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EXECUTIVE SUMMARY
The ultimate objective of the company is to maximize the wealth. It is possible through
the effective performance. So effectiveness of the performance of a company can be
analyzed by using the different items of the financial statements using different tools. The
reason behind the selection of the particular topic is to determine the reasons for
irregularity and consistency in the performance by comparing the financial statement of
last 5 years.
Depending upon the statement of the problem objectives is framed. The objective of
the study is to analyze the changes taken place in the financial statements for the period
of 5 years and also find the effect of these changes on the financial performance. There
are different tools to analyze the financial performance of the company. Here ratio
analysis is used for the period of 5 years. The study includes the data collection through
the discussion with senior manager as well as the other staff from the finance department.
BEML is a heavy engineering manufacturing company. They undertake large projects
which extend over a period of financial year. The total target for the year 2012-13 is
4,000crores and BEML is going to celebrate 50th Anniversary in the 2013-14 and the
target fixed is 5,000 crores.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 1
Introduction
The Government-owned corporations are termed as Public Sector Undertakings
(PSUs) in India. In a PSU majority (51% or more) of the paid up share capital is held by
Central Government or by any State Government or partly by the Central Governments
and partly by one or more State Governments. The Comptroller and Auditor General of
India (CAG) audits Government companies.
Post Independence, India was grappling with grave socio-economic problems,
such as inequalities in income and low levels of employment, regional imbalances in
economic development and lack of trained manpower, weak industrial base, inadequate
investments and infrastructure facilities. Hence, the roadmap for Public Sector was
developed as an instrument for self-reliant economic growth. The country adopted the
planned economic development polices, which envisaged the development of PSUs.
Initially, the public sector was confined to core and strategic industries. The second phase
witnessed nationalization of industries, takeover of sick units from the private sector, and
entry of the public sector into new fields like manufacturing consumer goods,
consultancy, contracting and transportation etc.
The Industrial Policy Resolution 1948 outlined the importance of the economy and its
continuous growth in production and equitable distribution. In this process, the policy
envisaged active engagement of the State in development of industries.
The Industrial Policy Resolution 1956 classified industries into three categories with
respect to the role played by the State -
The first category (Schedule A) included industries whose future
development would be the exclusive responsibility of the State
The second (Schedule B) category included Enterprises whose initiatives
of development would principally be driven by the State but private
participation would also be allowed to supplement the efforts of the State
CMR INSTITUTE OF MANAGEMENT STUDIES Page 2
The third category included the remaining industries, which were left to
the Private sector.
Two hundred years of colonial rule crushed Indian Industry and exhausted
resources. At the point of Independence, the leadership was convinced that political
freedom without economic freedom was of little use. However, most of the private
entrepreneurs did not have the vision, resources or capability or even the will to
undertake heavy investments in core sector industries which have long gestation
periods. Besides, given the ideological environment and shortage of supplies, it was
only natural for the Government not to choose a system controlled by the Private
enterprise.
Initially, the public sector was confined to core and strategic industries. Projects like
the Damodar Valley Cooperation, Sindhri Fertilizers and Chemicals, Indian
Telephone Industries, Hindustan Machine Tools, Steel plants, Aircrafts,
Shipbuilding, Bharat Heavy Electricals, Oil and Natural Gas Commission, and a host
of others. The second phase saw mainly three trends, a nationalization spree, and
takeover of sick units from the private sector, and entry of the public sector in new
fields like, Manufacturing consumer goods, Consultancy, Contracting, and
Transportation etc. Many foreign firms like Jessop & Co, Braithwaite & Co, and
Burn & Co etc were nationalized. Several hundred life insurance companies were
absorbed into the Life Insurance Corporation. Hundreds of coal mines were
transferred to the Coal Mines Authority. Then the public sector entered into fields
like making medicine, weaving cloth, and running hotels. During the 1970s and
1980s the growth was phenomenal, wherein it undertook works like providing power
and potable water, laying roads, constructing townships with basic amenities like
schools, markets, hospitals and recreation clubs.
The public sector attracted the best talent in the country. It not only provided jobs to
people in different regions, but invariably employed all the displaced people as well.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 3
The public sector has to a large extent succeeded in meeting the objectives and
laying a strong foundation for the industrial development of the country. It is widely
recognized that the public sector management is based on strong systems and
processes which is not usually the case with the private sector. At the height of its
development, the public sector was less concerned with making profits and more
with nation building activities. Also, huge investments were made in sectors which
did not promise adequate return on the capital invested.
Post-1991, with declining revenues, and budgetary gaps, the government withdrew
its budgetary support, and increased the pressure on them to produce profits, and
thus dividends. While, their social and other gains were taken for granted, PSEs were
criticized for not producing adequate profits and for entering into fields like Tourism
and food supplies. This was partly the result of the global movement to private
industry.
Over the years, a focused bureaucratic and inflexible approach led to the sapping of
the autonomy. Somewhere down the lane, the government lost clarity in its roles of
Governance, as investor, regulator and business manager. The Government paid
little heed to the Constitution of the board of directors, and hardly empowered them.
There are a large number of private sector units today, where ownership rests with
Government owned Finance institutions. These companies are not hampered by
bureaucratic control, and therefore are able to perform much better. Privatization
may have served as a panacea to some of the developed countries, but a country like
India has to find its own solutions bearing in mind its needs. There is a virtue in
following a middle path.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 4
Public Sector Undertakings (PSUs) have laid a Ground foundation for the industrial
development of the country. The public sector is less concerned with making profits.
Hence, they play a key role in nation building activities, which take the economy in the
right direction. PSUs provide leverage to the Government (their controlling shareholder)
to intervene in the economy directly or indirectly to achieve the desired socio-economic
objectives and maximize long-term goals. As agriculture is the backbone of Indian
economy, Public Sector Banks (PSBs) play a crucial role in pushing the agricultural
economy on to the progressive pathway and helping develop rural India. Moreover, PSUs
play a substantial role in the rural development by providing basic infrastructural services
to citizens.
CLASSIFICATION OF PUBLIC SECTOR UNDERTAKINGS
Public Sector Undertakings (PSUs) can be classified as Public Sector Enterprises
(PSEs), Central Public Sector Enterprises (CPSEs) and Public Sector Banks (PSBs).
Public Sector Enterprises (PSEs)
CHARACTERISTICS OF PSE
(a) Government Ownership and Management: The public enterprises are owned and
Managed by the Central or State Government, or by the Local authority. The
Government may either wholly own the public enterprises or the ownership may partly
Be with the government and partly with the private industrialists and the public. In any
Case the control, management and ownership remains primarily with the government.
(b) Financed from Government Funds: The public enterprises get their capital from
Government Funds and the Government has to make provision for their capital in its
Budget.
(c) Public Welfare: Public enterprises are not guided by profit motive. Their major focus
CMR INSTITUTE OF MANAGEMENT STUDIES Page 5
Is on providing the service or commodity at reasonable prices.
(d) Public Utility Services: Public sector enterprises concentrate on providing public
Utility services like Transport, Electricity, and Telecommunication etc.
(e) Public Accountability: Public enterprises are governed by public policies formulated
By the Government and are accountable to the Legislature.
(f) Excessive Formalities: The Government rules and regulations force the public sector
Enterprises to observe excess formalities in their operations. This makes the task of
Management very sensitive and cumbersome.
Central Public Sector Enterprises (CPSEs)
The Central Public Sector Enterprises (CPSEs) are also classified into 'strategic' and 'non-
strategic'. Areas of strategic CPSEs are:
Arms & Ammunition and the allied items of Defence equipments, Defence air-
crafts and Warships
Atomic Energy (except in the areas related to the operation of nuclear power and
applications of radiation and radio-isotopes to agriculture, medicine and non-
strategic industries)
Railways transport
Central public sector enterprise has been the mainstay of the Indian economy and were
set up with the mandate to
i) Serve the broad macro-economic objectives of higher economic growth,
ii) Achieve self-sufficiency in production of goods/ services,
iii) Facilitate long term equilibrium in balance of payments and
iv) Ensure stability in prices and create benchmarks for prices of essential items.
With the onset of economic reforms in 1991, the Government initiated a Systemic shift to
a more open economy with greater reliance upon market Forces and large role of the
CMR INSTITUTE OF MANAGEMENT STUDIES Page 6
private sector including foreign investment. Consequently, the CPSEs were exposed to
competition from domestic private Sector companies as well as the large Multi-National
Corporations. Given the Competitive environment, the CPSEs undertook significant
initiatives for up Scaling technologies and capacities in order to operate at par with the
private Counterparts in the liberalized economy. With continued focused efforts
Towards achieving excellence, several of the CPSEs have become self reliant and are
playing a critical role in building the Indian economy.
Public Sector Banks (PSBs).
Among the Public Sector Banks in India, United Bank of India is one of the 14 major
banks which were nationalized on July 19, 1969. Its predecessor, in the Public Sector
Banks, the United Bank of India Ltd., was formed in 1950 with the amalgamation of four
banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918),
Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932).
Oriental Bank of Commerce (OBC), a Government of India Undertaking offers
Domestic, NRI and Commercial banking services. OBC is implementing a GRAMEEN
PROJECT in Dehradun District (UP) and Hanumangarh District (Rajasthan) disbursing
small loans. This Public Sector Bank India has implemented 14 point action plan for
strengthening of credit delivery to women and has designated 5 branches as specialized
branches for women entrepreneurs.
ROLE OF PUBLIC SECTOR UNDERTAKINGS
Public Sector Undertakings (PSUs) have laid a strong foundation for the industrial
CMR INSTITUTE OF MANAGEMENT STUDIES Page 7
development of the country. The public sector is less concerned with making profits.
Hence, they play a key role in nation building activities, which take the economy in the
right direction.
PSUs provide leverage to the Government (their controlling shareholder) to intervene in
the economy directly or indirectly to achieve the desired socio-economic objectives and
maximize long-term goals.
As agriculture is the backbone of Indian economy, Public Sector Banks (PSBs) play a
crucial role in pushing the agricultural economy on to the progressive pathway and
helping develop rural India. Moreover, PSUs play a substantial role in the rural
development by providing basic infrastructural services to citizens.
GOVERNANCE OF PUBLIC SECTOR UNDERTAKINGS
The Department of Public Enterprise acts as a Nodal agency for all Public Sector
Enterprises (PSEs).
The important roles and tasks of the Department are:
General policy relating to Public Sector.
Matters relating to issue of Presidential Directives and guidelines to Public Sector
Enterprises.
Formulation of policy guidelines pertaining to Public Sector Enterprises in areas
like performance improvement and evaluation, financial management, personnel
management, board structures, wage settlement, training, industrial relation,
vigilance, performance appraisal, etc.
Matters relating to reservation of posts in the public sector enterprises for certain
classes of citizens.
All matters relating to Memorandum of Understanding between the Public Sector
CMR INSTITUTE OF MANAGEMENT STUDIES Page 8
Enterprises and the administrative Ministries/Departments.
Matters relating to delegation of powers to Board of Directors.
To undertake in depth studies in respect of significant areas of functioning of
Central PSEs.
Matters relating to ICEP International Center for Public Enterprise.
Matters relating to SCOPE Standing Conference of Public Enterprise.
To monitor and evaluate the performance of PSEs and to act as a repository of
data and to bring out an Annual Survey for the Parliament.
Permanent Machinery of Arbitrators for settlement of disputes among public
sector enterprises and Government Departments except disputes relating to tax
matters.
Appraisal of proposal from different administrative Ministries/Department.
Pertaining to restructuring, revival, joint venture etc.
INTRODUCTION TO FINANCE
CMR INSTITUTE OF MANAGEMENT STUDIES Page 9
Finance is lifeblood of the economy. It is one of the major components, which
activates and stimulates the overall growth of the economy.
Finance is a body of principles and theories, which deals with rising, and acquiring of
funds on reasonable terms, and use of money by the acquirer.
Definition:
Husband and Dockeray: “Something must direct the flow of economic activity and
facilitate its smooth operation. Finance is the agent that produces this result.
In the modern money oriented economy, finance is one of the basic foundations of all
kinds of economic activities. It is a master key, which provides access to all the
sources. It is rightly said that, “Business needs money to make more money”.
Efficient management of every business enterprise is closely linked with efficient
management of finance. Hence, a well-knit financial system directly contributes to
the growth of the economy.
BUSINESS FINANCE
Business finance is that business activity, which is concerned with the acquisition and
conservation of capital finds to meet financial needs and overall objectives of a
business enterprise.
Financial functions of a business may be stated as the procurement of funds and their
effective utilization.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 10
FINANCIAL MANAGEMENT
Sound financial management is necessary in every organization. Collins Brooks has
remarked that, “Bad production management and sales management have stain in
hundreds, but, a faulty financial management have stain in thousands”.
Financial management is a managerial activity, which is concerned with the
anticipation of financial needs, acquiring financial resources, allocating funds in
business, administrating the allocation of funds and accounting and reporting to the
management over the financial matters.
RATIO ANALYSIS
Financial statement no doubt, contains the items related to profit and loss and financial
position of a concern, but the items found in financial statement will not be much use, if
they are considered independently. They will be very use, if they are considered in the
light of another, i.e., compared.
In this regard, ratio analysis is a powerful tool. A ratio is defined as “The indicated
quotient of two mathematical expressions” and “as the relationship between two or more
items”.It is used as an index or yardstick for evaluating the financial position and
performance of a firm. Ratio analysis is the technique of the calculation of number of
accounting adios from the data found in the financial statements , the comparison of the
accounting ratios with those of the previous years or with those of the concerns engaged
in similar line of activities or with those of standard or ideal ratios and interpretation of
the comparison there after.
Ratios can be expressed in two ways:
In the terms of time. Eg.: current assets to current liabilities =1.36 times
In terms of percentage. Eg.: net profit to net sales=50%
CMR INSTITUTE OF MANAGEMENT STUDIES Page 11
CLASSIFICATIONOF ACCOUNTING RATIOS
Accounting ratios can be classified mainly on 2 bases:
I. On the basis of origin or source of figures placed in relation
with each other:
(a) Balance sheet ratios or financial ratios
(b) Profit and loss account ratios or operating ratios
(c) Mixed or combined or inter-statement ratios
II. On the basis of nature and functions of the accounting ratios:
(a) Liquidity ratios
(b) Leverage ratios
(c) Turnover ratios
(d) Profitability ratios
LIOUIDTY RATIOS OR SHORT-TERM SOLVECY RATIOS
The importance of liquidity in the sense of the ability of a firm to meet current or
short-term obligations when they. Become due for payment can hardly be over-
stressed. This liquidity ratio measures the ability of a firm to meet its short –term
obligations and reflect short-term financial strength or solvency of a firm.
The most common ratios which measure the liquidity of a are:
1. Current ratio or working capital ratio
2. Quick ratio or Acid test ratio or Liquid ratio or Liquidity ratio
3. Absolute liquid ratio or Cash position ratio or Cash ratio
4. Inventory to Working capital ratio
5. Net working capital ratio
CMR INSTITUTE OF MANAGEMENT STUDIES Page 12
LEVERAGE/ CAPITAL STRUCTURE/LONG TERM SOLVENCY RATIO
Leverage Ratios are the financial ratios, which throw light on long-term solvency of a
firm as reflected in its ability to assure the long-term creditors with, regarded to
Periodic payment of interest during the period of loan
Repayment of principal on maturity or in pre determined installments
at due dates
There are thus, two aspects of the long term solvency of a firm
Ability to repay the principal when due &
Regular payment of interest
Accordingly, there are two different, but, mutually dependent & interrelated,
Types of leverage ratios
(a) First, ratios are based on the relationship between borrowed
finds & owners capital. Their ratio are computed from the balance sheet & have many
variations, such as
Debt Equity Ratio/ External-Internal Ratio
Property/Equity Net worth Ratio
Solvency Ratio
Fixed Asset to Net worth Ratio
Current Asset to Net worth Ratio
Current Liabilities to Net worth Ratio
Capital Gearing Ratio
Fixed Assets Ratio
(b) The second type of capital structure ratios, popularly called as
Coverage Ratios are calculated from profit & loss account included in this category
Dividend coverage Ratio
Total Fixed Charges Ratio
Interest Coverage Ratio
CMR INSTITUTE OF MANAGEMENT STUDIES Page 13
Activity/ Performance / Turnover Ratios
Activity Ratios refers to Ratios, which measures the level of activates, the
performance or the operating efficiency of an enterprise. They may be the defined as
the test of relationship between sales & various assets of the firm. Several Activity
Ratios are calculated to judge the effectiveness of asset utilization.
The important Activity Ratios are
1. Inventory/Stock Turnover Ratio
2. Receivable /debtors Turnover ratio/debtors Velocity
3. Creditors Turnover Ratio/creditors Velocity
4. Cash Turnover Ratio/Cash Velocity
5. Assets Turnover Ratio/Investment Turnover Ratio
6. Sales to net worth Ratio
7. Working Capital Turnover Ratio
Profitability Ratios
Profit is the difference between revenues & expenses over a period of time. Profit is
the ultimate output of the company & it will have no future if it fails to make
sufficient profits.
Profitability Ratios reveal the total effect of the business transactions on the profit
position of the enterprise & indicate how far the enterprise has been successful in its
aim.
1) Profit Ratios Related to Sales
2) Profitability in Relation to Investment
CMR INSTITUTE OF MANAGEMENT STUDIES Page 14
1. Profit Ratios Related to Sales
These are the ratios, which are based on the premise that a firm should earn sufficient
profit on each rupee of sales, the difference ratios under this head are:
i. Profit Margin Ratio
Measures the relationship between profit & sales. The ratios under this category
are:
o Gross Profit Ratio
o Net Profit Ratio
ii. Expenses Ratio
Expenses refer to operating expenses of a firm exclusive of financial expenses
like interest, taxes & dividends & extra ordinary losses due to theft of goods,
goods loosed by fire etc. Different expense ratios are
o Operating Expenses Ratio
o Cost of Goods Sold Ratio
o Specific Expenses Ratio
2. Profitability Ratios Related to Investments
This is based on the exit that a firm should earn reasonable profits on the
capital invested. The different ratios under this category are
o Return on Assets
o Return on Capital Employed
o Return on Share holder’s Equity Funds
o Earnings Per Share
o Dividend Per Share
o Dividend Payout Ratio
o Earnings & Dividend Yield
o Price-Earnings Ratio
CMR INSTITUTE OF MANAGEMENT STUDIES Page 15
FUND FLOW ANAYSIS
FUND
The term fund may be interpreted in various ways, namely as cash, as total current
assets & as net current assets or net working capital.
FUND FLOW
Flow of fund means changes in the amount of fund or net working capital. There is said
to be flow of fund when a business transaction results in change, either in an increase or
in a decrease in the amount of fund or net working capital. If a transaction results in an
increase in the amount of fund, it is considered as source of fund. If a transaction results
in decrease of fund, it is considered as an application/use of fund.
FUND FLOW STATEMENT
A fund flow statement is a statement of fund or net working capital. It is also be a
condensed report of how activities of a business have been financed & how the
financial resources have been used during the period conversed by the statement.
Steps Involved in the Preparation of fund Flow statement:
i. Preparation of schedule of change in working capital.
ii. Preparation of adjusted profit & loss account to find out funds from operation.
iii. Preparation of fund flow statement.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 16
Steps Involved in the Preparation of Fund Flow statement:
i. Preparation of schedule of change in working capital.
ii. Preparation of adjusted profit & loss account to find out funds from
Operation.
iii. Preparation of fund flow statement.
Significance
A fund Flow statement is useful in following ways:
It is helpful in knowing sources of fund.
It suggests the way in which working capital .Position can be improved.
It is useful in forecasting the fund flow & in projecting the working capital.
Requirements
It can be used in planning a sound dividend policy.
It is helpful in planning the temporary investment of ideal fund.
On a comparison of the fund flow statements of a concern for a numbers of
years, the information about the financial method used in part can be obtained.
CASH FLOW ANALYSIS
CASH FUND
It includes only cash along with bank balance.
CASH FLOW
It means actual flow or movement of cash in & out of an enterprise. The increase in the
cash balance implies the inflow of cash, source of cash or positive cash flow. The
CMR INSTITUTE OF MANAGEMENT STUDIES Page 17
decrease in the cash balance indicates the out flow of cash, application of cash or
negative cash flow.
CASH FLOW STATEMENT
It is a statement, which depicts the change in the cash position of a concern between one
balance sheet dates to another. A cash flow statement is prepared by taking into account
the opening & closing cash & bank balances, various sources of cash & various uses of
cash.
STEPS
Ascertainment of operating cash profit.
i) Ascertainment of cash flow from operations.
ii) Preparations of cash flow statement.
Significance
It gives penetration review of cash movements over an operating cycle.
i. It is helpful to a concern to evaluate its current cash position.
ii. It facilitates affective & efficient cash planning.
iii. It helps the management to analyze the past behavior of the cash cycle, & to
control the uses of cash in future.
iv. It is helpful in determining the policies of financial management like dividend
Payments, repayments of long-term loans etc
CMR INSTITUTE OF MANAGEMENT STUDIES Page 18
RESEARCH DESIGN
INTRODUCTION
The public sector undertakings, today occupies the key position in the economy it
is already grown into an Industrial giant with more than 20,000 crores of investment
about 1/4th of the finance to railways. Therefore it can be said that Public Sector
Company is on a growing phase. The funds required by the company to carry on its
business effectively and efficiently are determined by these financial statements which
give a brief idea to allocate the resources in the right manner which could ease up the
difficulty in planning the fund flows effectively. So the study reveals the manner in
which the company performs these activities in order to distribute it accordingly and
bring the company profits than incurring losses.
PROBLEM STATEMENT
The study is based on the performance evaluation of the public sector
undertaking, as initially post-independence the public sector undertaking were making
huge losses due to inappropriate management of resources, poor management and
insufficient financial resources. When company is earning average profit and is a head of
its competitors in terms of the market share then the company is considered to be
performing well.
OBJECTIVE OF THE STUDY
To study the liquidity and profitability position of the company.
To analyze the financial statement using ratio analysis tools.
To study the financial position of BEML over past 5 years.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 19
RESEARCH DESIGN
Sources of Data
Primary data:
Primary data will be collected through personal interview with the company officials.
Secondary data
Secondary data will be collected through the following
Company annual reports
Magazines
Websites.
PLAN OF ANALYSIS
Data collected are presented through
Tables
Charts
Graphs
Diagrams
The data collected will be analyzed through ratio analysis.
SCOPE OF STUDY
The findings of this project would provide an insight into performance evaluation
of a public sector undertaking, enabling the companies to compare their performance
with the other public sector undertaking. Further the findings of this research would also
facilitate researchers, academicians & fellow students pursing on similar topics.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 20
LIMITATIONS OF THE STUDY
Time constraint.
Some of the data cannot be collected due to confidential policies of the
undertaking.
Area of the study is restricted only to Bangalore complex.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 21
INDUSTRY PROFILE
In early days rails called wagon were being used in Germany as early as 1550.
The primitive railed roads consisted of wooden rails over which horse driven wagons or
carts moved with greater ease than over dirt and roads. Wagon was the beginning of
modern railways. By 1776, iron had replaced the wood rails and wheels of carts. Wagon
ways evolved into Tramways and spread throughout Europe. Horses still provide all
pulling power. In 1789, Englishmen, William Jessup designed the first wagon with
flanged wheels. The flange was a groove that allowed the wheels to better grip the rail
this was an important design that carried over to later locomotives.
The invention of steam engine was critical to the invention of modern railroad and
trains. In 1803 a man named Samuel Homfray decided to fund the development of steam
powered vehicles to replace horse driven carts on tramway locomotive. On (1771-1833)
built that vehicle, the first steam engine tramway locomotive. On February 22, 1804, the
locomotive hauled a load of tonnes of iron, 70 men and five extra wagons the 9 miles
between the ironworks at Pen-y-Darron in the town of Merthyr Tydin, Wales to the
bottom of the valley called Abercynnon. It took about two hours.
In 1821, English, Julius Griffith was the first person to patent a passenger
locomotive. In September 1825 the Stockton and Darlington railroad company began first
railroad to carry both goods and passengers on regular schedules using locomotives
designed by English inventor, George Stephenson. Stephenson’s locomotive pulled six
loaded coal cars and 21 passenger cars with 450 passengers over 9 miles in about one
hour.
George Stephen is considered to be the inventor of the first stem engine for the
railways. Richard Trevithick’s invention is considered the first tramway locomotive,
however, it was a road locomotive, designed for a road and not for a railroad. Stephenson
was extremely poor and receiving very little formal education. He worked in local
collieries and was self-taught and reading and writing .In 1812, he became a colliery
CMR INSTITUTE OF MANAGEMENT STUDIES Page 22
engine builder and in 1814 he built the line’s first locomotive, the Locomotion. In 1825,
Stephenson moved to Liverpool and Manchester railway, where together with his son
Robert built (1826-29) the Rocket. Colonel John Stevens is considered the Father of
American Railroad.
In 1826 Stevens demonstrated the feasibility of steam locomotion on a circular
experimental track constructed on his estate in Hoboken, New Jersey. The first railroad
charter in North America was granted to John Stevens in 1815. The Pullman Sleeping car
was invented by George Pullman in 1857.It was designed to as a sleeper coach designed
for overnight passenger travel.
Advanced Train System
In 1960s and early 1970s, considerable interest developed in the possibility of building
tracked passenger vehicles that could travel much faster than conventional trains. From
1970’s, interest in an alternate high-speed technology centered on magnetic levitation, are
maglev. This vehicle rides on an air cushion created by electromagnetic reaction between
an on board and another embedded in its guide way.
Rail coach industry in India
India has been ruled by foreigners for several years and such, after independence
India has given priority to strengthen the country’s defence force. Several industries
producing defence equipment’s has been started by Government of India. India felt the
need of having strong defence, which is capable of defending its borders from
neighbour’s. In this view, the Ministry of Defence has established BEML.
BEML was mainly establish to produce equipment’s and heavy capital
equipment’s like railway coaches, Earth movers, machineries etc. ministry of defence
started one unit of BEML at Bangalore, In the year 1964. It is one of biggest unit in Asia.
BEML has number of branches all over India. Its various units in different parts
of the country have immensely contributed to the growth of the Indian economy. It not
only has provided employment but also successfully achieved the advantage of
CMR INSTITUTE OF MANAGEMENT STUDIES Page 23
economies of scale. Ancillary and small-scale industries have also been started around its
vicinity. It is contributing to the economic growth both directly and indirectly. It has
emerged as a powerful industries unit of Indian economy.
India’s heavy earth equipment and spare parts manufacture various capacities
ranging from mini version to giants. Overseas manufacture equipment’s and spare
exports to our country. Hence providing stiff competition.
Domestic manufactures
CLW: Large-scale loco productions in India did not begin until the establishment
of the Chittaranjan Locomotive works (CLW) in 1950.
DWL: the diesel loco works set up at Varanasi began producing diesel loco’s in
1967, and has since then produced a large number of main line and shunt diesels.
Variants of various classes in WDS and WDG series are supplied to industrial concerns
as well.
ICF: Integral Coach Factory has been making Emu’s for sub urban systems (e.g.
the YAU-I MG-4EMU) since 1966. It also makes some self-propelled special-purpose
units, such as the diesel Medical Relief Van and diesel electric tower cars.
Venkateshwara Transmission (Ventra) of Medak (Andhra Pradesh) is another
manufacturer who supplied some locomotives and locomotives parts to IR.
Apart from BEML there are two more companies that are equipped in the
manufacturing rail coaches, Integral Coach Factory (ICF) at Chennai and Rail coach
factory at Kapurtala.
Defence vehicle- An Introduction
Defence vehicles serve the most important purpose of defending any particular
country from external attacks in an efficient manner. Thus the machinery involved in
making of these companies that largely deal with the manufacturing of these vehicles are
Mahindra Motors and Ashok Leyland.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 24
COMPANY PROFILE
BEML Limited (formerly Bharat Earth Movers Limited) was established in May 1964 as
a Public Sector Undertaking for manufacture of Rail Coaches and Spare Parts and Mining
Equipment at its Bangalore Complex. The Company has partially disinvested and
presently Government of India owns 54 percent of total equity and Public, Financial
Institutions, Foreign Institutional Investors, Banks and Employees hold rest 46 percent.
Bharat Earth Movers Limited (BEML) is a premier ISO 9001 Company in India and
second largest manufacturer of Earth Equipment in Asia. A three decade old Multi
Location and Multi Product Company, BEML has a vital application in diverse sectors of
economy such as coal, mining, steel, cement, power, irrigation, construction and road
building and railways. It had expanded its product range to cover high quality hydraulics,
heavy-duty diesel engines, and welding robots and undertaking of heavy fabrication jobs.
In public sector undertaking, BEML commands 70% market share in domestic
earthmover industry. Nearly 40% of its quality has be completed.
BEML Limited, a ‘Miniratna-Category-1’, plays a pivotal role and serves India’s core
sectors like Defence, Rail, Power, Mining and Infrastructure. The Company started with a
modest turnover of ` 5 Cr during 1965 and today, thanks to its diverse business portfolio,
the company has been able to achieve a turnover of more than ` 3,500 Cr. Its three major
Business verticals viz., Mining and Construction, Defence and Rail and Metro are
serviced by its nine manufacturing units located at Bangalore, Kolar Gold Fields (KGF),
Mysore, Palakkad and Subsidiary - Vignyan Industries Ltd, in Chikmagalur District.
BEML’s products are sold and serviced through its large Marketing Network spread all
over the Country. BEML’s products are exported to more than 56 countries. As part of
company’s globalization strategy, the company has expanded its global reach by opening
local company at Indonesia and Brazil recently in addition to Malaysia and China offices.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 25
The company operates under three major Business verticals - viz. Mining and
Construction, Defence and Rail and Metro. A Director who acts as CEO of the Business
and reports to the Chairman and Managing Director of the company heads in each of the
above Business. In addition to the above, Technology Division of the company provides
end-to-end technology solutions in Auto, Aero, Defence and Rail and Metro related
areas. Trading Division deals in non-company products. BEML manufactures and
supplies Defence Ground Support Equipment such as Tatra based High Mobility Trucks,
Recovery Vehicles, Bridge Systems, Vehicles for Missile Projects, Tank Transportation
Trailers, Milrail Wagons, Mine Ploughs, Crash Fire Tenders, Snow Cutters, Aircraft
Towing tractors, Aircraft Weapon Loading Trolley. The company also plans to take up
overhaul and up gradation of Battle Tanks with a view to assemble and roll out the
products. Under Mining and Construction Business, the company manufactures and
supplies Mining and Construction equipment like Bull Dozers, Excavators, Dumpers,
Shovels, Loaders and Motor Graders to various user segments and under Rail and Metro
Business, manufactures and supplies Rail Coaches, Metro Cars, AC EMUs, OHE Cars,
Steel and Aluminium Wagons to the rail sector.
The company has a dedicated R&D infrastructure and team in line with consistent
policy of the company to meet the technological demands through in-house R&D and
strategic technical tie-ups with global players.
BEML operates on three major business verticals for associated equipment
manufacturing:
Mining and Construction
Defense
Rail and Metro
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In addition to the above there are three Strategic Business Units (SBUs):
Technology Division for providing end-to-end engineering solutions
Trading Division for dealing in non-company products
International Business Division for export activities
The company has been registering consistent growth in sales and profits and has
made a turnover of ` 3,558 Cr in 2009-10 registering a growth of 18% over the previous
year with a Profit Before Tax of ` 320 Cr and has orders on hand of over ` 5,000 Cr as of
end March 2010.
The Company has drawn up VISION – 2013 with an ambitious growth rate of
12% CAGR for crossing 5,000 Crores turnovers by 2013-14 coinciding with BEML’s
Golden Jubilee year. With this emerging prospects, BEML has plans to cross ` 5,000
Crores in the next 2 years and is poised to achieve ` 10,000 Crores mark by 2016-17 and
the company is gearing up with necessary infrastructure for achieving the same.
Vision and Mission
Vision
To become a market leader, as a diversified company supplying products and
services to Mining and Construction, Railway and Metro and Defence Services and
emerge as an International Player.
Mission
Improve competitiveness through organizational transformation and
collaboration / strategic alliances / joint ventures in technology.
Grow profitably by aggressively pursuing opportunities in national and
international markets.
Attract and build people in a rewarding and inspiring environment by
fostering creativity and innovation.
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Objectives
To maintain a dominant position in design, development, manufacture and
marketing of Defense, Earthmoving and Construction and Rail and Metro
equipment.
To diversify and grow.
To provide total engineering solutions to its customers.
To internationalize operations by enhancing exports.
To improve profitability.
To maintain State-of-the-Art technology for all products.
Re-orientation of the business operations to match present scenario.
Continuous building of skills and competencies to bring about Executive
Effectiveness for Management Succession.
Nature of the Business:
Rail and Metro Business:
In recent years, BEML Limited has forayed into high-tech Metro Trains deployed
for intra-city commuting. BEML is expanding its infrastructure to meet the greater needs
of metro projects coming up in the country. Also, BEML supplies equipment to Indian
Railways which include Integral Rail Coaches, Overhead Electric Inspection Cars, Postal
Vans, AC/DC Electric Multiple Units, D-EMUs, Utility Track Vehicles, Track Laying
Equipment, Broad-Gauge Railbus, Treasury Vans, Spoil Disposal Units etc
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Infrastructure Facilities
BEML’s Bangalore complex, a unit of Bharat Earth Movers Limited is situated at The
unit has a variety of products which includes
Rail Coaches(Integral Rail Coaches)
Defense Aggregates(BMP)
DMRC(DELHI METRO RAIL CORPORATION)
BMRC(BANGALORE METRO RAIL CORPORATION)
AC-EMU
OHE CARS
Bangalore Complex spans an area of 93 acres and houses state of the art equipment
for carrying out design, manufacturing and testing products. Constant modernization and
companywide training programme have resulted in BEML Bangalore Complex,
possessing the state of art Technology and highly disciplined manpower. The Company
has three Canteens in the factory premises for the Employees, Officers and Executives.
The food and snacks are provided at subsidized rates and the rates are deducted from the
salary of the employees those who have opted for canteen food. Others whenever
required pay and take food. Employees pay Rs. 55 for lunch and for Officers Rs. 75.
PRODUCT PROFILE
BEML products that is “Machine that build the Nation” find their application in
core sectors of economy in the viz Mining, Agriculture, Energy, Irrigation, Cement,
Steel, Construction, Rail and Road Transport apart from Defence. The company has three
ranges of products like earth moving equipment’s, defence products and railway
products.The Earth movers Equipment’s include Bull dozers, Dump truck, Hydraulic
Excavators, Wheel dozers ,Tyre handlers, Pipe layers, Rope shovels, Drag lines, Motor
grades, Scrapers, Water sprinklers, Aircraft towing tractors and backhoe loaders.
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BEML has recently introduced road headers and discharge loaders for underground
mining application, track laying equipment inspection cars. BEML manufactures heavy
truck and trailers and hydraulic aggregate for transportation sector. Apart from this
BEML also radio controls disaster management equipment in case of emergencies.
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BEML PRODUCTS
RAIL AND METRO
Stainless Steel Metro cars
AC Electric Multiple Units
DC Electric Multiple Units
Passenger Coaches
Stainless Steel AC EMU’s
8 wheeler OHE cars
4 wheeler OHE cars
Track Laying Equipment’s
Rail bus
Spoil Disposal Units(SDU)
Treasury vans
Main rail coaches
Track Laying Equipment
Sky bus
Spoil Disposal Units(SDU)
Treasury vans
Utility Track vehicles(UTV)
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ACHIEVEMENTS and AWARDS
CMD received Public Relations Council of India’s ‘CHANAKYA AWARD’ for
the year 2009-10
Received ‘Wealth Builder-Miniratna-Manufacturing Award’ in the second DSIJ
PSU Award-2010 held at New Delhi on 6th April 2010
Received 'Golden Peacock Award for Innovation Management' from Institute of
Directors on 16th January 2010.
CMD received the 'BEST PSU AWARD' instituted by India's leading B School,
Indian Institute of Planning and Management held at Bangalore on 25th March
2009.
Southern Region of EEPC India awarded BEML with 'Silver Shield' for Star
Performer as a Large Enterprise for its outstanding contribution to Engineering
Export held at Trivandrum on 11th February 2009.
CMD received the 'Raksha Mantri's Award for Excellence' for 'Best Performance
in Export’s held at New Delhi on 7th November 2008.
CMD received the 'ROTARIAN AWARD' of Vocational Excellence in their
District Conference held at Bangalore on 9th February 2008.
CMD received the 'BEST CEO AWARD' from Mr. SK Sharma, National
President, Indian Institute of Materials Management (IIMM) on 30th November
2007 at Chandigarh. Conferred ‘Star Performer Award’ by Engineering Export
Promotion Council, Southern Region on 24th November 2007.
CMD received the 'SCOPE Award for Excellence and Outstanding Contribution
to the Public Sector Management - Medium PSE CategoryD'for the year 2006-07
CMD received RakshaMantri's Award for'BEST DEFENCE PSU' for the year
2007.
Award for ‘Excellence in Technology and Innovation’ from Confederation of
Indian Industries (CII). Rated‘AAA’ by ICRA in January 2007.
Received 'Golden Peacock Award for Innovation Management' from Institute of
directors on 14th January 2007
CMR INSTITUTE OF MANAGEMENT STUDIES Page 33
Ranked 4th BEST WEALTH CREATER AMONG 21 BEST WEALTH
CREATERS OF INDIA and the first among PSUs (US$ 1 in 2002 as appreciated
to US$ 62.64 IN 2007) by Dalal Street Magazine.
Conferred “MINIRATNA Category –I Status “by MINISTRY OF DEFENCE,
Govt. of India during August 2006.
Received “GOLDEN EXPORT AWARD” from the Govt. of Karnataka, India
during August 2006.
Received “ENTERPRISE EXCELLENCE AWARD” from Indian Institute of
Industrial Engineers during May 2006.
Received “EXCELLENT “MOU rating in 2005-06
Award for “OUTSTANDING EXPORT PERFORMANCE” from Engineering
Export Promotion Council(EEPC) during 2005
Award for the “LARGEST AND MOST PROFITABLE CONSTRUCTION
EQUIPMENT COMPANY” 1st rank from Construction World-NICMAR 2007
Awarded “UDYOG RATAN AWARD” (Gold Trophy) by institute of Economic
Studies, New Delhi, during October 2004
Received “NIRYAT SHREE GOLD TROPHY” from Federation of Indian Export
Organization for its outstanding export performance in Export House/Non SSI
category for the financial year 2000-01
“NATIONAL AWARD FOR IMPORT SUBSTITUTION “ for Crawler Mounted
Shovels(2 to 2.5 bucket cu.,M. capacity)
Bangalore complex won the National Safety Award 1999 for achieving
“LOWEST AVERAGR FREQUENCY RATE OF ACCIDENT” and runner-up is
Mysore Complex Equipment division.
Established a local company in Indonesia
Launched Aerospace division and also rooled out Nation’s first Standard Gauge
Metro Car.
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CORPORATE SOCIAL RESPONSIBILITY
As part of government’s sustainable village development programme, the
company has been contributing towards providing computers, laser printers, UPS
for PC’s and related furniture for installing in BhoraKalan High School, Gurgaon
District and many other schools.
Further the company has been contributing towards construction of additional
classrooms, library cum reading room etc.
The company is also sponsoring four severely disabled children of the United
Physically Handicapped School for the second consecutive year by providing
food, clothing and education.
BEML runs one Junior college and two nursery schools at KGF and one at
Bangalore.
The institutions are not only meant for the BEML employees children, but it also
caters to large extent to the local population.
In addition BEML also runs a KV Project School at KGF by providing school
building with infrastructure facilities, mid-day meal programme and other
facilities.
BEML also runs a school named “SHISHYA”
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ORGANISATION STRUCTURE
Figure 3.1:- organization structure
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COMPETITORS
The Main Local competitors of BEML
RAIL COACH FACTORY
HINDUSTAN MOTOR
TATRA UDYOG
ESCORTS
ASHOK LEYLAND
JESSOP ENGINEERING AND OTHERS
LARSEN and TURBO
INEGRAL COACH FACTORY
RAIL COACH FACTORY THE MAIN LOCAL COMPETITIORS OF BEML
The foundation stone factory at Kapurthala was laid by the Honorable Prime
Minister on 17th august 1985.Manufacture of coaches was started on 19th September,
1987 and the first coach was rolled out on 31st March, 1988.RCF production had
progressively gone up and along with ICF, these two production units have been able to
meet the requirements of the Indian Railways.
The state of the art manufacturing facilities and the processes have enabled us to achieve
excellence in design, development, manufacture, installation and after sales services of
the Rail coaches with a view to ensure continued satisfaction of the Rail customers.
RCF has a strong tradition of the innovation and developing new products. Many major
developments on coaching stock such as AC-3 tier coaches, Roof mounted AC package
Unit IRY/IR20 coaches, Self propelled Accident Relief Train, High Capacity Parcel
Vans, Post office coaches, Coaching container flats, Refrigerated van MG-DMU etc.
have taken place in RCF. The other varieties of coaches, which have been manufactured
at RCF, are inspection carriages, Over Head Equipment cars, MG coaches and AC
coaches for Ministry of Defence etc.
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The first prototype Refrigerated van designed and developed by RCF was turned out in
October 2002.this has been well appreciated by the Railway customers and during 2003-
04, orders for 9 more Refrigerated vans have been placed on RCF recently. RCF has
developed a new product i.e., MG/DMU, which has already been pressed into services.
RCF has also developed MG/GSR, which has increased the seating capacity.
RCF has been entrusted with the task of manufacture of modern, high speed, state of the
art coaches with a TOT agreement with M/s.ALSTOM-LHB. Rail coach Factory has
further developed and manufactured LHB design coaches for Rajdhani rake. The design
for the variant coaches including layout, manufacturing drawings specializations etc was
entirely prepared at RCF. Honourable Minister of railway Sri Nitish Kumar inaugurated a
special assignment of the Railway Minister to manufacture fire proof coaches
accomplished by RCF and prototype on 21st 2003.
BEML Keen to Emerge As Global Brand
BEML LIMITED conferred with Mini Ratna Status and under the administrative control
of Ministry of Defence, is a multi-technology and multi-location company offering high
quality products for diverse sectors of economy such as Defence, Mining & Construction,
Rail & Metro, Technology services and Aerospace.
BEML has set its target to become a billion dollar company (Rs.5000 crores) as part of its
golden vision, by 2013-14 to coincide with its 50 years of foundation. BEML has bagged
prestigious Best PSU Award instituted by India’s leading B-School viz., IIPM. It has
emerged in the forefront of heavy engineering industries with a proven track record in
growth and revenues for over four decades. The Company has also bagged Raksha
Mantri’s Award for Excellency for the Best Performance in Export and also SCOPE
Award for Excellence and Outstanding Contribution to Public Sector Management from
the Prime Minister of India recently.
To conquer opportunities and to emerge as global brand, BEML has established a
company in Brazil to cater to the entire South American market. Recently the company
CMR INSTITUTE OF MANAGEMENT STUDIES Page 38
has also established a local company in Indonesia viz., PT.BEML INDONESIA apart
from International Warehouse in Malaysia and Outsourcing offi ce at China to cater to
the requirement of Asia and Pacific markets and also for sourcing respectively.
BEML LIMITED is the biggest OEM of defence land systems in India and the product
range includes High Mobility Vehicles (HMVs) for offset & cross country applications in
the configurations ranging from 4x4 &12x12 in collaboration with TATRA Czech &
Slovak.
Variants of these trucks are also manufactured by BEML Ltd that includes Special
Chassis for the Brahmos & Pinaka, Field Artillery Trucks for towing 155/130 mm guns,
Medium / Heavy Recovery Vehicles, Bridge carrying vehicles (Sarvatra), Pontoon Bridge
Systems(PMS), Heavy Duty off-highway Trailers, Missile Launchers & supporting
vehicles and MAST cum Radar vehicles.
Engineering Mine Ploughs and Armored Recovery Vehicles are also manufactured by
BEML. BEML also manufactures & supplies Armoured Recovery vehicles (ARVs) in
collaboration with M/s Bumar, Poland. The transmission, ejector and air cleaner
assembly, final drive & hydro pneumatic suspension for BMP II tank are some of the
aggregates supplied by BEML to BMP II and T-72.
BEML has also in-house developed Snow cutter for use of Indian Army and Director
General of Border Road forces (DGBR) for snow clearing operations in forward areas.
The equipment is undergoing extensive field trials. This equipment can withstand
extreme conditions at altitude up to 18,000 feet. The snow clearance rate is 3500
tonnes/hr and the casting distance is 40 mts.
Different types of Army rail products for the exclusive use of armed forces like the Mil
Rail Coaches for movement of personnel and mil wagons for the transportation of combat
equipment are also being manufactured.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 39
Defence Business:
New Projects /Opportunities:
BEML has developed and manufactures mobile assault Pontoon Bridge system for the
Indian army. These floating bridges can span water bodies’ up to 227 mts and take tank
loads up to 60 tones. BEML is the nodal production agency for 15mts supported Sarvatra
bridge systems. These bridges can span up to 75mts & cover depth of 5.85 mt by self
adjusting pier system while carrying load up to 60 tones. The individual units of the
bridge system are capable of being transported, launched and retrieved by BEML
TATRA 8x8 vehicles. BEML is also exploring opportunities in supplies of 10mt & 5 mts
short span bridges for which it is working closely with DRDO. BEML will also be
offering the state of the art 43 mts span Dry Support bridges to the Indian Army for load
capacity MLC 80 T/MLC 100T/ MLC. This bridge can be launched from one side of the
bank without intermediary support.
Offset opportunities
BEML being the offset partners for DMD, Slovakia for wheeled guns with 30% of value
is in the final stages of offering 155mm wheeled guns for which trials are scheduled
shortly.
Aerospace Division
The Aerospace Division of BEML is a recent addition of new business. The Aerospace
Division has recently bagged orders from HAL for Slat jigs for SU-30, Fuselage rotating
jig for IJTs, Tow bars for Aircraft operations, Gear component for Cheetah- Chetak
helicopters & ALH. BEML is already in the manufacture of Ground Support Equipments
(GSE)/ Ground Handling Equipment (GHE) that includes 18T and 28TAircraft Towing
Tractors(ATT) Automatic Weapon Loaders and Crash Fire Tenders.
This division also proposes to manufacture aero-structures and also different types of jigs
for manufacture and assembly of aero-structures. BEML got CEMILAC certification for
CMR INSTITUTE OF MANAGEMENT STUDIES Page 40
Aero design & is in the process of obtaining manufacturing certification to become
eligible for tie-up for Defence Aero offsets. BEML Aerospace division also has set its
prospective business plans to garner the offset opportunities that are foreseen.
Technology Division
The Technology Division is one of the new strategic business units of BEML Ltd
providing e-engineering services to the industry in the areas of Defence, Aerospace, Rail
& Metro and Automotive & Mining. The services cover all the domains of product
development cycle of systems involving cutting-edge technology. The manpower at
Technology Division consists of 150 well qualified engineers with many years of design
and development experience. They are supported by the latest infrastructure like high-end
computation servers and all the CAD and CAE tools. This division is working on a
number of prestigious projects with some of the renowned industries and has now been
well recognized as the one-stop-shop for development of new products. The division has
partnered with many of the DRDO laboratories for the development of solutions varying
from aerospace applications to naval systems and land systems. Infrared radiation
suppression systems launch and recovery systems for the unmanned underwater
surveillance equipment, design and validation of airborne antennae and quality systems
for manufacture of combat machines are some of the projects that are being executed at
present. Development of simulators for the training of our armed forces has been
identified as one of the thrust areas by this division. The driving simulator for the BEML-
Tatra trucks, which BEML manufactures and supplies to the Army in bulk supplies, was
developed by the Technology Division and has earned the appreciation of the Training
Command. BEML displayed this simulator at the recent DEFEXPO 2010. BEML, thus,
sets its sight to improve Business volume of Defence and expected to cross Turnover of
around Rs. 3500 Crores in 2009-10 with the order book of around Rs 5400 Crores.
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CURRENT SCENARIO OF BEML
BEML Limited (formerly Bharat Earth Movers Limited) is a public sector
undertaking under the Ministry of Defence and the Chairman and Directors are
directly appointed by the Government of India.
The Government has a stake of 54% in BEML and issued public shares in order to
raise funds to improve the infrastructure facilities etc
BEML is answerable to the Government of India and also to the public if the
profit is reduced drastically.
Nearly 12000 work forces are solely depending on BEML for their daily
livelihood.
Small scale industries and small entrepreneurs are also depending on BEML.
There is a worldwide marketing and sales service centers are operating to market
BEML products globally.
The present order position of the company is rail coaches 900, ACMEU-27,
SSEMU-9, OHE-36, DMRC RS6-100, BMRCL (Bangalore metro)-45 and Jaipur
metro-8 cars.
The total target for the year 2012-13 is 4,000crores and BEML is going to
celebrate 50th Anniversary in the 2013-14 and the target fixed is 5,000 crores
BEML as a future vision and recently an Aerospace division is going to be
operated shortly by fixing the target of 10,000 crores in the year 2017 onwards.
The recent allegations, controversies in the Media and News papers are only on an
individual person not on the Company. The Company is stable and the
production is going on well in all the divisions. Also the dedicated workforce and
Officers are working day and night to achieve the target fixed by the
Management.
The allegations against the Company will not affect its domestic market or global
market as BEML has established Quality products in the Domestic as well as
global market.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 42
The recent allegations are targeted on CEO not on Company`s Qualitative
products. There is no failures of its products because still BEML is monopolized
its products in Domestic market as well globally.
FUTURE PROSPECTS OF BEML
The company also manufactures railway coaches and wagons for Indian Railways and
defence forces. Recently, BEML has diversified its business by successfully assembling
state-of-the-art stainless metro coaches for Delhi Metro Corporation (DMRC) under
technical collaboration with M/s Rotem of South Korea.
If Indian Railways has its way, the day is not far when commuters would get to travel in
much lighter and faster state-of-the-art Aluminium coaches.
India's two largest public sector enterprises, the Bangalore-based Bharat Earth Movers
Ltd and the Bhubaneswar-based National Aluminium Company Ltd will soon be building
the country's first prototype coaches for trial runs by the Railways.
With the railway ministry endorsing the proposal of the Aluminium Association of India
to manufacture aluminium rail coaches after conducting a techno-eco study recently,
BEML and Nalco are set to sign a memorandum of understanding by this year-end to
design and develop the prototype.
BEML is waiting for the clearance from the Railway Board to go ahead with the project.
The railway ministry is scheduling a meeting with BEML for working out the modalities,
cost structure and the potential.
As one of the leading suppliers of freight wagons and passenger coaches to the railways
over the decades, BEML has already expanded its product portfolio to roll out stainless
steel metro coaches for the Delhi Metro Rail in joint collaboration with Rotem of Korea.
"Since aluminium coaches will be lighter than steel, traveling in them will not only be
more comfortable, but also cheaper for maintaining and operating.
"Aluminium being lighter, its coaches will consume less fuel or electrical power as
proven in developed countries like Korea and Japan,".
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the initial cost of producing aluminium coaches would be 2-3 times more than steel, they
will prove to be more efficient and cost effective, operationally and in the long term.
"The railway ministry has already responded positively to the proposal. As BEML has
the expertise with an active R&D set-up and Nalco has the metal and technology, it will
be a win-win situation to roll out the prototype aluminium rail coaches next year," the
initial high cost of the coaches, including their development could be off-set in the long-
term with reduced operational and maintenance costs. The game plan is to make
aluminium rail coaches first for the suburban services where high-grade steel coaches are
being used over the decades consuming more fuel or electric power.
Hundreds of local trains, EMUs and pull-push trains are in operation daily in the four
major metros (Mumbai, Kolkata, Delhi and Chennai), besides other cities across the
country. Substituting them with the lightweight metal (aluminium) coaches will drive
down the cost of ownership for the railways in the long run.
In the light of increasing use of lighter/composite materials and plastics in several
products and components in place of steel and other heavier metals the world over, the
Aluminium Association was persuading the automobile and two-wheeler industries to go
in for the silvery and more malleable metal, which is corrosion proof.
"Aluminium vehicles will be more efficient, light weight and consume less fuel. The
metal's utility, durability and functionality are found to be more advantageous even in
aerospace and space applications," the association president affirmed.
The consumption of aluminium in each automobile in India is about 20-25kg against
150kg in countries like the US, Japan, Korea, and Europe. The automobile and other
transport sectors are yet to make much headway in designing and developing products
with more aluminium.
The potential is huge. With abundant resources and proven technology, Indian industries
should harness them to double the aluminium content to catch up with developing
countries such as China and others in the region.
According to global industry surveys, the per capita consumption of aluminium in India
is just 500gm against 2.9kg in China and 4-5kg in advanced countries such as the US,
UK, Japan and Korea. The company ruled out the divestment of Nalco in the near future
due to opposition from several quarters. BEML however, admitted that the process of
CMR INSTITUTE OF MANAGEMENT STUDIES Page 44
acquisitions, mergers and consolidation in the industry would continue as part of the
global phenomenon in the aluminium industry.
With the government permitting foreign direct investment in the aluminium sector, the
prospects of overseas players pitching for equity stake, joint ventures or green field
projects are bright.
The total smelting capacity in India is still half of other countries. At 0.9 million tonnes,
we are way behind China and Russia, which have 4.5 million tonnes and 5 million tonnes
production capacity respectively.
Revival of the manufacturing sector, good monsoon and all-round economic activity are
expected to double the Indian aluminium industry growth during the current fiscal year
(2003-04) to 8 per cent from 3-4 per cent over the last two years due to downturn in the
economy.
Nalco is targeting an export revenue of Rs 2000 crores (Rs 20 billion) in the current
fiscal, with a projected gross turnover of Rs 3500 crores (Rs 35 billion) and net profit of
Rs 700 crores or Rs 7 billion.
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Products of rail and metro
Stainless steel metro cars
Passenger coaches
AC electrical multiple units
Stainless steel AC EMUS
DC electrical multiple units
Rail bus
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Overhead Equipment Inspection Cars
8 wheeler van
4 wheeler one
Treasury vans
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BEML LTD
Liquidity ratio:
1) Current Ratio= current assets
current liabilities
TABLE: 4.1
Current asssets
Year Current assets
2006-2007 1864735084
2007-2008 1769148995
2008-2009 3099940517
2009-2010 8187954973
2010-2011 8189437545
The current asset percentage was increased from the year 2006-11 by 4.39%
Table: 4.2 Current Liabilities
Year Current Liabilities
2006-2007 1234457174
2007-2008 1107513038
2008-2009 1384929634
2009-2010 3256721447
2010-2011 2578124003
The current liabilities has been decreased from the 2006-11 drastically.
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CURRENT RATIO
TABLE: 4.3
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
1.5 times 1.59 times 2.2 times 2.51times 3.17 times
Graph NO: 4.1
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
0
0.5
1
1.5
2
2.5
3
3.5
Series1
YEAR
CURRENT RATI
O
ANALYSIS AND INTERPRETATION
This ratio measures the solvency of the company in the short term. Current assets
are those assets which can be converted into cash within a year. Current liabilities
are those payables which are over the year. This constitutes of the current assets
are more important for the ratio helps in evaluation of the company’s solvency
position. Higher the ratio it is more capable of paying its liabilities.
The current ratio of 2010-11 is 3.17 which are higher than the previous years. The
ratio shows that the company is in very strong position to pay off its liabilities.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 49
Turnover Ratio
1) Inventory turnover ratio= Sales
Average stock
TABLE: 4.4
Year Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 7394837880
The sales percentage is increased form the year 2006-11 by 2.47%
AVERAGE STOCK
Table: 4.5
Year Average stock
2006-2007 2914689008
2007-2008 2914689008
2008-2009 4302269091
2009-2010 6414573871
2010-2011 14466294871
In the year 2006-07 the average
stock was 0.49% and drastically increased from the year 2007- 11 by 0.22%.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 50
Table No: 4.6 INVENTORY TURNOVER RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
1.02 0.97 1.33 1.10 0.51
Graph no :4.2
2006-2007 2007-2008 2008-2009 2009-2010 2010-20110
0.2
0.4
0.6
0.8
1
1.2
1.4
YEAR
INVENTORY TURNOVR RATI
O s
Chart: 4.2
ANALYSIS AND INTERPRETATION
The inventory turnover ratio indicates the efficiency of a firm’s inventory
management. The ratio gives the rate at which stocks are converted into sales and
then into cash.
The lower turnover ratio indicates excess inventory. So the company has higher stock
which means the company has cash locked up in inventory.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 51
Debtors turnover ratio= Credit sales
Average debtors
CREDIT SALES
Table No: 4.7
Year Credit Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 9394837380
The credit sales percentage has increased from the year 2006-11 by 2.47%
Table No: 4.8
AVERAGE DEBTORS
Year Average debtors
2006-2007 373116489.5
2007-2008 373116489.5
2008-2009 706402220.5
2009-2010 2475795254
2010-2011 3573417781
The average debtor percentage in the year 2006-07 was 9.5% and drastically reduced from the year 2007-11 by 1.44%.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 52
4.9 DEBTORS TURNOVER RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
7.99 7.62 8.15 2.85 2.62
Graph No :4.3
.
2006-2007 2007-2008 2008-2009 2009-2010 2010-20110
1
2
3
4
5
6
7
8
9
YEAR
DEBTORS TURNOVER RATI
O
ANALYSIS AND INTERPRETATION
This ratio indicates the relationship between net credits and trade debtors. It shows the
rate at which cash is generated by the turnover of debtors. The term debt includes trade
debtors and bills receivables.
The debt collection shows decreasing figures due to long duration for recovering the bills
receivables. The company should increase its debt collection efforts so that the incidence
of bad debts is reduced.
.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 53
CMR INSTITUTE OF MANAGEMENT STUDIES Page 54
Fixed asset turnover ratio= Sales
Net fixed asset
SALES
Table no 4.10
Year Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 9394837380
The credit sales percentage has increased from the year 2006-11 by 2.47%
Table no 4.11 NET FIXED ASSET
Year Net fixed asset
2006-2007 297330966
2007-2008 385898649
2008-2009 506587400
2009-2010 708564168
2010-2011 827148127
The net fixed asset percentage in the year 2006-07 was 2.78% and from 2007-11 the net fixed asset increased.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 55
Table no 4.12 FIXED ASSET TURNOVER RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
10.03 7.37 11.20 9.97 8.94
Chart : 4.4
2006-2007 2007-2008 2008-2009 2009-2010 2010-20110
2
4
6
8
10
12
YEAR
FIXED ASSET TURNOVER RATI
O
ANALYSIS AND INTERPRETATION
This ratio indicates the efficiency with which the firm is utilizing its investments in fixed
assets. The company fixed asset turnover ratio is fluctuating widely.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 56
The company is efficiently utilizing the company fixed assets in the year 2006-07 and in the
year 2008-09. As the company supplies only to the Indian railways, it depends on the orders
received from the Indian railways.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 57
Profitability ratios
1) Net profit ratio= Net profit * 100
Sales
NET PROFIT
Table:4.13
Year Net Profit
2006-2007 117150523
2007-2008 -316154685
2008-2009 375900145
2009-2010 635253361
2010-2011 -88208172
The net profit percentage in the year 2006-07 was -0.7% hence the profits increased in the year 2009-10 by .022%. SALES
Table: 4.14Year Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 9394837380
The credit sales percentage has increased from the year 2006-11 by 2.47%
CMR INSTITUTE OF MANAGEMENT STUDIES Page 58
Table:4.15 NET PROFIT RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
3.92 11.10 6.52 8.98 -1.19
Graph: 4.5
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
-15
-10
-5
0
5
10
15
YEAR
NET PROFIT RATI
O
ANALYSIS AND INTERPRETATION
The net profit ratio indicates the overall measure of a firm’s ability to turn each
rupee of sales into profit.
The net profit is declined due to losses made by the company by not acquiring
Government projects.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 59
CMR INSTITUTE OF MANAGEMENT STUDIES Page 60
2)Net operating ratio=Net profit+ depreciation+ interest *100 Sales
Net operating
Table:4.16
YearNetprofit+depreciation+
interest
2006-2007 143997361
2007-2008 -287075370
2008-2009 423495591
2009-2010 704467952
2010-2011 187975015
The net profit is highly fluctuating since 2006-10 the company profits were increased by 1.30% and in the year 2010-11 the percentage of net operating was 0.26%.
Table:4.17
SALES
Year Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 9394837380
The sales in the year 2006-07 was 2.47% due to low production the sales volume was increasing by 1.04%
Table No :4.17
CMR INSTITUTE OF MANAGEMENT STUDIES Page 61
NET OPERATING RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
4.82 -10.08 7.35 9.96 2.54
Graph No: 4.6
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
-15
-10
-5
0
5
10
15
YEAR
NET
OPERATI
NG RATI
O
ANALYSIS AND INTERPRETATION
EV/EBITDA is a valuation multiple used in finance and investment to measure
the value of a company. This important multiple is often used in conjunction with,
or as an alternative to, the P/E ratio (Price/Earnings ratio) to determine the fair
market value of a company.
On observation, it’s clear that the company’s Net operating ratio is widely
fluctuating. This is due to the fact that Indian Railway is the sole customer of the
company’s product. Indian Railways has not been consistent in lifting the
products or in placing orders. Hence the fortune of the company is directly
dependent on the orders received from Indian Railways
CMR INSTITUTE OF MANAGEMENT STUDIES Page 62
Expenses ratio
1) Raw material ratio= Direct material cost *100
Net Sales
DIRECT MATERIAL COST
Table No: 4.18
Year Direct material cost
2006-2007 1586860692
2007-2008 1730030836
2008-2009 3903818909
2009-2010 5059998589
2010-2011 5230207554
The material cost percentage was 3.2 % in the year 2006-07 and hence from then the percentage increased by 1.03%.
SALES
Table No: 4.19Year Net Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 9394837380
The credit sales percentage has increased from the year 2006-11 by 2.47%
CMR INSTITUTE OF MANAGEMENT STUDIES Page 63
Table No:4.19 RAW MATERIAL RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
53.20 60.71 67.90 71.55 70.72
Graph No: 4.7
2006-2007 2007-2008 2008-2009 2009-2010 2010-20110
10
20
30
40
50
60
70
80
YEAR
RAW
MATERIAL RATI
O
ANALYSIS AND INTERPRETATION
Direct material is the biggest cost component for the company. This
component has been steadily increasing over the years. This is due to the fact
that the cost of raw materials is increasing over the years and as Indian
Railways is the sole customer of the company, the company has been unable to
pass on its cost to its customer.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 64
2) Labour ratio= Direct labour cost *100 Net sales
Table No.4.20 DIRECT LABOUR COST
Year Direct labour cost
2006-2007 904066300
2007-2008 956676833
2008-2009 1097614625
2009-2010 1346135932
2010-2011 1443918661
Direct material cost is fluctuating from the year 2006-11. The percentage of direct
material cost in the year 2006-08 was 1.59% and in the year 2010-11 is 1.07%.
SALES
Table No :4.21Year Net Sales
2006-2007 2982530085
2007-2008 2846847932
2008-2009 5757690250
2009-2010 7071457491
2010-2011 9394837380
The credit sales percentage has increased from the year 2006-11 by 2.47%
CMR INSTITUTE OF MANAGEMENT STUDIES Page 65
Table No:4.22 LABOUR RATIO
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
30.31 33.60 19.06 19.03 19.52
Graph No: 4.8
2006-2007 2007-2008 2008-2009 2009-2010 2010-20110
5
10
15
20
25
30
35
40
YEAR
LABOUR RATI
O
ANALYSIS AND INTERPRETATION
The labour cost has decreased substantially from 2007-08 to 2008-09. Since then the
Company has been able to maintain the labour cost at acceptable level
CMR INSTITUTE OF MANAGEMENT STUDIES Page 66
What is the order book of the company for the next year?
Graph No: 4.9
Rail coachACMUSSMUOHEBMRCLDMRCLJaipur metro
ANALYSIS: Based on the data provided by the company, it can be interpreted that the
orders has been increased in mean time.
Inference:
The orders are increased due to the improvisation of Metro cities and most of the BEML
orders are for the ongoing projects like Rail coaches, Delhi and Bangalore Metro.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 67
What is debtor’s life cycle?
Graph No: 4.10
1 month2 months 3 months
ANALYSIS:
According to the analysis and data provided by the respondents, debtor’s life cycle begins
from not less than 2 months.
INFERENCE: when the bills are recovered earlier the company will have enough cash
to meet the working capital requirement.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 68
FINDINGS AND SUGGESTIONS
BEML is a heavy engineering manufacturing company. They undertake large
projects which extend over a period of financial year. Hence the profits are not
uniform for every year.
BEML is a public sector undertaking the objective and motive of the company are
not always profitability. The objective of this public sector undertaking is to
provide engineering services and make the country efficient.
The company’s profits are fluctuating since 2006-07 the profit was 3.92, in the
year 2007-08 the profits increased to 11.10, in the year the profits drastically
came down to negative figure of -1.19 in the financial year 2010-11
BEML has higher current ratio in the year 2010-11 it was 3.19 times and in the
year 2009-10 the current ratio was decreased by 2.51 times. This ratio is viewed
by the external creditors to evaluate the company’s ability to pay off their dues.
As BEML is a government undertakings have an in built assurance of safety of
their dues. Hence the company is having a positive current ratio.
BEML’s railway division only customer is Indian Railway which is again
government organization. So the growth of the division is directly dependent on
the order take-off ability of the Indian railways.
When BEML increases its production they deploy more labourers. The
company’s labour ratio has decreased from the year 2007-08 and 2009-2010
substantially and in the year 2010-11 the labour ratio was increased to 19.52.
Cost of raw material for BEML is high due to fluctuation in the production. The
cost of raw materials were less in the year 2006-07 by 53.20 and in the year 2009-
10 the cost was increased to 71.55%.
Debt collection period is for a longer duration because their project runs for 3-5
years. So they cannot recover their bills quickly. The company debtors turnover
ratio was 7.99 in the year 2006-07 and in the year 2008-09 the ratio was increased
by 8.15 and it decreased in the 2010-11 to 2.62 times.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 69
BEML get orders only from Indian railways due to this fact the company is not
able to use the fixed asset efficiently. The company’s fixed asset ratio is
fluctuating in the year 2006-07 by 10.03 and in the year it was increased by 2008-
09 11.20 times.
BEML cannot recover its cost quickly due to their other operating expenses. In
the year 2006-07 the ratio was 15.02% and in the year 2008-09 the net operating
ratio was increased by 16.79% and then from the year 2009-10 and 2010-11 it
was decreased to 12.60%
CMR INSTITUTE OF MANAGEMENT STUDIES Page 70
CONCLUSION
“BEML” is the pioneer in the market of manufacturing rail coaches. The company has
grown progressively and shown profits since its inception regardless of the state of
economy. The company produces on the order basis only.
The major customer for the BEML is Indian railways as the company is having a fair
market position in the industry. The company is maintaining its unit efficiently. The
company maintains well trained and qualified employees and considers them as an asset
to the company. The company profits are fluctuating due to its excessive dependency on
a sole customer, the Indian railways. The company with its technology leadership
resources, well qualified employees and asset base can increase its profits by diversifying
its customer base.
As owning a railway wagons is opened to private companies, BEML should diversify its
customer base and this will lead to uniform revenue base, thus reducing the wastage of
resources in lean years and also helps the company to grow its business and profitability.
CMR INSTITUTE OF MANAGEMENT STUDIES Page 71
RECOMMENDATIONS
The company has to improve its current assets to maintain an
appropriate current ratio for short term solvency.
The inventory management is inefficient. It is recommended that the
company to implement just in time inventory techniques to reduce
inventory cost. This will also help in increasing the profitability.
The company’s profitability is fluctuating as the company is 100%
dependent on the Indian railways. To reduce this dependency and
increasing profitability, the company should explore the markets in
private companies. As private companies are allowed to own a wagon.
BEML can diversify its customer base.
The company has to concentrate on expenses ratio in order to cut down
on material and labour cost and produce the products at lesser cost for
its prospective customers
CMR INSTITUTE OF MANAGEMENT STUDIES Page 72
CMR INSTITUTE OF MANAGEMENT STUDIES Page 73