Automobile Industry

AUTOMOBILE INDUSTRY

INDUSTRY OVERVIEW

Since the first car rolled out on the streets of Mumbai (then

Bombay) in 1898, the Automobile Industry of India has come a long way. During its

early stages the auto industry was overlooked by the then Government and the policies

were also not favorable. The liberalization policy and various tax reliefs by the Govt. of

India in recent years has made remarkable impacts on Indian Automobile Industry. Indian

auto industry, which is currently growing at the pace of around 18 % per annum, has

become a hot destination for global auto players like Volvo, General Motors and Ford.

A well developed transportation system plays a key role in the development of an

economy, and India is no exception to it. With the growth of transportation system the

Automotive Industry of India is also growing at rapid speed, occupying an important

place on the 'canvas' of Indian economy.

Today Indian automotive industry is fully capable of producing various kinds of vehicles

and can be divided into 03 broad categories : Cars, two-wheelers and heavy vehicles.

HIGHLIGHTS OF AUTOMOBILE INDUSTRY

The first automobile in India rolled in 1897 in Bombay.

India is being recognized as potential emerging auto market.

Foreign players are adding to their investments in Indian auto industry.

Within two-wheelers, motorcycles contribute 80% of the segment size.

Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%).

Tata Motors dominates over 60% of the Indian commercial vehicle market.

2/3rd of auto component production is consumed directly by OEMs.

India is the largest three-wheeler market in the world.

India is the largest two-wheeler manufacturer in the world.

India is the second largest tractor manufacturer in the world.

India is the fifth largest commercial vehicle manufacturer in the world.

The number one global motorcycle manufacturer is in India.

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Automobile Industry

Among the two-wheeler segment, motorcycles have major share in the market. Hero

Honda contributes 50% motorcycles to the market. In it Honda holds 46% share in

scooter and TVS makes 82% of the mopeds in the country.40% of the three-wheelers

are used as goods transport purpose. Piaggio holds 40% of the market share.

Among the passenger transport, Bajaj is the leader by making 68% of the three-

wheelers.

Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share in

passenger cars and is a complete monopoly in multi purpose vehicles. In utility

vehicles Mahindra holds 42% share.

In commercial vehicle, Tata Motors dominates the market with more than 60% share.

Tata Motors is also the world's fifth largest medium & heavy commercial vehicle

manufacturer.

The automobile industry has changed the way people live and work. The earliest of

modern cars was manufactured in the year 1895. Shortly the first appearance of the

car followed in India. As the century truned, three cars were imported in Mumbai

(India). Within decade there were total of 1025 cars in the city.The actual horseless

carriage was introduced in the year 1893 by brothers Charles and Frank Duryea. It

was the first internal-combustion motor car of America, and it was followed by Henry

Ford's first experimental car that same year. One of the highest-rated early luxury

automobiles was the 1909 Rolls-Royce Silver Ghost that featured a quiet 6-cylinder

engine, leather interior, folding windscreens and hood, and an aluminum body. It was

usually driven by chauffeurs and emphasis was on comfort and style rather than

speed.During the 1920s, the cars exhibited design refinements such as balloon tires,

pressed-steel wheels, and four-wheel brakes. Graham Paige DC Phaeton of 1929

featured an 8-cylinder engine and an aluminum body.The 1937 Pontiac De Luxe

sedan had roomy interior and rear-hinged back door that suited more to the needs of

families. In 1930s, vehicles were less boxy and more streamlined than their

predecessors. The 1940s saw features like automatic transmission, sealed-beam

headlights, and tubeless tires.

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Automobile Industry

INDUSTRY INVESTMENT

CURRENT SCENARIO

On the cost front of Indian automobile industry, OEMs are eyeing India in a big

way, investing to source products and components at significant discounts to

home market.

On the revenue side, OEMs are active in the booming passenger car market in

India.

The table show the ranking of India in the past four years.

Rank 2005 2004 2003 2002

1 China China China China

2 India Thailand Thailand Thailand

3 Thailand India USA USA

4 Vietnam Vietnam Vietnam Indonesia

5 USA USA India Vietnam

6 Russia Russia Indonesia India

7 Korea Indonesia Korea Korea

Facts & Figures

The automobile industry in India is on an investment overdrive. Be it passenger car or

two-wheeler manufacturers, commercial vehicle makers or three-wheeler companies -

everyone appears to be in a scramble to hike production capacities. The country is

expected to witness over Rs 30,000 crore of investment by 2010.

Over the next one year, some 20 new cars will be seen on Indian roads. Take note of this,

Maruti Udyog is coming up with new Zen and the diesel version of Swift during the next

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Automobile Industry

few months. Hyundai will also be unmasking the Verna and a brand new diesel car.

General Motors will be launching a mini and may be a compact car.

General Motors will be investing Rs 100 crore, Ford about Rs 350 crore and Toyota

announced modest expansion plans even as Honda Siel has earmarked Rs 3,000 crore

over the next decade for India - a sizeable chunk of this should come by 2010 since the

company is also looking to enter the lucrative small car segment.Some new entrants will

also taste the water. They are the big names in passenger cars like Citroen, Volkswagen

AG, Nissan (separately, apart from its tie-up with Suzuki), Alfa Romeo, Maserati, Land

Rover and Aston Martin.Talking about the commercial vehicle segment, Ashok Leyland

and Tata Motors have each announced well over Rs 1,000 crore of investment. Mahindra

& Mahindra's joint venture with International Trucks is expected to see an infusion of at

least Rs 500 crore.In two-wheelers segment, Chinese bike major Lifan and the iconic US

brand Harley-Davidson are expected to enter India soon. Hero Honda is about to establish

its fourth manufacturing plant. Bajaj Auto and TVS Motors are moving to the excise-free

zones of Himachal Pradesh and Uttaranchal for putting up new capacity.

INDIAN AUTOMOBILE INDUSTRY GROWTH

CURRENT SCENARIO

The Indian automobile industry crossed a landmark with total vehicle

production of 10 million units.

Car sales was 8,82,094 units against 8,20,179 units in 2004-05.

The two-wheeler market grew by 13.6 per cent with 70,56,317 units against

62,09,765 units in 2004-05.

Commercial vehicles segment grew at 10.1 per cent with 3,50,683 units

against 3,18,430 units in 2004-05.

OVERVIEW

India, sourcing base for global auto majors.

Passenger car and motorcycle segment is set to grow by 8-9%.

The two-wheeler segment will clock 11.5% rise by 2007.

Commercial vehicle to grow by 5.2 per cent.

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Automobile Industry

Estimated component market size is US$ 6.7 bn.

FACTS & FIGURES

India, in auto sector, is turning to be a sourcing base for the global auto

majors. The passenger car and the motorcycle segment is set to grow by 8-9 per cent

in coming couple of years, says the ICRA report. The industry is likely to maintain

the growth momentum picked up in 2002-03.The ICRA's analysis points on the auto

sector that the passenger car market in the country was inching towards cars with

higher displacements. The sports-utility-vehicle (SUV) that was getting crowded

everyday, would witness intense competition as many SUVs had been competitively

priced, the report said.Honda, Suzuki, General Motors and Hyundai, the global

automakers had already launched their premium SUVs in the market to broaden their

portfolio and create product excitement in the segment estimated at about 10,000

units annually.In the two-wheeler segment, according to the report, the motorcycles

would clock 11.5 per cent rise during 2004-2007 over its siblings-scooters and

mopeds. Scooters sales would decelerate and mopeds would also see the same.

Overseas market would present huge opportunities for the two-wheeler makers.

Indian Auto Market Growth for the year 2005-06

The domestic automobile industry sales grew 12.8 per cent at 89,10,224 units

as against 78,97,629 units in 2004-05.

The automotive industry crossed a landmark with total vehicle production of

10 million units.

According to the Society of Indian Automobile Manufacturers (SIAM), car

sales was 8,82,094 units against 8,20,179 units in 2004-05.

The growth of domestic passenger car market was 7.5 per cent

Car exports stood at 1,70,193 units against 1,60,670 units in 2004-05.

The two-wheeler segment, the market grew by 13.6 per cent with 70,56,317

units against 62,09,765 units in 2004-05.

Motorcycles had the upward march, 17.1 per cent in domestic market

touching 58,15,417 units against 49,64,753 units in 2004-05.

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Automobile Industry

Scooter segment grew by 1.5 per cent, fall at 9,08,159 units against 9,22,428

units in 2004-05.

Commercial vehicles segment grew at 10.1 per cent with 3,50,683 units

against 3,18,430 units in 2004-05.

Medium and heavy commercial vehicles managed a growth of 4.5 per cent

against 23 per cent growth in the year ended March 31, 2005.

Light commercial vehicles sales growth was 19.4 per cent at 1,43,237 units

against 1,19,924 units in 2004-05.

Three-wheelers sales rose by 17 per cent at 3,60,187 units against

3,07,862 units in 2004-05.

VEHICLE PRODUCTION IN INDIA

Automobile Industry is the largest industry in India with an impressive growth in the last

two decades. The reason behind the growth was abolition of licensing in 1991 and

permitting automatic approval and successive liberalisation of the sector.

According to estimation the compound annual growth rate (CAGR) of Indian

Automobile sales will grow at 9.5% and will touch a mark of 13,008 million by 2010.

The figure for FY05 was 8.45 million units. To tap this large opportunity, the Indian Auto

Companies along with the global giants have announced huge expansion plans.Maruti

Udyog Ltd. was the largest 4-Wheelers producer in 2005-06 followed by Tata Motors.

Hyundai did well but the difference was nearly half of Tata Motors. In 2-Wheelres

segment, Hero Honda is leading putting behind Bajaj Auto Ltd. Check the table below to

get complete figure.

Current Scenario

The growth rate of Passenger Cars in 2004 was 30% in India where as the average

growth rate of top 12 Passenger Cars producing countries were just 5.1%. In

Heavy Trucks it was 32% and 14.6% respectively.

Component industry's growth was only 9% between 1997-2000. But between

2000-2005 it has grown to 20%. It is projected 17% between 2005-2014.

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Automobile Industry

HIGHLIGHTS

Largest industry in India.

By 2010 there will be 13,008 million cars.

Maruti Udyog Ltd. is the leading 4-wheelers manufacturer.

Hero Honda is the leading 2-wheelers manufacturer.

2-wheelers are produced most followed by 4-wheelers and 3-wheelers.

Production of 4-Wheelers

Manufacturers2005-06 (Apr-Mar)In Nos.

Manufacturers2005-06 (Apr-Mar)In Nos.

Japanese OEM Korean OEM

Maruti Udyog Ltd. 572,097 Hyundai Motor India Ltd. 260,440

Toyota Kirloskar Motor Pvt. Ltd. 44,975 American OEM

Honda Siel Cars India Ltd. 41,361 General Motors India Pvt. Ltd. 30,687

Swaraj Mazda Ltd. 11,946 Ford India Pvt. Ltd. 26,946

Total 670,379 Total 57,633

European OEM Indian OEM

Skoda Auto India Pvt. Ltd. 9.767 Tata Motors Ltd. 449,878

Daimler Chrysler India Pvt. Ltd. 1,780 Mahindra & Mahindra Ltd. 128,601

Volvo India Pvt. Ltd. 1,004 Ashok Leyland Ltd. 65,085

Tatra Trucks India Ltd. 125 Force Motors Ltd. 35,728

Fiat India Pvt. Ltd. 671 Eicher Motors Ltd. 24,348

Hindustan Motors Ltd. 15,458

Total 13,347 Total 719,098

Source: Automotive Component Manufacturers Association of India

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Automobile Industry

Production of 2-Wheelers

Manufacturers

2005-06 (Apr-Mar)In Nos.

Manufacturers

2005-06 (Apr-Mar)In Nos.

Japanese Indian

Hero Honda Motors Ltd. 3,006,486 Bajaj Auto Ltd. 2,042,289

Honda Motorcycle & Scooter India (Pvt.) Ltd.

603,436 TVS Motor Company Ltd. 1,366,866

Yamaha Motors India Pvt. Ltd. 248,665 LML Ltd. 107,044

Suzuki Motorcycle India Pvt. Ltd. 2,328 Kinetic Engineering Ltd. 82,392

Majestic Auto Ltd. 56,819

Kinetic Motor Company Ltd.

53,880

Royal Enfield (Unit of Eicher Ltd.)

30,596

Total 3,860,915 Total 3,739,886

Source: Automotive Component Manufacturers Association of India.

If we take a quick look of almost a decade, it is seen that two-wheelers are the most produced in automobile industry followed by passenger cars and then three wheelers. The following are the number of units produced in 2003-04 and 2004-05 (April-Sept. 04) of different segment of vehicles:

Name of the Sector No. of units Production

2003-042004-05(April-Sept. 04)

Commercial Vehicles 9 275224 156815

Cars 12 842437 465983

Multi-Utility Vehicles 5 146103 114739

2-wheelers 12 5624950 3023805

3-wheelers 4 340729 177554

Total 42 7229443 3938896

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Automobile Industry

Production Range of Auto Components

Electrical Parts - 9%

Equipments - 10%

Suspension & Braking Parts - 12%

Body & Chassis - 12%

Drive Transmission & Steering Parts - 19%

Engine Parts - 31%

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Automobile Industry

CURRENT SCENARIO

Foreign auto makers, including Ford Motor Co. , General Motors Corp., Honda

Motor Co. Ltd., Toyota Motor Corp., DaimlerChrysler AG and Hyundai Motor

Co. Ltd., are looking to increase their presence in India and use it as an export

hub.

Exports of auto components, whose manufacturing costs are 30-40 per cent lower

than in the West, have grown at 25% a year between 2000 to 2005.

Overview

In 2003-04 the export of the industry was 55.98%.

Two-wheelers are mostly exported from India.

The reason behind the export is cost competitiveness in terms of labor and raw

material.

The export of auto components has grown to 19% from the start of the decade.

Facts & Figures

The Indian automotive export industry presently is finding a good recognition globally.

The auto industry along with the component industry is contributing to the export effort

of the country. In 2002-03, the export of the automobile industry had registered a growth

rate of 65.35%. In 2003-04, it was 55.98%. The following table briefs about the 2003-04

and 2004-05 (upto April-Dec. 2004) automobile export in numbers.

Category 1998-99 2004-05 (Apr-Dec)

Passenger Car 25468 121478

Multi Utility Vehicles 2654 3892

Commercial Vehicles 10108 19931

Two Wheelers 100002 256765

Three Wheelers 21138 51535

Percentage Growth -16.6 32.8

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Automobile Industry

ExportofAutoComponents:

Investments in the auto ancillary sector are rising rapidly. In 1997, the size of the auto

component industry was US$ 2.4 billion and now in 2004-05 it has become US$ 8.7

billion industry. The export of auto components has grown at a compounded growth rate

of 19 per cent over the past six years.Jai Parabolic Springs (JPSL) is a leading

manufacturer of parabolic springs in India and has bagged two major orders from

international auto majors, GeneralMotors (GE) and Ford.Robert Bosch, auto parts maker

of Germany has relocated manufacture of certain products to MICO, India. Crosslink

International Wheels, Malaysia's leading automobile security provider Wheels Electronic

SDN, is setting up its manufacturing unit at Baddi to make India the export hub for the

SAARC region.PSA Peugeot Citroën, French automobile group has placed orders for

components worth US$ 10 million with Indian companies.Fiat India exported

components worth US$ 8.3 million in 2004-05 to its operations in South Africa. GKN

Driveline and Dubai based auto ancilliary major Parts International plans for an

investments in India.

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Automobile Industry

Analysis of Indian Exports:

Strengths

Cost competitiveness in terms of labor and raw material.

Established manufacturing base. Economics of scale due to

domestic market.

Potential to harness global brand image of the parent company.

Global hub policy for small car like Hyundai, Suzuki, etc.

Weakness

Perception about quality.

Infrastructure bottlenecks.

Opportunitie

s

Huge export markets such as Europe, America, Africa, and others

for Indian cars.

Threats

China, Malaysia, Thailand, etc.

Many other countries also have strategies for export promotion.

ExportImperatives:

Internal Factors:

Attaining high quality for global standards.

Continuous cost reduction for global competitiveness.

Supply chain management (logistics).

Attaining economies of scale & scope.

External Factors:

Improve infrastructure (ports, roads, etc).

Improve EXIM regulations.

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Automobile Industry

Profits

Automobile

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08PBDITA 6309.13 8462.93 10213.63 12445.13 14881.19 18657

Depreciation 2032.17 2218.03 2488.96 2425.72 2818.11 3751.42

Amortisation 69.12 74.76 66.52 63.72 100.62 145.87

PBIT 4207.84 6170.14 7658.15 9955.69 11962.46 14759.71

Interest paid 1633.16 1110.21 909.9 837.21 821.37 1216.76

Financial charges on instruments 0 0 0 0 0 0

Fee based financial services expenses 0 0 0 0 0 0

PBT 2574.68 5059.93 6748.25 9118.48 11141.09 13542.95

Provision for direct tax 1178.01 1940.71 2328.9 2961.45 3560.64 3973.05

Corporate tax 726.11 1284.99 2130.25 2528.73 2836.4 3154.45

Deferred tax 451.08 655.24 369.52 561 1379.26 1463.44

Less: Deferred tax assets / credit 0.2 0.67 172.68 204.55 710.43 713.39

Other direct tax 1.02 1.15 1.81 76.27 55.41 68.55

Fringe benefits tax 0 0 0.65 75.06 54.28 66.66

PAT 1396.67 3119.22 4419.35 6157.03 7580.45 9569.9

PAT (as reported by the Co.) 1279.64 3132.86 4421.39 6145.83 7664.58 9583.76

Prior period & extra-ordinary income 680.67 415.68 592.49 880.76 977 1037.45

Prior period & extra-ordinary expenses 122.48 91.84 203.3 369.6 398.24 163.43

Net prior period & extraordinary transactions -558.19 -323.84 -389.19 -511.16 -578.76 -874.02

PBDITA net of P&E 5750.94 8139.09 9824.44 11933.97 14302.43 17782.98

PBIT net of P&E 3649.65 5846.3 7268.96 9444.53 11383.7 13885.69

PBT net of P&E 2016.49 4736.09 6359.06 8607.32 10562.33 12668.93

PAT net of P&E 838.48 2795.38 4030.16 5645.87 7001.69 8695.88Distribution of profits (%)

PBDITA 100 100 100 100 100 100

Depreciation & Amortisation 33.3055429 27.0921537 25.0202915 20.0033266 19.6135524 20.8891569

Financial charges 25.8856609 13.1185062 8.90868379 6.72720976 5.51951826 6.52173447

Tax 18.6715126 22.9318924 22.8018834 23.7960552 23.9271187 21.2952243

PAT 22.1372836 36.8574477 43.2691413 49.4734085 50.9398106 51.2938843

Non--provisions for: 285.56 38.22 46.93 30.36 99.95 70.37

Diminution in investement 20.21 0 0 0 0 0

Sundry debtors 4.9 3.59 5.61 3.78 4.07 0

Loans & advances including NPAs 29.49 1.73 0.49 0.47 0.69 0

Loans & advances to group cos. 15.96 0 0 0 0 0

Interest expenses 168.24 9.33 8.34 0.65 69.74 70.31

Power expenses 0.09 0.09 0 0 0 0

Gratuity 0 0 0 0 0 0

Others 46.67 23.48 32.49 25.46 25.45 0.06No of companies 62 63 65 61 60 58

Income & expenditure

Automobile

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

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Automobile Industry

Total income 58494 74891.47 94402.17 107056.85 134034.03 156220.86

Sales 56089.46 72550.14 91648.42 103026.48 128858.17 149368.87

Industrial sales 54796.37 70184.64 88559.04 98926.77 124582.59 143908.44

Income from non-financial services 1293.09 2365.5 3089.38 4099.71 4275.58 5460.43

Income from financial services 1358.08 1492.78 1590.42 2497.01 3308.5 4796.02

Interest 881.76 788.55 846.4 1365.94 1855.35 2953.87

Dividends 120.57 292.5 344.89 336.12 627.91 589.97

Treasury operations 251.55 300.9 333.51 657.14 695.27 1171.82

Other income 365.79 432.87 570.84 652.6 890.36 1018.52

Prior period income & extraordinary income 680.67 415.68 592.49 880.76 977 1037.45

Change in stock 619.13 1.29 928.64 1983.62 1906.95 2192.13

Total expenses 57718.26 71777.9 90911.46 102883.44 128360.53 148843.09

Raw material expenses 31533.29 41061.49 55006.13 62482.25 80659.31 92882.14

Packaging expenses 19.72 21.92 25.73 25.4 28.45 38.24

Purchase of finished goods 1278.08 2125.53 2692.34 3396.01 3756.37 4834.04

Power, fuel & water charges 799.31 921.18 960.61 1032.19 1236.11 1377.88

Compensation to employees 4105.39 4751.37 5051.32 5480.19 6364.37 8055.56

Indirect taxes 7971.03 10143.22 12626.82 13809.25 16512.22 18402.77

Royalties, technical know-how fees, etc. 737.72 998.45 1092.96 1075.01 1543.72 1611.21

Lease rent & other rent 124.94 130.05 148.51 151.3 173.16 239.57

Repairs & maintenance 360.62 445.7 553.64 646.68 731.73 891.66

Insurance premium paid 100.62 104.54 113.81 122.18 145.22 168.84

Outsourced mfg. jobs (incl. job works, etc.) 526.86 656.71 1022.94 1235.35 1534.45 1683.83

Outsourced professional jobs 39.57 50.92 93.77 149.85 205.96 322.56

Directors' fees 0.27 0.48 0.58 0.58 1.02 1.51

Selling & distribution expenses 3005.6 3183.68 3804.63 4326.86 5628.73 6509.55

Travel expenses 145.56 157.37 167.65 184.38 209.86 293.2

Communication expenses 24.91 25.9 26.93 26.23 24.56 28.85

Printing & stationery expenses 19.54 20.47 20.91 20.44 22.5 23.35

Miscellaneous expenses 1401.74 1823.79 2130.62 2439.38 2735.69 3310.11

Other operational exp. of indl. enterprises 306.74 190.13 211.06 225.73 156.38 180.17Other oper. exp. of non-fin. service enterprises 0.84 1.98 2.19 210.34 77.2 25.2

Share of loss in subsidiaries/JVs,etc. 6.46 14.19 25.11 29.76 46.62 53.96

Lease equalisation adjustment 0 0 0 1.54 3.78 4.49

Loss on securitisation of assets/loans 0 0 6.27 48.59 62.95 45.95

Fee based financial service expenses 157.31 175.49 192.69 211.07 239.69 313.58

Treasury operations expenses 237.48 179.47 151.85 144.77 102.15 200.23

Total provisions 423 279.85 227.07 238.06 466.05 676.78

Write-offs 142.4 99.06 193.22 87.06 156.3 140.43

Less: Expenses capitalised 781.21 1203.93 1108.71 1195.36 1468.21 2016.12

Less: DRE & expenses charged to others 4.47 16.66 526.77 379.35 694.79 706.98

Prior period & extraordinary expenses 122.48 91.84 203.3 369.6 398.24 163.43

PBDITA 6309.13 8462.93 10213.63 12445.13 14881.19 18657

Interest paid 1633.16 1110.21 909.9 837.21 821.37 1216.76

Financial charges on instruments 0 0 0 0 0 0

Expenses incurred on raising deposits/debts 0 0 0 0 0 0

PBDTA 4675.97 7352.72 9303.73 11607.92 14059.82 17440.24

Depreciation 2032.17 2218.03 2488.96 2425.72 2818.11 3751.42

Amortisation 69.12 74.76 66.52 63.72 100.62 145.87

PBT 2574.68 5059.93 6748.25 9118.48 11141.09 13542.95

Provision for direct taxes 1178.01 1940.71 2328.9 2961.45 3560.64 3973.05

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Automobile Industry

PAT 1396.67 3119.22 4419.35 6157.03 7580.45 9569.9

No of companies 62 63 65 61 60 58

Liabilities

Automobile

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Net worth 13351.52 17786.61 21110.09 27127.43 34432.67 46461.13

Authorised capital 9064.77 9026.67 9329.48 6911.47 9182.3 9481.21

Issued equity capital 6398 5360.49 5611.09 5925.62 7238.59 6593.23

Paid up equity capital (net of forfeited capital) 6357.23 5359.49 5610.36 5924.89 7242.19 6596.91

Forfeited equity capital 0.37 0.38 0.39 0.39 0.39 0.39

Paid up preference capital (net of forfeited capital) 364.92 714.91 959.34 958.59 803.16 822.21

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Automobile Industry

Capital contibution, suspense and application money 14.57 425.97 430.1 315.16 110.41 1379.79

Reserves & surplus 6614.43 11285.86 14109.9 19928.4 26276.52 37661.83

Free Reserves 11402.87 14410.81 17713.47 24045.63 30957.56 39590.06

Security premium reserves (Net of deductions) 2880.49 2979.11 2740.81 3969.99 4788.69 5478.47

Other free reserves 8522.38 11431.7 14972.66 20075.64 26168.87 34111.59

Specific Reserves 1181.19 815.56 763.81 742.53 585.83 1148.71

Revaluation Reserves 161.3 137.63 131.87 152.59 156.93 141.51

Less Accumulated losses 6130.93 4078.14 4499.25 5012.35 5423.8 3218.45

Total borrowings 13775.21 8957.3 10883.3 11293.29 15596.83 19675.34

Bank borrowings 3676.51 3073.2 2529.04 3439.95 5536.16 6788.72

Short term bank borrowings 1752.11 1572.41 1333.39 1981.92 3976.58 5252.54

Long term bank borrowings 1924.4 1500.79 1195.65 1458.03 1559.58 1536.18

Financial institutional borrowings 871.82 364.18 139.9 134.64 98.67 83.87

Central & state govt. (usually sales tax deferrals) 913.51 653.37 645.15 673.5 572.12 48.54

Debentures / bonds 2547.58 1325.69 1051.61 740.55 341.52 576.86

Convertible 5.29 5.29 1.33 0 9.75 0

Non-convertible 2542.29 1320.4 1050.28 739.09 317.43 535.72

Fixed deposits 103.57 105.66 90.19 78.99 86.27 91.95

Foreign borrowings 2372.64 792 3469.3 3639.47 5128.09 7116.67

Of which : euro convertible bonds 0 0 0 458.45 1792.16 3740.91

Borrowings from corporate bodies 955.44 595.45 643.43 558.6 692.65 388.4

Group / associate cos. 861.41 526.85 519.97 462.47 506.79 113.61

Borrowings from promoters / directors 1.8 2.25 4.71 2.36 9.72 18.94

Commercial paper 0 5 0 40 60 100

Hire purchase borrowings 0.52 0.89 1.5 1.85 2.3 2.81

Deferred credit 868.57 973.02 1243.42 1303.28 1497.72 2958.92

Other borrowings 1463.25 1066.59 1065.05 680.1 1571.61 1499.66

Secured borrowings 8053.7 4720.65 3903.42 4489.14 5978.49 6782.39

Unsecured borrowings 5721.51 4236.65 6979.88 6804.15 9618.34 12892.95

Current portion of long term debt 888.69 1466.78 1114.43 1053.78 1710.87 2353.75

Current liabilities & provisions 29969.74 33759.33 44186.92 53005.63 62032.22 73905.81

Sundry creditors 7281.28 9341.91 10916.77 12759.38 16673.87 20414.07

Acceptances 1750.1 2100.23 3358.23 3383.53 2767.85 4507.87

Deposits & advances from customers & employees 14129.46 15586.89 21002.51 27019.94 32259.31 36174.97

Interest accrued 1639.66 1123.15 1232.38 1295.1 1121.56 180.68

Share application money 0.02 0 0 0.02 0.1 0.1

Other current liabilities 2672.32 2655.22 2993.72 3301.57 2383.51 3252.37

Provisions 2496.9 2951.93 4683.31 5246.09 6826.02 9375.75

Deferred tax liability 2358.28 2402.57 2729.15 3166.39 3824.92 4764.72

Total liabilities 59454.75 62905.81 78909.46 94592.74 115886.64 144807

Net worth (net of reval & DRE) 12831.53 17378.77 18903.02 25110.7 32185.11 44246.28

Contingent liabilities 13593.53 10256.49 10244.28 13057 16799.09 22427.41

No of companies 62 63 65 61 60 58

APGCCS, Rajampet 16

Automobile Industry

AssetsAutomobile

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Gross fixed assets 33062.85 33228.81 36023.79 40301.54 50860.66 64376.19

Land & building 4466.75 4547.72 4900.8 5083.88 5866.21 7371.9

Plant & machinery 25366.93 23707.57 25135.89 26599.36 33645.88 39251.63

Transport & comm. equipment/infrastructure 502.61 574.89 672.63 751.01 932.64 1065.75

Furniture,amenities & other fixed assets 581.76 619.33 2303.87 3557.21 1195.12 1269.96

Capital work-in-progress 726.88 1874.91 2208.55 3248.25 7325.11 12444.45

Intangible assets 1416.77 1879.99 692.52 898.33 1194.4 2520.67

Net pre-operative expenses pending allocation 0.81 0.72 169.27 222.47 397.34 504.85

Net lease reserve adjustment 0 0 0 0 -2.41 -2.41

Less: Cumulative depreciation 12906.93 14536.07 16533.62 18363.16 20892.56 24014.84

Less: Arrears of depreciation 114.65 0 0 0 0 0

APGCCS, Rajampet 17

Automobile Industry

Net fixed assets 20041.27 18692.74 19490.17 21938.38 29965.69 40358.94

Investments 4128.14 8236.97 8657.34 9506.63 11967.32 21261.32

Equity shares 2209.95 2863.71 2953.35 3459.92 4894.42 9229.51

Preference shares 313.8 206.83 467.88 332.64 276.2 494.17

Mutual funds 1359.06 4801.88 4736.18 4809.52 5699.14 9231.05

Debt instruments 236.08 357.01 573.6 904.55 847.83 2022.83

Approved securites (slr/statutory req.) 0 0 0 0 0 0

Assisted companies 0 0 0 0 0 0

Others 76.13 182.55 153.2 293.17 439.42 472.29Less: Provision for dimunition in value of investments 66.88 175.01 226.87 293.17 189.69 188.53

Group companies 2211.16 2919.6 3604.92 3942.49 5293.08 9905.04

Non-group companies 1784.47 5208.39 5053.78 5561.04 6422.16 10601.03

Market value of quoted investments 1262.98 3015.29 4178.31 7948.63 16811.8 16791.06

Deferred tax assets 1398.17 645.93 720.47 891.18 970.98 1294.57

Current assets 32915.82 33900.33 45428.99 55220.72 65082.15 76302.2

Cash & bank balance 10592.59 11030.47 17043.22 21584.83 25844.41 28767.91

Inventories 10049.77 10899.68 13720.06 16497.72 18931.77 22940.69

Receivables 11477.27 11117.15 13514.54 15486.81 17804.41 21285.92

Expenses paid in advance 796.19 853.03 1151.17 1651.36 2501.56 3307.68

Loans & advances 612.66 1159.63 2537.29 5171.69 5809.87 3516.63

Deferred revenue expenditure 358.69 270.21 2075.2 1864.14 2090.63 2073.34

Total assets 59454.75 62905.81 78909.46 94592.74 115886.64 144807

No of companies 62 63 65 61 60 58

TOOLS OF ANALYSIS

FINANCIAL TOOLS

Cost Structure:

Cost structure shows the percentage of cost incurred to a product. It is the relationship

between fixed charges and value added. Here value added means sales-(raw material

expenses + power, water& fuel consumption).Fixed charges means compensation paid to

employees, interest paid and depreciation.

Fixed Charges Operating Performance = ------------------------- Value Added

Operating Performance:

APGCCS, Rajampet 18

Automobile Industry

Operating performance shows the relationship between operating profit and net assets.

EBIT Operating Performance = ----------------------- ×100 Net Assets

Financial Performance:

Financial performance shows the relationship between profit after tax and net worth

PAT Financial Performance = ------------------------- ×100 Net Worth

Growth Rate:

Growth rate of sales represents how much percentage of sales are increased or decreased

in a year as compared to the previous year by using the following formula.

Pn = Po (1+r) n

Here Pn = Current year

Po = base year r = growth rate

Statistical Tools

Trend analysis:

Trend analysis is used for estimating the future value of the industry or company.

Straight line trend is represented by the equation.

Yc= a+bx

In order to determine the values of the constants a and b the following normal

equations are to be solved.

ΣY=Na+bX

ΣXY = aΣX+bΣX²

APGCCS, Rajampet 19

Automobile Industry

Coefficient of correlation:

Correlation is the degree of association between two variables and it represented in

terms of a coefficient known as coefficient of correlation. The range of correlation

coefficient is-1and+1.If the coefficient is negative, then the variables are inversely

proportional and maximum when it is -1. If it is 0, there is no association between the

variables. If the coefficient is positive then the variables are associated directly and it is

maximum when it is =1.

COST STRUCTURE:

The Cost structure indicates that how much cost had incurred for obtaining the

output. On awareness of the cost structure of the industry we can able to take further

steps to decrease the cost structure in the coming years. The cost structure had established

with the relationship of fixed charges and value added.

Fixed charges

COST STRUCTURE = -------------------------------- Value Added

Table 1: Calculation of Cost Structure during 2003-2008. (Rs in Crores)S. No

Particulars2003 2004 2005 2006 2007 2008

APGCCS, Rajampet 20

Automobile Industry

1 Sales 56089.46 72550.14 91648.42 103026.48 128858.17 149368.87

2 Raw Material & spares

31533.29 41061.49 55006.13 62482.25 80659.31 92882.14

3 Power & Fuel 799.31 921.18 960.61 1032.19 1236.11 1377.88

4 Employee compensation

4105.39 4751.37 5051.32 5480.19 6364.37 8055.56

5 Interest paid 1633.16 1110.21 909.9 837.21 821.37 1216.76

6 Depreciation 2032.17 2218.03 2488.96 2425.72 2818.11 3751.42

7 Value added(1)-(2)-(3)

23756.89 30567.47 35681.68 39515.04 46962.75 55108.85

8 Fixed charges(4)+(5)+(6)

7770.72 8079.61 8450.18 8743.12 10003.85 13023.74

9 Fixed charges / Value added

0.327 0.264 0.236 0.221 0.213 0.236

INTERPRETATION:

From the above table it is observed that the fixed cost as a proportion of value

added has come down year by year from 32.7% in the year 2003 to 23.6% in the

year2008. The value addition was increased during the study period because of increase

of sales year because of increase of sales the fixed charges also proportionately increased.

OPERATING PERFORMANCE:

The Operating performance had established with the relationship of Earning

before interest and tax (EBIT) and Net assets. It convays the operating performance of

the industry which means the moving capabilities of the industry are appropriate or not. It

represents how much net assets are contributed for obtaining that particular PBIT.

PBIT Operating Performance = -------------------- X 100 Net Assets

Table 2: Calculation of operating performance during 2003-2008 (Rs in Crores)YEAR EBIT NET ASSETS OPERATING

PERFORMANCE

APGCCS, Rajampet 21

Automobile Industry

(%)

2003 4207.84 59454.75 72004 6170.14 62905.81 9.82005 7658.15 78909.46 9.72006 9955.69 94592.74 10.52007 11962.42 115886.64 10.32008 14759.71 144807.00 10.1

Graph No: 2

INTERPRETATION:

From the above table it is clear that the operating performance in automobile

industry is showing fluctuation during the study period of 2003 and 2008. This is due to

the fluctuation in EBIT. In the year 2005 and 2006 it was vary high(10.5%).

FINANCIAL PERFORMANCE:

The Financial performance had established with the relationship of profit after tax

(PAT) and Net worth. It represents how much net worth is lying for acquiring the profit

after tax (PAT), and we can able to aware the financial performance of the industry.

PATFinancial Performance = --------------------- x 100

Net worth

Table 3: Calculation of operating performance during 2003-2008 (Rs in Crores)

YEAR PAT NET WORTH FINANCIAL PERFORMANCE

(%)

APGCCS, Rajampet 22

Automobile Industry

2003 1396.67 12831.53 10.82004 3119.22 17378.77 17.92005 4419.35 18903.02 23.32006 6157.03 25110.7 24.52007 7580.45 32185.11 23.52008 9569.9 44246.28 21.6

Graph 3

INTERPRETATION:

From the above table it is clear that the financial performance of the automobile industry

is showing increased during the study period of 2003 and 2006. This is due to the

increased in pat and net worth. Expect In the year 2007 and 2008 is it is decreased.

Trend analysis sales:

Table no:4 (Rs in Crores)YEAR Sales

2003 1396.67

2004 3119.22

2005 4419.35

2006 6157.03

2007 7580.45

2008 9569.92009* 10972.51

APGCCS, Rajampet 23

Automobile Industry

2010* 12572.15

2011* 14171.79

*indicates estimated values

Graph no:4

INTERPRETATION:

From the above table it is observed that the trend analysis of automobile industry

was increased year by year during the study period of 2003-2008 because of the increase

of sales.

Trend analysis for Net worth:

Table no:5 (Rs in Crores)Year Net worth

2003 12831.53

2004 17378.77

2005 18903.02

2006 25110.7

2007 32185.11

2008 44246.282009* 69302.31

APGCCS, Rajampet 24

Years

Years

Va

lues

Automobile Industry

2010* 71347

2011* 73391.69

*indicates estimated valuesGraph no:5

INTERPRETATION:

`From the above table it is observed that the trend analysis of automobile industry

was increased year by year during the study period of 2003-2008 because of the increase

of Net worth.

Trend analysis for PAT:

Table no:6 (Rs in Crores)YEAR PAT

2003 1396.67

2004 3119.22

2005 4419.35

2006 6157.03

2007 7580.45

2008 9569.92009* 10972.532010* 12572.17

APGCCS, Rajampet 25

Years

Val

ues

Automobile Industry

2011* 14171.81

*indicates estimated valuesGraph no:6

INTERPRETATION:

From the above table it is observed that the trend analysis of automobile industry

was increased year by year during the study period of 2003-2008 because of the increase

of PAT.

Growth in Total Sales

Growth in total income represents how much percentage of profit there

increased or decreased at current year for growth trend in income we are using growth

trend formula as

Pn = Po (1+r) n

Here Pn = Current year Po = base year r = growth rate Table no:7

APGCCS, Rajampet 26

Years

Va

lues

Automobile Industry

Graph no:7

INTERPRETATION:

From the above table it is observed that growth rate in total sales of automobile

industry was showing fluctuations year by year during the period of 2003 and 2008.

During the year 2003 was vary high (0.293),because the sales also high.the2007 and 2008

decreased.

Growth trend in Capital Employed:

Growth in total income represents how much percentage of profit there

increased or decreased at current year for growth trend in income we are using growth

trend formula as

Pn = Po (1+r) n

Here Pn = Current year Po = base year r = growth rateTable no:8

APGCCS, Rajampet

Year Total sales Trend in(percentages)

2003 56089.46 ----2004 72550.14 0.293

2005 91648.42 0.263

2006 103026.48 0.124

2007 128858.17 0.250

2008 149368.87 0.159

27

Automobile Industry

Graph no:8

INTERPRETATION:

From the above table it is observed that growth rate in capital employed of

automobile industry was showing increased year by year during the period of 2003 and

2008. During the year it increased because changes of capital employed.

CORRELATION BETWEEN INCOME & EXPENSES:

Correlation is the degree of association between two variables and it is

represented in terms of a coefficient known as correlation. The range of the correlation

coefficient it is in between -1and+1. If the correlation coefficient is negative, then the

variables are inversely proportional and maximum when it is-1;if the coefficient is 0,

there is no association between the variables. If the coefficient is positive then the

variables are associated directly and it is maximum when it is+1.

APGCCS, Rajampet

Year Capital employed Trend in(percentages)

2003 33221.17 ----2004 37621.93 0.132

2005 43902.22 0.166

2006 56332.39 0.283

2007 74058.46 0.314

2008 101583.45 0.371

28

Automobile Industry

Table no:9 (Rs in Crores)

YEAR TOTAL EXPENCES TOTAL INCOME

2003 57718.26 58494

2004 71777.9 74891.47

2005 90911.46 94402.17

2006 102883.44 107056.85

2007 128360.53 134034.03

2008 148843.09 156220.86

Correlation between assets Vs income is = 0.999

INTERPRETATION:

If the evidence from the above table that there is a strong relationship between

total income and total expenses. Because 1% changr in total expenses that must be lead to

0.999% change in total income. It is showing positive relationship between total income

and total expenses.

CORRELATION BETWEEN SALES AND PROFIT:

Correlation is the degree of association between two variables and it is

represented in terms of a coefficient known as correlation. The range of the correlation

coefficient it is in between -1and+1. If the correlation coefficient is negative, then the

variables are inversely proportional and maximum when it is-1;if the coefficient is 0,

there is no association between the variables. If the coefficient is positive then the

variables are associated directly and it is maximum when it is+1.

APGCCS, Rajampet 29

Automobile Industry

Table no:10 (Rs in Crores)YEAR SALES PROFITS

2003 56089.46 1396.67

2004 72550.14 3119.22

20085 91648.42 4419.35

2006 103026.48 6157.03

2007 128858.17 7580.45

2008 149368.87 9569.9

CORRELATION BETWEEN income &expenses:0.994

INTERPRETATION:

If the evidence from the above table that there is relationship between total sales

and total profit. total sales that must be lead to 0.994% change in total profit. It is

showing positive relationship between total sales and total profit

CORRELATION BETWEEN SALES AND INVESTMENT:

Correlation is the degree of association between two variables and it is

represented in terms of a coefficient known as correlation. The range of the correlation

coefficient it is in between -1and+1. If the correlation coefficient is negative, then the

variables are inversely proportional and maximum when it is-1;if the coefficient is 0,

APGCCS, Rajampet 30

Automobile Industry

there is no association between the variables. If the coefficient is positive then the

variables are associated directly and it is maximum when it is+1.

Table no:11 (Rs in Crores)YEAR SALES INVESTMENT

2003 56089.46 4128.14

2004 72550.14 8236.97

20085 91648.42 8657.34

2006 103026.48 9506.63

2007 128858.17 11967.32

2008 149368.87 31261.32

CORRELATION BETWEEN income &expenses:0.921

INTERPRETATION:

If the evidence from the above table that there is a relationship between total sales

and investment. in total expenses that must be lead to 0.921% change in investment. It is

showing positive relationship between total sales and investment.

SWOT Analysis

Strength:

Attaining high quality for global standards.

Continuous cost reduction for global competitiveness.

APGCCS, Rajampet 31

Automobile Industry

Supply chain management (logistics).

Attaining economies of scale & scope.

Weakness:

Poor proactive communication channels between the local

sugar industry.

Failure to communicate in a consistent manner with

stakeholders.

Lack of conflict resolution/negotiation training of officers

handling complaints.

Bay editions of the local newspaper cover sugar industry

issues differently.

Opportunities:

Improve infrastructure (ports, roads, etc).

Improve EXIM regulations.

Threats:

Growing awareness of environmental issues by the general

public.

Increasing urbanization in coastal areas

Increasing conflict between farmers and residents

Increasing remoteness of rural industry from most Australians

Almost half the local residents have a neutral opinion of the

industry.

Location of mill close to CBD.

The hostile element of the population, generally unemployed

and living in rural residential areas.

APGCCS, Rajampet 32

Automobile Industry

OBSERVATIONS

It is observed that the fixed cost as a proportion of value added has come down

year by year from 32.7% in the year 2003 to 23.6% in the year2008. The value

addition was increased during the study period because of increase of sales year

because of increase of sales the fixed charges also proportionately increased.

It is clear that the operating performance in automobile industry is showing

fluctuation during the study period of 2003 and 2008. This is due to the

fluctuation in EBIT. In the year 2005 and 2006 it was vary high(10.5%),

It is clear that the financial performance of the automobile industry is showing

increased during the study period of 2003 and 2006. This is due to the increased

in pat and net worth. Expect In the year 2007 and 2008 is it is decreased.

Trend analysis of automobile industry was increased year by year during the study

period of 2003-2008 because of the increase of sales.

It is observed that the trend analysis of automobile industry was increased year by

year during the study period of 2003-2008 because of the increase of Net worth.

It is observed that the trend analysis of automobile industry was increased year by

year during the study period of 2003-2008 because of the increase of PAT.

It is observed that growth rate in total sales of automobile industry was showing

fluctuations year by year during the period of 2003 and 2008. During the year

2003 was vary high(0.293),because the sales also high.the2007 and 2008

decreased.

It is observed that growth rate in capital employed of automobile industry was

showing increased year by year during the period of 2003 and 2008. During the

year it increased because changes of capital employed.

APGCCS, Rajampet 33

Automobile Industry

There is a strong relationship between total income and total expenses. Because

1% change in total expenses that must be lead to 0.999% change in total income.

It is showing positive relationship between total income and total expenses.

There is relationship between total sales and total profit. total sales that must be

lead to 0.994% change in total profit. It is showing positive relationship between

total sales and total profit.

There is a relationship between total sales and investment. in total expenses that

must be lead to 0.921% change in investment. It is showing positive relationship

between total sales and investment.

CONCLUSION

APGCCS, Rajampet 34

Automobile Industry

The coefficient of correlation is showing positive value and strong

relationship between the other ratios. The estimating values are increased. The

financial position of the industry is good and also the industry provides

compensation. The earning power of the industry is not bad. The industry

maintains the standard norm of current ratio and investment is high. The average

components of marketing expenses and total income is long-term economic

contribution, it is develop conflict between the people.

APGCCS, Rajampet 35