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CHAPTER 1
INDUSTRY PROFILE
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THE INDISPENSABLE VALVE
A valve is a product rarely noticed by the average person, yet it
plays an important role in the quality of our life. Each time you
turn on awater faucet, use your dishwasher, turn on a gas range
or step on the accelator of your car, you operate a valve. Without
modern valve syatems, there would be no fresh pure water or
automatic heat in your home. There would be no public utilities,
and beyond wood and coal, almost no energy of any kind. Plastics
would be unheard of, as would many inexpensive consumer
products.
A valve is a device that regulates the flow of afluid (gases, liquid,fluidized solids, or slurries) by opening, closing, or partially
obstructing various passageways. Valves are technically pipe
fittings, but are usually discussed as a seprate category. In an
open valve, fluid flows in a direction from higher pressure to lower
pressure.
Valves are also found in the human body . for example, there are
several heart valves which control the flow of blood in the
chambers of the heart and maintain the correct pumping action.
Valves are used in a variety of contexts, including industrial,
military, commercial, residential, transport.
HISTORY
For centuries, throughout the Dark Ages, there were no advances
in valve design. Then during the Renaissance, artist and inventor
Leonardo da Vinci designed canals, irrigation projects, and
other large hydraulic systems, which included valves for use in
these projects. Many of his technical sketches are still in
existence.
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The modern history the valve industry parallels the Industrial
Revolution, which began in 1705 when Thomas Newcomer
invented the first industrial steam engine. Because steam built up
pressures that had to be contained and regulated, valves
acquired a new importance.
And as Newcomer’s steam engine was improved upon by James
Watt and other inventors, designers and manufactures also
improved the valves for these steam engines. Their interest,
however, was in the whole project, and the manufacture of valves
as a separate product was not undertaken on a large scale for a
number of years.
AUTOMOBILE INDUSTRY
The history of the automobile begins as early as 1769, with the
creation of steam engine automobiles capable of human
transport. In the 1806, the first cars powered by an internal
combustion engine running on fuel gas appeared, which led to the
introduction in 1885 of the ubiquitous modern gasoline- or petrol-
fueled internal combustion engine.
The internal combustion engine is an engine in which the
combustion of fuel (normally a fossil fuel) occurs with an oxidizer(usually air) in a combustion chamber. In an internal combustion
applies direct force to some component of the engine, such as
pistons, turbine blades, or a nozzle. This force moves the
component over a distance, generating useful mechanical energy.
Applications
Internal combustion engines are most commonly used for mobile
propulsion in vehicles and portable machinery. In mobileequipment, internal combustion is advantageous since it can
provide high power-to-weight ratios together with excellent fuel
energy density. Generally using fossil fuel(mainly petroleum),
these engines have appeared in transport in almost all vehicles
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(automobiles, trucks, motorcycles, boats, and in a wide variety of
aircraft and locomotives).
Internal combustion engines can be classified by their
configuration.
Four stroke configuration
As their name implies, operation of four stroke internal
combustion engines have four basic steps that repeat with every
two revolutions of the engines:
Intake: Combustion mixtures are emplaced in the combustion
chamber
Compression: The mixtures are placed under pressure
Combustion: The mixture is burnt, almost in variably a
deflagration, although a few systems involve detonation. The hot
mixture is expanded, pressing on and moving parts of the engine
and performing useful work.
Exhaust: the cooled combustion products are exhausted into the
atmosphere.
Many engines overlap these steps in time; jet angines do all stepssimultaneously at different parts of the engines.
Two stoke configuration
Engines based on the two-stroke cycle use two strokes(one up,
one down) for every power stroke.
Worldwide production
In 2007, worldwide production reached a peak of 73.3 million newmotor vehicles.
In 2009, production dropped 13.5 percent to 61 million. In 2010,
world markets mostly recovered.
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In 2009, India being the top seventh Motor Vehicle Manufacturing
country has produced of about 2,632,694 units.
Consumption trends
About 250 million vehicles are in use in the United States. Around
the world, there were about 1006 million cars and light trucks onthe road in 2009. The Detroit branch of Boston Consulting Group
predicts that, by 2014, one-third of world demand will be in the
four BRIC markets (Brazil, Russia, India and China). Other
potentially powerful automotive markets are Iran and Indonesia.
Tus, it can be said that valve industries have a very good future.
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CHAPTER 2
COMPANY PROFILE
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INTRODUCTION
KAR mobiles limited manufacture valves for internal combustionengines. The company manufactures valve of all sizes and ranges
used in various vehicles like motorcycle, cars, trucks, railway
engines, defense tanks, generator sets and marine engines.
Aiming to achieve and sustain product excellence, KML has
corners in establishing comprehensive world class facilities for its
entire range of products. The test laboratories and other
manufacturing shops are well equipped with the state-of-the-art
facilities for reliable manufacturing and testing operations.
KML has also got well equipped classrooms with the facilities of
LCDs and OHPs, which are used to train the employees and
trainee students. It has got a very good transportation facilities
and canteen facilities for the employees and for trainees.
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THEY BELIEVES IN:
K-Knowledge
A-Application
R-Reliability
M-Motivation
O-Opportunity
B-Brilliance
I-Innovation
L-Leadership
E-Excellence
S-Service
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Rane Group – Companies
Sl.
No.
Company Products
1 Kar Mobiles Limited
(KML)
Medium & Large
Valves for diesel
engines. Specialize inLocomotive, Power
generation, Off-road
vehicles &defense
applications.
2 Rane Brake Linings
Limited (RBL)
Brake linings, Disc
pads, Composite brake
blocks, Clutch facings
3 Rane Diecast
Limited (RDL)
High Pressure Die
Casting Products
4 Rane Engine Valve
Limited (R EV L)
Valves, Valve Guides,
Tappets
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5 Rane (Madras)
Limited (R M L)
Manual Steering &
Suspension Systems
6 Rane NSK SteeringSystem Limited
(R NSS L)
Energy AbsorbingSteering Columns
7 Rane TRW Steering
Systems Limited
(R TSS L)
Power Steering
Sy stems & Seat Belt
Systems
A.BACKGROUND AND INCEPTION OF THE COMPANY
➢ Kar valves limited was born out of an electric supply
undertaking in the old Maharaja’s state of cochin under the
name of cochin state power and light corporation limited.
➢ This company was started in the year 1936 and was
engaged in distribution of electricity.
➢ In 1971 this business was nationalized so the company
received compensation from the government and the
shareholders decided to invest in the new business activity.
➢ The company was name as “KAR Valves Limited” and
incorporated in the year 1972 under India companies Act,
with licensed capacity of 1.5 million valves per annum.
➢ Mr. L.L. Narayan laid the foundation stone on 30th August
1973 and established as private organization and started as
a manufacturing unit. Sri. V. P. Aghoram was appointed as
the Managing Director of the company in 1972.
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➢ The company commenced its commercial production in the
year 1975 and the first invoice was made on 12-03-1975 to
M/S. convert private limited, Delhi.
➢ Large valves for Diesel Loco Application & Export came into
focus. This success led the company to expand its licensed
capacity from 1.5 million to 5 million per annum.➢ In 1981 the company set up a 100% export oriented unit at
Tumkur. In the year 1997, the company entered into
technical collaboration with TRW inc, USA, to upgrade its
product and process technology.
B. NATURE OF THE BUSINESS CARRIED
It manufactures valves for all internal combustion engines. The
company is one
the diesel oriented unit which supplies valves for all engines
both petrol and
diesel and is fully equipped to support its developing market
needs. A valve is a
product rarely noticed by the average person, yet it plays an
important role in
the quality of our life. Each time you turn on water faucet, use
your dishwater,
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or turn on water faucet, use your dishwater, or turn on a gas
range, or step in the
accelerator of your car, you operate a valve.
Valves made from chrome-silicon alloy steel and exhaust from
chrome-nickel-
silicon alloy steel (to operate under high temperature and high
stress conditions).
Valves are also supplied with liquid nitrating process or hardchrome plating which
increases the surface hardening the stem. This improvesresistance with
consequent sliding ease.
Valves are used to regulate the flow of fluids in piping system
and machinery the flow phenomenon is frequently of pulsating
or intermittent character and the valve, with its associated
gear, contributes a timing feature. The valves commonly used
in piping systems are gate valves, usually operated closed or
globe valves, frequently fitted with a renewable disk and
adaptable throttling operations check valves, for automatically
limiting flow in a piping system.
To control the kinematics of the cycle, system engine valves
range from D-slide and piston valves to multicoated types.
Many type of reversing gear have been perfected which use
the same slide valve or piston valve for both forward backward
rotation of an engine, as in rail road almost exclusively in
internal combustion receipt locating engines because of the
demands for tightness with high operating pressures and
temperatures,. Two-cycle engines utilize ports, alternately
covered and uncovered by the main piston, for inlet or exhaust.
A structure in a hollow organ (like the heart) with a flap to
ensure one way flow of fluid through it, Device in a brass wind
instrument for varying the length of the air column to alter
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pitch of a ton control consisting of a mechanical device for
controlling the flow of a fluid.
Application: Engine valves for high performances locomotives,
marine engines, heavy duty engines, battle tanks, Tractors,
Agriculture/Industry/ stationery, Automotive passenger cars/
Light commercial vehicles/ heavy commercial cars.
C. VISION, MISSION AND QUALITY POLICY
Vision
To be highly profitable and socially responsible leadingmanufacturer of engine
valves for customers in global markets.
Mission
Provide superior products and service to our customers
and maintain market leadership.
Evolve as an institution that serves the best interest of
all stakeholders.
Ensure the highest standard of ethics and integrity in all
our action.
Pursue excellence through total quality management.
Motto
“Customer satisfaction through-on-time delivery of superior
quality valves”.
A testimony to the company’s commitment to quality system
through.
QS 9000 Quality certificate from BVQI.
Well-equipped standards room with testing facilities.
Negligible warranty claims.
Initiation like TQM, TPM and employees involvement.
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Concern for environment and initiatives for ISO 14000
certificate.
Quality policy
KML is committed to comply with ISO/TS 16949 systemrequirements and
improve customer satisfaction by –
Identifying and fulfilling all requirements of the clients/
customers.
Complying with all applicable statutory and regulatory
requirements.
Providing training to all employees to particle total
quality management and achieve continualimprovement in all areas.
Build awareness amongst all employees on
environmental issues through continuous training.
Operate under an environmental management system
as specified in ISO 14001.
D. PRODUCTS PROFILE
Product classification
The auto ancillary industry can be further divided into six
main segment.
➢ Engine parts
➢ Electrical Parts
➢ Transmission and
Piston, piston rings, engine
valves, fuel pumps,carburetors and bimetal
bearings.
Starter motors, generators and
spark plug.
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steering
➢ Suspension and
breaking
➢ Equipment
➢ Others
Gears, steering gears and
system, wheel, clutch plate
and disc.
Leaf springs, shock absorbers,brake assembly and facings.
Head light and dashboard
instruments.
Sheet metal parts, pressure
disc castings.
MANUFACTURING
KML has 2 world class manufacturing plants in Bangalore &
Tumkur
Manufacturing valves of all sizes for internal
combustion engines for automated and non –
automated applications.
Valves are being used in engines having 5 H.P to 4000
H.P.
For production of these valves different sophisticated
and modern equipment’s are being used such as
McGrinders,
Lathe cutters, welders, Heat treatment, CNC machine
etc.
Engine ValvesApplications ranging from 5 H.P. to 4000 H.P. engines in
segment such as:
➢ Agricultural/Industrial/ Stationary
➢ Marine
➢ Locomotives
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➢ Battle Tanks
➢ Farm Tractors
➢ Automotive – Passenger cars / Light
Commercial vehicle / Heavy
Commercial vehicles
➢ High performance cars
Manufacturing capability:
Min Max
Head Dia 18mm 105mm
Stem Dia 5mm 22mm
Overall Length 50mm 450mm
Configuration:
Monometal
Bimetal Friction welded
Projection welded
Head Finish Machine finish
Forge finish
Seat Hardfaced
Induction Hardened
Tip end Flame Hardened
Induction Hardened
Stellite faced
MONOMETAL
In Monometal only a single metal or material is used to
manufacture the
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Valve. The head to tip of valve is produced using the single
material. This
type of valve is comparatively costlier.
BIMETAL
In Bimetal two metals or materials are used. Bimetal is usedfor increasing the
length of the valve. If any vehicles requires the valves of long
length then
Starting material of the valve will be of high alloy and ending
material will be
of low alloy. The main aim of this process is to reduce the
cost of the valve.
Surface Treatment :
➢ Hard Chrome Plated
➢ Tufftrided
➢ Phosphated
Material used :
➢ Low Carbon Steel
➢ Martensitic Valve Steel
➢ Austenitic Valve Steel
➢ Nickel Alloy
➢ Stainless Steel
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D. AREA OF OPERATIONS
Location Total
Geographic
al
Area(Sq.mt
s)
Built Up
Area
(Sq.mts)
Production
Valve
(million)
Export
Bangalore 2430 14000 6 5%
Tumkur 40450 2200 2.5 95%
The company has its network all over the globe, and
the manufacturing process entirely takes place in India.
They have agents who market their products behalf of
the company and even they sell their product directly
to the customers according to their needs and
satisfaction.
D. OWNERSHIP PATTERN
Pattern of shareholdings as on March 31, 2011
Sl.
No.
Category No. of
Shares
% of share
holdings
A PROMOTERS 979337 43.72%
B GOVT. OF KERALA 37500 1.67%
C BANKS 3978 0.18%
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D PRIVATE BODY
CORPORATE
230786 10.30%
E NRIs & OBCs 4800 0.21
F INDIVIDUALS AND
OTHER
983599 43.91%
G TOTAL 2240000 100
Rane Group is the main promoter of the company with
43.72% share in the company. Remaining share is
divided among private body corporate, banks,
government of Kerala, individual and others.
D. COMPETITORS INFORMATION
There is several numbers of competitors of KML in the
industry.
Rane Engine Valves Limited
Shriram Piston & Rings Limited
Auto Field Engineers
Benera Udyog
Gratco Valves Limited
Duro Valves Limited
Vikram Valves Limited
The range of products manufactured with each broad
product segment having different market structure and
technology has neglected any possible concentration of the
market in a few hands. The market is so large and diverse
that a large number of players can be absorbed toaccommodate buyer needs.
However there are a few large companies that have
integrated their operations across the valve chain. The key
to compete in this industry is through specialization by
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product type and integrating operations across the related
area of specialization.
D. INFRASTRUCTURE FACILITIES
The basic physical systems of a country’s or community’spopulation, including roads, utilities, water, sewage, etc.
These systems are considered essential for enabling
productivity in the economy. Developing infrastructure often
requires large initial investment, but the economies of scale
tend to be significant.
Canteen Facilities: Hygienic nutritious foods are
facilitated to the employees according to standardsprescribed by the organization and factories act. 1948.
Ambulance: 24 hours ambulance facilities are provided to
the employees in case of any damage to employees or
health upset during the working hours.
Sports/Clubs: The Company has its own team of sports
such as cricket team and indoor games are facilitated such
as carom, table tennis.
Library: A Library facility is available with books, journals,
and articles, technical books etc., with related to the
company.
E. ACHIEVEMENTS/AWARD
Award is parts of the evolution and growth of every
company. They look at these recognitions as a source of
motivation that drives them to pursue higher level of
performance and excellence. They are proud of every award
they have received and they greatly value the role they
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played in transforming Kar Mobiles Limited into a high
performance organization.
➢ 1988- Excellence of export award (E&PC)
➢ 1995- ISO 9000 Certification➢ 2001-Received QS9000/98 certification from BVQI
➢ 2004-JIPM award (Japan institute of plant maintenance)
➢ 2004-Achieving for DEMING award
➢ 2004-ISO/TS/16949 Certification
➢ 2005-06-ISO 14000 Certification
MILESTONES OF KAR MOBILES LIMITED
1973 Foundation stone laid
1975 Commercial production started and made forays
into OEM segment.
1976 Developed large valves for diesel low applications.
1977 First exports made to RA lister &Co.
1983 set up plant II, a 100% EOU, with a capacity of 1.5
million valves.
1988 Capacity enhanced from 1.5 million to 5 million
numbers.
1991 Promoted “ ETA Technologies ” for developing
special purpose machines.
1995 Received ISO 9000 Certification.
1996 Business process Re-engineering implemented
1997 Entered into technical collaboration with TRW Inc.,
USA.
1999 Approved by Electro Motive Division [EMD] of
General Motors Corporation, USA as first vendor from
India.
2000 TQM and TRM initiated.
2001 Received QS 9000 Certification.
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D. WORK FLOW MODEL
Accounts Receivable Process
The Accounts Receivable Process starts with the shipment of
the goods to the customer. When this occurs, the shipping
department automatically causes Systems Applications andProducts(SAP) to send a bill to the customer by
interchanging customer master data with the shipment data.
This transcation also posts to the Accounts Receivable
subsidiary ledger and also to the reconciliation account.The
billing to the customer may be on paper or by Electronic
Data Interchange (EDI).
The next step of accounts receivable is setting up of clientaccount record. This information may come from a sales
receipt, a sales contract, a form from the sales/credit
department or whatever documentation is used to record a
sale. Contract information such as names, addresses, phone
numbers and references ( to name but a few ) are compiled
and entered into an accounts receivable software program
and/or a hard copy file is organized and stored for later use.
After the sale is made or the service has been provided, a
bill can be produced using the client account record. Bills are
sent to clients on a regular basis and include such things as
the date of the bill, a description of the product or service,
the price of each item, any additional fees or taxes and a
due date. Penalties for missing the due date is listed on
every bill, as well as instructions on where and how to send a
payment.
With the accounts receivable software, the orders/contracts
are all entered and identified by a client ID and then the bills
are printed and sent to each customer. If accounts are not
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paid in full before the due date, accounts receivables
collection measures are taken.
As the clients send in payments are posted to the correct
accounts. Each payment is identified either by account
number or client ID in order to be posted accurately.
E. FUTURE GROWTH AND PROSPECTS
Looking forward, the industry displays tremendous potential
in generating employment and boosting entrepreneurship in
country. The spate of new investment plans announced by
global and domestic automobile manufacturing promises the
emergency of India as a global hub for auto components.
The industry is transforming and the boost in demand will
see the emergency of several new payers in industry. The
vast market for auto components, and the diverse products
and technology involved ensure a place and role for many.
At the same time, the entry of several global automobile
manufacturing will bring in more regulation into the industry
and see a pruning of the spurious market. Among the small
players in the unorganized segment, this implies moving
away from being standalone companies to entering into
either contact manufacturing or being ancillary units. The
newly defined rules are specialized, development and
delivery that hold the key of the success in the auto
component industry.
At KAR MOBILES LIMITED, they have always taken a long
term perspective when preparing their business strategies.
They expected robust all-round growth in the global
economy in the next 10 years. They also believe that the
global economy has more inclusive. Countries like India and
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China are now poised to play a larger role in determining the
course of the global economy.
Their manufacturing presence in India, the US, Europe and
China has positioned them to capture global growth
opportunities, and helping downturns, should they occur. In
view of this, they are very optimistic about the future.
KAR MOBILES LIMITED is a 37 years old company. Since their
inception they have believed in setting challenging
milestone and have worked hard to achieve their goals.
While scale of operation is an important parameter for
manufacturing company like KAR Mobiles, there are critical
areas like:-
➢ Technology
➢ Product development
➢ Customer service
➢ Human resource
In which they are striving to excel. Their goal is to be the
industry bench mark in all
these area, to be an end-to-end service provided to global
customers and provide
them with unassailable value. The company in its continuous
guest for excellence
seeks new frontiers, delivering best-of-breed products that
meet global quality
standards and adopts innovative techniques to further improve
customer services.
3. McKensy’s 7S MODEL
McKensy’s 7S FRAME WORK
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INTRODUCTION
Background of the model
The 7’s framework was developed by the consultants at the McKensy Company, a
very well management consultancy firm the United States,
towards the end of 70’s
to diagnose the course of organizational problems and to
formulate programs for
improvement.
The model starts on the premise that an organization is not justStructure, but
consists of seven elements:
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The 7s frame of Mckensey is a value based management model
that describes how
one can holistically and effectively organize a company.
Together these factors
determine how a company operates.
The ‘3 ’ S across the top the model are described as “Hard S”
Strategy: the plan devised to maintain and build competitive
advantage over the competition.
Structure: the way the organization is structured and who
reports to whom.
Systems: the daily activities and procedures that staff members
engage in to get the job done.
The 4S across the bottom of the model are less tangible, more
culture in the nature and were termed as “Soft S” by McKinsey:
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Skills: the capabilities and competencies that exist within the
company.
Shared values: the capabilities and beliefs of the company.
Ultimately they guide
employees towards ‘valued’ behavior.
Staff: the Company’s people resources and hoe they are
development trained and
motivated.
Style: the leadership approach of top management and the
company’s overall
operating approach.
STRUCTURE
In Kar Mobiles Limited functional organization structure exists
under which all employees reports to their respective head of
department reports directly to the president.
a) Overall organization structure details
Level 1 Chairman (1)
Level 2 President (1)
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b) Substructure dealing with each functional discipline
Finance department
Level 3 General Manager/ Deputy General Manager/Senior
Manager (12)
Level 4 Manager/Assistant manager/Deputy manager (40)
Level 5 Senior executive/Executive/Deputy Executive/
Assistant executive (180)
Level 6 Staff (20)
Level 7 Workmen (285)
President
General
Senior Manager
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Marketing department
HR department
Assistant
Senior
Executive
Deputy
President
General Manager
Senior Mana er Senior Mana er Senior Mana er
Executives Office
Administration
Executives
Field staff
President
Senior Manager HR
Senior Executive Assistant Mana er(Tum
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IT department
Quality Assurance department
Production Planning & Control department
Executives
President
Senior
In charge IT
Plant Head 1
Head Plant Quality
Product Audit Process Audit Raw Material Audit
Gauge
Room
Material
Labs
Customer
complaint
Plant Head
Head PC
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Materials department
Maintenance department
In charge PPC Forge
Shop
In charge PPC Machine
Shift In charge1 PPC Machine
Shift In charge 2PPC Machine
Shift In
charge 1 PPC
Shift In
charge 2 PPC
President
Senior Manager
Purchases Stores Consumable Raw Materials Sub Contracting
Plant Head
Plant Head
Utilities Shop In charge
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STRATEGIES
Kar Mobiles Limited has maintained a good position in the value
industry through its good strategies in the market. Because of its
innovative strategies KML is the second largest valve
manufacturing company. Continuously cost reduction and
consistent quality helps to Kar Mobiles limited in the maintenance
of good position in the valve industry.Company is focusing more on cost reduction and inventory
control in order to increase the efficiency of firm by periodically
review the system of the organization.
Kar Mobiles limited also review the management structure of the
organization as well as different of departments in order to know
whether to increase or decrease staff and makes new structure of
top management also. Apart from this company continuously
focus on the development of existing product as well as tries toenter in new market segment. KML continouously review and
adjust the policies of different department i.e, financial policies,
Human resource policies, Distribution system and Marketing
Strategies etc. to respond the environment of business.
SYSTEMS
Management system of KML is as follows:
➢ Preparation of budget for the different activities, every year
in the month of February for the next financial year.
➢ Quarterly auditing of financial records.
Forge Shop Machine Shop
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➢ Pay scale revision for the top management once in a year.
➢ Pay scale revision for the employees once in four years.
➢ Performance analysis report of company is prepared for
every financial year.
➢ Continuous training program for the employees in its own
training institute as well as outbound training.➢ Insurance for all employees on the basis of team.
➢ Sales of valves in replacement market through 500 dealers
only spreading in all
over the India.
➢ Incentives are given on the basis of performance appraisal
system only.
➢ All major decision are takes by president subject to the
discussion with Board of Director.
SHARED VALUES
➢ Provide superior products and services to company’s
customer and maintain leadership.
➢ Evolve as an institution that serves the best interests of all
stakeholders.
➢ Pursue excellence through total quality management.
➢ Ensure the highest standards of ethics and integrity in all
actions.
STAFF
Staff of KML is efficient but not highly qualified. Mostly male
workers are there in Kar Mobiles Limited. Kar Mobiles Limited is
not a big company so there is no more opportunity for career
growth. Kar Mobiles Limited’s workers belong to different
geographical areas but most of them are from Karnataka state
only.
SKILLS
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The staff of KML can be divided into 3 categories i.e skilled non
skilled and semi-skilled. There is less number of highly competent
employees. There are lacks of multi-tasks employees and most of
employees are specialized in particular area only.
STYLECulture of KML is very good there is a democratic environment
exists within the organization. Relationship amongst the
employees and between the employees and manager is not very
formal. All employees day to day reports to the respective head if
necessary and get suggestion and recommend them without any
restriction. In the some types of decision making process ideas
are invited from the employees. Culture of KML is very open and
all employees enjoy freedom at the work place.
4. SWOT ANALYSIS
The SWOT analysis is the foundation for developing your
strategies and tactics
that then becomes the road map for writing your business
operating plan. Prior
to defining the company’s strengths, weaknesses, opportunities
and threats you
need to:
Have a written Vision, Mission and Values statement.
Have completed a through internal and external
business status evaluation.
So SWOT analysis plays an important role in comparing between
the competitors, and problems within the company, this helps the
management to make changes with regard to these factors.
STRENGTHS
➢ High brand equity
➢ Vast dealer network and field force
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➢ Capability to manufacture large valves
➢ Skilled manpower
➢ Wide range of products at industry level
➢ Experience in handling overseas customers
WEAKNESS➢ Low productivity
➢ Changing product/ market mix
➢ Poor process capability
➢ Inadequate focus on exports
➢ Poorly maintained machines
➢ Weak in technological innovation
➢ Lack of pride in workmanship
➢Insensitivity to customers
➢ High wages cost
➢ Inadequate systems
➢ Low competencies
OPPORTUNITIES
➢ Win market shares from high cost competitors in overseas
market
➢ Exploit large and growing domestic two wheeler market in
global outsourcing
➢ Manufacturing/trading of related engine components
THREATS
➢ Dumping from china and cheaper imports from other low
cost countries
➢ Strengthening of Rupee affecting exports
➢ More competition since there are no growth opportunities for
MNC’s elsewhere
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CHAPTER 5
ANALYSIS OF FINANCIAL STATEMENT
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Current Ratio:
Current Ratio measures the ability of an entity to pay its near-
term obligations.“Current” usually is defined as within one year.
Formula: Current Ratio= Current Assets /Current Liabilities
The company’s current ratio is 1.85 which can be read as 1.85:1
Though the ideal current ratio depends to some extent on the
type of business, ageneral rule of thumb is that it should be at least 2:1.
As the current ratio is lower the company will not be able to pay
its bills on time,
while with a higher ratio the company has money in cash or safe
investments that
could be put to better use in the business. So, the company is
suggested to work onits Current Ratio.
Inventory Turnover Ratio:
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Inventory Turnover Ratio shows how efficiently the company is
managing its
production, warehousing, and distribution of product,
considering its volume of
sales.
Formula: Cost of Goods Sold for the year / Average Inventory
The company’s inventory turnover ratio is 9.88
Higher ratios-over six or seven times per year-generally thought
to be better.
Extremely high inventory turnover will indicate a narrowselection and possibly lost
sales. A low inventory turnover rate, on the other hand, means
that the company is
paying to keep a large inventory, and may be overstocking or
carrying obsolete items.
therefore, the company is suggested retain the Inventory
Turnover Ratio for further
years.
Debt to equity ratio:
Debt to equity shows the ratio between capital invested by the
owners and the funds provided by lenders.
Formula: (Debt)/(Equity)
The company’s Debt Equity Ratio is 0.76 which is 76%
A company is generally considered safer if it has a low debt to
equity ratio i.e, higher proportion of owner-supplied capital-
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through a very low ratio can indicate excessive caution. In
general, debt should be between 50 and 80 percent of equity. The
company is maintaining very less Debt Equity Ratio when
compared with the standards which shows that it’s playing safe.
On the other hand, too little debt means the company is not
realizing the full potential of the business – and actually hurts theoverall profitability.
Return on Net Sales:
Return on Net Sales shows how munch profit comes from every
rupee of sales.
Formula: (Net Profit)/ (Total Sales)
The company’s Return on Sales is 8.15%
Compare to other businesses in the same industry to see if the
business is operating as profitably as it should be. Look at the
trend from month to month. Is saying the same? Improving?
Deteriorating? Are you generating enough sales to leave an
acceptable profit? Trend from month to month can show how well
the company is managing the operating or overhead costs.
Investment Turnover Ratio:
Investment turnover ratio measures a company’s ability to use
assets to generate sales.
Formula: Net Sales/Total Assets
The company’s Investment Turnover Ratio is 1.35 times
Although the ideal level for this ratio varies greatly, a very low
figure may mean that the company maintains too many assets or
has not deployed its assets well, whereas a high figure means
that the assets have been used to produce good sales numbers. It
can be justified that the company is using its assets efficiently.
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PART B
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GENERAL INTRODUCTION
THEORITICAL BACKGROUND OF THE STUDY
Accounts Receivable is the money owed by a customer
(individuals or corporations) to another entity in exchange forproducts and services that have been delivered or used, but not
yet paid for. Receivables usually come in the form of operating
lines of credit and are usually due within a relatively short time
period, ranging from a few days to a year.
On a public company’s balance sheet, accounts receivbles is often
recorded as an asset because this represents a legal obligation
for the customer to remit cash for its short-term debts.
Accounts receivables(alternately “receivables”) are created when
a customer purchases goods or services from a company but do
not pay for them at the time of purchase. Instead, the company
issues an invoice for the goods or services at a later date, often at
the end of the month. The amount due on the invoice is
considered accounts receivables for the company. Receivables
are treated as current assets on a company’s balance sheet.
Receivables are entered into a company’s books when theyreceives an invoice for good or service provision (and not before),
as the invoice proves that money is legally owed to the company
by an outside entity.
Receivables are typically issued by companies to reliable
customers, since they are selling their goods on credit.
Objectives
The sales of goods on credits is an essential part of moderncompetitive economic systems. In fact, credit sales and therefore,
receivables, are treated as a marketing tool aid the sales of
goods. Management should weigh the benefits as well as cost to
determine the goal of receivables management. The objective of
receivables management is to promote sales and profits until that
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point is reached where the return on investment in further
funding receivables is less than the cost of funds raised to finance
that additional credit (i.e. cost of capital ). The specific cost and
benefits which are relevant to the determination of objectives of
receivables management are examined below.
Costs
The major categories of cost associative with the extension of
credit and account receivables are:
• Collection costs
• Capital cost
• Delinquency cost
• Default cost
Benefits of Receivables management
• Increase sales
• Market share increase
• Increase in profit
• Enhanced customer services
• Control bad debts
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TITLE OF THE STUDY “A study on account receivables management of Kar Mobiles Ltd,
Bangalore.”
Statement of Problem
Accounts Receivables Management means planning,
organizing, directing and controlling of receivables. Generally,
account receivables refer to the total amount due and areconsidered in calculating the value of a business or the business’
problems in paying its own debts.
Poor administering of credit policies by the company to its
customers: By following a relaxed credit policy the liquidity
decision is seriously affected. The company is locking funds in idle
assets resulting in improper cash management. This problem
spills into another serious issue such as longer operating cycle
resulting in increased working capital requirement. Hence, the
study is conducted to know the accounts receivables
management of Kar Mobiles Ltd.
Objectives of study
• To study the present receivables management procedure in
the organization.
• To calculate various ways in which the debtors can be
managed efficiently.
• To study the trends in bad debts for the last 5years.
• To determine different ways in which the customer service
can be increased by redefine the collection process.
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• To analyze the impact of present credit policy on the
company.
Scope of the study
The scope of study is confined to the manufacturing industry andthere by suggesting ways by which an auto ancillary company
such as Kar Mobiles Ltd can optimally manage its accounts
receivables.
• The study has been carried out with data for five years.
• Information has been collected after a study on the existing
system of management of accounts receivables and also by
interviewing the concerned authorities in financedepartment.
Research Methodology
The system of collecting data for research projects is known as
research methodology.
The data may be collected for either theoretical or practical
research. For example management research may be
strategically conceptualized along with operational planning
methods and change management.
Descriptive research is the type of research used in the
collection of data.
Descriptive research includes surveys and fact-finding enquiries
of different kinds. The major purpose of descriptive research is
description of the state of affairs as it exists at present. The main
characteristic of this method is that the researcher has no control
over the variables; he can only report what has happened or what
is happening.
Collection of Data
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The data is collected through both primary and secondary
sources.
Primary data is collected by approaching related personal in the
finance department , production department, HR department and
so on…
Secondary data is collected through various sources such as from
company’s annual report, company library, previous projects,
internet, text books, etc…
Tools Used
Critical data with respect to accounts receivables will be analyzed
by using various tools such as:
Graphs – To analyze data this follows a trend or a pattern.
Ratios – To analyze the various components in financial
statements.
Correlation Analysis – The data that will be collected will be
analyzed in the following ways:
○ Trend Analysis: the growth of sales and the receivables
position for the financial years○ 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 will be
calculated.
○ Excepts from annual reports and other statements have
been used for making the analysis
○ A study has been made on the reasonableness of credit
sales of the company
Sample size
This study which has been carried out on accounts receivables
management of Kar Mobile Ltd., and has taken into consideration
the entire aspect of accounts receivables of Kar Mobiles Ltd.,
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therefore the sample size is Kar Mobiles Ltd., in total. And the
sample amount is annual report of 5 year period.
Limitation of the study
➢ The study on accounts receivables management of the
company is time based.➢ Other components of working capital management such as
cash management, inventory management are not
considered for the study.
➢ The confidentiality of some facts and figures and the non-
availability of relevant information is one of the limitations.
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ANALYSIS & INTERPRETATION
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Table no. 1
1.Determination of growth in sales
(‘000)
Year Sales Changes in
sales
Percentage
2006- 2007
670354
(37928)
(5.35)
2007-2008 853613 183259 27.34
2008-2009 935556 81943 9.61
2009-2010 807579 (127977) (13.68)
2010-2011 923106 115527 14.31
Analysis:
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Tables no. 22. Determination of growth in Accounts receivables
Year Receivables Changes in
Receivables
Percentage
2006-2007 170703 12127 7.65
2007-2008 195105 24402 14.30
2008-2009 215235 20130 9.35
2009-2010 163758 (51477) 23.92
2010-2011 203691 39933 24.39
Analysis
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Table no. 3
3. Determination of growth in profits
Year Profit Change in
profit
Percentage
2006-2007 65340 (12368) 15.92
2007-2008 71189 5849 8.95
2008-2009 52587 (18602) (26.13)
2009-2010 73715 21128 40.18
2010-2011 75211 1496 2.03
Analysis
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Table no. 4
4. Determination of Debtors Turnover Ratio
Year Gross Sales Average
Debtors
Times
2006-
2007
728746 170703 4.27
2007-
2008
920439 195105 4.72
2008-2009 998370 215235 4.64
2009-
2010
855767 163758 5.22
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2010-
2011
981914 203691 4.82
Analysis
Table no. 5
5. Determination of Average Collection Period
Year Debtor
turnover
No. of
working
days
Average
Collection
period
2006-2007 4.27 365 85
2007-2008 4.72 365 77
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2008-2009 4.64 365 79
2009-2010 5.22 365 70
2010-2011 4.82 365 75
Analysis
Table no. 66. Percentage of Debtors in total Current Assets
(‘000)
Year Debtors Total Percentage
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Current
Assets
2006-2007 170703 317878 53.70
2007-2008 195105 404977 48.18
2008-2009 215235 355051 60.62
2009-2010 163758 266935 61.34
2010-2011 203691 393200 51.80
Analysis
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Table no.
7. Percentage of Debtors in total Current Assets
(‘000)Year Debtors Total Assets Percentage
2006-2007 170703 479610
2007-2008 195105 584637
2008-2009 215235 578161
2009-2010 163758 502563
2010-2011 203691 679717
Analysis
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