this method estimate is made of cash receipts and payments for the next period. Estimated cash receipts are added to the amount of working capital which exists at the beginning of the year and estimated cash payments are deducted from this amount. The difference will be the amount of the working capital.
4)PROJECTED BALANCE SHEET METHOD: under this method, an estimate is made of assets and liabilities for a future date and a projected balance sheet is prepared for that future date. The difference in CA and CL shown in projected balance sheet will be the amount of working capital.
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of the current assets should be financed from long term sources and the short term funds should be used only in emergency situation. The conservative approach is a low-profit, low risk combination. Neither of the two is suitable for efficient working capital management. A trade off between these two extremes provides a financing plan between these two approaches, and therefore, an acceptable financing strategy from the view point of the management of working capital.
CASH MANAGEMENT
Cash management is one of the key areas of working capital management. There are 4 motives of holding cash (i) (ii) (iii) (iv) transaction motive precautionary motive speculative motive compensating motive
the transaction motive refers to the holding of cash to meet anticipated obligations whose time is not perfectly synchronized with cash receipts. The cash balances held in reserve for random & unforeseen fluctuations in cash flows are called as precautionary balances. The speculative motives indicates the desire of a firm to take advantage of opportunities which present themselves at unexpected moments and which are typically outside the normal course of business. The compensating motive means keeping the bank balance sufficient to earn a return equal to the cost of free service provided by the banks. The basic objectives of cash management are to reconcile two mutually contradictory and conflicting tasks: to meet the payment schedule & to minimize funds committed to cash balances. Cash budget is probably the most important tol in cash management. It is a device to help a firm to plan & control the use of cash. The cash position of a firm as it moves from one period to another period is high lighted by cash budget. A cash budget has normally three parts, namely, cash collections, cash payments and 27
cash balances. The major sources of cash receipts and payments are operating and financial. The operating sources are repetitive in nature while the financial sources are non-recurring.
INVENTORY MANAGEMENT
The term inventory refers to assets which will be sold in future in the normal course of business operations. The assets which the firm stores as inventory in anticipation of need are raw materials, work-in-progress, semi-finished goods, and finished goods. The objective of inventory management consists of two counter balancing parts, namely, to minimize investments in inventory and to meet the demand for products by efficient production and sales operations. In operational terms, the goal of inventory management is to have a trade-off between costs and benefits at different levels of inventory. The costs of holding inventory are ordering cost and carrying costs. The major benefits of holding inventory are in the areas of purchasing, production and sales. The non-mathematical inventory management techniques illustrated here are (i) ABC system (ii) EOQ (iii) Re-order point
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rather keep a more rigorous control on items that are (i) more costly (ii) slowest turning while items that are less expensive should be given less control effort. On the basis of the cost involved, the various inventory items are, according to this system, categorized into three items (1) A (2) B (3) C. the items included in group A involved the largest investment. Therefore, inventory control should be most rigourous and intensive and the most sophisticated inventory controtechniques should be applied to these items. C group consists of items of inventory, which involve relatively small investments alyhough the number of items is fairly large. These items deserve minimum attention. B group stands mid way. It deserves less attention than A but more than C. employing less sophisticated techniques can control it. The task of inventory management is to properly classify all the inventory items into one of these three groups. The typical breakdown of inventory items is shown in following table:
Group (%) A B C
No. of Items
Inventory Value
15 30 55 ---100
70 20 10 ---100
Some points stand out from above table. While group A is the least important than in terms of the no. of items, it is by far the most important in terms of investments involved. With only 15% of the number, it accounts for as much as 70% of the total value of inventory. The firm should direct most of its inventory control efforts to the items included in this group. The items comprising B group accounts for 20% of the
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investment in inventory. They deserve less attention than A, but, more than C, which involves only 10% of the total value although number wise its share is as high as 55%.
RE-ORDER POINT
The EOQ technique determines the size of an order to acquire inventory so as to minimize the carrying as well as the ordering costs. In other words, the EOQ provides an answer to the question: how much inventory should be ordered in one lot? Another important question pertaunung to efficient inventory management is : 30
when should the order to procure inventory be placed? This aspect of inventory management is covered under the order point problem. The reorder point is stated in terms of the level of inventory at which an order should be placed for replenishing the current stock of inventory. In other words, reorder point may be defined as that level of inventory when fresh order should be placed with the suppliers for procuring additional inventory equal to the economic order quantity. Although some sophisticated re-order point formulae are available, it is based on following assumptions: Constant daily usage of inventory & fixed lead time. In other words, the formulae assume condition of certainty. The re-order point = lead time in days x average daily usage of inventory.
OUTSOURCING
A few years ago there was a tendency on the parts of many companies to manufacture all components in hours. Now more and more companies are adopting the practice of out-sourcing. Out-sourcing is a system of buying parts and components from outside rather than manufacturing them internally. Many companies have 31
developed a single source of supply, and many others help developing small and middle sized suppliers of components that they require. Tata motors has, for example, developed a number of ancilliary units around its manufacturing sites that supplies parts and components to its manufacturing plant. With the help of tata motors, ancillaries are able to maintain the high quality of manufactured components. The car manufacturing company, maruti,, which is now controlled by Suzuki of japan, has the similar system of supply.
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Research Study: It is the study which help us to find out the relevant
information regarding a company or an organization, it shows us the clear picture of a concern. Research methodology help us to take efficient decisions regarding a business. It may be understood as a science of studying how research is done sciencefically.In it we study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them. There are two main sources of Research Methodology: 1.PRIMARY DATA 2.SECONDARY DATA 1.) Primary Data: When a person collects the data personally its known as Primary Data 2) Secondary Data: When a person collects the data from other sources which are related to a company or an organization its known as secondary data. . Magazines
. Websites
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. Books ANALYTICAL TOOLS USED The analytical tool used in this study is percentage method and mean score. For the easy Analysis of data percentage method has been worked out. For easy understanding of statistical data, diagrammatic representation has been made in the form of chart. This study is based mainly on an analysis & interpretation of data with Secondary data.
YEARS
199697 199798 199899 1999-2000 200001 200102 200203 2003-
PRODUCTION
4006 2931 2877 4010 5211 6360 8201 10225
SALES
3726 3303 2975 3983 5069 6222 8101 10979
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Production Sales
19
19
19
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INTERPRETATION:
The above graph & table shows the vehicle production & sales of Swaraz
mazda.In 1996-97 production of swaraz mazda was 4006 & sale was 3726.In 1997-98 the production was 2931 & sale was 3303. In 1998-99 production was 2877 & sale was 2975. In 1999-2000 production was 4010 & sale was 3983,in 2000-2001 the production was 5211 & sale was 5069, in 2001-2002 the production was production was 6001 &sale was 6000.in 2003-04 that was 10225 & 10279 respectively. in 2004-05, production was 12385 & sales was 12353,in 2005-06 that was119446 & 11887. In 2006-07 production & sales was 10915& 10841.
2005-06
8401 3275 117 94
2006-07
6702 3706 136 297
TOTAL
11887
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10841
9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Truck Bus Spp. Appl. ABM
2005-06 2006-07
INTERPRETATION: This table & graph shows the sales comparisions b/w 2005-06 & 2006-07. there
was a sale of trucks in 2005-06 of 8401 & in 2006-07 was 6702,in 2005-06 sale of buses was 3275 & in 2006-07 that was 3706. In 2005-06 the sale of spp.appl. was 117 & in 2006-07 it was 136.in 2005-06 the sale of ABM was 94 & in 2006-07 the sale was 297.
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INERPRETATION:The above Table and Graph shows the %age of market share of different companies in LCVs segment. All these companies are competitors in 5-10 Ton GVW in LCV sector. Telco is a market leader having 40% market share. Telco has local technology. Eicher stands at 2nd place with 23% market share. Swaraj Mazda is the 3rd player with 15% market share in LCV segment. Mahindra & Mahindra holds 12% market share it stands at 4th place. Force motors have 6% & Ashok Leyland has just 4% market share in LCV segment.
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INTERPRETATION: This pie chart & table shows the pattern of Swaraj Majda Ltd.The
co. having 41.03% share of sumitamo corporation. The share of Punjab Tractor ltd. Is 14.04%.The co. having 7.83% share of Mutual fund/nationalized banks 9.31% share of FIIs & remaining 27.79% of public.
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80 70 60 50 40 30 20 10 0
EXPENDITURE
INTERPRETATION: The above table & graph shows the expenditures which are incurred by that co. In 2001-02 the total expenditures were 52% in 2002-03 these were 66.6%,in 2003-04 73.5%,in 2004-05 71.4%,in 2005-06 that was 64% & in 2006-07 the total expenditures were 65.6%.
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EPS 6.4% 6.4 13.9% 13.9 20% 20 23% 23 16% 16 15.3% 15.3
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INTERPRETATION: This table & graph shows the EPS of that plant. it shows that 6.4%EPS was in 2001-02,13.9% in 2002-03,20% in 2003-04,23% in 2004-05,in 2005-06 that was 16%. The EPS in 2006-02 was 15.3%.
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DIVIDEND RATE
20 0102
20 0203
20 0304
20 0405
20 0506
20 0607
INTERPRETATION: This table & graph shows the dividend rate of the company.it shows that in
2001-02 the dividend rate was 25%,in 2002-03 rate was 45%, in 2003-04 it was 10%, in 2004-05 was 75%, in 2005-06 rate was 55% and 2006-07 the dividend rate was 55%.
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ROYALTY AGREEMENT
Royalty agreement made on 5th day of October, 1984 between mazda motor corporation ( formerly called Tokyo kogyo company limited), accompany organized and existing under the laws of japan (called licensor) and swaraj vehicles limited, a company organized and existing under the laws of republic of India and having its registered office at phase iv, S.A.S nagar, district ropar, Punjab, the republic of India (called licensee). Licensee shall pay licensor the royalty listed in addendum (B), which shall be in the net amount of the deduction of all the taxes and duties, if levied in territory, for each unit of CKD vehicles assembled and/or manufactured and shipped out of licencee,s plant for sale or its own use , provided that the royalty including Indian taxes per/each unit of CKD vehicle shall not exceed 1.5% of the net ex-factory selling price of the vehicle minus landed cost of imported CKD part used therein and the cost of standard bought out components namely tyres, tubes, wheel rims, batteries and shock absorbers.
15.6%
Sumitomo corporation
10.4% 55%
-------------
Remaining 45% was raised by SML from public and Indian financial institutions in the usual manner. 48
MC and SC agreed to nominate their directors on the board of SML. The joint venture agreement provided for the right of upto 3 directors. MC and SC agreed to subscribe to their entire equity at the earliest stage of the project even before the public issue signifying their commitment to the project.
CKD AGREEMENT
In case of CKD agreement, MC will send the CKD agreement through SC against the letter of credit in five products WT_48, WT-49, and WT-50, WV-26,ZT-5
PRODUCT MIX
The product selected by the Swaraj Mazda for introduction in India in 1985 was the latest, state of art technology of Japan, which had been introduced there in March 1984. The company started with a 30% of local content. Starting with one standard product i.e. truck, Swaraj Mazda has over the years, on the strength of their own R&D, have developed various variants of the same. The company is manufacturing Light Commercial Vehicles in four-wheel base i.e. 2515MM, 2815MM, 3335MM. All the version and the models are being fabricated on these wheelbases. Swaraj Mazda T3500 vehicles have been tested by Vehicles Research and Development Establishment (VERD), a designated authority by Government of India under Ministery of Defense. VERD tests the companys vehicles at frequent intervals and issue certificates confirming it the Indian road standards laid down by Government of India from time to time. Vehicles are fuel efficient and meet emission norms. The range of products now includes Buses, Ambulances, Police Vans, Dumpers, Sky Lifts, Dumper placer, Delivery vans, Bottle Carriers, Mobile Ration Shops, Fire Tenders, CNG Buses & Trucks etc. as a result of such wide range of products the companys products are very popular with both private and government customers. In addition to the above SML is adding up 4 wheel drive & CNG vehicles as with the changes which take places in the market CNG has more powerful engine more torque at low rpm thus higher pick up, Grade ability & fuel efficient.
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(b) Localisation:-
At the time of inception, production stated with 30% local content keeping in
view the govt. of India guidelines, Swaraj has now achieved a local content 75% & such critical parts as starter motor, crankshafts, connecting rods, transmission gears are all in the local list now.
(c) Manufacturing Methods:- All vehicles of Swaraj Mazda are based on the modern chassis
manufacturing method using a welded box construction. The chassis is much stronger despite of its being.
(d) Efficiency:-The
running at a comparatively low RPM of 3000 thereby giving a long engine life.
(g) Fuel consumption per month of Swaraj Mazda Super Truck is 312 liter in
455 liter, Eicher 10.90 is 416.67 litres & Ashok Leyland cargo 909 is 45.45 litres.
(h) Swaraj Mazda vehicle has more Lugging power & allows easy handling of the hilly terrain. (i) In addition to sedimentor which removes water from fuel, Swaraj Mazda has two diesel filters causing
more filtration & thus more F.I pump life.
50
CHAPTER-4
FINDINGS &SUGGESTIONS
51
SUGGESTIONS
The study involves practical & conceptual over view of decisions concerning current asset like cash & bank balances, inventories, sundry debtors & provisions of Swaraz Mazda was with the objective of maximizing the overall net profit of the bank. The working capital limits would be considered only after the project nearing completion & after ensuring control over the inventory. The inventory is a great concern for SWARAZ MAZDA & it needs proper procurement & management.
Suggestions:
1. The plant must take certain steps to decrease the working capital cycle. One way can be better management of inventories. 2. The plant is a suggested to maintain a balance in capacities, synchronization of various inputs availability of some materials or parts which are not easily available. 3.The plant should maintain inventory at an optimum level rather than a very optimistic level. 4.The procurement for materials requisition processing should be reduced so as to minimize the lead Time.
52
CHAPTER-5
CONCLUSION
53
Conclusion
I conclude my project with the following points about Swaraz Mazda : 1. working capital of the company was increasing & showing positive working capital per year.it shows good liquidity position. 2. positive working capital indicates that company has the ability of payments of short terms liabilities.
54
3.In a year working capital decreased because of increased the expenditures as manufacturing expenses & increases the price of raw material as increased in the inflation rate. 4.Inventory was supporting to sales thus inventory rate was positive but company into the raw material hold.
CHAPTER-6
LIMITATIONS
55
LIMITATIONS
In spite of best efforts, the study was subjected to following limitations: 1. Some officers were too busy to give a sincere response hence their response may not relate to real picture. 2. Manager some time denied to disclose some important financial matters, which can be helpful in this study.
56
3. The time period given to me for the completion of the project was short in such a short span of time, it is difficult to complete any project in detail. 4. Some information related to the study which had been collected from the company was rounded off because of some influence.
CHAPTER-7
57
BIBLIOGRAPHY
BIBLIOGRAPHY
The reference books
58
PARTICULARS
200506
200607
ACTUALS
Sales (Nos.)
Passengers Applications Goods Applications Total
(112183)
(106625)
(93661)
(83537)
(93165)
14.4
(23144)
4.8%
18.3
(22590)
4.9%
19.2
(18679)
4.0%
20.4
(16514)
3.5%
22.3
(18760)
3.6%
26.7
(24629)
4.4%
10.4
(16715)
3.5%
11.4
(14072)
3.1%
12.7
(12355)
2.7%
13.6
(11009)
2.3%
15.3
(12871)
2.5%
16.9
(15589)
2.8%
24.9
(40019)
8.4%
33.7
(41600)
9.1%
37.2
(36190)
7.8%
34.6
(28009)
5.9%
26.4
(22209)
4.3%
22.0
(20293)
3.6%
2.3 52.0
60
3.2 66.6
4.4 73.5
2.8 71.4
64.0
65.6
(83574)
(82212)
(71505)
(57800)
(53840)
(60511)
%age
17.5%
17.9%
15.4%
12.1%
10.4%
10.8%
Operating Profit
Margin
17.8
6.0%
27.7
7.4%
36.1
7.6%
44.3
7.5%
35.3
5.8%
35.4
5.8%
Corporate Tax Profit After Tax Paid-up Equity Capital EPS (Rs) Book Value Dividend (%age)
61
ANNEXURE
FINANCIAL PARTICULARS OF SWARAJ MAZDA LIMITED FOR THE YEAR 2007-08
PARTICULARS Sales (Nos.) Passengers Applications Goods Applications Total Net Operating Revenue Material Cost %age 7400 5800 13200 780.0 651.5 83.5% 1429 1253 2682 153.0 124.7 81.5% (105518 Contribution Per Vehicle Rs. (97348) ) 2007-08 PLAN Q1
Expenditure Employees Cost Per Vehicle Rs. %age Manufacturing & Others Per Vehicle Rs. 32.0 (24242) 4.1% 20.0 (15152) 6.7 (24981) 4.4% 4.1 (15287) 62
%age Selling & Distribution Per Vehicle Rs. %age Royalty Total Expenses Per Vehicle Rs. %age Operating Profit Margin Interest Cash Profit Depreciation Profit Before Tax Margin Corporate Tax Profit After Tax Paid-up Equity Capital EPS (Rs) Book Value Dividend (%age)
2.6% 28.0 (21212) 3.6% 80.0 (60606) 10.3% 48.5 6.2% 12.0 36.5 3.5 33.0 4.2% 10.0 23.0 10.5 21.9 -
2.7% 4.9 (18270) 3.2% 15.7 (58538) 10.3% 12.6 8.2% 3.0 9.6 0.8 8.8 5.8% 2.8 6.0 10.5 5.7 -
63
ANNEXURE
SWARAJ MAZDA LIMITED
CKD STOCK
June
2007
64
ANNEXURE
SWARAJ MAZDA LIMITED
VEHICLE STOCK 30th AS AT 31st MARCH
PARTICULARS 2003 2004 2005 2006
2007
June
2007
SALES INCLUDES : GOODS APPLICATIONS PASSANGER APPLICATIONS 5589 2512 8101 INS. CLAIM RECD./CAPITAL. VEH. STOCK LOCATION -BONDED / SAC 77 52 118 30 88 123 1 3 2 1 2 2 6564 3715 10279 7837 4516 12353 6412 5475 11887 5127 5714 10841 1253 1429 2682
65
89 371 578
57 549 636
30 590 708
683 675
852 857
1032 1029
996 991
910 903
884 894
ANNEXURE
CASH FLOW STATEMENT OF SWARAJ MAZDA LIMITED FOR THE LAST 5 YEARS
Particulars 2001-02 2002-03 66 2003-04 2004-05 2005-06
cash flow from operating activities (A) net cash from operating activities Cash flow from Investing activities Net cash from investing activities Cash flow from Financing Activities Net cash used in financing activities
857.96
3947.45
760
523
6599.06
327.91
314.05
195.42
342.69
587.76
519.18
4342.09
595.50
1077.11
7516.32
67
200102 6222 2978 178 6.0% 58 120 4.0% 16 104 3.5% -36 68
200203 8101 3723 277 7.4% 31 246 6.6% 21 225 6.0% -79 146
200304 10279 4777 361 5.8% 16 280 4.6% 21 253 4.1% -114 168
200405 12353 5899 443 7.5% 40 403 6.8% 25 378 6.4% -136 242
2005-06 11887 6126 353 5.8% 73 280 4.6% 27 253 4.1% -85 168
Margin 5.9% Interest Cash Profit 40 57 Margin 3.4% Depreciation Profit Before Tax (PBT) 11 46
Margin 2.8% Extra Ordinary Item 29 Income Tax Profit After Tax (PAT) Dividend - Rate - Outflow - Payout Ratio ----75
Equity Share Capital 105 Net Worth Earnings Per Share (Rs.) Book Value Per Share (Rs.) Return on Avg. Net Worth (5) 7.2 ---
68
69