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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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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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
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

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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.
• Estimated component market size is US$ 6.7 bn.

FACTS & FIGURES

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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.
• Scooter segment grew by 1.5 per cent, fall at 9,08,159 units against 9,22,428
units in 2004-05.

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• 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.

HIGHLIGHTS

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• 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

2005-06 2005-06
Manufacturers (Apr-Mar) Manufacturers (Apr-Mar)
In Nos. 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

Production of 2-Wheelers

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2005-06
2005-06
(Apr-
Manufacturers Manufacturers (Apr-Mar)
Mar)
In Nos.
In Nos.
Japanese Indian
Hero Honda Motors Ltd. 3,006,486 Bajaj Auto Ltd. 2,042,289
Honda Motorcycle & Scooter India
603,436 TVS Motor Company Ltd. 1,366,866
(Pvt.) Ltd.
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
53,880
Ltd.
Royal Enfield (Unit of
30,596
Eicher Ltd.)
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

2004-05
2003-04
(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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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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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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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.

Analysis of Indian Exports:

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• Cost competitiveness in terms of labor and raw material.

• Established manufacturing base. Economics of scale due to
domestic market.
Strengths
• Potential to harness global brand image of the parent company.

• Global hub policy for small car like Hyundai, Suzuki, etc.
• Perception about quality.
Weakness
• Infrastructure bottlenecks.
• Huge export markets such as Europe, America, Africa, and others
Opportunities
for Indian cars.
• China, Malaysia, Thailand, etc.
Threats
• 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.

Profits
Automobile

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

PBDITA 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 8695.88
Distribution of profits (%)
PBDITA 100 100 100 100 100 100
33.305542
Depreciation & Amortisation 9 27.0921537 25.0202915 20.0033266 19.6135524 20.8891569
25.885660
Financial charges 9 13.1185062 8.90868379 6.72720976 5.51951826 6.52173447
18.671512
Tax 6 22.9318924 22.8018834 23.7960552 23.9271187 21.2952243
22.137283
PAT 6 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 0.06
No 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

Total income 58494 74891.47 94402.17 107056.85 134034.03 156220.86

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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 306.74 190.13 211.06 225.73 156.38 180.17
Other 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
PAT 1396.67 3119.22 4419.35 6157.03 7580.45 9569.9

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

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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

Assets
Automobile
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

Net fixed assets 20041.27 18692.74 19490.17 21938.38 29965.69 40358.94

APGCCS, Rajampet 17
 Automobile Industry

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 76.13 182.55 153.2 293.17 439.42 472.29
Less: 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. Particulars
2003 2004 2005 2006 2007 2008
No
1 Sales 56089.46 72550.14 91648.42 103026.48 128858.17 149368.87

APGCCS, Rajampet 20
 Automobile Industry

2 Raw Material & 31533.29 41061.49 55006.13 62482.25 80659.31 92882.14

spares
3 Power & Fuel 799.31 921.18 960.61 1032.19 1236.11 1377.88

4 Employee 4105.39 4751.37 5051.32 5480.19 6364.37 8055.56

compensation
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 23756.89 30567.47 35681.68 39515.04 46962.75 55108.85

(1)-(2)-(3)
8 Fixed charges 7770.72 8079.61 8450.18 8743.12 10003.85 13023.74
(4)+(5)+(6)
9 Fixed charges / 0.327 0.264 0.236 0.221 0.213 0.236
Value added

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
(%)
2003 4207.84 59454.75 7

APGCCS, Rajampet 21
 Automobile Industry

2004 6170.14 62905.81 9.8

2005 7658.15 78909.46 9.7
2006 9955.69 94592.74 10.5
2007 11962.42 115886.64 10.3
2008 14759.71 144807.00 10.1
Graph No: 2

Operating performance
12 10.5 10.3
9.8 9.7 10.1
10
8 7
6
4
IO
A
R
T

2
0
2003 2004 2005 2006 2007 2008
YEARS

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.
PAT
Financial Performance = --------------------- x 100
Net worth

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

YEAR PAT NET WORTH FINANCIAL

PERFORMANCE
(%)
2003 1396.67 12831.53 10.8
2004 3119.22 17378.77 17.9

APGCCS, Rajampet 22
 Automobile Industry

2005 4419.35 18903.02 23.3

2006 6157.03 25110.7 24.5
2007 7580.45 32185.11 23.5
2008 9569.9 44246.28 21.6

Graph 3
Financial performance
30
23.3 24.5 23.5
25 21.6
20 17.9
15 10.8
IO
A
R
T

10
5
0
2003 2004 2005 2006 2007 2008
YEARS

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 9569.9
2009* 10972.51
2010* 12572.15
2011* 14171.79

APGCCS, Rajampet 23
 Automobile Industry

*indicates estimated values

Graph no:4
Values

Years
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
Years
2004 17378.77
2005 18903.02
2006 25110.7
2007 32185.11
2008 44246.28
2009* 69302.31
2010* 71347
2011* 73391.69

APGCCS, Rajampet 24
 Automobile Industry

*indicates estimated values

Graph no:5

Values

Years
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 9569.9
2009* 10972.53
2010* 12572.17
2011* 14171.81

*indicates estimated values

Graph no:6

APGCCS, Rajampet 25
 Automobile Industry

Values

Years
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
 Automobile Industry

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

Graph no:7
Operating performance
0.35
0.293
0.3 0.263 0.25
0.25
0.2 0.159
0.15 0.124
IO
A
R
T

0.1
0.05
0
2003 2004 2005 2006 2007 2008
YEARS

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 rate
Table no:8

APGCCS, Rajampet 27
 Automobile Industry

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

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 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,
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 30
 Automobile Industry

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.
• Supply chain management (logistics).
• Attaining economies of scale & scope.

APGCCS, Rajampet 31
 Automobile Industry

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.

OBSERVATIONS

APGCCS, Rajampet 32
 Automobile Industry

 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

The coefficient of correlation is showing positive value and strong

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

APGCCS, Rajampet 34
 Automobile Industry

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